Pakistan’s geoeconomic pivot: strategies, opportunities, and challenges

Pakistan's National Security Policy addresses the country’s particular geopolitical situation, including a new geo-economic focus. It offers a fresh approach to the national security framework of one of the world’s largest and most geostrategically located countries.

On December 28, 2021, Pakistan made a consequential statement to its citizens and the world by approving its first-ever National Security Policy (NSP) document. The statement was bold, not only because Pakistan chose to release a public version of the document – something no other South Asian country has done – but also because the Policy offered a fresh approach to the national security framework of one of the world’s largest and most geostrategically critical countries in terms of location.

Pakistan’s case is particular as far as its standing in the West is concerned. Although it has been a frontline ally of the United States and its Western allies, including Europe, the Western media and governments alike have often been extremely critical of Pakistan. Ironically, one of the critiques has been that the country’s approach to national security is too skewed in favour of traditional security. This is despite the fact that Pakistan’s hard security strength is precisely what has repeatedly attracted external actors to partner with its leaders in pursuit of their own geostrategic interests.

Unfortunately, such external support has not delivered the kind of national security and development gains Pakistan aspired to. Pakistani leaders saw the country’s utility as a net security provider to the West, a strategic neighbour for China, and a partner to key Middle Eastern countries such as Saudi Arabia, not only as a means of catering to the military threat it has continued to face from its eastern neighbour India, but also as a source of foreign economic support. While handsome amounts of assistance did flow in from the West, this was limited to the periods when Pakistan was considered geostrategically important. The end result is a national economy that has been caught in boom-and-bust cycles. Pakistan’s macroeconomic growth has been impressive in spurts, but only at times of heightened global importance. Pakistani leaders over the years are to blame for poor investment and resource distribution decisions that failed to create a sustainable economic growth model and skewed outcomes towards high levels of indebtedness, elite capture, and low human development.

This is what makes the new consensus among Pakistan’s decision-making elite so important. The NSP seeks to broaden the horizon of national security by introducing the concept of “comprehensive national security.” Centred on the idea that the ultimate objective of national security is to ensure the “safety, security, dignity, and prosperity” of all citizens, the Policy highlights the need to augment economic security as a prerequisite to achieving improved human and traditional security outcomes.

The NSP’s orientation reflects a realization that a passive, status-quo approach is likely to be unviable for Pakistan in the evolving geopolitical environment. Pakistan’s geography dictates that it cannot avoid being affected by the geopolitical landscape around it. Not only is Pakistan contiguous with China, but it also finds itself sandwiched between three of the four principal theatres of great power competition in the world today: Asia-Pacific, the Middle East, and Russia’s Central Asian backyard, which reaches down to Afghanistan (the fourth being Eastern Europe). Indeed, the South and Central Asian regions will remain important for global powers, and Pakistan’s broader neighbourhood could easily become one of the proxy battlegrounds for great power contestation if the Sino-American rivalry is not handled prudently by regional actors.

Therein lies the genesis of Pakistan’s attempt to conceptualize its future geostrategic utility by focusing on regional connectivity and development partnerships with the world, both of which the NSP highlights as key to ensuring economic security. To achieve this, Pakistan would have to act as a trade, transit, and production hub for West, Central, and South Asia, and gradually move away from primarily assistance-based relationships and towards prioritizing trade and investment partnerships across geopolitical fault lines. The objective would be multi-alignment and positive interdependence with a multitude of partners.

Neither regional connectivity nor development partnerships are going to be easy to pursue. Two of Pakistan’s neighbours, Afghanistan and Iran, are internationally isolated, while India is a perennial adversary whose unilateral attempts in recent years to alter the legal status of the disputed territory of Jammu and Kashmir have rendered meaningful dialogue impossible. China is the only neighbour with whom Pakistan enjoys a truly positive relationship. The two countries have been pursuing the China Pakistan Economic Corridor (CPEC), a multibillion-dollar investment project that some have called a litmus test for China’s Belt and Road Initiative. However, the closer Pakistan gets to China, the more uneasy some Western capitals are bound to become in the evolving geopolitical context.

