“We can easily forgive a child who is afraid of the dark: the real tragedy of life is when men are afraid of the light”— PLATO
John Ruskin, a British intellectual, described the economy as ‘the bastard science of darkness.’ He developed the idea of the ‘Economic Man.’ A material thought that now governs how the world views its activities – always in search of one’s own national interest, regardless at the cost to the interest of others.
Walter Block, an American economist, expanded on the idea of an economically driven world. He argued that the science of economics led to a ’brutish’ world where morality was not a priority.
Rand Cooperation, a US think tank, in its analytical paper, ‘The future of warfare in 2030s,’ explains how wars are not only fought because of economic objectives to acquire what one does not have, from those who do, but establishes that economy itself could now be an instrument of war. This is especially so now, as wars have become more total as opposed to being limited in application, and the masses themselves, become a target. Hunger and deprivation are the road to coercing a political decision among the civilized world today.
So as the economy begins to matter more and more, Pakistan finds itself in a dire state. With a debt-to-GDP ratio at 84.8% ($278Bn in 2019), the country finds itself trapped in a vicious cycle. There is hardly a possibility of its economy ever improving as the policies overwhelmingly remain unchanged. Therefore, any hope for an economic turnaround under these circumstances is insanity.
The GDP has to grow substantially to keep up with external and internal debt repayments, while ensuring adequate growth at the same time. New solutions are needed to address the existential economic problems that limit the space for any recovery. This recovery is essential for developing an autonomous structure to make independent fiscal decisions in the interest of the people, the sovereignty to make long-term financial plans in the interest of the State and to be able to exercise the liberty of political choices as an independent nation.
Sustainable growth is defined in financial terms as the maximum growth rate a company can sustain without having to increase financial leverage. These leverages are through debt and equity. The first is related to loans and the second to shareholders. This theory can be expanded up to the national level as well where loans are getting more difficult as well as expensive to acquire and there are no significant international shareholders, in terms of Joint Ventures or direct foreign investment. Yet, while one talks of best practices and future growth, it implies that one should somehow manage to meet one’s current needs without compromising the needs of future generations. But that’s not what’s happening and with each passing day, the present is criminally trespassing into the sustainability of the future. Someone needs to not only take an account of this but put a stop to it; red lines need to be defined and limits must be established.
But to discuss economic growth and sustainable development in a vacuum by itself makes no sense. One cannot make any recommendations that are oblivious to the influence and role of the government, its policies, and interventions.
The first and foremost step would be political stability, certainty, continuity and security. Without this, economic activity becomes disorganised, unpredictable and the risks are too high for any individual, institutional or foreign investment. The second issue is that of an effective foreign policy to establish a national standing amongst the comity of nations vis-à-vis trade, corporate undertakings and commercial activities. Business evolving around the inter-state enterprises, joint ventures and foreign investments, both incoming as well as out-going, cannot be done in isolation. Therefore, a sensible foreign policy is a must to integrate the nation’s fiscal endeavours into the global economic process and developments. Yet, the current scenario is characterised by the poor international image of the country and its low ranking at the global level in almost all fields of governance. Pakistan has a bad reputation and lacks credibility for investors, as reflected in some of the more pronounced indicators, among many others:
- Pakistan stands 129 out of 163 in the sustainability index
- 140th in corruption out of 180 countries
- And its judiciary ranks 130th out of 139 in judicial propriety.
These must improve and governance needs to develop a credible face; in fact, as a nation in general and a society in particular, there is a need to get out of the denial where the society seems to remain suspended in time, seeing no wrong in itself, promoting false pretenses of a superior culture with an overstated and hyperbolic perception of its history. Patriotism is not about bragging that one’s country is the best only because one was born in it. There are other far more measurable and defined parameters which must come into the equation before one can claim any level of ranking in any field. Begging the world for funds to survive, while at the same time projecting national pride is a big contradiction.
However, since this paper is about economic reforms, it shall restrict itself to those areas that are relevant to economic growth, but with total acknowledgment of the fact that political and administrative reforms must also be undertaken for which a separate effort is needed. Such reforms are essential to make any prospect of economic growth and development a realistic possibility. So keeping this in mind, some of the most salient aspects, considered essential for economic growth only and focusing on the national economy only, are described in the following paragraphs.
