Pakistan has been a “problem child” for the United States for a number of decades, but according to Daniel Runde of Forbes, that could all change in the next few years as Pakistan develops into an economic and diplomatic powerhouse in Southeast Asia. Avowed enemy of its populous neighbor India, a nuclear power since 1984, and a hotbed of Islamic radicalism, but also a fast-growing and rapidly developing nation of 185 million people, Pakistan is a challenging enigma for U.S. policy.
According to Runde, the U.S. needs to move beyond its current focus on the “security lens” and see Pakistan not as a problem to be solved, but as a promising partner in the global diplomatic and economic arenas.
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Pakistan today like Colombia in the 1990s
Runde argues that: “The Pakistan of today is similar to that of Colombia in the late 1990s. Back then, words like “drugs, gangs, and failed state” were freely associated with the Andean country.”
He then points out that just 15 years later Colombia now has a stable 3.5% annual GDP growth, a free trade agreement with the U.S. and a dramatically improved security situation. By the same token, Western media headlines on Pakistan today gloss rarely focus on progress on the security front, political stability and steady if slow progress on economic reform.
The security situation in Pakistan has turned a corner, according to Runde. He says: “What has not sunk into international perceptions about the country is the tangible consensus among government, military, and Pakistani citizens against violent terrorists including the Pakistani Taliban and… other terrorist groups in and around the country. Pakistan will continue to experience attacks by fringe groups, but policymakers and investors need to stop operating as if the Pakistani Taliban is at Islamabad’s doorstep.”
Economy gradually improving
Pakistan is also on trajectory to become a global economic power. The country’s population will top 300 million by 2050, and Pakistan is also urbanizing rapidly, with half its people projected to live in cities in just 35 years. Islamabad, a planned city much like Brasilia, had a population of 400,000 in 1995; in 2015, it has a population of close to 3 million including the suburbs. Most Pakistani cities are growing rapidly, and this will mean a huge demand for food, energy, water and consumer goods in the near futuure.
Runde also notes that macroeconomic and structural reforms over the last decade or so have shrunk the budget deficit and raised GDP growth to around 4% even with large energy deficits. The Pakistani Central Bank has also beefed up foreign reserves to more than $17 billion.
In another positive, Pakistan’s economy getting a notable boost from low crude oil prices, and the $14 billion in remittances flowing in from its 6 million-strong workers abroad is also a major positive. Runde also points to substantial progress in reducing poverty, which had dropped to 13.6% in 2011 from 35% in 2002; and in rural areas, poverty declined from 40% to 15% over the same nine-year period.
Of note, just a couple of months ago, credit rating agency Standard and Poor upgraded Pakistan’s rating from stable to positive.
Countering China’s influence on Pakistan
China’s increasing interest in and investment with Pakistan is another good reason the U.S. should reassess its position on the nation. Chinese President Xi Jinping announced the $46 billion China-Pakistan Economic Corridor in 2014, and it has become a important part of the ongoing relationship between the countries. CPEC envisions the building of a number of major highways, railways and oil and gas pipelines in Pakistan, all to be constructed by Chinese firms.
Even a long-term, “old-fashioned” development plan like CPEC has created great optimism in a nation desperate for infrastructure investment. Runde also argues that CPEC has also “greatly incentivized the government to clamp down on terrorist groups.”
He notes that the economic success of CPEC “is by no means guaranteed especially given China’s checkered track record of investing in infrastructure projects abroad, but goes on to say “China’s bet on Pakistan could overshadow US contributions unless we rethink our mix of engagement.”
Runde argues that China is trying to leverage Pakistan as a “launching pad” to link up with energy producers in the Gulf of Arabia and Middle East, and open up markets further west.
His discussion of Pakistan and China ends with the classic “something is better than nothing” argument: “The good news is that Pakistani businesses still prefer the allure of technology transfer and innovation offered by U.S. companies. But make no mistake: for Pakistanis, Chinese investment is better than no investment.”