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Predator Wednesday, May 13, 2009 01:35 PM

[B][U][CENTER][COLOR="DarkGreen"][SIZE="5"][FONT="Georgia"]For a new transport policy[/FONT][/SIZE][/COLOR][/CENTER][/U][/B]

[B][I][CENTER]Changes in society and the economy have created the demand for different modes of transport. The situation is highly dynamic and requires both analysis and action by policymakers.[/CENTER][/I][/B]

[B]By Shahid Javed Burki
Tuesday, May 12, 2009[/B]

IT is always useful to reflect on history before planning for the future. I will illustrate this point today by using the case of the transport infrastructure. Three legacies must be recognised to deal with the situation as it exists today and for the adoption of a strategy that would serve the future.
The British, when they constructed the transport system in the area which is today’s Pakistan, had in view an entirely different set of objectives. They wanted the transport system to quickly move troops to the geographical areas that had caused trouble for them as they sought to consolidate their control over the northwestern part of their domain.

Railways were the best form of transport for this purpose. They could transport heavy equipment relatively cheaply to pass through geographical corridors that were not too difficult to protect. Initial costs would be high but so would the returns if the areas the railways reached could be made secure for British rule.

The second British strategic interest was to supply the food-deficit areas in the northeastern part of their Indian domain with the food it needed. These provinces had suffered a number of famines in the 19th century and had caused a heavy loss of life. The British, remembering the 1857 war, were always sensitive to security concerns. They did not want another uprising on their hands produced by hunger. Accordingly, they invested heavily in developing Punjab to produce food grains for the food-short provinces in the east.

They also invested in constructing a network of market towns that could accumulate the surpluses produced, and in building a road and railways network to transport the surplus from Punjab to the northeast. This part of the transport network connected the northwest to the northeast. It was much more extensive in the distance it covered. A railway organisation that went by the name of the North-Western Railway, the NWR, was the backbone of the system.

The third inheritance from British rule was the assumption that the population in what is Pakistan today had neither the wish nor the need to travel long distances. Most of the people lived on the land and if there was need to travel it was to the market towns or, at most, to the administrative centres. By putting in place a highly decentralised system of governance, the British administration reduced the need for travel to a distance of a few miles from the place of residence. These requirements could be easily satisfied by the use of animal-drawn carriages moving mostly on dirt roads.

As against this, the population of what was to become India after independence was relatively more mobile. Those who practised India’s many different faiths wished to perform pilgrimages to various holy sites. This meant that the state had to facilitate the movement of hundreds of thousands of people over long distances. Once again railways served the purpose with the difference that they had to cater not only to the movements of the goods and commodities but also a large number of people. Unlike the Pakistani system, the transport system that supported economic and social life in India was much more complex.

To these legacies, Pakistan added two im peratives of its own to develop the system of transport. The partition of British India resulted in one of the largest movement of people in human history. Within a period of a few months around mid August 1947, some 14 million people moved in and out of Pakistan. Eight million Muslims came from India to Pakistan and six million Hindus and Sikhs went in the opposite direction. Most of the people went on foot but a large number also moved by train. Once the migration was over, there was a dramatic change in the geographical distribution of population.

Before 1947, what is now Pakistan had only one urban pole — the well-appointed city of Lahore. Now there were two; the other, Karachi, having been chosen as the capital of the country, developed quickly and in four years overtook Lahore in size. Two large urban centres, with a combined population of about five million out of a total of 40 million, needed transport to ferry people back and forth.

This was the case especially since the new additions to Karachi’s population came not only from India but also from the northeastern and northwestern parts of the new state of Pakistan. Karachi needed workers to build new offices, to run its industry and to serve its rapidly growing population. A large number of them came from the northern areas of Punjab, from Azad Kashmir and from the NWFP. These people did not initially bring their families with them to Karachi; they commuted from the capital to the places of their origin. They used the railways for this purpose.

The second important change that had a bearing on the sector of transport was the dramatic reorientation in Pakistan’s trade that occurred soon after the country became independent. In 1949 India declared a trade war against Pakistan and the latter had to quickly find new trading partners to survive. With this change Karachi, the port, rather than Lahore, the railway hub, became the epicentre of trade and finance.

While Lahore was the main trading centre for decades before independence, it surrendered this place to Karachi after inde pendence. Commerce through Lahore was dominated by railways. Commerce centred on Karachi became multi-modal involving shipping and road haulage. Since a significant quantity of bulk imports and heavy machinery were needed by the rapidly growing industry in Karachi, haulage over short distances was better done on roads than by railways. At the same time, the main trading corridor pivoted from north to east (from the granaries of Punjab to food-deficit areas in Bengal and Bihar) to north to south (from Karachi to the Punjab). This was a major transformation with which Pakistan is still learning to cope.

Other changes in the economy and society affected the demand for different modes of transport. The capital was moved from Karachi to Islamabad. This created a new urban community with a different set of demands for transport. The two wars in Afghanistan — one in the 1980s, the other still going on — have created new logistics demands.

The current war requires road corridors for supplying American and Nato troops operating in Afghanistan. This demand by foreign troops is also bringing into being new types of transport firms. The situation in other words is a highly dynamic one, one that requires both analysis and action by those responsible for making public policy. ¦

Predator Monday, May 18, 2009 03:25 PM

[B][U][CENTER][COLOR="DarkGreen"][SIZE="5"][FONT="Georgia"]Multiple costs of the war on militancy[/FONT][/SIZE][/COLOR][/CENTER][/U][/B]

[B]By Shahid Javed Burki
Monday, 18 May, 2009[/B]

In this article, I will discuss the cost to Pakistan of the war on terror, a term used by then President Bush to describe the American effort to beat back the rising threat posed by ‘Islamic extremism.’

The term has been abandoned by the new American administration headed by President Barak Obama. This change goes beyond the use of language. Washington now believes that the antipathy felt by a segment of the Muslim society towards America and the West is the result neither of the envy of the success achieved by these societies nor because of the desire to insulate the Muslim populations from the influence of the western culture.

Instead the conflict has its roots in the loss of hope on the part of some of the Muslim youth in their own future. However, today I will not enlarge upon the motives that have prompted some people to take up arms not only against the West but also against their own governments. I will instead focus on the cost of the conflict for Pakistan.

Until recently, the focus on the ‘War on Terror’ was largely on highlighting the benefits to Pakistan in terms of increased support from the international community, especially the US. But increasingly there is a concern that the costs of participation are rising exponentially and leading to severe dislocation of economic activity and unacceptably high losses of life and property.

The costs can be classified into a number of categories, largely depending on their nature (direct and indirect) and on the time period examined (immediate, medium-term or long-term). Those costs that are short run are more clearly identifiable and potentially less difficult to measure. Estimates covering longer periods of time and focused mainly on indirect costs require numerous assumptions and hence are on less firm ground. The decision to participate in the ‘War on Terror’ did lead to a major outpouring of international support to Pakistan. In 2001 Pakistan was emerging from a tough stabilisation programme with the IMF which, in the process of reducing macroeconomic imbalances had, more or less, ‘suffocated’ the process of growth. Per capita income was stagnant and there was a substantial increase in unemployment and poverty.