Developing Human Resource
To address the future economic equation, it is of utmost importance to first recognise and then address the greatest liability that is impinging on growth. This dubious distinction, uncontested and unchallenged can be safely attributed to the population — its current volume and growth and then the quality of human resource that this country is churning out.
Pakistan’s population stands at around 230 million people. It is growing at 2.0% annually and by the year 2050 it is estimated to be 310 million. Pakistan ranks 5th in the world by population. This impacts directly on food security and the water resources. Living space, pollution and environment all take a hit because of such a mass of humanity.
Our annual budget shows that one of the major contributors towards the national income are the foreign remittances. They were $31.2 billion for fiscal 2021-22 — growing by 6.0% annually, and may even increase to 8.0%. Remittances at present are estimated to be about 9.0% of the GDP as opposed to an international average of 5.0%. However, this is mostly from unskilled labour that largely works in the Middle East, undertaking menial jobs and who wallow at the lowest rung of employment within this region.
One must be realistic and come to terms with the fact that a large part of the population in the country will never acquire the literacy needed to find a white-collar job and as such qualifying for a blue-collar job must become a focus and a desirable goal to sustain an average family financially. In fact, one finds it difficult to define any national policy that can differentiate between literacy and education, with the former relating to a defined level of certified qualification (leading to a white-collar job) and the latter more related to technical skills integrated into the wisdom of the street and conforming to the local way of life, leading to a blue-collar job.
It will be in Pakistan’s economic interest if substantial part of the focus is shifted toward technical qualifications and expertise, leading to blue-collar employment. Technical skills must be developed and standards established through recognised international certification. Pakistan needs to set up globally recognised poly-technic institutes with a third party accreditation that would allow Pakistan to export skilled labour instead of unskilled labour the world over. Preparing skilled labour in recognised established institutes, technically trained as plumbers, electricians, vehicle mechanics, masons, builders etc. would contribute immensely towards the GDP as well as towards nation building.
If these institutions are set up based on international affiliations and are recognised and certified by the European, Australian, American, Canadian and British guilds, employment for the younger populace could be easily found and facilitated globally. Considering that the projected population in 2050 in Pakistan would be close to 310 million, such an endeavour where young people may be facilitated for gainful employment the world over, is an extremely important aspect of economic growth and development of the human resource. Also standards within the country would improve such as construction skills, mechanics and technicians who currently learn their respective trades through apprenticeships taught from father-to-son or other such family connections.
All these recommendations in no way impinge on or imply that method and means to contain and limit the population growth at some defined level, should not be undertaken concurrently and with equal enthusiasm. To maintain a large population does not make for a sustainable Pakistan. However, also, no nation can go forward in this techno-savvy world without imparting compatible education to its future generations at the high-end level, allowing them an opportunity to compete at the global level. After all, as was recognized that “after bread, education is the first need of the people’, Georges Danton.
The expertise within the country lacks competence and continues to drive the education system based upon a self-defined syllabi and curriculum that is regressive in nature and limited in scope. With global developments and outlook in digitisation, artificial intelligence, robotics and disruptive technologies, Pakistan has a lot of catching up to do.
The present curriculum, method and medium are all outdated and at times, can even be obscure. Future generations are inadvertently denied building intellectual capacities or acquiring progressive knowledge because of criminal indifference towards global standards and internationally compatible education systems. Pakistan’s youth need to keep abreast and survive in a world that is making headway, in leaps and bounds, in the realms of science and technology.
A generation stands to suffer and is held back on account of the lack of intellectual competence compatible to international standards aggravated by a heavy madrassa influence, corrupting contemporary education values – there is a dire need to get out of the paralysis of denial and face reality as it stares all in the face.
