Optimists refuse to surrender to the evident negatives and risks in a world plagued by lingering conflicts in Gaza and Ukraine. Despite politically rooted challenges, they envision stronger UK-Pakistan relations, driven by high trade potential in services.

As Pakistan’s economy gains breathing space with a three-year $7 billion International Monetary Fund deal, Prime Minister Shehbaz Sharif pledges to expedite economic revival. Meanwhile, British Prime Minister Keir Stamer embarks on his mission of ‘national renewal’ with a focus on growth.

Business leaders of Pakistani descent in the UK see this as a rare opportunity for economic diplomacy to realise the potential of trade and economic cooperation between the two nations.

Some considered the rosy outlook above to be based more on whims than reality. They doubted the possibility of significant improvement in two-way trade or increased UK investor interest in Pakistan until the country’s political situation stabilises in a manner acceptable to key institutions, major political parties and the public at large.

“The world is watching. It will damage the country’s image further if the government, in its desperation to assume control, resorts to strong-arm tactics to silence opposition or allows the country to slide towards an extra-constitutional order under any pretext. In a digitally connected world, governments need to be mindful of their perception,” remarked a reputed neurosurgeon during an informal discussion in London.

‘The reality is that no one is interested in a country besieged by multiple problems without a clear future path’

He aspires to build a modern health facility in Islamabad with UK support, for which land has already been acquired. Though there was initial progress, the plan stalled as the UK partner’s interest waned, and they politely declined to proceed for now.

Pakistan enjoys a generally positive balance of trade with the UK, the third-largest trade partner and source of remittances. Despite challenges, the trade volume between the two nations has increased since 2020, with minor fluctuations. According to the latest official data from the UK Department of Business and Trade, the total annual trade in goods and services between the UK and Pakistan was £4.1 billion in 2023. Of this, UK exports to Pakistan amounted to £1.8bn, while imports were £2.4bn.

Pakistan is the UK’s 51st largest trade partner, while the UK is Pakistan’s third biggest trade partner after China and the United States and the third-largest source of remittance inflows, trailing Saudi Arabia and the UAE. According to the State Bank, workers’ remittances increased by 10.7 per cent last fiscal year to $30.3bn, of which $4.5bn stemmed from the UK, second only to Saudi Arabia.

Atta Haq, President, UK Pakistan Business Council, was hopeful about the prospects for commercial and economic ties. He anticipated the new bilateral deals to enhance trade and investment, given the Labour Party’s inclination to forge deeper ties with Commonwealth countries, including Pakistan. Mr Haq identified infrastructure, renewable energy, technology and education as key areas of mutual interest.

“Increased cultural and educational exchanges, diplomatic visits and cooperative initiatives in international forums can foster a more conducive environment for a mutually beneficial relationship. This approach is crucial for effectively addressing regional and global challenges in a world marked by conflicts, economic stress and uncertainty,” he noted.

Dr Samina Zehra, Economic Minister of Pakistan in UK, endorsed the positive stance with a caveat. “In today’s fast-changing global economy, we need to explore more creative ways to attract investment to Pakistan. While there may be reluctance to invest in traditional brick-and-mortar projects, there is big appetite for investing in ideas, entrepreneurial ventures and future jobs.

“We must upscale our young population to meet the requirements of the developed world economies, including the UK, to become an investor-friendly country. The world economy is now service-driven. Are we equipped with skills, training and experience to cater to that? This will determine Pakistan’s investment readiness,” she emphasised.

Other senior diplomatic sources in UK were not convinced. “Lucrative infrastructure projects with guaranteed returns are reserved for Chinese investors. For other medium-scale projects, potential local partners are reluctant due to issues such as expensive commercial land, high energy and credit costs, unstable gas supply, law and order problems, high import tariffs and policy uncertainty. With this level of risk and no guarantee for decent return or its easy repatriation, why would any investor go there?” questioned a retired diplomat currently in London.

“At the current level of political uncertainty, when even members of Pakistan’s top government team doubt the longevity of their tenure, how can diplomats effectively promote the brand of Pakistan? The reality is that no one is interested in a country besieged by multiple problems without a clear future path,” noted another official during a private conversation.

“Moreover, foreign investors will follow the lead of local businesses. As long as Pakistani businesses are sceptical and keen to transfer capital abroad, it’s impossible to attract overseas investors to commit capital to Pakistan. For trade, you need tradable surpluses, which are hard to imagine when established companies are scaling down operations,” the official explained.

Published in Dawn, The Business and Finance Weekly, July 22nd, 2024