The air strikes on 11th September 2001 on the World Trade Centre (WTC) and the Pentagon in the USA have irrevocably changed the world. However, the region comprising countries bordering Pakistan immediately or not in distant future will probably register the most profound impact of these events.
The war against terrorism bodes long-range and high-potency engagement of the USA in this region. While Afghanistan, as the direct target of this war, is the centre-piece of the US launch, its ramifications are all too vivid for the Central Asian Republics (CAR), i.e. Tajikistan, Uzbekistan, Turkemenistan, Kyrgyzistan, Kazhakistan and Azerbijan, along with Iran, Pakistan, China and India.
The evolving situation will certainly be a powerful add-on to the complex geo-economic paradigm of the region, habitat to about 40 per cent of the world population. By definition, success in war against terrorism must result in peace, tranquillity and socio-political stability in the region, marking a conducive setting for economic development.
Primarily, the success in war against terrorism by the Coalition spearheaded by the USA, as the only super power of the globe, would be a giant stride towards completion of unfinished agenda unleashed by the collapse of the Soviet Union a decade back, resulting in a spectacular implosion of centrally-commanded economies of the Eastern Europe from the Black Sea to the Baltic. This is particularly relevant to the CAR bordering the Caspian Sea, termed as the Persian Gulf of the 21st century for its immense fabulous potential reserves of oil and gas, offering a viable alternative as a source of energy for the global economic machine viz-a-viz the Persian Gulf.
The energy dependence of the Western economic bloc led by the USA requires Caspian Basin to be linked and integrated to the international markets via a reliable and safe trade route that avoids its passage through Iranian or Russian territory. Politically desirable and economically preferable route - from the perspective of the Western bloc— leads to the Arabian Sea, passing through Afghanistan, on the shores of Pakistan. Energy dependence of the USA, the Western Europe and Japan on imports is the compelling reason that the discovered and potential hydrocarbon reserves of the Caspian Basin are controlled by the Western bloc, linked to the world markets via economically viable and strategically safest routes. The chain of events having so far occurred in the wake of war against terrorism lends pre-eminent importance to geographic location of Pakistan as potential transit route for the international trade of the CAR and Afghanistan. The other pivotal change, even from global point of view, adding to the importance of geographic location of Pakistan as a transit trade route, is the recent entry of China to the WTO. To borrow the description of Shahid Javed Burki, China is expected to emerge as the Asian Elephant of the world economy in the decades ahead. This would entail a balanced economic growth of the country, embracing as well the areas that have so far been neglected, in particular the western regions of the People’s Republic of China. Linkage of these areas via sea ports of Pakistan, to Europe, Middle-East and the African continent is considered a more efficient and economical option than through the ports located along the eastern coast of China.
Thus, Pakistan holds potential as a feasible and viable transit route for the international trade of land-locked CAR, Afghanistan and Chinese provinces bordering Pakistan.
The legendary Caspian Basin is considered to be world’s last great undeveloped hydrocarbon resources. For some of the border states oil and gas from Caspian Basin mark their last hope of becoming rich, providing a reliable base for the socio-economic catharsis of their masses. Early 2001, inauguration of 1580 km-long Caspian pipeline from giant Tengiz oil field in western Kazakhstan to Novorossiick, a Russian seaport on the Black Sea, has for the first time in the history connected the Caspian Basin to international markets. Tengez Field is being developed by a consortium, with 50 per cent stake by the US oil major Chevron, 25 per cent by Exxon-Mobil and 20 per cent by Kazakhstan. With an initial capacity at 0.56 million bpd, rising to 1.5 million bpd, this pipeline will have tremendous impact on global oil market.
Tengez alone contains 6 to 9 billion barrels of recoverable reserves; another giant Kazakh field Kashagan may contain 10 billion barrels or more, making it the largest discovery in 30 years. Add to it the fields off-shore Azerbaijan, home to world’s 50 per cent oil output 100 years ago or reserves in Turkmenistan and Uzbekistan. Reserves of oil and gas of the CAR around Caspian Sea are estimated to the tune of $5 trillion. The Central Asia is said to be rich in minerals. Canadian mining giant Cameco Corp opened Kumtor mine in Kyrgyzstan in 1996 at a cost of $452 million extracting an annual average of 19 tons of gold, an output worth $200 million, 10per cent of the GNP and 40 per cent of export income of 4.7 million nation. Afghanistan is also said to have a spectacular physical landscape, beneath which lie many natural resources; among them world’s largest copper deposits and third largest deposit of high-grade iron ore, in addition to reserves of gas, oil, coal, precious stones, underground water, plentiful limestone, etc. Once the productive potential is converted into economic process, it would trigger a powerful momentum with accompanying flows of imports and exports, requiring viable trade routes via sea to the world markets where Pakistan holds potential to play a constructive role.
Pakistan’ s potential as trade route for the transit of sea-borne trade of China could be as potent, if not more in the long term, as for Afghanistan and the CAR. China’s economy has successfully weathered the financial crisis of 1997 that devastated some of the South-east Asian economies, thus proving the inherent dynamics and strength of Chinese economy. Since the initiation of new economic policy by late Deng Xiopeng in 1978, opening China to the outside world, China has been able to accomplish an economic miracle over the past two decades; an average growth rate of the economy at 10.5 per cent, 17 times growth in its foreign trade reaching a volume of $360 billion, with 3.5 per cent of global trade in 2000, exports contributing 18.7 per cent of the GDP in 1998, progressive improvement in the quality of goods China produces and exports. China is currently the world’s top textile producer, making a fifth of the world’s garments. It exported garments worth $36.1 billion in 2000, 50 times that of 1978. Raw textiles and garments exports amounted to $52.1 billion in 2000, making 20.9 per cent of China’s overall exports and accounting for 13 per cent of world textile trade volume.
