Does Pakistan Qualify as "Too Big to Fail"?

The phrase "too big to fail" has gained currency in the United States to describe large and troubled financial institutions since the beginning of the banking crisis last year. The characteristics of such institutions include their large size and huge impact on the rest of the US banking system and the global economy at large.

Seen in the context of regional and global geopolitics, are there any parallels between the the large US banks and the Pakistani state? Let's examine this proposition in a little more depth.

Large Size:

In terms of its size, Pakistan is one of the largest countries in the world. With population exceeding 170 million, it is one of only eight nations armed with nuclear weapons. The nation ranks as sixth largest in population, seventh largest in its army size, 8th in number of mobile phone users, 10th in educated English speaking population, 10th in labor force size, 17th largest in number of Internet users, 26th in economy and 34th in land area.

Strategic Location:

Pakistan sits at the entrance to the oil rich Persian Gulf, and it shares borders with Afghanistan, Iran and the world's most population nuclear states of China and India. Pakistan's Gwadar port is only 180 nautical miles from the exit of the Straits of Hormuz, considered extremely important for the flow of the bulk of world's demand for oil transportation from the Gulf nations. It provides convenient access to sea routes for many of the landlocked mineral-rich Central Asian states and Western China.

Pakistan has a 650-mile long coastline on the Arabian Sea, extending from India to Iran. In addition, some of the air routes between west and east pass through Pakistan because of its central location. Karachi and Gawadar have natural harbor ports serving as trading and re-fueling stop for ships.

Major Failures:

Not unlike the troubled US banks facing the prospect of certain failure, Pakistan also shows up at number 10 on the failed state index compiled by Fund for Peace and Foreign Policy magazine in 2008. However, in spite of the disastrous political leadership and extremely poor governance, the country’s saving grace is arguably its people. As the consequences sink in among Pakistan’s secular elite of the rising Taliban, there are signs that the country’s educated middle class – in Islamabad, Lahore and Karachi, cities rocked recently by continuing terrorist attacks – is losing its patience with radicalism. The urban middle class has more clout than many analysts think. It constitutes the backbone of the army, the business and professional classes and the opinion makers in the media. And the middle class is getting serious about its responsibility. They have now compelled the government into taking more decisive action.

Anger and Distrust:

Just like the US bankers who are getting bailed out at US taxpayers' expense, Pakistanis do not trust Uncle Sam, either. But, in spite of the widespread and deep distrust of the United States, the latest polls now indicate that 86 percent of Pakistanis agree that Taliban and Al-Qaeda militants pose a problem for Pakistan and more than two-thirds support a recent Pakistani army offensive against the extremists. Just as many US taxpayers are unhappy with the massive bailout of the US financial services, there is popular opposition to bailing out many troubled nations around the world. Just as people say that US bankers should have to pay for their own failures, there is a strong feeling that nations who have misbehaved should be made to pay for their mistakes.

Consequences of Failure:

The fear of contagion triggering national and global economic collapse was the chief reason why the US acted swiftly and decisively to prop up the failing financial institutions on Wall Street last year. The same "contagion" logic applies to Pakistan's potential failure which can lead to catastrophic consequences for Asia, the Middle East and the rest of the world, and seriously hurt American economy and strategic interests. If a nuclear-armed nation of 170 million people with a large military falls, then the millions of Pakistanis armed and trained to fight could spread out into the neighboring nations and beyond. This could be highly destabilizing and extremely dangerous for the global peace and prosperity.

Rewards of Success:

If Pakistanis, Americans, Europeans and the world make a commitment and do succeed in helping to bring peace and stability to Pakistan, then there can be an expectation of a significant upside for all. A peaceful, stable, and prosperous Pakistan has a lot to offer in terms of a large, well-educated, English speaking work force, a huge market opportunity for all sorts of products and services, and tremendous potential for global economic growth.

There is no guarantee of success if the world does make a serious commitment and starts making a long term investment in helping Pakistan, but failure is definitely not an option.

Here are two video clips about Pakistan:





Related Links:

Pakistan's Foreign Visitors Pleasantly Surprised

Start-ups Drive a Boom in Pakistan

Pakistan Conducting Research in Antarctica

Pakistan's Multi-billion Dollar IT Industry

Pakistan's Telecom Boom

ITU Internet Data

NEDUET Progress Report 2008

Pakistani Entrepreneurs in Silicon Valley

Musharraf's Economic Legacy

Should Pakistanis be Proud of Their Country?

Pakistan's International Rankings

Assessing Pakistan Army Capabilities

Pakistanis See US as Biggest Threat

Pakistan is not Falling

Fear, Greed and Bailout on Wall Street

Jinnah's Pakistan Booms Amidst Doom and Gloom

Comments

Riaz Haq said…
Here's Daily Times on China's Gwadar plans:

ISLAMABAD: Chinese investment in the Gwadar Port is purely economic, said Hu Xijin Editor-in-Chief of the Global Times on Wednesday. Speaking at a roundtable organised by the Institute of Regional Studies (IRS) on Pak-China relations with the editorial staff of Global Times he siad China would make all the necessary investments in the Port to make it fully operational to support Chinese trade with West Asia, especially the trade between western part of China and that part of the world. China considers Pakistan an important friendly neighboring country and Chinese investors want to invest in projects in Pakistan. Some Chinese investors are apprehensive about the security situation in Pakistan. He said China would keep supporting the reconstruction of Afghanistan post-2014. China does not want to undertake projects in any country that are opposed by the host communities. Responding to a question about the imbalance in trade of China with Pakistan, Hu said China was a free market economy where the government could not dictate to the companies to import products from other countries if they were not market competitive. Ashraf Azim President of IRS pointed out Indian concerns about the use of Gwadar Port, as a naval base was completely baseless.

http://www.dailytimes.com.pk/default.asp?page=2013\02\21\story_21-2-2013_pg5_13
Riaz Haq said…
Here's an excerpt of a Time story about Holbrook's deputy Vali Nasr's latest book on US-Pak ties:

...Sitting with Holbrooke was Vali Nasr, then his senior adviser. Nasr recalls the episode in his new book, The Dispensable Nation: American Foreign Policy in Retreat, a searing critique of how the Obama Administration has been too timid to transform American foreign policy. Holbrooke, writes Nasr, was troubled by Zardari’s display of dependence on the U.S. and the sense of entitlement that went with it. “Holbrooke didn’t like the image of Pakistan holding a gun to its own head as it shook down America for aid,” writes Nasr, now dean of the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University.

