ISAS Brief 2011

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ISAS Brief 2011


ISA S Brief No. 184 – 07 January 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

History May Not Repeat Itself For Pakistan Shahid Javed Burki 1

Abstract Pakistan is currently facing a serious political crisis. It has many dimensions – economic, political, and extremism inside and outside its western borders. It is the rise of extremism that poses an existential threat to the country. In fact, the Pakistani society is at war with itself with extremist elements challenging the writ of the state. To deal with the growing extremist threat will need progress on the economic and political fronts. That said, there is some expectation that history will not repeat itself with another military intervention that happened on several occasions in the past. Some counter forces – an independent media, a rising middle-class and civil society institutions – are likely to prevent the collapse of the Pakistani state.

Pakistan’s history may not repeat itself this time around. The military may not intervene in politics as it did in the past whenever it felt that the country was moving on the wrong track. What the country is witnessing this time in terms of social and political instability and economic distress has no precedence in history. Yet in the past, lesser turbulence was reason enough for the military to step in to ‘save the country’. This happened four times in the country’s turbulent past.

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Mr Shahid Javed Burki is Visiting Senior Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore. He can be reached at isassjb@nus.edu.sg. The views reflected in the paper are those of the author and not of the institute.


In 1958, General Ayub Khan, the Commander-in-Chief of the army, was convinced that the frequent changes in the government with a new prime minister being sworn in every few months justified the staging of a coup d’etat. He threw the civilians out and established a military government that ruled for almost eleven years. In 1969, General Yahya Khan, the army’s Commander-in-Chief, thought that a popular campaign against the government of Ayub Khan prompted by an increase in the price of sugar was a good enough reason to stage another coup d’etat and assume the presidency for himself. He ruled for almost three years and saw the breakup of Pakistan with the province of East Pakistan gaining independence as Bangladesh after a bitterly fought civil war. In 1977, unhappiness with the alleged rigging of the elections held that year by the civilian government headed by Prime Minister Zulfikar Ali Bhutto brought large number of people out in the streets and the military was back in power, this time under General Zia ul-Haq. The General also governed as President for eleven years. He was replaced by a series of civilian governments – seven of them, counting the interim governments that were in office to prepare the country for repeated general elections – after his death in an unexplained aircraft crash. The civilians attempted to sideline the military but did not fully succeed. It was one of these attempts – by Prime Minister Nawaz Sharif when he tried to replace the army chief of staff, General Pervez Musharraf – that led to another spell of military rule. President Musharraf governed for almost nine years. In January 2011, Pakistan faces an existential threat even greater than the one it had to deal with after it lost its eastern ‘wing’ in December 1971. The government and the society has been challenged by several extremist groups whose declared objective is to establish an Islamic order in the country that embraces all aspects of life – the economy, the legal and political systems, relations with the outside world. The economy is in deep trouble and is unlikely to grow at a rate higher than the rate of growth in population. This will mean adding perhaps as many as 10 million people to the already large pool of poverty. Most of the new poor will be in the urban areas, to which belonged the assassin of Punjab Governor Salman Taseer. They will be willing recruits to the extremist cause if the economy cannot find productive jobs for them. The political structure is still in the process of being erected. Two days before Taseer was gunned down in Islamabad, the government headed by Prime Minister Yusuf Raza Gilani lost its working majority in the national assembly. This means that it can be brought down anytime the opposition is able to settle its own differences and move a vote of no-confidence against the prime minister. Economics once again was the immediate cause of the government’s predicament. It is obliged to reform the tax revenue system if it wishes to receive a large tranche release from the International Monetary Fund (IMF). The IMF wants Islamabad to introduce what is effectively a value-added tax in order to increase the pitifully low tax-to-GDP ratio. This 2


is not supported by the Muttahida Quami Movement (MQM), the only political party that has a strong urban and middle-class base. The party considers a value-added tax to be a burden on the urban poor and the urban middle classes. Instead, it wants a tax structure that does not have the loopholes through which the rich can walk out with impunity. It wants the government to cut down on its own expenditure, much of which it regards as wasteful. It is troubled by the seeming increase in corruption. Of all the many problems the country faces at this time, none poses a greater threat than extremism. For many who subscribe to the ideology espoused by the people who have gone to the extreme of the society, taking innocent lives through acts of terrorism is a legitimate device for achieving their goals. Any serious attempt to interfere with their campaign can result in heavy losses, including the cold-blooded murder of those who challenge their ways. This is the reason why Salman Taseer, the governor of Punjab, the country’s largest and most prosperous province, was gunned down by his own guard in a public place. The guard voluntarily surrendered himself and his weapon to the police after the killing with the chilling statement that he had achieved his mission. What is very troubling for the more moderate segments of the society is not only this political assassination, but the fact that it was endorsed by 500 religious leaders who issued a statement after the governor’s killing, approving the act. Whether the mission was really achieved will remain a question hanging over Pakistan for as long as the will of the majority does not prevail over the very small minority who are prepared to use extreme measures to exert their influence. To this interplay between rising extremism, poorly performing economy and a political system still working to find its feet, must be added the problem in the country’s western border where the Taliban are aiding the non-government groups fighting the United States (US) in Afghanistan. Washington would like to see Islamabad show greater resolve to eliminate the sanctuaries in its tribal areas from which these groups operate. The use of unmanned drone aircrafts by the US to kill the Taliban leaders has also resulted in the deaths of many civilians living in the area. This has caused enormous resentment against the Americans in the country and is adding to the popular support of Islamic militancy. If one were to trace the cause and effect of Pakistan’s current predicament, which development would be placed first? Should we consider the failure of the economy the cause for the rise of extremism? Is it extremism that is hurting the economy? Is the aggressive posture adopted by the Obama administration in the Afghan war giving the extremists the platform from which to operate? Historians will debate these questions for a long time. What is clear, though, is that Pakistan at this time is moving through a perfect storm. The military appears to have concluded that changing the commander of the ship would not help to navigate it towards the safety offered by the shore. What is needed is a concerted effort that involves all major groups in the 3


society. For them to work together would require a system where their differences can be resolved. This cannot be done by the military, but has to be the responsibility of a parliament that has the elected representatives of the people, a press that watches over the working of the government, and civil society institutions that represent well defined public interests. All these are present in the country and are gaining confidence and experience. Time is on their side.

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ISA S Brief No. 185 – 11 January 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

India’s Inflation: An Alternate Hypothesis S. Narayan 1 Abstract Inflation continues to remain the biggest challenge for economic policy in India. This paper analyses various factors contributing to inflation. It argues that rapid growth of a cash economy fuelled by heavy liquidity and large cash transactions, particularly in property markets, are sustaining inflation. Under such circumstances, monetary policies are likely to be ineffective in curbing prices.

In India, the major index of inflation, or what is considered to be the ‘headline inflation number,’ is the WPI (Wholesale Price Index). There is also the CPI (Consumer Price Index), but there are four different types of CPI indices and this makes it fairly unwieldy. The four are: CPI for Industrial Workers (CPI-IW); CPI for Urban Non-Manual Employees (CPI – UNME); CPI for Agricultural Labourers (CPI-AL); and CPI for Rural Labour (CPI-RL). India is about the only major country that uses a wholesale price index. Almost every other country uses the CPI as a measure of inflation, as this actually measures the increase in price that a consumer will ultimately have to pay for. The weights of items in the CPI and WPI baskets are calculated based on detailed surveys and other calculations. The WPI is published on a weekly basis and the CPIs, on a monthly basis.

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Dr S. Narayan is Head of Research and Visiting Senior Research Fellow at the Institute of South Asian Studies, an autonomous research institute at the National University of Singapore. He was the economic adviser to the former Prime Minister of India, Mr Atal Bihari Vajpayee. He can be contacted at snarayan43@gmail.com. The views reflected in this paper are those of the author and not of the institute.


Inflation indices are only as good as how well they are constructed 2 and the different weights that are assigned to the items in the basket. The inflation rate can, in theory, be manipulated by adjusting the weights of certain commodities. Another problem sometimes with an inflation index, and by definition the inflation rate, is that it can suffer from what is the base effect. Since inflation is typically calculated on a year-on-year basis, the inflation rate always depends on the base and that can sometimes either exaggerate or underplay the inflation rate. The WPI in its role as a guide to policy formulation has several critical imitations that include non-inclusion of services, following a fixed weighting scheme while the economy is undergoing major structural changes, and the inability to capture data on final purchases by the consumer. If one actually looks at the CPI basket in the United States, rent has a fairly high weight. Also, the fact that nearly every country uses CPI as a measure of inflation clearly indicates that CPI is a better index.

Figure 1: Monthly Inflation in India based on WPI (March-October 2009)

Inflation has been high all through 2009. The situation worsened during 2010. Food inflation jumped from 8.6 per cent during the week ending of 27 November 2010 to 9.5 per cent for the week ending 4 December 2010. It then increased to 12.1 per cent in the following week and further to 14.4 percent in the week ending 14 December, due to high prices of onion and milk. 3 Monetary policy actions in any country are based on the inflation rate. But in India it can be argued that monetary policy is being done looking at the wrong inflation rate. In fact, during December 2010, the CPI was higher than the WPI. This should mean that the interest rate should be higher than what it is now. Last year, the Reserve Bank of India (RBI) hiked policy rates six times to curb inflation, but in its review in December, RBI did not 4 increase the key rates due to the tight liquidity situation. 2

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http://advances.mse.ac.in/making/WPI%20Evolution%20of%20the%20Weighting%20Diagrams.pdf. Accessed on 10 January 2011. The Hindu Business Line (5 January 2011). Monetary Policy Review, Reserve Bank of India (16 December 2010).

