SCO membership could resolve energy crisis in Pakistan


Pakistan and potential benefits of joining the SCO
Pakistan’s textile exports during the first month of the current fiscal year (2011-2012) are recorded at $1.121 billion, registering an increase of 14.22 per cent. Remittances have risen by 39 per cent to $1.1 billion in July of the current fiscal year. These two indicators of economic stability unfortunately have little relevance to what the situation actually reflects. Due to inflationary expansion of the export value, the unit value of Pakistan’s exports may have gone up but on the scale of import value, it hardly makes any case for a joyful trade expectation, with the trade deficit rising from $4.51 billion in FY05 to $11.53 in FY10. The government could have a reason to boost economic survival with soaring remittances but the impact of the inflationary pressure would still be an impasse to future financial concerns of individual households. On the flip side, there is a gory picture presented by Independent Power Producers which are devoted to contribute 6000 megawatts of electricity to the national grid. According to news reports, due to the balance of payment crisis, nine out of 29 IPPs would shut their operations if their dues are not paid by the end of September 2011.
Shanghai Cooperation Organisation
Since World War II, the world has grown manifold. On the advent of WW-II, devastation of internal bickering and the taste of colonialism had spread to every stretch of Europe. European unity which later culminated into economic integration changed the hue and colour of Europe in many ways. Economic integration is always the final shot upon which resets the success of a country and that of a region. Pakistan needs to get around this reality as early as possible for not only political support but for expanding its economic base in the absence of American withdrawal from US aid commitment in the aftermath of Osama bin Laden’s death on May 1, 2011. Shanghai Cooperation Organisation is an avenue that could provide strong and consistent support to Pakistan for transforming its identity from a terrorist state to a resource rich and a development state.
Shanghai Cooperation Organisation is a consortium of six states, China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan, while Mongolia, Iran, Pakistan and India enjoy observer status. What started as a security hedge and threat combating cooperative adventure in 2001, has now become a promising cooperation in fulfilling the economic and financial needs of member countries. SCO has taken upon itself the responsibility to link the region through roads and railways. This infrastructure would boost trade among the member countries for which SCO is already planning to develop free trade and tariff free arrangements. The question is that what Pakistan has for itself in this elaborative setup for which Pakistan’s government is bidding a permanent membership. When Pakistan raised its voice for permanent membership in the 9th summit of SCO held in Dushanbe, the capital of Central Asian Republic of Tajikistan, there was not a slightest ripple among member countries, reason being Pakistan’s lost credibility in the world comity through corrupt and inconsistent economic policies.
SCO’s economic impact on member countries
SCO has had a positive economic impact on its member countries. Trade between China and the SCO’s five Central Asian members registered a 212 per cent increase during the last five years, reaching $37 billion in volume. The investments between member states surged to $15 billion, covering oil and gas explorations, transportation, telecommunications, chemicals and agriculture. In line with a bilateral agreement on the oil and gas sector signed in May 2004, Kazakhstan and China has constructed a 962.2 kilometres gas pipeline running trough Atasu (Kazakhstan)-Alashonkon (China), with a pumping capacity of 10 million tonnes of oil. Investment in the project totalled at $700 million. Uzbekistan sells gas to Russia and China on the basis of bilateral accords, and recently welcomed an increased investment from Russian sources over the next five years.
How could Pakistan benefit from joining SCO?
Coming back to our question of what benefits the SCO holds for Pakistan, the first priority of our government should not be anything other than energy creation and enhancement facilities. Pakistan has already entered into gas export arrangements with Iran through the Pak-Iran gas pipeline agreement, for which Pakistan is short of finances. Investors are fearful of the volatile political atmosphere in the country and thus are reluctant to bring in their money. Pakistan has already turned its attention towards China for assistance since our turbulent economy has already sunk by a budget deficit of Rs1 trillion. Energy deficiency has already caused closure of 50 per cent of our industry. Amidst the challenging economic conditions of the US and EU economic woes, Pakistan has more reason to concentrate on its energy needs and make its products more competitive in the world market. Being a member country of SCO would unleash opportunities for Pakistan in getting an easy flow of energy supply from different member countries as it is a common norm among the SCO member states.
