RIP Van Winkle who may have slept away for the last six years would be surprised at the strides Pakistan has made during this period — at least in the in the economic field. Almost every economist thought that the country was doddering on the verge of being declared a failed state in 1999. All or most of them, now admit that the country has transformed into a fairly stable middle-income economy in 2006.
The role of internal and external factors that played the prominent role in this turnaround are debateable. But for all the progress made, it cannot be denied that the country needs to sharpen its economic diplomacy to capitalize on its economic gains.
The fact that the country is located geographically in a most potent economic region only adds up pressure to address trade-related issues more effectively. The Financial Times, London, wrote a little while ago: “If the past belonged to Europe and the present to America, the future belongs to Asia”. And now with emerging largest middle class of the world it is not surprising if the consultancy firm, PricewaterhouseCooper’s survey confirms that 71 per cent CEOs of biggest western companies view this region as the most significant market opportunity. That is despite political volatility in the region. Pakistan’s neighbours, namely India and China, growing geometrically are brimming with confidence.
The way India marketed its image in Davos, Switzerland, at the annual meeting of the World Economic Forum (WEF) 2006, is a reflection of its New-found passion to enlarge its trade and economic engagement. The quantum increase in its trade volume with China from little over $600 million in 2000 to over $10 billion today despite legacy of sour political relations is an apt manifestation of its aggressive economic diplomacy. China, on the other hand, excels in the fine art of working its interests through without making much fuss. Their products have shown capability to penetrate deep into markets formally or informally. Travel as far as you can in a direction of your choice and the label of ‘made in China’ on every article would follow you everywhere.
At the WEF that concluded last month President Musharraf led the Pakistani delegation. He also addressed a session. However, a senior diplomat who attended it admitted that Pakistan’s participation was meek compared to a grand show put up by its next door neighbour. It was not just Indian foreign ministry but Confederation of Indian Industry (CII), the public sector arm that was the main organizer of the Indian presence, along with India Brand Equity Foundation and the ministry of tourism.
They launched a full blown campaign during the week. The shrewd Indian businessmen headquartered themselves at a hotel in Davos where most of India specific conferences took place. With active participation of stakeholders outside government, that country was able to do at WEF what Indian government alone could not possibly have achieved.
Attendance is important but clarity of purpose is crucial to squeeze more out of expensive diplomatic exercises. With all its weaknesses, Pakistan certainly deserves a better image. It would be difficult for the government to do it alone. The private sector and the civil society of Pakistan that stands to gain directly and indirectly from improved terms of trade and improved direct foreign investment needs to understand and initiate exercises that could complement the government’s efforts.
Signing of bilateral and multilateral deals, joining trade groupings, ratifying one trade convention after another, participation in multi-lateral, multi-level economic forums define parameters and identify conditions of economic interaction in a globalized world. All this is necessary but not sufficient for any development in a competitive environment.
The extent to which a country will be able to promote its economic interests will depend on the level of understanding of market factors at work in a given global economic environment. It will also depend on the quality of diplomacy and skills of trade diplomats who are able to negotiate from position of understanding and strength.
There certainly are a few officers in relevant ministries and departments who have expertise in technicalities of trade related issues. But the system of bureaucracy is such that at most of the time even those people are unable to contribute to their best. Besides it would not be fair to expect a small group of officers to deliver in the absence of support
structures in relevant ministries. The question that crops up is: How should the government structure the country’s positions on controversial but pertinent trade issues?
“It is all done in an extremely ad hoc manner. Close to the deadline the government asks the World Bank or some other such institution to do a quick study to base their position on”, a source in Islamabad, said when contacted.
Dr Abid Burki, an economist from Lahore found the situation to be a reflection of short-sightedness of the government. “Even outside the government there is no serious research on relevant trade and commerce issues by academia. There is a need to encourage universities and research institutes to initiate research in areas that government needs to know about” he said. He also suggested streamlining the process of quality data collection and creation of a repository where all data is made available on line. This in his view would encourage even overseas.
Pakistani scholars and others who are interested in the region to research specific aspects of the economy. He asserted that the personalized initiatives cannot make up for the institutionalised response that is required. For the economic diplomacy to translate into tangible gains Pakistan needs to take concrete measures to fill in information gaps both to sell Pakistani brand in a globalize markets and to attract foreign investors.
“It is a sad reality that the external pressure has played a defining role in Pakistan’s decisions to favour or oppose trade agreements. Many times in the past we depended on the gut feeling of negotiating officials. Some times we just followed our competitors to make commitments without fully understanding their impact on domestic economy”, confided a senior diplomat.
A senior economist from Islamabad expressed his reservation over the impression that Indians outsmarted Pakistan in economic diplomacy. He reasons: “Foreign direct investment as percentage of GDP is higher in Pakistan as compared to India”. But he did concede that there was a need for capacity building for better handling of trade related issues. He indicated that both private sector organizations and the government are working to bridge this information and research gap.
“The apex body of business class, the Federation of Pakistan Chamber of Commerce and Industry has interviewed people that it intends to engage for research on relevant topics. The government has also created a WTO cell in the commerce ministry and capacity building is on its agenda”, he informed.
The government may also consider instituting an over-arching body on trade and economic relations. This body may include representatives of private sector and scholars of economics along with senior government official from economic and foreign ministries and be headed by the prime minister. It should be mandated to provide the guidelines for economic diplomacy. It may formulate and advance policies relating to production, movement or exchange of goods, services labour and investment in other countries. It would be appropriate to involve the private sector as they are supposed to be monitoring market developments more closely because of their direct economic interest.
It should be noted that research in this area is particularly difficult as situation is fluid all the time and cannot be addressed by a one off research project. The research in this area has to be an ongoing process as in today’s globalized world change in economic relations of any two members can alter the dynamics of market for a third country.
For example, any change in cotton-based products importing countries towards any of our competitors can result in direct gain or loss to cotton trade of Pakistan. It would also be affected by any change in relationship between say India and Bangladesh and so on and so forth. So there is a lot of monitoring that has to done on a sustained basis.
To sum it up, both the government and the private sector must realize that times have changed, demanding a change in concept of diplomacy. Today economic issues are cornerstone of a country’s foreign policy. The ability to articulate one’s interests within the framework of different trade agreements is a big challenge. Besides nation state, sub-national governments, multinational firms, non-governmental organizations, international financial institutions and the likes are engaged indirectly in activities that have traditionally been perceived to fall in the scope of states.
The provincial government of Punjab’s direct contact with the state government of East Punjab to cooperate in areas of mutual interest is a case in point. It has become a vehicle through which to understand global interaction in their most encompassing sense. The role of foreign ministry has shifted from a more traditional role of (what a recent publication on the subject calls) a ‘goalkeeper’ to that of ‘boundary spanner’. It ought to speed up its work in the direction of facilitating direct contacts between commerce, finance, industry and agriculture in bilateral, multilateral and multilevel economic diplomacy.