How a stronger regional identity can strengthen our national identity

Lahore Literary Festival

I am a daughter, a sister, a student, a friend, a Muslim, and a human being. Someday I hope to be a wife, a mother, a writer…and who knows what else the future will bring. Each of these is and will be part of my identity, and it is the combination that makes me who I am. And just as I am a proud Pakistani, I am also a proud South Asian. Losing one would be like losing a part of my body, making me incomplete.

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Leaving billions on the table

India-Bangladesh

While backwards-looking groups like Difa-e-Pakistan are demanding that Pakistan limit trade with India, Bangladesh is taking a reasoned economic view of their relations and reaping the benefits – benefits to the tune of $1 billion.

For the first time in history, Bangladesh’s exports to India will cross the $1 billion mark in a 12-month period next July, a top Indian official has said at a conference jointly held by Indian Council of World Affairs and Association of Asia Scholars.

This is made possible because Bangladesh is willing to separate its economic interests from foreign policy matters. It does not mean that they are unwilling or unable to criticise India openly, though, even on matters of trade. When India imposed a ban on cotton import, Bangladesh spoke out against this violation of trade norms. Actually, Bangaldesh has moral authority on their side in this complaint because they are seen as a ‘good faith’ trading partner, and not one that uses trade as a tool of foreign policy.

Consider also that Bangladesh has benefitted to the tune of $1 billion and their national economy is almost half the size of Pakistan’s. Imagine how much we would benefit from taking a rational, unemotional approach to intra-regional trade. According to India’s National Security Advisor Shivshankar Menon, Bangladesh is only the latest country to take advantage of the fast-growing market within South Asia.

“Intra-regional trade within South Asia has begun to grow and has doubled over the past five years. We are therefore at a point where it is increasingly evident to all the countries in South Asia that there are substantial costs to not moving forward by lowering tariffs, minimising sensitive lists, and tackling non-tariff barriers. Each government has taken significant actions in the recent past,” he added.

Analysts much smarter than me have made convincing arguments for why trade with india is a rational policy choice. If that’s not convincing enough, though, $1 billion certainly should be.

The gateway of Asian trade

Spice routeLong before the west’s industrial revolution converted Saudi Arabia into the global center of energy production, Mecca was already a wealthy and bustling international city. Obviously it was not oil that provided this importance to the city at that time, but rather it was the city’s position as a gateway to international trade that provided its wealth. Today, too many of our analysts are focused on finding a Pakistani resource that can be tapped like Saudi oil when the answer to our economic woes may be further back in history.

It is well known that the current economic situation is not sustainable. Not only the tax scheme needs to be reformed, but more generally we need to expand our economic base. An article in the World Politics Review notes that Pakistan is naturally positioned to be a hub for economic activity in Asia.

These economic arrangements not only predispose the country to militarism, but are also financially untenable. Fewer than 2 million people in a country of 190 million pay taxes. Power shortages cripple businesses and lead to circular debt, displacing the cost of electricity subsidies. Pakistan faces a 350 percent increase in energy demand by 2030, but lacks the finances to undertake major energy projects alone. This military-heavy economy only survives thanks to the lifeline of American aid, which is locked in by Washington’s fears of Pakistan’s implosion.

To build themselves up as a viable alternative, Pakistan’s middle class businesses need sustainable economic growth driven by reliable sources of energy and open markets for Pakistani products. To achieve that, Pakistan must reconnect economically to the rest of the region. Meanwhile, India, which seeks access to Central Asian energy supplies and more-efficient distribution networks for food staples, would also profit from integration, as would Afghans and Kashmiris, whose isolated economies need connectivity to flourish.

Actually, this can provide benefits far beyond improving the economy only. Hosting trade routes between Iran and India, for example, would actually strengthen our security vis-a-vis India without requiring a single rocket.

Iran-Pakistan-India Map

The main proposed projects for regional integration — the Iran-Pakistan-India (IPI) and Trans-Afghan natural gas pipelines — would improve India’s energy access and give Pakistan $200 million a year in transit fees, but they also have a strategic dimension: These projects as well as other Central Asian trade would flow from the region’s northwest, putting Pakistan “upstream” of India. This would give Islamabad economic leverage over and increase its confidence vis-à-vis New Delhi — and it would do so in a way that is less volatile than increasing Pakistan’s military arsenal.

