From Geo-Strategic to Geo-Economic: Pakistan’s Foreign Policy Pivot

Pakistan is increasingly shifting its foreign policy focus from traditional geo-
strategic priorities to a geo-economic approach centered on trade, investment,
and regional connectivity. For decades, Islamabad’s foreign relations were defined
largely by security alliances and military strategy; today, economic diplomacy and
development partnerships are taking precedence (Pakistan Army Chief Announces
India Policy Shift in Major Speech – The Diplomat). This pivot is reflected in
numerous initiatives and projects aimed at transforming Pakistan into a hub of
economic activity. Key areas of this shift include major economic corridors,
investment-friendly reforms, regional infrastructure projects, energy collaborations,
and engagement with global financial partners. Below is an overview of how
Pakistan’s policy is transitioning in these domains, backed by recent data, official
policies, and expert commentary.
Economic Corridors and Trade Agreements
One of the clearest signs of Pakistan’s geo-economic turn is the emphasis on
economic corridors and new trade agreements to integrate with regional
markets:
 China-Pakistan Economic Corridor (CPEC) – Launched in 2015 with an
initial portfolio of $46 billion, CPEC is the flagship project of Pakistan’s geo-
economic strategy (China-Pakistan Economic Corridor (CPEC) | Map, Progress,
Impact, & BRI | Britannica). It is upgrading Pakistan’s infrastructure –
modernizing road, rail, and energy networks – to boost trade and connectivity
with China and beyond (China-Pakistan Economic Corridor (CPEC) | Map,
Progress, Impact, & BRI | Britannica) (China-Pakistan Economic Corridor
(CPEC) | Map, Progress, Impact, & BRI | Britannica). CPEC’s goal is not only to
transform Pakistan’s domestic economy but also to connect Pakistan’s deep-
sea ports (Gwadar and Karachi) to Western China and landlocked Central Asia
by overland routes (China-Pakistan Economic Corridor (CPEC) | Map, Progress,
Impact, & BRI | Britannica). Several special economic zones (SEZs) are
being established under CPEC, offering tax breaks and incentives to
investors, to spur industrial growth and exports (China-Pakistan Economic
Corridor (CPEC) | Map, Progress, Impact, & BRI | Britannica). By the late
2010s, CPEC had delivered hundreds of miles of new highways and railways
and significantly increased Pakistan’s power generation capacity (China-
Pakistan Economic Corridor (CPEC) | Map, Progress, Impact, & BRI |
Britannica). This corridor exemplifies the shift to “win-win” economic
partnerships in lieu of purely strategic alliances.
 Central Asia Connectivity – “Vision Central Asia” – Pakistan has
launched a Vision Central Asia policy to deepen ties with Central Asian
republics through trade and transit links (Pakistan’s Strategic Outreach to
Central Asia: Strengthening Ties with Azerbaijan and Uzbekistan - Modern
Diplomacy). Leveraging its location at the crossroads of South and Central
Asia, Pakistan is signing agreements that give Central Asian states access to
Pakistani ports and vice versa. For example, the Pakistan-Uzbekistan
 Transit Trade Agreement allows Uzbekistan to use Karachi and Gwadar
ports, boosting bilateral commerce (Pakistan’s Vision Towards Central Asia –
OpEd – Eurasia Review). In 2024, Pakistan and Uzbekistan agreed on a
$1 billion trade deal, and bilateral trade has risen sharply (from about $300–
400 million, a 50–60% increase over four years) (Pakistan’s Vision Towards
Central Asia – OpEd – Eurasia Review). A major Trans-Afghan rail project
($4.8 billion) has been signed to connect Uzbekistan through Afghanistan to
Pakistan’s rail network, creating a 573 km rail corridor linking Central Asia to
the Arabian Sea (Pakistan’s Vision Towards Central Asia – OpEd – Eurasia
Review). Pakistan also signed a transit trade agreement with Kazakhstan,
underscoring its role as a facilitator for Central Asian exports via new land
routes (Pakistan’s Vision Towards Central Asia – OpEd – Eurasia Review).
These economic corridors with the north are meant to turn Pakistan into a
regional trade conduit rather than a security buffer. Pakistani officials note
that enhanced north-south connectivity will not only increase commerce but
also contribute to stability in Afghanistan – highlighting the link between
economic integration and peace () ().
 Middle East and ASEAN Trade Outreach – In parallel, Pakistan is
expanding economic ties west and east. With the Middle East, Pakistan’s
long-standing strategic relationships (e.g. with Saudi Arabia, the UAE, Turkey)
are now being complemented by robust trade and investment links. Gulf
states host millions of Pakistani workers (a source of remittances) and are
increasingly viewed as investment partners rather than just aid donors () ().
Pakistan has been actively courting Gulf investment in infrastructure, energy,
and agriculture (discussed further below), and has maintained strong trade in
textiles, food, and manpower with these countries. In South East Asia,
Pakistan has pursued closer ties with ASEAN economies as part of
diversifying its trade. It has signed bilateral trade agreements in the region –
for instance, Free Trade Agreements (FTAs) with Malaysia (2007) and Sri
Lanka (2005), and a Preferential Trade Agreement with Indonesia (2013) –
to tap into ASEAN markets. Islamabad is also exploring broader economic
engagement with ASEAN and Asia-Pacific forums as part of its “Look East”
policy. These efforts indicate a shift from Pakistan’s historical focus on
Western trading partners toward non-traditional markets in Asia and the
Middle East (Exploring non-traditional export markets: Pakistan and the
Central Asian Republics - Atlantic Council) (Exploring non-traditional export
markets: Pakistan and the Central Asian Republics - Atlantic Council). The
government’s own National Security Policy stresses widening Pakistan’s
export base to “non-traditional” markets and goods and building “win-
win relationships in trade and investment” across Central Asia, the Middle
East, and Africa () ().
In sum, Pakistan’s foreign policy now actively prioritizes economic corridors like
CPEC and new trade routes to integrate with neighboring regions. By positioning
itself as a “melting pot of global economic interests”, Pakistan hopes to
leverage its geostrategic location for geo-economic gains () – connecting South Asia
with Central Asia, China, the Middle East, and beyond through commerce and
transit.
Investment-Friendly Policies and FDI Attraction
To support this geo-economic pivot, Pakistan has introduced investment-friendly
policies aimed at improving its business climate and attracting foreign direct
investment (FDI). Key initiatives include economic reforms, incentives, and special
zones to make Pakistan a more attractive destination for investors:
 Ease of Doing Business Reforms – The government undertook significant
regulatory reforms to streamline business activity. As a result, Pakistan was
ranked among the world’s top 10 business-climate improvers in 2019. It
climbed 28 places on the World Bank’s Ease of Doing Business index – from
rank 136 to 108 – after implementing six major reforms in a single year
(Doing Business 2020: Accelerated Business Climate Reform Agenda Puts
Pakistan Among Top 10 Improvers). These reforms simplified starting a
business (introducing a one-stop online registration system), made
construction permits and electricity connections faster, digitized tax
payments, and reduced corporate tax rates (Doing Business 2020:
Accelerated Business Climate Reform Agenda Puts Pakistan Among Top 10
Improvers) (Doing Business 2020: Accelerated Business Climate Reform
Agenda Puts Pakistan Among Top 10 Improvers). By cutting red tape and
modernizing regulations, Pakistan demonstrated a commitment to fostering a
private-sector led growth. Maintaining this reform momentum is seen as
crucial for sustaining investment inflows (Doing Business 2020: Accelerated
Business Climate Reform Agenda Puts Pakistan Among Top 10 Improvers).
Although the World Bank’s Doing Business index was later discontinued
globally, Pakistan continues efforts to liberalize its economy and improve
international rankings for competitiveness.
 Special Economic Zones (SEZs) and Tax Incentives – A cornerstone of
Pakistan’s investment strategy is the development of Special Economic
Zones that offer tax holidays, customs duty exemptions, and other
incentives to foreign investors. Under CPEC, multiple SEZs are being
established across Pakistan (e.g. Rashakai in Khyber Pakhtunkhwa, Allama
Iqbal Industrial City in Punjab, Dhabeji in Sindh, and the Gwadar Free Zone).
These zones are modeled on China’s SEZs and are intended to create
industrial hubs by providing infrastructure and attractive fiscal incentives
(China-Pakistan Economic Corridor (CPEC) | Map, Progress, Impact, & BRI |
Britannica). For instance, investors in many SEZs enjoy 10-year income tax
exemptions and duty-free import of machinery. The goal is to spur export-
oriented manufacturing (in textiles, auto parts, electronics, etc.) and
generate employment. The National Security Policy explicitly highlights
Pakistan offering “economic bases” to partner countries within its territory for
development partnerships – essentially inviting other nations’ companies
to set up production in Pakistan’s SEZs for mutual benefit (). Beyond CPEC,
Pakistan has introduced special tax incentives for priority sectors (such as
 IT, renewable energy, and tourism) to draw investment. Together, these
measures signal that Pakistan is pivoting from an aid-dependent economy to
one that welcomes FDI with open doors.
 Institutional Facilitation for Investors – Realizing that political instability
and bureaucratic bottlenecks have hampered FDI in the past, Pakistan’s
government is also creating new institutional mechanisms to facilitate
investment. In 2023, it formed the Special Investment Facilitation
Council (SIFC) – a high-level body comprising key ministers and the military
leadership – as a “one-stop” platform to fast-track big-ticket investments
(Pakistan Expects $50 Billion Investment from Saudi Arabia, UAE Within 5
Years). The SIFC is targeting investment from friendly countries (especially in
the Gulf and China) by streamlining approvals and offering co-ownership of
projects between Pakistan’s public sector and foreign investors. The Pakistan
Army Chief noted the SIFC could help attract $100 billion in investments
from Saudi Arabia, the UAE, Qatar, Kuwait and other Middle Eastern partners
(Pakistan Expects $50 Billion Investment from Saudi Arabia, UAE Within 5
Years). Indeed, the caretaker Prime Minister in 2023 announced that Saudi
Arabia and the UAE each plan to invest $25 billion in Pakistan over the next
five years under this new economic revival strategy (Pakistan Expects $50
Billion Investment from Saudi Arabia, UAE Within 5 Years). These claims, if
realized, would mark an unprecedented inflow of FDI into Pakistan’s mining,
agriculture, energy, and IT sectors. While such figures are aspirational, the
active courting of investors at the highest level – including military
involvement in economic management – underscores how central economic
security has become to Pakistan’s overall strategy (Pakistan Expects $50
Billion Investment from Saudi Arabia, UAE Within 5 Years). Additionally,
Pakistan has sought to market itself to global investors through initiatives like
investment conferences, the Pakistan Sovereign Wealth Fund (to co-finance
projects), and joining international investment programs (e.g. Pakistan was
the first country to implement the World Economic Forum’s “Digital FDI”
initiative to attract tech investments) (Pakistan becomes first country to
implement global initiative for digital foreign investment — PM | Arab News)
(Pakistan becomes first country to implement global initiative for digital
foreign investment — PM | Arab News). All these steps reflect a clear
reorientation towards economic diplomacy, where Pakistan competes with
other emerging markets to attract capital.
In short, Pakistan is backing its geo-economic foreign policy with domestic reforms
and incentives designed to improve its economic fundamentals. By making it
easier to do business, setting up special zones, and actively wooing foreign
investors, Pakistan aims to shift its global image from a security trouble-spot to an
investment-friendly economy. This is a notable change from prior decades when
foreign engagement was sought mostly for defense or aid; now the emphasis is on
trade deals, FDI, and development projects.
Regional Connectivity Projects (Road, Rail, Ports)
Another pillar of Pakistan’s geo-economic shift is the focus on regional
connectivity – building roads, railways, and ports that link Pakistan with its
neighbors to facilitate commerce. These projects strengthen economic ties and
embody Pakistan’s vision of itself as a transit and trade hub for the region:
 Upgrading Transport Corridors – Under CPEC and related initiatives,
Pakistan has massively invested in transport infrastructure. Highways: The
country’s highway network has been expanded and modernized, reducing
travel time for goods from China’s Xinjiang region down to Pakistani ports.
