Run­ning To­gether

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.

Southasia - - FRONT PAGE - By Shahid Javed Burki

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.

Afghanistan Aus­tralia Bangladesh Bhutan Canada China France Hong Kong In­dia Afg. 50 A$ 6 Taka 65 NU 45 C$ 6 RMB 30 Fr 30 HK$ 30 Rs. 65 Ja­pan Korea Malaysia Mal­dives Myan­mar Nepal New Zealand Pak­istan Philip­pines ¥ 500 Won 3000 RM 6 Rf 45 MMK10 NcRs. 75 NZ$ 7 Rs. 150 P 75 Saudi Ara­bia Sin­ga­pore Sri Lanka Thai­land Turkey UAE UK USA SR 15 S$ 8 Rs. 100 B 100 Lira. 2 AED 10 £3 $5

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