Pakistan’s corridors: economic and transit hub

Hassnain Javed

March 20, 2019

In an era where geostrategic and geopolitical maneuvering of states are giving way to ‘geo-economics’ pursuits, Pakistan’s advantageous location offers promising future prospects for its economy. Apart from inheriting the fertile Indus Valley, Pakistan sits on territory which has had historical significance as a transit hub for trade caravans, marching armies and wandering saints. Parts of the Ancient Silk Route, which passed through its mountains in the North, have been modernized into the Karakoram Highway.

The various mountain passes on Pakistan’s insurmountable peaks allowed passage to conquerors and invaders from Afghanistan, Iran and beyond, ushering the establishment and intermingling of entire civilizations in the subcontinent. Sufi saints travelled such ancient routes and trails, eventually settling in areas that became hubs of cultural and commercial activity.

For hundreds of years, the region of present-day Pakistan enjoyed a “central position in relation to the rest of the world, a place where different societies mingled, sharing cultural ties and making economic transactions. Cities such as Lahore, Multan and Peshawar, and those in Upper Sind lay on trade routes connecting lands to their west ? Iran, Central Asia and China ? and those to the east ? India ? and as such became centres of trade, commerce and culture and brought prosperity to regions they commanded.”

In the present-day and age, with states’ borders fixed according to the modern international legal framework, it is not difficult to see that Pakistan’s strategic location is more beneficial than ever for economic trade. And in this context, the various trade corridors, routes and projects available to Pakistan can also offer significant economic returns for the regional and global economies.

Within Pakistan’s vicinity lie Iran to its West; Afghanistan to the North-West; India to the East and China to the North. Its Southern coast, which boasts the celebrated port of Gwadar, grants access to the Arabian Sea, Gulf of Oman, Persian Gulf and the Indian Ocean. The importance of this maritime access cannot be stressed enough, especially in light of the assertions of eminent scholars who argue that the 21st century world politics will revolve around the Indian Ocean.

Thus, it is clear that Pakistan is part of a region that is demonstrating immense economic vitality. China’s populous and emerging middle class offers a “huge consumer market for Pakistan’s products”; and with a high savings rate, could also serve as “a deep pool of investment for Pakistan”. India too has seen a consistent high growth trajectory. The Central Asian Republics are “engaged with the world to exchange their mineral wealth for goods and services that satisfy growing consumption and rising living standards of their citizens.” Iran’s fossil fuel reserves can be channelled to power the “energy poor South Asia in exchange for skilled manpower and consumption goods.”

Even as sub-regional units, Pakistan’s environs have shown promising economic activity and regeneration with booming economic growth rates. Among these engines of growth, the Central Asian Republics as a sub-region have shown around 5% growth rate over the past five years. For China, “GDP growth has averaged nearly 10 % a year – the fastest sustained expansion by a major economy in history – and has lifted more than 800 million people out of poverty”. South Asia has shown a growth rate of 6.5% over the past five years.

Thus, there is emerging consensus that the decades ahead will usher in an Asian century. Within this milieu of a Rising Asia, Pakistan with its central location can serve as an economic and transit hub, by utilizing both its North-South and East-West trade potential through trade routes and corridors. From a practical standpoint, the ancient trade routes would help link the energy-rich states of Central Asia with the emerging economies of South Asia, and promise much benefit to Pakistan which would play the role of a regional trade-hub.

International trade opens up “sustained welfare improvements for citizens” as the economy moves from being a transit hub, to a manufacturing economy – which is marked by high productivity and high wages for its populace. This transition requires a skilled labour, modern infrastructure, efficient governance policies and promotion of investment over short-term consumption.

Such reforms will only be holistically achieved for Pakistan if it is able to develop the land-based trade routes across a full spectrum, i.e. in multiple directions and sub-regions. Trade via transportation on land routes is a common feature of the imports and exports between neighbouring countries. Yet despite having a common border with both China and India, Pakistan’s trade potential via land with these two booming economies has not been tapped to a significant degree. With China this has primarily been due to an absence of well-developed land-based infrastructure in the past. “Until recently, there were no feasible low cost land routes for transportation of goods between the two countries.”

However, this is an area where the China-Pakistan Economic Corridor will offer considerable remedies. “Western China is closer to Pakistan than the coastal provinces and can be accessed if highways, railways, pipelines are built to link the two countries. But Pakistan has yet to fit itself into China’s huge supply chain as other Asian countries have done.”

The re utilization of the historic trade corridors would expand the population base which is searching for avenues to maritime trade in the Indian Ocean. Pakistan promises easy access to the Arabian Sea via its strategic coastline, and thus can become a major transit hub in the region. Trade via Pakistan’s land routes can act as a driver of growth which can lead to substantial growth rates that result in a persistently rising GDP and per capita income.

Regional trade will enable Pakistan to establish modern special economic zones. Pakistan has a huge young labour force, as well as business-friendly policies which enhance competitiveness. Thus, regional integration would allow Pakistan to become a major manufacturing hub. Economic prosperity will eventually lead to social and political stability. One can find extensive work on trade corridors within the context of regional geographical divisions such as Asia, South Asia, etc. For instance, the Asian Development Bank has conducted extensive research on connectivity prospects between South and South-East-Asia. The effects of the regional connectivity will be far beyond the localized infrastructure; and it is through dialogue, engagement and investment that these projects will bear fruit for the regional and global economies.