12 2 September 2013 Pakistan s Policy Objectives in the Indian Ocean Region Associate Professor Claude Rakisits FDI Senior Visiting Fellow Key Points Pakistan s key present foreign policy objectives are: to ensure relations with the US remain on track, particularly in the lead up to ISAF s departure from Afghanistan in 2014; to further deepen relations with China; and to continue to improve bilateral relations with India. A stable and secure relationship with Afghanistan will be a key security and foreign policy objective for Pakistan post-2014, as this will have a direct impact on the military s ability to deal with the Pakistani Taliban challenge. Pakistan s crucial economic objectives today, and into the future, will be to upgrade the country s dilapidated infrastructure, find solutions to the massive shortfall in its energy needs and to invest significantly more into the country s health and education sectors. The Australian mining sector would have much to gain from an improvement in the security situation in the India-Pakistan-Afghanistan region. Summary The new administration of Prime Minister Nawaz Sharif will be seeking to keep Pakistan s bilateral relations with the US on a firm footing, particularly in the lead up to 2014 and beyond. Sharif will make it a priority to improve relations with India, as this could potentially unlock billions of dollars worth of trade and reduce the need for the high level of military spending. Improving the economic and fiscal management of the country, including upgrading its run-down infrastructure, would help attract foreign investment and open up business opportunities for foreign companies, including from Australia.
Analysis Pakistan s Existing Foreign Policy, Security and Economic Objectives in the Indian Ocean Region Foreign Policy Objectives Pakistan s most important foreign policy objective today is to ensure that its bilateral relationship with the United States does not go off track again. Given the critical importance of this relationship, it is vital that the two countries better understand each other s national interests. This is particularly important in the lead up to 2014, when the US and its ISAF coalition partners withdraw militarily from Afghanistan. It is in the interests of both Washington and Islamabad that the two countries work together to achieve a peaceful, negotiated solution to the present Afghan conflict which, as much as possible, takes into account their respective strategic interests. The continued improvement of bilateral relations with India is another vital foreign policy objective for Islamabad. The two countries recognise that it is in both of their interests to continue to deepen the progress that has been made in the bilateral relationship. There are a number of positive indicators (high-level political visits, Pakistan s willingness to grant Most Favoured Nation status, Indian support for Pakistan s bid for a seat on the UN Security Council), which confirm that there is an increasing degree of political will on both sides to move this relationship forward. This has been further strengthened with the election of Nawaz Sharif as prime minister in May 2013. He has made the improvement of bilateral relations with India a priority of his new administration. The Pakistani Government s third important foreign policy objective is to continue to deepen its relationship with China. While this is a relationship that has developed very significantly since the 1960s, there are a number of irritants, however, most notably the presence of Uighur militants in Pakistan s tribal areas and different policy approaches towards Afghanistan, which have caused Beijing to be more cautious than Islamabad in deepening this relationship even further. Security Objectives Given Pakistan s lack of strategic depth, particularly in the northern and central parts of the country its heartland Pakistan s primary objective is to secure its eastern border. This is a critical objective which must be achieved because any breach of its international border in the Punjab region by a significant Indian force could mean that Pakistan would be faced with an existentialist threat very quickly. One should not forget that Lahore is only 25 kilometres from the border. Accordingly, and notwithstanding the improvement in bilateral relations, Pakistan cannot afford to reduce its present heavy commitment of conventional forces on the Indo-Pakistani border. It also explains Pakistan s purported development of theatre nuclear weapons. Pakistan s second crucial security objective is to secure its western border with Afghanistan. In this case, the threat is of an asymmetric nature: the movement of Afghan and Pakistani Page 2 of 6
Taliban fighters into Pakistan. The irregular flow of Afghan Taliban fighters into Pakistan s tribal areas along its western border draws Pakistan deeper into the present Afghan conflict. The flow of Afghanistan-based Pakistani Taliban militants and insurgents back into Pakistan creates instability in the tribal areas, in particular, and in Pakistan, in general. The increasing use of Afghanistan as a safe haven for the Pakistani Taliban is complicating the Pakistani Army s task of securing the tribal areas. A third crucial security objective is to prevent the Indian Navy from restricting Pakistan s Navy and the free movement of maritime traffic to and from Karachi, Gwadar and other parts of its southern seaboard. As Pakistan s unimpeded access to the Arabian Sea and the Indian Ocean is a critical strategic lifeline, Islamabad cannot afford