The National Assembly approved an increased defence budget earlier this year when this very arms race is actually making us less secure. We are spending every last rupee to keep up with India’s massive defence spending when the reality is we do not have the resources to do this.

The problem for Pakistan is that there is very little it can do to effectively counter an operational Indian BMD shield. The absence of both resources and indigenous capabilities to develop its own missile-defense system renders Islamabad’s responses obsolete. But more ominous for Pakistan is the fact that an operational Indian anti-ballistic missile (ABM) capability would effectively provide New Delhi with an assured second-strike capability.

This does not mean that we cannot be secure against Indian hegemony, it just means that we need to look for more ways of establishing our security that fit within our natural means. In other words, if we want to be “strong”, we need to think “smart”. Our nuclear arsenal is massive – the fourth largest in the world. We have mastered the art of death – it’s time that we focus on the art of life.

According to the website EconomyCheck.com.pk, serving as a trade route between China and the Middle East, Pakistan could boost GDP by 2 percent or more.

China-Middle East trade is worth $172 billion today. It will exceed $2 trillion by 2030. If even 5% of Middle East trade flows through Pakistan, it will boost transit receipts collected by government by 2% of GDP per annum.

Combine this with the economic boom that would result from being a transit for Iranian energy and the impact becomes enormous. Claiming our natural role as the gateway of Asian trade will give a better position vis-a-vis not only India but vis-a-vis America also. In order for this to happen, however, we must stop the trend of isolationist thinking and participate openly in the world community.

On the Economic Front Lines

President Zardari speaks to American Congressmen

Raymond Davis continues to dominate the headlines, but the rest of the country has not ceased to function in other vital areas, especially on the economic front lines. This week two important points of note have been largely overshadowed by the diplomatic brouhaha but should not be overlooked.

The first item of note is the statement of Federal Minister for Information and Broadcasting Qamar Zaman Kaira that exports are expected to reach US $ 22 billion mark, a new record for international trade.

Additionally, President Zardari took the opportunity of a meeting with a delegation of American Congressmen to make the case for opening US and international markets to expanded trade from Pakistani business.

“Our priority is trade, and not aid. We need preferential market access to support our economy against the dire impact of the ongoing struggle against militancy on one hand, and to rehabilitate and reconstruct infrastructure damaged by devastating floods on the other,” he said.

The president said a long-term and stable equation marked by close collaboration and multidimensional cooperation between the two countries guaranteed not only development of the country but also peace and stability of the region.

The members of the delegation praised the country’s struggle against militancy and promised continued US support in this regard to the people and government of Pakistan.

President Asif Zardari reiterated his call for expediting the ROZs legislation to create economic opportunities in areas ravaged by militancy.

The government has made clear that the courts should be given time to consider the facts and make a judgment in the Raymond Davis case. Meanwhile, strengthening the domestic economy correctly remains as the top government priorities.

Taiwan, not North Korea is the right example

Pakistan and India trade

Presently, many seem to believe that we should only do business with nations like China that are less prone than their American counterparts to adding contingencies to deals, and that we should makes side deals with militant groups and belligerently refuse to improve relations with India. This is a recipe for failure. And not just economic failure, utter and complete national failure.

First, this idea that American conditionalities are somehow unique to American policy is simply not true. Consider the argument over the Kerry-Lugar bill. The actual requirements were related to not funding terrorist groups and securing our nuclear weapons. Do we honestly believe that China has no problem with militancy and nuclear proliferation?

Let’s be realistic here, please. China is not going to let us do whatever we want and simply look the other way. India is positioning itself like South Korea. They are creating strong economic ties that are the glue that holds together the world community by reducing incentives for connected nations to act against each others interests. Also please remember that they did not react to 26/11 with retaliation, but urged the world community to take notice. This is similar to the way that South Korea is not threatening unilateral action after a North Korean torpedo sank one of the South’s navy ships. Rather they are building the trust of the world community so that when the line is finally crossed, no one will come to the aid of the North Koreans. We learned from the Wikileaks cables that China is even ready to abandon North Korea and accept reunification of the Korean peninsula under Seoul.

