Religious cohesion and divisive economics
With that as the background why should the Muslim world show enthusiasm for the D-8 community of Muslim states? Created in 1997, the D8 held one of its periodic summits in Kuala Lumpur at the same time that the G-8 met in Japan.
Before discussing the possible relevance of D8 for Pakistan, it would be useful to highlight the relative economic strength of the countries in the group. The accompanying table provides basic economic data for the eight Muslim nations that have come together as D8. Together the eight had a population of 890 million in 2005. In the same year, the World Bank estimated their combined GDP at $ 1.3 trillion which means that the average per capita income for the group is $1,425. Indonesia is the largest country in terms of population; Turkey has the largest economy while Malaysia has the highest income per head of the population. In terms of the size of the population, Pakistan is the second largest country in the group, has the fifth largest economy, and is the sixth in terms of income per head of the population. Bangladesh is the group’s smallest economy and is also the poorest country.
The eight countries in the group account for only 16.4 per cent of the population of the developing world and 13.3 per cent of its combined gross domestic product. Their average per capita income is 81.3 per cent that of the developing world. For the world as a whole, the D8 account for 13.8 per cent of the population and only 2.8 per cent of gross output. In other words, they are neither a significant part of the economic strength of the developing world or that of the entire world.
Of the eight countries in the group, three – Iran, Indonesia and Nigeria – are large oil producers. However, only two are large exporters; a few years ago, Indonesia went from being a net exporter to a net importer. Some of the other large Muslim oil exporters – in particular Saudi Arabia and Kuwait – have not joined the group since the group was originally conceived as an organization of the non-Arab Muslim states. The political idea behind the creation of the group was to provide an institutional balance to the Arab League.
If religion does little to bind countries economically and if the combined economic strength of these states is small, why should Pakistan commit a significant amount of the scarce government resources to promote this group and participate in its activities? The prime minister took a large delegation with him to Kuala Lumpur which must have cost the state a significant amount of money at a time when the country is faced with a serious financial crisis.
There are two reasons why it might make some sense to persist in this effort. The first and by far the most important reason why it might be useful for Pakistan to work with a number of countries is to begin the process of changing the structure and pattern of international trade. Trade economists have developed a model that should define the pattern of a country’s trade. They call it the “gravity model”. According to it, country mass and the distance between the trading partners determine the main sources of imports and the main destination of exports.
Applying this model to Pakis-tan would mean that India and China should be the country’s largest trading partners. India held that position for a few years after independence but ceased to be so after relations between the two countries turned sour. Had that not happened the pattern of Pakistan’s international trade – in fact, the structure of its economy – would have been very different from what it is today.
At this time the United States, a country 7000 miles from Pakistan, is the largest trading partner, accounting for more than one-quarter of the country’s exports. Also, Pakistan continues to rely very heavily on cotton textiles for export earnings. Neither concentrating on the US nor a heavy a reliance on textiles would increase exports over the medium and long-term. The country must diversify both the content of its exports as well as their destination. One way of achieving this objective is to enter into multi-country trade alliances.
The most obvious trade alliances would be with the countries in the immediate neighbourhood. That has proven to be difficult because of the persistence of difficulties with India. The Indian approach up until now has been to freeze Pakistan out of regional trade groupings. Even when Pakistan was accommodated in a regional grouping – that is the case with the South Asia Free Trade Area, the SAFTA – India has given less attention to such associations than to those that don’t include Pakistan.
Instead of developing the SAFTA, the Indians seem more interested in another grouping, the BIMSTEC that has all countries of the SAFTA excluding Pakistan as its members along with Myanmar and Thailand. For this reason alone it makes sense for Pakistan to promote non-South Asian trading alliances for as long as the relations with India remain difficult. As is the case with some other regional organizations, the associating countries don’t have to share borders. Some of the associations in East Asia group countries that are not immediate neighbours.
However, for D8 to become a trade association, it will have to explicitly develop a programme for reducing inter-country tariffs and adopt other forms of trade facilitation measures.
The second reason why D8 might make sense for Pakistan is its dependence on oil imports. Pakistan may push for expanding the membership to include the Arab oil producing and exporting nations and then to work out a long-term arrangement between the oil exporting and importing countries to protect the latter from the types of price shocks that have been delivered in the last few months.
In return, large land mass countries such as Pakistan and Turkey could enter into long-term food grain and processed food export arrangements with the rich but land poor countries. Such an arrangement would help Pakistan to diversify its trade and change the structure of its economy. In sum much could be achieved in the context of an expanded D8 grouping if the focus is on economics rather than on religion. Pakistan could play a role in the evolution and development of an expanded D8.