Foreign exchange resources were scarce and at the beginning of FY 2001-02, foreign reserves stood at $3,231 million, enough only to finance three months of imports of goods and services. Participation in the war effort led to a substantial increase in the inflow of concessional assistance, especially in the form of grants from the US.

Since 2001-02 Pakistan has cumulatively received $12.2 billion funding from the US. This consisted primarily (almost 70 per cent), of reimbursement for the costs incurred by the military in counter-terrorism operations. Development and economic assistance has aggregated to $3.2 billion. The direct contribution to the growth process in the country was limited. However, the overall assistance, including the funding of military operations (mostly incurred in local currency), contributed to a rapid build-up in foreign exchange reserves.

Direct costs include the value of human lives lost or of injuries, the value of property or infrastructure destroyed or damaged, and costs of enhanced spending on security. Here, the major conceptual issue relates to the valuation of the human cost, either in terms of loss of life or of injuries.

In order to avoid controversy over any assumed value, we simply compute the cost as the (potential or actual) compensation due to affected families as per a prescribed government formula. Indirect costs are diverse in nature and include costs to local economies in the context of areas which are severely impacted by terrorism. In addition, due to the heightened sense of insecurity, loss of livelihood, and damage to shelter, terrorism may lead to internally displaced persons (IDPs) on whom costs will need to be incurred in the form of relief and rehabilitation.

Costs also include greater uncertainty and risk which relates to lost investment, both foreign and domestic, due to heightened risk perceptions, especially arising from ‘mega-attacks’ like the assassination of Benazir Bhutto and the bombing of Marriott Hotel. In addition, travel and tourism is likely to be adversely affected leading to decline in associated services by hotels, restaurants, tourist guides, transport operators, etc. Finally, an important category of costs relates to the higher costs of insurance premium for coverage against acts of terrorism.

Higher transaction costs are those costs which are associated with delays in the movement of goods and consignments. Firms may also incur costs of higher inventories to avoid the possibility of disruption in supplies. In addition, there are enhanced time costs, arising, for example, at airports due to greater security checks, immigration restrictions, etc.

If we look at the direct costs starting with the damage to human lives and property we focus only on the cost of compensation for loss of life or injury. Expenditure on security and defence was higher because of the need to place the armed forces at the western borders and for undertaking counter-terrorism operations, especially in the North. Another aspect of enhanced security is the development of private security arrangements. There was a mushroom growth in this service in recent years.

The total costs of fighting terrorism are high, estimated at Rs380 billion, at the 2007-08 base. The distributional consequences of these costs need to be highlighted. Higher security expenditures run the risk of ‘crowding out’ other expenditures related to the provision of basic social and economic services and thereby having an adverse impact, especially on the lower income groups.

The negative implications for the relatively poor include the loss of property and livelihoods in the affected areas which are among the most backward regions of the country, primarily as a consequence of dislocation of economic activity, including the labour-intensive sector of tourism. The human dimension is manifested most acutely not only in the loss of life but also in the emergence of large numbers of IDPs.

For the relatively well-off, the costs consist of foregone investment opportunities and decline in wealth associated with the fall in share values, due to heightened levels of risk and uncertainty. There are also higher costs to the corporate sector in the form of larger premium for insurance coverage and increased transaction costs.

A number of important conclusions can be drawn from the above analysis. First, as the incidence of terrorist acts and counter-terrorism operations has increased rapidly, the benefits of participation in the ‘War on Terror’ are falling while the costs are rising sharply.

In 2007-08, the inflow of concessional assistance from the US was about $1.9 billion, whereas the cost was three times higher at $6 billion. There was, therefore, substantial under-compensation for Pakistan’s participation in the ‘War on Terror.’

This, at least, partly explains the lack of some ownership of the war effort. The recent commitment by President Barak Obama that the US will pass a bill in Congress to authorise economic aid to Pakistan of $ 1.5 billion per year for the next five years, will raise the quantum of concessional assistance from the US but the level of support will still remain at less than half the cost of the ‘war.’

Second, the past experience with the utilisation of the concessional support is not very positive. From the viewpoint of achieving sustainable higher growth and promoting employment, especially for alleviating poverty, it is perhaps better if Pakistan is also given preferential access to markets, especially for textiles, in the US, EU and Japan.

While the proposal for Reconstruction Opportunity Zones (ROZs) in the affected areas, enjoying preferential access, is worthy of consideration, it is unlikely that in the short run much investment will be diverted to these areas despite the incentive given the prevailing situation. It is important that as an alternative fast-track concessional assistance is provided for public investments in infrastructure and basic services and employment-intensive public works in affected areas which are cleared up through military operations.

Finally, the higher direct costs being incurred on the military and police operations against counter-terrorism of almost Rs130 billion per annum and the concomitant increase in acts of terrorism, highlight the ineffectiveness of the current strategy being followed. There is need for a comprehensive review of the strategy, preceded by the development of a stronger political consensus and broad-based public commitment to participation in this war.

To conclude, the country is paying a heavy price for the delay in the effective resolution of these enormous challenges facing it. Potentially, GDP could have been higher by almost Rs590 billion if the problems of security and power shortage alone were not adversely impacting on the economy. The concomitant repercussions for exports, employment and poverty are also sizable. Any further inaction or inadequate/inappropriate policy action can further frustrate the country’s growth potential, which it can ill afford in these times of increasingly unfavorable global developments.

Predator Tuesday, May 19, 2009 01:34 PM

[B][U][CENTER][COLOR="DarkGreen"][SIZE="5"][FONT="Georgia"]Learning from Iraq[/FONT][/SIZE][/COLOR][/CENTER][/U][/B]

[B]By Shahid Javed Burki
Tuesday, 19 May, 2009[/B]

A GREAT deal has been learnt about insurgency and counterinsurgency from America’s seven-year involvement in Iraq. More will now be learnt as the struggle between the forces representing the state and the Taliban intensifies.

Some of Iraq’s lessons will no doubt be applied to the conflict in Pakistan’s north and in the settled districts of the Malakand division. Let us start with what Iraq has taught us.

The first lesson concerns the use of force. The Americans went in convinced that the use of disproportionate force would deter opposition to their occupation of the country. They called it “shock and awe”. This involved the use of an extraordinary amount of firepower to impress not only the Iraqi armed forces. There was also the expectation that what America could throw at the opposition in terms of bombs and bullets would scare the people into submission. But the strategy didn’t work.

It was only in 2007 that Gen David Petraeus was able to change course and adopt an approach that was to reduce significantly the level of violence and bring relative peace to the country. Iraq has reached a point where the Americans have begun to disengage, political processes have begun to work, and the economy has begun to revive. What was the main difference between the earlier American way of dealing with the insurgency and the approach that has produced a degree of normalcy?

The main difference was that the Americans recognised that it is not fear but hope that would pacify an unhappy populace. The use of force had to be combined with investment in development and institution-building that gave hope to the people that they could expect something better for themselves and for their children.

Initially averse to nation-building, the latter was precisely what the Americans began to do in 2007. They began with what Gen Petraeus called the “surge”. This involved the dispatch of an additional fighting force to the country to add strength to the already large American presence in Iraq. Once the commanders were sure that they would have enough soldiers available to them, they would be able to give confidence to the local leaders that after their areas were cleared of insurgents, there would be a strong enough American presence to ensure that the miscreants did not return. This was the area in which the Americans had failed earlier.

