Address at 70th Anniversary Celebrations of Pakistan
Excellencies, Ladies and Gentlemen,
The 70th anniversary of Pakistan’s independence coincides with the 70th anniversary of the United Nations Economic and Social Commission for Asia and the Pacific, ESCAP. This is an opportunity to reflect on how Pakistan and ESCAP can foster regional cooperation and integration so critical for the country’s repositioning to achieve long-term economic sustainability.
As an integral part of Asia, Pakistan must strive to achieve higher and robust growth by adopting inclusive and sustainable development to underpin equitable society, while reducing multidimensional poverty that grips 40 per cent of our population. Barring a few good years, Pakistan’s development has been impacted by structural fiscal and external imbalances, low investment levels, lack of economic diversification, risk averse bankers and investors and a weak implementation track record that complicates the cost of delivery. Industrial capacities created large service growing domestic demand, leaving limited scope for exports, the demand prospects of which have not been fully exploited. Achieving a turnaround in Pakistan’s export performance is critical, as boosting foreign exchange reserves through borrowing is not sustainable.
Pakistan has always been open to regional cooperation opportunities. Its geographical location is an asset - close to China, Iran and the Central Asian Republics on the one hand, but also South Asia on the other. Pakistan was a founding member of both the Economic Cooperation Organization, and the South Asian Association for Regional Cooperation. Yet despite the geographic proximity of their members, these sub-regional arrangements have underperformed. Bilateral trade between Pakistan and India alone could be 12 times higher than at its current level. Intraregional trade could grow to over $170 billion by 2020 if peace and stability were restored, trade liberalized and nontariff barriers removed. 1
Reforms of the UN are being structured to intensify preventive diplomacy, peace and security, and strengthen the policy and analytical capabilities of Regional Commissions to support the regions’ implementation of the 2030 Agenda.
Drawing on lessons from successful subregional blocs will be instrumental to any further deepening of cooperation. ASEAN, now celebrating its 50th anniversary, owes its origin to the need to promote peace and stability. Over the years, this has been fostered by the development of policy frameworks backed by legal and regulatory environments that will be further encouraged by the 2025 Vision and Action Plan.
As a coordinator promoting UN-wide implementation support for ASEAN, ESCAP has ensured coherent support for the organization and is undertaking a study to enhance the complementarity of its Action Plan with the 2030 Agenda. For example, the ASEAN Institute for Peace and Reconciliation will engage with its members to promote this agenda, drawing on ASEAN and broader global experiences. In support of ASEAN’s long-term vision, ESCAP is also promoting ASEAN Highways and the ASEAN Power Grid.
A critical element of ASEAN’s success has also been its membership’s drive to pursue their domestic political and economic transformation backed by macroeconomic and financial surveillance of member states. The private sector has been at the forefront of leading the growth in intraregional trade, that has reached 24 per cent of total trade 2 supported by regional production and value chains, benefiting not only from regional preferential agreements but also ASEAN free trade agreements with US, China, Korea and now India. Investment in regional cooperation has now seen ASEAN emerge as the world’s sixth largest economy. 3 Its collective GDP is expected to rise to $5.2 trillion by 2025, becoming the world’s 4th largest economy. 4
At the first Ministerial Conference on Regional Economic Cooperation and Integration, ESCAP’s membership collectively adopted the Bangkok Declaration that revolves around a four-pillar agenda. It calls for (i) regional market integration, (ii) seamless regional connectivity, (iii) enhancing regional financial cooperation; and (iv) addressing shared transboundary vulnerabilities, risks and challenges. Our approach to supporting regional cooperation and integration is being shaped by successive regional events that will lead up to the November 2017 Ministerial Dialogue on Regional Cooperation and Integration.
There must be a fundamental rethink of traditional RECI models and policy frameworks. This should involve a conceptual transition from a traditional “growth-centric” approach to one driven by sustainable development, incorporating social and environmental considerations. First and foremost, the RECI framework must therefore be guided by the 2030 Agenda which includes a wide range of new elements. These comprise peaceful and inclusive societies (SDG16), thematic areas such as eliminating inequalities, managing the global climate change (SDG13) and how to regionally foster partnerships and the means of implementation (SDG17) including statistics, finance and trade and investment to implement Agenda 2030.
Second, the region should benefit from some changing political dynamics. The opening up of Myanmar, the lifting of sanctions in Iran and the integration of post-conflict states all provide new opportunities.
Third, the RECI framework is now an integral driver of the Regional road map for implementing the 2030 Agenda for Sustainable Development in Asia and the Pacific, adopted at ESCAP’s 73rd Commission Session in May 2017. The Roadmap focuses on high priority SDGs which are critical to root out the multidimensional aspects of poverty through tackling broader challenges such as climate change (SDG13), energy security and sustainable energy (SDG7), decent work and economic growth (SDG8); as well as SDG9 on industry, innovation and infrastructure. Agenda 2030 calls for addressing transboundary vulnerabilities and risks associated with climate change, reducing regional pollution by adopting cleaner technology, more environmentally-friendly modes of transport and promoting energy security by boosting trade and investment in transboundary energy networks to integrate large-scale renewable energy. Interlinkages of Agenda 2030 can be harnessed as the region resolves to leverage externalities. Exploiting renewable energy would not only help meet growing energy demand, but facilitate climate-friendly energy and promote energy access for the poor.
