Money Matters

Functional framework

By Majyd Aziz
Mon, 01, 17


Pakistan's track record as a member of regional trade and cooperation blocs has been dismal and unfavourable. The country has not benefitted in any significant way nor has taken maximum advantage of the facilities and attractions provided by these blocs and organisations. Moreover, the domestic private sector has also been at fault in promotion of its products and services among trade partners. At times, other contentious issues, whether political, diplomatic, or territorial, have overshadowed trade and investment initiatives and movement.

Regional trade and linkages have become powerful channels and tools in enhancing trade and investment and the success rate of regional economic blocs and organisations have generally brought about significant advantages for member countries. No nation can produce everything required by citizens and that is why countries import and export. Therefore, the need to forge alliances and cooperation through a structured organisation becomes important. The advantage of having regional trading blocs is that a common interdependent platform enables members to develop a functional framework of tariffs, custom procedures, protection policies, quality standards, and even bilateral arrangements, etc.

Pakistan had joined Iran and Turkey to form the Regional Cooperation for Development in 1964 to strengthen socio-economic development. However, RCD was dissolved fifteen years later because it did not live up to expectations. In 1985, the three erstwhile partners of RCD formed Economic Cooperation Organisation that was expanded in 1992 with the inclusion of Afghanistan, Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. As is the case, there is no focused structure and most of the energy is spent in meetings and preparing documents, and little beyond generic statements. There have been no substantial economic benefits for us.

Pakistan is also a member of Central Asia Regional Economic Cooperation (CAREC) Programme along with ten countries, namely, China, CAR countries, Georgia, Mongolia, and Afghanistan. CAREC is supposed to help Central Asia and its neighbours realize their significant potential by promoting regional cooperation in four priority areas: transport; trade facilitation, energy, and trade policy. Here too, Pakistan has not successfully penetrated the CAR countries, while official trade with Afghanistan is on the decline. Imports from China have shot up to over $11 billion, although this figure does not reflect the actual imports because of under-invoicing, mis-declaration and smuggling.

In 2005, Pakistan, as well as India, were inducted as members of the Shanghai Cooperation Organisation (SCO). At the Dushanbe (Tajikistan) Summit in 2000, members agreed to "oppose intervention in other countries' internal affairs on the pretexts of 'humanitarianism' and 'protecting human rights' and support the efforts of one another in safeguarding the national independence, sovereignty, territorial integrity, and social stability". Despite the presence of China and Russia, the Indo-Pak border situation is hostile and aggressive. There has been no counselling, mediation, or reprimand from the SCO headquarters.

Then there is the South Asian Association for Regional Cooperation (SAARC) of eight countries. SAARC was considered as the ideal forum for Pakistan to enhance regional trade, ensure a peaceful environment, create a citizen-centric facilitation mechanism, and promote a myriad of auxiliary initiatives within the South Asian region. This visionary cooperation agreement should have brought about a friendly atmosphere between India and Pakistan. The huge economy of India should have been the driving engine to promote trade and investment and provide the critical mass to neighbours to take positive advantage of the giant Indian market. SAPTA and SAFTA were to be the game changers. However, there has been no worthwhile benefit to Pakistan in real time. The fate of SAARC Head of State Summits is primarily dependent on whims and desires of New Delhi.

The recent cancelation of the Islamabad Summit is a vivid example of this fact. So much so, even Sri Lanka, the most vocal supporter of Pakistan in SAARC, also toed the Indian line. Bangladesh routinely rattles Pakistan. Bhutan, Nepal, Maldives, and even Afghanistan look more towards India rather than attempting to bridge the divide between Islamabad and New Delhi.

All in all, Pakistan has been getting the short end of the stick. The depressing fact is that Pakistan's political leadership, as well as private sector, has seldom attempted to give importance to the regional forums in the true sense. There is always a flurry of activity in attending and hosting meetings and conferences but when it boils down to brass tacks and essence, there is no institutionalised or cohesive plan of action to gain meaningful advantages and make pragmatic and profitable inroads. The famous quote in William Shakespeare's play, Julius Caesar, reflects the prevailing situation:  “The fault, dear Brutus, is not in our stars / But in ourselves, that we are underlings.”

Pakistan has Free Trade Agreements with Sri Lanka, China, and Malaysia while Preferential Trade Agreements have been signed with Iran, Indonesia, and Mauritius. This is Pakistan's record card. Every now and then, the Prime Minister or Commerce Minister announces the imminent signing of PTAs with a host of countries such as Turkey, South Korea, Thailand, Jordan, etc. Nothing much comes out of these statements and there is a standstill on the FTA/PTA front. Moreover, Pakistan has not taken maximum advantages in export enhancement while these agreements have been a boon for importers.

One of the pillars of the Strategic Trade Policy Framework 2015-2018 stipulates market access through enhancing share in existing markets, exploring new markets, trade diplomacy and regionalism. STPF highlights a number of steps to be taken through multilateral, bilateral, and regional ways. Visions and policies become a reality only if properly and passionately implemented. There are two more years to navigate through the turbulent waters and achieve relative success. Achieving success would be a litmus test for the political government since national elections are due in 2018 and the trade indicators are not positive at present.

Pakistan and Afghanistan are still trying to remove the cobwebs from the Afghanistan-Pakistan Transit Trade Agreement and there is a long hiatus in the process of negotiating and approving the Afghanistan-Pakistan-Tajikistan Transit Trade Agreement. Pakistan ratified the Transports Internationaux Routiers (TIR) Convention in 2015 and is in the process of implementing it. Moreover, the proposed Land Port Authority is still just on paper and no progress has been reported.

The two prime stakeholders responsible for securing a strong presence in the global marketplace are the policymakers and the exporters. The export regime has substantially been affected by the narrow vision of decision makers to accord priority and importance to the exports from Pakistan. The exporters face many roadblocks and hindrances that impact negatively on exports and it is imperative that most of these roadblocks and hindrances are removed or cleared. From non-payment of export refunds, from misuse of Export Development Funds, from infrastructure shortages, from outdated and regressive laws, rules and regulations, and from other facilitation, there is hardly a comfort zone for exporters. Ironically, most of Pakistan's regional competitors are providing open and hidden subsidies and facilities to their exporters.

There is also an obvious disconnect between prestigious think tanks and research enterprises and the private sector. It is high time that the policymakers, private sector, as well as these think tanks initiate a comprehensive long-term action plan to get Pakistan on the export wagon. The focus should be on global marketing of Brand Pakistan and the recommendations should be practical, workable, and owned by both government and private sector. They must recalibrate their approaches to embrace a new forward-looking strategy anchored in the fundamentals of geo-economics.

A vision on paper is worth nothing. A vision, if implemented, is worth its weight in gold. That is where the critical mass of think tanks comes into play. Too much water has flowed under the bridge and the export regime continues to fall into the abyss. This dire situation is effectively eviscerating the country’s ability to invest in the prosperity of the people.

Therefore, in all sincerity, membership in regional forums is not helping Pakistan. A rethinking is required. Initially, Pakistan must announce unilateral suspending of membership in SAARC since the regional bloc has proved to be of little advantage. Pakistan would also not take active part in any organisation under the SAARC umbrella, such as SAARC Chamber of Commerce and Industry, SAFMA, etc. Instead, Pakistan must concentrate on connectivity with China, Russia, Iran, Afghanistan, and CARs, through multilateral and bilateral means. In the words of Edward Porter Humphrey, "True wisdom is to know what is best worth knowing, and to do what is best worth doing.”

The writer is former president of Karachi Chamber of Commerce and Industry