Asia: Strategic Reflexes

By Gwynne Dyer

THE test would hardly have made the news outside of India if the local air traffic controllers had posted a warning in advance, but when an Indonesian airliner had to turn around in Indian airspace a week ago and return to Jakarta to avoid flying into the missile's path, it was bound to draw attention.

So now the whole world knows that India has test-fired a nuclear-capable missile that can hit Shanghai and Beijing, and a few people (especially in China) may be asking: Why?The Agni-III missile failed its first flight test last July, but this one seems to have gone off very well. The missile, which reportedly can carry a 300-kiloton nuclear warhead, was not tested at its full range of more than 3,000 km (1,900 miles) on this occasion, but that is the number that gets people's attention. India's main potential enemy is Pakistan, which is right next door, and it already has missiles that can strike anywhere there. The Agni-III gives India the range to strike the Middle East (but it has no enemies there), or southern Russia and Central Asia (likewise) -- or China.

China is not India's enemy either, but there is a worrisome drift in Asian affairs, and the Agni-III is just the tip of the iceberg. To be fair, China has had missiles that could strike Indian cities for more than thirty years now (though they were actually built to reach American cities), so there is no monopoly of blame here. And neither China nor India is planning to attack the other. They're just doing what comes naturally for great powers.

As the strategists say (in every great power): "Intentions may change; capabilities are permanent." In other words, you don't trust in the goodwill of your neighbours; you plan and prepare for what they could do if they turned nasty. So China built some long-range missiles to deter the United States from attacking it, although the American missiles were really aimed mostly at the old Soviet Union. And a very long time afterwards, India builds long-range missiles to deter China from attacking it, although the Chinese missiles were really aimed mostly at the United States.

Why is India doing this now, thirty years after China built its missiles? Because India, with US encouragement, has finally decided, after a half-century of "non-alignment", that it wants to play the great-power game too. It has the resources these days, and it's just too galling to be left out when the Big Five get together to sort out the world. Even if playing the great-power game means you end up playing the nuclear-war game too.

There's more. American strategists do not think that China intends to attack the United States, but they know that China is going to be the second-biggest economy in the world in ten or fifteen years' time. China is therefore a potential challenger to America's position as the world's sole superpower, and as such it must be "contained." So for the past five or six years Washington has been busy renewing old military ties and forging new ones with countries all around China's borders.

Of those countries, the two most powerful by far are Japan (already an American ally) and India. Japanese right-wing politicians are tired of being a special country that has foresworn the use of force in its international relations (in the constitution that the United States wrote for it after the Second World War). They want to be a "normal" country -- well, a normal great power, really -- so Prime Minister Shintaro Abe has pledged to rewrite the constitution in order to remove those unreasonable restrictions on sending Japanese troops overseas and so on.

And since India is now a "normal" great power too, it is doing the things that normal great powers do, like making alliances with other great powers. Specifically, with the United States, with which New Delhi signed a ten-year military cooperation agreement in 2005. (No, it's not officially called an alliance. It doesn't need to be.)

When you go to Beijing and ask Chinese officials (off the record) how they feel about all this, they swear that they are not going to panick. They understand that this sort of thing is just the reflexive way that great powers have always behaved, and that they know it doesn't mean that America, Japan and India are planning to attack them. Quite right, too, and as long as they hang on to that thought no harm will come of all this.

But if they do panick at some point -- maybe over some crisis in the Taiwan Strait, or the disputed seabed between China and Japan, or some stupid incident like the American spy-plane that collided with a Chinese fighter in 2001 -- then all the pieces are already in place for an Asian Cold War. Which would be a serious waste of half the world's time at best, and a mortal peril to the whole planet at worst.

But they're all just doing what comes naturally to great powers. History doesn't repeat itself, as Mark Twain remarked, but it does rhyme.
http://www.dawn.com/2007/04/17/op.htm#2

Better Cooperation with China


THE 27 pacts and memorandums of understanding signed between Pakistan and China during Prime Minister Shaukat Aziz’s just concluded visit to Beijing aim at widening cooperation between the two countries in various fields. This time round the emphasis has been on strengthening business-to-business relations between the Pakistani private sector and various Chinese development agencies and institutions. The existing cooperation between the two countries involves sectors such as infrastructure, development, defence, space technology, trade and economics. It has been agreed that the volume of trade between the two countries will be expanded from the existing five-billion-dollar per annum mark to $15 billion over the next five years. The most significant development project to have passed through the recent top-level exchange between Islamabad and Beijing is the construction of an international airport at Gwadar. On completion, the $100 million project will not only put the new port city on the international aviation and trade map, it will also create considerable employment opportunities in the economically backward region. China has considerable stakes in the development of transit trade facilities at Gwadar as its growing industrial sector in the western provinces, too, can use these facilities for shipping their exports to the Gulf region and beyond.

