Pakistan is unable to focus on the economic diplomacy owing to the fact that Pakistan became part of the US-led war on terror. It has severely affected law and order situation in major cities of Pakistan, and eventually has worsened its position in international arena ‘politically and economically.
Foreign policy of Pakistan has constantly been centred on military-strategic relations world over instead of encouraging economic diplomacy. Strengthening of our defence system was always been of foremost priority instead of regional economic integration. The long and interruptive dictatorship also pursued a foreign policy based on militaristic objectives rather than the economic ones. Due to which, we are part of the war on terror today, and that has further deteriorated Pakistan’s economy to its worst. Pakistan has fallen behind countries in the region, and around the world in serving its people’s needs. The government’s persistent failure to implement its plans or reforms damaged the economy. There is no better example of this than the power sector. Government’s inability to collect taxes limits the possibilities for Pakistan to operate as a democratic and independent country. Pakistan’s economy is not growing as fast as it should, but, the population is growing too fast. Our focus on health and education is myopic while our defence and debt services is draining the resources of the country. The resources could have been better used to fuel the industrial growth. Inefficient government expenditure has crippled Pakistan’s ability to provide its people with the services that matter. Government subsidies hurt the economy, and a hurting economy hurts the poor.
Geographically, Pakistan has much importance in the region. Pakistan can become a hub of economic activities for the Asian countries as Pakistan shares its border with very prominent countries of the Asia like India, China and Iran. Landlocked countries do not have route for the transportation of goods by sea therefore, Pakistan provides sea transportation to many countries of Asia. Pakistan is very important for China as it is one of the mid-range powers of South Asia and its geographical location is helpful to create link between China-Middle East and China-Central Asia. To maintain economic and strategic connectivity with these regions, China requires safe passage through Pakistan and the Gwadar port is also an emerging gateway to Central Asia and China because it will be providing opportunities for the promotion of global shipping in the region. Despite the fact, Pakistan is strategically important and its relationship with China, which were termed as deeper than ocean and higher than mountain, are only limited to the military strategic cooperation. If we compare China’s trade volume with India and Pakistan, Pakistan stands far behind India. Despite a fall in the volume of India-China bilateral trade during first half of the current year, China remained upbeat over trade prospects with India. The expected volume of trade between China and India is expected to be 100 billion US dollar by the year 2015, with growing investment opportunities in both the countries. While, on the other hand, with all the efforts of the current government, China is Pakistan’s largest trading partner and Pakistan is China’s second largest trading partner in South Asia and the volume of trade is expected to reach 15 billion US dollar by 2015, the gap between India and Pakistan is enormous. The trade between China and Pakistan is a one-sided affair, while China has agreed to invest more in Pakistan, our share to the gigantic Chinese market is miniscule.
Despite the fact, Pakistan is strategically important and its relationship with China, which were termed as deeper than ocean and higher than mountain, are only limited to the military strategic cooperation.
Pakistan’s economic prosperity and stability is directly dependent on its trading ties with emerging economies, such as India and China, and access to the big markets. European Union is one of Pakistan’s top trading partners. The EU accounts for 20% of Pakistani external trade with Pakistani exports to the EU amounting to €3.4 billion (mainly textiles and leather products) and EU exports to Pakistan amount to €3.8 billion (mainly mechanical and electrical equipment, and chemical and pharmaceutical products). Pakistan and European Union has also moved forward to implement a new Five Year Engagement Plan which attempts to strengthen vis-à -vis diversify their traditional relations of donor and recipient and enhance their cooperation and partnership in other areas of mutual concerns. The dialogue provided an opportunity to review EU development cooperation including the broad parameters of the second EU Multi-annual Indicative Programme (MIP) for 2007-2013, which included projects for rural development and natural resource management, education and human resource management, governance and human rights, and trade development. European Union is also benefiting Pakistan by its Generalised System of Preferences (GSP), according to which Pakistan would receive duty free treatment from 2014.