for this to be threatened. Economic Objectives Pakistan s primary economic objective will be to try to return to the high economic growth rate of the mid-2000s when it was around seven per cent. Today, it is down to just over three per cent, a consequence of the Global Financial Crisis that hit Pakistan hard. In order to deal with this economic downturn, Pakistan obtained an International Monetary Fund (IMF) $11.3 billion loan under a two-year Stand-By-Arrangement. This agreement required that Pakistan embark on a stabilisation programme which includes implementing economic reforms. While Pakistan has made some progress in meeting some of its obligations, it still needs to implement tax reforms, particularly in broadening its tax base. Reducing the budget deficit will be imperative to take pressure off monetary policy so as to make it easier for the private sector to expand. In August 2013, the IMF agreed to lend Pakistan $6.6 billion to help it deal with its balance-of-payment problems and assist it to repay the $5 billion debt it still owes the IMF. In addition to the IMF measures it needs to implement, Pakistan s priority will be to upgrade its dilapidated infrastructure, especially in the energy and communication sectors. The devastating floods of 2010 put even more stress on an already broken infrastructure. Importantly, unless it can fix its severe energy shortages, which have a very significant impact on the country s economic growth, it will not be able to attract the vital foreign direct investment that it needs to kick-start the economy. Foreign Direct Investment has collapsed from $5.4 billion a year to only $700 million annually. Moreover, poor infrastructure, compounded by the overall security situation, does not make Pakistan an attractive investment destination. This is unfortunate, given the many rich mineral deposits present in Pakistan that are waiting to be exploited. How Might These Objectives Differ Between Now and 2025 and What Challenges Might They Face? Foreign Policy Objectives A stable relationship with the US will continue to be a key foreign policy objective for Islamabad in 2025. Meeting such an objective should be easier in 2025 than it is now. Except for a residual number of Special Forces and training officers, American troops will have been gone from Afghanistan for over a decade. This means that, while Washington will still have Page 3 of 6
strategic interests in the region, its interest in developments in the region will nevertheless be relatively diminished. Turning specifically to Pakistan, Washington s most important interests will be to ensure that Pakistan s nuclear arsenal remains secure and that global terrorists do not find refuge in Pakistan. On both those fronts, Pakistan shares the same interests. Accordingly, Washington and Islamabad should be able to work co-operatively in those two areas. With the US out of Afghanistan, and most of the al-qaida fighters having moved elsewhere, Washington should have stopped US drone attacks in the tribal areas of Pakistan, thus removing a major irritant in the bilateral relationship. Unless there is another Mumbai-type attack originating from Pakistan, bilateral relations between New Delhi and Islamabad should continue to improve. By 2025, there may well be a much more significant movement of people and goods between the two countries. If relations do continue to improve, the ubiquitous Kashmir issue may well have become less of a hot issue, making substantial negotiations on that issue a distinct possibility. But, a significant improvement in bilateral relations will only happen if Pakistan feels that India is not excessively involved in Afghanistan. Pakistan s foreign policy objective vis-à-vis China will be to continue to deepen that bilateral relationship. This is most likely to happen, especially in the fields of trade, energy and defence. It is quite likely that the plan to have an energy corridor from Gwadar on the Indian Ocean to western China will be closer to being completed. A terrorist attack in western China by Pakistan-based Uighur militants, however, would undoubtedly set the relationship back. Nevertheless, China s take-over of the management of the port of Gwadar will likely deepen further Chinese involvement in Pakistan s internal developments. Security Objectives Pakistan s overall security objectives in 2025 will be the same as in 2013. In some respects, however, they may be easier to achieve down the road than they are today. Turning to India, if bilateral relations do continue to improve, as they are expected to do, Pakistan may not need to station such a high number of conventional troops along its border with India. It is quite possible that, by 2025, there may be a number of trust-building measures that will have been agreed to and which will have eased the tension on the border. Regardless of the political outcome post-2014, Afghanistan will continue to be a critical security concern for Pakistan in 2025. More importantly, if a Taliban-friendly government comes to power in Kabul, this may well be bad news for Islamabad because such an Afghan government would not only give a real moral fillip to the Pakistani Taliban s drive to impose Sharia law in the whole of Pakistan, it may well give its Pakistani ideological travellers military support in the process. Were this to happen, it would significantly complicate Pakistan s security equation, including having to permanently station a substantial number of troops in the tribal areas. Pakistan s maritime interests, notably its unrestricted access to the Indian Ocean, will remain the same in 2025. Given the present and planned build-up of the Indian Navy, though, this security objective will become increasingly difficult to achieve. Page 4 of 6