The Karakoram Highway to China was upgraded, and new motorways like the
392 km Multan–Sukkur M-5 have been built, forming a north-south spine. By
2020, hundreds of miles of new highways were completed (China-
Pakistan Economic Corridor (CPEC) | Map, Progress, Impact, & BRI |
Britannica). Railways: A major project in the pipeline is the $6.8 billion
upgrade of the Main Line 1 (ML-1) railway from Karachi to Peshawar, which
will double train speeds and capacity on Pakistan’s key rail route. Although
ML-1 has faced delays, it remains central to plans for efficient freight
movement from the Arabian Sea to the Chinese border. Beyond internal
routes, Pakistan has partnered with neighbors on transnational links. In 2021,
Pakistan, Afghanistan, and Uzbekistan agreed on a Trans-Afghan Railway
project. This rail line (over 570 km) will connect Uzbekistan’s rail network to
Pakistan’s ports via Afghanistan (Pakistan’s Vision Towards Central Asia –
OpEd – Eurasia Review). Once completed, it can significantly cut transit times
and costs for Central Asian goods reaching global markets, while giving
Pakistan access to new export markets in Central Asia. Such connectivity
fulfills Pakistan’s long-held desire to be a bridge between Central Asia and
the Indian Ocean.
 Port Development – Gwadar and Beyond – Ports are a linchpin of
Pakistan’s geo-economic strategy. The Arabian Sea ports of Karachi and
Port Qasim (Karachi) have long served Pakistan’s trade, but now Gwadar
Port in Balochistan is being developed (with Chinese assistance) as a
regional transshipment hub. Gwadar’s strategic location near the Gulf is
meant to attract shipping and provide landlocked countries a gateway to the
sea. Pakistan is marketing Gwadar to countries like Afghanistan and the
Central Asian Republics as their shortest route to the ocean. Recent
agreements suggest progress: Turkmenistan is poised to become the first
Central Asian nation to use Gwadar port for commerce, which could reduce
its trade costs by 30% compared to longer routes (Pakistan’s Vision Towards
Central Asia – OpEd – Eurasia Review). A draft agreement between the port of
Gwadar and Turkmenistan’s port of Turkmenbashi was under review in 2024
to facilitate this (Pakistan’s Vision Towards Central Asia – OpEd – Eurasia
Review). Additionally, Gwadar Free Zone offers warehousing and processing
facilities for foreign traders. Apart from Gwadar, Pakistan has invited regional
players to invest in port and logistics infrastructure, including upgrades to
Karachi port and the development of Pakistan’s coastal “Blue Economy.”
The NSP 2022 emphasizes exploiting Pakistan’s vast Exclusive Economic
 Zone and coastline for economic gain – through transshipment, shipbuilding,
and port modernization () () – indicating that ports are no longer seen merely
in strategic military terms, but as engines of growth and connectivity.
 Cross-Border Roads and Corridors – Enhancing overland routes with
neighboring countries is a priority. Pakistan has multiple border crossings with
Afghanistan (Torkham, Chaman, etc.) and Iran, and is upgrading facilities
there to expedite trade. A notable project is the Khyber Pass Economic
Corridor, funded with assistance from the Asian Development Bank and
World Bank, which aims to expand and modernize the highway from
Peshawar to the Afghan border (Pakistan needs to reframe its regional
connectivity push | Middle East Institute). This will improve the flow of goods
between Pakistan and Afghanistan and onwards to Central Asia. In fact, major
multilateral donors have been supporting Pakistan’s regional connectivity; for
nearly two decades, the Central Asia Regional Economic Cooperation
(CAREC) program (led by ADB) has invested in road and border
improvements on routes crossing Pakistan (Pakistan needs to reframe its
regional connectivity push | Middle East Institute). Two of CAREC’s designated
corridors pass through Pakistan, helping integrate transport networks across
Eurasia (Pakistan needs to reframe its regional connectivity push | Middle
East Institute). Similarly, the United States, EU, and Japan have at times
funded road projects in Pakistan’s tribal areas to facilitate trade with
Afghanistan (Pakistan needs to reframe its regional connectivity push | Middle
East Institute) (Pakistan needs to reframe its regional connectivity push |
Middle East Institute). These efforts underscore that Pakistan’s connectivity
drive is not solely China-centric – it is a broad-based push involving multiple
international partners. By upgrading roads and logistic systems, Pakistan
hopes to overcome the geographic obstacles that once isolated regions. The
ultimate aim is a web of interconnected trade routes: from India to Iran,
and from China/Central Asia down to the Arabian Sea all converging through
Pakistan. Though challenges remain (political instability in Afghanistan, India-
Pakistan tensions limiting “eastward” connectivity), Pakistan’s focus is firmly
on cementing its role as the transport hub of South Asia.
Through these regional connectivity projects, Pakistan is tangibly rebalancing its
foreign policy. Infrastructure that once served military purposes (like roads for troop
movement) is now seen as a catalyst for trade and prosperity. Improved
connectivity with neighbors is intended to foster interdependence, thereby reducing
conflict and building peace through economic integration. This approach is
encapsulated in Pakistan’s policy of “regional peace through development”,
wherein highways and railways are as crucial as diplomacy in binding countries
together.
Energy and Infrastructure Development
Pakistan’s geo-economic strategy also places a strong emphasis on energy
cooperation and modern infrastructure (including digital infrastructure) as
foundations for economic growth. Key initiatives involve partnering with countries
and investors to meet Pakistan’s energy needs, pursuing renewable projects, and
advancing the digital economy:
 Energy Corridors and Projects – Solving Pakistan’s chronic energy shortfall
is critical for economic stability. Under CPEC, a host of power generation
projects were completed in the last decade, adding over 5,000 MW to the
grid (from coal, gas, and solar plants) and helping reduce blackouts ( China-
Pakistan Economic Corridor (CPEC) | Map, Progress, Impact, & BRI |
Britannica). By 2019, Pakistan’s installed capacity had expanded
dramatically, though many new projects were fossil-fuel based (China-
Pakistan Economic Corridor (CPEC) | Map, Progress, Impact, & BRI |
Britannica) (China-Pakistan Economic Corridor (CPEC) | Map, Progress, Impact,
& BRI | Britannica). Now, attention is turning to cleaner and regional energy
sources. The National Security Policy sets ambitious goals: increase the share
of renewables to 30% by 2030, and combined with large hydropower, have
60% clean energy in the mix by 2030 (). In line with this, Pakistan is
developing wind corridors in Sindh and solar parks (such as the Quaid-e-Azam
Solar Park in Punjab) to harness renewable power. International partners are
involved in many projects: Chinese firms built the Karot and Suki Kinari
hydropower dams and several wind farms; Qatar and Saudi companies have
shown interest in solar and LNG power plants. On the regional front,
Pakistan is part of multi-country energy schemes like the CASA-1000 project
– designed to import 1,300 MW of surplus hydroelectricity from Kyrgyzstan
and Tajikistan through Afghanistan to Pakistan (Pakistan's Vision Towards
Central Asia – OpEd - Eurasia Review) – which is under implementation.
Another is the long-delayed TAPI gas pipeline (Turkmenistan–Afghanistan–
Pakistan–India): Pakistan and Turkmenistan have recently reaffirmed
commitment to expedite TAPI’s construction (Pakistan’s Vision Towards
Central Asia – OpEd – Eurasia Review). If completed, TAPI could deliver about
33 billion cubic meters of natural gas annually to Pakistan and India,
bolstering Pakistan’s energy security (Pakistan’s Vision Towards Central Asia –
OpEd – Eurasia Review). These projects illustrate Pakistan’s shift from a
military view of “energy security” (once primarily about securing oil supply
lines) to a cooperative economic view – i.e. building pipelines and
transmission lines that bind countries in mutual dependence. Energy
collaboration is now a key component of Pakistan’s foreign engagements with
Central Asia, Iran, and the Gulf states, turning former security relationships
into economic partnerships.
 Infrastructure and the Digital Economy – In the broader sense,
“infrastructure development” in Pakistan’s new policy mindset extends to
digital infrastructure and the technology sector. The government
recognizes that modern connectivity isn’t just roads and power lines, but also
internet networks and innovation capacity. Pakistan has partnered with China
to lay a fiber-optic cable from Xinjiang to Islamabad (as a CPEC ICT project) to
improve digital connectivity. Domestically, the rollout of 4G/5G networks and
expansion of broadband is ongoing to support e-commerce and IT services.
 These efforts are yielding results: Pakistan’s IT exports have surged,
reaching $1.86 billion in FY2024-25 (a 28% increase) amid a growing tech
industry ( Pakistan's IT exports surge by 28% to $1.86b ). The government in
2023 introduced the “Digital Pakistan” initiative and a Digital Nation
Act 2025 to promote a comprehensive digital transformation ( Pakistan's IT
exports surge by 28% to $1.86b ). This includes supporting startups,
improving tech education, and offering incentives for IT investment. In fact,
Pakistan became the first country to implement a global Digital Foreign
Direct Investment initiative launched by the World Economic Forum and
Digital Cooperation Organization (Pakistan becomes first country to
implement global initiative for digital foreign investment — PM | Arab News).
Under this program (begun in 2022), Pakistan identified and is addressing
regulatory gaps to attract digital FDI, focusing on pillars like digital
infrastructure and services exports (Pakistan becomes first country to
implement global initiative for digital foreign investment — PM | Arab News)
(Pakistan becomes first country to implement global initiative for digital
foreign investment — PM | Arab News). By taking part, Pakistan signaled its
commitment to a “digital-friendly” investment climate and leveraging
technology for growth (Pakistan becomes first country to implement global
initiative for digital foreign investment — PM | Arab News) (Pakistan becomes
first country to implement global initiative for digital foreign investment — PM
| Arab News). Additionally, Pakistan and friendly nations are collaborating on
tech and innovation: e.g. under a Pakistan-Saudi “Vision 2030”
partnership, both countries are investing in emerging technologies and
forging joint ventures in IT and digital finance ( Pakistan's IT exports surge by
28% to $1.86b ). This pivot to the digital realm shows that economic
diplomacy is not limited to heavy infrastructure; it also encompasses the
digital economy and knowledge sectors. By advancing energy projects
and the digital ecosystem simultaneously, Pakistan hopes to build a
sustainable economic foundation that reduces reliance on foreign aid. Each
new power plant, pipeline, fiber cable, or software technology park is seen as
strengthening Pakistan’s hand in international relations through economic
resilience.
Overall, Pakistan’s focus on energy and infrastructure development – from power
grids to cyberspace – highlights a foreign policy increasingly geared toward
development cooperation. The pursuit of joint energy projects and tech alliances
marks a departure from the past when security pacts (like the CENTO or SEATO
treaties of the Cold War) dominated foreign policy. Now, power plants and digital
hubs are as much a part of diplomacy as bases and weapons once were.
This rebalancing toward infrastructure and economic capacity is aimed at
underpinning Pakistan’s long-term security with sustainable development.
Government Strategy and National Security Policy 2022
Pakistan’s shift to geo-economics has been formally enshrined in its government
policies – most notably the National Security Policy (NSP) 2022–2026, which
reframes national security to foreground economic stability and regional integration.
Key aspects of this new strategic doctrine include:
 Economic Security as National Security – The NSP 2022 is the first
comprehensive security policy that places citizens’ economic welfare at its
core. It explicitly states that Pakistan is supplementing its geo-strategic
focus with an added emphasis on geo-economics, envisioning the
country as a hub for global economic interests and development partnerships
(). This represents an official recognition that economic strength and
connectivity are indispensable to national security. The policy argues that
sustainable and inclusive economic growth is needed to fund defense and
ensure people’s well-being (Issue Brief on “Pakistan’s Pivot to Geoeconomics:
Operational Imperatives” | Institute of Strategic Studies Islamabad) (Issue
Brief on “Pakistan’s Pivot to Geoeconomics: Operational Imperatives” |
Institute of Strategic Studies Islamabad). In a break from the past, human
security (food, health, education) is prioritized as a prerequisite for traditional
security (Pakistan’s new National Security Policy: A step in the right direction -
Atlantic Council). Experts have hailed this as a paradigm shift: “the first time
in Pakistan’s history that national security is anchored in human security and
economic security, after seven decades of a primarily military-defined
security policy” (Pakistan’s new National Security Policy: A step in the right
direction - Atlantic Council). By broadening the concept of security, the NSP
aims to build a national consensus that economic diplomacy and internal
development are as vital as military might.
