The world around us

Published April 18, 2014

A LOT is happening around us, both in our immediate neighbourhood, as well as further afield, that has not just geopolitical, strategic or military underpinnings, but potentially far-reaching economic ramifications as well.

Beyond a small circle of policy wonks and IR specialists, most people in Pakistan view the region through the prism of current developments next door — such as the ongoing elections in India and Afghanistan — which makes it somewhat harder to appreciate the momentous and tectonic shifts occurring on the broader canvas of Asia.

Two recent events in China provide a flavour and a setting. The Boao Forum for Asia annual conference, which China has been hosting since its inception in 2001, had multiple sub-themes this year all feeding into a larger search for “new growth drivers” for Asia. The potential growth drivers are new markets, cheaper and more reliable sources of energy and other natural resources, innovation and technological collaboration, and deeper economic reforms.

Within the overall theme, one of the sessions was on “the vision of reviving the Maritime Silk Road”. The US views the maritime silk route as China’s re-branding of what has been dubbed by American commentators since 2005 as the latter’s so-called string of pearls strategy — the establishment of naval bases, refuelling and docking stations and surveillance facilities along China’s sea lines of communication, extending from the western Indian Ocean to the East China Sea.

At around the same time as the Boao Forum, the US defence secretary was being given a tour — at his request — of China’s first aircraft carrier, the ‘Liaoning (which is the retrofitted Soviet-era ‘Varyag’). Many commentators see Chinese naval developments in the light of a historic move from a ‘defensive’ orientation to one that will have the capability of power projection in the seas around China’s sea lines of communication (or, SLOCs). Not surprisingly, the most visible part of any Chinese naval deployment is likely to be around the Malacca Straits in the South China Sea — not just for reasons of territorial disputes with some of the littoral countries, but also because the Straits are considered a ‘choke point’ for ships bringing oil and other natural resources to the Chinese mainland.

The supposed outward expansion of China’s sphere of influence and protection of its sea lines of communication coincides with the US’s re-orientation of its strategic focus away from the Atlantic towards the Pacific, specifically towards Asia as part of its ‘Asia pivot’ strategy. That re-orientation has taken place in recognition of the emergence within Asia of a number of economic powerhouses with rising military capabilities. Hence, while Asia as a whole accounts for 63pc of the world population, it is home to 12 out of the top 30 biggest economies by purchasing power parity (PPP), including the second, third and fourth largest. Collectively, Asia accounts for 43pc of global GDP on a PPP basis.

(For a broad canvas of the seismic shifts under way, and an appreciation of why the “map of the Indian Ocean will be a map of the 21st century”, Robert Kaplan’s Monsoon: the Indian Ocean and the future of American power is highly recommended).

To be sure, Asia is witnessing competition and cooperation not just in the strategic and military spheres. Ambitious plans for regional as well as pan-Asian connectivity — ranging from economic and transportation corridors, grand mining projects, preferential trading arrangements to energy pipelines — are being laid out. The most ambitious of these are the Asian Development Bank-sponsored Central Asian Regional Economic Cooperation corridors initiative, and the US move to create a mega free trade area via the Trans-Pacific Partnership agreement. The Carec initiative involves six two-way ‘corridors’ linking, horizontally, East Asia to Europe, and vertically, Russia to South Asia and the Middle East. The Trans-Pacific Partnership agreement is meant to create a free trade agreement between initially nine Pacific-rim countries, with the US in the lead.

Myriad other regional initiatives are either on the drawing board, or are slowly but surely taking shape on the ground. These include the CASA-1000 project, designed to transmit Central Asia’s surplus electricity to South Asia; the moribund Iran-Pakistan gas pipeline; the equally dead Turkmenistan-Afghanistan-Pakistan-India gas pipeline; Pakistan and India’s talks on the import of at least 500MW of electricity by the former; India’s energy agreements with Nepal and Bangladesh; and India’s push to create a highway to Myanmar through Mizoram.

The planned Pakistan-China economic corridor is also one among many regional connectivity initiatives that are being rolled out. India’s collaboration with Iran in building a port at Chahbahar, less than 100 miles west of Gwadar at the mouth of the Hormuz, is another initiative aimed at gaining access to Central Asia by bypassing Pakistan — while also acting as a counter to China’s development of Gwadar. Other regional cooperation frameworks include the free and preferential trading arrangements being put in place, such as India’s agreements with Bangladesh and Sri Lanka, and its Economic Partnership Agreement with Japan.

In virtually all the regional cooperation frameworks, barring the bilateral China-Pakistan Economic Corridor, Pakistan is either at the periphery or completely bypassed. Where it does figure, its role is either that of a transit route or a partial buyer of energy, diminished by security-related concerns.

Unfortunately, prospects for greater regional cooperation involving Pakistan may have to wait a bit longer. The expected outcome of the Indian and Afghan elections appears to herald a more tense regional environment for the foreseeable future.

The writer is a former economic adviser to government, and currently heads a macroeconomic consultancy based in Islamabad.

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