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The persistent inflationary pressures are becoming a source of major concern for the economic policymakers as well as the politicians. There appears to be several facets to the problem that are exacerbating the difficulties in managing the situation. The fiscal policies of the government, since 2008, have been expansionary. In 2008-09, the budget provided for the write-off of agriculture loans, an extension of subsidies for oil and fertilizer, an expansion of the flagship National Rural Employment Guarantee Programme (NREGP) and an increase in the Minimum Support Price (MSP) to agricultural products, particularly rice, wheat and cotton. These measures were coupled with relaxation in financial markets by allowing more derivative and future products, greater flexibility for external commercial borrowings (ECBs) and an increased lending programme for infrastructure projects. All these measures induced substantial liquidity into the markets. Most importantly, the direct grants to smaller towns and rural areas have expanded the operations of the cash economy in these areas. It must be emphasised that most rural areas, especially in the fertile rice and wheat growing regions of Bihar and Uttar Pradesh, are underbanked, and traditionally, economic transactions are carried out in cash. Further, there are no taxes on agricultural production. Hence, the entire agricultural sector in India which constitutes around 20 per cent of the Gross Domestic Product (GDP) is essentially cash-generating and a cash economy sector. In short, government policies and schemes have resulted in substantial cash being injected into rural areas and small towns in the last two years. For example, the allocations under the NREGA (National Rural Employment Guarantee Act) have been close to US$10 billion for each of these two years and have been in form of cash grants for unskilled labour. At the same time, receipts from disinvestment in Public Sector Undertakings 5, sale of 3G spectrum and robust taxation revenue, coupled with a slowdown in planned expenditure, has resulted in governmental balances with the RBI being substantially positive, as at the end of November 2010. At the corporate and bank levels, therefore, there has been a shortage of liquidity and banks have increased interest rates for medium term deposits. This has turned the monetary stance of the RBI into a cautious one. At one level, they are watching the inflation very carefully, fully aware that these pressures could well jeopardise the growth story. At another level, the shortage of liquidity is affecting business sentiments and overnight call money rates and kerb money rates are ruling at all time high. There is considerable evidence available for this mismatch between the liquidity in the goods and services economy and that in the secondary, non-monetised economy. 6 Real estate prices have increased by 30 per cent (year-on-year) in 2010. There has been a sharp increase in equity prices by about 55 per cent during January through December 2010 with Indian investors and mutual funds exiting markets after profit booking, while FIIs (Foreign Institutional Investors) remain major investors. Prices of agricultural commodities have been 5 6

The Coal India Limited (CIL) disinvestment alone fetched US$3 billion. Indian Realty News, http://indianrealtynews.com/category/property-prices. Accessed on 10 January 2011.

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shooting up, and there is evidence that the onion price spurts in November and December 2010 were due to stocking of produce by intermediaries; some indications of threat of dehoarding operations led to prices falling as supplies reached the market. Food price inflation has also been partly due to intervention by commodity traders who have seen this as an opportune investment during inflationary circumstances. These are all cash markets. Real estate deals involve substantial cash transactions, as reluctance to pay property registration charges and capital gains taxes persuades both buyers and sellers to settle for a bulk of the transactions in cash. Indeed, more than 90 per cent of all real estate transactions include large cash components. This is especially true in the smaller towns where there is a surplus of liquidity. The above effects are exacerbated by other less-discussed but equally powerful influences. The 2009 election is estimated to have cost around US$10 billion on account of substantial cash expenses in arranging for election expenditure as well as for wooing voters. Real estate purchases in several states by people in the political hierarchy as well as those usurping rent from government activities is another source of cash. There is evidence that the size and scale of corruption among politicians and bureaucrats is quite significant. A recent report 7 suggests that India lost an estimated US$213 billion in illegal capital flight. It is possible to argue that a substantial amount would also have been generated as flows within the country from bribery and corruption. Current estimates of the cash economy in India are around 40-45 per cent of GDP, of which the share of agriculture, at around 20 per cent, can be argued to be the legitimate part, the rest being largely illicit cash flows from transactions listed above. It is therefore possible to argue that with liquidity of close to INR two lakh crores (approximately INR2 trillion) in the economy distorting effects of policies, it would be difficult for fiscal and monetary policy measures to correct the inflationary pressures in the short or even medium term. As long as cash transfers to rural areas continue, and illicit flows augment the black market economy, monetary policy measures are unlikely influence inflation. Tax to GDP ratios have stagnated and are currently around 7.7 per cent, which is close to 7.6 per cent witnessed in 1990-91. 8 The economy has grown fourfold since the early 1990s and one would have expected that tax compliance measures and reforms in taxation would have improved the ratio to at least 10 per cent. That this has not happened is yet another indicator that the parallel cash economy has been growing at perhaps the same rate as that in GDP, if not faster. The above arguments indicate that the government would be hard put, through conventional monetary measures, to have any impact on inflation. There is a possibility that an emphasis 7

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Dev Kar, ‘The Drivers and Dynamics of Illicit Financial Flows from India: 1948-2008’, Global Financial Integrity (November 2010). India Economy Review, Special Issue (30 September 2010), pp.45.

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on greater tax compliance, improvements of institutions and procedures, and even a short term tax amnesty to bring the cash economy into the legal balance sheets, may be a measure that would improve the government’s fiscal revenues, while at the same time reining in the free play of the cash economy. .....

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ISAS Brief No. 186 – 27 January 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Global Realignment: Significance of Hu Jintao’s Visit to the United States for South Asia Shahid Javed Burki 1

Abstract The recently concluded visit by the Chinese President Hu Jintao to the United States (US) is significant for South Asia. The main purpose of the visit was to reset the relations between these two global powers – one that was unchallenged for a couple of decades as the sole superpower, and the other that is surging ahead economically and militarily – with the aim of producing a more stable global order. The American tone at the formal meetings in Washington was very different from the one used by President Barack Obama during his visit to Beijing in November 2009. Then he had welcomed China to a shared position with the US in the emerging world order, a kind of G2 arrangement. This time the American President talked about cooperation and competition between the dominant powers. The Hu visit came after Mr Obama’s trip to India in which he promised a larger role in world affairs to the other rising Asian power. Washington seems to be moving away from a G2 world to a multipolar world. The paper examines the reasons for the shift in tone and the implications for South Asia.

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Mr Shahid Javed Burki is Visiting Senior Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore. He can be reached at sjburki@yahoo.com. The views reflected in the paper are those of the author and not of the institute.


Introduction President Barack Obama’s state visit to China in November 2009 was meant to introduce a new economic and political order in which most of the direction would be provided by Washington and Beijing working together within a new framework dubbed the G2. China seemed less willing to play the role that was being assigned to it by the new US leadership. Neither side made much progress after the Obama visit. There were few breakthroughs but also many differences lending edginess to the bilateral relationship. The Americans wanted the Chinese to adopt a tougher stance towards North Korea whose activities on uranium enrichment has caused great anxiety in the US. On economic issues, there was the perennial US concern about an undervalued Chinese currency that gave the country tremendous advantage in international trade. The Chinese were less welcoming of American investments and less open to allowing US companies to bid for government contracts than Washington had expected. The US also continued to worry about China’s lax attitude towards protection of intellectual property. Washington was also concerned about the aggressive posture adopted by the Chinese military. There were also usual concerns about human rights in China, exacerbated by the way Beijing reacted to the award of the latest Nobel Peace Prize to dissident Liu Xiaobo, who was serving an eleven-year prison term in China. On the Chinese side, worries and complaints were equally long. They included Washington’s failure to bring under control its large fiscal deficit which, Beijing believed, was the main cause of the trade imbalance between the two countries. Sale of American arms to Taiwan and Washington’s continued support to the Dalai Lama were even bigger thorns in the relationship. The year 2010 ended with both sides wary and suspicious of each other’s intentions. As a Chinese journalist put it at the joint press conference addressed by Presidents Hu and Obama, there was ‘strategic mistrust’ between the two countries. 2 There was apprehension in Beijing that the US was seeking to encircle China and suppress its rise.

The India Factor There was some fear in Beijing that in dealing with China, Washington was using the tactics it had employed during the height of the Cold War against the Soviet Union. Then, Washington had established a series of formal alliances involving countries around the periphery of the Soviet Union. This time around, Washington seemed to be concentrating its attention on India, Asia’s other rising economic and military power. President George W. Bush had initially adopted that approach. President Obama was initially reluctant to follow his predecessor. However, he appears to have changed his mind midway through his first term. He went to India exactly a year after his visit to China and indicated that America’s 2

Michael Wines, ‘In words at least, subtle signs of progress in U.S.-China relations’, The New York Times (20 January 2011), p.A12.

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relations with India would shape the 21st century. In Mumbai and New Delhi, the two cities on his itinerary, the American President repeatedly declared that India was no longer rising, but had already risen. These messages were not lost on Beijing which launched its own efforts to cultivate the large Asian neighbours. In December 2010, a month after President Obama’s visit to India, Wen Jiabao, the Chinese Prime Minister, visited India and Pakistan for reminding the two countries about what China’s growing economic strength could do for them. 3 During the visits the Prime Minister announced large investment programmes by China in several sectors of the two South Asian economies. The message was clear: unlike the US that faced many economic and financial difficulties, China had necessary resources for developing South Asia.

The Hu Visit There were several aspects of the visit by President Hu Jintao that pleased the US government as well as analysts. The US under President Obama changed its earlier position with respect to pressurising the Chinese leadership for greater progress on human rights. Earlier in the Obama presidency, the US administration had adopted a soft approach towards China on this issue. In 2009, soon after assuming office, Secretary of State Hillary Clinton had said that advocacy for human rights in China should not interfere with negotiations over climate change and the global financial crisis. These two problems, Washington believed, were much more important and needed China’s cooperation. The dialogue with Beijing had to focus on these and was not to be distracted by other concerns. Subsequently, the Obama administration seems to have concluded that given China’s rising economic stature, it was essential to focus on human rights, not because it was the right thing to do, but also because it would bring political and social stability to the country. According to some observers, ‘Obama’s shift on human rights reflects a realisation among administration officials that a rising China that remains a one-party state could ultimately be more unstable and more unpredictable than a nation moving ahead with democratic reforms.’ 4 President Hu also recognised that it was important for his country to move towards a more open society. But he argued that more time was needed before that journey could begin. ‘China is a developing country with a large population, and also a developing country in a crucial stage of reform’, he told reporters at a joint press conference addressed by the two 3

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See, Shahid Javed Burki, ‘China’s play in South Asia’, ISAS Working Paper No.120 (20 January 2011), for a discussion of the Chinese Prime Minister’s visit to South Asia. http://www.isas.nus.edu.sg/Attachments/PublisherAttachment/ISAS_Working_Paper_120_-_Email__China%27s_Play_in_South_Asia_24012011124058.pdf. Accessed on 26 January 2011. John Pomfret and Scott Wilson, ‘Obama presses China leader on rights’, The Washington Post (20 January 2011), pp.A1 and A6.