 Regional Integration and “Connectivity as Peace” – The National
Security Policy emphasizes regional economic integration as a path to
stability. It highlights Pakistan’s “prized geo-economic location” at the
crossroads of South, Central, and West Asia, and urges capitalizing on this
through north-south and east-west connectivity (). The document
explicitly mentions CPEC and other connectivity initiatives as opportunities to
expand Pakistan’s export base and industrial capacity while fostering “win-
win relationships” with neighboring countries (). Notably, the NSP adopts a
conciliatory tone towards rivals in service of geo-economic goals: it calls
peace with India “vital” to unlock South Asian connectivity, and supports
peace in Afghanistan as key to accessing Central Asia (Pakistan Army Chief
Announces India Policy Shift in Major Speech – The Diplomat) (Pakistan Army
Chief Announces India Policy Shift in Major Speech – The Diplomat). In March
2021, Pakistan’s Army Chief Gen. Qamar Javed Bajwa articulated this vision
by saying “Pakistan would reprioritize economics and put it at the heart of
foreign policy; peace with India is a precondition for this geo-economic
pivot.” (Pakistan Army Chief Announces India Policy Shift in Major Speech –
The Diplomat). He outlined four pillars of a geo-economic vision: internal
and external peace, no interference in other states, regional
trade/connectivity, and sustainable development through investment hubs
(Pakistan Army Chief Announces India Policy Shift in Major Speech – The
Diplomat). This strategic messaging — coming from the military — reinforced
 the government’s policy direction. The NSP thus aligns Pakistan’s defense
and diplomatic establishments toward a common aim: making Pakistan a
connector of regions and a beneficiary of global economic flows, rather than a
front-line state in great power conflicts.
 Policy Initiatives Under NSP – Following the NSP’s guidance, Pakistan has
rolled out several strategies. One is the “Vision Central Asia” mentioned
earlier, which the NSP cites as working to finalize agreements on energy and
transport with Central Asian republics (). Another is a planned comprehensive
Maritime Policy to develop the blue economy (ports, shipping, fisheries) for
economic gain (). The NSP also stresses fiscal stability – recognizing that
without fixing debt and deficits, Pakistan cannot achieve economic security ().
Therefore, the government has been pursuing reforms (often under IMF
programs) to increase revenues and control debt, as part of national security.
In essence, the NSP 2022 provides a blueprint where economic diplomacy,
regional integration, and internal economic reforms all converge to
secure Pakistan’s future. This is a significant departure from earlier strategic
documents that scarcely mentioned economics. The policy’s public abridged
version was unveiled by the then Prime Minister in 2022, signaling
transparency and commitment to this new direction (Pakistan’s new National
Security Policy: A step in the right direction - Atlantic Council). While
implementation remains challenging, the mere existence of a national
security document that talks about export diversification, connectivity with
Central Asia, and human development is itself evidence of Pakistan’s evolving
mindset.
In summary, Pakistan’s top policymakers and security institutions have formally
embraced geo-economics. The National Security Policy and related strategies codify
the shift from a “guns before butter” approach to one where “economic health
is the guarantor of national security.” This dovetails with Pakistan’s diplomatic
messaging on the world stage that it seeks “partnerships for development” rather
than alliances for war. It is a work in progress, but the direction is clearly set by the
state’s highest level.
Global Economic Partnerships and Financial Diplomacy
Finally, Pakistan’s pivot to an economic-centric foreign policy is evident in its
engagement with global economic partners – from international financial
institutions to foreign investors and multilateral initiatives. Rather than aligning with
superpowers for military aid, Pakistan is increasingly working with global
stakeholders for economic development and stability:
 IMF and Macroeconomic Stability – Given recurring balance-of-payments
crises, Pakistan’s relationship with the International Monetary Fund (IMF)
has become a cornerstone of its economic policy. In July 2023, Pakistan
secured a $3 billion IMF bailout (Stand-By Arrangement) to stave off default
and stabilize its ailing economy (IMF approves $3 billion bailout for cash-
starved Pakistan | Reuters). The IMF noted Pakistan was facing “large fiscal
and external deficits” amid an external debt crunch and needed a policy
 anchor (IMF approves $3 billion bailout for cash-starved Pakistan | Reuters).
The program’s approval immediately disbursed $1.2 billion, shoring up
Pakistan’s foreign reserves (IMF approves $3 billion bailout for cash-starved
Pakistan | Reuters). While IMF programs mandate painful reforms (raising
taxes, cutting subsidies, etc.), Pakistani leaders have framed them as
necessary for economic security. The then PM Shehbaz Sharif called the 2023
IMF deal “a major step forward” to achieve macroeconomic stability, giving
the next government breathing room to plan growth (IMF approves $3 billion
bailout for cash-starved Pakistan | Reuters). Engaging the IMF (as well as the
World Bank and Asian Development Bank for budget support loans) has thus
been part of Pakistan’s diplomatic outreach to restore confidence. Officials
acknowledge that a stable economy is vital for attracting investment – one
Pakistani economist noted “the key to boost foreign investor confidence is a
long-term agreement with the IMF” (fDi Intelligence – Your source for foreign
direct investment information - fDiIntelligence.com). This indicates a shift: in
the past, agreeing to IMF terms was seen as a last resort or imposed
necessity, but now it’s considered a proactive step to enable geo-economic
objectives (by stabilizing the economy and unlocking multilateral and
bilateral funding) (IMF approves $3 billion bailout for cash-starved Pakistan |
Reuters). Pakistan’s coordination with international lenders underscores a
foreign policy focused on economic management and reform, in contrast
to Cold War-era alignments that were about geopolitical positioning.
 Bilateral Investment from Allies (Middle East and China) – Beyond
institutions, Pakistan is leveraging relations with friendly countries to garner
investment. China has of course been a major economic partner via CPEC. In
addition, Pakistan is now looking to Gulf states for large-scale
investments as part of its geo-economic diplomacy. Saudi Arabia and the
UAE, traditionally sources of loans and oil on deferred payment, are being
engaged as equity investors in Pakistan’s economy. Under the new SIFC
framework (noted above), Pakistani officials claim Saudi Arabia and UAE will
pour $25 billion each into Pakistan in sectors like mineral development,
agriculture, petrochemicals, and IT over the next 3–5 years (Pakistan Expects
$50 Billion Investment from Saudi Arabia, UAE Within 5 Years) (Pakistan
Expects $50 Billion Investment from Saudi Arabia, UAE Within 5 Years). While
these figures may be optimistic, there are concrete moves: for example,
Saudi Aramco signed an MoU to explore building a multi-billion
dollar oil refinery at Gwadar, which constituted the bulk of Pakistan’s
planned greenfield FDI in 2023 (fDi Intelligence – Your source for foreign
direct investment information - fDiIntelligence.com). Similarly, Qatar invested
in Pakistan’s LNG terminals and power plants, and China continues to invest
in energy and manufacturing projects (though new CPEC investments have
slowed in recent years as earlier projects finish). By encouraging such FDI
from diverse partners (China, Middle East, Turkey, Malaysia, etc.),
Pakistan is attempting to reduce reliance on foreign aid or debt. This is geo-
economics in action: using diplomacy to secure capital and technology for
development projects. The presence of foreign investors is also meant to
 create a lobby for Pakistan’s stability internationally. For instance, if Gulf
sovereign wealth funds are invested in Pakistan’s mines or farms, those
governments have a stake in Pakistan’s peace and prosperity. This marks a
subtle shift from military aid dynamics to investment interdependence as
a basis for partnerships.
 Multilateral Development Initiatives – Pakistan is also actively
participating in multilateral economic initiatives. It remains a member of
organizations like the World Bank, ADB, Islamic Development Bank, and now
the China-led Asian Infrastructure Investment Bank (AIIB), utilizing their
funding for development. Multilateral support has been crucial for Pakistan’s
regional connectivity projects: the World Bank and ADB fund parts of the
CAREC transport corridors through Pakistan, finance energy projects like
CASA-1000, and support reforms in trade facilitation (Pakistan needs to
reframe its regional connectivity push | Middle East Institute). Pakistan joined
the Central Asia Regional Economic Cooperation (CAREC) program to
coordinate infrastructure and policy with neighboring countries (Pakistan
needs to reframe its regional connectivity push | Middle East Institute). It is
also part of China’s larger Belt and Road Initiative, of which CPEC is a
flagship. Additionally, Pakistan engages with the OECD and UN agencies on
economic matters, and seeks membership in trade blocs (it has shown
interest in the Shanghai Cooperation Organization’s economic activities and
even the RCEP free trade bloc). The aim is to multilateralize its economic ties
and not be isolated. An example of this inclusive approach is Pakistan’s
outreach to Africa through its “Look Africa” policy to open new trade
missions and links in a previously neglected continent (diversifying beyond
traditional partners) (Pakistan’s Strategic Outreach to Central Asia:
Strengthening Ties with Azerbaijan and Uzbekistan - Modern Diplomacy)
(Pakistan’s Strategic Outreach to Central Asia: Strengthening Ties with
Azerbaijan and Uzbekistan - Modern Diplomacy). All these efforts illustrate
that Pakistan’s foreign policy is now networked through global economic
forums rather than just bilateral defense pacts. The country is positioning
itself as a developing market eager to integrate into the global economy – a
narrative quite different from the frontline-state rhetoric of the 2000s.
 Expert Views on Economic Diplomacy – Analysts observe that Pakistan’s
increased focus on economic diplomacy is gradually changing how it deals
with the world. Instead of a singular alliance (as with the U.S. during the Cold
War and War on Terror), Pakistan is pursuing a portfolio of economic
partnerships: China for infrastructure, the Gulf for investment, Western
institutions for financial stability, Turkey and Malaysia for trade and tech
cooperation, and Central Asia for regional integration. This diversification is
both an opportunity and a challenge. Some experts caution that Pakistan’s
geo-economic ambitions must be backed by internal economic reforms and
political stability to truly bear fruit (fDi Intelligence – Your source for foreign
direct investment information - fDiIntelligence.com) (fDi Intelligence – Your
source for foreign direct investment information - fDiIntelligence.com). For
 instance, despite the influx of infrastructure under CPEC, Pakistan still
struggles to increase exports and industrialize, which are necessary to reap
long-term gains (fDi Intelligence – Your source for foreign direct investment
information - fDiIntelligence.com) (fDi Intelligence – Your source for foreign
direct investment information - fDiIntelligence.com). Others, however, argue
that the geo-economic pivot is “a step in the right direction” to break
Pakistan’s cycle of dependency (Pakistan’s new National Security Policy: A
step in the right direction - Atlantic Council) (Pakistan’s new National Security
Policy: A step in the right direction - Atlantic Council). By prioritizing trade
over aid and development over defence, Pakistan can potentially unlock a
future of stability rooted in prosperity. There is a growing consensus in policy
circles that Pakistan’s security will ultimately “hinge on economic security” –
a mantra now often repeated by officials. In practice, this means diplomatic
initiatives are now evaluated by their economic payoff: e.g. engaging with
India is discussed in terms of trade openings, relations with the US are seen
through market access and investment (beyond just security cooperation),
etc. Economic diplomacy has thus moved to the forefront, with military
cooperation taking a back seat unless it serves an economic or peace-
building purpose.
In conclusion, Pakistan’s transition from a geo-strategic to a geo-economic foreign
policy marks a significant reorientation of its national priorities. Key initiatives –
such as CPEC and regional trade corridors, aggressive investor outreach via reforms
and SEZs, connectivity projects tying Pakistan with its neighbors, and energy/digital
development partnerships – all reflect this shift. The National Security Policy 2022
encapsulates the new mindset by declaring economic development and human
security as the foundation of national security. Expert opinions largely concur that
Pakistan is now more focused on economic diplomacy rather than military
alliances, seeking stability through connectivity and prosperity rather than
confrontation. While challenges (debt, political instability, security threats) remain,
Pakistan’s deliberate pivot to geo-economics is reshaping its foreign relations: from
a state fixated on geopolitics to one striving to be a trade conduit and
investment destination in the broader region () (Pakistan Army Chief Announces
India Policy Shift in Major Speech – The Diplomat). This policy evolution, if sustained,
could integrate Pakistan more deeply into the global economy and hopefully secure
a more peaceful and prosperous future for the country and its region.