China’s accession to the WTO is anticipated to raise the share of China’s exports in the world trade volume from the present 3 per cent to 10 per cent by 2010. This enormous increase in China’s trade will be achieved by an equally impressive increase in foreign direct investments from all over the world. In equal measure, this would entail massive restructuring of Chinese economy, in particular of its industrial base, focusing on the development of several East-West transport corridors to support the industrialisation of mid-west and western provinces bordering on Pakistan. China’s eastern part, mainly because of its coastal character, is far more developed than the West of the country.
The southern tip of the huge Xinjiang province is stated to be located 4500 km. from China’s east coast, but only 2500 km from the two sea ports of Karachi or Gawadar — to be developed by China. Thus it makes economic sense that sea ports of Pakistan can be used by exports originating from and imports destined to western provinces of China to/from the countries of Middle East, Africa and Europe. Twenty years of open-door modernisation of Chinese economy has left serious disparity in economic development between eastern and western parts of China. Under the 10th five-year plan, focus of developmental activity will be on the accelerated development of 12 western provinces of China, comprising 71 per cent of the area and 28.4 per cent of the population of China, and inhabited by 87 per cent of the ethnic minorities of China. Socio-economic and political considerations call for greater share of the western provinces in the future economic development of China.
With further opening of Chinese economy in the wake of WTO rules and regulations becoming operative for China, there would be greater rush of foreign investments in capital-intensive and high-tech investments in the already far-developed coastal provinces in eastern China, resulting in the need to translocate labour and land-intensive manufacturing capacities of the Eastern provinces as well as to develop the new ones in this category in the western provinces. The existing KKH (Karakoram Highway) already connects western China to north-east of Pakistan. With further expansion and up-grading of this traffic artery, Pakistan can provide an economical and reliable transit route to the foreign trade of western China, contributing to the economic prosperity of the two nations. China is bound and determined to assert itself as emerging global economic power . In view of this it is only natural that manufacturing sector where China has vivid competitive edge over countries at similar stage of economic development, would be pre-eminent in the coming years, and especially in the realm of foreign trade. KKH with necessary improvement and upgrading would ideally fit the bill as transit route for a part of the Chinese sea-born trade.
Odd it may sound, despite the past history of not-so-warm economic relationship of India and Pakistan, transit route for trade of northern parts of India through Pakistan could prove to be economically a viable proposition. Whereas last decade of 20th century turned out to be a failed decade in terms of economic development and diversity in case of Pakistan, India has registered impressive economic achievements; as per the Economist, GDP per head in case of India is $504 against $425 in case of Pakistan. India has built respectable standing in IT, pharmaceuticals and entertainment exports. As the 2nd Asian Elephant along China— to quote S.J.Burki— India is forecast to raise its IT exports to $80 billion by the end of current decade, i.e. double of its total exports in the last financial year. Growing at an incredible rate of 50 per cent annually, at $6 billion, software exports were 15 per cent of its total exports last financial year. Normality in political relations between India and Pakistan can positively impact trade and transport between them in a big way.
Thanks to its geographic location, Pakistan enjoys vividly a competitive edge as potential transit route for the trade of its immediate neighbours as well as the CAR. Realisation of this potential could mark an impressive addition to our economic capacities. However this would require upgradation, alignment and integration of individual modes of transport to have an integrated system, efficient and capable to come up to the requirements of trade as regional transit hub. This concerns not only the physical infrastructure, perhaps more significantly, but also institutional infrastructure. Multi-modalism is presently the pre-dominant pattern in the movements of international trade, the intact movement of goods from the warehouse of the exporter to the sale point of the importer, with liability and responsibility for safe, smooth and speedy movement of cargo between points of origin and destination resting with one organisation. With the up-coming commercial-cum-industrial-cum transit port of Gwadar, Pakistan would have adequate port capacity to take care of this added business. Logistics and freight forwarding industry as the architect of international movement of trade would be required to play a critical and constructive role in this venture to lend requisite level of confidence and reliability to those carrying their transit trade through Pakistan.
The history of economic development in the wake of post-World War II global recovery teaches us that trade and transport have gone hand in hand ahead. Both trade and transport are positively correlated; both promote and reinforce each other. Economic miracle of Hong Kong and Singapore would have hardly occurred without the pre-dominant role played by their sea ports in developing and operating first rate port facilities for sea-borne trade passing through them, and over past many years have been claiming first and second positions as world top container ports. Inter-action and inter-linkage of trade and transport provide the most potent input for economic cross-fertilization boosting the inherent dynamics of the economy, motivating and promoting development of new productive capacities, generating new job opportunities and additionally contributing to the GNP.
The air strikes on 11th September 2001 on the World Trade Centre (WTC) and the Pentagon in the USA have irrevocably changed the world. However, the region comprising countries bordering Pakistan immediately or not in distant future will probably register the most profound impact of these events.