They had earlier used a great deal of force to push back the insurgents from the province of Fallujah, one of the most troubled areas in Iraq. Dominated by fiercely independent Sunni tribes who resented the rise of the Shia leadership in the country, the tribal leaders looked the other way as the insurgents established their control in the area. However, the insurgents brought with them a culture and social norms that were alien to the people of the area and resentment built up as they introduced their values in the system of governance.

When the American push came, the locals watched the developing situation without taking sides. But the US left after scoring a victory over the insurgents. They said they couldn’t stay since they did not have the manpower to keep the place pacified. This was expected to be done by the Iraqis themselves. But Iraq was slow in developing its own security force. This is where the surge in the American presence made a difference.

Once the additional troops came, the locals developed confidence in the American willingness to do more than simply fight. The new troops came equipped with the training and the ability to provide the local population with the services and basic needs it needed. Once these came to be provided, the Americans were able to build alliances with the area’s tribal leaders who came over to the side of the government and lent their support to the counterinsurgency efforts.

The Pakistani Army has to learn the same lesson. It has not only to expel the insurgents who have been defying the state’s authority, it must also stay on in the area while local leaders re-establish control. As is now recognised by most people who have studied the situation in Swat, the Taliban initially won some support from the locals in connection with the legal system that replaced the one that operated before 1969 when the district along with Dir and Chitral were merged to form the administrative division of Malakand.

That was when the old princely states became a part of the province of the North West Frontier and adopted its governance system. With the merger came the established legal system, replacing the one that was based on the Sharia and tradition. The old system was quick in dispensing justice; the one that replaced it was slow, cumbersome and often corrupt.

The demand by some of the religious groups to reintroduce the old system resonated with the people and the Taliban climbed on the bandwagon. Once the state made the concession, the Taliban did not stop at that and they pressed forward putting in place other practices that had no tradition and were not sanctioned by the state or religion. They did not confine themselves to Swat; they began to push ahead and took over Buner and threatened other settled parts of the NWFP. The West became nervous. It was widely reported in the western press that the Taliban were only 60 miles from Islamabad; only the Margalla Hills were in their way before they took over the capital city. That, of course, was nonsense but it got Islamabad to take notice.

With the military operation now underway, those who are managing it must draw lessons from Iraq. Four of these are important. One, the military must go the entire way and rid the Pakistani territory of insurgency. Two, once the military has reoccupied the areas currently controlled by the insurgents it should only leave when the state has developed the capacity to provide security to the local people. Three, an intensive effort should then be launched to bring development to those areas, including programmes and projects aimed at improving women’s welfare. Women were targeted by the Taliban; the state must demonstrate that it has a different set of priorities. Four, a system of local government must then be developed based on tradition as well as the need to provide adequate representation to the people.

A great deal depends on how this phase of the conflict develops. The Taliban have posed an existential threat to the state of Pakistan. The state must respond fully and intelligently.

Predator Monday, May 25, 2009 12:50 PM

[B][U][CENTER][COLOR="DarkGreen"][SIZE="5"][FONT="Georgia"]Reshaping the global economy[/FONT][/SIZE][/COLOR][/CENTER][/U][/B]

[B]By Shahid Javed Burki
Monday, 25 May, 2009[/B]

THIS is a bad time for the world economy and an even worse time for the western financial system. But this is a good time for speculating about the future shape of the global economic system.

Some economic historians have identified catch up periods in the world economy when some of the national economies that had lagged behind joined the leader, some time even overtaking it.

In the 18th century France caught up with Britain, the country that had launched the industrial revolution. A quarter century later, Germany joined the two leading economies of Europe and became one of them. In the late 19th century it was the turn of the United States. It not only joined Europe’s leading economies but by the time of the start of the First World War it had overtaken most European economies in terms of the size of its economy and income per head of its population.

The 20th century saw more catch up periods. After the Second World War that saw the defeat and devastation of Germany and Japan, the Americans helped the defeated “axis powers” to recover. It did this by launching the Marshal Plan, an unusual response by the victor towards the countries it had defeated Not only did Japan recover, it joined the leading world economies in terms of the structure of economy and income per capita of its population. The pace and style of Japanese economic development caught the eyes of many academics, including Ezra Vogel, the sociologist at Harvard University who wrote a bestselling book titled Japan as Number One.

He saw the dynamism of the Japanese economy so impressive that it could, he thought, overtake the United States within the foreseeable future. Had that happened that would have been a spectacular case of an overtake. Japan with one-half of the US population would have had to double its income per head to overtake America.

The next period of closing the gap took place between 1975 and 1995 when a number of East Asian economies – the World Bank called them the “miracle economies” in a celebrated study of East Asia – achieved rates of economic growth unprecedented in economic history.

Within these two decades four East Asian states – South Korea, Taiwan, Hong Kong and Singapore – saw a remarkable transformation of their economies. Although they did not approach the income levels of Japan and the western economies, they became industrial powerhouses. Even though there was a brief interruption in their progress by what came to be called the Asian Financial Crisis of 1996-97, they resumed economic development at about the pace of the pre-crisis period.

Before the start of the global economic crisis in the summer of 2007, there was much speculation that a new group of “catch up” economies had appeared on the global economic scene. Brazil, Russia, India and China got their own name, the BRICs. They were likely to become major economic players.

Given the large sizes of their populations, some analysts believed that the centre of global economic activity would move to these countries. There was also a consensus emerging in academic circles that we were witnessing another significant change in the structure of the global economy.

“Decoupling” was occurring in the global economy and the BRICs, along with some other large emerging economies, would no longer be affected by the cycles to which the more developed economies were subject. That was not to be so.

As the crisis that began in the United States in the summer of 2007, when it reached other shores, it did not spare the BRICs or other parts of the globe. “The impact of the crisis will be particularly hard on emerging countries: the number of people in extreme poverty will rise, the size of the new middle class will fall and governments of some indebted emerging countries will surely default” wrote Martin Wolf, chief economics commentator of Financial Times for a special issue of the newspaper.

“Confidence in local and global elites, in the market and even in the possibility of material progress will weaken, with devastating social and political consequences. Helping emerging economies through a crisis for which most have no responsibility whatsoever is a necessity.” It is hard to accept this grim conclusion. Some countries in the emerging world will be hurt no doubt, and many of them need the as sistance of the international community. Several, however, will emerge stronger from this experience and continue to participate in the reshaping of the global economic structure. Among those that will benefit and thus lead are several Asian economies. To make this point it might be useful to briefly visit the changes that have occurred in economic thought in the last few decades, especially after the conclusion of the Second World War.

The last half century divides itself neatly into two periods – neat in the sense of the attention given by policymakers the world over for certain ideologies concerning economic management. Several influential world lead ers did not see the war as a triumph of the United States and its allies in Western Europe. They saw it as the victory of socialism and statism over the market place.

The remarkable economic growth of the Soviet Union and the growth of its military might were seen as vindication of the way it had managed its affairs. The admirers of the Soviet Union were not confined to the leaders of what came to be called the Third World – leaders such as Jawaharlal Nehru of India, Gamal Nasser of Egypt, Julius Nyrere of Tanzania, Kwame Nkrumah of Ghana and Soekarno of Indonesia.