Economic Objectives Pakistan s economic objectives in 2025 will be same as they are today. Given the relatively high population growth rate of close to two per cent per year, it will be critical for Pakistan to meet the objectives it sets itself today, notably improving infrastructure, fixing the growing energy shortage problem, expanding its tax base and attracting foreign direct investment. Only when these objectives are met will the country s leaders be able to seriously tackle some of Pakistan s developmental issues. Some of these challenges include: one-quarter of its population living below the poverty line, one-quarter of its people being malnourished, almost half the population being illiterate, and a very high maternal mortality rate. If bilateral relations with India continue to improve, however, there may well be less of a need for Pakistan to have such a large armed force of some 700,000 men. If Pakistan were able to reduce the size of its armed forces, then part of the 26 per cent of the national budget consumed by the military could be directed to desperately needed socio-economic programmes, in such areas as education and health care. Improvements in bilateral relations with India may well open opportunities for Pakistan to join the Indian Ocean Rim Association for Regional Co-operation (IOR-ARC). Until now, New Delhi has blocked Islamabad s entry to that club for fear that it would try to make the Kashmir dispute a multilateral issue. Similarly, if bilateral relations do improve, the South Asian Association for Regional Co-operation (SAARC) may become more effective and lead to an increase in trade between its member states, including between Pakistan and India whose annual bilateral trade stands today at a paltry $2 billion. Opportunities and Challenges for Australia Bilateral relations between Australia and Pakistan are relatively limited today. On the political front, much of the relationship is centred on Australia s participation in the coalition effort in Afghanistan and the spill-over effect that developments in Afghanistan have on Pakistan. Accordingly, Australia is today Pakistan s second-largest provider of overseas military training. This level of military co-operation need not necessarily have to diminish once Australia leaves Afghanistan in 2014. One of the other positive consequences of Australia s involvement in Afghanistan has been the establishment in 2010 of a 1.5-Track Strategic Dialogue co-hosted by Australia s Chief of the Defence Force and Pakistan s Chairman of the Joint Chiefs of Staff Committee. The Dialogue members meet annually, giving an opportunity for both countries to deepen their understanding of each other s strategic interests. Now that this Dialogue has been established, there is no reason why it would not continue post-2014. On the trade side, bilateral relations are rather limited despite the establishment of an Australia-Pakistan bilateral trade agreement, which has been in force since 1990. Bilateral trade has been hovering around $600-$700 million annually for the last few years, although both countries are actively exploring sectors in which trade and investment could be expanded. Some of the more promising areas include: education (tertiary and vocational), agribusiness (dairy, crop production, quality issues storage and handling), airports (design Page 5 of 6
and construction), mining (oil and gas exploration and development), processed foods and IT and communications products and services. Needless to say, given its very large natural gas and oil reserves, the fourth-largest coal reserves in the world and substantial potential in hydropower, Pakistan offers significant opportunities for the Australian mining sector. Of course, if relations between Pakistan and India continue to improve and peace eventually comes to Afghanistan, then the vast trade and economic potential of the region would be unlocked, opening up enormous trade and investment opportunities for Australian business. The India-Pakistan-Afghanistan region is a virtual gateway to Central Asia and the Middle East, both areas with vast natural gas and oil reserves waiting to be exploited and transported to other parts of the world. With the on-going infrastructural development of the port of Gwadar on its Indian Ocean coastline, the benefits to the economic development of Pakistan are almost limitless. If Australian business plays its cards well, it can be a major participant in this economic boom. ***** About the Author: Dr Claude Rakisits is Associate Professor in Strategic Studies at Deakin University. His principal research interests are Pakistan and Afghanistan. He has almost 30 years of professional experience and knowledge in defence and strategic issues, intelligence and international affairs. A/Prof Rakisits has taught at universities in Australia, Canada and Switzerland. He writes and comments regularly for Australian and international media and visits Pakistan on a regular basis. ***** Any opinions or views expressed in this paper are those of the individual author, unless stated to be those of Future Directions International. Published by Future Directions International Pty Ltd. 80 Birdwood Parade, Dalkeith WA 6009, Australia. Tel: +61 8 9389 9831 Fax: +61 8 9389 8803 E-mail: lluke@futuredirections.org.au Web: www.futuredirections.org.au Page 6 of 6