These are welcome developments which can help broaden the base of cooperation between the two friendly neighbouring countries. However, the need remains to further translate the existing convergence of views that both sides hold on major, unfolding political developments in the region and the world beyond into greater bilateral cooperation in many more fields. The PM has done well to seek China’s participation in the energy sector, including the Iran-Pakistan-India gas pipeline project. Chinese assistance has also been sought in the expansion of Pakistan’s nuclear energy programme and the building of dams and reservoirs to help generate more power and to streamline the use of water resources, both of which constitute Pakistan’s urgent needs. The Thar coal mine development project should also get the priority it deserves by removing the bureaucratic hurdles at our end that have stalled an agreement on tariffs between the two countries. The trust Islamabad and Beijing place in each other should be the guiding spirit

http://www.dawn.com/2007/04/19/ed.htm#7

__________________
Yasser Chattha

Redefining Ties with China
By Tanvir Ahmad Khan

THERE are indications that Pakistan is more aware than a couple of years ago of the complexity of the unfolding international situation. It is reflected in a new quest for a more diversified foreign policy. While this would mean exploring avenues that have not received full attention before, its main vector would doubtless be the consolidation and expansion of time-tested friendships.

Inevitably, China is the centrepiece of fresh initiatives and it would be fair to say that the Sino-Pakistan relationship is poised to enter a period of enhanced salience. It will be a period of great promise and some peril as it is predicated on a certain reading of how global power would be distributed in the years to come.

Pakistan is beginning to recover from the misplaced euphoria of becoming once again a front line state in a US-led coalition in the region. Catch phrases like a non-Nato ally of the United States and claims of an entente with the sole superpower of our times that from now on would never be subject to expediency or erosion had a strange self-hypnotic effect; the foreign policy establishment of Pakistan looked like a mere implementing arm of a decision-making machine that stood in no particular need of its counsel or experience.

Pakistan has had a long history of interaction with the United States; in fact it spans virtually all the 60 post-independence years. For most of the time, it was a complex interaction. Pakistan benefited a great deal in certain areas during some of the phases of what, by definition, was always an unequal and fluctuating alliance. It is doubtful if without this alliance, bilateral as in the 1959 treaty or multilateral as in the military pacts of 1954, Pakistan would have ever been able to raise armed forces of such size and strength.

It is also true that this assistance conferred no great leverage on Pakistan in settling issues with India on equitable terms. It might even have been counter-productive in this context. Furthermore, from time to time, Pakistan was punished hard and in some instances its interests were irreparably hurt.

On its part, Pakistan too endeavoured to maintain a policy that reflected much compliance and some selective defiance. The opening to China in the mid-1960s and the single-minded pursuit of the nuclear weapon capability after India demonstrated it in the 1970s are obvious examples of that assertion of national interest.

The team that took President Pervez Musharraf headlong into the war on terror without even a minimum effort to negotiate mutually beneficial terms of engagement was, however, notably characterised by a servile imagination. There were apprehensions in Pakistan that its foreign policy may have become hopelessly lopsided and that, more ominously, Pakistan may miss a correct view of the cross-currents of international politics in a period of major changes. In aligning itself with one turn of the tide, it may just blink on the tides to follow.

It is said that you cannot speak authentically about the future because it has not happened as yet. But an honest appraisal of the past and present does help map out the space and time in which the drama of future events would be enacted. It is not a precise science but the strategic context for coming developments can be discussed intelligently.

Perhaps one should venture to share one’s private crystal gazing with one’s readers on a relatively reckless day. It may, however, be in order to mention some of the more obvious conjectures relevant to this piece here.

One, the events of the first seven years of the 21st century foreshadow a long period of instability. Two, the journey towards a multipolar world would not be smooth; it is likely to take place in an environment of continuous friction and conflict. Third, the Cold War alternatives of two sharply antagonistic economic strategies would not return; global economy will develop at an accelerated pace and it will continue to be driven by the western capitalistic model.

Four, this rapid growth under the rubric of globalisation will be uneven and will almost certainly exacerbate inequalities. Fifth, disparities will intensify strife much of which would take the form of asymmetrical warfare and terrorism. Sixth, countries like Pakistan are situated in stress zones where metropolitan powers will not hesitate to change partners arbitrarily. In Pakistan’s specific case, India will most probably become a greater focus of American interest and support. All the talk about a long-haul collaboration with Washington may fade away before long.

The world of tomorrow will be a chequered board of interdependence and rivalry. The most important theatre for working out this dialectic would be the scramble for natural resources. Energy should be expected to be the pivot of the new and perhaps a more ruthless Great Game. Pakistan has been unsuccessfully trying to position itself appropriately for it since the early 1990s only to see Afghanistan wrecking most of its initiatives.

By making itself a major candidate to be an energy corridor, Pakistan is at once reiterating its heavy stake in this game and also opening itself to new pressures and threats. At the heart of this project lies the Sino-Pakistan friendship.

A potentially dramatic factor in the emerging scene is the new Pakistani deep sea port of Gwadar in which the Chinese have invested $200 million. In fact, some observers are already talking about the new Great Game centring on this port. Pakistan, they argue, may be setting off “alarm bells in Washington” that may impact on the current Pakistan-US alliance.

