OPINION Vol.1, No.1 June 2013 - National Defence University

Challenges in Economy
Economic Strangulation. Globalization is closely linked to economy which is a key determinant of
national power. Some challenges for Pakistan in economic field are:-
Given Pakistan’s current economic situation, intrusion of IFIs in economic policy-making of
Pakistan is likely to continue in near to mid-term. Our policy makers are therefore faced with the
challenge of meeting the demands of IFIs besides addressing domestic demands/concerns. Recent
example of RGST is a case in point.
Influence of donor countries on the recipient country is another dimension to economic
strangulation. Pakistan is energy starved these days and is looking towards the most feasible
options for the import of gas. Of all the options, Iran-Pakistan (IP) gas pipeline project is the
most viable option. However, US instead suggests that Pakistan should go for Turkmenistan-
Afghanistan-Pakistan-India (TAPI) which costs more than US $ 10.5 billion as compared to IP
which costs around US $ 7.5 billion 57 . Kerry-Lugar Bill and the strings attached to it is another
example.
Most Favourite Nation (MFN) Status to India. 58 A lot has been said and written on this issue,
however, some misgivings still persist. Following points merit consideration:
For the financial year 2010-11, official mutual trade stood at $2 billion. Pakistan imported
worth US $275 million as opposed to over $1.20 billion worth of imports by India.
Tariff liberalization programme is yet to take effect due to an environment of mistrust
between Pakistan and India.
Even though India granted MFN status to Pakistan in 1995, our products have not been
able to make sufficient headway in the Indian markets due to raised non-tariff barriers
(NTBs) by India.
According to one’s argument, availability of Indian products in Pakistani markets at much
cheaper rates in abundance might cripple own industrial base. Proponents of free trade on
the other hand argue that it will lead to competitiveness.
Pakistan’s positive list for non-MFN India consisted of 1,945 items while India’s positive
list for MFN Pakistan included 850 items only. According to the WTO Secretariat, India is
one of the highest users of safeguard policies against imports from other countries.
Challenges of Free Trade at International Level
Pakistan’s exports are mainly limited to unfinished products like cotton, rice, textile and leather
products. This gives Pakistan limited capability to optimally exploit the opportunities of liberalized trade
since the value of raw products is far lesser than finished goods. Moreover, some large countries protect
their domestic suppliers by subsidizing their farmers. At present Pakistan’s contribution in international
trade is only 0.14 %. 59
Poverty Alleviation
Globalization can juxtapose enormous economic wealth with severe economic poverty. Almost
half the world i.e. more than 3 billion people live on less than US $ 2.50 a day. 60 Poverty level in
Pakistan still stands at a staggering 22.3%. 61 As per study, the wealthiest 20% of the world account for
76.6% of total private consumption, while the poor 20% consume just 1.5%. 62 It is therefore no
understatement to say that, while globalization has brought prosperity, it also has brought with it new
problems, new risks, and new vulnerabilities. The challenge therefore remains whether opening up trade
at the regional level will address this issue or exacerbate it. 63
Implications of Capital Flow on National Security
The sheer volume of capital flow across the national boundaries every day speaks of the
importance of this aspect of globalisation. Impact of capital flow on national security are as follows:
FDI is crucial for any developing country especially the non-industrialized states like Pakistan.
FDI is contingent upon security and consistency in government policies; the absence of which
OPINION Vol.1 No.1 72 June 2013