By Dr. Vaqar Ahmed
The new Pakistani government faces a fast-evolving political situation in the region. The sudden rise in attacks inside Afghanistan has again triggered a blame game between the two neighbors. Meanwhile, there is a reluctant feeling of hope for improved relations between India and Pakistan. Iran’s hopes for a more receptive Pakistan have increased thanks to the deteriorating relations of both with the US and their economic predicaments. The Chinese also seem to be waiting to see how Pakistan’s new government wishes to pursue the next phases of the China-Pakistan Economic Corridor.
While Pakistan has to go back to the drawing board and reimagine a new foreign policy, time seems to be running out. The move by the Financial Action Task Force to put Pakistan on its grey list, along with reductions in military assistance, clearly shows that Islamabad is losing the support of traditional partners. It has been made clear on several occasions, and particularly through US President Donald Trump’s new South Asia policy, that Pakistan is currently is not relevant (i.e., useful) to the US and its allies in Afghanistan.
It is now extremely important that, without losing any further time, the new government should try basing its future foreign policy direction on internal security and economic considerations. The latter presents both challenges and opportunities as, in the short term, Pakistan’s foreign exchange reserves will continue to remain under pressure due to a large current account deficit. But the longer term prospects of growth seem to be improving on the back of improved infrastructure and energy supplies coming from CPEC projects.
Unfortunately, the government has yet to demonstrate full ownership of the CPEC program. Several elected representatives are viewing CPEC-related contractual commitments with suspicion. This is not a good position as China may end up being Pakistan’s last resort for help as the country will continue to require assistance with its balance of payments needs and infrastructure requirements.
Perhaps a better move would be to imagine how the dividends of CPEC can be offered to Pakistan’s neighbors and how to leverage energy, road, rail and port-related infrastructure endowments for trade and investment cooperation with economies in the region and beyond. For this to happen, the Ministry of Finance and the Foreign Office will need to work together in convincing the Chinese to expediently carry out the next phases of CPEC, particularly the development of nine special economic zones in Pakistan and the development of Gwadar Port as a transit and commercial trade hub.
CPEC’s gains will be fully realized only once the private sector in China starts taking an interest in engaging with its Pakistani counterpart, and business-to-business relationships blossom on both sides.
By demonstrating better ownership of CPEC, the new government will also be able to engage in a comprehensive manner with Beijing in the revision of the China-Pakistan Free Trade Agreement. Pakistan requires three critical benefits from the future FTA, namely: Market access for Pakistani goods, particularly textiles and ready-made garments, similar to the extent allowed in countries in East Asia; a liberal trade in services agreement, where Pakistan’s IT, engineering, medical, education, and other technical experts are allowed to offer their services in China; and a more certain and easier visa regime, where Pakistani businesspeople do not have to face high transaction and travel costs.
Pakistan can also expediently engage with Central Asian economies through the Central Asia Regional Economic Cooperation Program, which is supported by multilateral institutions in the region. In the past, weak coordination within the federal government has not allowed this program to move forward at the originally envisaged pace. Two corridors under CAREC pass through Pakistan and several Central Asian economies, most notably Tajikistan, have requested transit facilities for food supplies from Gwadar and Karachi.
However, cooperation with Central Asia cannot be fully realized unless Afghanistan and Pakistan engage in a meaningful dialogue to ensure peace in the region. It is in the interests of both to ensure that progress under the Afghanistan-Pakistan Action Plan for Peace and Solidarity is not derailed.
Another encouraging sign is the strengthening Moscow-Islamabad relationship. Russia’s keenness to work with China on the Belt and Road Initiative is a welcome sign for Pakistan, which can now engage both major powers simultaneously. While there has been a significant increase in engagements in the civil and military tiers, Pakistan should continue to persuade Russia to open a more broad-based cooperation going forward. Unfortunately this cannot happen unless the top-level Russian leadership is willing to visit Pakistan. Both sides need to engage more deeply so that President Vladimir Putin looks at Pakistan not just through a strategic lens, but also a trade and investment lens.
(Dr. Vaqar Ahmed is Joint Executive Director of the Sustainable Development Policy Institute, Pakistan. His book ‘Pakistan’s Agenda for Economic Reforms’ was recently published by the Oxford University Press. Twitter: @vaqarahmed)