Required: a multi-dimensional strategy
South Asia is home to 22 percent of the world’s population and is considered an important player in international geo-politics due to its strategic location, sheer number of inhabitants, potential as a big consumer market and the variety and abundance of its natural resources. But the region’s share in world GDP and global trade is just about 2 percent. In this backdrop, while Pakistan has recently made efforts to demonstrate greater flexibility by granting MFN status to India in order to normalize trade ties and remove bureaucratic hurdles, the fact remains that Indian import tariffs are high and there are obstacles in expansion of India-pakistan trade though it is said to offer an annual potential of $40 billion according to some analysts. Studies show that in the medium term, Pak-india trade can easily be multiplied by 20 times. Considering that India will be the engine of growth in South Asia in the next decade, it is important for Pakistan to benefit from this opportunity.
Pakistan also needs to expand its trade horizons in other directions. It lies at the heart of tremendous trade prospects between Central and South Asia and this could play a key role in the development of regional economic integration. However, the ability of the Pakistani economic regime to derive benefits from regional trading arrangements depends upon its export-oriented strategies, the way its domestic industry is progressing, the quality of products it is producing and the competitiveness that it offers in terms of prices. While Pakistan achieved impressive economic growth for the most part of the last decade, in recent years the country’s initiatives in terms of taking advantage of preferential trading arrangements have not been very encouraging though the Trade Development Authority of Pakistan has been instrumental in creating opportunities for trade expansion.
There has also been a desire in recent times to increase the amount of trade and investment in the region through the creation of a new “Silk Road,” by creating an economic region integrating Central Asia, Afghanistan, Pakistan, India and Bangladesh. The Pak-china Free Trade Agreement is one example. Since it became operational in 2007, bilateral trade between the two countries has been increasing. Bilateral trade between Pakistan and China during 2006-07 was US $4,110 million and the balance of trade of US $2,958 million was in favour of China. Current volume of bilateral trade between the two countries is still in favour of China. This is because Pak-china trade has remained uni-directional all through and there is much that needs to be done from Pakistan’s side to improve the balance.
Another example of the situation with reference to Pakistan is that some of the biggest companies in the United Arab Emirates have invested in the country and are constantly on the lookout for more opportunities. Currently, the UAE is Pakistan’s second largest trading partner. Many large private companies from the UAE are working in Pakistan in various fields and contributing to vital sectors of the economy such as telecommunication, banking, real estate, airlines and insurance and are looking for joint ventures in oil exploration, energy, aluminium products, agriculture, financial sector and housing. Given the absence of innovative and imaginative solutions to its current trade situation, Pakistan needs to come up with a more workable and well-thought route map to consolidate its position in a multi-dimensional region and take advantage of its strategic location.