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Pakistan This Week


Photo Source: Dawn

Pakistan Reader# 173, 9 May 2021

PM and COAS in Saudi Arabia, Imran's criticism of the foreign ministry and the growing trade deficit



The importance of Middle East, Diaspora and Remittances

PR Team

Rishabh Yadav, D. Suba Chandran and Abhiruchi Chowdhury


Pakistan in Saudi Arabia: Imran Khan and Gen Bajwa visit the Kingdom
What happened?
On 4 May, COAS Gen Bajwa arrived in Saudi Arabia on a four-day tour to strengthen defence cooperation between the two countries and to lay the groundwork for Prime Minister Imran Khan's bilateral tour.

On 7 May, COAS Gen Bajwa discussed the regional security and Afghan peace process with the Saudi Arabian Crown Prince Mohammad bin Salman and Deputy Defence Minister Prince Salman bin Abdulaziz Al-Saud.

On 7 May, Prime Minister Imran Khan and foreign minister Shah Qureshi, Interior Minister Sheikh Rashid, and other officials arrived in Jeddah. Both sides agreed to form a 'Supreme Coordination Council' that would streamline their political, economic, cultural and social, and security relationships. Saudi Arabia also committed to providing USD 500 million for the development of infrastructure, water resources and hydropower in Pakistan. An agreement on the transfer of convicted individuals was also signed that would allow hundreds of Pakistani prisoners languishing in Saudi jail to return to Pakistan.

What is the background?
First, the reset in bilateral ties. The "brotherly relations" between the two countries in recent times had hit a rough patch after FM Qureshi demanded Riyadh to call a special meeting of OIC to discuss the Kashmir issue. The criticism did not go well with Riyadh, and they recalled for the repayment of a USD one billion loan. The recent visit is a signal towards reconciliation.

Second, the changing strategic scenarios in the region and Riyadh's foreign policy reset. The US troops are pulling out of the region, the Biden administration is reviewing its policy towards Riyadh, Iran-US talks have resumed, there is pressure on Riyadh to end the Yemen war. A reset is also emerging in Riyadh with a signal to cool down its relationship with Iran.

What does it mean?
The bilateral reset comes amid Pakistan's economic woes and changing geopolitical scenario in the region. Gen Bajwa's visit ahead of the Prime Minister and his meeting with Crown Prince signals the importance of military diplomacy and defence cooperation to Saudi Arabia.

Second, Pakistan and Saudi Arabia share the same security concerns in Afghanistan. Both countries have had good relations with the Taliban; however, in recent years Taliban has diversified its relations with other countries, particularly Iran and Qatar. Though Pakistan, too is improving its relations with Iran, both Islamabad and Riyadh would not want the increased influence of Tehran in Kabul.

Third, the discussion on India-Pakistan rapprochement and Saudi-Iran peace talks could have been on the agenda. For Saudi Arabia, India is an important economic partner, whereas, Pakistan-Iran relations have also improved in past one year. In addition to that, a possible discussion on Israel could also have taken place, as there have been reports of Pakistan wanting to open a diplomatic channel with them.
For geopolitical shifts taking place in the region, the recent visit signals that Pakistan and Saudi are committed to each other, and their relationship remains strong.


Imran Khan criticize the Foreign Ministry for "indifferent attitude" 
What happened?
On 5 May, Imran Khan came down heavily on Pakistan's foreign ministry. In an online meeting with Pakistan's diplomats stationed across the world, he criticized them for on Wednesday expressed his displeasure over an "indifferent attitude and unnecessary delays in routine services."

Pakistan's missions in the Middle East was a particular focus of his criticism. He said: "Feedback that I have received from Saudi Arabia shows as if the staff is not working. The staff in Kuwait's NADRA office take bribes instead of guiding people and an official is involved in making wrong documents... I was shocked to learn all this." In particular, he wanted the missions to provide better service to the citizens of Pakistan living abroad, and sending crucial remittances to the country. According to Imran, "They spend hefty amount but there is a lack of compassion from (the foreign ministry's) end."

What is the background?
First, the recent crisis of Pakistan's embassy staff in Saudi Arabia as a trigger. During late April, seven officials, including the Ambassador posted at the Pakistan embassy in Saudi Arabia, were recalled on "complaints of demanding bribes from the Pakistani expatriates" (The Express Tribune, 30 April 2021).  An inquiry has been ordered. According to the Foreign Office spokesperson Zahid Hafeez Chaudhri: "The Government of Pakistan attaches high importance to the welfare of overseas Pakistanis. The Overseas Pakistanis are our greatest asset. Their role in national development is indispensable..There is zero tolerance, whatsoever, for any lapse in the public service delivery." The problem should have started there; Imran's outburst should have been based on what happened in Pakistan embassy in Saudi Arabia.