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leaders. ‘In this context, China still faces many challenges in economic and social development. And a lot still needs to be done in China in terms of human rights.’ 5 These remarks were meant for his Western audience. While reporting to the domestic audience on the Hu visit, the state-controlled Chinese media censored his statement by excluding the reference to human rights. 6 China made several small concessions to the US. These were reflected in the joint statement issued by the two countries following the discussions in Washington 7 as well as in the agreements signed by various Chinese entities for importing American products. Among the deals announced was one in which China authorised various airlines in the country to buy 200 airplanes from Boeing. Chinese firms also signed railway and energy contracts with General Electric and concluded a joint venture agreement between Honeywell and Haier, a Chinese appliance maker. Beijing also agreed to relax controls over government procurement for allowing American companies with operations in China to bid for government contracts. ‘All told the [American] officials claimed that these deals would support 235,000 jobs in 12 states, but the precise nature of each deal was unknown.’ 8

Conclusion Most observers gave the Hu state visit a passing grade. According to Michael Green, a former National Security Council Advisor, ‘the most important thing they did was, for the time being, put a floor under the relationship after a very bad year. No one expected a transformational summit, but if you graded it pass-fail, I say they passed.’ 9 From a South Asian perspective, the most important outcome of the visit was the signal that went out to India that President Obama and his administration were prepared to correct the course they had set earlier. They were persuaded that they had moved in the wrong direction. Upon taking office, the first impulse on the part of the new administration was to step back and allow Beijing to have greater economic and political space. This message was read by the Chinese as Washington recognition that it was a declining power. It was also seen as a weakness on Washington’s part in its dealings with Beijing. President Obama’s pronouncement during his first official visit to Asia in November 2009 might have contributed to greater assertiveness on China’s part in international affairs. A year later, in November 2010, especially during his stay in India, the American President sent a different 5 6 7

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Ibid. Keith B. Richburg, ‘Hu’s remarks censored back home’, The Washington Post (21 January 2011), p.A6. The White House, ‘U.S. & China: Building a Positive, Cooperative and Comprehensive Relationship’, www.whitehouse.gov/the-press-office/201. Accessed on 3 January 2010. Helen Cooper and Mark Lander, ‘Obama raises human rights, pressing China’, The New York Times (20 January, 2010), p.A1 and A12. John Pomfret, ‘For China and U.S summit gets a passing grade’, The Washington Post (21 January 2011), pp.A1 and A10.

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signal by recognising the global importance of a rising India. He and his advisors appear to have concluded that in the new international economic and political order being fashioned, greater space had to be allowed to other rising countries such as India than was the case in the G2 configuration earlier espoused. It was clear that China had read the new message. During his stay in the US, Hu Jintao displayed much greater humility in his pronouncements than he had done during President Obama’s visit to Beijing in November 2009. He also recognised that China had a long way to go before it reaches the pinnacle of global power. The new governing elite in Washington were slow to recognise that an international order not accommodating global diversity will be inherently unstable. India offers not just a counterpoint to China, but an entirely different approach to statecraft. Its active participation in the new global order would bring stability. As Pankaj Mishra notes in his review of a number of new books on India for the Financial Times: ‘According to the west, India is a vibrantly democratic country full of confident tycoons, adventurous entrepreneurs and friendly English speakers, which will counterbalance vaguely menacing China and assist the economic recovery of the west.’ 10 This recognition was on display during the recently concluded state visit by President Hu Jintao to the US. .....

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Pankaj Mishra, ‘Caste adrift’, Financial Times (22 January 2011), p.11.

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ISA S Brief No. 187 – 2 February 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Much Ado about Nothing Ronojoy Sen 1

Abstract The Cabinet reshuffle in India in January 2011 was a damp squib. The major portfolios – finance, home, external affairs and defence – were left untouched. There were only a few relatively minor changes in portfolios and promotions to a handful of ministers. Though a bigger reshuffle has been promised after the forthcoming budget session of the Parliament, the Government seems to have a lost an opportunity to make a statement of intent at a time when the country is besieged by scams, inflation and a Parliamentary deadlock. Not much was expected of the Cabinet reshuffle in India in mid-January 2011. But even by that yardstick, the reshuffle on 19 January 2011 was decidedly underwhelming. At a time when India is being buffeted by corruption scandals, a spike in prices of essentials and a Parliamentary impasse, there was little by way of sending bold signals. Indeed, the UPA (United Progressive Alliance) Government and the Prime Dr Minister Manmohan Singh seemed to have lost an opportunity of countering the impression that they have lost their way over the past few months. All that happened were a few relatively minor changes in portfolios and promotions to a handful of ministers. The major portfolios – finance, home, external affairs and defence – were left undisturbed. The most significant change was the appointment of S. Jaipal Reddy as Petroleum and Natural Gas Minister replacing Murli Deora, who was shifted to the relatively insignificant Corporate Affairs Ministry. Deora’s stint in the Petroleum Ministry has not been without controversy and his close links with business groups have come in for criticism.

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Dr Ronojoy Sen is Visiting Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore. He can be reached at isasrs@nus.edu.sg. The views reflected in this paper are those of the author and not of the institute.


The other prominent change was moving Praful Patel out of the high-profile Civil Aviation Ministry to Heavy Industries and Public Enterprises. Even though Patel was promoted to Cabinet rank, in terms of the profile of the Ministry, this is a distinct downgrading. Again, like Deora, Patel had faced criticism for his link with the private sector airlines as well as for his ineffectual handling of India’s national carrier, Air India, which is in terrible shape. The new Civil Aviation Minister, Vayalar Ravi, will handle this additional responsibility along with his existing charge of Overseas Indian Affairs. Patel’s boss, Nationalist Congress Party (NCP) chief, Sharad Pawar, has also been divested of Consumer Affairs, Food and Public Distribution. Given that food prices have spiralled out of control and with Pawar’s increasing pre-occupation with cricket in his capacity as the President of the International Cricket Council, many had seen this coming. However, one does not know if the new Minister, K.V. Thomas, will be able to tackle the pressing problem of food inflation. Another loser in the reshuffle was Kamal Nath who was shunted to Urban Infrastructure, after having been downgraded last year from Commerce and Industry to Road Transport and Highways. Yet another minister who lost out was Sports Minister M.S. Gill, who was in the hot seat for the controversy-marred run-up to the Commonwealth Games. He has now been put in charge of statistics and programme implementation. Those who gained from the reshuffle were Salman Khursheed who was promoted to cabinet rank with the charge of Water Resources and Minority Affairs, and Sriprakash Jaiswal, who retained the Coal Ministry but was also elevated to Cabinet rank. Both of them are from the crucial state of Uttar Pradesh, which goes to polls next year, and might reflect an attempt by the Congress to regain lost ground there. Yet another Congress leader from Uttar Pradesh, Beni Prasad Verma, has been appointed Minister of State with independent charge of Steel. Among those who were stuck with a heavy workload was Kapil Sibal who continues to hold charge of Human Resource Development as well as Communications and Information Technology, the latter being the toughest job at the moment in the wake of the 2G telecom scandal. Obviously, the feeling is that he is the best man to handle the mess that the Government finds itself in. Handing back the Ministry to Congress’ coalition partner, the DMK (Dravida Munnetra Kazhagam), the party to which A. Raja belonged – under whose watch the 2G scandal happened – is at the moment not being entertained. The other important ministry that did not see any change was the Environment and Forests Ministry, which under Jairam Ramesh has often been in the news for questioning on environmental grounds huge foreign investment projects such as the South Korean steelmaker Posco’s in Orissa (which has now been approved with several riders). There were whispers that Ramesh was being too much of an activist and was rubbing corporates and investors the wrong way. But it seems that the Congress’ high command does not have too many problems with that. The change that came up for some criticism was the shift of former Maharashtra Chief Minister Vilasrao Deshmukh from heavy industries to rural development, the flagship 2


ministry for the National Rural Employment Guarantee Act (NREGA) programme. 2 When Deshmukh was Chief Minister of Maharashtra, farmer suicides had risen sharply in Maharashtra. He also came in for sharp criticism from the Indian Supreme Court for protecting moneylenders in the Vidarbha region of the state. Not surprisingly, the opposition was unimpressed with Shahnawaz Hussain, spokesperson for the Bharatiya Janata Party (BJP), saying, ‘There is no political message in this reshuffle. The Government did not show any courage to remove those who are involved in corrupt practices.’ 3 Why then did the Prime Minister and Congress President Sonia Gandhi go in for this insipid exercise? The only plausible reason one can think of is to show that something was being done to tackle the multiple crises afflicting the nation. But if that was the purpose, it was not served by the reshuffle. It only served to underscore the inability of Manmohan Singh, someone who is seen as personally honest and is much admired by world leaders, to take tough decisions. Part of the problem, of course, is that due to lack of a support base within his party, Singh is dependent on Sonia Gandhi to push through reforms. He has occasionally shown flickers of independence as when he stood his ground on the Indo-US nuclear deal. But on economic reform and the taming of corruption, Singh has been largely ineffective. That has been one of the most disappointing aspects of the current tenure of the UPA Government where it had the numbers to take up big-ticket reform. This was noted by commentator Pratap Bhanu Mehta just before the reshuffle took place, ‘There are so many uncertainties over the next four or five years that if you don’t fix things while the going is good, it is going to be that much harder, later. Given the historic opportunity that India has, they are frittering away precious time.’ 4 This is especially true at a time when the Indian economy is growing at around nine per cent per year. The reshuffle confirmed these fears. Singh has promised a bigger ‘reshuffle’ after the budget session of the Parliament, which is likely to end in mid-April 2011. Although, that begs the question as to why this ‘mini’ reshuffle was taken up in the first place. By just making cosmetic changes, the Prime Minister seems to have done little to stem the sense of drift within the Government. .....

2

Saba Naqvi, ‘All Lather, No Soap’, Outlook (31 January 2011). Jim Yardley, ‘India’s Prime Minister Shuffles His Cabinet’, New York Times (19 January 2011). 4 Jim Yardley, ‘Lauded Abroad, Manmohan Singh is Besieged at Home’, New York Times (18 January 2011). 3

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ISA S Brief No. 188 – 7 March 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

India Budget 2011-12: Scoring Low on Politics Amitendu Palit1

Abstract Politics, not economics, was the main worry for the Government of India on the eve of the latest budget. The budget tried to maintain economic momentum and also address concerns over black money and governance. While it scores reasonably well on the economic front, this paper argues that its political impact may be diluted due to lack of signals on a firm action agenda. The pre-budget annual Economic Survey forecast India’s real GDP (gross domestic product) to grow by around 9.0 per cent in 2011-12. With GDP growth rates of 8.0 per cent and 8.6 per cent in 2009-10 and 2010-11, the forecast appeared realistic. Few would have also disagreed with the Economic Survey’s assessment that the economy had not only recovered from the slowdown caused by the financial crisis, but that the turnaround was ‘fast and strong’. Backed by recovery in GDP growth, pick up in savings and investment, recovery in exports, and signs of distinct improvement in government deficit indicators, most felt that the budget could have hardly had better fundamentals. Other than inflation, which has assumed chronic proportions and refuses to be tamed by either monetary or fiscal measures, there were hardly any other macroeconomic anxieties for the Finance Minister and the United Progressive 1

Dr Amitendu Palit is Head (Development & Programmes) and Visiting Senior Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore. He can be reached at isasap@nus.edu.sg. The views reflected in the paper are those of the author and not of the institute.


