Perhaps carried away by the exuberance of the moment or under the influence of the views of the Indo-US lobby, Prime Minister Imran Khan, at the groundbreaking ceremony of the Kartarpur corridor, asked with reference to India, “If France and Germany can move ahead while making (economic) union, why can’t we?” The question, which was obviously based on the assumption of the desirability of a Pakistan-India economic union, reflected woeful ignorance of the rationale, necessary preconditions, dynamics, and the economic and political consequences of regional economic integration. Regrettably it overlooks the likelihood that the Pakistan-India economic union will lead to the domination of the Pakistan economy by India, the loss of Pakistan’s economic and, in due course, political sovereignty, deindustrialisation of Pakistan, and the establishment of the Indian hegemony over Pakistan which has been New Delhi’s main strategic goal all along.

I have discussed the issue of regional economic integration in South Asia in detail in my book, “Pakistan and a World in Disorder---A Grand Strategy for the Twenty-First Century”, which was published by Palgrave Macmillan from New York in 2016. While regional cooperation per se is desirable, it is a mistake to assume that any regional association of states or any program of regional economic cooperation can evolve successfully on the lines of the European Union. In fact, the challenges and the potential of regional economic organisations vary according to their economic circumstances, cultural and historical background, geographical location, intraregional political relations, world outlook, and vision of the future.

Undoubtedly, regional economic cooperation offers several benefits to the participating countries. Above all, free trade among the member states on the basis of comparative advantage leads to increase in their gross domestic product as a result of a more efficient allocation of resources to various sectors. Economies of large scale production because of the larger size of the market, created through regional economic cooperation, also lead to increased productivity and lower prices. Further, the larger market acts as a magnet for increased inflow of foreign direct investment and technology, thus adding to the productive capacity of the member states. From the political point of view, regional economic cooperation helps in strengthening peace and stability in the region by defusing tensions, discouraging confrontational policies, and building up linkages among the member states in various sectors.

However, the success of a regional economic organisation in evolving towards the goal of an economic union is not guaranteed in every case. An economic union requires the fulfilment of several prerequisites which may or may not be available in a particular region. To begin with, there must be a feeling of shared goals and aspirations for the future. The absence of such a feeling is likely to pull the member states in different directions politically, economically, and culturally making the complicated task of regional economic integration that much more difficult. Pakistan and India lack this community of interests. India is more interested in establishing its hegemony in the region than in promoting regional cooperation on an equitable basis. Further, while India looks at China as a rival in Asia, Pakistan considers it an important strategic partner. Pakistan also has legitimate security concerns vis-à-vis India which dismembered it in 1971.

Cultural affinities facilitate regional cooperation by promoting a feeling of common identity among the member states. It is a major factor for the success of EU as all of its current members trace their cultural roots to Greco-Roman-Christian civilization. It also explains EU’s reluctance to admit Turkey, a major Muslim country, into its fold. The absence of cultural affinities between Pakistan and India is a major obstacle in the establishment of an economic union between them. After all, the cultural divide between the Muslims, whose religion teaches human equality and brotherhood, and the Hindus, who believe in the oppressive caste system dividing them into impregnable classes and barring vertical mobility, was an important factor leading to the establishment of Pakistan. Growing Hindu extremism in India makes an economic union between Pakistan and India even more unfeasible.

Economic complementarities among the member states largely determine the benefits of regional cooperation. The greater the economic complementarities, the more would be the possibilities and benefits of regional economic cooperation. In the case of SAARC, including Pakistan and India, the economies of the member states in many cases are in competition with each other instead of being complementary. These factors restrict the possibilities of expanding intraregional trade in the SAARC region on a mutually beneficial basis.

Geographical proximity, absence of serious disputes, and nonexistence of hegemonic designs are other prerequisites for regional economic integration. In the case of Pakistan and India, Kashmir and other disputes are a strong barrier to the establishment of an economic union. Above all, India’s hegemonic designs block progress towards this objective. Hegemonic ambitions on the part of India have engendered disputes and generated tensions between it and Pakistan. As long as India maintains these hegemonic designs and as long as Pakistan resists them in the interest of safeguarding its sovereignty and territorial integrity, an economic union between Pakistan and India will remain elusive.

As the process of regional cooperation evolves from programs of cooperation in various economic fields to the establishment of a free trade area and then to the creation of a customs union leading to an economic union, the economies of the member states are gradually integrated resulting ultimately in the establishment of a single market, where goods, capital, and workers can move freely, and in the harmonisation of their economic and monetary policies. Further, in view of the close connection between economic issues, on the one hand, and political and security issues, on the other, progress towards economic integration also generates pressures for the coordination of foreign and security policies of member states. Both Pakistan and India are not ready for such harmoniaation of their policies for reasons given earlier.

In accordance with the principle of social and cumulative causation propounded by Swedish economist Gunnar Myrdal, economically advanced member states tend to benefit more from the process of economic integration. They also tend to dominate the decision making process in an economic union. In the case of an economic union between Pakistan and India or one within the framework of SAARC, decisions on major economic and political issues would be virtually dictated by India endangering Pakistan’s security and economic well-being.

The foregoing analysis answers the question posed by Imran Khan as to why Pakistan and India cannot form an economic union. Such an economic union would result in the gradual erosion of the economic and political sovereignty of Pakistan, the undermining of the rationale for the creation of Pakistan, the general weakening of Pakistan’s economy, deindustrialisation of Pakistan, and making it the supplier of raw materials to industries in India as was the case before the Partition. Decisions about Pakistan’s security and economic well-being would be taken in New Delhi rather than in Islamabad.

Ideally, Imran Khan should have asked the question, “Why Pakistan, Iran, Turkey, Afghanistan and Central Asian Republics cannot form an economic union within the framework of ECO?” because conditions within the ECO are similar to those within the European Union. In contrast, an economic union within SAARC or between Pakistan and India would be much more limited in its scope and even harmful from Pakistan’s point of view for the reasons given above. Even Pakistan-India trade must be carefully managed and promoted strictly on a level playing field with due regard to the health and progress of Pakistan’s economy.


The writer is an author, a retired ambassador and the president of the Lahore Council for World Affairs.