Even in the victorious Britain, the voters sent home Winston Churchill and his Conservative party in favour of the Labour party and its leader Clement Attlee. The model these leaders favoured was that of the mixed economy. In John Maynard Keynes, they had their own philosopher for this approach. The man who gave the clearest substance to this line of thought in the Third World was India’s Nehru under whom the state was placed on the “commanding heights” of the economy.

A reaction set in to this approach with the election of Ronald Reagan in the United States in 1980 and the ascent to the British prime ministership of Margaret Thatcher the year before. Other events also contributed to the development of a new approach in which private enterprise was to be left alone to its own devices. These included the shift in China from the plan to the market under Deng Xiaoping and the dismantling of the ‘”licence raj” in India starting in 1991 under the stewardship of then finance minister Manmohan Singh.

“Government,” proclaimed Reagan, “was not the solution to the problem but itself a problem”. The man who gave real substance to this philosophy was Alan Greenspan who served for 18 years as the Chairman of the US Federal Reserve Bank, the country’s central bank.

The fervour with which this economic ideology was supported has been replaced by the fervour with which it is now being condemned.There is now consensus that the state has a large role to play in the management of the economy. Even if it is not placed on the economy’s commanding heights, it must watch over it with great care and diligence.

The countries that will do better in this respect are those that did not dismantle the state as an economic overseer and most of those are in the emerging world. For this reason alone, I find it hard to accept that the entire emerging world has been thrown back almost to the start of the economic race as a result of the economic crisis of 2007-10. Many in this part of the world will recover stronger than the weakened economies of the West.

Predator Tuesday, May 26, 2009 08:17 AM

[B][U][CENTER][COLOR="DarkGreen"][SIZE="5"][FONT="Georgia"]Have we turned the corner?[/FONT][/SIZE][/COLOR][/CENTER][/U][/B]

[B]By Shahid Javed Burki
Tuesday, 26 May, 2009[/B]

THERE are two — perhaps three — nation-building ideas that have been in conflict in South Asia since the British left the subcontinent in the late 1940s.

One was espoused by Jawaharlal Nehru, the first prime minister of India who governed the country for the first 17 years after independence in 1947.

This was that even in a country with such diversity as India it was possible to construct economic, political and social systems that would protect all citizens, not only those who constituted the majority. Sunil Khilnani, the Indian historian has called this the “idea of India”.

This idea, however, was rejected with some vehemence by Mohammad Ali Jinnah. He maintained that the land over which the British ruled was not inhabited by one Indian nation but by two — one Hindu and the other Muslim. Jinnah believed that each nation deserved its own political space within which it could order the lives of its citizens according to their religious beliefs and social norms. This came to be called the two-nation theory which became the basis for the creation of Pakistan as a homeland for the Muslims of British India. The American political scientist, Stephen Cohen has called this “the idea of Pakistan”.

However, some revisionist historians, in particular Ayesha Jalal, have suggested that Jinnah was not serious about the idea of Pakistan. His demand for the creation of a separate homeland for the Muslim community of British India was meant to obtain protection from the Hindu majority once India became independent. But the leaders of the Congress party granted him his wish and, in Jinnah’s own words, a “moth-eaten” Pakistan was born on August 14, 1947 a day before Indian gained independence.

But religion as a glue for nation-building turned out to be a weak device. The leaders of West Pakistan were reluctant to fully accommodate the wishes and aspirations of the citizens of East Pakistan. The result was considerable acrimony between the two leadership groups which eventually resulted in civil war. This led to the emergence of East Pakistan as an independent Bangladesh led by Sheikh Mujibur Rehman whose “six-point” formula for the grant of considerable autonomy to the eastern wing had not been not acceptable to the West Pakistani leaders. The six points were in fact the third nation-building idea to take hold in the South Asian mainland. According to this ethnicity and culture are powerful attributes of nationhood, even stronger than religion.These three ideas have contributed to the persistence of tensions in South Asia. These have been very strong in the case of Pakistan’s relations with India. It is not clear from Jinnah’s speeches and the few writings he left behind as to what were his precise intentions with respect to the role of religion in the state of Pakistan. He often spoke about the need to be guided by the teachings of Islam.

This was inevitable since he had used the idiom of religion to make his case for a separate homeland for the Muslims of South Asia. But it appears that he was inclined to lead the country towards a secular democracy, not too different from the one Nehru and his colleagues were able to enshrine in their country’s constitution. Adopted in 1951, the Indian constitution has proved to be a flexible instrument of governance. It has been amended scores of times to keep it current with the demands of a society that has seen rapid economic and social change.

For Pakistan, the case for keeping religion out of politics was weakened by the unanticipated transfer of population that occurred around the time India and Pakistan obtained independence. I have estimated in an earlier work using the censuses conducted by the two countries in 1951 that some 14 million people moved across the border in a few months in the summer and autumn of 1947. Eight million Muslims migrated from India to Pakistan while six million Hindus and Sikhs moved in the opposite direction.

By 1951, Pakistan had been ‘ethnically cleansed’ — a term that was not used then but gained currency when Yugoslavia fell apart in the early 1990s. For Pakistan the event was traumatic; when the country took its first census in 1951, 25 per cent of its population of 32 million was made up of refugees. What was not realised then but proved to be a political trauma in the long run was the ‘Muslimisation’ of Pakistan.

In the late 1940s non-Muslims in the areas that are today’s Pakistan constituted about a third of the population. Today the religious minorities account for less than five per cent. It was inevitable that with Muslims constituting such an overwhelming share of the population religion would become a greater force. However, it needn’t have bred religious extremism as it did starting in the late 1970s.

While the idea of India worked in India, it did not keep religion entirely out of politics. The BJP, one of the two national political parties in the country, traces its origin to the Rashtriya Swayamsevak Sangh, founded in 1925 to protect what were perceived to be the rights of the Hindu population in British India. The party gained ground in the 1990s by drawing upon the grievances of those who believed that the Indian state had given too much ground to the lower castes in the population and to the Muslim minority.

The party drew support in particular from the Hindus who had migrated from what was now Pakistan. L.K. Advani, the party’s leader in the elections of 2009, was born in Karachi and left for India at the age of 20. The party’s overt pursuit of Hindu interests led to the demolition of the Babri mosque at Ayodhya in the state of Uttar Pradesh. The mosque was supposed to have been built on the ground where Ram, one of the most venerated figures in Hindu mythology, was said to have been born. The assault on the mosque led to riots, in particular in the always restive city of Bombay. Thousands of people were killed, many of them Muslims.

The 2009 elections in India have confirmed the longevity of the “idea of India”. The Congress won handily against the BJP-led alliance as well as the alliance of regional parties that would have liked to see the further weakening of central authority. The decision by the elected government in Pakistan to send the military to chase out Islamic militants from Malakand in the north-eastern part of the country may have ushered in a process that could bring the country back towards religious moderation and political modernisation.

It would not be an exaggeration to suggest that the Indian elections in April-May 2009 and the action against Islamic extremists in Pakistan could cleanse the political systems in the two countries of religious influences. It will require leaders from both sides of the South Asian divide to take advantage of these events.

Predator Monday, June 01, 2009 01:06 PM

[B][U][CENTER][COLOR="DarkGreen"][SIZE="5"][FONT="Georgia"]Regional integration for sustained ‘national’ growth[/FONT][/SIZE][/COLOR][/CENTER][/U][/B]

[B]By Shahid Javed Burki
Tuesday, 01 June, 2009[/B]

GLOBALISATION, the process that allowed relatively free movement of capital, trade and information across national frontiers was meant to create a new economic reality.

