Looking Back, Looking Forward: Assessing the US-Pakistan Relationship
Washington D.C., June 26, 2024
Mr. Michael Kugleman,
Ladies and Gentlemen,
I thank Mr. Michael Kugleman and Mr. Ghazanfar Hashmi for convening this conference on the present and past of the Pak-US relations. I’ll also focus on the present as well. Mr. Kugleman, you are a respected voice and you have many admirers and followers in Pakistan.
The prospects of Pakistan-United States relations are bright. We share values, our security and economic interests are interwoven, and it is the aspiration of our two peoples that we strengthen our ties.
In the past, our two nations have leveraged this bilateral relationship for their respective strategic interests. We have a history of cooperation, which provided crucial military and economic assistance to Pakistan during the nascent phase of its statehood and contributed to significant advances in defense, agriculture, industry, communications, education, healthcare, and technology.
The relationship also helped the United States achieve its strategic goals in our immediate neighborhood and Eurasia. We have been partners in UN peacekeeping.
So, there are many bonds that join us. Now, in the midst of shifting geopolitical sands, we are developing a practical roadmap that enables us to deepen our understanding and deliver security and prosperity for all.
The lessons we have learnt during the Cold War and afterwards are that we should not base our engagement on incongruity of expectations. Our ties should be anchored in ground realties, even as we aim for stronger security and economic partnerships. Secondly, one or two issues should not hold the entire relationship hostage. We should be pragmatic, given the complexity of the emerging world order.
In this era of renewed strategic competition, the US and Pakistan would build on existing partnerships and explore new horizons for establishing the parameters of mutuality of interests.
Pakistan is a large and vital state. It is one of the most consequential countries in West Asian hemisphere. Pakistan is the fifth most populous country with a population of 240 million, and a median age of 22. It is a huge market of growing middle class of 80 to 90 million people according to UNDP. Human capital is increasing fast to be absorbed by the domestic and international markets.
There are nearly 200 million mobile telephone users; and 135 million are broadband subscribers. Teledensity is more than 83%. Globally, Pakistan has the fourth largest cohort of freelancers. Digitization and e-commerce are transforming the traditional economy. We are also introducing the whole range of new technologies – Generative AI, quantum computing, robotics, blockchain, 3-D printing, virtual and augmented reality, Internet of Things, biotechnology, nanotechnology – in universities, industry and markets.
Since August 2021, following the withdrawal of the US and its NATO allies from Afghanistan, our two countries have been recalibrating bilateral ties. Both sides have realized that security and non-security relations must be continued in a new paradigm, which has three features – security, economic and strategic.
Security cooperation has its importance. It equals trust building. Defense talks between Pakistan and the US, post-Afghanistan, have continued apace. Pakistani and US military leaders have had frequent contacts in the past two years.
Last year, our Chief of Army Staff held important talks with his counterparts in Washington D.C. on the regional security developments and defense cooperation. Two mid-level structured defense dialogues have already taken place. Intelligence cooperation has been discussed at the highest level.
Last month, General Kurilla, Commander CENTOM, after concluding his visit to Pakistan said that the US looked forward to continuing to strengthen seven-decades plus [US-Pakistan] military-to-military partnership.
Also in the last month, Naval forces from Pakistan and the United States held a four-day capstone exercise – Inspired Union 2024 – in Karachi, Pakistan, to enhance maritime security and promote freedom of navigation.
Pakistan Air Force and the US Air Force held two-week long exercise Falcon Talon to develop interoperational capabilities, the first such exercise held since 2019.
We also have a standing agreement on communication interoperability and security. Military trainings are taking place under IMET. Exercise Red Flag provides another medium for furthering defense cooperation through training.
Even after the departure of the US and its NATO allies from Afghanistan, the threat of terrorism rages unabated against Pakistan, with the resurgence of Tehrik-i-Taliban Pakistan and Islamic State-Khorasan. We have continued dialogue and cooperation with in this field. In May this year, we had a comprehensive dialogue in Washington on working together to eliminate this scourge from our region. We have launched a new operation – Azm-i-Istehkam or Resolute Stability – to oppose and dismantle terrorist networks. For that, we need sophisticated small arms and communication equipment.
Over the decades, we have evolved an interface between Pakistan and US businesses. Therefore, economic and trade relations between our two countries have assumed their own importance and must continue to be nurtured. That’s why, both sides have invested political will, time and energy to promote cooperation in trade, investment, energy, agriculture, climate change, healthcare, science and technology, and education. In the past two years, there has been considerable momentum in all these areas.
