The memo offers a pragmatic blueprint for how Pakistan and the US can recalibrate their relationship amidst shifting geopolitical dynamics. It signals a departure from the past toward a future built on mutual understanding, cooperation, and shared prosperity. It proposes concrete actions to promote sustainable bilateral relations based on consultations with stakeholders and policy circles. From leveraging Pakistan’s growing tech sector to addressing climate change and enhancing public health cooperation, the memo outlines a roadmap for mutual benefit and calls for a nuanced, multifaceted approach to engagement, moving beyond traditional security concerns.
Introduction
The latest National Security Strategy (NSS) of the United States1 outlines the return of great power competition and the need for Washington to outmaneuver China and constrain Russia. To accomplish this, the strategy emphasizes the importance of building and maintaining strong alliances in the Indo-Pacific. As the depth and breadth of these relationships are likely to play a crucial role in shaping future competition with China, it is vital for the United States to strengthen existing partnerships and stabilize relationships with estranged partners. Pakistan is an important example. Fostering collaboration in areas that may not have been taken advantage of in the past — technology, health, climate, and education — can promote stability, understanding, and long-term engagement between Washington and Islamabad.
The U.S. and Pakistan share a complex history of positive partnerships and tense distancing phases. Successive U.S. administrations sought cooperation with Pakistan on an ad hoc basis to accomplish short-term security interests. At the same time, Pakistan leveraged the relationship for its own strategic goals, with limited consideration for sustainability from both sides. The myopic, reactive approach of policymakers from both countries has resulted in the need for a framework for engagement beyond security matters. Under the Biden administration, U.S.-Pakistan ties have been strained, a situation further compounded by the botched U.S. withdrawal from Afghanistan in August 2021.2
The factors that previously bound the two countries together have changed; therefore, the strategy must change, too. Pakistan and the U.S. had a close, if contested, partnership over the two decades of U.S. military involvement in Afghanistan following the September 11 attacks. However, the U.S. now uses the great power competition lens, rather than the counterterrorism one, to navigate its foreign policy. Consequently, Pakistan’s close relationship with China has factored into Washington’s regional calculus. Pakistan’s exclusion from the NSS3 provides a welcome break from the traditional focus on security that has long dominated U.S.-Pakistan relations, allowing both nations to explore new opportunities for cooperation.
With a new government in Pakistan and the U.S. gearing up for its elections later this year, both countries have an opportunity to reassess and reconfigure ties. This policy memo suggests ways to transform the bilateral relationship in light of changed priorities under great power competition. It focuses on how both states can effectively navigate Pakistan’s challenging investment climate to strengthen people-to-people ties and institutional linkages that transcend political changes and short-term interests. Drawing on the author’s consultations with stakeholders in Washington and experience in Pakistan’s policy circles, this policy memo proposes specific actions in nonsecurity issue areas — health, education, and climate — that can promote sustainable bilateral relations and counter anti-Americanism in Pakistan while also advancing U.S. interests in South Asia and the Indo-Pacific region.
Moving US-Pakistan Relations Forward While Navigating Great Power Competition
The Taliban regime’s return to power in Afghanistan has triggered a humanitarian crisis domestically as well as increased threats to regional and global security.4 The Islamic State –Khorasan Province and Tehrik-e-Taliban Pakistan groups pose potent threats to Afghanistan. The U.S.’s withdrawal has left a power vacuum that creates a potential opening for other regional players.5
CHINA
China’s pursuit of closer ties with Afghanistan, Pakistan, and Central Asian countries through expanding the Belt and Road Initiative (BRI) predates the U.S. withdrawal from Afghanistan. It remains a key talking point despite slow progress.6 In January 2023, the Taliban renewed a previously signed contract with China’s Xinjiang Central Asia Petroleum and Gas Co. to extract oil from northern Afghanistan.7 The agreement could pave the way for other economic projects and partnerships, giving China a stronger foothold in the region.
