Brexit: Pak­istan need ...

Pakistan Observer - - IN­TER­NA­CIONAL -

roughly Euro 2.2 bil­lion, out of which Pak­istani ex­ports are nearly Euro 1.5 bil­lion. Pak­istan is mainly ex­port­ing tex­tiles, cloth­ing and leather goods and im­port­ing me­chan­i­cal and elec­tri­cal ma­chin­ery, as well as chem­i­cal and phar­ma­ceu­ti­cal prod­ucts. Tex­tiles and cloth­ing are 75 per cent of Pak­istan’s ex­ports to the EU.

On Jan­uary 1, 2014, Pak­istan en­tered into the Gen­er­al­ized Sys­tem of Pref­er­ences Plus (GSP+) ar­range­ment with the EU un­der which the EU sup­ports Pak­istan’s sus­tain­able de­vel­op­ment and good gov­er­nance; and, in re­turn, Pak­istan ex­ports to the EU mar­kets 20 per cent of its goods at zero tar­iff and 70 per cent at a pref­er­en­tial rate. Pak­istani tex­tile goods are slated to en­ter the EU with­out any du­ties till 2017.

There would be no dis­rup­tion in this pat­tern, although we should brace for some dip in our ex­ports to the UK, if not the EU mi­nus Bri­tain. That ne­ces­si­tates re­me­dial mea­sures. The UK’s with­drawal ar­range­ments would take some time to be ef­fec­tive. Un­til then, de­ci­sions on GSP + would re­main op­er­a­tive. But be­fore that, we will have to start a process, as would many other coun­tries, to ne­go­ti­ate with the UK terms for Pak­istan-UK trade that are com­pa­ra­ble to GSP +. If the EU agrees to keep the UK part of the Cus­toms Union, Pak­istan’s GSP + may still con­tinue. This, how­ever, is a com­pli­cated process, and EU Pres­i­dent Don­ald Tusk has warned that the UK would not be al­lowed to “cherry pick” its way into sep­a­ra­tion.

Although there is lit­tle cause for con­cern in the im­me­di­ate fu­ture, we should not be com­pla­cent. Our real prob­lem is not ac­cess of our prod­ucts to the Euro­pean and other mar­kets but in­ad­e­quate man­u­fac­tur­ing and ane­mic ex­ports. Lack of ex­portable sur­pluses, as well as ex­port of raw ma­te­rial and semi-fin­ished prod­ucts fetch low re­turns in the in­ter­na­tional mar­ket. For decades, we have been plan­ning to in­vest in value ad­di­tion in in­dus­tries pro­duc­ing tex­tiles, leather, sur­gi­cal and sports goods, but this ef­fort has not taken off.

Against this back­ground, the gov­ern­ment has taken two steps in the right di­rec­tion. It has tried to al­lay fears of our busi­ness­men who are con­cerned by un­cer­tainty cre­ated by Brexit. Sec­ond, it has asked its en­voys in Brus­sels and other EU cap­i­tals to proac­tively reach out to trade min­istries and busi­ness houses to main­tain and ex­pand the niche for Pak­istani goods and ser­vices. Remit­tances

We will also have to closely watch the trends in remit­tances from the UK, be­ing the third largest source of over­all for­eign remit­tances to Pak­istan. The sil­ver lin­ing of the EU im­broglio could be trans­fer of large amounts by Pak­istani ex­pa­tri­ates in the UK who may feel that their in­vest­ments have be­come vul­ner­a­ble and would be more se­cure in Pak­istan. The Fi­nance Min­is­ter an­nounced last Fri­day that Pak­istan for­eign ex­change re­serves had sur­passed $23 bil­lion, a his­toric first. This up­ward trend is likely to con­tinue. In­vest­ment

Last month, Pak­istan was clas­si­fied as an emerg­ing mar­ket by MSCI rais­ing hopes of new in­flows of in­vest­ment in Pak­istan, in­clud­ing from Europe and the US. This may have to wait in the short run be­cause of the spike in risks within the EU. But, on the other hand, Bri­tish and Euro­pean busi­nesses, may find Pak­istan a lowrisk, high-profit mar­ket. This would not hap­pen au­to­mat­i­cally though. Gov­ern­ment of­fi­cials, cham­bers of com­merce and in­dus­tries and en­trepreneurs will have to mount an ag­gres­sive and co­or­di­nated ef­fort to at­tract for­eign di­rect in­vest­ment from Eu­ro­zone and the UK. Im­mi­gra­tion and Is­lam­o­pho­bia

