File photo of shipping containers. Asghar Achakzai—AFP
Addressing an event in London last month, former finance minister Miftah Ismail described Pakistan as having “the most ineffective governance” in the world. Validating this view is a recent World Bank report that found Pakistan’s Human Capital Index more comparable to sub-Saharan Africa and lower than the South Asian average. The root cause, as posited by Ismail, is the intra-elite tussle between Pakistan’s political and non-political classes. “Pakistan has gotten left behind as India moved forward,” he said. “In 1990, the two states had an identical per capita income. Thanks to [years of] Pakistan’s mis-governance, in 2021 India’s per capita GDP was $2,277, approximately 50 percent higher than Pakistan.”
Extremism and intolerance of diversity, fueled by a narrow view of national identity, threaten Pakistan’s prospects for social cohesion and stability, while state institutions are unable to reliably provide peaceful ways to resolve grievances. Despite two successive peaceful political transitions in 2013 and 2018, the country today evinces deep domestic polarization, facilitated by a fragile economy worsened by last year’s floods that caused billions in damages.
Pakistan is also increasingly isolated within its region, with extremist threats from across the border with Afghanistan and strained ties with India despite a declared ceasefire on the Line of Control. The only stable border is with China, whose influence as a close ally of Pakistan tends to balance Islamabad’s ties with Delhi but has yet to bear significant fruit for trade. The lack of trade between Pakistan and India, particularly, is considered a deep economic loss for Islamabad.
A hard pill to swallow for policymakers is that Pakistan cannot hope to normalize trade with its neighboring nations until it steadies itself internally. It must work to sidestep territorial disputes that have existed since Partition and focus on trade as a means to resolving the persistent state of hostility and increasing bilateral dependence. Traditional nationalism that grows out of mutual threats has to go and that is only possible by undertaking a new economic order in the region.