As the name given to these processes suggests, countries around the globe were expected to come together and begin to work as the constituents of one economic order.

As Thomas Friedman wrote in his bestselling book published in 2002, globalisation had produced a “flat world” in which capitalism had triumphed. After a struggle that lasted for several decades, capitalism won against socialism and communism as the most efficient and effective way for managing economic affairs.

That “globalisation” would reshape the world economy happened but only to a limited extent.This was for at least three reasons.

One, the world’s smaller nations found that they needed economic mass to deal with the countries that had a larger weight in the global economic system.

Two, capitalism may have triumphed but had a number of flaws of its own.These included not enough concern for the less advantaged countries in the world and for the world’ poor.

Three, multilateral institutions were needed to regulate global transactions that went beyond the flow of goods and commodities. This was particularly the case for financial transactions where national regulatory systems did not serve the purpose. Their absence led to the deep crisis of 2007-2010.

The first development that went counter to globalisation was the organisation of hundreds of arrangements involving a limited number of states. Some countries came together because of geographic proximity; some because they shared common history; and some because of shared culture and religion. Geography was the most common reason for the organisation of economic and trading arrangements. By the end of the 20th century, the global economy had acquired another layer by dividing itself into a number of economic trading blocs.

South Asia followed the trend. In 1986, seven countries of the region agreed to form the South Asian Association for Regional Cooperation, the Saarc. This was done at the urging of the then president of Bangladesh, General Zia ur Rahman. His government did a lot of preparatory work before the countries of the region could be persuaded to subscribe to the Saarc idea.

In 1980, the president wrote a letter to all the heads of state indicating why he believed that it was important for South Asia to have a formal arrangement for addressing common issues. He followed up his letter with visits to all the capitals. The countries of the region agreed but reluctantly. It took them six years to endorse the idea when they met in Dhaka in 1986 for the first Saarc.

President Zia ur Rahman wanted the Saarc to launch the process that would ultimately lead to the creation of a free trade area in South Asia. It took 18 years before this process could begin. It was at the Saarc summit in Islamabad held n January 2004 that it was agreed to begin work on the launching of the South Asia Free Trade Area, the Safta.

The Islamabad declaration was nothing more than the beginning of a process for the eventual creation of a free trade area. The first step towards this end was the ratification of the treaty by the member states. That took more time than originally envisaged. It was only on January 1, 2006 that the process towards creating a free trade area in South Asia was begun with the formal launch of the agreement.

I carried out a study for the US AID on the Safta in 2005-06. Washington’s interest in the matter was related to its desire to bring peace to South Asia that had been long torn by strife. As I will discuss a little later I had been active in a similar way in encouraging the South East Asian countries to create an institutional framework within which they could resolve their differences.

The main purpose of the study was to un derscore the benefits the smaller countries of South Asia could draw from the arrangement and why such an arrangement was beneficial for India, by far the largest economy in the area, as well.

The preparation of the study took me to five South Asian capitals – Colombo, Dhaka, New Delhi, Islamabad and Khatmandu. I also met with a number of senior leaders in the capitals I visited, including President Pervez Musharraf and Prime Ministers Manmohan Singh and Shaukat Aziz. The only places where I found some enthusiasm for the Saarc and Safta were Dhaka and Khatmandu; the former because these organisations were, after all, the result of a Bangladeshi initiative and the latter because it housed the Saarc secretariat.

What are the reasons why the Saarc and Safta as two ideas for regional cooperation have not worked? Are there lessons that the countries in the SAARC could draw from the experiences of other parts of the world, in particular from South East Asia?

Some answers to these questions can be found in the gradual and pragmatic development of the Association of South East Asian Nations, the ASEAN. This is now an organisation that includes ten countries; the original five – Indonesia, Malaysia, the Philippines, Singapore, and Thailand – and later, after the end of the war in Vietnam, three countries of Indochina – Cambodia, Laos, and Vietnam as well as Brunei. Myanmar was recently admitted mostly for geographical reasons.

Historians don’t agree as to the original motivation for the five founding members to associate themselves in a supra-national organisation. According to some, it was Bangkok that wished to form a broad coalition of nations in its neighbourhood in order to balance the American influence on the country. Thailand was an important part of the US effort to contain the spread of communism in the Asia.

According to some other, it was in fact the United States that was behind the move. It wanted the non-Communist countries of the region to work together to work out their differences and to present a slid front to block the advance of Communism. After all, the then Chinese president had, in 1965, urged the people of Asia to rise against their rulers and to bring the masses to power. There may not be a consensus among scholars as toe the motivation of the leaders that created the original ASEAN but there is agreement as to what it made it possible for the organisation to develop.

It was the attitude of Indonesia, the largest country in the association in terms of the size of the population as well as the size of the economy that made the organisation to become a an effective regional enterprise. While it was prepared to be treated as an equal, the smaller countries were, at the same time, prepared to treat Indonesia as the first among equals. There is lesson in this for India. While it is a more dominant economy in South Asia compared to Indonesia in South East Asia, it has to lower its profile in order to provide comfort to the region’s smaller countries. At the same time, the region’s smaller nations and economies have to treat India as by far the most prominent player.

The other important lesson to be drawn from the ASEAN experience is the pragmatic response of several generations of leaders that have guided its evolution over time.

The original agreement has spawned a number of other institutions and forums in response to the changes in the external economic and political environment in which the region has been operating. What was the political dynamics that motivated the member countries not only to remain involved but to engineer practical changes for making it more effective?

While the original motivation may have been political in terms of creating the conditions that would prevent the spread of Communism, that threat has disappeared. Now the member countries find that an association that transcends national interests and makes it easier to deal with the growing competition between two global powers, America and China.

Predator Tuesday, June 02, 2009 08:36 AM

[B][U][CENTER][COLOR="DarkGreen"][SIZE="5"][FONT="Georgia"]Is South Asia emerging?[/FONT][/SIZE][/COLOR][/CENTER][/U][/B]

[B]By Shahid Javed Burki
Tuesday, 02 Jun, 2009[/B]

IF by ‘emerging’ we mean a geographic entity — a state or a region — that has achieved political and social stability and economic dynamism then the term cannot be applied to South Asia. It can only be used for India.

Over the last five years, specifically from 2004 to 2007, the Indian economy finally shook off a sluggish past when the country did not run but lumbered on.

GDP grew at an average rate of close to nine per cent a year compared to just 3.5 per cent in the 40-year period after independence. Income per head of the population grew by more than seven per cent per annum and the incidence of poverty has declined. Some of the cities and states in the country are showing signs of prosperity. The size of the middle class increased significantly; some 200 million people perhaps fall in this category.

The middle class exerts its influence on many aspects of Indian life, with a taste for consumption creating a large market for luxury goods. Indian movies and writers have developed audiences and readers outside the country’s boundaries.

Foreign investors began to take notice of the country, looking at it as a market they could move into and also as a supplier of trained human resource in a world experiencing demographic declines in several places. Large quantities of foreign capital arrived in the country; some of these went into reserves which increased to an impressive level. In 1991 then Finance Minister Manmohan Singh had taken a load of gold with him to London and Tokyo to borrow money to keep the country afloat and save it from bankruptcy. That is now a distant nightmare.