Suggesting that Gwadar is indicative of how Chinese largesse is coming into open competition with the US, one American analyst has this to say : “The more money China dishes out, the more Pakistan is likely to gravitate towards Beijing as a countervail to US influence, given that Islamabad is increasingly pummelled to do more in the war on terrorism”. If sovereign decision-making becomes an irritant in Pakistan-US relations, history would have come full circle reminding Pakistan of the hostility experienced as Ayub Khan went to Beijing to open that great window for his beleaguered country.

There are formidable problems in creating an all-weather corridor from Gwadar to Xinjiang through Pakistan’s majestic mountain ranges but, if successful, the project will hugely reduce the distance and expense, making China a very serious player in a region that the United States traditionally dominates. Pakistan is the geopolitical hub for bringing China, the Gulf including Iran and Africa into a thriving economic interaction.

Mr Shaukat Aziz’s visit to China shows that his hosts were willing to make the enterprise worthwhile for Pakistan by further diversifying cooperation. China is ready to make a large investment in Pakistan’s chronically weak manufacturing sector. It is also the only worthwhile partner of Pakistan in defence technology and production. Already, the strong differentiation made by the United States between Pakistan and India on the question of transferring sophisticated American technology for peaceful nuclear energy programmes has become an argument for enhancing relations with Beijing.

China is the only country in the world that has helped set up a nuclear power reactor and may be open to Pakistani requests for more reactors. More than 20 agreements in the public and private sectors have been signed during Shaukat Aziz’s latest visit to China. If the trade target set out in Beijing is achieved, it would easily become a major transformational factor in Pakistan’s economy. One could not also miss the clear security symbolism of many of his engagements.

Washington is not indifferent to Pakistan’s looming energy crisis or, for that matter, its economic growth. But it favours solutions that remain subordinate to its global agenda. It opposes the eminently feasible Iran-Pakistan-India gas pipeline which offers the additional advantage of giving India and Pakistan a joint stake in regional peace.

It is, however, willing to help promote a gas pipeline to South Asia from Turkmenistan and a hydroelectric power grid from Tajikistan and Kyrgyzstan to Pakistan, projects which are today vulnerable to instability in Afghanistan. Turkmenistan’s ability to supply gas in quantity after its recent agreements with the Russian Federation also has a question mark.

Conscious of being the greatest ever military power, the United States has tried to pre-empt history through the Bush era doctrines of pre-emptive military interventions. So far, the results have been catastrophic. The destruction of Iraq has led some states to seek nuclear deterrence and many more to accelerate the dawn of a multipolar world order. It is highly unlikely that American military might can overcome varied forms of resistance and revolt.

Confronted with this dilemma, the United States should not be expected to regard any alliance outside the inner circle of western power as sacrosanct. The present alliance with Pakistan remains as dependent upon unilateral American perceptions of the need for it as in the past. It is high time Pakistan outgrows the habit of lamenting changes of policy and preference considered necessary by an increasingly embattled United States.

Against the chequered backdrop of past alliances, Pakistani diplomacy faces the challenge of persuading the United States that Pakistan needs to supplement its American connection with a robust regional role anchored in a special relationship with China.
http://www.dawn.com/2007/04/23/op.htm#1

__________________
Yasser Chattha

Limitations of Saarc

By Javid Husain

I MIGHT have foregone the opportunity to write on the 14th Saarc summit recently held in New Delhi but for the following short but meaningful paragraph in its declaration: “The Heads of State or Government emphasised the need to develop, at an early date, a roadmap for a South Asian Customs Union and a South Asian Economic Union in a planned and phased manner.”

As even an elementary student of regional economic cooperation can see, the paragraph, despite the caveats contained in it, has far-reaching implications not only for economic cooperation within South Asia but also for the geopolitics of the region. The paragraph, therefore, deserves close scrutiny and analysis with a view to highlighting its implications for Pakistan, particularly in its capacity to take decisions in economic and political fields in its best national interest if a South Asian Customs Union or a South Asian Economic Union comes into existence with Pakistan as its member.

The history of the European Union illustrates the journey from a customs union, in which member-states trade freely among themselves with a common external tariff, to an economic union which involves the coordination of fiscal and monetary policies of the member-states in addition to their external trade policies. An economic union, for all practical purposes, implies the amalgamation of the economies of the member states into a single unit with uniform fiscal, monetary and external trade policies and free mobility of labour and capital.

Thus, as a regional economic grouping evolves into an economic union, more and more decisions about economic issues are taken at the regional level rather than at the national level. In short, there is a transfer of sovereignty from the national governments to the regional authorities in the management of internal and external economic issues.

Needless to say that since economic decisions cannot be divorced from political issues, pressure builds up soon in an economic union to coordinate political and security policies of the member states. That is the stage where the European Union is today with the debate on the common foreign and security policy and the EU constitution.