Some 83 American wholly or majority-owned U.S. subsidiary firms, mostly Fortune 500, are doing business in Pakistan successfully. They have invested billions of dollars and earned billions at a high profit rate. These enterprises cover a wide range of sectors, including beverages, pharmaceuticals, food and hospitality franchises, ICT, chemicals, agriculture, financial services, and renewable energy.
The United States has a strong and enduring investment infrastructure in Pakistan and its companies are fully familiar with the business ecosystem in Pakistan. For them, Pakistan’s market has remained lucrative and attractive. The US International Trade Administration finds the following positives for US investors: lack of shareholding restrictions, simple work permit rules, no technology transfer requirements, and a large and sophisticated entrepreneurial class.
As I speak to you, we are undertaking following regulatory reforms to improve ease of doing business: intellectual property protection and enforcement, assured repatriation of funds, removal of bureaucratic bottlenecks, dispute resolution through application of the rules of LCIA and UNCITRAL. At the same time, we have embarked on a three-pronged macroeconomic reform to streamline our taxation, make energy sector efficient, and privatize non-performing state-owned enterprises.
The Pakistan-US trade has been growing over the years. Last year, its volume was $10.6 billion, with Pakistan’s exports at $8.4 billion, making the US the largest export destination for us. Our exports included IT products worth $1.4 billion. Reduction in tariffs on textiles and restoration of the Generalized System of Preferences (GSP) can help us increase two-way trade. There is some movement in Congress on the restoration of GSP.
Our economy experienced turbulence in 2022 and 2023 because of the pandemic, the floods and the supply chain disruptions caused by the Ukraine conflict. This year, our macro- and micro-economic situation has improved. We have turned a corner. There are many contributory factors.
Last year, we successfully negotiated and completed a $3 billion Stand-By Arrangement with the International Monetary Fund (IMF). Now our financial teams are holding staff level talks with IMF for the next multi-billion, multi-year Extended Fund Facility (EFF).
In 2024, the GDP growth rate will bounce back to 3.6 %, and, hopefully, rise to 5% in 2025. Inflation has gone down to 11.8 % from the high 30s last year. The Pakistani rupee is recovering.
We are receiving strong support from the World Back, International Finance Corporation (IFC) and the International Monetary Fund (IMF) for economic reforms, investments and macroeconomic stability.
There is more good news. Recently, the Pakistan Stock Exchange has peaked at all-time high of 78,000 making it the fastest growing and best performing stock exchange the world over. Remittances by overseas Pakistanis made through Roshan Digital Account have surged to $8 billion. The majority of the dispositors in this account are US-based diaspora. General remittances from the US were $ 3 billion. Fitch and Moody’s have given favorable reports on gonging fiscal consolidation.
Pakistan is inviting fresh investments in the IT, energy, agriculture, and minerals sectors. A new entity – Special Investment Facilitation Council – has been created as “one stop shop” to facilitate foreign inflows. A vast array of incentives is being given in these areas. The most mature sector for enhanced investment is tech startups, backed by international venture capital funding, the bulk of it flowing in from the US. Following the introduction of new Electronic Money Institution (EMI), digital banking licenses, and e-wallets, there has been a meteoric rise in the tech sector returns from US $10 million in 2018 to $4 billion this year. This is just the beginning. Other areas ripe for investment are green energy, corporate farming and mineral extraction.
Pakistan has proven reserves of critical minerals. These include gold, copper, lithium, rare earth elements, cobalt, chromite, bauxite and nickel. We are grateful to the US for associating us with the recent forums of the Minerals Security Partnership (MSP).
The SIFC-prioritized projects have opened up new opportunities to American technologies in agriculture, ICT and mining projects.
We are grateful the US International Development Finance Corporation in renewables and climate resilient growth. It, along with USAID, can help us promote more inclusive development, powered by sustainable green technologies and reliable supply chains. The US-Pakistan Green Alliance provides an excellent framework to work jointly on climate resilience, water conservation and efficiency, high-yield seeds and energy transition.