Second, the sentiment that the foreign office is casual in its approach towards the commoner. According to an editorial in the Express Tribune, "Ask any Pakistani abroad about their interactions with embassy staff, and the answer will be a horror story. Yes, there are rare exceptions, but even in these cases, a disproportionate number of people who did not go through hell also have instantly recognizable last names or crushingly heavy pockets." An independent analysis in the Daily Times says: "While the symptoms may be becoming more obvious now, the fact is that the malaise is not new at all. Deterioration at the Foreign Office has been evident for a while, only the reverses are piling up now, and even the trained penmanship of the diplomatic mandarins cannot put a positive spin to everything going on."

Third, the importance of diaspora, especially in the Middle East and the significance of remittances. Imran Khan stated this: "Today, if Pakistan is not on the verge of bankruptcy, it is due to the remittances sent by overseas Pakistanis...Overseas Pakistanis are our asset and any negligence to serve them is unacceptable." In Imran's words, ""I remember some ambassadors used to have a really bad attitude with the labour community, like masters would deal their [subjects] in the colonial days…We cannot continue like this. The way our embassies are running, this could work in an old colonial system but not in today's Pakistan. Embassies' foremost work is to service the diaspora and then they should work to bring investment into the country that is going through very bad financial conditions right now."

What does it mean?
First the emphasis on Pakistan's working class, especially in the Middle East, and the importance of the remittances they bring. Imran Khan's anger seem to be based on immediate cause, related to what had happened earlier in Saudi Arabia. Second, the focus on immediate cause mean, he is less likely to address the larger systemic issues facing the foreign ministry. Responding to Imran's outbursts, retired diplomats did highlight the larger structural issues facing the foreign ministry, including independence, politicization, merit, funding and the workforce.


Economy: Trade deficit expands further
What happened?
On 5 May, data released by the Pakistan Bureau of Statistics (PBS) showed that the trade deficit of Pakistan had reached USD 23.8 billion in the initial ten months from July to April of the current fiscal year. The government had aimed at keeping the trade deficit for the current fiscal year to USD 19.7 billion. There is an increase of 21.6 per cent as the trade deficit was higher by USD 3.9 billion for the same period in the previous fiscal year.

A surge of 13.5 per cent was seen in the export numbers of Pakistan for the July-April period of FY21 in comparison to the same period in FY20, which stood at USD 20.9 billion.
Imports have also gone up by 17.7 per cent to USD 44.7 billion in the current fiscal year as compared to the previous year where it stood at USD 38 billion. The target of the annual imports was set at USD 42.4 billion which has already been exceeded with two months still left in the current fiscal year.

What is the background?
First, the decline in exports. Pakistan has primarily relied on textiles as its main export commodity. The export of cotton yarn, cloth and value-added textiles contribute to 60 per cent of the total exports from Pakistan. However, it has been seen that there is a decline in export of group 52 cotton, which accounts for 12 per cent of the total exports. The export of other items, the majority of them coming from the agricultural sector, has also taken a hit in the last few years where a decrease in exports of as high as 22 per cent is observed.

Second, the impact of Covid-19 on trade. The pandemic has had a devastating impact on the profits earned by the exporters. Due to the increase in the Sea Freight charges by up to 700 per cent, the margins in profit of industries like cotton have gone down drastically. In addition to that, export-oriented industries are facing several issues such as a decrease in demands, disruptions in the supply chain, cancellation of the export orders, shortage of raw materials and transportation disruptions. Also, there is an increase in the imports of antibiotics and vaccines, which are essential to cope-up with the pandemic situation.

What does it mean?
The recent press conference of Pakistan's newly sworn-in Finance Minister signalled that the government would be looking at policies for economic growth in contrast to the earlier policies, which mainly focussed on stabilization. However, he failed to mention the government's plan in the next few years to address the question of trade deficit. The trade deficit could reach a sustainable level only when serious efforts are made to increase the export base in dollar terms. Unless and until some cuts are made in the non-essential consumer imports, the trade deficit would continue to increase.

Due to the violence exhibited by TLP on blasphemy issues, Pakistan is also at the risk of losing its GSP plus status, which enables it to get trade concessions from the EU. Therefore, this could further aggravate Pakistan's worries.  

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