Alliance (UPA) government. The main worry for the UPA government and its managers as they went into the latest session of the Parliament and prepared for the budget was the shadow cast by allegations of corruption and the establishment’s perceived inability to address it. The last year saw the Indian establishment getting rocked by various scandals. Scandals are not new to India. But the latest disclosures were shocking in terms of their implications on ‘rising’ India’s main sources of pride such as the private corporate sector, telecommunications and the independent media. Reports flew thick and fast on the nefarious nexus between corporate lobbyists, industry and politics in manipulating business opportunities such as allocation of telecom spectrum. There were also allegations over accumulation of unaccounted resources or ‘black money’ by people occupying public offices. For a government about to enter the second phase of its five-year tenure in office, it was crucial to demonstrate willingness to address these issues. A cosmetic reshuffling of ministerial portfolios a few weeks ago had failed to convince people about its sincerity in addressing the concerns. The Finance Minister in his budget speech mentioned: ‘Certain events in the past few months may have created an impression of drift in governance and a gap in public accountability. Even as the Government is engaged in addressing specific concerns emanating from some of these events in the larger public interest and in upholding the rule of law, such an impression is misplaced. We have to seize in these developments, the opportunity to improve our regulatory standards and administrative practices. Corruption is a problem that we have to fight collectively.’2 Few expected the budget to be an instrument for the Government to signal a positive intent for addressing corruption. But it has tried to do so by announcing a five-point strategy for unearthing black money. Various bilateral double tax avoidance treaties and tax information exchange agreements have been concluded. The capacities of the Enforcement Directorate have been strengthened for addressing money laundering complaints. The Finance Ministry is commissioning a study on unaccounted income and wealth. A national policy on handling the trafficking of narcotics is on the anvil. A group of ministers is expected to study various issues on corruption. And finally, India has been actively engaging various international forums engaged in preventing money laundering and financial integrity. While the action plan for controlling black money is expected to send out a positive signal on corruption, announcing transfer of cash subsidies to the poor is expected to do the same on delivery of public services. Subsidies provided through the budget on refined petroleum products [eg. kerosene and liquefied petroleum gas (LPG)] have often been criticised for their 2

Budget 2011-12, Speech of Pranab Mukherjee, Minister of Finance (28 February 2011), p.2, paragraph 7, http://indiabudget.nic.in/ub2011-12/bs/bs.pdf. Accessed on 2 March 2011.

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inability to reach the targeted beneficiaries. Providing direct cash subsidy to the poor for availing these commodities will serve two purposes. First, only the poor will benefit from the facility as intermediaries will be removed. Second, the subsidy bill in the budget will be reduced leading to a reduction in revenue and fiscal deficits of the Government. The subsidies, however, will probably remain ‘off-budget’ items and would be financed from the Government exchequer thereby continuing to remain financial commitments of the Government. The effectiveness of the system will depend upon accurate identification of people below the poverty line. This is not easy in a huge country like India. The Government’s long-term plan may be to identify the targeted people for subsidies on the basis of the unique identity numbers being prepared. The task force set up on cash transfer of subsidies certainly has its task cut out in preparing the modalities of an effective system. A few other initiatives announced can make differences to the access of the poor to basic needs. These include the announcement to introduce the National Food Security Bill (NFSB) in the Parliament during the current year, indexing wage rates under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) to consumer price indices for agricultural labour, introducing pre-matric scholarships3 for students belonging to scheduled castes and tribes and expanding the scope of the Rashtriya Swasthya Bima Yojana (RSBY) – the state health insurance scheme. Like in the earlier years, the budget retained the emphasis on agricultural credit and rural infrastructure through the Bharat Nirman programme. From an economic perspective, the budget was well-placed to maintain the growth momentum and continue fiscal consolidation. Riding on the buoyant economic activity encouraging a positive outlook for revenue collections, the budget has projected increase in both tax and non-tax receipts. Better revenue collections and expenditure management is expected to maintain fiscal consolidation, which has seen revenue deficit declining to 3.4 per cent in 2010-11. The budget expects effective revenue deficit4 to decline to 1.8 per cent of GDP in 2011-12. Fiscal deficit is projected to decline to 4.6 per cent of GDP in 2011-12 from 5.1 per cent in 2010-11. While these targets are promising and indicate that the Government is back on the track of fiscal consolidation, lowering the fiscal deficit will depend upon mobilisation of capital receipts through sale of equity in public sector undertakings. The track record of the Government has not been particularly good in this respect. Unless public sector equities are sold off in a planned manner, revenue receipts may not be adequate, since unlike the last year, receipts from 3G telecom auctions are not going to materialise this year. How does the budget score on economic and political objectives? On the economic front, there may be some disappointment over the delay in introducing Goods and Services Tax (GST). There will be cheer though over operationalisation of the Direct Taxes Code (DTC) from 1 April 2012. The budget appears to have performed reasonably well within the 3 4

These are scholarships for children below the 10th standard. This is excluding grants for creation of capital assets.

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confines of its mandate though many might have expected some innovative measures for tackling supply shortages and price rises. On the political front, the budget has made an attempt to answer criticism on growth of black money and corruption. In view of the impending state elections and the discontent among people over high prices and bad governance, it has tried to placate people by avoiding sensitive measures like cutting subsidies and by extending income tax reliefs. But these may be too little to influence outcomes in upcoming elections. The budget’s political impact might be diluted due to lack of signals on a firm action agenda.

.....

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ISA S Brief No. 189 – 11 March 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

India’s Tourist Visa on Arrival: One Step Forward and Two Steps Back? Syeda Sana Rahman1

Abstract Since 1991, following the currency crisis and subsequent liberalisation, India has involved itself with what has been deemed the ‘Look East’ policy. In ‘looking East’, towards Southeast Asia, India has sought to forge a greater and deeper economic and political relationship with the region. As economic ties have deepened, the Indian government has made further moves to increase tourist inflows from the region by introducing the tourist visa on arrival (TVOA) scheme in 2010. Although on a limited (but incremental) basis the extension of the TVOA to ASEAN (Association of Southeast Asian Nations) is quite significant in the perspective of India’s mounting engagement with the region, both economically and politically. However, some roadblocks remain, which may well dilute the objective of the scheme. Since its currency crisis and subsequent liberalisation in 1991, India has been engaged in what has been termed the ‘Look East’ policy. The policy, initiated in 1992, was articulated by the then Indian Prime Minister, P.V. Narasimha Rao. 2 Accordingly, India has been ‘looking East’, towards Southeast Asia, to forger greater and deeper economic and political relationships. Since 1

2

Syeda Sana Rahman is Research Associate at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore (NUS). She can be reached at isasssr@nus.edu.sg. The views reflected in the paper are those of the author and not of the institute. See Chak Mun, India’s Strategic Interests in Southeast Asia and Singapore (New Delhi: Institute of South Asian Studies & Macmillan, 2009), pp.2-3.


it started its engagement of ASEAN, India has gone from being a sectoral dialogue partner in 1992 to a full dialogue partner in 1995 and a member of the ASEAN Regional Forum (ARF) from 1996. India and ASEAN have also been holding annual summit-level meetings since 2002. Additionally, the two signed an ASEAN-India Free Trade Agreement (FTA) in August 2009. As economic ties have deepened, the Indian government made further moves to increase tourist inflows from the region by introducing the TVOA scheme in 2010. The scheme was initially extended to Singapore, along with Japan, Finland, Luxembourg and New Zealand starting on 1 January 2010. According to the Indian tourism ministry, by December 2010, over 6,500 tourists from these five countries had travelled into India using the TVOA. Singapore alone accounted for over 1,800 of the TVOAs issues.3 Given this relative success of the TVOA, beginning on 1 January 2011, the Indian government has now extended the scheme to four other ASEAN countries, namely Cambodia, Lao People’s Democratic Republic (PDR), Vietnam and the Philippines. The extension of the TVOA to ASEAN countries, albeit on a limited (but incremental) basis, is significant in light of India’s growing engagement with the region, both economically and politically. Singapore has long been at the centre of India’s ‘Look East’ policy. Indeed, India identified the island-nation as a key partner back in the 1990s, as it recalibrated if foreign (economic) policy towards Southeast Asia, given Singapore’s ‘tremendous strategic location’.4 India’s ties with other Southeast Asian states have also been steadily deepening. In 2008, Choummaly Sayasone, President of the Lao PDR, visited India. This was the first time after 33 years that such a high level visit had taken place. Subsequent to his visit, the Indian President, Pratibha Devisingh Patil, also visited Laos in September 2010. The two states have also signed a number of bilateral agreements to boost both economic and military ties.5 Indeed, India is now one of three countries training Laos defence personnel in English, computing and basic tactics.6 India’s economic and political relations with Cambodia have also improved in recent years with India providing bilateral financial assistance to Cambodia to help develop infrastructure – 3 4

5

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Singapore ranked second behind New Zealand at 1944 TVOAs issued. Amitendu Palit, ‘India’s Economic Engagement with Southeast Asia: Progress and Challenges’, ISAS Working Paper No.60, Institute of South Asian Studies (2009), p.1; Kripa Sridharan, ‘The Evolution and Growth of IndiaSingapore Relations’ in Yong Mun Cheong and V.V. Bhanoji Rao, Singapore-India Relations: A Primer (Singapore: Singapore University Press, 1995), p.33. These include a Bilateral Investment Promotion and Protection agreement in November 2000, an agreement on Cooperation in Defence in November 2002, an agreement on Cooperation in Science and Technology in June 2003, and an agreement on Cultural Exchange Programme for the years 2011-2013 in September 2010. See ‘India-Laos Relations’, Ministry of External Affairs, Government of India (February 2011), http://meaindia.nic.in/meaxpsite/foreignrelation/laopdr.pdf. Accessed on 1 March 2011. Ibid. The other two countries are Vietnam and China.

