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SCO & Pakistan’s Future, New Vistas for Economic Development

sco and pakistan future

Founded in Shanghai, China in 2001, the Shanghai Cooperation Organization (SCO) is an intergovernmental organization comprising six member states namely China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Formed as ‘Shanghai Five’ in 1996, — as a confidence-building forum to demilitarize borders — the organization added Uzbekistan in 2001 and adopted its present name. The organization’s goals and agenda have since broadened to include increased military and counterterrorism cooperation and intelligence-sharing.  The SCO has also intensified its focus on regional economic initiatives like the recently announced integration of the China-led Silk Road Economic Belt and the Russia-led Eurasian Economic Union.

The Shanghai Cooperation Organization (SCO), apart from six permanent members, has six observer states i.e. Afghanistan, India, Pakistan, Mongolia, Iran and Belarus; and six dialogue partners i.e. Armenia, Azerbaijan, Cambodia, Nepal, Sri Lanka and Turkey. The SCO member states occupy an exceptional position on the world map. They  cover a vast landmass with approximately 1.6 billion population, nearly a quarter of the world’s total population.

Although the SCO’s main objectives include countering “three evils,” viz. terrorism, separatism and extremism but today the SCO is also providing a platform to member countries for launching major ventures, such as advancement in trade, education, culture, energy, transportation, tourism, human rights protection and environmental protection.

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In present global politics, economic relationship is chanted as no less than mantra. The economic significance of the SCO — often termed as the ‘Nato’ of the East — is undeniable due to its linkages with the Eurasian region which possesses a large proportion of the world’s oil and gas reserves. The SCO includes four nuclear states; out of which two are de jure (China and Russia) and two are de facto (India and Pakistan). As Pakistan, recently, has become the full member of the SCO, it is apt to look into the opportunities that the membership of this powerful regional bloc would bring to the country.

First of all, Pakistan’s future collaboration, especially in the economic domain, with the SCO will help the country usher in an era where reaping huge economic, political and cultural dividends would be possible not only for Pakistan but also for the entire Eurasian region. Pakistan is already in the limelight because of the regional mistrust based on historical legacy. This is compounded by a plethora of problems from big neighbours, clash of national interests, humanitarian issues, India’s hegemonic designs, poverty, fragile economy, exploding population, water issues, nuclearization of South Asia and War on Terror (WOT).  But, it can be expected that Pakistan’s permanent SCO membership will help it not only in contributing to economic well-being of the region but also in having a symbiotic relationship with the SCO.

The SCO states are seriously lacking in one particular aspect despite their large territories and proportion of the world’s oil and gas reserves. Landlocked SCO states, don’t have access to warm waters or more rightly easy access to sea trade. Pakistan’s strategic location and its maritime link with the Arabian Sea and the Persian Gulf make the country more significant than other SCO observer nations. Hence, strategic location of Pakistan will be able to provide land and sea routes and connectivity to the CARs, Russia and China.

Secondly, the accessibility to warm waters (Indian Ocean) could become possible by establishing North-South Corridor. The Chinese investment of $46 billion on China-Pakistan Economic Corridor (CPEC) is very consequential in this regard. Sea, as a mode of traffic, is comparatively a cheap trade route than others i.e.  land and air. Pakistan’s Gwadar port is the third largest deep sea port in the world, bearing strategic significance, especially with reference to maritime links of Silk Roads.

China’s revolutionary idea of “One Belt, One Road” will help Pakistan in having a symbiotic relationship with the SCO states. China’s economic expansion, especially toward western and southern countries — Central Asia and South Asia, respectively — would open up immense opportunities for the two diverse regions. This will further lead to a web of connectivity with the Middle East, Africa and Europe through the Arabian Sea and then Mediterranean Sea.

Moreover, Pakistan has a tantalizing opportunity for investment in trading, marketing, business and banking sectors as well as a sizeable market for common goods. Regional connectivity of SCO member states with Pakistan would unfold immense opportunities in trade, business, infrastructure and transportation. As the SCO states lack north-south corridors, this could become a future reality by establishing links with Pakistan through the CPEC.