The ‘Single-National-Curriculum’ may address the needs of people with limited language skills and poor awareness but it also subsidises mediocrity and lowers standards to accommodate those who cannot rise to higher standards. The fatwa banning the printing press in Turkey in the 15th century ensured that Islamic Civilisation would never rise or ever again have a competitive edge over western knowledge in sciences, medicine and art. Similarly, it appears, the government is bent on repeating the folly of yesteryears. This is a self-inflicted wound caused by an ignorant and politically self-serving administration in search of cheap popularity, playing to an ignorant gallery.
There are only six universal languages in the world where education, scientific developments, medical progress, business etc. evolve around. These languages are universal only because they acquired a recognition and global respect as mediums of communication in the expansion and illustration of sciences, literature, general knowledge, and development of civilisation, social and civic sciences as well as functional financial transactions and practices. They represent developed societies that were emancipated and liberated allowing for large scale global developments.
Pakistani society does not have any such pretensions or aspirations being indifferent to global progress in every field. Pakistani schools and colleges never promoted modern scientific study because of which we suffer a backward society, drowning in superstition, magic, divinity and extremism. The nation never evolved and remained suspended in history in a false and exaggerated account of its past. Now to expect that the international community will respect or recognise Urdu-language as a useful or functional language, is a wishful thought. If the nation continues to obstinately stick to this medium, it will never allow Pakistan’s younger generation to go global in thought or live an enlightened and progressive life. Generations will remain hostage to what is considered as tradition, custom and local convention. Pilots cannot fly and no plane can be operated by a crew that does not know the international lingua-franca. So whereas it is alright to have high national spirit and display emotional patriotism, yet these values must never be blind or lead to a dead-end.
Urdu should be promoted and taught as a subject but the medium of education must be English to allow everyone an equal opportunity to go for higher education anywhere in the world. Let Pakistani society grow and first contribute to civilisation, be recognised as a partner in a free and liberated world before one can expect one’s language to become an instrument of custom, progress, learning and wisdom.
In fact, as it’s now, a basic right is being denied to future generations by politicising the education system and justifying its current mediocre standards through ideological rhetoric. There is a need to immediately acquire internationally recognised and acceptable syllabi and programmes. All exams must be third party evaluated allowing for internationally-recognised certification. This is the right way in empowering the youth as they are sent forth into the world to represent their country – not slogans without substance.
The largest sector of our economy rests in agriculture that contributes only 24% to the GDP but involves about 65% of the total population. Even the largest manufacturing industry, which is cotton textiles, is agriculture based.
Here, there is a need to introduce reforms that include crop management, fertilizer and pesticide application, better irrigation techniques and improved farm practices. The soil is totally devoid of NPK (Nitrogen, phosphate and potassium), and needs to be revitalised.
There is a need for radical reforms to improve farming practices. Today, Pakistan has the lowest yields in every major crop when seen against any international data. Pasteurization of milk is the need of the hour to control disease and waste. Such plants can be set up centrally in all regions where milk can be easily brought in. Unfortunately, the parliament did not find it within itself to pass the relevant law for the pasteurization of milk and succumbed to the pressures of the local milk-vendors who sell polluted milk. This is now leading to stunted growth in children.
Meat processing is ad hoc and must also be properly regulated. The type of feed to the animals must be properly defined for quality and should then be suitably regulated and supervised. If proper regulation is undertaken and ‘foot-and-mouth’ disease eradicated, something which Pakistan is inflicted with, it would allow the export of meat. These measures would allow rural areas to generate a better income.
The migration from rural areas to urban areas is causing saturation of humanity in cities. Rural life must be improved all-around to discourage migration. Emancipation of women would help in changing the way of rural life. Let women lead in the poultry and livestock industry through soft loans. Better schools, sports and scholarships for children could assist in improving the way of life. Some important steps to improving food security are:
- How fertilizer is manufactured and applied needs to be reconsidered. Fertilizers must be blended after soil analysis on the farms. Specific areas have specific needs which need to be customized. An atlas has already been structured on these lines highlighting the peculiarities of the soil from region to region. Fertilizer manufacturers now need to integrate the farmers from every region. Mobile labs need to be deployed to ascertain the type of soil and its needs in every area. Modern blenders mixing suitable NPK (Nitrogen, phosphate, potassium) ratios in accordance to the needs of the lands should be done and only then companies should sell this customised fertilizer to the farmer. This experiment was done and a 30% increase in cotton yields was observed.