China is also exploring other mineral resources in Afghanistan, including copper and lithium deposits estimated to be worth more than $1 trillion.8 While there is reason to question the near-term viability of such efforts, any resulting significant contracts backed by Beijing could assist the Taliban regime in gaining international legitimacy.9 China’s goal is to safeguard its economic investments by maintaining stability in Afghanistan and broader regional security in Central Asia,10 where it has made significant investments in energy and infrastructure projects as part of its BRI.11
RUSSIA
Russia has also been cautiously active in Afghanistan. For instance, in 2023, the Russian President’s Special Representative for Afghanistan, Zamir Kabulov, met with the Taliban’s Acting Foreign Minister, Amir Khan Muttaqi, to discuss potential areas of cooperation between the two countries, including the possibility of Afghanistan importing essential commodities from Russia.12 The Taliban regime had previously signed a provisional agreement with Russia to import petroleum products and wheat at a discount.13
Additionally, there are growing concerns that Russia may be recruiting former Afghan soldiers to fight in Ukraine, which could destabilize the region; some former Afghan soldiers have claimed Russian recruiters are approaching them.14 These fighters purportedly do not want to take up arms for Russia but feel that Western governments have abandoned them, leaving them with few options.15
A SOUR POINT FOR US-PAKISTAN RELATIONS
In some quarters of Washington, the perception that Pakistan has chosen sides in the great power competition underway in the Indo-Pacific is only partially accurate. While Pakistan and China have close economic and strategic ties, Pakistan has also maintained strong relations with the U.S. and its allies. By overlooking Pakistan as a potential economic partner, the U.S. risks pushing the country indisputably into China’s sphere of influence. A strong U.S.-Pakistan relationship could ensure that Pakistan does not become overly reliant on China and could protect U.S. interests in South Asia.
Washington has excluded Pakistan, and Gwadar by extension, from its Indo-Pacific strategy that aims to outcompete China. In February 2022, China Foreign Minister Wang Yi stated that China was open to working with the U.S. on a G7-led global infrastructure plan (Build Back Better World, or B3W) and invited Washington to join its Belt and Road Initiative.16 Though the BRI and B3W are intended to compete with each other, Pakistan can be a potential place to explore the idea of the coexistence of both initiatives. However, this requires a long-term commitment and dedication from both Pakistan and the U.S. to prioritize economic and investment engagements.
From Pakistan’s perspective, its National Security Policy for 2022-202617 and leadership statements18 have consistently reiterated Islamabad’s neutrality in the great power competition and its desire to retain beneficial relations with the U.S. and China. Pakistan might not have the road map for that yet, but Washington’s political willingness will shape the level and scope of future engagements.
To help reduce Pakistan’s dependence on China and further engagement, Washington and Islamabad can diversify their economic partnership to favor both U.S. and Pakistani interests. The U.S. has worked to deepen economic and commercial ties with Pakistan over the past two decades. Direct U.S. investment in Pakistan increased by 50 percent in the 2021-2022 fiscal year, reaching its highest level in over a decade.19 U.S. firms have a strong presence in Pakistan, with over 80 wholly or majority-owned U.S. subsidiary firms registered with the American Business Council of Pakistan and the American Business Forum. These companies have collectively invested over $1.5 billion in Pakistan and generated approximately $3 billion in annual revenue.20
A multifaceted approach is needed to consolidate the U.S.’s economic engagement in Pakistan. Direct U.S. investment in Pakistan can help achieve this goal, as can contributions from friendly countries such as Saudi Arabia, the United Arab Emirates, and Japan. There are some areas in which Pakistan can strengthen its business sector, such as regulation, intellectual property protection, and taxation. Currently, some challenges Pakistan’s investment climate faces include bureaucratic red tape, inadequate infrastructure, political instability, and security concerns in certain regions. Despite these challenges, the market offers attractive trade and investment opportunities in certain sectors, with fewer restrictions on the movement of capital and no shareholding restrictions for foreign companies.21 Addressing these challenges and implementing reforms in governance and infrastructure development will be crucial to fully unlocking Pakistan’s economic potential and attracting sustained foreign investment.