Sources:
1. Pakistan National Security Policy 2022–2026 (public version) () ()
2. Atlantic Council – Analysis of Pakistan’s NSP and economic shift (Pakistan’s
new National Security Policy: A step in the right direction - Atlantic Council)
(Pakistan’s new National Security Policy: A step in the right direction - Atlantic
Council)
3. Eurasia Review – “Pakistan’s Vision Towards Central Asia” (2024) (Pakistan’s
Vision Towards Central Asia – OpEd – Eurasia Review) (Pakistan’s Vision
Towards Central Asia – OpEd – Eurasia Review)
4. Modern Diplomacy – Pakistan’s outreach to Azerbaijan and Uzbekistan (2025)
(Pakistan’s Strategic Outreach to Central Asia: Strengthening Ties with
Azerbaijan and Uzbekistan - Modern Diplomacy) (Pakistan’s Strategic
Outreach to Central Asia: Strengthening Ties with Azerbaijan and Uzbekistan -
Modern Diplomacy)
5. VOA News – $50 billion investment expected from Saudi/UAE (Sept 2023)
(Pakistan Expects $50 Billion Investment from Saudi Arabia, UAE Within 5
Years) (Pakistan Expects $50 Billion Investment from Saudi Arabia, UAE Within
5 Years)
6. Reuters – IMF approves $3 billion bailout for Pakistan (2023) (IMF approves $3
billion bailout for cash-starved Pakistan | Reuters) (IMF approves $3 billion
bailout for cash-starved Pakistan | Reuters)
7. Britannica – China-Pakistan Economic Corridor overview (China-Pakistan
Economic Corridor (CPEC) | Map, Progress, Impact, & BRI | Britannica) (China-
Pakistan Economic Corridor (CPEC) | Map, Progress, Impact, & BRI |
Britannica)
8. World Bank Press Release – Pakistan’s ease of doing business reforms (2019)
(Doing Business 2020: Accelerated Business Climate Reform Agenda Puts
Pakistan Among Top 10 Improvers) (Doing Business 2020: Accelerated
Business Climate Reform Agenda Puts Pakistan Among Top 10 Improvers)
9. The Diplomat – Bajwa’s 2021 Islamabad Security Dialogue speech (Pakistan
Army Chief Announces India Policy Shift in Major Speech – The Diplomat)
(Pakistan Army Chief Announces India Policy Shift in Major Speech – The
Diplomat)
10.The Express Tribune – Pakistan IT exports and digital economy (2025)
( Pakistan's IT exports surge by 28% to $1.86b ) ( Pakistan's IT exports surge
by 28% to $1.86b )
11.Arab News – Pakistan’s Digital FDI Initiative (2025) (Pakistan becomes first
country to implement global initiative for digital foreign investment — PM |
Arab News) (Pakistan becomes first country to implement global initiative for
digital foreign investment — PM | Arab News)
12.Middle East Institute – Pakistan’s regional connectivity (2022) (Pakistan needs
to reframe its regional connectivity push | Middle East Institute)
13.Eurasia Review – Turkmenistan’s use of Gwadar, TAPI progress (2024)
(Pakistan’s Vision Towards Central Asia – OpEd – Eurasia Review) (Pakistan’s
Vision Towards Central Asia – OpEd – Eurasia Review)
I will gather data on how Pakistan’s shift from a geo-strategic to geo-economic
foreign policy has benefited the country in recent years. This includes initiated
projects, economic indicators, trade agreements, foreign investments, and
regional cooperation efforts that favor Pakistan. I will also highlight how this
transition can further strengthen economic stability, global partnerships, and
regional integration in the future.
I will update you soon with a structured report detailing these aspects.
Pakistan’s Shift from Geo-Strategic to Geo-Economic Foreign Policy
Economic Growth & Stability
Pakistan’s pivot to a geo-economic foreign policy has started yielding tangible
economic benefits. Greater emphasis on trade and infrastructure has helped boost
GDP growth and resilience. For example, Pakistan’s exports hit $39.6 billion in
2022 – a 25% jump from 2021 ( Regional integration and export performance of
Pakistan: Empirical evidence from the Shanghai Cooperation Organization (SCO) -
PMC ) – marking a record high that strengthened foreign exchange earnings. Foreign
direct investment has also surged alongside geo-economic initiatives. The launch of
the China-Pakistan Economic Corridor (CPEC) in 2015 catalyzed investment inflows;
UN data show FDI in Pakistan jumped 56% in one year (from $1.2 billion in
2015 to $2.1 billion in 2016) due to CPEC projects (Empirical nexus between
Chinese investment under China–Pakistan Economic Corridor and economic growth:
An ARDL approach). These investments in energy and transport have improved
economic stability – 14 new power plants built under CPEC now supply about
one-fifth of Pakistan’s electricity, easing blackouts and boosting industrial
output (CPEC lays groundwork for growth - Chinadaily.com.cn). Experts estimate
that without the new CPEC energy supply, Pakistan would be losing $15–20 billion
in GDP each year to power shortages (CPEC lays groundwork for growth -
Chinadaily.com.cn). In short, the geo-economic focus on infrastructure, trade, and
investment has begun to strengthen GDP growth, expand trade volumes,
attract FDI, and build economic resilience against shocks.
Major Initiatives & Projects
Pakistan’s geo-economic strategy is embodied in major development initiatives
and regional projects that leverage its strategic location for economic gain:
 China-Pakistan Economic Corridor (CPEC) – the $60+ billion flagship
corridor of China’s Belt and Road has financed highways, railways, Gwadar
deep-sea port, and power plants across Pakistan (China–Pakistan Economic
Corridor - Wikipedia). Over the past decade CPEC brought $25 billion in
direct investment into Pakistan (CPEC lays groundwork for growth -
Chinadaily.com.cn), modernizing infrastructure and addressing critical energy
shortages. By upgrading transport and energy networks, CPEC is
transforming Pakistan into a more attractive destination for industry and
commerce (CPEC lays groundwork for growth - Chinadaily.com.cn) (CPEC lays
groundwork for growth - Chinadaily.com.cn).
 Special Economic Zones (SEZs) – Multiple industrial zones are being
developed under CPEC to boost manufacturing and exports. The first SEZ at
Rashakai (Khyber Pakhtunkhwa) is now operational, while others like Dhabeji
(Sindh), Allama Iqbal Industrial City (Punjab), and Bostan (Balochistan) are in
advanced stages (CPEC lays groundwork for growth - Chinadaily.com.cn).
These zones offer tax breaks and infrastructure to investors, creating jobs
and value-added exports. Officials report strong progress: e.g. “Rashakai
SEZ’s first phase is now operational, generating momentum in Pakistan’s
industrial development” (CPEC lays groundwork for growth -
Chinadaily.com.cn).
 Saudi–Pakistan Economic Corridor (SPEC) – Pakistan has engaged Saudi
Arabia as a partner in an “auxiliary” corridor to complement CPEC (Pakistan
leverages CPEC to launch 2 auxiliary corridors: SPEC & RPEC - Global Village
Space) (Pakistan leverages CPEC to launch 2 auxiliary corridors: SPEC & RPEC
- Global Village Space). Saudi Arabia signed agreements in 2019 to invest
$20 billion in Pakistan (including a $10 billion oil refinery in Gwadar) (Saudi
crown prince begins Asia tour with $20 billion Pakistan investment pledge |
Reuters). Riyadh is planning $15 billion in renewable energy projects
and other investments, leveraging Gwadar as an energy hub for supplying
Asian markets (Pakistan leverages CPEC to launch 2 auxiliary corridors: SPEC
& RPEC - Global Village Space) (Pakistan leverages CPEC to launch 2 auxiliary
corridors: SPEC & RPEC - Global Village Space). SPEC envisions Gulf oil and
goods reaching China and Central Asia through Pakistan, shortening trade
routes and boosting Pakistan’s transit revenues.
 Russia–Pakistan Economic Corridor (RPEC) – Another new corridor in the
works is with Russia, aimed at granting Moscow access to warm-water ports
on the Arabian Sea via Pakistan (Pakistan leverages CPEC to launch 2
auxiliary corridors: SPEC & RPEC - Global Village Space). Discussions include
building a gas pipeline from Russia through Pakistan to South Asia (Pakistan
leverages CPEC to launch 2 auxiliary corridors: SPEC & RPEC - Global Village
Space). RPEC would link Russian commodities to Pakistani ports
(Gwadar/Karachi), integrating Russia with South and Central Asian trade.
While still in early stages, this initiative underscores Pakistan’s geo-economic
diplomacy of broadening partnerships beyond its traditional allies
(Pakistan leverages CPEC to launch 2 auxiliary corridors: SPEC & RPEC -
Global Village Space).
 Digital Economy & Tech Initiatives – Pakistan is also prioritizing the digital
and knowledge economy as part of its geo-economic shift. A China-Pakistan
“Digital Corridor” has been established, including cross-border fiber-optic
cables to improve connectivity (Pakistan leverages CPEC to launch 2 auxiliary
corridors: SPEC & RPEC - Global Village Space). The government set up a
Special Technology Zones Authority to attract IT investments, and technology
exports have soared. The IT sector grew ~25% annually in recent years, with
Pakistan’s IT exports rising from $900 million in 2018 to $3.2 billion in
2022 (CPEC lays groundwork for growth - Chinadaily.com.cn). Beijing’s tech
 firms have invested (e.g. installing telecom infrastructure), and Pakistan’s
young tech talent is being leveraged to drive innovation. This digital focus
diversifies the economy and creates high-skill jobs, aligning with the geo-
economic vision of development.
 Regional Connectivity Projects – Tapping into regional trade and energy
networks is a cornerstone of Pakistan’s geo-economic policy. Key projects
include the Turkmenistan–Afghanistan–Pakistan–India (TAPI) gas
pipeline, a $10 billion project to import 33 billion cubic meters of natural gas
annually from Turkmenistan to Pakistan and India (A New Direction for
Pakistan’s Foreign Policy - The Spine Times). After long delays, TAPI
construction began in Turkmenistan and promises to meet Pakistan’s energy
needs while fostering interdependence with neighbors. Similarly, the CASA-
1000 project is building a high-voltage transmission line to import electricity
from Central Asia (Tajikistan/Kyrgyzstan) to Pakistan, with operations
expected in 2024 (A New Direction for Pakistan’s Foreign Policy - The Spine
Times). Pakistan is also pursuing rail and road links northward – for example,
a trilateral Pakistan-Afghanistan-Uzbekistan (PAKAFUZ) railway to
connect Pakistani seaports with Central Asia (A New Direction for Pakistan’s
Foreign Policy - The Spine Times). Through the Central Asia Regional
Economic Cooperation (CAREC) program (which Pakistan joined in 2010),
over $2 billion has been invested to improve Pakistan’s highways (like the N-
55) that form part of CAREC Corridor 5 linking Central Asia to Karachi and
Gwadar (Pakistan | CAREC Program) (Pakistan | CAREC Program). In return,
Pakistan can import Central Asian energy to ease its power shortages, while
landlocked neighbors gain access to the Arabian Sea (Pakistan | CAREC
Program). These connectivity projects – whether gas pipelines, power grids,
railroads or trade corridors – are converting Pakistan’s geostrategic location
into an economic asset for regional integration.
Foreign Direct Investment (FDI) Trends
A geo-economic orientation has made Pakistan a magnet for investment from
strategic partners, especially China and Gulf countries. China has become
Pakistan’s single largest investor by far. With the rollout of CPEC, Chinese
companies poured capital into Pakistan’s power, infrastructure, and
telecommunications sectors. By 2019, China accounted for about one-third of
Pakistan’s total FDI inflows (China Regional Snapshot: South Asia - Committee
on Foreign Affairs), and cumulative Chinese investment had reached $65 billion by
2022 (China–Pakistan Economic Corridor - Wikipedia). This influx has financed
roads, ports, and industrial units, and also brought technology and expertise into
Pakistan’s economy (China–Pakistan Economic Corridor - Wikipedia) (China–Pakistan
Economic Corridor - Wikipedia).
