Open thy borders - case for Pakistan's economy
Mohammad Mohtasham
Renewable energy sector consultant with focus on Wind and Solar - Transaction lawyer , equity investor
These days, there is much discourse surrounding the dire state of Pakistan's economy and its rapidly declining foreign reserves. Inflation is uncontrolled, causing many young people to leave the country. Those in power have turned to the International Monetary Fund (IMF) as a last resort, but it is evident that they have no clear plans to address the root cause of the economic crisis.
It should be noted that even if the IMF does intervene, it will only provide a temporary fix, and the country will soon find itself back where it started. It should be noted that Pakistan has had 22 IMF programs since 1947 but even now, the IMF appears reluctant to offer support, making it clear that it is not a lasting solution. Our trade and fiscal deficits are just too high.
In this article, I will present my perspective on how by opening borders and liberalizing trade with Pakistan's neighboring countries, India, Afghanistan, and Iran, the country can significantly improve its economy and get back on its feet within 5-7 years.
OPEN BORDERS - history:-
Since the beginning of human history, people have been trading with each other. For example, a settlement in Mesopotamia (modern-day Iraq) in 4000 BC had an abundant supply of crops but a shortage of livestock. They would then trade or barter with their Sumerian neighbors to the south, who had a surplus of livestock but needed crops. This way, both parties benefited from the transaction.
Arab traders in Hejaz (modern-day Saudi Arabia) would send trading caravans to Roman Syria and return with goods. Our Prophet Mohammad (peace be upon him) was also a trader and frequently travelled these routes. Spices from the fertile crescent were highly prized in Hejaz, while dates from Mecca were in demand in Antioch (modern-day Syria).
The largest trading route of all was the Silk Road, which stretched from modern-day China to the gates of Europe, passing through Persia, India, Central Asia, modern-day Turkey, and southeastern Europe. Roman traders often travelled to India to buy slaves, spices, and carpets, while they sold Roman broadswords, pearls, and other goods from the empire. Roman swords were especially popular in Persia and India due to their superior metallurgy.
The Crusades were another boom period for the Silk Road traders. European soldiers in the 12th century who encountered Middle Eastern bazaars were spoiled with spices, food products, saffron, and silk, while Arab traders were particularly fond of European shields and armors, which were heavier and better cast. The liberalization of trade had another side as well: bandits and bounty hunters frequently raided trading caravans, and entire mercenary armies were formed to protect them. Additionally, huge trading cities were established along the Silk Road (Antioch, Constantinople, Samarkand, Baghdad), and they became fabulously wealthy. The Silk Road created an open market of goods, and this greatly benefited those who participated. Ideas also flowed freely. For instance, a merchant from Venice could travel to Baghdad and learn about a new production process, and vice versa.
Historical records indicate that empires and governments in those days did not worry much about taxing the Silk Road, as the risk of losing business to a rival city was too great. Wars were frequent, but the Silk Road survived until the 15th century, when the Ottoman Empire shut it down. European traders then sought alternate routes to reach India and the Orient, which sparked the age of discovery and sea navigation.
European union. Modern day open borders:-
The European Union serves as a modern-day example of open borders and free trade. The concept of open borders and free trade among European nations has been a driving force behind the creation and success of the EU. The elimination of borders and trade barriers allows for the flow of goods, services, and people across the continent, leading to increased economic growth and job creation. The competitive environment resulting from free trade also leads to lower prices and higher quality products for consumers. The freedom to move and do business within the EU makes it easier for companies to expand into new markets and for workers to find employment.
SKODA, a car company based in the Czech Republic (an EU member), serves as a prime example. With its headquarters in Prague, production in Germany, and design offices in Spain, SKODA sells its cars throughout the EU. The use of a single currency eliminates exchange rate risk.
A financial institution in Germany can open an office in France and trade on the Paris stock exchange, tapping into the entire French market. A farmer in Spain can sell his olives in Poland, and an Italian steel plant can purchase electricity from France (which has the cheapest tariffs due to its reliance on nuclear power).
A Danish wind turbine maker can bid for a wind farm project in the UK, while Norway can sell its gas to Germany. And, a German company can bid for the maintenance agreement of a Norwegian gas producer.
This results in a decentralized, mutually beneficial ecosystem of small, medium, and large businesses tapping into the entire EU market and reaping the benefits of open borders. Competition keeps prices low and product quality high, and the mutual business interest is too large to disturb. European nations, which were at war for centuries, haven't fired a shot at each other since the formation of the EU in 1953.
As of 2021, the EU economy is valued at 18 trillion euros and its member nations are among the most stable, developed, and peaceful in the world.
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OPEN borders - Pakistan, iran, afghanistan, india:- ( The APII EU)
For this article, I will refer to Pakistan, Iran, Afghanistan, and India as the APII Economic Union(APII EU). Let's examine some facts:
Pakistan and India are energy-starved economies with growing populations. Iran, on the other hand, has abundant oil/gas, having the second largest gas reserves in the world. Natural gas from Iran can easily fulfill the needs of Pakistan and India. This arrangement would benefit all three countries: Pakistan would benefit from transit fees and self-use, Iran would secure long-term customers and stable earnings via long-term agreements, and pak/India would have a reliable gas supplier instead of importing expensive Qatari LNG.
https://www.worldometers.info/gas/iran-natural-gas/
Iran is barren and facing food shortages, having seen food inflation riots in 2022. Meanwhile, Pakistan is abundant in rice, milk, meat, and vegetables. Pakistan can collect transit fees from Indian trucks delivering to Iran and sell its own produce there as well. Infact, in 2019, Afghan President Ashraf Ghani proposed a such an arrangement between Pakistan, Afghanistan, and India.
The new oil - Lithium:-
The world is rapidly transitioning to electric cars and lithium is becoming the new oil. Afghanistan is home to one of the largest lithium deposits in the world, and Pakistani companies can invest in lithium ore processing plants and even set up giga factories to produce battery cells. The Chinese are already exploring such arrangements in Afghanistan.
Afghanistan is war torn and short on skilled labor( and resources), they would be more than happy to sell their Lithium ore to a Pakistani gigafactory in KPK!
The above are just a few examples of regional economic co operation among APII EU that can transform the entire landscape of these countries. The wealth generated will be in the billions of USD and Pakistan will never have to look to china or international lenders.
The writer is of the opinion that Pakistan's neighbors want this to happen, they are tired of perpetual hate and rivalry/ conflict.
Economic progress via APII EU is the only way forward for these nations to uplift their citizens and become a global force.
Once the APII EU takes off, investors from all over the world will flock here, generating even more wealth!
The question is........ will Pakistan's leaders smell the opportunity and take initiative?
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My name is Mohammad Mohtasham- I'm an entrepreneur , a trader and avid reader . I run my company that sells medical equipment . I also trade stocks, commodities, offer financial coaching and advise businesses.
Project Procurement Life Cycle | SAP MM | Consultancy
2 年I fully endorse OPEN borders - Pakistan, iran, afghanistan & india. It is need of time and beneficial for the people as well.
Renewables Professional
2 年Very good take. I think this generation is near to declare the “sickness for war”. Thanks to the “big boys” they just accelerated the thought process for youth and the son of soldiers.