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including electric transmission lines and irrigation networks.7 Additionally, since 2003, India has been aiding in the restoration of the Ta Prohm Temple in Siam Reap.8 Similarly, India’s trading relations with the Philippines and Vietnam have also improved. India’s trade with the Philippines has more than trebled, going from US$338.50 million in 2001-02 to US$1061.84 million in 2009-10.9 In that same period, India’s trade with Vietnam grew over ten times to hit US$2.75 billion in 2010.10 Given the increased political and economic interactions between India and the ASEAN countries, the TVOA is both a logical and welcome next step in the development of India’s ties with Southeast Asia. Nevertheless, despite the apparent convenience of having the TVOA scheme, some bottlenecks remain that may eventually scupper the potential for increased people-topeople interactions. The TVOA provides for a single entry trip into India for a maximum of 30 days and is issued at the major Indian airports in Delhi, Mumbai, Kolkata and Chennai. 11 However, to prevent misuse of tourist visas by people staying long term in India and going on visa-runs to neighbouring countries, the Government has also introduced some measures that water down the benefits of the TVOA scheme. First, there has to be a gap of at least two months between two visits to India (this applies to all tourist visas, including multiple entry visas) and second, a maximum of two TVOAs are to be issued within a year to any individual.12 Also, for tourists planning on using India as a base to visit neighbouring countries as well, the Indian government has allowed for up to three entries into India within a year – provided that the said tourist can provide adequate documentation in the form of plane or train tickets, hotel bookings and ‘detailed itinerary’ at the nearest Indian mission or at the immigration check posts.13 Thus, it becomes very important for all potential visitors to India to ensure they have detailed travel plans even before they enter the country to avoid any problems. Under some circumstances the Government has also allowed for the relaxation of the two-month gap rule. Unfortunately, the requirement for that is not only stringent, but the procedure may also 7

8 9

10

11

12 13

‘India-Cambodia Relations’, Ministry of External Affairs, Government of India (February 2011), http://meaindia.nic.in/meaxpsite/foreignrelation/cambodia.pdf. Accessed on 1 March 2011. Ibid. ‘India-Philippines Bilateral Relations’, Ministry of External Affairs, Government of India (December 2010), http://meaindia.nic.in/meaxpsite/foreignrelation/philippines.pdf. Accessed on 1 March 2011. ‘India-Vietnam Relations’, Ministry of External Affairs, Government of India (February 2011), http://meaindia.nic.in/meaxpsite/foreignrelation/vietnam.pdf. Accessed on 1 March 2011. ‘Tourist Visa On Arrival (T-VoA) Scheme’, Ministry of Tourism, Government of India (not dated), http://tourism.gov.in/events/visa.pdf. Accessed on 1 March 2011. Ibid. ‘Frequently Asked Questions Relating To Tourist Visa’, Ministry of Home Affairs, Government of India (not dated), http://mha.nic.in/pdfs/FAQ-TVisa280710.pdf. Accessed on 1 March 2011.

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prove too involved for it to be useful. According to the Indian Ministry of Home Affairs, a tourist may re-enter India within two months of a previous visit ‘only in emergent situations like death/serious illness in the family, non-availability of flights to return to his/her country of origin or travel to another country or any other exigent situation which can be duly justified with proper documentation to the satisfaction of the Mission/Post granting the permission.’.14 Additionally, those tourists that are granted permission to enter India within two months must “register himself with the FRRO/FRO (Foreigner Regional Registration Offices) within 14 days of arrival...preferably at the first place of entry’.15 While the need for safeguards is understandable given India’s concern with visa-abuse, these particular convolutions largely undermine the convenience of the TVOA, as most travellers may prefer to obtain their visas in their countries of origin to avoid any complications. The processes associated with circumventing the two-month gap requirement are also far from hassle free. Finally, the limit on the number of TVOAs to be issued to an individual is also likely to discourage potential visitors from travelling into India frequently. Thus, while the provision of TVOAs may be a giant step forward for India, the fine print attached may well prove to be two (medium) steps back. Clearly, there is a need to retool the tourist visa policies to ensure greater understanding and ease for legitimate travellers, while devising ways to discourage visa-abuse. After all, the point of the TVOA is to encourage people to visit India, not to confound them into giving up on it. .....

14 15

Ibid. Ibid.

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ISA S Brief No. 190 – 15 March 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Restoring Order in Grameen M. Shahidul Islam1

Abstract The removal of Nobel Prize-winning economist Muhammad Yunus from the Grameen Bank in Bangladesh has created a deadlock in the Bank. The stalemate that is widely believed to have deep-rooted political interest is denting clients’ confidence, leading to hasty withdrawal of deposits. This can also prompt some borrowers to refuse to repay their loans, eventually defaulting on their debts owing to a ‘moral hazard’ problem repeating the recent experience in Andhra Pradesh in India. Given the Grameen’s local as well as global role in poverty alleviation through microcredit, an apolitical management with or without Muhammad Yunus needs to be restored as soon as possible, allowing the higher court to act independently. If not handled properly, the ‘Grameen contagion’ can travel well beyond Bangladesh’s boundaries. Following the removal of its founder Muhammad Yunus from the Grameen Bank, growing concerns about the future of the Bank are prompting some depositors to withdraw their savings. Indeed, many analysts and industry experts caution that a sudden exit of Yunus from Grameen and a legal battle between its Board and the Government may dent borrowers' confidence, jeopardising the organisation's future. 2 This is a matter of concern for the financial system of Bangladesh as well as the global prospects of microcredit.

1

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M. Shahidul Islam is Research Associate at the Institute of South Asian Studies (ISAS) in the National University of Singapore (NUS). He can be reached at isasmsi@nus.edu.sg. The views reflected in the paper are those of the author and not of the institute. Fazle Hasan Abed, ‘Statement from Bangladesh Rural Advancement Committee (BRAC) on the recent controversy about Grameen Bank’, BRAC (7 March 2011), www.brac.net/node/861. Accessed on 10 March 2011.


Such loss in confidence may not necessarily lead to a systemic banking crisis, popularly known as a ‘bank run’. But it could be another shock for Bangladesh’s already nervous financial system that barely recovered from the recent crisis in the country’s equity market. This is the last thing a central bank wants to see. It is also important to note that microcredit serves over 20 million poor households in Bangladesh and has the highest penetration of borrowers per square mile in the world.3 Yunus, who was sacked by the Bangladesh Bank alleging that he was past retirement age and was improperly installed in his post, is fighting in the Supreme Court to reverse the decision after the Lower Court dismissed his appeal. But the deadlock in Grameen can take some time to settle given the deep political interest in the case. 4 Consequently, the loss in depositor confidence is not entirely unexpected. Moreover, going by history, financial institutions are the most vulnerable to such shocks. According to MIX (Microfinance Information eXchange) Market, a web-based microfinance information platform, Grameen Bank, which championed the idea of collateral-less credit, has over US$1.2 billion deposits entrusted by eight million depositors, mostly small savers.5 There is another concern as far as Grameen Bank’s lending programmes are concerned. Like depositors, if the debtors assume that the stalemate will not end soon, it may prompt some borrowers to refuse to repay the loans, eventually defaulting on their debts. Such a ‘moral hazard’ problem is highly prevalent across the world. The prevailing situation with regard to microfinance in Andhra Pradesh of India – where a punitive ordinance6 against microfinance business de facto barred microfinance institutions (MFIs) from operating in the state 7 – reinforces the doubt. In the name of protecting borrowers’ interests, the politicisation of microcredit in India’s fourth largest province led to widespread defaults and a major crisis in the country’s microfinance industry. The Grameen Bank’s eight million borrowers have a debt portfolio of over US$ 1.1 billion with a cumulative disbursement amounting to US$8.7 billion as of 2009.8 Similarly, there are several ‘for-profit’ and ‘not-for-profit’ non-government organisations (NGOs) and MFIs in

3 4

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7 8

MIX Market, www.mixmarket.org. Accessed on 8 March 2011. See, ‘You're fired. No, I'm not’, The Economist (3 March 2011); Also see, ‘Is this the way to treat our Nobel laureate?’, The Daily Star (4 March 2011); ‘Yunus Departs as the Empire Strikes Back’, www.bdnews24.com (3 March 2011), http://opinion.bdnews24.com/2011/03/03/yunus-departs-as-the-empire-strikes-back. Accessed on 5 March 2011. Ibid. Andhra Pradesh Microfinance Institutions (regulation of money lending) Ordinance, 2010, http://indiamicrofinance.com/wp-content/uploads/2010/10/Andhra-MFI-Ordinance.pdf. Accessed on 15 March 2011. ‘Microcredit is Not the Enemy’, The Financial Times (13 December 2010). See Grameen Bank, www.grameen-info.org. Accessed on 10 March 2011.

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Bangladesh that are in micro-lending operations disbursing at least another US$1.5 billion and reaching out to over 15 million poor households, excluding Grameen.9 But there is a silver lining in the dark cloud created over Yunus’ ouster: Yunus and Grameen were awarded the Nobel Peace Prize in 2006 for their efforts to create economic and social development from below. This has been the biggest hedge for the bank in the wake of mounting adversities. Credited as the birthplace of modern microcredit, the current situation in Bangladesh is being closely watched across the world with marked concern. The stake in the Grameen crisis is particularly high for microcredit stakeholders around the world, including the global microcredit summit campaign that lately reported that a record 128 million of the world's poorest families received micro-loans in 2009. A recent survey by an international advocacy group reveals that 10 million of Yunus’ fellow countrymen moved above the US$1.25 a day earning threshold between 1990 and 2008.10 This trend cannot be afforded to be reversed. Worse still, the deadlock in Grameen is highly disturbing for the burgeoning microfinance industry, which has been undergoing a fundamental shift as a number of microcredit institutions are evolving from ‘not-for-profit’ to ‘for-profit’ outfits by going public, inter alia. This tectonic shift casts some doubts on whether over-commercialisation will be a disaster for the industry or if this is the way forward for sustaining microcredit.11 Yunus has been highly critical of the commercialisation of microcredit, alleging that such moves are terribly ‘wrong turn’ and worrying ‘mission drift’ in the motivation of those lending to the poor. 12 The proponents, notably Compartamos, a Mexican bank, and SKS Microfinance, the largest bank of its kind in India that allegedly charged very high interest rates13 and enjoyed astounding growth until the recent crisis in Andhra Pradesh, have justified their move in a manner similar to Deng Xioping’s famous observation, ‘The colour of the cat is not important as long as it catches mice.’ Thus, Yunus and Grameen’s roles are even more important in guiding the global microcredit industry at this critical juncture with their threedecade-long experience. Grameen’s contribution is not merely limited to microcredit. Its new vision – again concentrated in poverty – is to develop social business based on the principle that investors and owners can gradually recoup the money invested, but cannot take any dividend beyond 9