- Nutrients need to be examined such as Sulphur and zinc etc. These are catalysts to release the NPK at the right time for the plant.
- Drone technology with suitable AI must be introduced to predict, assess and deal with pests. Controlled pesticides allow for a healthier plant, enhance yields while saving resources and money.
- Water management needs to be controlled and regulated. New best practices using drip and capillary irrigation must be introduced rather than flood irrigation as is the common practice today.
- There is a lot of talk about constructing dams to store water, yet no one ever stops for a moment to consider how the water resource was depleted, that is the existing subsurface aquifer. One may be able to store more water with more dams but without appropriate regulation one shall misuse that stored water as well. This is not a sustainable practice.
- A policy to regulate regional crop management must be structured. This should define the cash crops and food crops from region to region keeping in mind the climate, water resource and the agricultural based industry. Marketing strategy to include exports can then be based on a proper coordinated plan.
- Burning of roots after harvest of rice and sugarcane is a horrible practice and must be banned. The roots can be easily converted into compost using an appropriate rotor-weightier plough. It will allow for a healthier soil.
- Tree plantation and afforestation must be undertaken as a project under national emergency. Pakistan had 6.0% forests in 1947, and now has only 3.0% as opposed to international standards 25%. The overall land cannot sustain such destructive practices.
Encouraging the Private Sector
Pakistan’s greatest burden is of course debt repayments. This implies taking a relook at the loans taken out by the successive governments and how best to retire them. To facilitate debt repayment, steps must be taken to offload many of the State Owned Enterprises (SOEs) that now number 200 such entities, which according to the World Bank are a liability.
A study conducted over the last five years reveals that these SOEs show a consistent liability towards the GDP by about 12 -18%, which in absolute terms amounts to Rs429 billion. In any case, the government must not be in the business of doing business. Instead, it should only coordinate, facilitate and define strategic goals and economic objectives, providing focus and direction for the private sector. The government should refrain from getting itself into the corporate activity, which creates serious imbalances in the national corporate structure.
Today, there is over regulation which leads to red-tape and corruption. Illogical laws, rules and regulations stifle economic and business activities. Just to illustrate a few: the GIDC (the gas infrastructure development cess) — a black law — was implemented, but the practical axle-load law was blocked. The former blackmailed industry into providing funds without setting up the promised infrastructure and the latter allowed trucks to ply on the roads tearing up the surface. This further burden’s the government substantial revenue on repair and maintenance of these roads without any reciprocal payment made by the trucks based on the loads. Unnecessary regulation and government oversight discourages investment and growth, slowing down development significantly.
Services are about choices available to clients. Potential clients should be able to choose on the basis of cost, quality, availability and reliability.
Privatisation of the energy system, its production and distribution would go a long way in developing efficiency and a competitive environment, encouraging growth. To develop alternative energy is another goal that should be implemented but through the private sector. Alternative energy, electric transportation, public charging stations and recycled resources are where the future lie. Such measures would generate higher revenue and save expenses. Line losses can be reduced by investing in the HVDC (High Velocity Direct Current) transmission lines, allowing more energy to consumers on competitive plans and payment methods. Energy must be harnessed with efficiency regardless of whether it is fossil or alternative. The national grid must have flexibility, depth and capacity to supply energy to all parts of the country under all circumstances since life must never come to a standstill from want of an infrastructural collapse or disruption.
Fixed Tax in a Cashless Economy
‘I shall easily show that it is impossible to tax further, ruinous to be always borrowing and not enough to confine ourselves to measures of economy.’– CHARLES CALONNE, 1887.
The tax system is one of the greatest hurdles to development and progress if not properly figured out. One cannot tax oneself into being a rich state. As it stands, in Pakistan, the system is skewed; it is unfair since there are huge amounts of regressive taxes that are borne equally by the rich as well as the poor. The system is narrow-based and resource limited to very few with only 1.2% (2.8 million people) registered taxpayers; it fosters corrupt practices, which is why it is totally stacked against growth, development and expansion.