Finally, market integration must be recognised as the core driver of RECI. The recent rise in global protectionism and disruption in labour mobility prompted by growing nationalistic sentiments have cast a shadow over efforts to pursue the gains of market integration. There are considerable challenges facing deeper market integration across the region. Trade costs in Central Asia and South Asia remain stubbornly high. For example, tariff equivalent trade costs between the SAARC bloc and North and Central Asia stand at 285 per cent. The participation of the region in global value chains relies heavily on intraregional imports of intermediate goods.
Efforts to liberalise and facilitate intraregional trade need to continue, supported by the next generation of trade and investment agreements, in particular the consolidation of the 170 regional preferential trade deals into a multilateral framework. We must reverse the unhealthy competition in national investment regimes through regional agreements - including in the service sector - and by switching from a reliance on opaque privileges and tax incentives which reduce government revenues, to more transparent and open foreign direct investment regimes. For too long, bilateral investment flows have been impeded by restrictive regimes, the lack of appropriate hard and soft infrastructure and administrative hurdles. More balanced international investment agreements are needed to recognize host country development needs and the right of governments to regulate for development purposes.
These measures would support intra-regional trade for both goods and services. Contributing to dismantling procedural barriers, ESCAP has negotiated and opened for ratification the Framework Agreement on Facilitation of Cross-Border Paperless Trade in Asia and the Pacific. Labour market integration which aims to improve and allow smooth labor mobility of skilled work force, setting of regional qualification standards, improving working conditions through proper remuneration and access to social protection and pay for migrant workers are subjects of the forthcoming regional consultations on the Global Compact on Safe, Orderly and Regular Migration.
ESCAP has worked to accelerate the delivery of the regional agenda by restructuring and reorienting our Sector Investment Committee’s work programmes to reinforce practical approaches to regional cooperation. This involves nurturing the development of sustainable, holistic, multimodal transport networks and prioritizing developing missing links, enhancing regional power grids to deploy renewable energy sources and developing the Master Plan for the Asia-Pacific Information Superhighway to improve competitiveness and reduce the region’s digital divide.
ESCAP has been called upon to support the implementation of a range of regional mega-initiatives for the mutual benefits of all members. At the 73rd Commission Session of ESCAP member States passed a resolution to “advance integrated and seamless connectivity for sustainable development in Asia and the Pacific”. In support of China’s Belt and Road Initiative or BRI, ESCAP and the Chinese Ministry of Foreign Affairs signed a Memorandum of Understanding, under which ESCAP will undertake analytical work. The first analytical piece has offered an assessment of the six corridors to be developed under BRI and insights on how BRI can foster market integration and holistic, seamless and sustainable regional connectivity. It draws on ESCAP’s efforts to promote multilateral trade and investment frameworks, mainstreaming our normative work on standards and regulations and supporting newer corridors and transit routes through long-standing ESCAP sponsored transport and trade agreements. Outcomes in connectivity have been good as the Asian Highway Network extends to 142,000 kilometres, the Trans Asian Railway holds promise to integrate freight railway networks across Europe and Asia, and the Asian Dry Ports agreement is now ratified by 11 countries in the region. Linking Asian corridors through multimodal transport systems will enhance the competitiveness of region. Concurrently, ESCAP has been fostering greater integration of power grids through the BRI and initiatives such as the Asian Energy Ring.
The China-Pakistan Economic Corridor stands out as a flagship of the BRI that will be instrumental in adding energy capacities including renewables, and constructing alternate and competitive routes - providing China and landlocked countries access to Gwadar port - while promoting industrial development. It entails the construction of road, fibre optic projects, rail links and many hydropower and coal plants. Efforts which could be particularly beneficial if there could be more information sharing on processes, projects and terms and condition of financing transactions to further public confidence - and if the regulatory infrastructure could be strengthened to support trade, investment and global value chains and pricing mechanisms.
In Pakistan, as many as 700,000 direct jobs could be created through the China-Pakistan Economic Corridor between 2015 and 2030. It holds great promise of closer trade, investment and energy cooperation between the two countries and beyond. Indeed, this corridor could support trade and economic integration in the broader region, particularly between China, Pakistan, Iran, India, Afghanistan and the Central Asian States.
To conclude, there is need for Asia to broaden and deepen RECI and in the process consider pragmatic approaches to restrategizing RECI to be supportive of the sustainable development agenda and use the opportunity to accelerate implementation of transboundary goals which would play a critical role in seamless climate friendly infrastructure.
ESCAP is driving a reinvigorated region-wide approach to cooperative arrangements and is supporting its member States to maximise the benefits, delivery and impact of mega initiatives including the BRI, and ensure they deliver outcomes that support the achievement of the SDGs.
To realise the full potential of regional cooperation initiatives, Pakistan needs to fast track domestic structural reforms so critical for regional trade and investment flows. Sustainable development pathways, supportive legal, regulatory and policy frameworks, strengthened public finance, deeper capital markets and a favourable business environment are all prerequisites for maximizing the benefits of RECI. ESCAP will continue to work steadfastly with Pakistan and other member States of the Asia-Pacific to realise the vision of a more interconnected region – one that is prosperous, sustainable and peaceful.
I thank you.
1ESCAP “Unlocking the Potential of Regional Economic Cooperation and Integration in South Asia: Potential, Challenges and the Way forward”
2ASEAN Trade Statistics http://asean.org/?static_post=external-trade-statistics-3
4Frost and Sullivan 2017, Future of ASEAN: Forecast to 2025, https://www.reportlinker.com/p04833516/Future-of-ASEAN-Forecast-to.html