By Manish Chand, IANS,
Islamabad : Pakistan may be headed towards its biggest economic crisis in decades, says a leading Pakistani economist who also suggests a way out: shed distrust, accelerate trade and investment with India and reap the peace dividends.
“Liberalization of trade and investments with India may benefit Pakistan more than it would India,” Yousuf Nazar, the economist, told a visiting IANS correspondent.
Author of the widely noticed “The Gathering Storm” that warns of an impending economic crisis in Pakistan, Nazar advocates “gradual and well-planned trade liberalization with India”, but reminds the civilian dispensation in Islamabad that it should not “raise expectations” as there is a lot of ground work that still needs to be done for economic ties to take wings.
“Pakistani businessmen generally admire the successes of Indian businesses and would like the ties to grow though they are a bit cautious and apprehensive due to India’s size and advantages,” he said alluding to the fear of a section of the business community here of being swamped by their much bigger and richer Indian competitors.
“India needs to take the lead and remove these apprehensions,” he said over a week after Indian External Affairs Minister Pranab Mukherjee and his Pakistani counterpart Shah Mehmood Qureshi held talks here and decided to give a push to economic ties.
“The governments should provide a policy framework and an enabling environment (for example, relaxation of travel formalities) but leave the rest to the private sector,” said Nazar, former head of equities in emerging markets at Citigroup.
“SEZs (special economic zones) should not be country-specific and be open to all foreign investors,” he stressed.
He was referring to a recent interview by Asif Ali Zardari, co-chairman of the Pakistan People’s Party (PPP) that leads the ruling coalition, in which he proposed setting up an SEZ along the India-Pakistan border to intensify trade between the two countries.
In a sign of the changing atmospherics in the India-Pakistan discourse, Nazar said India can also play a big role in helping Pakistan grapple with the curse of terrorism that has grown exponentially since the 9/11 attacks.
The way out for Pakistan, Nazar underlined, is to build bridges with India and jointly fight terrorism and say no to US meddling in its internal affairs.
“India can play a big role in this respect and help Pakistan because the peace dividend will be beyond the expectations of most politicians in India,” he said.
Nazar may be upbeat about business potential with India, but he has a gloomy forecast about the Pakistani economy.
Nazar, an influential economic commentator who writes for The New York Times and leading Pakistani dailies like the Dawn, argues in his book that unless the government takes the problem head-on, Pakistan may be heading for “its biggest economic crisis since 1971”.
“Pakistan’s economic performance in the next few years will be weak with an average GDP growth of not more than around 3.5 percent, high inflation, weak currency, dwindling foreign exchange reserves, a large current account deficit and low investment levels.”
If the economy is not fixed, Nazar warns that Pakistan’s negotiating position vis-à-vis the US will weaken, but not necessarily with India which does not have much economic clout with Islamabad. In that situation, Pakistan may have to go to the International Monetary Fund (IMF), the US and Saudi Arabia for help, he said.
India is pushing to make expanded trade ties the centrepiece of its engagement with Pakistan and feels that it will prove to be a crucial confidence-building measure that will help in the full normalisation of relations.
India’s annual trade with its next-door neighbour is not even $2 billion. If right steps are taken, it can more than double to $5 billion in the next two years, said a recent report.