Holbrooke did agree, however, with Zardari that Pakistan was important and the U.S. had a long-term interest in its stability. For the next year and a half, Holbrooke and his team pursued a policy of diplomatic engagement with Pakistan. It went beyond the traditional approach narrowly based on security concerns. The idea was to try and address Pakistan’s strategic calculus — an ambitious target that may have underestimated how far Pakistan was willing to go without changing its ways. “What Holbrooke wanted,” Nasr tells TIME in an interview, “was to engage big and try and change the course of this country and its relationship with Washington once and for all.”

But from the very start, President Barack Obama and the White House never really bought into the idea. “The White House tolerated Holbrooke’s approach for a while,” Nasr writes in the book, “but in the end decided that a policy of coercion and confrontation would better achieve our goals in Pakistan.” Washington was less interested in working with Pakistan, Nasr says, than pressuring it into compliance. That strategy, he says, has failed. And now, he warns, the U.S. risks pivoting away from the region at the cost of abandoning vital interests that remain there.

“When you look at Pakistan today,” says Nasr, “it is nuclear-armed, in near conflict with India, has a dangerous civil war with its own extremists, is now subject to one of the most brutal terrorism campaigns against its population, that is now coming apart along sectarian lines.” If the U.S. does not maintain influence in Pakistan, he says, it won’t be able to have a positive impact on the direction of the country. “Looking at it from an American perspective,” Nasr says, “we’re just going to be basically saying, ‘We’re going to sit on the sideline and look at this roller coaster go off this rail.’”
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But the Obama Administration didn’t have the patience to stick with it. As Nasr acknowledges, there was a rival school of thought that said, “It was too difficult, too time-consuming and wouldn’t work anyway.” When Holbrooke died, their view won out. Nasr resigned from the State Department soon after. In 2011, three major incidents brought the relationship crashing to its lowest-point ever: a CIA contractor, Raymond Davis, allegedly killed two people in Lahore; U.S. Navy Seals carried out a raid to get Osama bin Laden without informing the Pakistanis; and toward the end of the year, 26 Pakistani troops were killed in a cross-border incident.
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The CIA and the Pentagon saw the benefits of the cooperation, Nasr notes in his book. But at the same time, he writes, they applied constant pressure that “threatened to break up the relationship.” At one point, Holbrooke turned to him, shaking his head, and said: “Watch them [the CIA] ruin this relationship. And when it is ruined, they are going to say, ‘We told you, You can’t work with Pakistan!’ We never learn.”


http://world.time.com/2013/04/14/losing-pakistan-an-insiders-look-at-how-the-u-s-deals-with-its-ally/
Riaz Haq said…
As of 2012, the World Bank data shows Pakistan's PPP GDP is $518 billion.

The World Bank data also shows that Pakistan's economy is now the 23rd largest in the world in terms of PPP, up from 26th largest in 2008.

http://data.worldbank.org/indicator/NY.GDP.MKTP.PP.CD/countries/order%3Dwbapi_data_value_2012%20wbapi_data_value%20wbapi_data_value-last?order=wbapi_data_value_2012%20wbapi_data_value%20wbapi_data_value-last&sort=desc&display=default

http://www.riazhaq.com/2009/11/is-pakistan-too-big-to-fail.html
Riaz Haq said…
Kevin Hulbert, a former CIA station chief in Islamabad, warned that the "failure" of Pakistan would have implications for the world.
Pakistan is like the bank that is "too big to fail", or "too big to allow to fail" more appropriately, because allowing the bank to fail could have catastrophic impacts on the greater economy, Hulbert wrote in the Cipher Brief - a website for the intelligence community.
"We have big problems in Afghanistan+ with its population of 33 million people, but Pakistan has about 182 million inhabitants, over five times the size of Afghanistan," he said.
"With a failing economy, rampant terrorism, the fastest growing nuclear arsenal, the sixth largest population, and one of the highest birthrates in the world, Pakistan is of grave concern," Hulbert said.
"In the end, while Pakistan is not the most dangerous country in the world, it probably is the most dangerous country for the world. There seem few levers to pull in Pakistan today, but if we pursue a strategy of containment or disengagement, things will only get worse," he said.
The US and the IMF have given billions of dollars in financial assistance because the specter of Pakistan collapsing presents US President with more nightmare scenarios than probably any other country in the world, he said.
"So, we keep throwing money at it, trying to steer them towards good behavior, and with only limited success. But, we must keep trying," he added.
In Afghanistan, Hulbert said the only real mission today is to stop the country from falling to the Taliban and to prevent Afghanistan from becoming a safe haven for terrorists who might plan attacks against the West

"Meanwhile, if we stay, the death toll for the US continues as the casualties dribble in," he said

http://timesofindia.indiatimes.com/world/pakistan/pakistan-most-dangerous-country-for-world-former-cia-official/articleshow/57185685.cms

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