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Pakistan in great need of financing, economic policy measures

Fully participation of chambers of commerce leads to success of economic diplomacy

Interview with Dr. Ayub Mehar – an economist

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Dr. Ayub Mehar is currently serving as Professor at Iqra University and is also associated as economist with the Gerson Lehrman Group, Austin USA (Political Upheaval and Global Competitiveness project for World Economic Forum). Before this, he has been working at various responsible positions in industry and academic institutions in Pakistan. He has served Federation of Pakistan Chambers of Commerce and Industry (FPCCI) as Director General (R&D) for 6 years and Economic Advisor in Economic Cooperation (ECO) Chamber of Commerce and Industry. He is alumni member of the International Academy of Leadership (IAF) Gummersbach Germany, where he did training courses in New Public Management including Political Administration and Public Finance. In recognition of his expertise, the Technology Policy and Assessment Center at Georgia Institute of Technology acknowledged its membership in the distinguished panel of international experts for Indicators of Technology-based Competitiveness Project (supported by the US National Science Foundation, United States Government). He has also been member of various committees, think tanks and working groups including Cotton Crop Assessment Committee (Government of Pakistan), Working Group on Balance of Payment for MTDF 2010-15 (Planning Commission), Independent Economist for MTDF 2005-10 (Planning Commission), Task Force on Taxation Reforms (CBR/ FBR), USAID Empowering Pakistan Project, USAID Business Support Fund, UNDP SSGATE Program, and the Private Sector Credit Allocation Committee (State Bank of Pakistan). In 2005, he was appointed as Independent Economist/ Consultant to write the draft chapter and evaluate the Monetary and Financial Sector of Pakistan economy for the Medium Term Development Framework (Five Year Plan) 2005-10.

PAKISTAN & GULF ECONOMIST had an exclusive conversation with Dr. Ayub Meharon economy. The excerpts of the conversation are as follows:

One of the major reasons of deterioration in Pakistan economy is its inactive economic and trade diplomacy, which is an integral part of the foreign policy. Effectiveness of economic diplomacy can be measured by various indicators including significant inflow of foreign direct investment, enhancement of exports, foreign remittances, the number of workers at abroad, arrival of the foreign delegates and visitors in the country, and the number of joint ventures, mergers and acquisitions with foreign affiliates.

A successful economic diplomacy improves not only economic relations, it enhances also the magnitudes of incoming and outgoing professionals, students, tourists, sportsmen, and even NGO workers. Two alternative hypothesis have widely been debated in public forums in recent past: (1) Pakistan’s foreign policy is formulated and operated by its military establishment; or (2) It is formulated and operated by civil governments. However, a third option was completely ignored by the discussants in public forums. This third option belongs to the role of private sector in international relations and economic diplomacy. Only the government and public sector agencies are not responsible for the failure of economic diplomacy. In today’s contemporary world the economic progress and development of nations depend on the capacity and wisdom of the private sector. The economic remapping and new alliances in contemporary world are entirely based on the strength and linkages of private sectors of the partner countries. This trend has changed the role of national chambers and trade associations in contemporary world. Now, it is a common phenomenon all over the world that the leading national chambers play an influential role in the success of economic diplomacy and victory in global economic wars.

By virtue of their broader jurisdiction and structural association with the local chambers and trade associations, the national chambers of commerce represent the business sector of their countries in the regional and international chambers of commerce. Flow of foreign investment, collaboration and joint ventures among world leading business groups, integration of financial institutions, relocation of the production activities of gigantic transnational corporations, migration of workers, brain drain of experts, mergers and acquisition of foreign companies, imports and exports of goods and services, set up of foreign offices and business outlets, transfer of entrepreneurships and participation in planning of international businesses are including in those activities of private sector which establish the strong and sustainable linkages among the countries.

The responsibility of economic diplomacy and development is now largely been shifted from governments to private sector institutions. Such relations and development determine the ultimate political relations and alliances. One of the important trend related to this contemporary requirement is the increasing number of regional and international chambers of commerce and trade associations. Even sometimes governments encourage the formation of bilateral and multilateral chambers of commerce. Such regional trade associations promote the economic diplomacy.