Every regional economic grouping cannot aspire to reach the ambitious goal of economic union or even the target of a customs union. The process of economic integration involved in the establishment of a customs union and even more so in that of an economic union presupposes certain essential conditions which must be fulfilled if it has to produce the desired results. Those essential conditions are cultural and civilisational affinities, absence of serious disputes, non-existence of hegemonic tendencies, geographical proximity and economic complementarities among the member states of the regional economic grouping.

The first three conditions act as facilitators in the process of economic integration which involves difficult decisions in the fields of production, trade, consumption, employment, investment, redistribution of wealth and social welfare. The last two conditions, that is, economic complementarities and geographical proximity, not only facilitate the process of economic integration in a regional economic grouping, they also determine the extent of advantages that can accrue from it.

Even a cursory glance at the history and the ground realities in South Asia shows that Saarc does not fulfil most of the conditions essential for its successful evolution towards an economic union or even a customs union. The peoples of South Asia mainly belong to two different civilisations, that is, Islam and Hinduism. They are, therefore, culturally far apart as the history of the Pakistan movement clearly shows. There are also serious disputes between the member-states, the most important being the one on Kashmir between Pakistan and India which has bedevilled relations between the two countries and hindered progress in regional cooperation.

There is little doubt that India entertains hegemonic ambitions in South Asia. If there are any doubts in the minds of Pakistan’s policymakers about India’s quest for hegemony in South Asia, New Delhi’s past conduct in dealing with its South Asian neighbours especially Pakistan and the following quotation from an article by C. Raja Mohan, a member of India’s National Security Advisory Board, entitled “India and the Balance of Power” in the Foreign Affairs issue of July-August, 2006 should help remove them:

“India’s grand strategy divides the world into three concentric circles. In the first, which encompasses the immediate neighbourhood, India has sought primacy and a veto over actions of outside powers. In the second, which encompasses the so-called extended neighbourhood stretching across Asia and the India Ocean littoral, India has sought to balance influence of other powers and prevent them from undercutting its interests. In the third, which includes the entire global stage, India has tried to take its place as one of the great powers, a key player in international peace and security.”

Finally, economic complementarities are weaker in South Asia than those in the ECO region which also has the advantage of cultural affinities, absence of serious disputes and non-existence of hegemonic ambitions on the part of any ECO member state. Little wonder that the intra-regional trade as a percentage of total trade is higher in the case of the ECO region compared with the corresponding figure for the Saarc region. Pakistan should, therefore, choose the ECO as the forum of choice for the establishment of a customs union or an economic union.

The most important advantage of a regional economic organisation is the increase in the gross domestic product of its member-states as a whole through free trade which leads to a more efficient allocation of resources at the regional level.

A regional economic organisation also enables the member-states to tackle more effectively than would otherwise be the case issues such as water management, environment, energy and trans-border crimes and diseases which cannot be handled at a purely national level and that, therefore, require regional cooperation.

Other advantages of a regional economic grouping include the ability of the member states to speak effectively with one voice at international forums during negotiations on important international economic issues. Finally, the establishment of a single market within a region encourages the inflow of foreign investment and technology.

As member-states engage in regional cooperation, they establish positive linkages amongst themselves thus producing a peace dividend. This has been an important outcome of the process of economic integration which has taken place in Europe in the form of the European Union.

The decision taken by the Saarc leaders at the 14th summit to prepare the roadmap for a South Asian Customs Union and a South Asian Economic Union in one go is an example of the lack of realism in assessing the true potential of Saarc which for reasons given earlier would remain limited even under the best of circumstances.

It is amazing that this decision with far-reaching implications for Pakistan’s future destiny was taken when Pakistan and India have yet to resolve serious differences on the implementation of the Safta agreement, when India shows no signs of giving up its hegemonic designs, when serious Pakistan-India disputes continue to bedevil their relations and when Pakistan continues to face a serious threat to its security from India.

Even on the sidelines of the Saarc summit in New Delhi, Prime Minister Shaukat Aziz had to raise with his Indian counterpart the issue of alleged Indian involvement in the tribal insurgency in Balochistan.

In the case of Pakistan, the decision also negates the very rationale for the creation of the country under which the Muslims of South Asia sought a separate homeland for themselves because they felt that from the point of view of culture and civilisation, they were a separate nation and, therefore, entitled to take decisions about their political, economic and social life free from the domination of the majority community.

The move towards a South Asian Customs Union and more so a South Asian Economic Union would unleash economic and political forces which would result in decisions about Pakistan’s economy and ultimately even political and social life being taken at some regional forum dominated by India through the sheer weight of its huge size. The natural outcome of this process would be the gradual establishment of Indian hegemony in South Asia. India would, thus, have achieved through the process of regional cooperation what it has failed to achieve through coercive means.

Saarc can play a useful role in promoting regional cooperation in South Asia by increasing regional trade which is the raison d’être of all schemes of regional cooperation. It can also encourage regional cooperation in such areas as water management, environment, energy, transportation, communications, cross-border crimes and diseases, etc. Its very existence and the opportunity that it provides to the leaders of the member states to meet each other help in defusing tensions and promoting mutual understanding in South Asia.