Energy rich SCO a bane to western interest
Way back in 2006, when Russian President Vladimir Putin proposed the formation of the Energy Club within Shanghai Cooperation Organisation, a hurricane of denials and apprehensions swept across the west. The fear factor was the development of “OPEC for gas” cartel led by Russia in the east. However, there were reasons to believe this fear. The SOC’s oil reserves are not more than 20 per cent of world oil reserves, including those of Iran which has an observer status within the organisation. As far as gas is concerned, gas reserves of Russia, Central Asian states, and Iran make up 50 per cent of world reserves. Although the club has not been formed, energy production and consumption patterns along the lines of assisting others within SCO, have given member states enormous power to yield economic benefits.
Why SAARC and not SCO?
Some analysts such as SAARC Chamber of Commerce Vice President Iftikhar Ali Malik believe that in spite of playing on SCO, we are trying to bring Pak-China trade relations in the ambit of SAARC. “Since Pak-China relations are already established and China has been assisting Pakistan on a number of projects, therefore there is no need to work on joining SCO. It is better to establish SAARC, which is a larger organisation and more embedded into our system as far as experience is concerned,” he mentioned.
Why SCO?
A very different view point emerged when we discussed the benefits Pakistan would enjoy after joining the SCO. To Dr Qais Aslam, renowned economist of Pakistan, Pakistan needs to create a way forward in relation with Central Asian countries and ECO, rather than hinging upon SAARC alone. If we come to think of it, relations between India and Pakistan, even after coming together under the umbrella of SAARC, have not improved at all. India’s economic spur is far greater than that of Pakistan. The composition of SCO is such that it offers a wide spectrum of choices among countries to satiate different economic needs. If Pakistan joins SCO then, one, there would be less religious issues, two, territorial conflicts would be minimal and three, since Russia, Iran, China, and other Central Asian states are rich in energy and intellectual resources, Pakistan could tap these resources to build its own energy bank. SAARC, on the other hand, does not have energy or any intellectual resources. China with a population of one billion people, Russia with the largest territorial and technological powers, Iran as a technological and nuclear power with a clear concentration on stem cell technology, and Central Asia with vast reserves of gas energy has opportunities ad nauseam. These multiple benefits in a multilateral agreement would change the living standards and economic outlook of member countries. Secondly, I would like to add that economic blocs always have a positive impact for members and a negative one for non-members. People opposing SCO are those who fear the United States. This theory goes back to colonial fears that have always seen relations between Pakistan, Russia and Iran as being dangerous to western interests. The way India has been pressurised to back out of the Pak-Iran-India pipeline project and the extent to which Pakistan has been forced to relinquish this project explains the fear America has over any association that these states could get into. The reality however is that the more a country cooperates regionally, the wider and more holistic would be its economic, political and diplomatic strengths. I am pretty sure that none of the member countries of SCO would be against Pakistan joining the group. SCO has obviously one major concern with Pakistan and that is about its export potential. They have been arguing about the adverse balance of payments issue with Pakistan, questioning what could Pakistan export to these countries. To this I would say that Pakistan has rich resources hidden under its soil, it has a vast human development base, and growing water resources, and it also has the badge of nuclear power tagged to it. So Pakistan can be beneficial to their investors in term of explorations and various other sectors. We have already given the exploration for copper reserves to China as well.
The move towards self-reliance
An export-led economy makes riches for itself not only by putting a cut to budget deficits but also by promoting its industry to produce more goods, employing more people and paying more taxes for the country to develop indigenously. This simple methodology has led counties to become more viable, favourable and progressive in their outlook to move out of their sphere and into the larger sphere. In short, the journey from a closed economy to an open one has extended further, and there seems to be no end to it. Pakistan has been scaling this height but has never been able to keep up the required pace to get the ranking of a thriving world economy. It is time for Pakistan to let go its reliance on aid and take up self-reliance as its major economic, political and social objective. Regional economic integration could be an excellent way out for this objective
The writer is a freelance business journalist based in Lahore can be reached at [email protected]