United Nations Economic and Social Council (ECOSEC), International Chamber of Commerce (ICC), Common Wealth Enterprise and Investment Council (CWEIC), World Chambers Federation, Confederation of Asia Pacific Chambers of Commerce and Industry (CACCI), D-8 Chamber of Commerce and Industry, Islamic Chamber of Commerce, Industry and Agriculture (ICCIA), SAARC Chamber of Commerce and Industry (SAARC-CCI) and the ECO Chamber of Commerce and Industry (ECO-CCI) are included in those regional/international chambers, which have been formed with the supports of concerned government. It has become a global trend to utilize the strength and capacity of such private sector representative bodies for economic and political diplomacy. Unfortunately, the national chamber of Pakistan FPCCI is not playing its role in improving the economic and trade diplomacy and it is painful to mention that the role of FPCCI in economic diplomacy has been totally removed. Gradually FPCCI has withdrawn itself from the participation in international organizations. It does not participate in the programs and meetings of World Economic Forum, while the active and leading participation of the national chambers of the neighboring countries can be observed every year.

FPCCI does not participate in WTO meetings on trade negotiations and its one of the consequence was the permission of agriculture subsidies to the neighboring country which badly damaged the competitiveness of Pakistani products in international markets. FPCCI had decided to keep itself isolate from Common Wealth Organization, International Chamber of Commerce, and other such important organizations. Consequently, Pakistan has failed to raise its voice at the international platforms and advocating its economic policies at international level. In the absence of FPCCI, its counterpart in India has become the leader of those powerful international organizations, while FPCCI has failed even to establish it offices at abroad. Though FPCCI has established a department of International Relations, but the role of this department was limited to events management and providing logistic facilities to foreign delegates or to facilitate office bearers for their foreign trips. The role of this institution is limited to events management and providing the logistic facilitation, while its counterpart in India (Federation of Indian Chambers of Commerce and Industry – FICCI) has played a significant role in the success of Indian Foreign Policy. FICCI participated its role in Indian foreign policy through its significant intellectual contribution. Its International Relations Department has published more than 100 reports/surveys in 2015 and 2016. Some of those are: ‘India – Israel Economic Partnership’, ‘Kazakh-India Relation on the Rise, ‘India-Russia-Iran Transport Corridor’, Background Paper – India-USA, Leveraging Synergies’, ‘Direct investments in the US by Indian Enterprises’, ‘India-Turkey Trade and Economic Relations: Prospects for the Future’, ‘The Impact of Political and Social Instability in Egypt on Indian Trade and Investment’, ‘Compilation of Various International Acts & Laws for Direct Selling Industry’, ‘Creating Synergies and Erasing Boundaries’, ‘The Rising Africa’, ‘Trends in Gulf Demographics and Labor Migration (focus on Bahrain)’, ‘The South Asian Century: Progressing Towards Regional Integration – A Study’, and ‘Understanding the Regulatory Landscape for Mergers and Acquisitions in India & Germany’. These are the themes which have been initiated, analyzed and recommended by FICCI. Now Indian government is following these ideas. The topics of these reports depict the entire mechanism and trend of Indian foreign policy. The office administration and logistic support which is the only core area in FPCCI is not considered even a functional department in FICCI.

The International Relations Department in FICCI is divided into 11 desks namely, Economic Diplomacy, Multilateral Investment Policy and Strategy, Diaspora Engagements, Africa desk, Arab Israel desk, ASEAN & Pacific desk, CIS desk, East Asia desk, Europe desk, Latin America & Caribbean desk, and North America desk. Each desk is divided into four sections: (a) Focus countries data bank, (b) Events (Past follow up and Future Arrangements), (c) Publications of Studies, Reports and Surveys, and (d) Special projects.

The role of FPCCI in this scenario is questionable, though some office bearers have shown remarkable progress by significant contribution in their individual capacity. After a long time the serious efforts to revive its role in economic progress and policies have been initiated in 2013 when the then top management has decided to focus on playing an active and leading role in boosting the economic diplomacy of Pakistan through private sector. At that time FPCCI has participated in various international forums to oppose the Indian move in WTO for permission of subsidies on agricultural products. FPCCI has opposed this move and shown its concern that it is against the philosophy of free trade and will affect the competitiveness and share of the developing countries in international trade. FPCCI has shown serious apprehension that the exports of rice, textile and clothing products, sugar, fruits, vegetables, tobacco and cigarettes will be affected by Indian policy. Later on this apprehension was verified by declining exports from Pakistan.

The role of FPCCI in international economic diplomacy has become more important in 2014 when the presidency of ECO CCI was handed over to Pakistan. FPCCI has played an effective and leading role in revamping of the Economic Cooperation Organization (ECO) and D8 CCI in 2015. The year 2016 was an important year in the history of FPCCI when extremely important steps have been taken in the international economic diplomacy. The main focus was on the ‘Common Wealth Organization’, ‘European Union’, ‘Islamic Chamber of Commerce, Industry and Agriculture (ICCIA)’, ‘Shanghai Corporation’ ‘Silk Route Chamber’, ‘Gulf Council’ and D8 CCI.