These are not minor advantages and must be kept in view in any assessment of the future potential of Saarc. However, because of the various drawbacks from which it suffers, it is not an organisation of choice for Pakistan for establishing a customs union or an economic union. If Pakistan makes the mistake of relying on the Saarc for these purposes, it would either be frustrated in the achievement of its objectives or it would gradually lose its separate national identity in the huge Indian mass.

http://www.dawn.com/2007/04/20/op.htm#1

__________________
Yasser Chattha

Economic Links with China

By Sultan Ahmed

PRIME MINISTER Shaukat Aziz made the most useful and productive visit to China last week and signed 27 agreements and memoranda of understanding with the neighbouring and most friendly country. The agreements consolidate the old relationship between the two countries and opens new vistas of cooperation with immense possibilities.

As a result of cooperation in space, between the space administrations of the two countries, a space satellite is to be launched for communication purposes and an earth satellite later. A notable feature of the close relationship is the expanding cooperation between the private sectors of the two countries. Of the 27 agreements, 14 are in the public sector and 13 in the private sector. So the private sector in Pakistan has a much larger role to play in boosting the economic relations with China.

Shaukat Aziz said at the BOAO conference of Asian leaders, where he made a rather futuristic speech, that he is looking forward to the shaping up of the new century as the Asian century. China, Japan, India and Pakistan are to be the lead players. The role of South Korea has to be recognised. Asia, he said, will lead not only in production but also in consumption as the purchasing power of the people of China, India, Pakistan and the Gulf countries improves. He wants the Asian countries to focus on three things – energy security, prevention of environmental degradation and development of their own global brands which will attract global consumers. He also wants the Asian countries to improve the lot of the poor as they get richer.

After offering to China an energy corridor to carry oil from the Gulf region to Western China, he has offered another energy corridor for carrying gas from the Middle East to Western China and Central Asia. But China may find it more economic to get its gas supply from the nearby Central Asian states like Turkmenistan. However, the gas reserves in the Middle East are much larger than those in Central Asia. It has now been reported that the oil reserves of Iraq are almost double of what was earlier estimated.

Anyway, China will be a major player around the Gwadar port which it helped to build. Now, it has agreed to build an airport there at a cost of $100 million. Railways minister Sheikh Rasheed Ahmed now talks of a railway link between Pakistan and China so that people from one country can visit the other with ease. He has also proposed to use Chinese signalling experts for Pakistan railways to reduce accidents. That linkup will follow the railway linkup between Quetta and Kandahar which brings together Afghanistan and Pakistan and another linkup between Zahidan and Taftan.

It is proper that while developing railway system we should have a proper linkup with the neighbouring countries, and not merely a token linkage as with India. We are seeking large-scale cooperation with China at a time when it has recorded a growth rate of 11.1 per cent in the first quarter of the year despite Beijing’s efforts to hold down the growth rate and cool its economy. Its exports are rising and its investment in the infrastructure is paying good dividends after it recorded a growth rate of 10.7 per cent last year.

China’s inflation target is three per cent which in fact was 2.7 per cent in the first quarter of the year. In the month of March however inflation was 3.3 per cent.

Meanwhile, Indian exports are to rise by 30 per cent to $160 billion this year. Last year it achieved its target of $125 billon. Next year’s target is $200 billion. With India leaping forward in exports and filling the markets which our exporters can normally exploit, can Pakistan be content with its export growth of 3-5 per cent, or even the rise in textile exports of seven per cent within 9 months of this financial year. Pakistani exporters are licking their wounds while the government is preoccupied with its own obsessions and diversions.

Can we afford such a situation, although it may be said that the Indian exports are excelling in the service sector particularly IT and call centre performance. Pakistan was supposed to make headway in the IT sector too but clearly we are not making enough efforts but making more noise. Anyway it is a matter of some relief that the textile exports have increased by seven per cent during the first 9 months of this financial year to touch a total of $8 billion. Earlier, the rise was mere 2-3 per cent.

So we are living on home remittances of Pakistanis overseas which rose to $3.936 billion marking an increase of 22 per cent over the same period last year which is a remarkable improvement. That has helped to cut down the soaring current account deficit in a big way after that has been reduced by the rapidly rising direct foreign investment which may touch $6 billion this year.

That stands in sharp contrast to the bouncing growth of 11.1 per cent of the Chinese economy with its low inflation compared to Pakistan’s eight per cent and food inflation at 10.5 per cent.

Shaukat Aziz has advocated the SWOT analyses – strengths, weaknesses, opportunities, threats to the Asian countries. The Pakistan government and its economy should also be put through such an analysis instead of focusing too much on the success despite the cautionary notes of the World Bank and the Asian Development Bank. Why is the economy so small in size when the population is over 160 million and why are the exports so modest and the official expenditure so high and perennially dependent on external aid.