Middle Eastern investors have likewise increased their stakes in Pakistan under the
new economic diplomacy. Saudi Arabia’s Crown Prince Muhammad bin Salman,
during a 2019 visit, signed MoUs for $20 billion of Saudi investments in Pakistan
(Saudi crown prince begins Asia tour with $20 billion Pakistan investment pledge |
Reuters) – covering an oil refinery at Gwadar, mineral development, energy
projects, and more. These plans, under the SPEC framework, aim to integrate Saudi
Arabia’s Vision 2030 investments with Pakistan’s economy, benefitting both sides.
Other Gulf states have joined in: for instance, in 2022 the Qatar Investment
Authority announced a $3 billion investment plan for Pakistan to support
commercial and investment sectors (Qatar Investment Authority aims to invest $3
bln in Pakistan | Reuters). Qatar has shown interest in Pakistan’s airports, LNG
terminals, and hospitality industry as part of this package (Qatar Investment
Authority aims to invest $3 bln in Pakistan | Reuters) (Qatar Investment Authority
aims to invest $3 bln in Pakistan | Reuters). The United Arab Emirates and Bahrain
have also extended financial support (such as oil on deferred payment and cash
deposits) and are exploring equity investments in Pakistan’s state enterprises and
infrastructure.
Beyond China and the GCC, Pakistan’s outreach has attracted FDI from other
partners as well. Turkey has invested in energy and public transit projects (e.g.
Turkish firms running Lahore’s public bus system), and companies from Malaysia
and South Korea have stakes in telecom and manufacturing ventures.
Multinationals from the West are noticing improvements in Pakistan’s business
climate too, though China and the Gulf remain dominant. Overall, the shift to geo-
economics has diversified Pakistan’s FDI sources – moving away from reliance
on Western aid towards sustainable investment ties with economic partners.
This trend not only brings in capital but also knits Pakistan’s interests closer with
those of investor countries, reinforcing long-term partnerships.
Trade Expansion & Regional Integration
Pakistan’s foreign policy pivot has prioritized trade expansion and integration
into regional markets. Unlike the earlier geo-strategic approach, which often saw
neighbors through a security lens, Islamabad now emphasizes economic
cooperation through trade agreements and connectivity corridors:
 Bilateral Trade Agreements: Pakistan has pursued new trade pacts to
widen its export markets. Notably, an upgraded Free Trade Agreement
with China (Phase II) took effect in 2020, granting Pakistan duty-free
access to 313 additional product categories (FTA under review to enhance
Pakistan’s export footprints in China - Profit by Pakistan Today). This helped
Pakistani exports to China climb to $3.45 billion in 2023 (up from
$1.6 billion in 2016) (FTA under review to enhance Pakistan’s export
footprints in China - Profit by Pakistan Today) (FTA under review to enhance
Pakistan’s export footprints in China - Profit by Pakistan Today), with higher
shipments of textiles, seafood, and chemicals. Similarly, Pakistan signed a
Preferential Trade Agreement with Uzbekistan in 2021 and is discussing
FTAs/PTAs with Turkey, Iran, and Central Asian states to boost two-way
commerce. Re-engaging with traditional partners has also been key – for
example, Pakistan and Iran are working to expand barter trade (energy for
rice) despite sanctions, and talks with Afghanistan aim to streamline transit
trade. By shifting focus to export-led growth, Pakistan is slowly moving
 from aid dependency to earning its way via trade (Pakistan’s new National
Security Policy: A step in the right direction - Atlantic Council) (Pakistan’s new
National Security Policy: A step in the right direction - Atlantic Council).
 Economic Corridors & Regional Blocs: In tandem with CPEC, Pakistan is
championing new corridors like SPEC and RPEC to anchor itself in regional
supply chains. SPEC would connect Arabian Gulf trade with Pakistan –
effectively offering Gulf states a shorter, secure route to send oil and goods
to China, South Asia, and beyond via Pakistani ports (Pakistan leverages CPEC
to launch 2 auxiliary corridors: SPEC & RPEC - Global Village Space) (Pakistan
leverages CPEC to launch 2 auxiliary corridors: SPEC & RPEC - Global Village
Space). RPEC would integrate Russia with South Asia by linking Russian
transport networks to Pakistan’s Indian Ocean ports (Pakistan leverages CPEC
to launch 2 auxiliary corridors: SPEC & RPEC - Global Village Space).
Alongside these, Pakistan actively participates in the Central Asia Regional
Economic Cooperation (CAREC) program to improve overland trade
routes. By upgrading highways that link to Afghanistan and China, Pakistan is
becoming the “transit artery” for landlocked Central Asian economies to
reach warm waters (Pakistan | CAREC Program). More than $2 billion has
been invested through CAREC in modernizing Pakistan’s highways and border
facilities (Pakistan | CAREC Program), complementing CPEC’s infrastructure.
Pakistan’s membership in the Shanghai Cooperation Organization (SCO)
is another platform for regional economic integration – through the SCO,
Pakistan has built closer trade ties with Eurasian countries, contributing to a
10%+ annual increase in exports to SCO markets on average ( Regional
integration and export performance of Pakistan: Empirical evidence from the
Shanghai Cooperation Organization (SCO) - PMC ) ( Regional integration and
export performance of Pakistan: Empirical evidence from the Shanghai
Cooperation Organization (SCO) - PMC ).
 Energy Cooperation: One of the most tangible aspects of geo-economic
diplomacy is joint energy projects that bind countries together. The
envisioned TAPI gas pipeline would not only supply Pakistan with cheap
Turkmen gas but also link the interests of four nations (Turkmenistan,
Afghanistan, Pakistan, India) in continued peace and pipeline security (A New
Direction for Pakistan’s Foreign Policy - The Spine Times). Meanwhile, the
CASA-1000 electricity corridor (connecting Kyrgyzstan/Tajikistan to Pakistan)
is underway, slated to deliver surplus Central Asian hydropower to Pakistan’s
grid by 2024 (A New Direction for Pakistan’s Foreign Policy - The Spine
Times). Pakistan has also discussed importing Russian oil and gas (an idea
gaining momentum under RPEC amid Russia’s pivot to Asian buyers).
Additionally, Pakistan and Iran have completed a portion of the Iran–
Pakistan gas pipeline on the Pakistani side, awaiting sanctions clearance to
finish the project. By pursuing multiple energy routes – TAPI from the north, IP
pipeline from the west, and Gulf oil via Gwadar – Pakistan aims to ensure
energy security through regional interdependence. Each of these
 initiatives makes Pakistan and its neighbors stakeholders in each other’s
economic success, thus deepening regional integration.
In sum, Pakistan’s geo-economic shift has led to more trade agreements, new
regional corridors (CPEC, SPEC, RPEC, CAREC) and collaborative energy
schemes, all of which tie Pakistan’s prosperity to that of the broader region. This
integrationist approach is expanding Pakistan’s trade footprint and anchoring it
firmly in the regional economy.
Financial & Institutional Reforms Supporting Geo-Economics
To maximize the gains from economic diplomacy, Pakistan has undertaken financial
and institutional reforms that improve its business climate and governance.
Recognizing that a geo-economic strategy requires a solid domestic foundation,
recent governments implemented changes in taxation, regulation, and
digitalization:
 Taxation Reforms: Pakistan has worked to broaden its tax base and
modernize tax administration – critical for fiscal stability and investor
confidence. Between mid-2019 and 2021, domestic tax revenue increased by
19% thanks to reforms such as the digitalization of tax collection
systems, online taxpayer registration, and a new track-and-trace
system to curb evasion (Pakistan | ATI). The Federal Board of Revenue
introduced e-filing, automated refund processing, and data integration to
make tax compliance easier and reduce leakages. Large Taxpayer Units were
established to focus on major contributors, and tax laws were amended to
close loopholes (Pakistan | ATI) (Pakistan | ATI). These steps have improved
revenue without heavy new taxes, freeing up funds for development and
signaling to investors that Pakistan is committed to transparent, rules-
based fiscal management.
 Ease of Doing Business: A concerted push to improve the business
regulatory environment saw Pakistan jump 28 places (to 108th) in the
World Bank’s Ease of Doing Business rankings by 2020 (Accelerated
Business Climate Reform Agenda Puts Pakistan Among ...). Reforms like
simplifying start-up procedures, introducing online one-stop portals, and
streamlining construction permits have lowered barriers for entrepreneurs.
For example, Pakistan made starting a business faster by merging
registration processes and improving access to credit information
(Accelerated Business Climate Reform Agenda Puts Pakistan Among ...). The
government also launched the Pakistan Single Window in 2022 to
digitalize cross-border trade documentation – cutting down clearance times
for imports/exports and aligning with WTO trade facilitation commitments.
These measures support geo-economic aims by attracting local and foreign
investors through a more conducive and predictable business climate.
 Institutional Innovations: New institutions have been created to drive
economic diplomacy goals. In 2023, Pakistan formed the Special
Investment Facilitation Council (SIFC) – a high-level body that brings
 together key ministries and the military leadership to fast-track foreign
investments in priority sectors (energy, infrastructure, IT, agriculture) (CPEC
lays groundwork for growth - Chinadaily.com.cn). The SIFC serves as a one-
window platform to approve projects and resolve investor issues efficiently,
reflecting a whole-of-government approach to economic security. Likewise,
the Board of Investment (BOI) has been empowered to negotiate investment
treaties and provide aftercare to foreign businesses. Regulatory bodies are
being strengthened – for instance, the Securities & Exchange Commission
improved corporate governance rules, and the State Bank enacted policies to
ease international payments for businesses. Pakistan is also embracing
international norms (joining agreements on tax transparency and anti-money
laundering (Pakistan | ATI)) to integrate with the global economic system.
Digital governance initiatives, such as e-procurement and biometric ID
verification for financial transactions, further enhance transparency and cut
red tape. Collectively, these reforms bolster Pakistan’s capacity to engage in
economic diplomacy by building investor trust, improving governance,
and aligning domestic policies with its geo-economic vision.
Strategic Advantages of Geo-Economic Diplomacy
Pivoting from geo-strategic maneuvers to geo-economic diplomacy offers
Pakistan several strategic advantages over its old security-driven approach.
Foremost, it directly addresses Pakistan’s core challenges of underdevelopment and
unemployment by prioritizing trade, investment, and connectivity projects that
create jobs and prosperity. This focus on economic uplift elevates human security
– improving citizens’ welfare – as the foundation of national security (Pakistan’s new
National Security Policy: A step in the right direction - Atlantic Council ) (Pakistan’s
new National Security Policy: A step in the right direction - Atlantic Council). By
pursuing an export-led growth model and regional integration, Pakistan can grow its
economy organically rather than relying on foreign aid or military rents, making the
country more self-reliant and stable in the long run.
Geo-economic policy also incentivizes peace and stability, which is a crucial shift
in a volatile region. Economic diplomacy requires a friendly neighborhood to
flourish; hence Pakistan has a greater stake in peaceful relations with neighbors to
keep trade routes open. As Army Chief Gen. Qamar Bajwa articulated, Pakistan’s
new vision is “centered around four core pillars: lasting peace at home and abroad,
non-interference in neighbors’ affairs, boosting regional trade and connectivity, and
sustainable development through investment hubs” (Read: Full text of Gen Bajwa's
speech at the Islamabad Security Dialogue - DAWN.COM). This outlook marks a 180°
turn from past decades when Pakistan’s location was used chiefly for geostrategic
leverage in conflicts (from the Cold War to the war on terror). Instead of being a
“frontline state” in great-power rivalries, Pakistan now aspires to be a “geo-
economic hub” that connects Asia’s economies (Read: Full text of Gen Bajwa's
speech at the Islamabad Security Dialogue - DAWN.COM). Such a role enhances
Pakistan’s global standing – it is seen as a potential trade bridge and market of
240 million people, rather than a source of insecurity.