An out-of-the-box solution is being suggested but it must be examined by experts as well as the government for its efficacy and functionality. After modifications and necessary changes, it must be adopted as soon as possible.
With irreversible damage already done to the national economy, the stage is now far past to expect that conventional or regular interventions may make any positive difference. And so it is time for radically different solutions to take the country out of its present fiscal quagmire. The one being suggested is to introduce a relatively tax-free economy in general, yet to introduce a fixed-tax system for all financial transactions in a newly structured digital fiscal system.
This will immediately control inflation, lower prices, improve economic activity and allow people, entities and institutions better opportunities for investment in industry, manufacturing and production. This already exist as a system in some countries. The CPEC, which is now coming of age, would become a haven for all kinds of investments — local as well as foreign — accelerating industrial growth, manufacturing and production on all its three corridors. This is an obvious road to economic development, a huge employment boom, generating financial activity and large taxable financial transactions and exports.
A government’s views on the economy were amply described by Ronald Reagan when he said, if it moves, tax it, if it keeps moving, regulate it, and if it stops moving, subsidise it. So, we desperately need to get out of the conventional governance of economic activity, as it is today, which stifles and discourages growth. Since the government would now have no visible source of income and revenue, it is suggested that a fixed-tax be imposed on all financial transactions, the efficacy of which is explained below.
Parallel to such a radical step, that of introducing a relatively tax-less society, would also be to gradually remove denominations of paper money from circulation and to enforce all financial transactions through digital banking. A fixed percentage of all banking transactions should be taxed and as such everyone would pay tax compatible with the expenditures. The rich with a greater expenditure would pay more than the poor. The figures determining revenue generated by the system being proposed needs to be properly evaluated and the efficacy of the method needs to be validated by qualified economists.
However, as to establish some benchmark to carry the argument forward, the World Bank’s figures for Pakistan’s per capita GDP has been taken as a benchmark from where the reasoning has been further developed. The working has been attempted on the lower end of the value spectrum so as not to exaggerate the resultant figures.
With a total population, estimated to be 240 million, and using international figures of the per capita GDP, i.e. $1500 as a benchmark, applying 5.0% tax deductions to it, the annual revenue of the government goes beyond $18 billion. When commercial and corporate transactions are added to this, which actually account for far more in revenue than the per capita GDP. It is assumed the overall revenue would at least go up by another 100%, making it around 36 billion. This is as opposed to $35 billion, recorded for June 2022. Today with 17% indirect taxes, individuals who pay taxes, pay about $255 annually, on essential commodities in indirect taxes at the very least, but in the proposed system one would be paying out only $75 which is 300% less than what it is now.
By introducing a digital economic system that is cashless, the informal economy would also be taken into account. At present the undocumented economy is almost as big as the formal economy and has been estimated to be around more than 35% of the GDP.
If the informal sector also gets into the tax-net, it would double the revenue and push it to at least $60-70 billion. Individual’s overall purchasing power would improve as a consequence of cheaper prices and lower cost. This means new industry would be set up because of lesser taxes, greater investments and demand.
A natural consequence of this would be creation of new employment opportunities and increased economic and financial activities. This would improve cash flows and generate substantial liquidity for the development at the state level.
Another great benefit of digitalization of the economy would be shrinking of space for corruption. It would also speed-up financial activities, make all transactions transparent and ensure that everything is accounted for with an institutional memory and record.
A cashless society has existed in one form or other since time immemorial. Various systems have come and gone such as the barter system and even now the Block Chain. Therefore, it’s not really a very new concept. The examples of nations that have taken this road include Sweden with the United Kingdom, Netherlands, Norway, Finland, New Zealand and China closely following it.
However, there are four major impediments towards the introduction of a relatively tax-free society and a cashless economy. First and foremost are the international money regulators such as the IMF and the World Bank. Since they have been politicised by the United States and the Western World, the odds are stacked up against a country like Pakistan in breaking conventional rules and setting up an autonomous system. Regulations based on WTO etc. would come into play, triggering sanctions. Yet, a means must be found to manage such a shift. Pakistan would be far less susceptible to international influences and acquire a sovereign capacity to reform its foreign policy and political thought if this change is managed well.