India is a strategic partner of the EU and its relations with the EU are far better than that of Pakistan. India stands with EU on the grounds of strategic and business partnership, while, on the other hand, the relations of Pakistan with the EU are always been referred as that of the donor and the recipient. However, with the improving ties with India and granting of MFN status, Pakistan is been able to strengthen and smoothen its relations with India in recent years with the efforts of the democratic government seated in Islamabad. The efforts of seeking better and workable ties with India proved an achievement. One of the important aspects is that India is likely to withdraw its opposition on the controversial trade-aid package proposed by the European Union for Pakistan, at the General Council of the World Trade Organisation (WTO). Around 75 tariff lines or products from Pakistan would get concessional access to European markets for three years, of which 67 would have zero tariff. On the remaining eight, tariff rate quotas (TRQ, limited imports at reduced duty) would apply. The package is expected to be for two to three years, with about $300 million of yearly benefits to Pakistan’s exports to the EU. The WTO’s proposal was opposed by India, Brazil, Bangladesh, Peru and Vietnam primarily because their exports to the EU would be impacted with that move.
Terrorist activities have adversely impacted all the sectors of the economy, which cannot be gauged in the short-term. The security issue is seen hitting the economy at every level. Foreign businessmen and investors are afraid to visit Pakistan, a country where they cannot move freely and where heavily guarded hotels are also the prime target.
However, with all those achievements, Pakistan is unable to focus on the economic diplomacy to a larger extent, since Pakistan became part of the US-led war on terror. It has severely affected law and order situation in major cities of Pakistan. Pakistan is facing worst terrorism on its soil which has affected its position in international arena, not only politically but also economically. Foreign Direct Investment (FDI) has enlisted considerable downfall, investors are moving their business abroad while the local businessmen are feeling insecure because of the worst law and order situation witnessed in the history of this country, with bomb blasts and target killings taking place across Pakistan, with all those problems on one hand we cannot forget that Pakistan is also playing frontline role in the America’s war against terrorism.
State Bank of Pakistan (SBP) has reported 50.4% decrease in FDI, including private proceeds in 2012-13 (July) as compared to 2011-12 (July), due to the slow economic activities, worst law and order situation and poor infrastructure. According to the economists, global economic meltdown and poor industrial infrastructure like power shortage are the major reasons behind the decline in the FDI. While operation against the militants and rising tension in the northern areas also played an important role in depleting foreign investment. Investors are reluctant to invest in these circumstances when uncertainty is prevailing in the country and the country is witnessing worst law and order situation with bomb blasts. Although there was some improvement in portfolio investment, FDI has been constantly declining despite several efforts are made by the government. The unabated incidents of terrorism in major cities have been compounding the country’s woes, resulting into reduced foreign and domestic investment and lesser trade and business activities. Terrorist activities have adversely impacted all the sectors of the economy, which cannot be gauged in the short-term. The security issue is seen hitting the economy at every level. Foreign businessmen and investors are afraid to visit Pakistan, a country where they cannot move freely and where heavily guarded hotels are also the prime target. Investment is drained out. Resulting, in aggregate demand, closure of production units and unemployment, due to slowdown of economic activities, paving the way for terrorists to exploit the situation.
However, it is unrealistic to expect any miracles to boost the economy of Pakistan, with yawning gaps in trade policies and diplomatic fronts, but the efforts which were made are insufficient. External debt of Pakistan has reached to 67 billion dollar. Despite of it Pakistan is continuously printing currency notes with an average of Rs. 1.5 to 3 billion daily, which indebted every Pakistani citizen to an amount of Rs. 61,000. The economy of Pakistan is deteriorating day by day. The value of Pakistani rupee has fast eroded during the last four-and-a- half years, and will soon touch Rs. 100 to a dollar. It creates an impression as if this economic condition will prevail and continue climbing until the subsequent elections.
Jahangir's World Times First Comprehensive Magazine for students/teachers of competitive exams and general readers as well.
