It's the Economy…

November 15, 2010

Textiles

Bill Clinton knew it. Hu Jintao certainly knows it. Barack Obama is learning it the hard way. And if we really want to ensure democracy and justice in Pakistan, Congress needs to figure this out, too: It’s the economy, stupid.

Pakistan’s democratic government continues to suffer incredible attacks from militant extremists. Just last week, Lashkar-e-Jhangvi – a terrorist group affiliated with Al Qaeda and the Tehrik-e-Taliban Pakistan – attacked a security compound in Karachi killing at least 18 and wounding over 100. And this was only the latest in a wave of deadly attacks that have plagued the city in recent months.

Karachi is financial heart of Pakistan. That may be one reason terrorist militants are so keen to destroy it. Undermining stability in Karachi has a direct impact on foreign investment in Pakistan; undermining the nation’s economy undermines support for the democratic government. It creates a feeling of hopelessness and frustration that militants use to recruit new foot soldiers.

Discussing the nation’s education system, Pakistani analyst Mosharraf Zaidi told PBS Frontline that a lack of economic opportunity can have dire consequences.

“You look at the consequences of these kids not going to school — and let’s set aside the fearmongering and the scare-mongering of saying, you know, ‘What if all these kids become terrorists?’ Setting that aside, the real problem is that, if you aren’t capable of participating in the global economy, you will be very, very poor. And desperate and extreme poverty has some diabolical consequences for societies and for individuals.”

Michael O’Hanlon, Senior Fellow at the Brookings Institution, writes that one of the keys to creating peace and stability in Afghanistan and Pakistan is economic stimulus for the region through trade liberalization.

Struggling economically, Pakistan needs such a shot in the arm, and a trade deal could arguably do even more than aid at this point.

Over the weekend, the US and Pakistan agreed to cooperate on a new $375 million wind farm near Karachi to provide 150 megawatts of power. This is a good start. Projects of this nature go beyond mere aid and create sustainable infrastructure that can reduce Pakistan’s dependence on foreign energy supplies while also providing a much needed boost to employment.

This is a good start, but the US needs to do more if we’re going to continue to have a strong relationship with the South Asian power. Pakistan’s president Zardari is no American puppet, and he has been making successful overtures to Chinese investors keen to profit from Pakistan’s unrealized potential.

The President said that there existed a great potential between Pakistan and China to further expand their bilateral trade and Pakistan was keen to welcome greater Chinese investment in the country.

He said that Pakistan and China have established a Joint Investment Company (JIC) with the help of China Development Bank to assist joint ventures and signed the Free Trade Agreement on goods and services, which were helping integration of Pakistani and Chinese economies.

The President said that the Government has put in place policies directed towards rapid economic growth, employment generation, poverty alleviation and encouragement of the private sector.

And it’s not only the cash-flush Chinese who are looking – the UK is also beginning to see the potential of investment in Pakistan.

[British Deputy High Commissioner] Robert Gibson pointed out that British entrepreneurs working in Pakistan were having continued interest to work and safeguard their businesses and were looking forward to opportunities to further increase their operations by expanding existing projects and explore new avenues for investment.

The US can begin its program of economic investment by liberalizing trade, specifically through granting preferential market status to Pakistani textiles, a policy encouraged in a new report by the Council on Foreign Relations.

“To reinforce US-Pakistan ties and contribute to Pakistan’s economic stability in the aftermath of an overwhelming natural disaster, the Obama administration should prioritize and the Congress should enact agreement that would grant preferential market access to Pakistani textiles,” former deputy Secretary of State Richard L. Armitage and former national security adviser Samuel R. Berger, stress in the report.

This agreement would help revive the Pakistani industry and all of the associated sectors of the economy, including Pakistan-grown cotton, the report adds.

Additionally, Congress should revisit legislation establishing Reconstruction Opportunity Zones (ROZ), a bill first introduced by President Bush and passed by House Democrats in 2009.

Conventional wisdom says that American policy towards Pakistan should involve ‘carrots’ and ‘sticks.’ This thinking is misguided. Targeted aid packages like Kerry-Lugar and flood assistance are necessary, but not sufficient if the goal is to develop a strong and lasting partnership. Pakistan has demonstrated that it will not be a client state, nor should any such outcome be at the heart of American foreign policy. Only by developing economic partnerships that benefit both countries will lasting trust be established. Investment in Pakistan may involve certain risks at this time, but ignoring this opportunity poses greater risks still.

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Partner, Not Patron

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As analyses of the Strategic Dialogues continue to roll out, there has been some good advice about what to take away from the discussions, and how the two nations can best proceed. An important step will be for the US to stop operating as Pakistan’s patron, and more as a partner.

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