New Eco­nomic Al­lies?

The suc­cess­ful com­ple­tion of the Iran-pak­istan gas pipe­line project could trig­ger fu­ture ar­eas of co­op­er­a­tion be­tween re­gional coun­tries.

Southasia - - Cover Story - By Mohiuddin Aazim

An en­ergy cri­sis con­tin­ues to hin­der eco­nomic progress in Pak­istan. In the scorch­ing sum­mers, avail­able electricity meets only 60 per cent of the coun­try’s needs and in the chill­ing win­ters, the same be­comes true for gas sup­ply.

Lack of do­mes­tic and for­eign fund­ing in en­ergy in­fra­struc­ture over the years has cre­ated a pre­car­i­ous sit­u­a­tion and has left us with few op­tions to over­come it. Pak­istan has seen fis­cal con­straints par­a­lyze the coun­try due to its en­gage­ment in the war- on- ter­ror. Sheer mis­man­age­ment of public sec­tor fund­ing in huge en­ergy projects has dealt a se­vere blow to an al­ready strug­gling in­dus­try. For­eign funds are also dif­fi­cult to se­cure un­der present cir­cum­stances - es­pe­cially large amounts that are re­quired for gi­gan­tic en­ergy sup­ply projects.

The Iran- Pak­istan gas pipe­line is an an­swer to the prob­lem. How­ever, ini­tially a part of the project, In­dia is so far out of the loop, with only Pak­istan and Iran pro­ceed­ing ahead with the pro­posal to lay a gas pipe­line be­tween the two coun­tries.

Petroleum Min­is­ter, Dr. Asim Hus­sain says that the sur­vey for lay­ing a gas pipe­line on Pak­istani soil has been com­pleted and the coun­try would soon be­gin the work.

Although the US is try­ing to dis­suade Pak­istan from un­der­tak­ing this project and is of­fer­ing fi­nan­cial and tech­ni­cal help for an al­ter­na­tive Turk­menistan, Afghanistan, Pak­istan and In­dia ( TAPI) gas pipe­line project, Pak­istani au­thor­i­ties seem to have de­cided to work on both the projects si­mul­ta­ne­ously.

As for the Iran- Pak­istan gas pipe­line, the ad­van­tages are ob­vi­ous and are likely to come in much sooner than in the case of TAPI. Thou­sands of kilo­me­tres long, the Iran- Pak­istan gas pipe­line will ben­e­fit Pak­istan’s econ­omy the mo­ment the de­vel­op­ment of the pipe­line starts: it would cre­ate thou­sands of jobs and prompt en­hanced ac­tiv­ity in land de­vel­op­ment, ce­ment, con­struc­tion and al­lied in­dus­tries.

While the ac­tual sup­ply of gas from Iran to Pak­istan would take a few years, it would be a se­cure and sus­tained source of en­ergy sup­ply, badly needed for mov­ing the wheels of the en­ergy sec­tor in Pak­istan.

The post- re­ces­sion 2008- 09 change in Pak­istan’s di­rec­tion of ex­ter­nal trade is ob­vi­ous. Pak­istan’s ex­ports to emerg­ing mar­kets in Asia have grown rapidly over the last three years. Europe re­mains at the brink of a dou­ble- dip re­ces­sion and Amer­ica is still strug­gling to shrug off the ill ef­fects of the fi­nan­cial cri­sis- cum- re­ces­sion of 2008- 09. In such a sce­nario, Pak­istan needs to main­tain and sus­tain the cur­rent trends in its ex­ter­nal trade. Iran be­ing a next- door neigh­bor is bound to emerge as an im­por­tant trad­ing part­ner for Pak­istan in the years to come. Con­nect­ing the two coun­tries with a gas pipe­line would help both in main­tain­ing their look- to­ward-Asia pol­icy in trad­ing and in­vest­ment.

