AFTER China opened up a vast landscape of economic cooperation with Pakistan, global political influences seem to be overshadowing the country’s attempted transition towards a new framework of economic diplomacy. While this was being noticed with the slowing down of progress on the China-Pakistan Economic Corridor (CPEC), it became more evident after Pakistan’s decision to stay away from the Kuala Lumpur summit. Having taken a clear position on promoting strategic economic partnerships as a policy priority, the leadership is now spending most of its time on damage control due to lack of delivery on its promises.

It can be argued that a country with weak economic fundamentals, political instability and fragmented institutions will struggle to take a leadership role in economic diplomacy. A serious shift towards increasing trade and investment stakes of regional partners may well be the only answer to reviving growth and stability. It is a real test for the leadership to maturely and sensibly manage this transition from a security-led engagement to leveraging regional economic potential for shared prosperity and the possibility of catching up with the income levels of emerging Asia.

Economic diplomacy is a diverse practice and an evolving subject which generally involves three kinds of negotiations — trade, investment and development cooperation. The meaning, forms and ways of economic diplomacy vary from nation to nation, depending on their levels of economic development. At the same time, each country is redefining its economic value proposition in the rapidly changing dynamics of economic gravity towards a multipolar setting that tilts towards Asia. The dynamics of globalisation and emerging regional markets have challenged traditional diplomatic practices by forcing countries to increase their sphere of influence through engaging with a wide range of partners.

In addition to the state, the most important actors of economic diplomacy include regional organisations, financial institutions, sovereign wealth funds, private companies and non-governmental economic bodies. Most recent literature closely links economic security with national security priorities where the role of economic diplomacy becomes crucial in neutralising the security threats emerging from weak economic fundamentals.

Signalling a progressive way of engagement to investors is the first step towards economic diplomacy

In the case of Pakistan, an economic diplomacy strategy should focus on an in-depth partnership framework with China and regional players, a private sector-led model to undertake large commercial transactions, revamping of the ministries of foreign affairs and economic management and a new way of engaging with multilateral and regional financial institutions.

First, this requires clear ownership of the revival of economic growth at the top and the prime minister needs to appoint a professionally competent leader to convene a series of dialogues with researchers, government officials, the private sector and international institutions. It is pertinent to note that it will have to be a change-management exercise led by indigenous resources capable of using evidence to lay the foundations of sustainable growth. No wonder that a country of over 200 million people is struggling to come up with a serious growth policy with an inexperienced conflicted team of generalists.

The point is simple: without creating space for top-class economists, sector experts and people of international standing, a mindset shift will not happen. When I proposed this idea a year back, I faced a rather hostile pushback from those looking to secure their comfort zones and to maximise resources rather than looking at systemic flaws.

Moving ahead, Pakistan needs to demonstrate its capability to undertake a few large-scale trans-actions to give confidence to interested investors. The prime minister did a great job by opening doors for future investment from China, Saudi Arabia, the UAE, Malaysia and Turkey. The challenge was to quickly come up with a professional response to fast-track decision-making on these commitments. It was a big mistake to hand over these projects to the usual bureaucratic structure which has been perpetually failing to structure transactions linked to privatisation, state-owned enterprises or foreign direct investment. The purpose is not to criticise but to reflect on how to strengthen the capacity to match the expectations of countries looking for investment stakes in Pakistan.

In my opinion, the only short-term answer is to insulate priority investment projects from the current system and hand over to a group of top professionals to fast-track the structuring of these transactions. Signalling a progressive way of engagement to investors is the first step towards economic diplomacy.

A serious debate has started on the future of multilateralism and new models of economic engagement with an increasingly multipolar world. Pakistan’s recent response to CPEC implementation and strategic engagement in Kuala Lumpur summit has not been up to the mark. It will be prudent to pick up small doable transactions with key economic partners and avoid big talk until our economic realities and state structures are ready to deliver on promises. It is crucial to show pragmatism in our approach towards economic diplomacy by leveraging the low-hanging fruit in a proper manner.

The Foreign Office needs to review incentive structures to send its best envoys to countries with a promise to engage on economic terms. Major investment will be required to groom the skills of diplomats specialising in economic diplomacy. At the institutional level, there are too many cooks dealing with investors; this needs to be urgently streamlined. Several countries have merged the functions of trade ministries with foreign missions where ambassadors have been given clear targets regarding the delivery of commercial deals.

Finally, a crucial component of economic diplomacy strategy is to effectively manage relationships with IFIs and sovereign wealth funds. There are multiple pockets of regional resources that could be tapped rather than solely banking on the post-colonial World Bank or Asian Development Bank for financing all development projects. Pakistan has the weakest representation dealing with international financial institutions handed over to retired bureaucrats and junior officials resulting in unnecessary policy influencing by IFIs. It is time to revisit the approach towards key appointments in international institutions with clear targets to align with the country’s growth priorities. Economic diplomacy requires visible signals of a new approach to reposition Pakistan in a rapidly changing world.

The writer is a senior economic policy thought leader and served as minister of state and chairman of the Board of Investment in Pakistan.

Published in Dawn, February 8th, 2020