Economic diplomacy furthermore creates mutual dependencies that can enhance
Pakistan’s security more effectively than arms build-ups. Trading partners and
investors gain a vested interest in Pakistan’s stability and progress. For example,
China’s massive investments under CPEC tie China’s economic interests to
Pakistan’s stability, ensuring a level of support and attention that pure security
alliances might not guarantee. Likewise, Gulf states investing in Pakistan’s energy
and infrastructure will prefer Pakistan to remain peaceful and economically viable.
This web of interdependence gives Pakistan leverage and goodwill that military
alliances alone would not foster. As one observer noted, the geo-economic pivot
aims to achieve “interdependency rather than dependency,” making Pakistan
and its partners stakeholders in each other’s success (Read: Full text of Gen Bajwa's
speech at the Islamabad Security Dialogue - DAWN.COM). In contrast, the old
geostrategic approach often left Pakistan dependent on superpower aid while
domestic economic needs went unmet.
Another advantage is the flexibility in foreign relations that geoeconomics
provides. Pakistan is no longer strictly tethered to one bloc or power; it trades with
China, the US, Russia, Gulf Arabs, Iran, and Turkey all at once. This balancing ability
– sometimes called “economic non-alignment” – allows Pakistan to benefit from
multiple partnerships. For instance, Pakistan can work with China on infrastructure,
court Gulf investment, seek trade with India (if political tensions subside), and
maintain ties with the West, all in parallel. Focusing on economics thus broadens
Pakistan’s options and reduces the risk of over-reliance on any single patron. It also
encourages pragmatic policymaking: decisions are guided by economic merit and
development outcomes, rather than zero-sum security calculus. The National
Security Policy 2022–2026 explicitly puts economic security at the center of
national security, reflecting this holistic approach (Issue Brief on “Pakistan’s Pivot to
Geoeconomics: Operational Imperatives” | Institute of Strategic Studies Islamabad)
(Issue Brief on “Pakistan’s Pivot to Geoeconomics: Operational Imperatives” |
Institute of Strategic Studies Islamabad).
In summary, the shift to a geo-economic foreign policy is proving more beneficial for
Pakistan because it directly contributes to national development, promotes
regional peace through shared prosperity, and improves Pakistan’s
leverage in international affairs. By trading guns for butter – that is, prioritizing
commerce over conflict – Pakistan is gradually transforming its global image from a
security-centric state to an economically dynamic nation. This change is
strengthening Pakistan’s economy and laying the groundwork for more enduring
security, as a stable, prosperous Pakistan is far better equipped to assert its
interests globally than an isolated, conflict-ridden one. As Pakistan continues on this
geo-economic path, early results suggest the country is reaping dividends in the
form of a stronger economy, new strategic partnerships, and a more
positive global profile (Read: Full text of Gen Bajwa's speech at the Islamabad
Security Dialogue - DAWN.COM) (Read: Full text of Gen Bajwa's speech at the
Islamabad Security Dialogue - DAWN.COM). The challenges of implementation
remain, but the consensus is that Pakistan’s future lies in economic diplomacy
rather than geopolitical rivalry, and recent years have started to validate the
wisdom of this strategic reorientation.
Sources: Pakistan’s National Security Policy 2022–26 (public version); Government
and State Bank data; CPEC Authority reports; Asian Development Bank (CAREC)
publications; speeches by Pakistani leadership; and analysis by experts (CPEC lays
groundwork for growth - Chinadaily.com.cn) (Empirical nexus between Chinese
investment under China–Pakistan Economic Corridor and economic growth: An ARDL
approach) (Read: Full text of Gen Bajwa's speech at the Islamabad Security
Dialogue - DAWN.COM) (Qatar Investment Authority aims to invest $3 bln in
Pakistan | Reuters), among others.
I will provide a structured response according to your outline, ensuring that all major
initiatives are covered concisely while giving equal weight to domestic, regional,
and international initiatives. The discussion will be formal, clear, and well-organized
with a proper introduction.
I will update you soon with a detailed yet concise analysis.
Introduction
Pakistan’s foreign policy is undergoing a marked transition from a traditional geo-
strategic focus to a geo-economic orientation. This shift means that instead of
viewing international relations primarily through a security or military lens, Pakistan
is prioritizing economic partnerships, trade connectivity, and development. The
change was formalized in Pakistan’s first National Security Policy (NSP) launched in
2021, which for the first time placed economic security at the core of national
security (Pakistan’s geoeconomic pivot: strategies, opportunities, and challenges)
(Pakistan’s geoeconomic pivot: strategies, opportunities, and challenges). The
rationale behind this pivot is clear: decades of security-driven policy yielded only
sporadic economic gains and left the economy in boom-and-bust cycles (Pakistan’s
geoeconomic pivot: strategies, opportunities, and challenges). By embracing geo-
economics, Pakistan aims to ensure sustainable economic stability at home and
enhance its influence through commerce and connectivity rather than conflict.
Officials articulate a vision of Pakistan as a trade, transit and investment hub
linking South Asia with Central Asia, China, and the Middle East (Pakistan’s
geoeconomic pivot: strategies, opportunities, and challenges). This vision assumes
that improving domestic economic health will increase Pakistan’s regional clout and
bargaining power. In practical terms, the geo-economic shift is expected to attract
foreign investment, boost trade, and integrate Pakistan into regional supply chains –
outcomes that would not only stabilize Pakistan’s economy but also give it a greater
stake in regional peace. As one policy analyst noted, Pakistan is “reprioritiz[ing]
economics” and placing it “at the heart of its foreign policy”, recognizing that
connectivity and development partnerships are the keys to future security and
influence (Pakistan Army Chief Announces India Policy Shift in Major Speech – The
Diplomat). In summary, Pakistan’s new approach foresees economic cooperation as
the primary driver of its foreign relations, a change that could transform its role in
the region from a security-centric state to an economically integrative force.
A. Domestic Initiatives
Pakistan’s geo-economic strategy is underpinned by robust domestic reforms
designed to strengthen the economic foundation. Recognizing that a strong home
economy is a prerequisite for effective economic diplomacy, the country has
embarked on several initiatives:
1. Structural and Macro-Economic Reforms: Pakistan is implementing broad
structural adjustments to stabilize its macroeconomy and foster sustainable growth.
This includes adhering to IMF-supported programs that demand fiscal discipline
and monetary tightening to curb deficits and inflation (IMF Executive Board
Concludes 2024 Article IV Consultation for Pakistan and Approves 37-month
Extended Arrangement ) (IMF Executive Board Concludes 2024 Article IV
Consultation for Pakistan and Approves 37-month Extended Arrangement ). Key
reforms involve cutting inefficient expenditures, reforming loss-making state-owned
enterprises (SOEs), and improving governance in economic management (IMF
Executive Board Concludes 2024 Article IV Consultation for Pakistan and Approves
37-month Extended Arrangement ) (IMF Executive Board Concludes 2024 Article IV
Consultation for Pakistan and Approves 37-month Extended Arrangement ).
Privatization of poorly performing public entities (such as national airlines and steel
mills) has been put back on the agenda to reduce the fiscal burden and invite
private-sector efficiency. Likewise, the government has launched initiatives to
strengthen economic governance – for example, by enhancing transparency and
anti-corruption measures in public finance (IMF Executive Board Concludes 2024
Article IV Consultation for Pakistan and Approves 37-month Extended Arrangement
). Under these reforms, Pakistan’s policy emphasis has shifted to creating conditions
for inclusive, resilient growth, rather than short-term fixes (IMF Executive Board
Concludes 2024 Article IV Consultation for Pakistan and Approves 37-month
Extended Arrangement ). The approach is already yielding some stability: by 2024,
prudent policies helped Pakistan rebound to modest growth (2.4% in FY2024) while
bringing inflation down to single digits (IMF Executive Board Concludes 2024 Article
IV Consultation for Pakistan and Approves 37-month Extended Arrangement ). These
stabilization efforts are laying the groundwork for a more confident economic
outlook at home, which in turn supports Pakistan’s credibility in pursuing economic
partnerships abroad.
2. Tax Base Enhancement & Financial Reforms: A cornerstone of domestic
reform is increasing Pakistan’s historically narrow tax base. Successive governments
have introduced measures to broaden the tax net and improve tax
administration, aiming to raise more revenue for development. This involves
cracking down on evasion, phasing out exemptions, and using technology to
improve compliance (IMF Executive Board Concludes 2024 Article IV Consultation for
Pakistan and Approves 37-month Extended Arrangement ) (IMF Executive Board
Concludes 2024 Article IV Consultation for Pakistan and Approves 37-month
Extended Arrangement ). Digitalization of tax collection processes – for instance,
online filing systems and databases to track economic activity – has been
accelerated to make tax collection more efficient and transparent. These efforts are
critical given that much of Pakistan’s economy is informal; an estimated 60% of
economic activity has traditionally escaped formal taxation (Pakistan - eCommerce)
(Pakistan - eCommerce). Reforms are also targeting the financial sector to
strengthen Pakistan’s fiscal position. The government has moved to strengthen
fiscal federalism (better revenue sharing and coordination with provinces) and enact
laws to improve public financial management (IMF Executive Board Concludes 2024
Article IV Consultation for Pakistan and Approves 37-month Extended Arrangement
). Incentives for foreign investment are another key part of this initiative. Pakistan
introduced special legal frameworks that protect and reward large investors –
for example, a recent law offers tax breaks and legal safeguards to foreign
investments over $500 million designated as “qualified investments” (2024
Investment Climate Statements: Pakistan - Department of State). By tightening
fiscal discipline at home and making Pakistan a friendlier destination for capital,
these reforms seek to provide the stable economic environment needed for a geo-
economic foreign policy. International lenders and partners have taken note: the IMF
lauded Pakistan’s “ambitious fiscal reforms to broaden the tax base” and improve
debt sustainability (Pakistan: 2024 Article IV Consultation and Request for an
Extended ...), while foreign investment in the first half of FY2025 reportedly grew by
20%, reflecting renewed confidence in Pakistan’s trajectory (| Ministry of Finance |
Government of Pakistan |).
3. High-Tech Manufacturing & Digital Economy: Pakistan is also pivoting its
domestic economy toward technology and high-value manufacturing to ride
the wave of the digital age. In recent years, the country has experienced rapid
growth in its information technology (IT) sector and digital exports. Monthly IT
exports hit record highs in 2024, reaching $348 million in December – a 15% year-
on-year increase and part of a sustained 15-month growth streak ( IT exports hit
record $348m in Dec'24 ). This boom is fueled by supportive policies: the
government provides tax incentives for IT exports and has relaxed foreign currency
rules to encourage tech companies to repatriate earnings ( IT exports hit record
$348m in Dec'24 ). Pakistan has also established Special Technology Zones and
innovation parks that offer tax holidays and infrastructure to attract both local
startups and foreign tech giants. These tech-driven business zones are drawing
investment from global companies in software development, fintech, and electronics
assembly. A notable success is in smartphone manufacturing – major brands like
Samsung, Xiaomi, and Tecno now assemble phones in Pakistan. As a result, local
factories produced 31.3 million mobile handsets in 2024 (a 47% increase from the
previous year), meeting 95% of the country’s demand (Pakistan’s local Mobile
production hits 31.38 million units in 2024, fulfilling 95% of local demand -
Islamabad Scene) (Pakistan’s local Mobile production hits 31.38 million units in
2024, fulfilling 95% of local demand - Islamabad Scene). This shift towards high-tech
manufacturing not only saves foreign exchange by substituting imports, but also
positions Pakistan to export electronics in the future. Additionally, Pakistan is
embracing the digital economy through initiatives in e-governance, digital
payments, and most recently, exploring artificial intelligence (AI) and automation. In
2023, the government released a draft National AI Policy aimed at fostering AI
adoption across industries, signaling the country’s intent to be part of the Fourth
Industrial Revolution (Pakistan's Draft National AI Policy: fostering responsible
adoption ...). By cultivating a tech-savvy workforce and encouraging automation in
sectors like agriculture and manufacturing, Pakistan hopes to boost productivity. The
overall strategy is to transform Pakistan from a primarily agrarian, low-tech
economy into a modern, tech-driven economy – thereby increasing its
competitiveness and attractiveness as an economic partner on the global stage.