Iran is ea­ger to go ahead with the pro­posed gas pipe­line project as soon as pos­si­ble be­cause pol­icy mak­ers there know that in case they de­cide to build nu­clear weapons, the coun­try would at­tract much harsher sanc­tions from the West in par­tic­u­lar and from the rest of the world in gen­eral. The coun­try hopes that in that case, neigh­bor­ing coun­tries like Pak­istan and Rus­sia could be of some help in terms of keep­ing trade and in­vest­ment flows open even if it means ma­nip­u­lat­ing the sanc­tions.

For the Pak­istani busi­ness com­mu­nity, Iran is as im­por­tant in trad­ing and in­vest­ment as is In­dia. Pak­istani busi­ness­men know, how­ever, that de­vel­op­ing nor­mal trade and in­vest­ment re­la­tions with In­dia will take much longer than the time re­quired to fo­cus on the growth of a Pak- Iran busi­ness re­la­tion­ship.

“If the Pak- Iran gas pipe­line be­comes a suc­cess the two coun­tries can also think about a sim­i­lar project in the oil sec­tor. Iran be­ing a big sup­plier of fuel oil would nat­u­rally be in­ter­ested in ex­port­ing oil to Pak­istan ei­ther through a pipe­line or in the be­gin­ning through oil tankers,” a se­nior of­fi­cial of the Min­istry of Petroleum told Southa­sia.

More im­por­tantly, the gas pipe­line project can also mark the launch of an en­ergy cor­ri­dor in this part of Asia - sim­i­lar to the one that is be­ing es­tab­lished in the Gulf re­gion. “That ex­plains why Pak­istan is in­ter­ested in both the Pak- Iran gas pipe­line as well as TAPI.”

While Pak­istan’s ex­ter­nal trade flows have changed course fol­low­ing post- re­ces­sion de­vel­op­ments and have be­come more Asia- cen­tric, the same may hap­pen to for­eign in­vest­ment if the Euro­zone ex­peri- ences a dou­ble- dip re­ces­sion and if Amer­ica re­mains en­tan­gled with its com­plex fi­nan­cial sec­tor prob­lems and fis­cal woes.

“Coun­tries like China, In­dia, Rus­sia, Turkey, Iran, Kaza­khstan, Malaysia, Hong Kong, Sin­ga­pore and Thai­land would be our ma­jor for­eign in­vestors in the fu­ture,” a se­nior of­fi­cial at the Board of In­vest­ment told Southa­sia. “Bar­ring In­dia ( in which case in­flow of in­vest­ment may take a longer time) all other coun­tries have al­ready en­tered into a num­ber of in­vest­ment deals with us. If the Iran- Pak­istan gas pipe­line be­comes a suc­cess story it would boost the con­fi­dence of Asian in­vestors in Pak­istan’s econ­omy.” Malaysia has al­ready of­fered to set up a 3000MW power plant in Iran to sup­ply electricity to Pak­istan.

Last but not the least, the IranPak­istan gas pipe­line project would have a very fa­vor­able im­pact on ru­ral de­vel­op­ment in both coun­tries. When­ever a large project is set up, far from the cities, it gen­er­ates a lot of ac­tiv­ity not only be­fore and dur­ing its com­ple­tion but also af­ter its suc­cess­ful com­mis­sion­ing. Larger ben­e­fits would ac­crue when pri­vate in­vestors of both coun­tries, em­bold­ened by this project, would think of en­ter­ing into a num­ber of joint ven­tures. From oil re­fin­ing, min­eral ex­trac­tion and pre­cious stone cut­ting to ce­ment pro­duc­tion, live­stock rear­ing, agri­cul­tural de­vel­op­ment, food pro­cess­ing, car­pet weav­ing, ship­ping, ports and light to heavy en­gi­neer­ing; there is a long list of sec­tors wherein the two coun­tries could share their ex­per­tise with each other and come up with mu­tu­ally ben­e­fi­cial ven­tures.

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