October 22, 2005

AS the energy crunch looms larger, many countries around the world are scrambling to secure long-term arrangements to meet their energy needs. The recent developments on the Iran-Pakistan-India gas pipeline project have further brought into focus the long story of Pakistan’s efforts to access permanent sources of energy supplies for its development.

So how is Pakistan faring in its efforts to secure the energy lifeline for its long-term growth? And will its economic diplomacy set its sails correctly this time?

The energy concerns have occupied a central position in development strategies of many countries after the energy shocks of 1973 and 1977. For Pakistan, the first opportunity to secure a durable and economic source of energy arose during the 1980s. It was an overland Iranian oil pipeline coming into Pakistan but it was scuttled by president Ziaul Haq for his own reasons. The non-utilization of this opportunity provided a bonanza the to shipping industry by opening up lucrative business in its direction for transporting the country’s ever increasing energy requirements.

Later, when Central Asian republics became independent states in 1991, a few others were better placed than Pakistan, to benefit from this opportunity. Soviet Union had packed and left Afghanistan and then itself disappeared as well. What this required of us was a vision to look beyond Afghanistan at the opportunities that had opened up after 200 years. Pakistan exercised great influence at the time and if it had used it towards stabilizing Afghanistan, both of them would have prospered. Our country would have become a bridge between Central Asia and South Asia — reviving the historical role which the areas comprising Pakistan had played for centuries.

However, while we played favourite hobby horses in Afghanistan, and got nearly branded by Americans as sponsors of terrorism in 1993, everyone else worked feverishly to benefit themselves from the oil, gas, mineral and other opportunities of Central Asia on long-term basis.

Recovering from these initial setbacks, Pakistan then worked with the prestigious World Economic Forum (WEF), Davos, Switzerland, and enlisted its support in its pursuit of building investment links with Central Asia and finally developed a portfolio of several cross-border investment projects relating to Central Asian opportunities, including energy and infrastructure related projects.

After two years of discussions and presentations, the WEF was convinced of the potential and viability of these projects, and agreed to co-host a major regional economic summit for the first time in Pakistan. Called CASA (Central Asia- South Asia) Economic Summit, it was to be the first and the largest event of its kind so far. The Economic Summit was finally scheduled to be held in Lahore in 1997 to coincide with the 50th anniversary of independence. The presence of over 2,000 top government and business leaders from OECD countries but more particularly from Central Asia, South Asia and the Gulf regions was arranged by the WEF which was jointly organizing the summit with Board of Investment of Pakistan.

How useful were the projects and how serious the investor interest could be gauged from the facts about one of the infrastructure projects in the portfolio, that was to be signed on the occasion of the summit. A major European group (for proprietary reasons their names are not being mentioned) agreed to construct 1,200 km railway line between Khushka railway station in Turkmenistan through Herat in Afghanistan and connecting it to Pakistan’s railway system.

This entire cross-border project was to be completed within 600 days of its signing. So confident were the sponsors of their capabilities that they agreed to incorporate a clause in the agreement, to pay penalties for every day of delay beyond 600 days. Standing behind the group and confirming their seriousness, was a European bank with Triple-A standing. Many other projects were also sponsored by these investors.

Once all these issues were settled with the WEF, the government of Pakistan was requested to make logistic arrangements for hosting the conference. In the summer of 1996, and on the formal advice of the then prime minister Benazir Bhutto, president Farooq Leghari became chairman of National Steering Committee for CASA Economic Summit, and this writer, its chief coordinator.

As the logistics for the summit, its delegates and the foreign media, that were to descend upon Lahore, were being arranged, Pakistan was hit in November of the same year by one of the palace coups that have been its bane since inception. The co-sponsors in the WEF were concerned whether the economic summit would go ahead. Their doubts were soon removed as Nawaz Sharif, the new prime minister, gave more importance to settling scores with his real and imaginary opponents in pursuit of his grandiose ambition to become an all-powerful ruler (Amirul Momnin) of Pakistan.

Giving up finally on Pakistan’s ability to hold CASA Economic Summit, the WEF then went ahead and split it into two — with one each being organized in Istanbul and New Delhi to carry forward other investment initiatives.

In the meantime, however, energy pipelines and rail and road networks connecting with Central Asia have materialized everywhere else — eastwards across the land mass to China, Japan and Korea, and westwards across Caspian Sea to Turkey, Ukraine and up to Europe and beyond. Iran (the third largest gas producer in the world) has also constructed a railway link and gas pipeline with Turkmenistan (the fourth largest producer).

In all these developments, the only country conspicuous by its absence has been Pakistan, despite all the advantages it has had. Not only that. The Economic Cooperation Organization (Eco) exists which puts Pakistan and Central Asian countries under the same umbrella. From Pakistan’s perspective, the most important benefits from Eco are that of developing its infrastructure and energy links with Central Asian republics. Many bilateral and multilateral meetings are frequently held at all levels including the summit level between them. But the ‘quality’ of discussions in all such meetings is evident from the fact that till today no road or rail link or an oil or gas pipeline project is under construction to link Pakistan with Central Asian markets.

Now about the Iran-Pakistan-India (IPI) gas pipeline project which during the last one year has picked up speed under the momentum of improved relations between Pakistan and India, driven largely by India’s energy needs. The gas pipeline from Iran has always had great merit for Pakistan as also for going across to India. Both are energy hungry and would consume any amount of energy supplied to meet South Asian needs for development. But some recent developments in the external sector indicate that the time for an IPI pipeline is not ripe yet. And there have been statements by our prime minister proclaiming that Pakistan would go ahead with its shorter version.

But that is missing the point. The focus of Pakistan’s energy strategy should be on reviving its Central Asian option and constructing energy and infrastructure links including the gas pipeline from Turkmenistan. As is the case now, the US was supportive of such a pipeline earlier also in preparations for CASA Economic Summit, as Clinton administration papers have also confirmed.

Once the work on Turkmenistan-Afghanistan-Pakistan (TAP) pipeline begins, it will inevitably lead to construction of a railway line, a highway, and oil pipeline. In fact a huge economic corridor between Central Asia and Pakistan will develop as was earlier designed. If Pakistan succeeds in materializing this potential, it would earn for itself strategic benefits, much more than any other project undertaken so far.

If IPI pipeline does not materialize and TAP pipeline does, it will meet our own and India’s requirements and also provide an outlet for other energy consumers world-wide. A bonus to them all including India would be that they will also be able to use the highways and rail links for two-way trade with Central Asian markets. Once started, as earlier indicated, these projects could be completed quicker than many think, and well before the energy crunch hits Pakistan’s economy by 2010.

Pakistan may work for the development of IPI pipeline although its future is still uncertain. But with or without IPI, it should never lose sight of its energy lifeline which is connected to Central Asia and is also viable. The energy and transportation corridor with Central Asia remains the lifeline of Pakistan’s future prosperity, and the country should not be content with anything less.

The writer is a former head of the Board of Investment and a federal secretary.

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