4. Service-Oriented Economy & Digital Trade: Complementing the
manufacturing push is Pakistan’s focus on expanding its services sector and
digital trade. Services already account for a major share of GDP, and Pakistan is
leveraging its young, educated population to excel particularly in ICT and online
services. A vibrant freelancing industry has emerged as a “digital lifeline” for the
economy ( Freelancing: providing digital lifeline for Pakistan's economy ). With over
1.5 million freelancers active in fields like software development, graphic design,
and digital marketing, Pakistan is now consistently ranked among the top freelance
markets in the world. These freelancers and IT professionals contributed over $3.2
billion in export earnings in FY2023-24, marking a 24% year-on-year increase in the
IT and IT-enabled services sector ( Freelancing: providing digital lifeline for
Pakistan's economy ). The rise of freelancing has not only brought in much-needed
foreign exchange but also created new employment avenues – an estimated
100,000 jobs have been created in the gig economy ( Freelancing: providing digital
lifeline for Pakistan's economy ). At the same time, Pakistan’s e-commerce sector
is flourishing. The country is the 46th largest e-commerce market, with online retail
revenues around $5.2 billion in 2023 and climbing rapidly (Pakistan - eCommerce)
(Pakistan - eCommerce). Platforms for online shopping, ride-hailing, and food
delivery have seen widespread adoption, especially after the COVID-19 pandemic
accelerated digital transactions. The State Bank reports that digital payment
volumes are growing steadily, reflecting greater consumer trust in online commerce.
Government policy has been supportive: a National E-Commerce Policy was
introduced to streamline online business and improve logistics, and startups in
fintech and e-commerce have attracted significant venture funding. In sum,
Pakistan’s service-oriented initiatives – from encouraging freelance exports to
nurturing e-commerce entrepreneurs – aim to diversify the economic base
beyond agriculture and textiles. By boosting digital trade and services, Pakistan
increases its integration with the global economy. This strengthens the geo-
economic posture by turning the country into a source of in-demand services (like
software development and business process outsourcing) and by linking Pakistani
entrepreneurs with international markets through digital platforms.
B. Regional Initiatives
At the regional level, Pakistan’s geo-economic turn is most evident in a flurry of new
economic corridors and connectivity projects with neighboring countries. These
initiatives seek to capitalize on Pakistan’s strategic location at the crossroads of
South Asia, Central Asia, and the Middle East. By developing shared infrastructure –
pipelines, railways, ports, and special economic zones – Pakistan aspires to become
a trade and energy hub for the region, moving from conflict dynamics to
cooperative economic interdependence. Key regional undertakings include:
1. Saudi–Pakistan Economic Corridor (SPEC): Building on the model of CPEC
(the China–Pakistan Economic Corridor), Islamabad and Riyadh have deepened their
economic partnership in what is informally dubbed the Saudi–Pakistan Economic
Corridor. Saudi Arabia has committed large-scale investments in Pakistan’s
infrastructure and energy sector, which both sides frame as a long-term strategic
economic alliance. A flagship project is the planned $10 billion oil refinery at
Gwadar port, which Saudi Arabia announced in 2019 (Saudi Arabia to set up $10
billion oil refinery in Pakistan | Reuters). The refinery project, located at the Arabian
Sea gateway of CPEC, would not only help Pakistan meet its own energy needs but
also potentially serve as an export hub for refined oil to other markets (including
western China via CPEC logistics) (Saudi Arabia to set up $10 billion oil refinery in
Pakistan | Reuters) (Saudi Arabia to set up $10 billion oil refinery in Pakistan |
Reuters). Saudi officials have explicitly linked this investment to Pakistan’s geo-
economic vision – stating they want to “make Pakistan’s economic development
stable” through such partnerships (Saudi Arabia to set up $10 billion oil refinery in
Pakistan | Reuters). Beyond the refinery, Saudi Arabia is exploring other ventures
under SPEC: investments in petrochemical complexes, mining, and renewable
energy have been discussed at high levels (Saudi Arabia to set up $10 billion oil
refinery in Pakistan | Reuters). Additionally, Saudi participation in Pakistan’s energy
and infrastructure projects provides Pakistan with another major power patron in the
region, reducing overreliance on any single ally. Strategically, SPEC is also viewed as
an “energy gateway” arrangement wherein Gulf energy (Saudi oil and perhaps
Qatari LNG via Pakistan) could funnel to new markets in Asia through Pakistani ports
(CPEC plans likely help grow the country’s logistics) (CPEC plans likely help grow the
country’s logistics). In return, Pakistan gains Saudi financial support (such as low-
cost oil on deferred payments and monetary deposits to shore up reserves during
crises) and a boost to its regional credibility by having the Arab world’s largest
economy as a development partner. The SPEC initiative thus reflects Pakistan’s
effort to broaden its economic partnerships in the Middle East and anchor its foreign
relations in concrete investment projects, thereby moving away from a solely
security-centric reliance on Gulf countries.
2. Russia–Pakistan Economic Corridor (RPEC): In a notable foreign policy
reorientation, Pakistan has also looked north to forge closer economic ties with
Russia. Discussions have begun on a potential Russia–Pakistan Economic
Corridor (RPEC), signaling Moscow’s entry into South Asian connectivity plans
(Russia Pakistan Economic Corridor - Daily Times). While not a formally defined
program like CPEC, RPEC refers to growing cooperation in energy and transport
infrastructure between the two countries. The longstanding Russian ambition of
accessing “warm waters” of the Arabian Sea may finally be realized through
Pakistan’s ports (Russia Pakistan Economic Corridor - Daily Times) (Russia Pakistan
Economic Corridor - Daily Times). One concrete component is energy: Russia and
Pakistan have signed agreements for building major gas pipelines (detailed in the
next section) and are exploring oil supply arrangements at discounted rates ( Fast
track development on Russo-Pak Energy Corridor urged for Pak's economic stability
- Islamabad Post) (Fast track development on Russo-Pak Energy Corridor urged for
Pak's economic stability - Islamabad Post). In early 2023, Pakistan imported its first
shipment of Russian crude oil, a breakthrough in diversifying its oil suppliers.
Additionally, Russia has shown interest in logistics and connectivity projects
that would link Central Asia to Pakistan. For instance, both countries have talked
about improving rail and road links – potentially connecting via Afghanistan – to
facilitate trade of goods like wheat, metals, and chemicals. Analysts note that RPEC
could mirror aspects of CPEC, using Pakistan’s location to give Russia (as well as
the Central Asian states) a reliable overland route to maritime trade (Russia
Pakistan Economic Corridor - Daily Times) (Fast track development on Russo-Pak
Energy Corridor urged for Pak's economic stability - Islamabad Post). The
geopolitical subtext is significant: enhanced Russia-Pakistan economic cooperation
marks a departure from Cold War-era hostility and signals Pakistan’s multi-
alignment strategy in the new geo-economic era. It allows Pakistan to reduce
exclusive dependence on Western financial institutions by tapping Russian
investment and expertise. In turn, Russia gains a new avenue to Asian markets and
a strategic partner in Islamabad. As one development expert observed, a “Russo-
Pak Energy Corridor is very crucial for both countries”, with the potential for
“historic economic growth” and for Pakistan to play a “backbone role” in a regional
economic bloc spanning South and Central Asia (Fast track development on Russo-
Pak Energy Corridor urged for Pak's economic stability - Islamabad Post).
3. Energy Corridors – Pak Stream & Iran–Pakistan Gas Pipelines: Addressing
its chronic energy shortages while becoming a transit country for others, Pakistan
has doubled down on energy corridor projects with its neighbors. The most
prominent is the Pakistan Stream Gas Pipeline (PSGP), a joint venture with Russia.
Formerly known as the North–South pipeline, this 1,100 km pipeline will transport
imported LNG from Karachi in the south to Punjab in the north, improving
distribution to Pakistan’s populous heartland (Russia, Pakistan agree to build gas
pipeline - Business - DAWN.COM) (Russia, Pakistan agree to build gas pipeline -
Business - DAWN.COM). An intergovernmental agreement was signed in 2021 to
jumpstart this flagship project (Russia, Pakistan agree to build gas pipeline -
Business - DAWN.COM), which is hailed as a symbol of Russia-Pakistan strategic
cooperation. Once completed, the Pakistan Stream pipeline will significantly
enhance Pakistan’s energy infrastructure, allowing it to regasify and move large
volumes of gas to fuel power plants and industries. It will also solidify the country’s
role as an energy transit corridor, potentially connecting to gas import routes from
Iran or Central Asia in the future. Speaking of Iran, Pakistan has cautiously revived
plans for the Iran–Pakistan (IP) gas pipeline, long stalled due to international
sanctions on Tehran. The IP pipeline (dubbed the “Peace Pipeline”) is designed to
deliver Iranian natural gas to Pakistan’s border and onward to consumers in
Pakistan. Iran has already built its section up to the Pakistani border; Pakistan’s
section remained dormant for years. By 2024, facing energy needs and encouraged
by some easing of global pressure, Pakistan officially signaled intent to proceed –
the government finally granted approval to the project, decades after its conception
(Iran–Pakistan gas pipeline - Wikipedia) (Iran–Pakistan gas pipeline - Wikipedia). If
completed, the pipeline could supply Pakistan with around 750 million cubic feet of
gas per day, substantially alleviating gas shortfalls. It would also mark a huge step
in regional economic integration, binding Pakistan and Iran in a commercial
partnership. However, challenges remain: Pakistan is seeking waivers or flexibility
regarding U.S. sanctions (Pakistan to seek US waivers for gas pipeline from Iran), as
any transactions with Iran’s energy sector must navigate a complex geopolitical
landscape. Despite hurdles, the fact that Pakistan is actively pursuing both the Pak
Stream and IP pipeline projects underscores its geo-economic strategy of
enhancing energy security through connectivity. These energy corridors would not
only diversify Pakistan’s own energy imports (making it less reliant on expensive
LNG spot markets), but also position the country as a key route in the flow of oil and
gas across Asia. In the long run, an interconnected pipeline network through
Pakistan (potentially linking Middle Eastern suppliers to China or India) could be
transformative, turning Pakistan’s geography into an economic asset that yields
transit fees, energy security, and diplomatic leverage.
4. Central Asia Regional Economic Cooperation (CAREC) & Trans-Afghan
Railway: Pakistan’s geo-economic ambitions extend to becoming a commercial
bridge between South Asia and Central Asia. Under the framework of the Central
Asia Regional Economic Cooperation (CAREC) program – a partnership of 11
countries supported by the Asian Development Bank – Pakistan is investing in trade
and transport links that integrate it with the Eurasian landmass (Pakistan needs to
reframe its regional connectivity push | Middle East Institute). Two of CAREC’s
designated transport corridors pass through Pakistan (Pakistan needs to reframe its
regional connectivity push | Middle East Institute), and projects are underway to
modernize highways, streamline border crossings, and harmonize customs
procedures. For example, with international assistance, Pakistan is upgrading the
Torkham and Chaman border posts (connecting to Afghanistan) to expedite overland
trade (Pakistan needs to reframe its regional connectivity push | Middle East
Institute). The vision is to make Pakistan a transit hub for landlocked
Afghanistan and Central Asian republics, providing them the shortest route to
the sea via Karachi and Gwadar ports. A game-changing initiative in this regard is
the proposed Trans-Afghan Railway, which Pakistan is pursuing in collaboration
with Uzbekistan and Afghanistan. In February 2021, the three countries signed a
roadmap for a 760 km railway line linking Termez in Uzbekistan through Mazar-
i-Sharif and Kabul in Afghanistan to Peshawar in Pakistan (Uzbekistan–
Afghanistan–Pakistan Railway Project - Wikipedia). This rail corridor, once
completed, would reduce cargo transit time between Central Asia and Pakistan by
about five days and substantially cut costs (Uzbekistan–Afghanistan–Pakistan
Railway Project - Wikipedia). Practically, it means goods from Tashkent or Almaty
could reach Pakistani seaports far quicker than via the current routes, boosting
trade volumes. Construction is slated to begin as soon as security conditions allow,
with Uzbekistan taking a lead and seeking international financing for the
multibillion-dollar project (Construction of Trans-Afghan railway to start in 2025)
(Uzbekistan expecting to commence Trans-Afghan railway project in ...). Pakistan
stands to benefit enormously: the railway would bring in transit fees and business
for its ports, and it would cement Pakistan’s role as Central Asia’s gateway to global
markets. Moreover, by cooperating on such a venture, Pakistan and Afghanistan
(under the Taliban government) are finding common economic interest, which can
contribute to regional stability. In broader terms, these connectivity efforts – roads,
rails, and economic corridors – aim to convert Pakistan’s geostrategic location into
geoeconomic dividends. As one commentary noted, greater regional connectivity
can “transform the geostrategic axiom… from competition to
cooperation,” making economic interdependence a bulwark against conflict
(Pakistan’s geoeconomic pivot: strategies, opportunities, and challenges). In line
with that, Pakistan’s regional initiatives depict a country positioning itself as a
linchpin of inter-regional trade, reducing historic political rivalries through shared
prosperity projects.
