Between FATF and GSP Plus

Published February 22, 2018

TWO parallel developments in the past few days perfectly illustrate how Pakistan’s economic diplomacy is caught between a rock and a hard place. On Tuesday, Pakistan narrowly missed being grey-listed by the Financial Action Task Force (FATF) as a country whose financial system presents terror financing and money laundering risks to the international financial system. Also on Tuesday, the EU agreed to extend GSP Plus status to Pakistan’s products for another two years, subject to review, meaning another short lease on life to our sagging exports.

Let’s get one thing straight first. In both cases, very good people worked long and hard to bring about the outcome. It took very hectic diplomacy by a team including Miftah Ismael and Khawaja Asif among others to line up three countries that were willing to vote against the motion introduced by the Americans, the UK, France and Germany to grey-list Pakistan’s financial system in FATF. And the secretary commerce, Younus Dagha, led the efforts with the EU to get our GSP Plus status renewed. All of them deserve acknowledgement for their efforts, and nothing of what follows is intended to detract from their contribution.

But take a look at what we are celebrating. On the one hand, we narrowly missed getting labelled as a country that harbours terrorist individuals and groups, and thereby getting slapped with a tag that would make our external financial dealings very cumbersome and expensive, for starters. On the other hand, we are celebrating being extended a privilege that has been designed as assistance to some of the poorest countries in the world, where we find ourselves in the company of states like Armenia, Bolivia, Mongolia, Cape Verde. The saving grace, perhaps, is that Sri Lanka and the Philippines are also on this list.

Our economic diplomacy consists of little more than seeking financing from multilateral lenders.

None of these countries takes pride in being a nuclear power. None of them harbours outsize ambitions and great game-like fantasies. And if any of them ever landed on the FATF grey list, it was most likely for institutional weaknesses in the regulatory framework, as well as legislation designed to curb terror financing and money laundering, not for harbouring groups and individuals who have been designated as terrorists by the United Nations for well over a decade.

Why are we even asking for entry into the GSP Plus regime? For the simple reason that we have been unable to put in place the right reforms to diversify our exports away from cotton textiles for decades now, and our economic diplomacy consists of little more than seeking financing from multilateral lenders and entry into preferential trade regimes on the grounds that we are either desperately poor (which we are not) or badly impacted by terrorism (which we are, but then why selective action against the myriad terrorist groups who set up shop on our soil?).

The review mission from the Asia Pacific Group, that was going to report Pakistan’s compliance to FATF in implementing UN Security Council Resolution 1267 which lists all those individuals and groups that the world body has designated as terrorists, was arriving in January. A review was scheduled for November 2017, in Buenos Aires, Argentina. And in August of 2017, the individual at the centre of the entire controversy with FATF founded his own political party, the Milli Muslim League.

In September the party fielded its first candidate in a by-election in NA-120, Lahore. The candidate, Yaqoob Shaikh, is himself on a US government list of sanctioned individuals for their connections to terrorism. He bagged five per cent of the votes cast. In November, Hafiz Saeed was released from house arrest since the government insisted on holding him under the Maintenance of Public Order Ordinance so they could detain him legally without charge. And in December he inaugurated his party office in Lahore, plastering the city with posters advertising their arrival.

So the road to the motions placed before FATF ran parallel to an attempt to bring into the political mainstream a group that is considered by the United Nations to be a terrorist entity. The whole world watched this unfold. ‘He’s on Wanted Posters in US, and Campaign Posters in Pakistan’ ran a headline in the New York Times in September. ‘Pakistan army pushed political role for militant-linked groups’ ran another story in Reuters. And so on.

This was the road to Paris, that ended on Tuesday when three countries, we are told, refused to support the motion advanced to grey-list Pakistan’s financial system, giving the country an additional three months ‘reprieve’ to demonstrate that it is serious about ensuring that its financial system does not end up handling funds that can be traced back to designated groups or individuals, leaving the financial system at risk of being levied with heavy fines.

This is the story of Pakistan’s economy. It is because of priorities of this sort that our reform agenda has never advanced, why our exports remain stuck in a primitive mould, why our tax base is so narrow, productivity below that of our competitors and so on. It is because the top levels of our government, whether civil or military, have always been consumed with finding ways to walk both sides of the aisle at the same time, to have a foreign policy that is built on telling the world all the sacrifices that the country has made in the fight against terror, while the world watches groups designated by it as terrorists being nurtured, and in the latest instance, actively mainstreamed.

Look at how much of the effort our leading economic team had to expend just getting past the FATF review, and the other side, where our commerce folks were in Brussels, asking for access to the EU market on terms designed for some of the poorest countries on earth. This double play, growling at the creditors and benefactors one day, asking them for favours the next, is the state of play on our economic diplomacy.

The writer is a member of staff.

Twitter: @khurramhusain

Published in Dawn, February 22nd, 2018



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