The IT sector continues to show great strength, making a significant contribution to exports. Some other sectors of the economy have also developed remarkably well, among them the health services and pharmaceutical industry. India has become an important destination of what has come to be called “health tourism”.

But can this progress be sustained? The country faces many problems which will have to be faced and overcome before it achieves the status of an economic superpower.

In an issue giving significant space to the Indian elections recently, The Economist provided a revealing summary of some of the problems that remain. “India is a land of bright promise. It is also extremely poor,” it was stated in the lead article. “About 27 million Indians will be born this year. Unless things improve, almost two million of them will die before the next general election. Of the children who survive, more than 40 per cent will be physically stunted by malnutrition. Most will enrol in a school, but they cannot count on their teacher showing up. After five years of classes, less than 60 per cent will be able to read a short story and more than 60 per cent will be stumped by simple arithmetic.”

Nonetheless, the term “emerging” can be easily applied to India. It cannot be to the rest of South Asia. India at this time has a very troubled neighborhood. The most troubled country in the neighborhood is, of course, Pakistan. Its economy is in a freefall. The Economist in the issue cited above estimated a GDP growth rate of only 0.6 per cent for 2009 compared to five per cent for India. Pakistan’s political system is showing signs of life but has a long way to go before it can become stable. Most important, the country is faced with what its senior officials have called an “existential threat”.

Until recently, the leaders of Pakistan showed

a lack of resolve in terms of dealing with the threat Islamic extremists were posing to the country’s integrity as a state. Islamabad first endorsed an agreement entered into by the NWFP government with a group operating in Swat and then, when it became clear that the group had no intention of abiding by the terms of the agreement that called for its disarming, the political leadership ordered the military to launch an all-out offensive against the militants. In contrast to the Indian society’s outlook on its country’s future is the total loss of confidence by the people of Pakistan in their future

Let’s look at Sri Lanka. The government there celebrated in mid-May the triumph of its military over the Liberation Tigers of Tamil Eelam. The rebel leader Velupillai Prabhakaran was killed in the operation. His fight against the Sri Lankan state and his quest for an independent country for the Tamils took the lives of some 100,000 people. The victory scored by the military after nearly 30 years of struggle can bring stability but the administration of President Mahinda Rajapaksa remains controversial.

At a recent meeting of parliament in which he declared victory over the rebels, 20 opposition chairs in the 225-seat chamber remained empty. They belonged to the Tamil National Alliance, the largest group of parties representing the Tamil minority, elected in the north and east of the island. Without full reconciliation with those members of the Tamil community that are prepared to operate within the political system, Sri Lankans will achieve neither political stability nor sustained economic progress.

Proceeding northeast from Sri Lanka along the Indian border and arriving at Bangladesh, we get to a county that is also struggling to find its feet. There are prospects of positive change after the country was returned to the elected representatives of the people in last December’s elections. For two years Bangladesh had been governed by a caretaker administration that first attempted to factor out established mainstream parties from the political system only to work out an arrangement with them for the transfer of power. This was achieved in January when Sheikh Hasina Wajed returned as prime minister as the head of a coalition dominated by the Awami League.

Nepal is also struggling mightily to define itself after having shed the monarchial system of governance that had gone awry. However, it is finding the road ahead a rocky one. Reconciling various disparate elements in the country is proving to be a more difficult task than was originally anticipated.All this raises an important issue. Can India afford to keep aloof from the rest of South Asia or does it have to help the countries around its periphery to become stable? My strong belief is that the Indians would do well to pause and reflect on how South Asia in peace and stability would help India achieve the big-power status. Without that the country could stumble.

Predator Monday, June 08, 2009 03:08 PM

[B][U][CENTER][COLOR="DarkGreen"][SIZE="5"][FONT="Georgia"]Trading ideas with neighbours[/FONT][/SIZE][/COLOR][/CENTER][/U][/B]

[B]By Shahid Javed Burki
Monday, June 08, 2009[/B]

THE movement of goods and people across borders can be blocked by the use of administrative fiat. This is difficult to do in the case of ideas. This is also true for South Asia.
The region has erected all kinds of barriers to inhibit the movement of people and to discourage trade. This is not just the case for the way India and Pakistan have managed their joint borders.There is not as much trade among other countries of the region as the gravity model of trade will have us believe.

According to the model, trade is determined by two things: the mass of trading partners and the distance among them.The size of India and the fact that it shares borders with all countries of the region save Afghanistan and the Maldives, should have meant that India would be the dominant player in the pattern of international trade for the region.That has not happened; the gravity model has not worked for South Asia.

Politics and bureaucratic hurdles – and to some extent protectionist instincts of the policymakers – have come in the way. India should be the main destination of exports for the countries of the region and also the origin of a significant proportion of their imports. This is not the case for Bangladesh, Pakistan and Sri Lanka.

The only countries where this is true are the landlocked Bhutan and Nepal. For them trade links are the consequence of their geography not necessarily the product of public policy.

The South Asian countries, on the other hand, have looked across their borders and learnt a great deal from one another. Most of this learning was done by watching what was happening in other countries. There was little formal exchange of ideas by policymakers – even by think tanks. The forums from where such exchanges could have been exchanged simply did not exist. This was certainly the case with India and Pakistan.

There are some links between Bangladesh and India but even these are sporadic and relatively infrequent. There are no such links between, say, Pakistan and Bangladesh or between Pakistan and Sri Lanka.

In the domain of ideas, although India has been the main exporter, Bangladesh has also been fairly active. Pakistan also briefly played that role when, during the presidency of Field Marshal Ayub Khan, it had begun to be taken seriously as the model of economic success. This was the line taken by the experts drawn from the Harvard University’s Development Advisory Service who had helped with the development of the Pakistani approach to economic progress. Some of the books they wrote were read with a great deal of interest by the development community.

Pakistan, it appeared, had managed to find a cure to a disease that the Swedish economist Gunar Myrdal called the prevalence of the “soft state” in South Asia. This was the state that neither had the political will nor the bureaucratic competence to deal with the strong vested interests that were not keen to see structural changes take place in their societies.

Initially the main idea imported from India was that of the use of central planning to allocate capital among the users favoured by the state. Jawaharlal Nehru, the first Indian prime minister who remained in that position for 17 uninterrupted years, was enamored of the Soviet style of centralised planning.

He had bought the Soviet belief that the only way time could be compressed for converting an agrarian society into an industrialised one was by allowing the state to manage the economy. This was done by Moscow by nationalising all economic assets owned by the private sector. This included land agricultural as well as urban.

In borrowing the Soviet style centralised planning Nehru did not go that far; he did not nationalise private property. But he did put the Indian state on the “commanding heights of the economy”.

What the phrase meant was that the state had the right and the duty to control and guide the private sector – to determine how much it will invest, where will it invest, what and how much it would produce, how it will obtain the inputs required for production, and how would labour be compensated and what would be the conditions under which the workers would work. Thus was ushered in the “licence raj” in India.

What it actually meant for the Indian private sector was described in vivid detail by Gurucharan Das, one of the senior executives of a transnational corporation that had large operations in India. Das’s book appeared after the “raj” was dismantled by then finance minister Manmohan Singh.