Along with direct U.S. investment, the U.S. International Development Finance Corporation (DFC) can explore U.S.-Pakistan collaboration in renewables, information technology (IT), textiles, and pharmaceuticals by facilitating partnerships, offering support, and promoting sustainable practices. However, navigating regulations and ensuring mutually beneficial agreements will require sustained compliance and cooperation from Pakistan, as exemplified by challenges related to tariffs in an existing DFC wind-power project.22 This project aimed to support renewable-energy initiatives by financing five wind-power projects, only to have progress stalled by a Pakistani push to lower tariffs across all independent power producers. The DFC reportedly offered a generous package of revised terms for the power purchase agreements of its sponsored wind projects in Pakistan. Still, the challenges in this renegotiation process underscore broader complexities within Pakistan’s investment climate, including regulatory uncertainties. Addressing these challenges is vital to unlock the potential benefits for Pakistan’s energy sector and economy.23
The U.S. government can also work with lawyers, business advocacy organizations, civil society, and other stakeholders to identify incomplete projects and evaluate areas where U.S. support would be most useful. Technical assistance and training programs for Pakistani entrepreneurs and small and medium-sized enterprises can also increase their competitiveness, reducing Pakistan’s dependence on China and promoting more significant economic ties between Washington and Islamabad. The U.S. Congress is considering the reauthorization and renewal of the Generalized System of Preferences (GSP) program for Pakistan,24 which had expired, as well as reconsidering a bilateral investment treaty. While Pakistan remains on the list of countries eligible for GSP benefits,25 the U.S. has not renewed Pakistan’s status yet. The renewal would be received favorably by Pakistan 26 and would create room for a bilateral investment treaty.
Regarding the potential of the BRI and B3W, Islamabad’s point of view is that it would be valuable for Pakistan to participate in both projects to address the country’s infrastructure gaps.26 For Washington, Pakistan’s trade agreement with China makes it an ideal re-exporting hub. U.S. companies could build manufacturing facilities in Pakistan, enabling those goods to reach the Chinese market as Pakistani exports. This mechanism would provide the U.S. with a neutral platform to continue accessing the Chinese market while still decoupling from Beijing.27
Potential for Multisectoral Engagement
The technology, education, climate, and health sectors have emerged as promising, pragmatic areas for interinstitutional and interdepartmental collaboration between the United States and Pakistan. By prioritizing investment and cooperation in these sectors, Washington and Islamabad can create a sustainable and mutually beneficial partnership independent of political instability and governmental change in either country.
TECHNOLOGY
Pakistan is working to forge a hospitable environment for its domestic tech industry. At the 2022 Pakistan Tech Summit in Silicon Valley, Ambassador to the U.S. Masood Khan highlighted that Pakistan is ready to join the IT revolution by integrating and absorbing innovations in U.S. technologies.28 Despite the global pandemic and macroeconomic challenges, Pakistan’s market for computers and peripherals — a major prospective sector for the U.S. — has experienced growth in recent years.29 Pakistan’s startup and tech sector witnessed unprecedented growth during the COVID-19 pandemic. 2021 was a record-breaking year, with tech startups raising $350 million, while in 2022, Pakistani startups raised more than $227 million in the first half of the year and $322 million overall. Additionally, Pakistan’s IT services sector has emerged as the largest net services exporter, with IT exports doubling from $1.19 billion in 2019 to $2.62 billion in 2022.30 Fintech is now on the rise in Pakistan, benefiting from positive regulatory changes, including the introduction of new electronic money institutions and digital banking licenses. The digitization of the education and healthcare sectors has also contributed to the growth of Pakistan’s tech sector.31
In 2003, Pakistan and the U.S. signed a comprehensive Science and Technology Cooperation Agreement.32 Since 2005, 110 projects have been funded in the health, water, agriculture, and energy sectors. However, according to publicly available information, no new projects have been initiated under this framework since 2017.33 Agencies from both sides could revisit and reactivate projects under this existing framework.
Concurrently, Washington could consider funding capacity-building projects and making Pakistani entrepreneurs more investable as a way to build an innovation culture and know-how in Pakistan. There is potential for technology education and exchange programs. For instance, Pak-U.S. Tech Exchange is an initiative that connects startups, tech professionals, business students, and government leaders in Pakistan directly with successful Silicon Valley entrepreneurs, allowing them to learn and exchange best practices on developing a startup ecosystem in the country.34 The U.S. State Department’s Bureau of Education and Cultural Affairs has focused on encouraging women entrepreneurs in Pakistan, providing them with training and seed-funding opportunities.35 A similar initiative, the U.S.-Pak Women’s Council’s Women’s Economic Accelerator Program, a pilot startup competition, was launched and successfully implemented in 2023.36 USAID is another example where collaboration between the U.S. and Pakistan’s technology community is focusing on removing barriers to investment and trade, facilitating Pakistani-led improvements in government relations, and improving the overall investment climate of Pakistan. Both states can ensure continuity and scaling of such programs to develop technological linkages between the U.S. and Pakistan.