MIX Market, www.mixmarket.org. Accessed on 8 March 2011. ‘Microcredit’s Mega Feat’, The Daily Star (28 January 2011), www.thedailystar.net/newDesign/newsdetails.php?nid=171858. Accessed on 8 March 2011. 11 See, ‘Conflicts of Interest’, The Financial Times (6 December 2008); ‘The Battle for the Soul of Microfinance’, The Financial Times (6 December 2008). 12 Mohammad Yunus, ‘Sacrificing Microcredit for Megaprofits’, The New York Times (14 January 2011). 13 Banco Compartamos, ‘Interest Rates, Profits, and an Initial Public Offering’, Consulting Group to Assist the Poor (15 June 2007), http:// cgap.org/p/site/c/template.rc/1.26.4905. Accessed on 11 March 2011. 10

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that point.14 Grameen has already started a number of ventures involving companies like Intel Corporation of the United States (US) and Danone of France, among others. While global capitalism today is in search of an alternative route following the great recession of 2008-09, the idea of social business is considered one way to renew the existing structure by arresting excessive greed and making the system work for the poor. The functioning of Grameen is imperative from another perspective. This is perhaps the most successful homegrown brand that has gone global along with BRAC, the world’s largest NGO, which is a close second. So, protecting the interests of Grameen is critical for the branding of Bangladesh abroad. It is hardly surprising that the removal of Yunus has generated widespread outrage among the large community of expatriate Bangladeshis, who enjoy the intangible benefits of Grameen. International relations experts and economists alike foresee that diasporas are going to play a major role in shaping the new world order.15 Hence, perceptions of the diaspora cannot be overlooked. Grameen’s vision has produced a number of ‘for-profit’ and ‘not-for-profit’ entities aiming at poverty alleviation. All these ventures might not have been highly successful. But Grameen under Yunus’ leadership has led a revolution in microcredit, leading economic and social development from below. Bangladesh’s stride in social sector development, including women empowerment, is no accident given the rampant governance failure in the country. While 26,000 Grameen employees and nine directors of the Board – all women – want to restore its founder’s honour with strong support from literally all corners of the world, a peaceful solution is the only way forward. The Central Bank of Bangladesh and the microcredit regulatory authority of the country should act prudently to restore the confidence of Grameen clients. A strong apolitical management in the Grameen Bank with or without Muhammad Yunus needs to be restored as soon as possible. This can only be done by allowing the court to decide the future of Yunus at Grameen with no political influence from the ruling government. This has to be done for the benefit of millions of poor households across the world. Otherwise, the ‘Grameen contagion’ could travel well beyond the Bangladesh borders. .....

14

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See Yunus Center, www.muhammadyunus.org/Social-Business. Accessed on 15 March 2011. Also see, ‘Social Business: Is the Debate Going to Follow the Footsteps of Microcredit?’, The Financial Express (12 March 2011). ‘Global Paradigms: The Postmodern Thinker’, The Business Times (5 March 2011).

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ISA S Brief No. 191 – 28 March 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

The Raymond Davis Case Rajshree Jetly1

Abstract This paper discusses the Raymond Davis case in the context of Pakistan-United States (US) relations. The Raymond Davis saga demonstrates, once again, the challenges faced by Pakistan as a frontline state in the international war on terrorism and how the Government has to make difficult decisions in balancing its domestic and foreign policy interests.

On 26 January 2011, an American named Raymond Davis shot two young men dead in broad daylight on a busy street in Lahore. Raymond Davis surrendered to the authorities and claimed diplomatic immunity with the support of the US Government. The tussle over how to deal with Davis threatened to spiral into a major crisis between Pakistan and the US, straining the already tense relationship between the two countries. The US pressed for Davis’ release on the grounds that he was protected by diplomatic immunity as prescribed under the Vienna Convention, to which Pakistan was also a signatory. There were also reports of US threats to cut off aid unless Davis was set free. President Barack Obama also personally weighed into the crisis and issued a statement pressing for Davis’ immediate release. The issue was complicated by the uncertainty over Davis’ actual diplomatic status and the fact that Davis was a Central Intelligence Agency (CIA) contractor. According to reports, he was a part of CIA operations ostensibly working outside of Inter-Services Intelligence’s (ISI) knowledge to track militant organisations such as the Tehrik-e-Taliban and Lashkar-e-Jhangvi. This was seen by large sections in Pakistan as interference in their internal affairs. It also inflamed the ISI and the Pakistan military. 1

Dr Rajshree Jetly is Research Fellow at the Institute of South Asian Studies (ISAS) in the National University of Singapore (NUS). She can be reached at isasrj@nus.edu.sg. The views reflected in the paper are those of the author and not of the institute


The Pakistan government was reluctant to be drawn into making an official statement on whether Davis enjoyed full diplomatic immunity, maintaining instead that the case, including the question of immunity, would be tried in Pakistan under Pakistan’s laws. However, it was soon clear that differences of opinion existed between Pakistan and the US on the ‘interpretation and applicability of international and national laws’.2 Both sides adopted strong positions publicly and were put in a difficult situation where they could not compromise without losing face. The question of immunity was ultimately not decided by the courts although the issue was considered by the Sessions Court and the High Court of Lahore. Meanwhile, the US and Pakistani officials were working frantically in backroom negotiations and diplomatic parlays to find a mutually acceptable solution. The military was also involved in the negotiations, reportedly at a meeting held in Oman, between top military officials including Admiral Mike Mullen, Chairman of the US Joint Chiefs of Staff and General Ashfaq Parvez Kayani, Pakistani Chief of Army Staff. The solution finally came not through a resolution of the question of immunity, but through a creative alternative option, relying on Sharia law. There are provisions in Sharia law for the pardon of a crime if the perpetrator pays compensation to the victim or victim’s families and that those parties accept that compensation and forgive the perpetrator. The families had agreed to accept diya or compensation in the total sum of US$2.3 million and forgave Davis on 16 March 2011.3 Davis was then formally acquitted and within hours left Pakistan for the US. While a showdown between Pakistan and the US was averted, the solution did not bring much respite to the Pakistan government reeling under public criticism for its failure to stand up to US pressures. The Davis case is a classic example of realpolitik in action. The stakes were too high for both Pakistan and the US. Pakistan has been under immense stress due to its frontline status in the international war on terror as well as its own rising domestic militancy. There are many people like Raymond Davis in Pakistan and the Pakistan government cannot be seen turning a blind eye to this killing. On the other hand, the US needs to protect its agents who are operating in Pakistan, which was why the US Government was adamant that diplomatic immunity applied. The sad thing is that to some extent truth also became a casualty in this unfortunate episode. By avoiding a trial, there was no finding as to why the killing occurred and who was in the wrong. More significantly, there was no resolution as to the extent of diplomatic immunity that persons such as Davis might enjoy.

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Raja Aghar, ‘Row continuing with US on Davis issue, admits Gilani’, Dawn (22 February 2011), www.dawn.com/2011/02/22/row-continuing-with-us-on-davis-issue-admits-gilani.html. Accessed on 28 March 2011. ‘CIA-ISI Partnership after Davis’, The Friday Times (25-31 March 2011), Vol.XXIII, No.6, www.thefridaytimes.com/25032011/page3.shtml. Accessed on 28 March 2011.

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At the broader level, the Raymond Davis case is symptomatic of deeper issues impinging on Pakistan’s internal and external challenges as well as the US’ own dilemmas in the region. First, the key challenge for Pakistan is to find a balance between maintaining relations with the US on an even keel and coping with an increasingly hostile anti-US climate within the country. Pakistan is in an increasingly difficult position. Its role as a frontline state in the war on terror is imposing an unacceptably heavy domestic burden on it. Caught in the midst of US priorities and rising anti-US public opinion within the country, Pakistan is finding itself with few options. Its equivocal position on Davis’ immunity is an example of its predicament. Affirming immunity would alienate its domestic constituency and denying immunity would alienate the US. Pakistan is heavily dependent on the US for advanced weapons and training of its military. In addition, Pakistan receives a massive package of economic and humanitarian aid. The US’ financial assistance remains crucial to curb rising militancy within the country. For example, the US is expected to sanction US$1.1 billion through the Pakistan Counterinsurgency Fund to help fight militants.4 Pakistan cannot afford to lose that. On the other hand, there is no denying that the US needs Pakistan to achieve success in its war on terror and its strategy towards Afghanistan. The US, however, feels that the Pakistan government and security forces are not doing enough against key insurgent groups operating in Afghanistan. More important, despite repeated US pleas, Pakistan remains reluctant to launch counter operations against the militant groups in North Waziristan, who are using this territory to launch attacks against US forces in Afghanistan. In view of its commitment to gradually wind down its operations in Afghanistan, beginning July 2011, the US pressures on Pakistan are bound to grow in the days to come. The recent drone attack in Dattakhel, North Waziristan, just a day after Davis’ release, only underlines the simmering undercurrents in the Pakistan-US relationship. The resumption of the drone attacks, which had been suspended for a while during the Raymond Davis saga, has led to a public outcry against the US transgressions of Pakistan’s sovereignty. The government in Pakistan has strongly condemned the attack in Dattakhel, which has resulted in heavy casualties amongst innocent civilians including children. Calling it a violation of human rights, General Kayani went on record to say that ‘such acts of violence take us away from our objective of elimination of terrorism.’5 Pakistan has also postponed the trilateral dialogue between the US, Pakistan and Afghanistan scheduled for 26 March 2011. A related challenge that the Davis case has brought to the fore is the fragility of the present coalition government in Pakistan. The Government has been under attack for failure to take 4

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‘Raymond Davis case: Three possible outcomes’, The Express Tribune (19 February 2011), http://tribune.com.pk/story/120866/raymond-davis-case-three-possible-outcomes/. Accessed on 28 March 2011. ‘Rare condemnation by PM, army chief: 40 killed in drone attack’, Dawn (18 March 2011), www.dawn.com/2011/03/18/rare-condemnation-by-pm-army-chief-40-killed-in-drone-attack.html. Accessed on 24 March 2011.