Pakistan borrowed the idea of central planning from India and started work on the First Year Plan for the period 1955-60. The document could not be produced for the reason that politics got in the way. It was only in 1958 that the plan’s draft was produced but it was no longer consequential since the period covered by it was almost over.

However, the military government that was in power at that time empowered the Planning Commission to begin serious work on the Second Five Year Plan for the period 1960-65. This was done and the plan began to be vigorously implemented.

It was a great success in terms of producing an unprecedented rate of growth in the economy. Although the idea of centralised planning came from India, the strategy that Pakistan adopted was not Indian in origin. In Pakistan, the government wished to focus on igniting growth in the economy and placing its faith in the “trickle down effect” for helping the less advantaged segments of the society.

There was a different set of objectives in India. There the constitution obliged the planners to focus on the poor. The constitution had directed “the ownership and control of the material resources [should be] as best serve the common good” and that “the operation of the economic system does not result in the concentration of wealth and means of production to the common predicament.” There were no such constraints on the Pakistani planners.

The government headed by Ayub Khan also bought some aspects of the licensing system from India but it was less vigorous than the one the Indians had operated. Pakistan allowed much greater space to the private sector than the Indians did.

It was only after Zulfikar Ali Bhutto assumed power that the private sector came to be tightly regulated. Bhutto in that sense was a “Nehruvian”. But he went a step further. Nehru had eschewed nationalisation as a way of increasing the presence of the state in the economy, preferring to do it by expanding investment in industry by the public sector. Bhutto, on the other hand, resorted to wholesale takeover of private assets by the government. The two-year nationalisation spree by the government in 1972-74 changed in a fundamental way the structure of the economy.

In the early 1990s, both India and Pakistan changed the way they looked at the state as a player in the economic field. Both adopted a series of measures to reduce the presence of the state in the economy.

In that respect, the policymakers did not borrow from each other but followed what was being advocated by development economists working in a number of Washington-based institutions.

Some of the members of the Manmohan Singh team that instituted reforms in India had worked at the World Bank and had participated in the development of the thinking that came to be known as The Washington Conesus. Later, in the early 2000s there was a significant amount of borrowing from India by the government of President Pervez Musharraf as it gave even more space to the private sector.

The conclusion is clear. While the South Asians may not have traded much with one another, they have been quite active in learning from each other’s experiences. If this were to be recognised explicitly it could perhaps help to improve cooperation in other fields as well.

Predator Tuesday, June 09, 2009 12:52 PM

[B][U][CENTER][COLOR="DarkGreen"][SIZE="5"][FONT="Georgia"]A welcome change[/FONT][/SIZE][/COLOR][/CENTER][/U][/B]

[B][I][CENTER]With the Swat operation, Islamabad may have initiated a major change in its worldview. But, to succeed, there must be similar changes in the thinking in Washington and New Delhi.[/CENTER][/I][/B]

[B]By Shahid Javed Burki
Tuesday, June 09, 2009[/B]

HE decision by the government to send the military to chase out the Islamic militants from Malakand may have ushered in a process that can bring the country back to the path of religious mod eration and political modernisa tion. The move represents a major change for the army.

According to one analysis, “the coming weeks are a reckoning for Pakistan’s army. …The … force — long primed for another war against the regional rival India — is now fighting an internal conflict”.

Maj-Gen Athar Abbas, head of the army’s public affairs division, was interviewed by the Financial Times in which he indicated the change in focus in the military’s thinking. If this persists — and there is good reason to believe that it would — it would have enor mous consequences for the country’s rela tions with India and, consequently, for the future of South Asia.

“An existential threat in terms of our internal security has grown over time. It needs our attention and an urgent response,” he told the correspondents of the British newspaper. The thinking is changing but the army is aware of the dangers that are involved. “But we have to be very care ful as we are operating against our own people in their own area. We have to separate the militants from the tribes. We can afford to fight the militants; we cannot afford to fight the tribes,” he continued.

The operation is proceeding at the time of this writing and it is taking a heavy human toll. The UN official responsible for looking after “internally displaced persons” has suggested that the displacement of people by the military’s action in the valley of Swat and in the districts surrounding it has reached proportions last seen in the Rwanda conflict in 1994. Relief agencies were warning that the number of refugees is not likely to stabilise while fighting continues. Soon after the exodus of refugees began from Swat, the UN estimated that the country required half a billion dollars to provide relief to the displaced people. A donors’ conference pledged about half that amount. Last month, the US announced an emergency assistance package for $110m.

“President Obama is determined to match our words with our actions because Pakistan’s government is leading the fight against extremists that threaten their country and our collective security,” said Secretary of State Hillary Clinton in a statement issued to accompany the announcement for the aid package.

This assistance from the United States along with that to be provided by other donors will certainly help Pakistan deal with this extraordinary situation. That said three things need to be underscored in this context. One, Pakistan has experienced a large displacement of people in the past. It received eight million refugees from India soon after the partition of British India and the birth of Pakistan. It hosted three to four million refugees that left Afghanistan and sought refuge in the areas on the Pakistani side of the border.

An earthquake in October 2005 in Pakistan’s north produced another flow of two to 2.5 million refugees. All these were near catastrophic situations, but all of them the government was able to deal with and from all of them flowed political, social and economic consequences that were not antici pated when these displacements occurred. There is no doubt that the Swat displacement will also have similar consequences. What is important is that there is a consensus in the country that this is a price worth paying for dealing with an existential threat to Pakistan posed by the rise of Islamic extremism.

The second area of concern is the nature of America’s deeper involvement in what the current set of American policymakers have begun to call the Af-Pak area. From the sixyear long engagement in Iraq, the Americans are developing a new counter-insurgency approach for this part of the world. That involves considerable focus on winning the hearts and minds of the people who are economically and socially very backward. They need focus on human and physical development — work which will involve not only the provision of funds but also technical knowhow and institution-building.

The Obama administration seems keen to move in that direction but by using unmanned aircrafts — the drones — to hunt and eliminate suspected terrorists, it is produc ing collateral damage. David Kilcullen, who has written on the subject of counter-insurgency after having experiencing it firsthand in Southeast Asia while working for the Australian military, sees serious problems with the use of the drones as a weapon of choice. On a recent visit to Pakistan, he was told that 17 militants had been killed by the drone attacks while 700 civilians also died. He called a two per cent hit ratio “not moral”.

Also the use of air muscle reminds the people of this area of the atrocities committed during colonial times. According to the historian Priya Satia, “Only a permanent end to the strategy will win the Pakistani hearts and minds back to their government and to its US ally. They, like Afghans and Iraqis, are less struck by the strategy’s futuristic qualities than by its uncanny echo to the past: aerial counter-insurgency was invented in precisely these two regions — Iraq and the PakistanAfghan borderland in the 1920s by the British. In the memory of [the] colonial and political dynamics of … aerial strategy in the region Pakistanis see the drones as ‘post-colonial’.” The third concern is even trickier than the first one. It is my belief that the rise of Islamic extremism and militancy is one of those areas that call for a regional solution. But calling the region ‘Af-Pak’ does not do full justice to the regional aspect of the problem. The Obama administration’s instincts were correct when the terms of reference it issued for the appointment of Richard Holbrooke as a special representative to the region implicitly included India.