The second, most important spoiler would be Pakistan’s very own politicians, its system and those in power. A cashless system would limit corruption and thus would trigger resistance from within. But with political will, a suitable process can be constructed so that any resistance can be overcome. One of the ways is to remove the economic process from the political process and structure it to become an independent standalone discipline.
The third serious impediment is the existing low-level of technology that exists within the country. This would not permit the establishment of a fully digitalised system, and the little that gets set up would be vulnerable to intrusion and hacking. It could easily be disrupted thus causing identity theft or even a national financial crisis. But safeguards against such a threat can be developed and applied. The new system would gradually evolve and mature and cannot be implemented in a short-span of time.
The last problem related to the recommendation lies in losing one’s privacy, yet this too can be mitigated through suitable laws and regulations. But it is the price that society would have to bear to own such a system.
An alternative to it remains sticking to the conventional economic system as far as possible, but lower taxes significantly. There should be a gradual shift towards the digital economy to encourage the informal sector to get into the mainstream. At the same time, the government must privatise the SOEs at the earliest.
Pakistan’s national potential lies deeply integrated in three major assets.
These are: Thar Coal, Riko Diq and the Coastline, including the Gwadar Port. This does not imply that there are no other minerals, resources or economic opportunities, which are any less important. But the three mentioned above can lead to speedy economic progress.
A) Thar Coal
It is estimated to be the 6th largest reserve in the world. It is estimated to be 175 billion tons. Some have even described its potential to be greater than revenues generated by the Saudi Oil and the Qatari Gas put together.
Pakistan is currently suffering from an energy crunch. Shortage of energy stunts industrial growth. Already two 660 megawatts and one 330 megawatts plants are being run on Thar coal. The overall production of electricity from this resource would go up to 2000 megawatts in another year. New power generation plants can be set up here provided water issues are resolved in the desert. Scarcity of water can be dealt with by setting up desalination plants through the private sector. The location of such a plant should be close to the coastline and Rahim Ki Bazar from where the water would need to be piped, i.e. about 200 kilometers. The capacity should be modular and serial in design so it can expand and cater for a growing industrial city in the vicinity of the coal mines.
Gasification of coal gas is estimated to be a 3.0 billion equity based project. Monetization of gas is best served by manufacturing fertilizer. Pakistan already produces 6.0 million tons, but is likely to need even more in the future. A bag of Urea today in Pakistan cost around Rs2,250/- while the international price of urea is Rs9,250.47/=. The difference between the two is almost Rs7000/- . This allows for a huge profit margin, helping generate foreign exchange. Russia is the world’s biggest fertilizer producer but is currently under sanctions. Europe at present is in dire need of fertilizers. This is a big opportunity for Pakistan to capture and sustain itself in the global market provided it moves quickly.
Gasification also allows to run industries as well as provide fuel for domestic use, giving a lot of relief to the country. Gasification further permits the manufacture of polypropylene and other plastics. These materials are exportable and are important components of almost every industry.
The environmental issues connected to use of coal can be addressed with new modern best practices. These involve carbon capture and re-inserting carbon back into the ground. If stored, carbon dioxide has a commercial value which could be organised for sale within the country as well as for export. Pollution and environmental contamination is further mitigated by other measures such as tree plantation campaigns and afforestation, which must be organised at a national level.
B) Riko Diq
The Riko Diq reserves are considered among the largest gold and copper mines in the world with a 5.9 billion of ore grading, 0.45% copper, and gold reserves amounting 41.5 million oz. This requires a refinery in the vicinity for value-addition instead of just exporting the raw minerals. A refinery would take care of Pakistan’s defence needs in copper and much more. Mishandling of the mines by the past governments and judiciary caused grievous loss to Pakistan’s economy. This needs to be fixed.
