If the enormous resources of the Gulf Cooperation Council (GCC) and South Asia were put together, a powerful new socic-economic force would emerge, benefiting the entire region.
The Arab states on the western rim of the Persian Gulf have been in contact for centuries with the Muslim world on the other side of this expanse of water. In fact, it was their frequent incursions into the Indian subcontinent that brought Islam to this part of the world. Islam ventured into the Indian domain from another side as well. The Arabs never became the political masters of the area on either side of the great Indus River but the Central Asians did. Several long-enduring Muslim kingdoms that governed from Delhi were founded by military adventurers from Afghanistan, Iran and what are today called the Central Asian republics. It would be correct to suggest that it is in Pakistan and some parts of the modern state of India that the two Islams – the Arab
and the Central Asian – meet. How the two relate with one another would profoundly affect the world of Islam.
The Arabs, then a trading community, came to India to establish a presence on the other side of the sea. The Central Asians, on the other hand, came mostly to plunder as well as to proselytize. These are different times. Economics is the main reason for developing close relations between the two rims of the Persian Gulf in the 21st century. As the northern states of the Arab world plunge into sectarian, tribal and class warfare, those in the south – the six states of the Gulf Cooperation Council – the GCC – are increasingly turning towards South Asia. For the last forty years – since the oil embargo of the early 1970s – the six GCC states have developed strong economic links with the non-Arab Muslim populations on the eastern shore of the Persian Gulf. This area has both Muslim states (Afghanistan, Bangladesh, the Maldives and Pakistan) as well as those with large Muslim minorities (India and Sri Lanka). Together with 600 million Muslims, this is the largest component of the world of Islam. The economic links that have been formed and are being developed take two forms: trade and labor movements. Since Pakistan is the most important state within this cluster of countries, it is interesting to study how its relations have developed with the GCC countries.
Had Pakistan followed the “gravity model of trade”, its trading pattern would have evolved differently. According to the model, international trade should be guided by two considerations. Important trading partners should be the countries that are not too distant and also have large markets that can be tapped. In technical jargon, most of the trade should be based on distance and mass. Had that been the case, Pakistan would be trading more with India, China, Afghanistan, Iran and the Middle East than with the United States and Western Europe. That is not the case. A bit more than 15 percent of Pakistan’s exports go to the United States and another 10 percent to Britain and Germany. These are distant, albeit large markets.
Pakistan should be mindful of its quite extraordinary location in devising its trade policy. On the country’s three sides are trillion dollar sized economies. According to the International Monetary Fund’s latest estimates of national incomes, China has overtaken the United States as the world’s largest economy. In purchasing parity terms, its gross domestic product is estimated at $16.15 trillion. The country’s per capita income is about $12,000. To Pakistan’s south is India with the gross domestic product at $7.28 trillion. On the west is the GCC, made up of six states – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The GCC’s combined population is 51 million and combined gross domestic product of $1.64 trillion. In other words, Pakistan has in its neighborhood three large economies with a combined gross domestic product of over $25 trillion, about a third of the world’s total of $77.61 trillion. China and the GCC each account for about 10 percent of Pakistan’s exports while India is the origin of and destination for only 5 percent of Pakistan’s total trade.
Islamabad’s approach to developing economic ties with the GCC has lacked much strategic thought. It has reflected three concerns: two on the side of Pakistan and one on the side of the GCC countries. Pakistan has worked with the countries in the region to protect the rights of its citizens who have gone as workers. It has also attempted to bring about an increase in the flow of investments from the capital-rich GCC nations. On their part, the GCC states are interested in getting Pakistan’s help in dealing with the scourge of Islamic extremism. They reached some formal and informal security arrangements with Islamabad.
There was a flurry of activity on the part of some of the GCC countries after Nawaz Sharif took over the reins of the Pakistan government as prime minister. In March 2014, the King of Bahrain Hamad ibn Isa Al Khalifa visited Islamabad and brought with him a large delegation that included business people from his country. While business and investment opportunities were discussed, the focus was on security arrangements between the two countries. According to the communique issued following discussions in Islamabad, “the two sides stressed the importance of increasing the defense and security cooperation.” There were also visits to Pakistan by several senior leaders from Saudi Arabia. They arrived at the same kind of understanding with the Sharif administration.
Labor movements and associated flow of remittances is the second type of economic link between the GCC and Muslim areas in South Asia. There are now some 15 million South Asian Muslim workers present in the GCC countries almost equally divided between Bangladesh, India and Pakistan. They send about $30 billion a year to their homelands and in spite of some strain being felt by the GCC economies because of the pressure on oil prices, the amount of remittances continue to increase. For instance, the State Bank of Pakistan reports that the flow of remittances in October 2014 from the GCC was $864 million, 10 percent more than in October 2013.
What is significant about this flow of money from the GCC to the Muslim communities in South Asia is not only that they meet the pressing needs for foreign capital of the countries from which they come. They also have resulted in significant economic, social and political change in these countries. For instance, the state of Kerala in India has seen the rise of the Muslim middle class because of the money sent by the workers in the Gulf States. The sharp increase in the size of the middle class in Pakistan can also be related to the flow of remittances. This class is now seeking political space in Pakistan which is one reason why leaders such as Imran Khan and Tahirul Qadri were able to attract tens of thousands of people to attend their rallies and dharnas.
By focusing on further developing economic ties with the GCC nations, South Asian states can draw even more benefits from the relationship. For instance, the work being done on the Pakistan-GCC free trade area will serve to enhance trade links between Pakistan and GCC. Were that to happen, Pakistan would have finally begun to follow the gravity model in determining its pattern of trade.
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