This led to protests from New Delhi and expressions of considerable satisfaction by Indian officialdom and think-tank community when that reference was removed. But the Indian involvement in dealing with the matter is critical not only because that country has suffered from several acts of terrorism, most recently in Mumbai in November 2008, that can be traced to some terrorist groups operating on Pakistani soil . India also needs to ensure that the countries on its periphery are economically, politically and socially stable. Only then would the rise of extremism in the area be checked.

With the beginning of the Swat operation, Islamabad may have initiated a significant change in its worldview. However, for the effort to succeed, there must be similar changes in the thinking in other capitals, particularly Washington and New Delhi. ¦

Predator Tuesday, June 16, 2009 09:36 AM

[B][U][CENTER][COLOR="DarkGreen"][SIZE="5"][FONT="Georgia"]Transition to a new world economic order[/FONT][/SIZE][/COLOR][/CENTER][/U][/B]

[B][I][CENTER]Resource issues will gain prominence on the international agenda. Unpre- cedented global economic growth – pos- itive in so many other regards – will continue to put pressure on a number of highly strategic resources, including energy, food and water[/CENTER][/I][/B]

[B]By Shahid Javed Burki
Monday, June 15, 2009[/B]

FUTURE is notoriously hard to predict but attempts continue to be made. It would be useful for Pakistan’s policymakers to recognise what the current thinking is in some influential quarters about the shape of things to come.
The recent and most authoritative view of the future has come from the United States intelligence community, according to which the world is becoming multipolar but in a different way. In November 2008, the United States Intelligence Council presented its view of the world in 2025 in Global Trends.

“By examining a small number of variables that we judge will probably have a disproportionate influence on future events and possibilities, the study seeks to help readers to recognise signposts indicating where events are headed and identify opportunities of policy intervention to change or lock in the trajectories of specific events”, says the report.

According to it, the international system will be almost unrecognisable by 2025 owing to the rise of emerging powers, a globalising economy, an historic transfer of relative wealth and economic power from the West to the East, and the growing influence of non-state actors. The report accepts the notion that by that time the inter national system will have several poles of economic activity with the United States declining in relative strength.

Historically multipolar systems have been less stable than those that were dominated by one power as was the system since the collapse of the Soviet Union in 1991. What will be the new centres of economic power and how they will interact with one another?

“Growth projections for Brazil, Russia, India and China indicate they will collectively match the original G7 share of the global GDP by 2040-2050” says the report. However, the BRICs are not likely to work as a cohesive group as did the G7 to a considerable extent under the leadership of the United States. One reason why this group will be unstable is that there will not be one leader in the pack, recognised as such, by other members. This is what the United States-dominated G7 did for that group.

One of the important changes likely to take place in the next couple of decades is the replacement of the AngloSaxon model of capitalism with state capitalism that has already produced some remarkable results for the miracle economies of East Asia. State capitalism is a loose term used to describe a system of economic management that gives a prominent role to the state.

There is a possibility that this model of economic management will also be adopted by some of the developed countries that came under heavy eco nomic stress as a result of the very limited role that was assigned to the state when Reaganism and Thatcherism held sway. These two almost identical ideologies lost favour when the global economy went into a deep recession starting in 2007.

The report recognises the impact of demographic change on the relative economic strength of the world’s large economies. “Europe and Japan will continue to far outdistance the emerging powers of China and India, but they will struggle to maintain robust growth rates because the size of their working age populations will decrease.

The US will be a partial exception to the aging populations in the developed world because it will experience higher birth rates and more immigration”. However, in my view, the impact on the shape of things to come as a result of a number of unexpected demographic changes will be more profound than the report recognises.

Given the steep increase in commodity prices – in particular the price of oil – when the report was being researched upon, the authors place shortages of resources at the centre of their analysis of the future.

“Resource issues will gain prominence on the international agenda. Unprecedented global economic growth – positive in so many other re gards – will continue to put pressure on a number of highly strategic resources, including energy, food and water, and demand is projected to outstrip easily available supplies over the next decade or so…As a result of this and other factors, the world will be in the midst of a fundamental energy transition away from oil toward natural gas, coal and other alternatives.” Among the alternatives wind and chemical power seem to hold the most promise. However, this won’t be the first time that the global economic system would be making such a transition. Such transitions occur about every hundred years or so. Each transition produced a new economic order. The industrial revolution saw the transition from wood to coal and thus to steam power as the source of energy. The ability to produce electricity and transmit it over long distances contributed to the rise of the United States as a leading global economic power. The current transition will also shake up the global economic order.

Energy is not the only resource that has come under pressure. Water is another. “Lack of access to stable supplies of water is reaching critical proportions, particularly for agricultural purposes, and the problem will worsen because of rapid urbanization worldwide and the roughly 1.2 billion persons to be added over the next 20 years. Today experts consider 21 countries, with a combined population of about 600 million to be either cropland or freshwater scarce. Owing to continuing population growth, 36 countries, with about 1.4 billion people, are projected to fall into this category by 2025.” This includes Pakistan.

Understandably the report also included climate change as a cause for global restructuring since its consequences will be spread unevenly across the globe. The Bush administration’s skepticism not withstanding, a consensus has been reached among economists as well as scientists that climate change is real. A number of reports have been issued including the one authored by Lord Nicholas Stern on Britain who developed estimates of both the cost of not taking action to arrest global warming as well as the benefits if such actions were taken.The intelligence community gave this matter the attention it deserves.

“Climate change is expected to exacerbate resource scarcities. Although the impact will vary by region, a number of regions will begin to suffer harmful effects, particularly water scarcity and loss of agricultural production.” Climate change will add to the growing food problem; the prospect of regional shortages was real. The World Bank had estimated that demand for food will rise by 50 per cent by 2030 as a result of growing world population, rising affluence, and the shift to Western dietary preferences by a larger middle class.” This also happening in Pakistan.

In the view of the intelligence agencies, future global conflicts would be the result of the pressure on scarce resources because of the shifting pattern of demand for a variety of goods and commodities and not because of ideological differences.

The threat posed by Islamic extremism was downplayed by the report even though “in the absence of employment opportunities and legal means for political expression, conditions will be ripe for disaffection, growing radicalism and possible recruit ment of youths into terrorist groups…In those countries that are likely to struggle with youth bulges and weak economic underpinnings – such as Pakistan, Afghanistan, Nigeria, and Yemen – the radical Salafi trend of Islam is likely to gain traction.” But even then, some of the countries most affected by the rise of Islamic extremism seem to be tiring of it. Those that had large middle classes such as Pakistan and Egypt were anxious to shake off this legacy and join the global economy and the evolving global governance system as responsible players.

In light of all this how was the world likely to structure itself? It seemed unlikely that a big and cohesive world order would emerge and would be centred around the emerging centres of economic power.

“Greater Asian regionalism – possible by 2025 – would have global implications, sparking or reinforcing a trend toward three trade and financial clusters that could become quasi –blocs with the ability to achieve World Trade Organisation (WTO) agreements. Regional clusters could compete in setting trans-regional product standards for information technology, biotechnology, nanotechnology, intellectual property rights, and other aspects of the ‘new economy’. On the other hand, an absence of regional cooperation could help spur competition among China, India, and Japan over resources as such as energy.”

04:50 PM (GMT +5)

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