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adequate action in social and economic sectors and address the concerns of the common man – who has been hard hit by rising prices, power shortages, unemployment and challenges of governance, including corruption. The acquittal of Davis has evoked further criticism of the Government for failing to take a firm stand and appearing to accommodate US interest. The extremist sections have lost no time in whipping up passions against the Government which could feed into growing Islamist militancy in the country. The only silver lining is that the settlement of the Davis case under the Sharia law seems to have taken some wind out of the sails of a few extremists, although it has failed to fully placate them. For example, the Jamaat-e-Islami has condemned the release of Davis and called for street demonstrations in protest. The Davis episode shows once again the continuing challenges for the Government in Pakistan. It remains to be seen whether there will be any major fallout from Davis’ acquittal.

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ISA S Brief No. 192 – 30 March 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Tamil Nadu Assembly Elections: Mapping Electoral Alliances and their Strategies Gayathri Lakshminarayan1

Abstract Even days after the process of filing nominations for the April 13 Assembly polls had begun, the political alliances in Tamil Nadu were in a state of flux. The All India Anna Dravida Munnetra Kazhagam (AIADMK) and the Desiya Murpokku Dravida Kazhagam (DMDK) had differences regarding identification of constituencies, while the Vaiko (Vai. Gopalsamy)-led Marumalarchi Dravida Munnetra Kazhagam (MDMK) pulled out of its alliance with the AIADMK and decided to boycott the elections. The incumbent Dravida Munnetra Kazghagam (DMK) government, on the other hand, has finalised seat-sharing agreements with its allies. However, the negotiations between the DMK and Congress had proven difficult, as discussions were held against the perceived weakness of the regional party in the 2G scam controversy and the resolve of the Congress to reposition itself in the state. In what is likely to be a close and contested election, the DMK and the AIADMK are relying on traditional populist strategies such as promising freebies and relying on the film industry to mobilise the voters, apart from electoral arithmetic. This paper attempts to map the two major electoral alliances in Tamil Nadu, the factors which have gone into shaping them and to examine the electoral strategies of the two political coalitions while identifying issues which may influence the outcome.

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Gayathri Lakshminarayan is Research Associate at the Institute of South Asian Studies (ISAS) in the National University of Singapore (NUS). She can be reached at isasgl@nus.edu.sg. The views reflected in the paper are those of the author and not of the institute.


The seven-year old partnership between the DMK and the Congress survived a near collapse during seat sharing talks in March 2011, which threatened to topple the alliance with its gamut of caste-based parties. Talks reached an impasse after the Congress raised its demand from 60 to 63 seats, apart from asking for a choice of constituencies and power sharing. The DMK walked out of the alliance and threatened to pull out of the United Progressive Alliance (UPA) coalition at the centre. According to some political commentators, talks collapsed as the Congress could not make a commitment to prevent or slow down the Central Bureau of Investigation (CBI) from going after the family members of the DMK. The Chief Minister of Tamil Nadu, Muthuvel Karunanidhi, walked out of the DMK-Congress partnership so that he could possibly paint future raids as a form of vengeance.2 It is likely that one of the reasons the DMK gave in was because it needed some backing at the centre, with the arrest of the then Minister of Communication and Techonology, A. Raja and with the CBI raiding of Kailaignar TV. The Kailaignar TV is part owned by Rajya Sabha member Kanimozhi and Karunanidhi’s second wife, Dayalu Ammal. This was also vital to its arithmetic against the AIADMK and DMDK alliance. Congress, on the other hand, which has not won an election since 1967, bargained hard for a choice of seats and power sharing, as the party wants to strengthen its standing in the state. It has been reported that Rahul Gandhi, prominent Congress Party leader and General Secretary of the party, is in favour of building the party up from grassroots and reclaiming its pre-eminent position.3 The ruling DMK will contest 119 seats; Congress will contest 63 seats; and Pattali Makkal Katchi (PMK) whose vote base is the Vanniyar community, will contest 30 seats. Other parties in the group are the Viduthalai Chiruthaigal Katchi (VCK), headed by Thol Thirumavalan, which is expected to bring in the Dalit vote and has been allotted 10 seats; Kongunadu Munnetra Kazhagam, with its voter base in the Kongu region has been allotted seven seats; three have gone to Indian Union Muslim League and one each to Moovendar Munnetra Kazhagam and Perunthalivar Makkal Katchi.4 The AIADMK has released its list of 160 candidates. However, it was unable to finalise the seat sharing with some of its members. Parties in the coalition were upset with the AIADMK’s announcement of contesting 160 seats including constituencies of its sitting allies without consultations. The DMDK at one point was holding consultations to start a third collaboration.5 In an uncharacteristic move, J. Jayalalitha sought to iron out differences 2

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Cho Ramaswamy, ‘Reactions over DMK-Congress split’, CNN-IBN (5 March 2011), http://ibnlive.in.com/news/reactions-over- the-dmkcong-split/145072-37.html. Accessed 10 March 2011. Sabha Naqvi, ‘Worth the three seats?’, Outlook India (21 March 2011), www.outlookindia.com/article.aspx?270838. Accessed on 29 March 2011. T.S. Subramanian, ‘Troubled Alliances’, Frontline, Vol 28, Issue 7 (26 March-8 April 2011), www.frontline.in/stories/20110408280712600.htm. Accessed on 20 March 2011. ‘Allies Team Up Against Jayalaithaa’, Indian Express (18 March 2011),

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with her allies. However, the Ahila India Naadalum Makkal Katchi (AINMK) pulled out of the alliance followed by the MDMK whose voter base is made up of supporters for the Tamil Eelam. Vaiko decided to boycott the elections calling the AIADMK ‘arrogant’ for offering the MDMK, what he considered an inadequate number of seats.6 J. Jayalalitha’s AIADMK has teamed up with film stars who have used their influence to start their own parties. Actors Joseph Vijay Chandrasekhar (popularly known as Vijay), whose recent film was rumoured to have been blocked by the ruling DMK party, and Sarath Kumar, who left the DMK due to differences with the party’s ruling family and then started the All India Samathuva Makkal Katchi, are both in alliance with the AIADMK. Polls are predicting a win for the AIADMK and DMDK alliance, which can affect the polling in 65 constituencies.7 The DMDK received over ten per cent of the votes in the last Assembly elections and has been allotted 41 seats this time around. 8 Christening himself the ‘Black M.G. Ramachandran (MGR)’ after the former actor turned politician who went on to become the Chief Minister of Tamil Nadu, Vijayakanth is positioning himself as a champion of the poor and women. However, DMDK has fashioned itself as the third alliance and cashed in on the anti-DMK and anti-AIADMK votes in previous elections. The other parties of this alliance include left wing parties with ten seats for Communist Party of India (CPI), 12 for the Communist Party of India-Maoist (CPI-M) and one seat for the All India Forward Bloc (AIFB). Manithaneya Makkal Katchi (MMK), which has its base in the Muslim community will contest three seats; Puthiya Tamizhagam (PT), a Dalit party will contest two seats; and one seat has gone to the Republican Party of India representing the scheduled castes and scheduled tribes. The DMK is using populist strategies to woo the voters, by offering an array of freebies including blenders, grinders, laptops and continuing free distribution of colour television sets.9 J. Jayalalitha, the AIADMK leader is relying on the support from the film industry to translate into votes. She has teamed up with movie stars who have floated political parties – a strategy which has worked in the past for her mentor and founder of the AIADMK, MGR. She has also announced a similar list of freebies, and actually added to the list announced by the DMK. Most importantly, J. Jayalalitha has promised improvement in the law and order situation in Tamil Nadu, a promise that would appeal to the urban dwellers of the region.

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www.indianexpress.com/news/allies-team-up-against-jayalaithaa/764114/0. Accessed on 18 March 2011. ‘Vaiko’s MDMK to boycott polls’, Times of India (21 March 2011), http://articles.timesofindia.indiatimes.com/2011-03-21/chennai/29171149_1_vaiko-s-mdmk-aiadmk-seniormdmk-leader. Accessed on 21 March 2011. Coomi Kapoor, ‘It’s not just corruption’, Indian Express (4 March 2011), www.indianexpress.com/news/itsnot-just-corruption/757615/2. Accessed on 15 March 2011. ‘DMDK gets 41 seats in poll pact with AIADMK’, The Hindu (4 March 2011), www.thehindu.com/news/cities/Chennai/article1510097.ece. Accessed on 12 March 2011. ‘Freebies Galore in DMK manifesto’, Outlook (11 March 2011), http://news.outlookindia.com/item.aspx?715691. Accessed on 15 March 2011.

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While the popular opinion seems to indicate a win for the AIADMK-DMDK alliance there are a number of unforeseen factors, which can influence the outcome of the elections. Firstly, the DMDK has been touted as the game changer in these elections and has contested independently in previous elections. Vijayakanth’s DMDK party might lose about 40 per cent of its voter base after joining alliance with the AIADMK. 10 The other factor to take into consideration is the trend of ‘cash and sops’ for votes. The recent WikiLeaks of India cables have revealed that political parties offer bribes to undecided voters to sway votes in their favour. Many parties in Tamil Nadu distribute cash to the voters or make donations towards amenities for their community or village.11 The upcoming elections will be a closely contested one. The DMK is keen to retain power, especially in the light of the corruption charges, which is bound to multiply if J. Jayalalitha becomes Chief Minister. It is an important election for the AIADMK as their leader is keen to recapture power as this could be the last election she might be able to contest, with her age as it is. .....

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Interview with Dr Illango Nallarasu, Associate Professor, Department of Tamil Studies, Madras Christian College, Tambaram (28 February 2011). 11 ‘206688: cash for votes in South India’, The Hindu (16 March 2011), www.thehindu.com/news/the-indiacables/article1541385.ece. Accessed on 16 March 2011.

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ISA S Brief No. 193 – 31 March 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

China and India: Competitors or Collaborators?

Shahid Javed Burki1

Abstract2 As the global economy is slowly emerging from the devastating 2008-09 recession, China and India have been leading the way in global growth, both nearing the double-digit markers in regards to their respective gross domestic product (GDP) growth. At the same time this growth has not been universal. The United States (US) has revived to some positive numbers but it still remains under-par in historical comparison. Situations in Western Europe have proved to be even worse. Several countries have been facing crises with balance of payments (BoP). Britain has had negative growth of one-quarter, which, followed by another such quarter drop, would bring the country back into a recession. Japan’s severe earthquake and resulting tsunami has knocked down the country’s economy and there is likely to be a drop in the future rate of economic growth. This clearly means that for the moment, economic activity will be in Asia and within the continent’s largest economies, China and India. What will these trends portend for the global economy?

