Partnering for trade
With countries drifting away from a long-deadlocked Multilateral Trading System and negotiating various interregional free trade agreements, Pakistan does not seem to be taking advantage of any of these groupings by not being a member of any of them. But there is still a ray of hope, as it is going to be a member of a forthcoming larger group of emerging economies – the Next Eleven (N11).
So far, there are three main Mega-Regionals being negotiated between different groups of countries. The first one is TPP (Trans-Pacific Partnership); the second is TTIP (Transatlantic Trade and Investment Partnership) and RCEP (Regional Comprehensive Economic Partnership).
As mentioned earlier, Pakistan is not a member of any of them or it may be assumed that Pakistan’s share in the global trade and investment is so minimal that it is not important for other countries to consider it as a potential partner. On the contrary, being well-integrated in the upcoming interregional trade groupings can be highly beneficial for Pakistan.
The member countries of N11 are Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey and Vietnam.
According to Jim O’ Neil, the former Goldman Sachs Chairman and the person who coined the term BRIC (Brazil, Russia, India, China), which later on became BRICS with the inclusion of South Africa, “N11 includes economies who can potentially become among the biggest ones in the world”
According to Jim O’ Neil, the former Goldman Sachs Chairman and the person who coined the term BRIC (Brazil, Russia, India, China), which later on became BRICS with the inclusion of South Africa, “N11 includes economies who can potentially become among the biggest ones in the world. This also implies that they should be seen as potentially great investment opportunities. While the BRIC concept seems to me more acceptable, I rather find peculiar both the composition and diversity of the Next Eleven economies”.
The assumption of Jim O’ Neil about N11 economies being future emerging economies sounds rational if we take stock of the performance of the BRICS so far. According to the Euro-Monitor International, four of the five BRICS countries have shown steady economic growth since 2001 despite the global economic recession of 2001-2002. In 2007, economic growth registered by Brazil, Russia, China and India was 4.4%, 7.0%, 8.9% and 11.5% respectively. Although the figures are a bit old, we can easily assess the economic performance of these economies in the near past.
Although all of the N11 countries have varying degree of geographic and economic indicators, still they have some common features, which indicate their high economic potential in future. For example, all of them have large and growing populations. As per the Euro-Monitor, the population growth in Pakistan between 1980 and 2008 was the highest and stood at 110.8 percent.
The population growth rates of all the 11 countries are above those of western developed economies, which indicates a greater consumer market potential over the medium term. Large and further-growing populations show a bigger potential pool of consumers for businesses to target.
The population growth rates of all the 11 countries are above those of western developed economies, which indicates a greater consumer market potential over the medium term. Large and further-growing populations show a bigger potential pool of consumers for businesses to target
N11 economies can be categorised into two main groups: developing economies and the newly industrialised economies with an exception of South Korea, which is a developed economy. Pakistan, Bangladesh, Vietnam, Nigeria and Iran, being developing economies, are mainly the exporters of primary products. The other countries except South Korea are the newly industrialised economies and they are well into exports of heavy manufactured and value added products. In order to have maximum benefit being a member of this group, Pakistan will need to broaden its export base and also shift from the export of primary products to value added products. Moreover, till the time N11 becomes fully active; Pakistan must address capacity related issues for the manufacturing sector and get rid of energy crisis as well.
Pakistan also needs to make its business environment investor friendly. According to the World Bank (WB) ease of doing business index, Pakistan ranks 127 out of 189 economies. Although it is better than major South Asian Economies, but still in order to compete within and outside the N11 economies, it must work to improve upon the current situation.
Talking about the potential risks associated with N11 countries, the biggest risk these economies are facing and would tend to face in the future (except maybe Korea, Mexico and Philippines) is the political risk. Sudden political changes (which already affected Egypt and might potentially affect Turkey, Iran, Pakistan and Nigeria) could lead to a change in the openness to investors and a good environment for business.
So, striking economic, demographic and cultural differences and equally striking commonalities between the N11 economies tend to demonstrate an interesting interplay of opportunities and threats. It is now to be seen how these countries are going to capitalise on opportunities and mitigate the threats involved.
