by Hammad Baloch 3 September 2023
Pakistan’s foreign policy has been significantly molded by the changing interests of both regional and global powers, with a particular focus on its neighboring nations, Afghanistan and India. The security and strategic dynamics within South Asia have been central in guiding Pakistan’s foreign policy choices and behaviors. However, in more recent developments, Pakistan has exhibited a discernible shift towards a more geoeconomic-oriented approach, wherein economic considerations have taken a prominent role within its foreign policy framework.
This shift is palpably reflected in Pakistan’s first-ever National Security Policy (NSP), which encompasses a broad spectrum of aspects including defense, internal security, foreign policy, regional peace, and human security. Notably, the NSP places a strong emphasis on the prioritization of citizen-centric and economic security, with a specific focus on uplifting vulnerable segments of society. This strategic reorientation underscores the recognition of the importance of comprehensive security, encompassing economic and human dimensions alongside the traditional military security aspects. Indeed, the policy underscores the critical need for economic resources to ensure both military security and the well-being of citizens, thereby emphasizing the pursuit of a geoeconomic-focused policy.
Pakistan’s economic landscape is characterized by its mixed economy, featuring agriculture, industry, and services sectors that collectively contribute to its Gross Domestic Product (GDP). Each sector presents distinct strengths and challenges, significantly contributing to the country’s overall economic growth and development. However, the nation has grappled consistently with formidable economic challenges over the years. These encompass issues such as diminishing foreign reserves, currency devaluation, and persistent high inflation rates. Moreover, the economic environment has been further complicated by factors including stringent import controls, escalating borrowing and fuel costs, wavering investor confidence, and protracted political and policy uncertainties. Given the expectation of continued sluggish economic growth below its potential in the medium to long term, a swift transition toward geoeconomics-driven policies is deemed as not only beneficial but imperative for Pakistan’s best interests.
Intriguingly, Pakistan’s economic interdependencies extend beyond its borders, involving both its neighboring countries and major global players. Among these, the most notable economic partnership is with China through the China-Pakistan Economic Corridor (CPEC), a flagship project of China’s Belt and Road Initiative (BRI), which has seen significant direct investment of USD 25.4 billion over the past decade. The United States has also played a pivotal role as a trade and aid partner, with Pakistani exports to the U.S. amounting to USD 6.56 billion in 2022. The European Union (EU) represents another significant trading partner, particularly in textiles, clothing, and other goods, with Pakistani exports to the EU totaling USD 9.94 billion in 2022. Additionally, remittances from Pakistani expatriates working in countries such as Saudi Arabia, the UAE, and Qatar constitute a vital lifeline for Pakistan’s economy, with receipts reaching USD 869 million in July 2023 from these three countries alone. Hence, Pakistan’s geopolitical location and the overall security environment play pivotal roles in steering its shift toward a geoeconomic strategy, significantly influencing its economic growth and development.
Operationalizing a geoeconomic policy entails the implementation of strategies and measures designed to achieve specific economic objectives within the context of geopolitical considerations. Several key steps are integral to the successful operationalization of Pakistan’s geoeconomic policy:
- Pakistan can position itself as a regional trade and connectivity hub by fostering closer economic integration with neighboring countries. Existing participation in regional initiatives such as CPEC and the Economic Cooperation Organization (ECO) can further enhance transportation networks, energy infrastructure, and digital connectivity throughout the region.
- To reduce reliance on a few trading partners, Pakistan should diversify its export markets. Strengthening trade relations with emerging economies in the Middle East, Central Asia, and Africa while maintaining ties with traditional partners like China, the U.S., and the EU is essential.
- Given the critical importance of energy security, Pakistan must attract foreign investment and develop domestic energy resources. This entails bolstering energy infrastructure, including oil and gas exploration, expanding renewable energy sources, and collaborating on energy projects with neighboring nations.
- To attract Foreign Direct Investment (FDI), Pakistan must create an investor-friendly environment. Offering incentives, tax breaks, and streamlined procedures for investors, particularly in sectors such as infrastructure, manufacturing, mining, agriculture, and services, is necessary. The operationalization of Special Economic Zones (SEZs) can facilitate investment and industrial growth.
- Active engagement with regional forums and organizations is critical to foster economic cooperation and shared development objectives. Leveraging platforms like the South Asian Association for Regional Cooperation (SAARC), ECO, and the Shanghai Cooperation Organization (SCO) can strengthen economic ties and collaborative pursuits.
- Prioritizing investments in human capital is crucial for driving economic growth. Pakistan should concentrate on enhancing education and vocational training systems to cultivate a skilled workforce capable of meeting the demands of a rapidly evolving global economy.
- Pakistan should harness the potential of the digital economy by promoting technological innovation, fostering e-commerce, and developing digital infrastructure. Initiatives are required to expand access to high-speed internet, support startups and entrepreneurship, and cultivate digital skills to tap into the burgeoning digital market.
- Consistent employment of economic diplomacy as a tool to advance geoeconomic objectives is imperative. Engaging in bilateral and multilateral negotiations, trade agreements, and economic partnerships to enhance market access, technology transfer, trade facilitation, and investment attraction from diverse sources is vital.
In conclusion, Pakistan’s shift toward a geoeconomic approach should not entail neglecting its geopolitical considerations. Instead, it should acknowledge the intricate interplay between economics and geopolitics, striving to integrate economic factors into its broader strategic decision-making processes. A geoeconomic strategy must strike a delicate balance between economic interests, security concerns, and political objectives to maximize Pakistan’s influence and the well-being of its citizens. Overall, Pakistan’s NSP, with its focus on citizen-centric and economic security, represents a holistic approach to addressing various facets of national security. It underscores the importance of human security within the geoeconomic policy framework, ensuring that economic development is not only sustainable but also inclusive, benefiting all individuals and communities. The shift in policy direction underscores the recognition among Pakistan’s policymakers that to boost its economy and enhance its global standing, the country must offer the world more than just its geostrategic location. Nonetheless, meaningful implementation of this policy direction remains imperative for Pakistan’s brighter future.