Analysing Pakistan’s economic prospects

By Humzah Haroon

Economics is a social science, a wide and extremely important subject that is more relevant in today’s world than it has ever been before. In the context of Pakistan, economics has never been on the forefront of policy initiatives but it seemed as though the prospect of economics would change when the new government and the new finance minister came into power.

However, as a student of economics, I feel disappointed in this matter. But let’s not get bogged down with the technical aspects of economics and how Pakistan may end up suffering in the long run, lets instead try and focus on the relevant questions that every person whether a student of economics or an economic analyst, needs to be asking themselves.

Question 1: Why are we settling for the short-term?

I implore the reader to take a look at the current economic prospects that are supposed to help Pakistan gain economic stability. First, let’s talk about the China-Pakistan Economic Corridor (CPEC). There is absolutely no point in denying that CPEC will not place Pakistan at the forefront of economic gain, however, it is also juvenile to deny that CPEC will not have any negative consequences in the long term. 5 to 10 years, which still constitutes a short term, into the completion of CPEC we will definitely see increasing economic returns, however, when the economic prospects gain substantial traction then China will definitely intervene and ask for something in return. This will affect Pakistan in the long term as they will be liable to ‘payback’ the Chinese.

Those who admit that China only invested in Pakistan because of the initial benefits that the corridor will have are grossly mistaken. China has taken this initiative to harbor economic gain for a very long time. The CPEC project is the gateway for the One Road, One Belt (OBOR) initiative.

An article published by the International Crisis Group reports: “Locals need to see dividends; benefits that overwhelmingly flow to outsiders would aggravate social and political divides, fueling tension and potentially conflict,” and as we can see that this is exactly what seems to be happening, with the Chinese manufacturers, workers and businesses benefitting a lot more than the Pakistanis.

The same article added, “Moreover, Pakistan’s trade deficit with China has tripled over the last five years, reaching around $12 billion in 2017. Leading economists and representatives of Pakistan’s business community to see the country’s Free Trade Agreement (FTA) with China, signed in 2006 and operational the following year, as disproportionately benefiting the latter.”

This goes to show that in the long-run China has a lot more to gain at Pakistan’s expense, whereas, the government and policy makers have convinced the general populous that CPEC has nothing but steady advantages for the country.

On a side note, Gwadar is the epitome of economic progress and countries like Dubai and Iraq are under danger of losing competition in the Persian Gulf, with the development of the Gwadar port in the Arabian Sea. Therefore it goes without saying that it would be in the interest of, for example Iraq to make sure that their main port – Basra, which contributes significantly to their economy – is not in danger of being run out of business, which will be the inevitable conclusion of the development of the deep sea ports in Gwadar.

Sadly, it does not end there. Since coming into the government, the finance minister Asad Umar has faced a lot of criticism from the community. While the budget bill introduced by Mr. Umar was revised after a few months, it has not really shown much improvement in the economy, with the rupee being less competitive against the dollar than it has ever been before. Considering this, would this not have consequences in the future?

To make matters worse, the government has tried to convince the general population of the “shot term” benefits of this bill as well.

All in all, good news in the now does not constitute to good news in the future.

Question 2: Why does Pakistan fail to see the economic prospects that its geographical location provides?

Courtesy: Geology.com

Let’s refer to the map of Pakistan as shown above. Pakistan provides the shortest distance that China has to undertake for its OBOR initiative. It is right next to the Arabian Sea where the deep sea Gwadar port is located and it shares waters which the Gulf countries have utilized for economic gain for years. Keeping these points in mind, Pakistan is geographically ‘god-gifted’, and unfortunately little has been done to take advantage of this natural geographic advantage. The term ‘cash it in’ could be not be better suited for the situation that Pakistan is in at the moment.

It seems as though other nations such as China, Saudi Arabia and the UAE have seen the true potential of Pakistan’s geographical position more than the country’s policy makers. As a result, the foreign direct investment has increased due to which foreign countries now hold stocks in projects like Gwadar.

Ironically Pakistan has never had enough money to develop these sectors on its own and has relied on foreign investment, but if we had taken the time to carefully implement and produce regulations that affect the country more positively, foreign investors would have abided by them even if they were strict. Unfortunately, now we are at the mercy of foreign investors to a large extent such that, for example, China may be able to have a significant influence on Pakistan’s policies.

Conclusion

Pakistan needs an economic policy that is in its self interest devoid of the influence of foreign powers. While we may have lost some control due to past policies, there is still a chance to take control of our own destiny by capitalizing on the natural advantages we have been bestowed with. For that, however, we need leaders with sound economic sense and the foresight to make the best decisions for our long-term future. While we may have been devoid of this in the best, we can always hope that the future will bring better economic decision-making.


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