Being a donor helps when it comes to communicating on sensitive issues. The World Bank Group has done just that in Pakistan, and very publicly. It isn’t clear if the message has been received as it was intended for the right audience. The “media” hasn’t covered the issue thus far. But WB recommendations in the report, supported by relevant economic data and forecasts, should spark some discourse.
In the ‘Regional Connectivity’ policy note contained within WB’s recently-released report “Pakistan @ 100,”, the global lender has been less subtle and more direct than usual in calling out Pakistan on its “predilection” to “maintaining strong military capabilities” despite “some of the lowest socioeconomic indicators in the world”. Two compelling arguments are provided in favor of a development state.
One, the report argues that growing economic differential between Pakistan and its perennial bête noir, India, would make it unsustainable for Pakistan to play catch-up with India militarily. If both economies continue to grow at the latest five-year averages, India’s per capita income, which is already marginally higher than Pakistan’s, will be four times higher than Pakistan’s by 2047, the two nations’ centenary of Independence.
To avoid that scenario, Pakistan needs to “allocate more of its budgetary resources to building its human capital”. But continued conflict with India puts Pakistan in a catch-22 situation. With limited economic expansion, it can continue to spend more on security versus human development, in order to maintain a degree of parity with India. But “Pakistan cannot afford such resource diversion without harming its long-term economic prospects”.
Mind you, the defence-sector numerical imbalance is already growing while competing with a country boasting a much larger economic base. In 2006, India’s military spending was five times higher than Pakistan’s – a decade later, it was seven times higher, the report says. Meanwhile, recent hostilities can be used by hawks in India to force Pakistan to spend even more on security. That will further deplete Pakistan’s economic potential it was economic collapse that did Soviets in, despite their military might.
The second argument suggests that Pakistan will be a richer country if it follows the path of economics and integrates within the region (the “region” being South Asia, China and Central Asian Republics). The report, taking 2015 trade numbers, suggests that regional integration would lead to Pakistan trading about $58 billion within the region (55% of total ‘potential’ international trade of $106 bn) – three times what it actually traded within this region in 2015 ($18 bn; 28% of total ‘actual’ international trade).
Among all its neighbours, the report suggests, normalized trade relations with India offers Pakistan the greatest economic dividend over the coming decades. Some 85 percent of the above-mentioned incremental regional trade for Pakistan can come through India. Compared to just opening up with China, opening up with both China and India can make Pakistan’s economy $137 billion richer by 2047, with GDP forecast at $1.06 trillion that year.
For its part, the report recognizes constraints to realizing regional trade liberalization, chief among them Pakistan’s declining manufacturing, India’s non-tariff barriers, domestic political imperatives and regional tensions affecting Pakistan. Perhaps the greatest obstacle is Modi-led India’s hard-line approach to giving peace a chance. Political will is needed on both sides to overcome decades of mistrust. Unfortunately, it is Pakistan that has much more to lose if economic and security costs of non-cooperation keep piling up.
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