However, these efforts were not sustainable because of the lack of institutionalization. It is a common phenomenon that change of office bearers modifies the priorities and activities in FPCCI. After the fall of Soviet Union a new cold war between the countries which share the bloody boarders and deep rooted historical disputes has been evolved. And it is a known fact that cold war is not fought between the armed forces in battlefields. In cold war, nations fight in the every field of life: literature, media, education, health, social lives, religion, scientific development, technological advancement, infrastructure development, diplomacy and most importantly economics. The failure of economic diplomacy can lead the failure in other fields also. Any compromise is not affordable and the ignorance should be treated as criminal negligence.

The sociopolitical changes and economic development of nations in today’s world are closely related with their integration with the global environment and policies. Who derives the global policies and determines the global environment? The roles of political leadership, secret services agencies, scientists, innovators, philosophers, large transnational corporations, monetary and financial institutions, big investors, and funds’ managers are considered as the instigators of global changes. Now, the role of trade associations, chambers of commerce, large corporations and the business conglomerates as catalyst of development and world economic remapping is emerging as an important area of research.

 

The trade organizations are commonly known as ‘Chambers of Commerce’ and work in local, national, regional and international tiers. The cold war regime in 20th century had divided the world into two segments: First part led by USA was the representative of capitalist’ societies. Western Europe, Canada, Australia, New Zealand and Japan were included in this part. While the second world was the representative of socialist countries led by Soviet Union, China, North Korea. This bipolar segmentation was based purely on economic ideology, where religion, culture and racial identities have played a little role. The surprising aspect of this division was the disappearance of classical (supply side) school of thought in economic policies, where Keynesian approach (demand management policies) has played a leading role in economic development and planning of capitalist countries during the bipolar regime. Keynesian approach allows government intervention and influence on private sector through monetary and fiscal policies. This approach invites the intervention in business sector by monetary and fiscal policies. The provision of subsidies, tax exemptions, transfer payments, determination of exchange rates, and managing the interest rates are the common tools of demand management policies.

Fall of Soviet Union in late 20th century led the emergence of world economies and a new era of economic transformation was originated. In fact, it was the rebirth of classical (supply side policies) school of thought in New Economic Order (NEO).The emergence of NEO Classical regime in late 20th and early 21st century has moved the focus of policy makers to efficient allocation of resources, development of infrastructure, creating competitiveness, improving governance and institutional development.

World Trade Organization (WTO) and World Economic Forum (WEF) are the flagship institutions of NEO regime, while the demand management representative institutions like World Bank and International Monetary Fund (IMF) are now tuning up their approaches according to the contemporary trends. The journey of NEO classical thoughts from denationalization to globalization has been passed through the stages of Denationalization, Privatization, Deregulations, Liberalization, and New Public Management including Lean government, Lean administration, and Decentralization. The NEO Classical approach does not allow government intervention in economic mechanism. It advocates the economic freedom, deregulations, cross boarder movement of goods and services, individual liberty, and free market mechanism. It believes in the ‘invisible hand’ of market mechanism. So, the role of governments in trade policies, trade negotiations and economic diplomacies is rapidly disappearing.

In the present regime of free trade and globalization, the role of the chambers has further been extended by introducing two important slogans: “World peace through world trade,” and “More business in government and less government in business.”Trade Bodies in Demand Management Regime have been playing their role as collective bargaining agents of business community, proposers of commercial subsidies and tax exemptions, the advocates of low interest rates, and the associates of political marketing and trade diplomacy. Now, in ‘New Economic Order’, they have become partners in supply side policies, catalyst for capacity building, and proactive leaders in overall socioeconomic development.

In present regime of globalization and free trade practices the role of trade bodies has been completely changed and enhanced. Now, it has become a worldwide practice that national trade associations actively participate in the economic policies’ formulation and they play their effective role in economic development and progress. Their role belongs mainly to supply side policies, which cover to doing ease business, achieving competitiveness, facilitation for investment and trade and the planning for sustainable development.

They have been considered as the most important and effective organ of the economic and also political diplomacy. How the chambers of commerce control and determine the global policies it is described by George Ridgeway who is a notable author in institutional economics. In his book, ‘Merchant of Peace – The History of the International Chamber of Commerce’, he discussed the nexus of the UNO, International Chamber of Commerce and the US National Chamber of Commerce. In his opinion, the United Nations Organization could be used to gain governments’ compliance with the chamber’s plans for a unified, controlled world economy. How can the United Nations be used to increase chambers of commerce power and help the chamber throw its blanket over other activities?

