The world’s geo-economic scene has been undergoing a sea-change since the advent of China’s One Belt One Road (OBOR) initiative launched in 2013. To this was added a new but crucially momentous dimension by the US when soon after he was sworn as the 45th President of the US early this year, Donald Trump signaled what can only be described as a policy of isolation by adopting the ‘America First’ slogan. In response to these policies – China’s OBOR initiative and Washington’s ‘America First’ policy – those countries that felt their economies would be affected one way or the other as a result started recalibrating their relation with the two super powers – one as old as history itself and the other making history as it entered the current century.
So, it was only understandable that many old friends of the US started mending their economic fences with China and at the same time de-escalating decades old economic ties with Washington.
The Philippines, Malaysia, Thailand, Laos and Cambodia have already moved closer to China. Japan and South Korea feel uneasy because of North Korea’s war like posturing, otherwise these two would have also gone over to China. But if President Trump carries out his ‘America first’ policy to its logical conclusion then these two countries would also find it impossible to remain within the US camp any longer.
Even Australia had a spat with the US over questions of refugee asylum. And Canberra publicly said it was open to the idea of China taking the place of the US in leading Trans-Pacific Partnership (TPP) negotiations, following Trump’s withdrawal. Today, China is Australia’s largest market for merchandise exports. Canberra also is in consultation with other nations to forge ahead with TPP minus the US, and its leadership is in talks with Japan.
Even Europe and the UK seem to be wooing China and cold shouldering the US at least in matters of economy. In South Asia, India perhaps dictated by its pathological hatred of Pakistan and worried about Chinese strategic ambitions in the wake of its OBOR initiative has gone very close to the US. The recent confrontation between the Chinese and Indian troops in the Himalayas-Doklam plateau, on China-Bhutan border– has pushed New Delhi further into the lap of US.
Some analysts see a US-India-Japan-Vietnam regional alliance in the offing. The visit to Israel by PM Modi – the first by an Indian prime minister – and the signing of a defence deal worth billions of dollars between the two countries reflects a shift from India’s traditional dependence on Russia as its major supplier of military hardware.
According to Professor Syed Munir Khasru, (The geopolitical landscape of Asia Pacific is changing dramatically. Here is how – published on August 4, in the Agenda weekly of World Economic Forum), economics, politics, and military alliances may no longer follow the same trajectory as before. Professor Khasru who chairs the Institute for Policy, Advocacy, and Governance (IPAG),says that the future of the region is fraught with challenges and uncertainty that require a much better understanding of both the strategic issues and economic interests, along with the forces that are either uniting or driving a wedge between countries.
He adds: “Complex issues need mature understanding, which at this moment seems to offer the Chinese an edge over the Americans, as anxious Asians wait and watch events unfold. One thing is for sure, things will never be the same.” It is in this changing geo-economic context that Pakistan also needs to reset its own economic policies by throwing the Washington Consensus book out of the window as a first step.
Over the last nearly seven decades we have been trying everything in this book of advice prepared by our major donors to lift the country out of its depressed level of socio-economic moorings but to no avail. Every recommended step in that ‘book’, singly, in pairs and in every combination and permutation seemed to have only succeeded in further deepening the stagnation.
For long we have sustained mainly on foreign dole, mostly from the US and Europe which came in the shape of kind (military equipment, weapon systems and aircraft plus commodities) and cash. From the 1970s onwards we also started receiving significant assistance from Saudi Arabia and China which in the 1990s increased manifold.
However, in most cases the dole magic refused to work. And this failure was no-where more pronounced than in Pakistan. Most rich countries design their foreign aid programs basically to promote their own respective global, regional and indigenous political and economic interests. So out of every one dollar of assistance 99 Cents went back to the donors in the shape of exports, transfer pricing, shipping, insurance, consultancy and technical assistance fees and then out of the remaining one cent of the dole, a large part is siphoned off by the ruling elite of the recipient country leaving next to nothing for inclusive socio-economic development needs. The Saudi and Chinese bilateral assistance was, however, different in design but even the benefits of this assistance went into meeting our security needs rather than our social needs.
No doubt, Pakistan’s economy has grown at an annual average rate of about 7 per cent during the last five years of General Pervez Musharraf government. And similar growth rates have been achieved during the decade of General Zia’s rule and also during the 11 year rule of Field Marshal Ayub Khan. But most of this growth was driven by the unencumbered dollar dole that the country received during these periods and not because of any policies that restructured the economy for sustained growth on its own enhancing its ability to save enough to invest enough to grow at a healthy rate on its own without the crutches of dole. In fact, this dole was more of a rent for our services in promoting the global and regional interests of the rich world.
It is, therefore, time to do some candid reappraisal of the ground realities to meet the new challenges emanating from the new economic policies of China and the US.
We don’t have our own sources of energy; we do not own enough capital to provide even two square meals to our galloping population; and being too far behind in world ranking in education, our capacity to acquire knowledge-based technologies is too limited. Much of our so-called natural wealth, like the huge coal deposits in Sindh and rich minerals in Balochistan are buried deep under mounds of earth. We don’t have either the capital or the technology to exploit these on our own.
Our border trade with our immediate neighbors – India, Afghanistan and Iran – has been held hostage since the very day Pakistan came into being to our self-destructive geostrategic compulsions. So much so that we have actually cut the nose to spite the face as we have virtually bottled up the country shutting down our trade-outlets in the East, in the West and North-West while the Northern outlet is too far away and in the South we have a small little sea outlet, not enough for even our own limited export and import activity.
In the changing geo-economic scenario Pakistan stands to gain immensely if it were to convert its economy into warehouse/ transshipment economy taking full advantage of our comparative advantages: 1) We are an agricultural country; 2) We are a market of about 200 million people; 3) Pakistan is located at the crossings of trade routes from Casablanca in Africa to Kashgar in West China’s Xinjiang Uyghur autonomous region and from Thailand in Southeast Asia to Turkey beyond the Middle East; 4) China and Pakistan are all set to build a 3,000-kilometre economic corridor connecting Kashgar in China to the southwestern Pakistani port of Gwadar with road and rail. And one cannot also rule out the possibility – in a couple of years – of overland transit trade route through Pakistan linking India with Afghanistan and beyond to Central Asia.
These advantages can be exploited to the maximum if we become a warehouse/trans-shipment economy rather than continue to hanker for an industrial economy, which we have been trying all these 70 years to achieve but without any success. This would require a well-thought-out trade policy that would allow almost free-of-duty entry of raw materials, intermediaries and items in knock-down condition to be warehoused in Pakistan and then forwarded to final destinations after the required value addition. Such a regime would also require letting the rupee appreciate/depreciate on its own without any artificial crutches.
Such a policy would also attract foreign direct investment in avenues in which it would be more economical for the sponsors to fabricate items inside Pakistan for local consumption and also to re-export them to the four-corners from the ‘hub’. This will also facilitate the transfer of technology and training of skilled manpower. Transfer of appropriate technologies would also open the way for Pakistan to graduate from being an agricultural country to becoming a leading high quality processed-food exporter.