And yet, with more than 30 percent of South Asians living in extreme poverty, the opportunity costs of ignoring regional connectivity are prohibitive. South Asia’s colossal food security, human development and climate challenges cannot be mitigated without coordinated actions and responses. Connectivity is critical not only for Pakistan but the entire region. According to a report published by the UN Economic and Social Commission for Asia and the Pacific (UNESCAP), enhanced levels of regional connectivity would allow South Asia to emerge as an “important hub of trade between Europe and Central Asia, on the one hand, and South-East and East Asia, on the other, thereby contributing to broader regionalism in Asia and the Pacific.”

One promising avenue is offered by regional infrastructure linkages that are already in the works. Over the years, Pakistan has entered into various partnerships with a view to linking up with regional countries. Some of these multi-country energy, road and rail megaprojects are extremely attractive not only commercially but also because their operationalization could transform the geostrategic axiom of regional countries from competition to cooperation. While these projects are unlikely to progress until there is a change in Western relations with Afghanistan and Iran, and India is encouraged to re-engage in regional initiatives involving Pakistan. When they do, they will prove to be real game changers in terms of the economic and strategic future of South and Central Asia.

In terms of development partnerships, Pakistan’s success in enhancing its trade- and investment-based relationships will gradually reduce the primacy of foreign loans and grants in the country’s international economic engagement. To tip the balance from debt to non-debt sources of foreign exchange, Pakistan must focus on a growth model led by exports, foreign direct investment (FDI), and foreign remittances. To do so, Pakistan needs to put greater emphasis on economic diplomacy while working to produce exportable surpluses in key economic sectors, attract FDI in these sectors for import substitution, and target skilled manpower export to countries with ageing populations.

The NSP constitutes Pakistan’s statement of intent to move in this direction. It needs all the support it can get to turn its vision into reality. Pakistan’s Western partners must now step up to prove that their often-stated interest in a strong and stable Pakistan is sincere. They should also recognize their self-interest in doing so.

Partner countries should look to support the vision of connectivity in the South and Central Asian region in ways that ensure Chinese and Western efforts towards connectivity supplement rather than contradict each other. A Central Asia connected to Pakistan’s warm waters will benefit the West by reducing the region’s dependence on Russia. At the same time, convincing countries like India to create the necessary enabling environment for dialogue with Pakistan will not only reduce tensions in a nuclear region but also open up space to propel the infrastructure connectivity projects that are so crucial for the region’s economic growth. Western companies could also benefit immensely from the transport and energy connectivity now available to Pakistan, courtesy of CPEC-linked investments. Some successful examples of such collaboration already exist, but greater utilization of this model would help Pakistan turn its ambition of becoming a melting pot for positive economic interests of partner countries into a reality.

Western partners must also support Pakistan’s efforts to improve its investment climate and export competitiveness through incentives and capacity building. Pakistan could be an ideal home for industries that are seeking relocation from China and other countries in the region. Finally, European countries with ageing populations could work closely with Pakistani authorities to facilitate the emigration of a specially trained semi-skilled and skilled labour force.

There is a real opportunity for the world to benefit from Pakistan’s vision of economic security. An economically stable Pakistan wanting to steer clear of camp politics but enjoying positive ties with the West as well as China could offer everyone a rare partner able to help lower the geopolitical temperature, as it once famously did between the US and China in the early 1970s.

It is time for Pakistan and its partners to walk the walk.

Moeed W. Yusuf is vice chancellor and president of Beaconhouse National University, Pakistan’s first non-profit liberal arts university. He was previously Pakistan’s national security adviser to the prime minister.

Read the full analysis in FES Pakistan's publication: Pakistan's Geoeconomic Pivot: Strategies, Opportunities, and Challenges by Moeed W. Yusuf and Rabia Akhtar.

The views expressed in this article are not necessarily those of FES.

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