In re­gard to im­mi­gra­tion, right now the feud is in­tra-Euro­pean not pri­mar­ily di­rected against Mus­lims, though that un­der­cur­rent is there. The de­vel­oped Euro­pean coun­tries were not able to in­te­grate work­ers from Cen­tral and East Europe. That strain has been in­creased by the ar­rival of mil­lions of refugees from Syria and other Mid­dle East­ern coun­tries. Poles are more dis­crim­i­nated against in the US com­pared to Mus­lims from South Asia. The EU-UK break up of­fers an op­por­tu­nity to Mus­lims in Europe to be bridge builders, rather than paint them­selves as vic­tims. There are forces within Europe who are ready to fight Is­lam­o­pho­bia to avoid frac­tur­ing their multi-cul­tural so­ci­eties and poli­ties. There could be a rise of xeno­pho­bia in Europe but col­lec­tively we need to find ways to re­verse this trend. China-Pak­istan Eco­nomic Cor­ri­dor (CPEC)

The CPEC gets some breath­ing space, as at­ten­tion would be riv­eted on Euro-cri­sis. In the next two years, China and Pak­istan should ac­cel­er­ate the speed of the im­ple­men­ta­tion of its early har­vest projects. Devo­lu­tion

There are un­in­tended con­se­quences of Brexit, as it un­leashes cen­trifu­gal and de­vo­lu­tion­ary forces within the EU and within its mem­ber states. While Europe will have to de­vise ways to stem ero­sion of the con­fed­eral struc­ture of Europe and fed­er­a­tions at the na­tional level, the UK’s sem­i­nal po­lit­i­cal act could lead to repli­ca­ble pat­terns else­where fu­eled by na­tion­al­ism and pop­ulism. Frag­ile fed­er­a­tions par­tic­u­larly have to be vig­i­lant about the rise of transna­tional ir­re­den­tism and in­tra-na­tional se­ces­sion­ism. A “Nu­clear Brexit”?

An es­say in the lat­est is­sue of Bul­letin of the Atomic Sci­en­tists pos­tu­lates that if Scot­land de­cides to se­cede in a sec­ond ref­er­en­dum (the first was held in 2014), as de­manded by its First Min­is­ter Ni­cola Stur­geon, this may well set in mo­tion a process for the UK’s “uni­lat­eral nu­clear dis­ar­ma­ment”. The ra­tio­nale given is sim­ple: Scot­land is op­posed to the sta­tion­ing of nu­clear weapons on its ter­ri­tory; but all of the UK’s nu­clear weapons, in­clud­ing war­heads, mis­siles and sub­marines are sta­tioned in Scot­land. The es­say un­der­lines that there are no al­ter­na­tive sites in Eng­land. The UK’s “dis­ar­ma­ment” could the­o­ret­i­cally stim­u­late mo­men­tum for re­duc­tion in nu­clear ar­se­nals all around the world. A study needed

Be­cause of the speed with which Brexit un­folded, most of our re­ac­tions are based on guess work and fo­cus on fire­fight­ing. We need to con­duct a com­pre­hen­sive study or a se­ries of stud­ies to un­der­stand the full im­pact of Brexit on our econ­omy, and to come up with a set of pol­icy rec­om­men­da­tions sug­gest­ing ap­pro­pri­ate re­sponses and, more im­por­tantly, iden­ti­fy­ing new op­por­tu­ni­ties for us. In the short term, we should give re­lief to our ex­port in­dus­try so that the de­vel­op­ments in Europe do not fur­ther push down our ex­ports. Wish the UK well

As the peo­ple of the UK ne­go­ti­ate a dif­fi­cult tran­si­tion, the peo­ple of Pak­istan should show un­der­stand­ing and sol­i­dar­ity to­wards them. We should hope that they would come out of this predica­ment ei­ther by sep­a­rat­ing from the Euro­pean Union on most favourable terms or by re­vers­ing the de­ci­sion to exit, which even the ‘leavers’ now re­al­ize was taken in haste. The wel­fare of our di­as­pora com­mu­nity in the UK, the unity of the Bri­tish na­tion and con­tin­u­a­tion of Pak-US bi­lat­eral co­op­er­a­tion all hinge on sound de­ci­sions that would be taken by Lon­don and Brus­sels. (The writer is Di­rec­tor Gen­eral In­sti­tute of Strate­gic Stud­ies and for­mer Am­bas­sador to the United Na­tions and China.)

Za­far Bakhtawari, Vice Pres­i­dent FPCCI is pre­sid­ing a meet­ing at FPCCI Cap­i­tal Of­fice to re­view the im­pact of Bri­tish exit from Euro­pean Union on Pak­istan Econ­omy. Mian Shaukat Ma­sud, Ch Wa­heed-ud-Din, Khalid Mehmood Chaudhry, Naeem Sad­dique and Baber Chaudhry are also seen in the pic­ture.

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