Pakistan and its role in SAARC

Pakistan is located in South Asia. Other countries in this region include Pakistan’s arch rival India, Nepal,
Sri Lanka, Bangladesh, Maldives and Bhutan. These countries are also part of a bloc called SAARC (South
Asian Association for Regional Cooperation) which was established in 1985. While Afghanistan was
included as full member in 2006, Iran, China and Myanmar are seeking full member status in the bloc.
After Sub Saharan Africa, South Asia is the poorest region in the world with a large percentage of the
population living below the poverty line. Quarter of the world’s poor population is living in Africa while
half is in South Asia alone. South Asia is amongst the least integrated region in the world according to a
World Bank report published in 2007. In South Asia, trade amongst the countries is only 2% of the
region’s combined GDP while on the other hand in East Asia it is 20%.

These countries are still competing with each other globally, due to similar mindset of the ruling
elite, similar climatic conditions and soil composition. These countries have however have hostilities
against each other despite having close proximity and common borders. In this region the largest
countries by population in the descending order are India, Pakistan and Bangladesh. These three
countries are agriculture and manufacturing based economies but don’t have good diplomatic relations
with each other. This ‘trust deficit’ hinders any economic cooperation between these countries in
agriculture and manufacturing sector. Countries in this region are suffering from energy shortage which
according to me is a lifeline for any economy in the world. Inconsistent policies and mismanagement is
prime reason for the energy crisis in this region for the past 40 years or so. The power generation
facilities in this region are running below optimum capacity because of fuel shortage and poor cash
flows.

The aggregate installed electricity generation capacity of Pakistan is around 30,000 megawatt
but unfortunately the capacity utilization is around 50% i.e. 15,000 megawatt. Not only Pakistan, but its
neighbor India, is also suffering from the same problem. India, which happens to be the third largest
economy in the world, has installed generation capacity of 250,000 megawatt but capacity utilization is
around 60% i.e. 150,000 megawatt. While India is trying to overcome the energy crisis, Pakistan on the
other hand has often ignored the important problem and appropriate steps or not taken to overcome
the problem.

One can just forget two of the gas pipeline projects Iran-Pakistan-India (IPI) and Turkmenistan-
Afghanistan-Pakistan-India (TAPI). Both the pipelines were aimed at catering to Indian gas requirement
but Pakistan was to benefit in two ways: 1) getting millions of dollars transit fee and 2) also gas for
meeting domestic requirements. It was believed that after easing of economic sanctions on Iran,
Pakistan will succeed in completing portion of gas pipeline located in its territory. However, it seems
that Government of Pakistan (GoP) does not wish to complete this project due to the US pressure. Fate
of TAPI is also in doldrums as NATO forces are likely to vacate Afghanistan in 2014. Therefore, Pakistan
will have to accelerate oil and gas exploration activities in the country and also complete LNG project on
war footings.

Pakistan is a natural corridor for energy supply because on one side are energy-rich countries and on the
other side are energy-starved ones. Pakistan can also follow Singapore example and establish state-of-
the art refineries on the coastal belt. In this regards help can be sought from China, Russia and other
Central Asian countries. Pakistan already has a mid-country refinery and two pipelines to carry black and
white oil products up to Multan. This can pave way for export of white oil products to Afghanistan and
Chinese cities enjoying common border with Pakistan. Realization of all these projects can help the
country in earning millions of dollars transit fee.

Ironically, Gwadar port project has been put on back bumper after the departure of Pervez
Musharraf. In fact the paraphernalia should have been completed prior to transfer of management
control to China. Though, India is facilitating in the construction of Chabahar port in Iran, Pakistan will
continue to offer shortest and most cost effective route up to Central Asian countries passing through
Afghanistan.

Lately, some of the Middle Eastern countries have shown keen interest in acquiring agriculture land in
Pakistan but local feudal lords have emerged to be the biggest opponents to leasing of cultivable lands
to other countries. Pakistan has millions of acres of land which is not cultivated, mainly due to shortage
of irrigation water. Leasing out land to other countries is not a bad proposal because it would help in
improving the infrastructure i.e. construction of farm to market roads, and modern warehouses.
Construction of water courses and installation of tube wells would have helped in raising sub-soil water
levels in arid zones.

Pakistan produces huge quantities of wheat, rice, sugar, fertilizer but a significant portion of
these commodities is smuggled to neighboring countries. Plugging of porous border and formalizing
trade with India, Iran and Afghanistan can increase Pakistan’s export manifold. It is estimated that nearly
one million tons wheat and half a million tons rice and sugar each is smuggled to the neighboring
countries.
The increase in lending to farmers has started yielding benefits with Pakistan joining the club of wheat
exporting countries. The recent initiative of State Bank of Pakistan, Warehouse Receipt Financing and
trading of these receipts at Pakistan Mercantile Exchange is likely to improve earnings of farmers,
though reduction in wastages and better price discovery. It is encouraging that British Government has
offered assistance equivalent to Rs240 million to complete the project at a faster pace. The key hurdle in
the realization of this project is lack of modern warehouses and absence of collateral management
companies.

It is necessary to remind the GoP that nearly 1000 palm oil plants were grown in Sindh near the coastal
line. While a large percentage of plants have died due to improper management, extracting oil is almost
impossible because no crushers have been installed. Achieving self-sufficiency in edible oil can help in
saving over US$2 billion currently being spent on import of palm oil.

Pakistan often faces ban on export of seafood because to not abiding by international laws.
While local fishermen face starvation deep sea trawlers from other countries intrude into Pakistan’s
territorial waters and take away huge catch. On top of all use of banned net results in killing of smaller
fish that are ultimately used in the production of chickenfeed. This practice going on for decades
deprives Pakistan from earning huge foreign exchange besides ‘economic assassination’ of poor
fishermen.

Pakistan’s agri and industrial production has remained low due to absence of policies
encouraging greater value addition. Pakistan is among the top five largest cotton producing countries
but its share in the global trade of textiles and clothing is around two percent. The country needs to
establish industries that can achieve higher value addition. Pakistan should export pulp rather than
exporting fruits which have shorter shelf life.

Pakistan has overwhelming majority of Muslims but still goods worth billions of dollars are
imported which are not Halal. Ideally, Pakistan should be exporting Halal food products to other Muslim
countries. The country need to focus on breeding of animals (i.e. chicken, goat, cows) and export frozen
meat and dairy products. If countries like Australia, and Holland can produce Halal Products what is
stopping Pakistan.

Another example to follow is Bangladesh, which does not produces cotton but its export of textiles and
clothing is more than that of Pakistan. This is because Bangladesh has focus on achieving higher value
addition and Pakistan continues to produce law quality and low prices items. This is waste of precious
resource and to be honest value addition is negative. Pakistan has also not been able to benefit from
being a member of SAARC. Some of the analysts say it is difficult to compete with India but has Pakistan
really made any effort to achieve higher value addition? The reply is in negative due to prevailing
mindset of Pakistanis who want to lead ‘easy life’.