The answer may lie in the vast manpower without skills and technical training in this technological age and going by local values while the challenges to the economy are global. We also make small use of our woman power and a great deal of our resources are spent wastefully by the idle rich, the corrupt and the tax-evading citizens. What matters is not the number of hands available but their technical skill and professional competence.

Shaukat Aziz said that Asia which until recently was the importer of capital has become the exporter of capital. China leads the way with its new external investment policy along with Japan, South Korea and Singapore and some of the oil-rich Gulf states. And that marks the beginning of the Asian century. The high rate of growth in the world is now to be led by Asia.

Pakistan is also negotiating a new trade agreement with Russia. Negotiations for such a comprehensive agreement gained greater momentum following the visit of the Russian prime minister to Pakistan last week. The corridor meant to connect Gwadar with central Asia can be used for trade with Russia as also the new transit trade agreement with Iran.

While China is negotiating a free trade agreement with Pakistan, it is also negotiating the same kind of arrangement with many other countries. An FTA agreement with Australia is to be signed during the forthcoming visit of the Chinese president to that country . That means Pakistani goods will have to compete with tax-free or less taxed goods of many countries while entering China and that can be tough.

So what finally matters is the quality and price of Pakistani goods. We should be able to reduce our cost of production and cost of doing business and lower our profit margins so that we can stand intense global competition.

http://www.dawn.com/2007/04/26/op.htm#1

__________________
Yasser Chattha

Economic Links with China

By Sultan Ahmed


PRIME MINISTER Shaukat Aziz made the most useful and productive visit to China last week and signed 27 agreements and memoranda of understanding with the neighbouring and most friendly country. The agreements consolidate the old relationship between the two countries and opens new vistas of cooperation with immense possibilities.

As a result of cooperation in space, between the space administrations of the two countries, a space satellite is to be launched for communication purposes and an earth satellite later. A notable feature of the close relationship is the expanding cooperation between the private sectors of the two countries. Of the 27 agreements, 14 are in the public sector and 13 in the private sector. So the private sector in Pakistan has a much larger role to play in boosting the economic relations with China.

Shaukat Aziz said at the BOAO conference of Asian leaders, where he made a rather futuristic speech, that he is looking forward to the shaping up of the new century as the Asian century. China, Japan, India and Pakistan are to be the lead players. The role of South Korea has to be recognised. Asia, he said, will lead not only in production but also in consumption as the purchasing power of the people of China, India, Pakistan and the Gulf countries improves. He wants the Asian countries to focus on three things – energy security, prevention of environmental degradation and development of their own global brands which will attract global consumers. He also wants the Asian countries to improve the lot of the poor as they get richer.

After offering to China an energy corridor to carry oil from the Gulf region to Western China, he has offered another energy corridor for carrying gas from the Middle East to Western China and Central Asia. But China may find it more economic to get its gas supply from the nearby Central Asian states like Turkmenistan. However, the gas reserves in the Middle East are much larger than those in Central Asia. It has now been reported that the oil reserves of Iraq are almost double of what was earlier estimated.

Anyway, China will be a major player around the Gwadar port which it helped to build. Now, it has agreed to build an airport there at a cost of $100 million. Railways minister Sheikh Rasheed Ahmed now talks of a railway link between Pakistan and China so that people from one country can visit the other with ease. He has also proposed to use Chinese signalling experts for Pakistan railways to reduce accidents. That linkup will follow the railway linkup between Quetta and Kandahar which brings together Afghanistan and Pakistan and another linkup between Zahidan and Taftan.

It is proper that while developing railway system we should have a proper linkup with the neighbouring countries, and not merely a token linkage as with India. We are seeking large-scale cooperation with China at a time when it has recorded a growth rate of 11.1 per cent in the first quarter of the year despite Beijing’s efforts to hold down the growth rate and cool its economy. Its exports are rising and its investment in the infrastructure is paying good dividends after it recorded a growth rate of 10.7 per cent last year.

China’s inflation target is three per cent which in fact was 2.7 per cent in the first quarter of the year. In the month of March however inflation was 3.3 per cent.

Meanwhile, Indian exports are to rise by 30 per cent to $160 billion this year. Last year it achieved its target of $125 billon. Next year’s target is $200 billion. With India leaping forward in exports and filling the markets which our exporters can normally exploit, can Pakistan be content with its export growth of 3-5 per cent, or even the rise in textile exports of seven per cent within 9 months of this financial year. Pakistani exporters are licking their wounds while the government is preoccupied with its own obsessions and diversions.

Can we afford such a situation, although it may be said that the Indian exports are excelling in the service sector particularly IT and call centre performance. Pakistan was supposed to make headway in the IT sector too but clearly we are not making enough efforts but making more noise. Anyway it is a matter of some relief that the textile exports have increased by seven per cent during the first 9 months of this financial year to touch a total of $8 billion. Earlier, the rise was mere 2-3 per cent.

So we are living on home remittances of Pakistanis overseas which rose to $3.936 billion marking an increase of 22 per cent over the same period last year which is a remarkable improvement. That has helped to cut down the soaring current account deficit in a big way after that has been reduced by the rapidly rising direct foreign investment which may touch $6 billion this year.

