In November, India and the Gulf Cooperation Council (GCC) agreed to resume talks on a free trade agreement (FTA) largely focusing on technology transfers, food security and energy security. The last round of trade negotiations were in 2008.
The GCC is one of the top trading partners for India. In Fiscal Year (FY) 2022, trade in goods between India and the GCC stood at $154bn and services trade at $14bn.
India imports almost 35 per cent of its oil and 70 per cent of its gas from the GCC. In FY 2022, Indian oil imports from the GCC amounted to $48bn and liquefied petroleum imports were around $21bn.
While India is in talks with the GCC as a whole, it simultaneously increased strategic engagements with all the GCC countries on a bilateral level.
A recent example is the India-Qatar Start-up Bridge, launched in June during Indian Vice President Venkaiah Naidu’s visit to Qatar. New Delhi has also invited Doha to be a partner in the International Solar Alliance, which was launched by Prime Minister Modi at the 2015 United Nations Climate Change Conference (COP 21) in France. The Joint Businesses Council and the Joint Task Force on investments between the two countries are also very active.
Another example of India’s forward-looking approach is its relations with the United Arab Emirates (UAE). Earlier this year, India and the UAE signed the Comprehensive Economic Partnership Agreement (CEPA), which will not only help Indian exporters find new opportunities within the Gulf State, but will also help act as a trading hub and provide further access into markets in Africa and Europe. Under CEPA, which took effect in May, India and the UAE will surpass $88bn this year in bilateral trade and are on track to achieve the $100bn trade target in non-oil trade by 2027. Moreover, under the CEPA framework, UAE wants to make investments worth $2bn to develop food corridors, and an additional $300m to build a hybrid power plant in India.
Minilateralism, a reaction to the failure of Multilateralism, is on the rise and has, so far, yielded success. Though it has no set definition as yet, one way in which Minilateralism can be defined is when small, identity-focused blocs of like-minded allies form a partnership. An example of this recent trend is India’s partnership with Israel, the US and UAE, known as the I2U2, in 2021, which aims to deepen cooperation between partner states in various avenues, including water, energy, transportation, space, health and food security. This alliance was formed in the backdrop of the signing of the Abraham Accords between Israel and UAE in 2020 and has further smoothed the pathway for New Delhi to pursue its regional ambitions. For Pakistan, this alliance is especially problematic, since it endangers Islamabad’s maritime interests in the Persian Gulf and Indian Ocean.
Why has Pakistan lost out?
Given India’s growing Middle East partnerships, it can be said that it is well on a path to making great strides. Its neighbour, Pakistan, should therefore take note of these developments.
This past year, Pakistan has been enmeshed in political upheaval which has been compounded by the depreciating economic situation of the country.
In 2021, Islamabad launched its National Security Policy, which signalled the country’s shift from geopolitics to geo-economics. This indicated that the Pakistani Government’s prime focus would now be on making use of economic tools to advance its diplomatic objectives.
Though there has been increased engagement in terms of bilateral visits and agreements in the form of Memorandum of Understanding (MoUs) such as in the environment and IT sectors, not much by way of implementation has been done.
It is important to note that remittances make up approximately 86 per cent of the secondary income of Pakistan and 60 per cent of these come from the large Pakistani Diaspora community in the Gulf. At present, the Pakistani workforce is substandard at best. Most of it comprises of unskilled and semi-skilled labour.
Every Gulf country has embarked upon its respective national rejuvenation plans to stave off oil dependency. Among others, these include Saudi Vision 2030 and Oman Vision 2040. Pakistani workers are losing out on new opportunities since their qualifications are not in line with these niches.
Pakistan has also missed out on critical opportunities because of its hostile investor policies and inability to follow up on projects efficiently. A case in point is a refinery that Saudi Arabia proposed building in 2019. Pakistan has not, till date, identified the location of the refinery, which has meant an automatic delay in starting the formal process. It is important to note here that setting up even a small unit in Pakistan involves a slow and tedious process of documentation.
While the present Pakistani leadership has convinced the Saudis to revive the project, it remains to be seen whether it will actually launch this time.
It is generally known that if a country is an economic lightweight, it does not have much influence in global affairs. With India making considerable progress, there is a very real chance that Pakistan will be pigeon-holed and not be taken seriously when it comes to matters of regional concern, such as connectivity and trade. It will also lose out when it comes to advocating for the rights of Kashmiris in the Indian-occupied Jammu and Kashmir.
While India has managed to build itself up as a reliable, proactive international partner which can provide reliable supply chains, Pakistan, despite its potential, has not been able to inspire such confidence.
How to stay relevant?
The Pakistani Government, thus, needs to engage in constructive research and train its workforce in line with the visions of these Gulf countries – especially white collar jobs in the fields of construction and engineering. Vocational institutes need to be opened to train skilled man-power.
Sideways, Islamabad should appoint a labour attaché within its embassies in the GCC who will be responsible for identifying areas where occupational skills are needed for workers coming into the Gulf.
After its success in Dubai Expo 2020, the Pakistani Government should have expos in all major cities of the GCC so that it can both market resources and also attract investment into Pakistan. Pakistan must further introduce investor-friendly policies to attract Foreign Direct Investment (FDI) into the country. All the Gulf countries have, at one time or another, expressed interest in investing in the China-Pakistan Economic Corridor (CPEC). It goes without saying that, at a time when countries like KSA are diversifying their Public Investment Fund, Pakistan should take advantage of this opportunity.
In this regard, Islamabad can focus specific investment in the Special Economic Zones (SEZs) which are under CPEC. For instance, there can be a dedicated SEZ to food and agriculture – which in terms of food security is very attractive for the Gulf States.
An error on the part of Pakistan has been its economic focus on the three major countries within the GCC – Saudi Arabia, UAE and Qatar. It should also be focusing on all six members of the GCC, each of which has special niches which Pakistan can tap into. For instance, Pakistan and Oman have a comparative advantage when it comes to poultry and energy security. Presently, even outside of a free trade pact, according to recent figures, India’s trade with Oman stands at US$ 9.988 billion, while Pakistan’s trade with Oman is approximately US$ 653 million, which is well below potential.
Furthermore, for a long time, the Pakistani leadership has had unrealistic expectations from the Gulf States when it comes to the Kashmir issue. For instance, in 2020, when Pakistan questioned the muted response of the Gulf States with regards to Indian atrocities being carried out in Kashmir, it resulted in a diplomatic spat. According to James M. Dorsey, a Senior Fellow at the S. Rajaratnam School of International Studies at Singapore, “Riyadh has been less forthcoming to extend support to Pakistan’s stance on Kashmir.” Hence, Islamabad needs to realise that no one will fight for, or alongside Pakistan, especially since in a post-pandemic hit world, economic realities submerge all else. Therefore, it needs to concentrate on creating sustainable economic linkages with these countries, since this will give weight to its voice on the global platform.
But, above all, Pakistan needs to set its house in order first, because economic prosperity depends on all political parties being on the same page when it comes to the future of the country. Each party needs to keep its vested interests aside, and think of ways in which to keep Pakistan economically afloat.
If Islamabad continues on this present pathway, there is a very real fear that it will be completely marginalised in the international arena. The leadership in Pakistan should be aware that rising from the ashes is a feat only few have accomplished and it should not go to a point of no return. Even though there is a lot of talk regarding geo-economic policies, successful implementation requires a changing of mindset which cannot be merely professed on paper.
The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.