Furthermore, as Pakistan is successfully overcoming terrorism and extremism through “Operation Zarb-e-Azb,” the CARs could also imbibe some tried tactics and strategy to counter “three evils” within their territories.

Allocation of permanent SCO seat will also offer Pakistan easier access to energy resources of Central Asia. Currently, by virtue of a major agreement i.e. Quartet Agreement of Transit Trade (QATT), Pakistan is able to trade with China and some of the CARs. This agreement was concluded in 1995 by Pakistan, China, Kazakhstan and Kyrgyzstan. It is more in favour of Pakistan because Pakistani ports (Gwadar, Karachi, and Port Qasim) are going to be used. The SCO’s rationale of economic cooperation, eradication of terrorism, strengthening mutual cooperation and establishing good neighbourly relations will forge connectivity that will result in  fruitful opportunities for economic intercourse (trade and commence) among different states of Asia and Europe.

The term “North-South Corridor” is well known as a trade phenomenon in the world politics. Currently, there are two projects meant to establish these corridors. The first one is Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline which is a $10 billion worth project of 1,814-kilometre-long pipeline that will provide gas from Turkmenistan to other parties to the deal. In this way, the TAPI could be the first step to establish economic relations between Central and South Asian states. Additionally, it involves major powers of Asia (China) and Europe (Russia). As “Silk” today also stands for “hydrocarbon reserves”, therefore, trade through different routes has importance for its transfer from one state to another.

In December 2015, the TAPI project was signed by four leaders of the project member states in the city of “Merv” located near today’s Mary in Turkmenistan. The completion of the TAPI is expected by 2019.

The TAPI project is still under discussion among member states. The conflicting interests and a sheer lack of trust among Kabul, New Delhi and Islamabad are the main hurdles to the project. Although economic rationality of the project is beyond question it is clouded by politics of different actors on several “ifs and buts”.

The TAPI, if completed, would help change the existing politics of “win-lose” into “win-win” with possible extension toward China and Bangladesh. This could create opportunities for all the stakeholders to generate increased revenues by trade, commence, investment and crisscrossing of gas and energy pipelines.

Yet another opportunity is the Central Asia-South Asia (CASA-1000) electricity project. The basic idea behind the creation of CASA-1000 is to build a bridge between the two regions and to develop Central Asia-South Asia Regional Electricity Market (CASAREM). This agreement was signed on 12 May 2016, in Dushanbe, Tajikistan by high-ranking dignitaries from Afghanistan, Pakistan, Kyrgyzstan and Tajikistan, representatives of the international financial institutions (IFIs), donors and partners.

The CASA-1000 has economic and political problems like the TAPI. Both projects have created a political tug of war between diverse regions involved in the TAPI.  Economically, total cost of the project it US $997 million. The economic significance of both projects is that they connects the CARs directly with the South Asians states.

The main stakeholders of the CASA-1000 project are the developing states of Asia which are in urgent need of electricity. The project would fulfil contemporary electricity requirements of South Asia, especially Pakistan, by importing 1,000MW of electricity.

Pakistan’s economy needs to energize the current projects while enhancing its further strings in the regions. It is an active player of the creation of North-South Corridor that would benefit it in the long run. Acquiring permanent membership of the SCO and maximizing regional connectivity through softening of bilateral relations will be a harbinger of an era of peace, growth and development. The idea of connectivity through different organizations, such as the SCO, is beneficial for several states. The new initiative of north-south connectivity through CPEC will create lucrative opportunities for several regions of the world.

This is one positive aspect of globalization where borders neither impose limits, checks and restrictions nor do they create walls of distrust. Free flow of trade, goods, capital and ideas could gestate a new world. As an old saying goes: where caravans start crossing the borders, the armies usually will hesitate twice to do so.

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