That stands in sharp contrast to the bouncing growth of 11.1 per cent of the Chinese economy with its low inflation compared to Pakistan’s eight per cent and food inflation at 10.5 per cent.

Shaukat Aziz has advocated the SWOT analyses – strengths, weaknesses, opportunities, threats to the Asian countries. The Pakistan government and its economy should also be put through such an analysis instead of focusing too much on the success despite the cautionary notes of the World Bank and the Asian Development Bank. Why is the economy so small in size when the population is over 160 million and why are the exports so modest and the official expenditure so high and perennially dependent on external aid.

The answer may lie in the vast manpower without skills and technical training in this technological age and going by local values while the challenges to the economy are global. We also make small use of our woman power and a great deal of our resources are spent wastefully by the idle rich, the corrupt and the tax-evading citizens. What matters is not the number of hands available but their technical skill and professional competence.

Shaukat Aziz said that Asia which until recently was the importer of capital has become the exporter of capital. China leads the way with its new external investment policy along with Japan, South Korea and Singapore and some of the oil-rich Gulf states. And that marks the beginning of the Asian century. The high rate of growth in the world is now to be led by Asia.

Pakistan is also negotiating a new trade agreement with Russia. Negotiations for such a comprehensive agreement gained greater momentum following the visit of the Russian prime minister to Pakistan last week. The corridor meant to connect Gwadar with central Asia can be used for trade with Russia as also the new transit trade agreement with Iran.

While China is negotiating a free trade agreement with Pakistan, it is also negotiating the same kind of arrangement with many other countries. An FTA agreement with Australia is to be signed during the forthcoming visit of the Chinese president to that country . That means Pakistani goods will have to compete with tax-free or less taxed goods of many countries while entering China and that can be tough.

So what finally matters is the quality and price of Pakistani goods. We should be able to reduce our cost of production and cost of doing business and lower our profit margins so that we can stand intense global competition.

http://www.dawn.com/2007/04/26/op.htm

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Yasser Chattha

A New Compact in Dhaka?

By Tanvir Ahmad Khan

DURING the last decade and a half, politics in Bangladesh has run a paradoxical course. There has been, on the one hand, an undiminished attachment to the Westminster model of parliamentary democracy and, on the other, a persistent violation of its basic principle that elections produce a government of the majority party or a coalition of parties and a ‘loyal’ opposition’ that offers policy alternatives, primarily in the national parliament.

Bangladesh has not been without articulate non-governmental organisations, a robust civil society and a vigorous tradition of the independence of the media.

But this framework of democratic assent and dissent has frequently been overshadowed by boycotts of parliament, prolonged strikes, unruly demonstrations and, more recently, by increased political violence. The events of the last few months seem to have posed the question of whether the polity that produced this intense drama has reached a breaking point.

Clearly, a new factor has become discernible in the shape of a demand for the reconstruction of the greatly stressed polity. In its oversimplified version, it is a manoeuvre to sideline the old leadership so that a new leadership emerges. The project rests on three fundamental assumptions.

One, the political confrontations that paralyse governance are largely the result of irreconcilable rivalry between Begum Khaleda Zia and Hasina Wajed who have dominated the Bangladesh Nationalist Party (BNP) and the Awami League (AL) respectively. Both of them, it is said, control their parties with the help of a coterie of power brokers who have no real faith in democratic institutions. In this analysis, the rise and fall of the political party created by General Ershad after seizing power has not

made much impact on their enduring hostility.

Two, there is a strong nexus between the politics of these two mainstream parties and rampant corruption in the country.

Three, disillusionment with them first contributed to the noticeable empowerment of Jamaat-i-Islami and Islami Oikya Jote (Islamic Unity Front) in the electoral process and as BNP’s coalition partner and then to the emergence of far more radical and violence-prone fringe groups such as Jamaat-ul Mujahideen Bangladesh (JMB) and Jagrata Muslim Janata Bangladesh ( JMJB), which reject constitutionalism and aim at an Islamist revolution.

On present evidence, the reformist project has gradually evolved as the crisis around the elections that had to be held before January 25, 2007, unfolded. A constitutional amendment of 1996 requires that elections be held under a neutral caretaker government. The government led by Begum Khaleda Zia ostensibly fulfilled this requirement but Hasina Wajed was not prepared to put her faith in the new elections without a series of major decisions involving personalities and procedures. She backed her demands by street power.

As the confrontation worsened, Bangladesh witnessed a tacit intervention by seemingly apolitical technocrats with links to donor international financial institutions apprehensive about the impact on the national economy. Reluctant to stage a classical coup d’etat, the armed forces have decided to underwrite the reformist agenda.

