Economic Diplomacy: Agenda Item One

                                                         Majyd Aziz

Pakistan’s Presidents and Prime Ministers love to travel during their tenure, declare that every foreign trip is official, and that every trip is always imperative, a game changer, and more importantly, hyped as a super success. These leaders usually have a large delegation traveling with them and these also include family members. Naturally, the leaders have a full itinerary that includes the bilateral political, economic and global issues. Invariably, world issues are always a hot topic of discussion among leaders in the comity of nations. Photo opportunities are galore and there is always the mandatory interaction with the Pakistani expatriates based in that country. 

As a former Foreign Secretary recently revealed, General Musharraf was the most traveled head of state in the world. His Prime Minister, Shaukat Aziz, visited over one hundred countries in three years. Asif Ali Zardari loved to be the state guest all over the world. Now, Prime Minister Nawaz Sharif keeps his luggage all packed, ready to show himself to foreign governments. He has already made trips to the crucial countries, China, Saudi Arabia and United States of America. In between, a trip to Turkey was also undertaken. After Eid, he is to visit the White House to meet its resident.

Pakistan is handicapped by a tough scenario in her economic environment where a strait-jacket of economic malaise has tightly wrapped her and preventing her to freely hobble in the global marketplace. The dire situation is further compounded by the lack of revolutionary initiative and pragmatic policy making among a host of economic managers who have been entrusted with the task of making the country a viable economic entity again. Thus, this is the desired signal that should prompt the Prime Minister to base his foreign visits on a truly focused approach through economic diplomacy.

What is economic diplomacy? Bergeijk en Moons in Economic Diplomacy and Economic Security, describe economic diplomacy as related to cross border economic activities (export, import, investment, lending, aid, migration) pursued by state and non-state actors in the real world. They further explain that typically economic diplomacy consists of three elements:

• The use of political influence and relationships to promote and/or influence international trade and investments.
• The use of economic assets and relationships to increase the cost of conflict and to strengthen the mutual benefits of cooperation and politically stable relationships, i.e. to increase economic security. This contains structural policies and bilateral trade agreements.
• Ways to consolidate the right political climate and international political economic environment to facilitate and institute these objectives. This covers multilateral negotiations and is the domain of institutions such as the World Trade Organization, the Organization for Economic Cooperation and Development and the European Union.

 The past few years have seen a major upheaval in the economic state of affairs in many countries, regions, and blocs. The negative impact of these mini, as well as mega, meltdowns has exposed the inadequacies of economic policies and at the same time has brought into the forefront the demonic after-effects of unbridled spending, laxity in regulations, non-adherence to economic priorities and more ominously, displaying the total disregard for prudence in policymaking. These discouraging and purposeless ramifications have strengthened the need to bring about a fundamental change in how governments apply economic deliberations and justifications in their relationship with other countries as well as with the concerned organizations and institutions. Thus, bilateral or compound contentious issues are being gradually relegated to the lower side of priorities and economic diplomacy and economic security have elevated to the top of international policy agenda, driven by a blend of political and economic factors. It has to be understood that economic diplomacy is a practical tool to generate and increase economic security. This is of foremost importance given the formidable development in the global thinking of countries who have achieved new economic powers.

A quick review of the economic situation in Pakistan, especially after the assumption of the powers of the state by the Sharif government, demonstrates the crucial need to enhance and improve economic diplomacy and focus on achieving the status of a viable and functioning country. The macro-economic indicators are gloomy and a shuddering thought reverberates through the mind that even the economic managers are enjoying foreign sojourns, with a nary a worry on their foreheads about where the country’s economic ship is drifting. Recently, IMF’s Mission Chief for Pakistan Jeffrey Franks in an interview stated that “Pakistan is in a difficult economic situation right now; foreign exchange reserves are falling, chronic fiscal deficit is widening and in addition high inflation and major structural impediments have stalled economic growth.” IMF has agreed to a $6.64 billion new credit program that would give breathing space to the government and assist in repaying loans. However, the conditionalities are so tough and so anti-people that it would be a gargantuan and uphill task for the government to bring to fruition these conditionalities and sustain them.

The government, with hands tied and a default looming over on the horizon, did put up a brave face and went ahead with enhancing rates of energy, petrol and diesel, elimination of certain subsidies, closing loopholes and distortions in the revenue collection system, and announced with fanfare the program to disinvest and privatize 31 corporations and institutions still under governmental control. Notwithstanding the adherence to abide by the IMF diktat, the disturbing facts are that foreign exchange reserves have drastically dipped to an alarming low of less than $3.90 billion, the Rupee sank to 110 to $1 until artificially resuscitated by intervention of the State Bank of Pakistan, the continued liberal import regime, the messed-up rules and regulations in Sales Tax, Excise, and Income Tax, and this government’s penchant for focusing on public-popular schemes rather than a serious approach to resolving outstanding issues.

It is in keeping the economic malaise in perspective that the government should strategize its global policies and must initiate solid steps to promote economic diplomacy. Sad to report, there are no full-time Ministers for Foreign Affairs, Commerce, and Defence. These highly sensitive and key Ministries are being managed by retired and serving bureaucrats. Probably, the ruling party does not have competent elected representatives to oversee these Ministries. Thus, a concentrated and centralized power base is the modus operandi and this does not bode well for democracy to prosper.

Pakistan is at a very crucial stage now. The European Union is deciding on GSP Plus, Washington is sympathetic to a long-term trade and investment relationship that may lead to a US-Pak FTA, India is demanding MFN, Russia is supporting Pakistan’s membership in Shanghai Cooperation Organization, the Iran-Pakistan and the TAPI gas pipelines need full-time attention, while ASEAN is also making positive approaches towards a strong role for Pakistan in the near future. Pakistanis want their political leaders and economic managers to emulate Mahmood Ghaznavi, Muhammad Bin Qasim, or even Sher Shah Suri. Alas, in Islamabad, it seems that their role models are globe-trotter Marco Polo, Roman Emperor and crazy fiddler Nero, or General Ibrahim Babangida the Nigerian strongman who devastated the economy. In short, as someone said about this government, “they are still trying to sort out where they are and where they want to go”.