The United Nations do it through its ‘Economic and Social Council (ECOSOC)’. The Council (ECOSOC) is one of the six major organs of the United Nation Organization (UNO) and placed beside the Security Council. The International Chamber of Commerce was granted general consultative status with the United Nations Economic and Social Council (ECOSOC) and UN Observer Status. ICC supports the work of the United Nations (UNO), the World Trade Organization (WTO), and many other intergovernmental bodies, both international and regional, such as G20 on behalf of international business. It is notable that the US Chamber of Commerce is older than UNO and it is the promoter of the International Chamber of Commerce. When the United Nations was set up, the Economic and Social Council (ECOSOC) opened the way for the chambers to have direct and continuous influence upon international affairs, even though it was a non-governmental organization.

George Ridgeway has mentioned in his Merchants of Peace: “The important thing about the Economic and Social Council was that it made provision to include representatives from non-governmental organizations in its discussions. The International Chamber of Commerce was immediately included as one of the most important advisory organizations. The large charitable institutions (particularly, Carnegie Foundation for International Peace and the Rockefeller Foundation), large banks and financial institutions, international corporations (particularly, IBM), universities (particularly, Harvard and Columbia) and the leading economists and sociologists favored the chamber’s association with the ECOSOC.

Now, the national chambers of commerce and industry from all over the world are associated with the ECOSEC — directly or indirectly, with deliberation or without deliberation. By this way, they get direction from the International Chamber of Commerce, which has special recognition at the United Nations. Surprisingly, the majority of the office bearers of the local and national chambers do not know this.

Majority of those office bearers represent some geographical or industrial segments and they want to help their community. In this context it is noteworthy that the United Nations is not an open forum for discussion on public matters. It is not a think tank. It is a goal oriented decision making body which is dedicated to accomplishing the purpose for which it was founded.

The role and modalities of the US Chamber of Commerce is another example to explain the powers of the chambers in determination of socio-political and economic trends.

The US Chamber of Commerce represents more than 3 million businesses, nearly 3,000 state and local chambers, 830 associations, and over 90 American Chambers of Commerce abroad. It is noteworthy that the aim of the chamber is not limited to the extent of the protection of business and economic interests of the member organizations, the US Chamber describes its role as “to advance human progress through an economic, political and social system based on individual freedom, incentive, initiative, opportunity, and responsibility.” This aim determines a global role of the United States Chamber of Commerce. The Chamber is staffed with policy specialists, lobbyists and lawyers. To accomplish its objective, the USCC involves in all policy matters related with the global economic, social and political systems.

To achieve the global agenda, its penetration in the US government and UNO is quite natural. Other than international trade and fiscal policies, the US Chamber of Commerce has aggressively been contributed in developing of the concepts of globalization, free trade, naked short selling, corporate governance, counterfeiting and piracy, energy source diversity, offshore oil drilling, and health savings accounts etc. It actively participate in formulation of the policies regarding homeland security and defense issues, immigration reforms, social security reforms, nuclear power, education and workforce training, energy, environment, and health care etc.

Though, some statesmen in the United States are not happy with the broader role and power of the US Chamber of Commerce. For example, Betty Freauf – a Republican Party activist – has aggressively shown his concern in his famous article, “Is the Chamber of Commerce a UN front?” He indicated that world is being restructured by the Chamber of Commerce. According to him, most people, including Chamber of Commerce members, would be astonished to learn the extent of power that organization exerts over international, national, state and local policies. With the exception of a few leaders at the top, most members never learn about the inner sanctum of the Chamber, which appears to think locally, but actually act globally.

Erica Carle is another notable researcher and writer on the role of trade associations. She presented an unbelievable picture of the role of chambers of commerce in her article, “The Chamber of Commerce; Its power and Goals”. She mentioned that, “it is common knowledge that the Chamber has lobbyists in Washington and state legislatures, and that it is active in local communities. These activities are no secret. They can be noticed by the casual observer, and are expected by members. But there is a great deal more which must be understood in order to gain a concept of the real power of the Chamber of Commerce — not only over commerce, education, religion, technology, industry, agriculture, transportation, medicine, communication, labor and government.

To understand this power we have to look beyond the local communities to the Chamber’s national and international activities, and to Chamber ties with other organizations, both governmental and non-governmental”. Like the Unites States Chambers of Commerce, the other national and regional chambers are aimed to participate in policymaking and economic governance in the globally integrated economies. More or less all the national chambers of commerce participate in the international economic policy dialogues.

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