This actually makes sense for China. Even if China is not trying to export their ideology, it wants to export something else. Chinese trade with South Korea has been growing at a record pace, with South Korea importing $323.1 billion in goods from China, and China importing $365.3 billion from South Korea. Why would China be willing to sacrifice such economic progress for the North Koreans? Answer: They won’t.

So what does that have to do with us? Let me tell you.

Chinese Premier Wen Jiabao is not on a three-day visit to India to sample the panipoori. Actually, he is there to oversee the signing of billions of dollars in business deals. According to The Wall Street Journal, Wen expects companies from China and India to sign $16 billion worth of agreements during his trip – that’s more than double the total amount of trade between Pakistan and China, and eight times the amount of trade between India and Pakistan. He said he expects bilateral merchandise trade to surpass $60 billion for this year. India and China are moving beyond the Cold War mentality of East/West blocs and working within the 21st century framework that involves nations connected by shared economic and security interests. Nations that are not part of this framework include North Korea, Somalia, and Zimbabwe. I don’t want to be part of the second group.

Thankfully, there is an alternative. Raza Rumi made the point perfectly on his blog a few weeks ago that we can increase our own influence and improve our own country by taking the path not of North Korea, but Taiwan.

China and Taiwan are sworn enemies. In 2009, the total volume of their trade was 110 billion dollars. India’s trade is expanding with China, and the current volume is nearly 60 billion dollars per annum. On the other hand, the total volume of formal trade between India and Pakistan is around a billion dollars. What does this say about keeping rational economic interest over emotional narratives of nationalism and politics? The politics and troubled past has ruined South Asia’s present and potentially its future. It is time to review the situation and reverse this trend.

This makes sense for reasons related to both economics and security. The economic benefits are obvious. Again quoting Raza Rumi:

For centuries trade has taken place in the region. Today the routes between the two Punjab[s], between Karachi and Mumbai and from Rajasthan and Gujarat into rural Sindh are still valid. Asad Sayeed, a reputed economist based in Karachi states that if normal trade resumes, “regional economic benefits that can accrue on either side will have a multiplier effect.” In fact informal trade that takes place is unknown but quite significant. Yasir Khan writing for The News (July 10, 2010) also highlighted the World Bank estimates of 2002 whereby Indo-Pak trade could expand Pakistan’s Gross National Product by 1.8%. Khan also quoted a study by Peterson Institute of International Economics which estimated informal trade between two countries in the range of $3 billion per annum. The potential therefore is immense.

India will also gain as Pakistan will provide a viable land route for its trade with Central Asia. Most importantly, given India’s energy deficits, normal trade will meet its energy demands and Pakistan can make impressive gains in foreign revenues through rents. It has already been estimated some years ago by the State Bank of Pakistan that the proposed gas pipeline to India could make us earn upto 700 millions dollars per annum.

Now consider the security benefits. While some elements in India may retain outdated resentments and harbor designs on Pakistani sovereignty, belligerent behaviour only feeds them. North Korea may have nuclear weapons, but it has demonstrated that this is not enough to ensure that anyone treats you with respect. Look at what it has bought them – a starving population, crumbling infrastructure, political and diplomatic isolation…and even their so-called ‘friend’ China is ready to cut them loose.

Taiwan, on the other hand, has played its cards differently. Like Pakistan, Taiwan has a long history of colonial rule followed by nationalist martial law. It wasn’t until the 1990s that Taiwan shifted to a more stable democratic government. But once they did, things have looked up. By joining the world community of democratic nations, Taiwan earned protection from the Americans. But more importantly, they have developed trade agreements that benefit both countries economically, while also greatly reducing the chance of any aggression between the two states.

Trade between Pakistan and India is a mere $2 billion. That’s about the same as the amount of trade between China and North Korea. Though they have had a rough history filled with mutual suspicion and disrespect, trade between China and Taiwan today totals more than $110 billion each year and continues to grow.

When you do the math, the direction Pakistan should take is obvious.