Transit-Based Economy: A Game Changer for Pakistan

Geographic factors of a particular region play a significant role in defining its strategic importance in the global arena, influencing both foreign and domestic policies. Many states and regions have gained prominence due to their location on the world map, altering their fates in terms of economy and national standing on the global stage. Panama, for instance, is known for its trade-facilitating region, which boosts international trade volume, economy, and global cooperation. According to the World Bank Report, Panama’s GDP has grown from 1 billion dollars to 66 billion dollars from 1960 to 2020. In this century, the idea of a transit-based economy has successfully been leveraged by many states, transforming their GDPs. Singapore, Hong Kong, the United Arab Emirates (UAE), and The Netherlands are classic examples of transit economies.

In line with this, Pakistan is among the lowest GDP states in South Asia. It has been grappling with the issue of economic deficit since its inception due to multifaceted reasons. However, there are many pathways to scale up the financial volume of the state, addressing the current account and fiscal deficit of the nation. Amazingly, one such way includes a transit-centric economy backed by the geographical position of the state. Shedding light on the geography of Pakistan, it is located at the crossroads of Asia. Furthermore, it is at the heart of the Central Asian states and also lies in close proximity to energy-rich regions like Iran and the Middle East.

Moreover, it also possesses maritime significance in terms of the Arabian Sea, located to the south of Pakistan, facilitating maritime trade with the Middle East, Africa, and the European continent. Additionally, the favorable topography, vast mountainous terrains including the Karakoram and Himalayan ranges, and the presence of strategic passes like Khunjerab and Bolan connect the nation with the Central Asian region, China, and Afghanistan, increasing the strategic importance of the state. Furthermore, it is blessed with an extensive network of waterways, such as the Chenab, Jhelum, and Indus rivers, offering opportunities for trade via water transportation with regional players.

The presence of strategic deep, warm-water ports like Gwadar and Karachi ports serves as trade linkages between China and the Middle East, acting as the best alternative to the Strait of Malacca. In addition to the aforementioned geographical factors, Pakistan has the potential to generate almost 10 billion dollars of economic activity by 2025 from trade routes by connecting regional actors in terms of trade expansion, according to the World Bank Report 2020. The World Economic Forum (WEF) 2019 report also highlighted that the strategic location of Pakistan would make it a key player in the South Asian region.

With the addition of economic gains, Pakistan would have the opportunity to diversify its economic activities beyond agriculture and industry. Furthermore, it would enhance opportunities for Foreign Direct Investment (FDI) by cooperating with multiple investors. Additionally, the South Asian region has always been vulnerable to instability, and Pakistan’s transit-led initiatives would bring peace to the region by fostering interdependence through trade routes, promoting an environment of coordination.

Moreover, this regional cooperation would bring technology exchange, technocratic exchange, job creation, cultural exchange, and many other avenues to Pakistan, strengthening its national standing globally. With this, global markets would connect to Pakistan to navigate their goods via Pakistan’s transit routes, aligning it with global powers. Such transit trade routes would also create balance in the South Asian region by neutralizing the hegemony of the Indian factor, strengthening the economic and trade roots of Pakistan. Additionally, the domestic fabric of the nation would be fortified through increased finance and employment opportunities, eradicating poverty and grievances. Moreover, both Pakistan and India can address their security dilemmas through this prospect of transit facilitation, mending their ties with each other. Hence, this initiative would act as a game changer for Pakistan.

Currently, under the China-Pakistan Economic Corridor (CPEC), many railway lines, roads, logistics systems, and other supply chain mediums are being developed. The development of Gwadar is also in the final stages under CPEC 2.0. Furthermore, five new corridors have been added to this program. Addressing climate issues and infrastructure advancement are part of these new corridors. Additionally, the Uraan Pakistan initiative 2025 is also focusing on the transit economy sector in light of the 5 Es mechanism. Moreover, the Special Investment Facilitation Council (SIFC) is removing bureaucratic hurdles from developmental projects and programs.

However, Pakistan is surrounded by various challenges while offering this transit facility. First, the surge in terrorism, particularly after the regime change in Afghanistan, is hindering the expansion of transit trade in the region. Furthermore, poor transportation infrastructure, including inadequate roads, railway lines, and airports, is obstructing the growth of such transit-driven initiatives. Moreover, political instability in Pakistan, coupled with weak democratic structures, is preventing the government from efficiently working on infrastructure development that would smoothen the supply chain of the entire trade system. The plague of red-tapism within the state’s machinery is exacerbating the situation, causing delays in implementing transit-oriented projects. Additionally, misinformation and propaganda are obstructing the state’s efforts to promote transit-led initiatives. The stark reality of climate change is also impacting the nation’s development and infrastructure, posing further challenges to promoting transit-focused economic programs. Lastly, corruption in transit-led plans remains one of the key stumbling blocks to the success of the transit economy.

Despite these prevalent concerns, Pakistan is still struggling to promote transit trade facilities in the region, necessitating a consolidated plan of action to address these barriers. Despite the setbacks, there are many ways to tackle the challenges discussed. First, to counter the new waves of terrorism, reforms in the National Counter-Terrorism Authority (NACTA) are crucial. Also, in Afghanistan, there is a prevalence of commercial terrorism, so joint efforts with the Afghan state and new methods to combat non-traditional terrorism would help mitigate the issue. Additionally, more infrastructure development projects would connect the region with Pakistan via trade. Transparent electoral processes and peaceful power transitions would help alleviate political instability and nourish democracy. The digitalization of governance would reduce red-tapism, addressing delays in developmental projects. Moreover, investments in cybersecurity and promoting education would reduce the impacts of misinformation and propaganda, a tool of fifth-generation warfare. To combat climate change, technological exchanges with international communities must be prioritized. Lastly, to curb corruption in transit-led projects, stringent audit measures must be implemented to ensure transparency.

In conclusion, Pakistan has recently availed the International Monetary Fund (IMF) loan scheme, portraying itself as a weak, loan-dependent economy. However, the geography of Pakistan provides a new way to explore its strengths and enhance its economy by connecting the region via trade routes. Although this opportunity comes with multiple challenges, the suggested solutions would help the nation capitalize on its geography while controlling the issues. The threats can be mitigated if proper actions are taken in time; otherwise, the future of Pakistan may be plunged into dire straits.

Aisha Khalid

The writer is a computer systems engineer with a keen interest in politics and social issues.

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