EDUCATION
Pakistanis widely value a U.S. education and opportunities to conduct research in the country, as witnessed by a 17.4 percent increase in the number of Pakistani students studying in the U.S. during 2021-22.37 Pakistan’s Fulbright program is the largest in the world in terms of financial contributions by the U.S. government, providing scholarships for Pakistani students and professionals.38 Furthermore, the U.S. government, through USAID, is partnering with the Pakistani government to launch a $19 million five-year program to improve Pakistan’s higher education system and increase the employability of its university graduates.39 The U.S. Mission in Pakistan identifies creating “a healthier, better educated, inclusive, and more skilled workforce” in Pakistan as a core objective of the bilateral relationship.40
In addition to continuing such existing programs, the U.S. government could also extend its assistance to programs like Scholars at Risk, which works to offer a temporary refuge to academics threatened by harassment or incarceration.41 Further, the two countries could explore expanding two-way university exchange programs to facilitate greater interaction between Pakistani and American youth, creating generational pathways of engagement and people-to-people interaction.
Finally, there is a strong need for local voices and Pakistani perspectives to be a part of Washington’s policy community, to help facilitate a more sustainable and mutually beneficial bilateral relationship. However, stringent visa and immigration policies on both sides restrict this potential. Investing in educational scholarships, exchanges, and fellowship programs, as well as opening up travel and work authorization policies, will enable students and researchers from both countries to gain a better understanding of each other.
CLIMATE CHANGE
Climate change presents a significant mutual interest between the U.S. and Pakistan. Proactive and preventive approaches toward climate change are more efficient than the post-disaster aid and reconstruction efforts that have characterized U.S.-Pakistan climate cooperation so far. Addressing climate change could create economic opportunities for Pakistan, modernizing its agricultural sector and increasing exports to meet the global demand for food security. The U.S. can support Pakistan in reducing its reliance on fossil fuels and mitigating the negative impacts of climate change in line with fulfilling its own global commitments.
The U.S. has already partnered with Pakistan to launch a $23.5 million four-year power-sector improvement project.42 The U.S.- Pakistan Green Alliance Framework to advance cooperation in climate-smart agriculture, renewable energy, and water management is a main vehicle of cooperation between both countries.43 Another way to enhance cooperation is by inviting Pakistan to join the U.S. State Department’s Energy Resource Governance Initiative. By joining, Pakistan can benefit from technical assistance and capacity-building to improve its energy sector and attract more American investment. After all, the U.S. Agency for International Development helped Pakistan diversify its fuel sources, and now the country is generating 4000 megwatts (MW) of electricity through imported liquified natural gas.44
Another way to enhance cooperation in this sector is through partnering to share early-warning flood risk data that would give authorities time to proactively prepare to mitigate impacts.
HEALTH
In July 2022, the U.S. and Pakistan hosted the U.S.-Pakistan Health Dialogue at the U.S. Department of State.45 Both sides identified areas for mutual engagement and established an action plan to reach shared goals, including establishing a Center for Disease Control in Pakistan, global health security, childhood immunizations, tackling COVID-19, maternal and child health, and noncommunicable diseases. The U.S. Centers for Disease Control and Prevention announced the successful transfer of the Pakistan Field Epidemiology Training Program to the government of Pakistan.46 USAID pledged to undertake new programs in Pakistan under the Global Health Security Agenda. The dialogue also advocated strengthening cooperation between drug regulatory authorities and disease control centers.
A robust Pakistan-U.S. partnership in the public health sector could provide another opening for Pakistan-U.S. cooperation in nonsecurity areas, contingent on the newly launched health security dialogue continuing to implement the established action plan. Pakistan and the U.S. may explore the idea of health tourism, modeling on Turkey’s framework.
Looking Ahead
It is crucial to acknowledge the deep-rooted mistrust and structural issues that plague U.S.-Pakistan relations. Overcoming these challenges may take years, but allowing the relationship to be shaped solely by changing international trends and past mistakes will only weaken it further. This paper has proposed addressing the remnants of the Afghan war, navigating great power competition, and promoting cooperation in four non-security areas: technology, education, climate, and health. While the U.S. should seek out opportunities that are of mutual interest in the current milieu, Pakistan should focus on becoming a more competitive and attractive market for cooperation and engagement outside the security space. The new Pakistani government’s biggest challenge will be strengthening Pakistan’s economy and preparing for upcoming negotiations with the International Monetary Fund to use its Extended Fund Facility.47 While Pakistan has a lot of work to do internally, focusing on these practical measures can build a more stable foundation for the future of U.S.-Pakistan relations.
source : stimson