C) The Coastline
Pakistan’s coastline is of amazing geo-strategic importance. Exploiting the location for trade, connectivity and boosting economic activities could actually single-handedly help Pakistan’s economic turnaround. It also establishes Pakistan’s global relevance as an international trade corridor. With Pakistan, fortunate enough to have a ‘Continental Shelf’ that extends 350 nautical miles into the sea, all ports along the coastline take on a great significance. The Continental Shelf itself is larger than any province on land and has more resources in it than anything available on land. With a number of ports along the 1046-km coastline, Pakistan needs to assert proper control of its Continental Shelf, which is being plundered by external elements. This would boost fisheries, minerals, regulation of seafaring traffic generating revenue and ‘right-of-way’ tariff for the deployment of pipelines and cables etc.
Gwadar is a natural deep water port and remains central to the eastern and western hemispheres, making it important for international shipping. Gwadar Port is being constructed by China under CPEC (China-Pakistan Economic Corridor) — a flagship project of China’s Belt-and-Road Initiative (BRI). The region as a whole, to include the Subcontinent and China, is home to 25% of the global population and remains a lucrative international market and a huge consumer of food and energy. These ports are of great significance to the land-locked Central Asian Republics, allowing them access to the world for trade when connected by road and pipelines.
Russia, on the other-hand, has limited port facilities most part of the year and has always been in search of warm water ports, which at present is limited to Sevastopol, Crimea. Gwadar can provide and facilitate such an all-year port to Russia on account of its warm waters — if Moscow and Islamabad can come to a mutually beneficial bi-lateral agreement. This will give Russia an alternative to Sevastopol, mitigating the Port’s strategic vulnerability as well as its limited capacity.
No wonder that all three superpowers — the United States, China and Russia along with the EU — either already have stakes in the subcontinent or are in search of them. This has led to competing interests in relevance to Pakistan’s coastline with economic and political interests as well as opportunities and challenges. Pakistan must act carefully and refrain from playing one power against the other.
Take China for instance: its trade is basically through the Malacca Straits, now commonly addressed as the Malacca Dilemma. It amounts to 16 million barrels of oil passing daily and 100,000 ships carrying cargo annually. Control for the Malacca Straits is now being contested. The United States is asserting itself and has aligned other countries against China. This has forced China to seek an alternative to the Malacca Straits, which it found in the BRI.
So why has CPEC become so important? The distance from the Western China to the Pakistani coastline is less than the distance it takes to transport goods within China to the Chinese ports; currently the distance travelled is 16,000 KMs — taking two to three months, which would reduce to 5,000 KMs or to 1 month at the most through CPEC. Thus from a strategic angle, CPEC is more important to China than Pakistan, but remains a game-changer for our country as well. Because of CPEC, China has begun the industrialisation of its South Western regions since these are now easily accessible logistically. It also implies that in the future, Afghanistan and Central Asia could also benefit from it.
Gwadar Port has the potential of being one of the world’s largest when it gets completed in 2030. The berths at Gwadar can accommodate 200,000 ton tankers and other ships, which along with the newly constructed oil pipelines, fibre optics etc., makes it an ideal regional trans-shipment port. It out-does the Long Beach Port at Miami and has greater capacity than all the Indian Ports put together. With its potential as a future trans-shipment port in the region, the Saudi Government is contemplating investing in Gwadar by constructing one of the world’s largest refineries. The future of such a Port, if managed properly, allows for huge development and international connectivity. The trade hub and conduit at Gwadar establishes Pakistan’s relevance in the region as well as the world as a trade corridor — connecting the east to the west; a key component in global trade as well as a supplier of oil and gas. If manufacturing industries develop within these CPEC corridors, the potential for economic growth is huge for the country.
Pakistan stands at a defining moment in history. With a background of missed opportunities and failed initiatives, the country is suffering from self-inflicted damage. Lack of sustained economic policy and with gross indifference towards the well-being of its people, Pakistan remains wallowing in abject poverty. It blunders on from day-to-day.
The world in general and the region in particular — China, India and Bangladesh – on its march towards development and progress has left Pakistan trailing behind, barely surviving on hand-outs, as it limps on from one day to another.
Therefore, it is time for bold decisions and brave initiatives, grappling with the situation with courage, grit and determination, putting all national resources to work. The suggestions made in this paper can be improved upon and there are many more aspects to the economic development that can be examined, but what has been stipulated in this document is the bare essential that must be executed at the earliest.