Parallels of such a convergence of forces are easily found in Pakistan’s own history and the objective is nearly always a re-engineering of the political class. It led to declaration of emergency and postponement of election. It is being validated by embarking upon an anti-corruption drive which has already taken into its net important political figures including Khaleda Zia’s son Tareq Rahman

In the light of the experience of the past direct interventions, the army has apparently decided that it can act as a praetorian guard with subtlety and without pulling down the basic political organisation. For one thing, it probably genuinely believes that long term national interest is better served by avoiding extra-constitutional steps. Then in Bangladesh, the concept of the unity of command has not been as inflexible as in Pakistan.

The top echelon of the army has often harboured more than one view and that is probably the case this time as well. Be it as it may, the armed forces are pushing for reforms while retaining the umbrella of a perfectly legitimate interim government which in all likelihood will extend the emergency beyond the present expiry date in May.

Perhaps taking a cue from Pakistan, it seems to have played with the idea of exiling both Khaleda Zia and Hasina Wajed. In fact, a government press note implied that much and Hasina Wajed was not allowed to board a Dhaka –bound flight from London.The widely circulated story that Khaleda Zia would head for Saudi Arabia was followed by reports that Saudi Arabia, Kuwait and Qatar had declined to accept another guest from the Muslim states of the subcontinent. Meanwhile, the interim government also did not quite relish a legal battle in the higher courts of the country. So the exile has petered out as an instant option.

The interim government has not, however, abandoned the intention of heralding a new dawn by somehow removing the massive shadow of the daughter of the founding father and of the custodian of the legacy of the general who widened the political base of the country by redefining Bangladeshi nationalism.

The fact of the matter is that the chequered course followed by Bangladesh’s parliamentary politics is not entirely because of the personal ego of a leader or two; it reflects the lingering presence in the body politic of certain divisions that accompanied its traumatic emergence as a sovereign state. It will be much easier to put the ship of state on an even keel if these divisions were not exploited again and again for reasons of political expediency.

The first upheaval came when the founding father, Sheikh Mujibur Rahman, decided to become a powerful president and transformed Awami League, the party of freedom movement, into the left-leaning Bangladesh Peasants and Workers League. This experiment ended with his tragic assassination on August 15, 1975.

It took his successor Ziaur Rahman nearly three years to promulgate a revised constitution. His main political legacy has been the BNP designed to be the main alternative to the restored AL. Historically, the two parties have represented rival interpretations of the idea of Bangladesh.

Awami League began with democracy, socialism, secularism and nationalism as the guiding principles of the state. Secularism was recognition of the more varied composition of the population of the breakaway province of Pakistan, a conceptual device to distance it from the short-lived federation with that Islamic Republic and a more modernistic approach to the problems of today.

The task of reconciling secularism with the strong Islamic identity of the people, however, remained a foremost concern. Similarly, the initial definition of nationalism in ethnic and linguistic terms had to be differentiated from Bengali nationalism on the Indian side of the border to resist the gravitational pull of the much bigger neighbour.

Extreme polarisation between freedom fighters and the rest was another issue that needed to be mediated by opening up political space to groups of people who were aligned with the wrong side of history in 1970.

General Ziaur Rahman founded BNP to resolve some of these inherent tensions. His concept of Bangladeshi identity sought synthesis with the Islamic heritage of the nation; it also gave nationalism a territorial base. He tried to heal the internal divisions. BNP also wanted to make state socialism and free enterprise a matter of political choice.

In the international context, Awami League has often been dubbed as “pro-Indian” while BNP has laid claims to a stronger assertion of national sovereignty. In actual practice, it cannot work for a sharply different India policy as the demands of realpolitik are identical for either party. It is more a question of style than substance.

Political violence in the country has a complex socio-economic genesis. It has been exacerbated by the tendency of political parties to fight their battles outside the parliament. Fringe groups assert themselves through terrorist acts. They have demonstrated their ability to survive bans as well as tough operations by the newly raised Rapid Action Battalions composed largely of military personnel by finding a place for themselves in the political undergrowth of the country.

There is doubtless proliferation of small arms, which is partly a legacy of the 1971 guerrilla war and partly related to increasing flows of weapons throughout South Asia. Crime syndicates and fringe political groups cooperate all over the region.

Conversations with Professor Ghulam Azam and other Islamic leaders of Bangladesh some 20 years ago revealed fears that efforts made by the freedom fighters’ lobby to keep them out of legitimate politics would radicalise the impatient segments of the religious opinion.

This radicalisation was also encouraged by larger forces at work in the region. Once the global war on terror began, the western media hyped up the degree and expanse of religious radicalism in Bangladesh.

External pressures on governments since 2003 have forced the government into a bloody conflict with these fringe movements. The army and the culture of establishment in which the caretaker government is rooted are evidently under pressure from external powers to develop, as in Pakistan, an agenda to secularise national politics.

How far this project of re-engineering the political class succeeds will become clear only over several months. Bangladesh’s best hope is still a new national compact between the warring political parties for which the two veteran ladies would have to transcend personal rivalry and vendetta. In the final analysis, their ideological differences are not unbridgeable and the nation has enough dynamism to meet the challenges of our time.

The writer is a former ambassador to Bangladesh.
http://www.dawn.com/2007/04/30/op.htm

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Yasser Chattha