C. International Initiatives
On the global front, Pakistan’s shift to geo-economics is reflected in new trade
diplomacy and compliance with international norms to enhance its economic
standing. These international initiatives are about diversifying markets, securing
favorable trade terms, and improving Pakistan’s financial credibility worldwide.
Major elements include:
1. “Look Africa” Policy: Pakistan has launched a concerted “Look Africa” (also
called “Engage Africa”) policy initiative to expand trade and investment ties with
the African continent. For years, Africa accounted for only a small fraction of
Pakistan’s global trade (around $3 billion annually) due to low engagement (Look
Africa Policy Initiative - Ministry of Commerce | Government of Pakistan). In August
2017, the Ministry of Commerce rolled out the Look Africa Policy to change that
(Look Africa Policy Initiative - Ministry of Commerce | Government of Pakistan).
Under this strategy, Pakistan undertook diplomatic outreach, trade
agreements, and capacity-building focused on Africa. It opened six new
commercial sections (trade offices) in key African countries – including Algeria,
Egypt, Ethiopia, Senegal, Sudan, and Tanzania – to facilitate business links (Look
Africa Policy Initiative - Ministry of Commerce | Government of Pakistan). High-level
visits and the first-ever Pakistan-Africa Trade Development Conference were
organized to connect Pakistani exporters with African buyers. Pakistan is also
seeking preferential trade agreements with major African economic blocs like the
East African Community (EAC), Southern African Customs Union (SACU),
and ECOWAS to reduce tariff barriers (Look Africa Policy Initiative - Ministry of
Commerce | Government of Pakistan). These efforts have started to pay off: by
2019-20, Pakistan’s trade with Africa had crossed $4.18 billion, showing
significant growth from the prior stagnation (Look Africa Policy Initiative - Ministry of
Commerce | Government of Pakistan). Exports of Pakistani rice, pharmaceuticals,
textiles, and engineering goods to Africa have notably increased as new markets
open up (Rwanda seeks trade growth with Pakistan under Look Africa Policy). For
instance, Pakistan has cultivated big buyers in Kenya and Tanzania for its rice, and
in North Africa for its medicines. Beyond trade in goods, Pakistan is also eyeing
investments – both ways – such as African investment in Pakistani industries and
Pakistani companies participating in Africa’s agribusiness or IT sectors. The Look
Africa policy exemplifies Pakistan’s broader geo-economic approach:
diversification. By not relying solely on traditional partners (US, EU, China),
Pakistan is widening its economic horizons to more regions. This reduces
vulnerability to shocks in any single market and taps into the rising economies of
Africa, which are growing above 5-6% annually in many cases (Look Africa Policy
Initiative - Ministry of Commerce | Government of Pakistan). In sum, the Look Africa
initiative strengthens Pakistan’s global trade footprint and forges South-South
economic links, aligning with the geo-economic goal of finding new avenues for
growth and influence.
2. GSP+ Status & EU Market Access: Europe has emerged as a crucial economic
partner in Pakistan’s geo-economic calculus, thanks in large part to the
Generalised Scheme of Preferences Plus (GSP+) trade arrangement. Pakistan
has benefitted from GSP+ since 2014, which grants it duty-free access to 66% of
EU tariff lines (mostly covering manufactured and semi-manufactured goods)
([PDF] GSP+ Insights. - Pakistan - Ministry of Commerce). This preferential access
has given a major boost to Pakistan’s exports, especially in the textile and apparel
sector, which is the backbone of its export economy. Nearly 28% of Pakistan’s total
exports now go to EU countries ([PDF] GSP+ Insights. - Pakistan - Ministry of
Commerce), making the EU Pakistan’s second-largest export market. Since joining
GSP+, Pakistan’s exports to the EU have grown significantly – roughly 46%
increase from 2013 to 2021 by one estimate () (). For example, Pakistani textile
products (garments, home linens, etc.) enjoy zero tariffs in Europe under GSP+,
which has sharpened their competitive edge against products from other countries.
This led to a surge in Pakistan’s textile shipments to Europe and helped double
bilateral trade in the past decade (Risks to Pakistan's Market Access to The
European Union (EU)). The GSP+ scheme, however, comes with conditions:
beneficiary countries must implement 27 international conventions on human
rights, labor rights, governance, and the environment (). Pakistan’s drive to retain
GSP+ (which was up for renewal beyond 2023) has therefore spurred domestic
reforms in these areas as well – from passing new labor laws to improving human
rights monitoring – aligning domestic policy with global standards. Retaining GSP+
is vital for Pakistan’s geo-economic strategy as it underpins investor confidence and
export earnings. Pakistani officials frequently credit GSP+ for strengthening the
manufacturing sector and creating hundreds of thousands of jobs in export
industries. In the bigger picture, preferential EU market access complements
Pakistan’s efforts to be seen as a responsible economic player internationally. It
secures a steady demand for Pakistani goods in high-value markets and reduces
over-reliance on any single economy. Pakistan is now seeking to deepen this
engagement by negotiating a free trade agreement with the EU or at least an
extension of GSP+ with additional sectors covered. By solidifying its trade ties with
Europe, Pakistan not only gains economically but also solidifies a diplomatic
partnership that balances its relations with other great powers – a hallmark of the
multi-aligned geo-economic approach.
3. FATF Compliance & Global Financial Credibility: In its quest for geo-
economic stability, Pakistan recognized the importance of international financial
norms and worked to exit the Financial Action Task Force (FATF) “grey list” to restore
its credibility. Being on FATF’s grey list (a list of countries under increased
monitoring for illicit finance) from 2018 to 2022 hampered Pakistan’s financial
image and made foreign investors cautious. Over four years, Pakistan enacted a
series of stringent reforms to combat money laundering and terror financing – from
passing new regulations on banking transparency to cracking down on illegal money
transfers (hawala/hundi). By October 2022, these efforts culminated in FATF
removing Pakistan from the grey list, citing “significant improvements” in its
AML/CFT (anti-money laundering/combating terror finance) framework (Case Study:
Pakistan’s Journey off the FATF Grey List and the Role of the Institute of Chartered
Accountants of Pakistan | IFAC). Pakistan addressed 34 action items in two FATF
action plans, overhauling its laws and enforcement mechanisms (Pakistan taken off
global watchdog's 'grey' list for terrorism financing | Reuters) (Pakistan taken off
global watchdog's 'grey' list for terrorism financing | Reuters). The delisting was
more than just a technical win; it delivered a “reputational boost” to Pakistan at
a critical economic juncture (Pakistan taken off global watchdog's 'grey' list for
terrorism financing | Reuters). Global financial institutions and banks view a country
off the grey list as lower-risk, which improves access to international banking
services and credit. Indeed, FATF’s president noted that Pakistan’s progress gives it
a “clean bill of health” in terms of terror finance compliance (Pakistan taken off
global watchdog's 'grey' list for terrorism financing | Reuters). For Pakistan’s
economy, the immediate benefits include improved investor sentiment and
potentially increased capital inflows (Pakistan taken off global watchdog's 'grey' list
for terrorism financing | Reuters). Foreign direct investment, which investors
previously held back due to concerns about regulatory risks, may be more
forthcoming now that Pakistan is seen as aligning with global financial norms.
Multilateral lenders like the IMF and World Bank also take FATF compliance into
account when assessing programs – Pakistan’s adherence strengthens its case for
financial support on better terms. Furthermore, Pakistan’s commitment to FATF
reforms reflects a broader strategic choice to integrate with the global financial
system and avoid isolation. By bringing its financial regulations up to international
standards, Pakistan is trying to ensure that its banking sector and markets can
seamlessly connect with the world, which is essential for a trading economy. In sum,
exiting the FATF grey list removed a significant barrier to Pakistan’s geo-economic
objectives. It signaled to the world that Pakistan is a responsible financial actor,
thereby lowering the risk premium on Pakistan and improving its prospects for
trade, investment, and even sovereign credit ratings. Sustaining this credibility will
be important for Pakistan’s long-term geo-economic stability, as it continues to
attract foreign investment and pursue economic partnerships without the shadow of
sanctions or monitoring.
Conclusion
Pakistan’s pivot from a geo-strategic to geo-economic foreign policy represents a
profound reimagining of its national priorities. This transition has begun to yield
tangible economic gains: domestically, prudent reforms have stabilized the
economy and unleashed new sectors like IT and digital services as engines of
growth ( IT exports hit record $348m in Dec'24 ) ( Freelancing: providing digital
lifeline for Pakistan's economy ). Regionally, Pakistan is emerging as a critical
connector – whether by hosting energy pipelines or by building rail corridors – that
knits together the economies of Central, South, and West Asia for mutual benefit
(Pakistan’s geoeconomic pivot: strategies, opportunities, and challenges)
(Uzbekistan–Afghanistan–Pakistan Railway Project - Wikipedia). Internationally,
Pakistan’s trade diplomacy and compliance efforts have secured vital market access
(through schemes like GSP+ ()) and restored financial credibility (through FATF
compliance (Pakistan taken off global watchdog's 'grey' list for terrorism financing |
Reuters)), thus reinvigorating foreign investor confidence. The cumulative effect is
that Pakistan is slowly transforming its image from a security buffer state to a
commercial hub in Asia.
However, the journey towards a fully realized geo-economic vision is ongoing and
challenges remain. To ensure long-term geo-economic stability, Pakistan will
need to maintain consistency in its economic policies beyond political cycles –
investors and partners will be looking for continuity in reforms, contracts, and
openness. Further improvements are needed in the business climate: simplifying
regulations, improving contract enforcement, and investing in human capital so that
Pakistan’s workforce can support a modern economy. Regional peace is another
essential ingredient – the benefits of corridors with India, Afghanistan, or Iran can
only be reaped in an environment of minimal conflict and diplomatic engagement.
This means Pakistan must continue working towards “policy peace” in the
neighborhood (for example, sustaining ceasefires and trade talks with India when
possible), as stability will amplify the gains of geo-economic initiatives. Additionally,
Pakistan should focus on moving up the value chain in its exports – shifting from
primarily textiles to higher-value goods and services – to avoid external shocks and
ensure more robust economic growth.
In conclusion, Pakistan’s geo-economic pivot has laid a new foundation that aligns
the country’s foreign engagements with its domestic development needs. By
prioritizing economic stability and regional connectivity, Pakistan is seeking
prosperity not just for itself but for the wider region, turning erstwhile fault lines into
economic arteries. The success of this strategy will ultimately be measured by
sustained growth, improved living standards for Pakistan’s people, and the country’s
enhanced role in the global economy as a bridge state. If Pakistan stays the
course – deepening reforms, persevering with regional projects, and adapting to
global economic trends – its geo-economic approach could well secure the peaceful
and prosperous future that decades of geo-strategic maneuvering did not fully
achieve. The shift is a bet that roads and rails, not just rifles, will define
Pakistan’s influence in the 21st century – a bet that early signs suggest is well worth
taking. (Pakistan taken off global watchdog's 'grey' list for terrorism financing |
Reuters) (Pakistan’s geoeconomic pivot: strategies, opportunities, and challenges)