Pakistani students and professionals value US education. We appreciate the gradual increase in our students in the US universities. These numbers ought to be increased. Pakistan is the largest recipient of Fulbright scholarships. Our alumni network is 40,000. We welcome the launch of a US-supported programme for the improvement of higher education system to enhance the employability of graduates. Beyond formal education, we want our civil servants, technocrats and entrepreneurs to get training in US institutions to build and run their businesses and enterprises.
In the health sector, we look forward to the establishment of a Center for Disease Control in Pakistan, with the help of the US Centers for Disease Control and Prevention (CDC), promote maternal and child health, press ahead with immunizations, fight non-communicable diseases, and explore health tourism. We are preparing for the next round of health dialogue in Washington later this year.
The primary onus is on Pakistan to become a more attractive and competitive market for US businesses. At the same time, the US should use its enormous enabling power to help Pakistan achieve this objective. The US Government and private sector will be key catalysts in this endeavour.
Pakistani-Americans are shared asset for Pakistan and the US. Their number nears 1 million, as they excel here, build bridges between our two nations, facilitate two-way commerce and direct investment to Pakistan. Eleven of them are in the State Assemblies. Many more are contesting elections this year. A few head top American franchises. They have immense space and potential to grow.
Regional stability is our shared goal.
When it comes to China, our posture is neither one of strategic autonomy nor of strategic neutrality; but one that may be called a strategic dyad model, which has been chosen by major countries in Global South. The US and China both are important to Pakistan, in their own right, none at the expense of the other, because we believe these are not conflicting goals. Despite apparent differences, there is broad complementarity between the US and China. We too can benefit from that symbiosis. Besides, neither the US nor China have asked us to choose sides. Not so far anyway.
Pakistan was a strategic bridge between the US and China in the early 1970s. Now we can be an economic conduit. The China-Pakistan Economic Corridor (CPEC) can connect the Belt and Road Initiative (BRI) and the US-led Partnership for Global Infrastructure and Investment (PGII). The US could start new manufacturing plants whose products can be exported to Central, West and East Asia. The US has competitive edge in so many areas; and, to start new projects in Pakistan, it can partner with the Gulf Countries, Japan and South Korea, for instance, who have wide market exposure in Pakistan.
In 2022, both sides took a conscious decision that Pakistan and the United States would develop their broad-based relations without using the lenses of Afghanistan, India and China. This also necessitates that we do not foist on this relationship a new prism, a new re-hyphenation – such as the Indo-Pacific Strategy (IPS). The IPS should not become a vehicle to accentuate regional imbalances. A study needs to be conducted to assess the impact of IPS on countries not part of the group.
Pakistan has always been keen on dialogue with India to resolve outstanding problems, such as the Kashmir dispute, so that our two nations can live in peace and harmony for centuries to come. Elections in two countries should offer a new opening for diplomacy.
The US should make Pakistan a partner for a diplomatic comeback in Kabul, if that is what is being planned, and work with Pakistan, in an inclusive setting, on counterterrorism and the rights of women and girls in Afghanistan. Pakistan has been advocating for Afghanistan’s stability and its integration into the international community. Stability in Afghanistan will open the gates for Turkmenistan-Afghanistan-Pakistan (TAP) gas pipeline. The good news is that the World Bank has approved support for CASA-1000. It’s a great breakthrough.
The world is looking towards the United States to demonstrate its leadership to effectuate a permanent ceasefire in Gaza, ensure uninterrupted, fully functioning humanitarian corridors to Gaza and develop consensus around a two-state solution.
I am grateful to the US think tanks who are reshaping the policy landscape for a new phase in Pakistan-United States relations focused on the positives, rather than the negatives. I have benefited from their valuable inputs.
We should continue to invest in the reset of our relationship, maintain strong security links, enhance intelligence cooperation, resume sales of advanced military platforms and sustainment of Pakistan’ US-origin defense equipment. This is crucial for regional security and opposing the rising tide of terrorism that also threatens the interests of the US and its allies.
In a highly polarized and distressed world, the US is looking for new friends. It is equally important to preserve its ties with the ones who have been with Washington in difficult times over the decades. We have a strong stake in this.
Our relationship will thrive on the basis of deep relations between our two people and positive perceptions. Both sides are working on these dimensions by leveraging public diplomacy and people to people exchanges. For this, we need liberalized and speedy visa regimes.
To all our friends I would say: have faith in Pakistan. As a nation, we will make it. We will succeed against all odds. My confidence stems from the genius of our people. So, my key message is invest in Pakistan; invest in Pakistan-US relations.
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