GEO-ECONOMICS is the buzzword these days among our ruling elite. It is recommended as the panacea for Pakistan’s economic ills and a sure path to prosperity. However, there is little inclination to define it properly or understand its far-reaching implications.
Geo-economics is about using economic tools and geography to benefit through international trade and other means of interstate economic cooperation.
In Pakistan, the term is employed generally in support of promoting intra-regional trade and economic cooperation in South Asia and inter-regional trade between South Asia and surrounding regions. But geo-economics alone cannot accelerate economic progress, which is dependent on a judicious combination of sound internal and external policies, especially high national savings and investment rates, and the development of human resources, science and technology.
Regional economic integration can enhance the prosperity of the participating states through free intra-regional trade, leading to a more efficient allocation of resources, enhanced productivity through increased competition and the economies of large-scale production, and lower prices. However, to fully reap the benefits, these states must have a shared vision of the future, economic complementarities, geographical proximity and cultural affinity. Besides, there must be no serious disputes or hegemonic designs.
Unfortunately, in South Asia, barring geographical proximity, none of the other necessary conditions for the success of regional economic integration are fulfilled. India’s hegemonic designs; serious disputes between Pakistan and India, particularly over Kashmir; and cultural and religious divergences between the two countries, with the caste system hampering vertical social mobility in India, are among the major barriers to economic integration in South Asia.
Saarc cannot be the organisation of choice for Pakistan.
The dynamics of regional economic integration in South Asia on the pattern of the European Union also militate against Pakistan’s political and economic interests. In accordance with the principle of social and cumulative causation, propounded by the famous Swedish economist Gunnar Myrdal, economically advanced member states tend to benefit more from the process of economic integration as compared to less developed member states if matters are left to market forces alone.
In the case of Saarc, free intra-regional trade would lead to the economic domination of the region by India because of the huge size and relative advancement of its economy.
Further, as economic issues cannot be totally divorced from political and security issues, progress towards economic integration inevitably generates pressure for the coordination of foreign and security policies of member states by transferring decision-making powers to the headquarters of the regional organisation, as has happened in the EU. The more powerful member states tend to dominate the decision-making process at the regional level. In the case of Saarc, India, because of its economic and political clout, would inevitably dominate the decision-making process, covering both economic and political issues if the process of economic integration is to be unchecked. This certainly would not be in the best interest of Pakistan, which faces an enduring threat to its security from India.
Therefore, Saarc cannot be the organisation of choice for Pakistan for the purposes of regional economic integration on the pattern of the EU. Instead, Pakistan must look westward and try to explore the possibilities of economic integration within the framework of the Economic Cooperation Organisation, comprising Pakistan, Iran, Turkey, Afghanistan, the Central Asian states and Azerbaijan, as this would fulfil all the prerequisites.
Editorial: Regional trade
Pakistan’s trade and economic cooperation with India, bilaterally or within the framework of Saarc, should be on a level playing field with due regard for the overall security environment and safeguards for the health of its economy.
In short, the importance of economic development and technological strength in raising the standard of living of the people of a country, preserving its security, and ensuring a dignified position for it in the comity of nations cannot be over-emphasised. Therefore, the linchpin of Pakistan’s grand strategy should be to assign top priority to the goal of rapid economic growth along the lines of what China has done since 1980.
Within this framework, Pakistan should take advantage of its strategic location to develop trade, economic and transportation links with regional countries, always keeping in view its economic and security interests. As historical evidence clearly shows, when it comes to the crunch, geopolitics always trumps geo-economics.
The writer is a retired ambassador and the author of Pakistan and a World in Disorder — A Grand Strategy for the Twenty-First Century.
Published in Dawn, July 21st, 2022