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Mr Shahid Javed Burki is Visiting Senior Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore. He can be reached at sjburki@yahoo.com. The views reflected in the paper are those of the author and not of the institute. This paper is based on a speech given by the author at the Singapore Indian Chamber of Commerce and Industry Biennial Conference; Shahid Javed Burki, ‘India-Singapore-China Business Opportunities in the Trilateral Relationship’ (27-28 May 2011), Suntec Singapore International Convention and Exhibition Centre.


Introduction It has now become a cliché to talk about China and India as the rising giants in the global economy. As President Barack Obama famously observed during his state visit to India in November 2010, ‘India was not rising; it had already risen.’ A similar statement was made of China a decade ago. Combined, the two countries carry close to 40 per cent of the world’s population. They account for almost 10 per cent of global production. This year, both countries saw their GDP grow nearly 10 per cent; this rise accounts for the greatest contribution to global output. What is interesting is that the two countries have taken very different routes to attain their present state of development. The result of the different paths taken by China and India are two very different economic structures and possibly two very different economic futures. Given these differences, will the countries become competitors or collaborators in the evolving global economic and political systems? A historical comparison to today’s China and India could be made with France and England of the late eighteenth and early nineteenth century – two sets of countries both rising in economic prosperity and linked by geographical proximity. The question remains of whether China and India create a bond or take the route of France and England, creating decades of hostility. One complication for China and India may be that they share a long border, parts of which are still contested. That said, it is more than likely that the two Asian giants will work with each other to their mutual advantage rather than become hostile neighbours. It seems extremely unlikely that the border disputes will not be resolved diplomatically and, therefore, not re-enacting the military actions of 1962.

Economic Transformations of China and India China began its journey towards rapid economic growth and modernisation in 1976 when the mantle of leadership moved from the shoulders of Mao Zedong, the founder of modern China, to Deng Xiaoping, the country’s builder. India’s rise started a decade and half later in 1991, under the stewardship of Dr Manmohan Singh, the country’s current Prime Minister and then Finance Minister. The process of economic change began in both countries during periods of great crises. In China the crisis was political. An ailing Mao became erratic in his tactics for establishing his successor. He had attempted to influence his succession by sending a number of his competitors, including Deng Xiaoping, into domestic exile. Deng bided his time and after a 2


struggle with the group that came to be called the ‘gang of four’ which included Mao’s wife. Deng later emerged as the undisputed leader of post-Mao China. For India the crisis was economic as the country faced a severe BoP crisis that led to the pledging of gold to obtain finance which would keep its international payments current. It was clear to the managers of the Indian economy that the old model of excessive control by the state over the processes of production had not worked. It had established what had come to be called the ‘license raj’ which kept a tight control over private investments, permitting only those that were considered to be socially desirable. The result was what Indian economists themselves had called the ‘Hindu rate of growth’ – increase in the rate of GDP of about 3 to 3.5 per cent – not enough to deal with the growing problem of poverty. The slight opening in the market that was allowed in the mid-1980s by the Congress Party government headed by Narashima Rao had put an enormous amount of pressure on external accounts. With the opening, imports picked up while exports remained stagnant. There are a number of other similarities between the two countries in addition to the origin of periods of development in deep crises. Both countries are modernising rapidly, India somewhat more narrowly than China where the process of change is much broader in scope. Both are seeing enormous growth in the sizes of their urban populations. Both are becoming integrated in the global economy, again China more rapidly and more thoroughly than India.

Differences between China and India Apart from the similarities noted above, there are a number of differences in the way the two countries are being managed. India is a well functioning democracy that over the years has been able to give voice to its diverse citizenry and provided enough space within the political system not to have those with grievances to adopt approaches outside the constitutions to express their frustration. The political system in China is centrally managed with little space allotted to those who are aggrieved and would like to express their views. This is certainly the case if these views markedly differ from those held by the ruling Communist Party. A vibrant print and electronic media in India is fully representative of its boisterous democracy. In the decentralised Indian political system, a variety of political parties hold power in the constituent states. In China, the centre and the provinces are governed by the same party – the Communist Party. The structures of the two economies differ. In spite of rapid development of the economy and the modernisation of a number of sectors, India remains a largely rural and agrarian-based economy. On the other hand, manufacturing is a large sector for China. China relies much more on external trade to find markets for its rapidly developing industrial base. In India, output of the economy is much more oriented towards meeting domestic demand. There is no international pressure on India to stimulate its domestic demand for feeding economic 3


growth. Such a pressure has been exerted on China for years. Many in the West – in particular in the US – believe that the global economic imbalances can only be corrected if China moves its growth strategy from export expansion to domestic demand promotion, and in the process appreciates its currency.

The Process of Development in the Two Countries How did the two countries reach their present economic situations? For both it happened in two phases. In China, there was emphasis on human resource development and achieving food selfsufficiency during the Mao period from 1949 to 1976. During this time the country was able to achieve universal primary education and universal primary health coverage. It also brought out its women from near-servitude. The second phase from 1979 to 2011 saw China become the workshop for the global economy moving from the production of labour-intensive manufacturing to technologically sophisticated goods. India’s two phases were from 1947 to 1991 and from 1991 to the present. In the first phase, it put the state on the commanding heights of the economy in order to invest in heavy industries for the public sector. In the second phase, it pulled the state back and allowed more freedom to the private sector. India now gives the state a much less significant role than it did during the period of the ‘license raj’. That is not to say that the state has pulled back entirely. For instance, foreign direct investment is still allowed in a limited extent in some sectors. In retail trade, for instance, multi-brand stores are not allowed to be established. Investments in finance and insurance are also subject to strict state scrutiny and control. On the external side, China has a policy of working with its neighbours to develop a regional economic system, making them less reliant on the markets in the West. It is correct in assuming that those markets, given the serious demographic transitions they are experiencing, have only a very limited capacity for expansion. The expansion that will take place will be in non-tradables such as healthcare. India, on the other hand, remains indifferent towards much of its immediate neighbourhood, preferring to leap-frog over them and reach out to the rapidly transforming economies of East Asia. China has used the large programme of domestic demand stimulation to deal with the Great Recession of 2008-09 by connecting itself with its neighbours by building a modern transport infrastructure.

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Devising a more China-India-Centric System of Global Economic Management With these differences in history and endowments, the two countries will have to work hard to work together. One way of doing this will be to create a G2 between them based on developing common positions on international economic issues. During his first official visit to Asia in November 2009, US President Barack Obama indicated his support for the establishment of a new political order for the management of the global economy. A G2 made up of the US and China would be at the apex of the system followed by the G20 that is made up of seven industrial countries, 12 large emerging economies and the European Union. Most of the large policy initiatives would be the responsibility of the US and China, while India would be relegated to the second tier. The Chinese did not show much enthusiasm for the proposal. It was for this reason that President Obama began to court India a year later when he visited that country. On the other hand, a G2 arrangement involving China and India may better serve their separate and mutual interests. They could also begin to gather under one umbrella the various regional economic and trading arrangements that have proliferated in the last few decades. They should develop a common approach in gaining access to the global resources that both are deficient in. In other words, the idea should be to stress the commonality rather than allow other large global powers to put an accent on the perceived differences between the Asian powers. .....

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ISA S Brief No. 194 – 1 April 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

The TAPI Pipeline: A Recipe for Peace or Instability? Shanthie Mariet D’Souza1

Abstract Amidst talks of rising instability and violence in Afghanistan, what seems to have eluded the eye is the progress on the Turkmenistan, Afghanistan, Pakistan and India (TAPI) gas pipeline project. The projected gain from the pipeline is seen as an opportunity to create a win-win deal among local and regional stakeholders in Afghanistan by binding the ‘warring’ factions in an integrative economic framework. By building on Afghanistan’s role as an ‘energybridge’ between an energy abundant central Asia and energy deficient South Asia, there exists possibilities of integrating the conflict-ridden country mostly driven by regional power competition into a mutually dependent cooperative framework. The TAPI pipeline is projected to boost economic interdependence among competing regional powers, thus making the costs of conflict too high and benefits of cooperation lucrative. However, there are potential roadblocks, which need to be addressed before the project can take its final shape. The proposed project of the TAPI gas pipeline appears to have hit the fast track. As per latest reports, the Gas Sales and Purchase Agreement (GSPA) is expected to be signed on 30 April 2011 in New Delhi following a ministerial level meet. Prior to the meeting the Technical Working Group (TWG) will meet in New Delhi between 25 and 27 April 2011, to finalise the GSPA. The contentious issues regarding gas price and gas transit fee would also be discussed during the TWG meeting. 1

Dr Shanthie Mariet D’Souza is Visiting Research Fellow at the Institute of South Asian Studies (ISAS) at the National University of Singapore (NUS). She can be reached at isassmd@nus.edu.sg. The views reflected in the paper are those of the author and not of the institute.


It has taken a long wait of 15 years for the pipeline to turn into reality. The pipeline from Turkmenistan to Pakistan through Afghanistan was first proposed in the mid-1990s with the now defunct American energy company Unocal-led consortium and the Argentine company Bridas vying for signing a deal with the then Taliban regime in Kabul. However, security considerations combined with international condemnation of the Taliban regimes on women and human rights had led both the companies to pull out, leaving the project in a lurch.2 The idea was revived after the Taliban were unseated from Kabul. At the end of 2002, three countries (Afghanistan, Pakistan and Turkmenistan) signed a new agreement. The Asian Development Bank (ADB) conducted a feasibility study and rendered the project possible in 2005. Following an approval by the Indian cabinet, India became the fourth country to join the project in 2008. The TAPI project is expected to start in 2012 and should come on stream by 2016. It envisages constructing 1,680 km of pipeline with a total gas capacity of 90 million standard cubic metres per day (mscm/d). As per the plan, 38 mscm/d of gas would go to India and Pakistan each, while 14 mscm/d would be bought by Afghanistan. The proposed pipeline would stretch from Turkmenistan’s gas fields and travel 1,650 km through Turkmenistan (145 km), Afghanistan (735 km) and Pakistan (800 km), before culminating at the Indian border town of Fazilka in Punjab.3 Annually, the pipeline would carry roughly 33 billion cubic metres of natural gas to consumers. In addition to providing clean energy, it would provide huge revenue and employment opportunities for the people of the regions. In conflict-ridden Afghanistan, where narrow short-term interests of key stakeholders continue to impinge on the peace-building efforts, the TAPI has seen a convergence of interests, both by the great powers as well as regional players. The United States (US), for example, is propounding the project as ‘magic glue’ that will bind the warring factions and their regional proxies into an interdependent cooperative framework. The US hopes that TAPI will in all likelihood wean India away from the Iran-Pakistan-India (IPI) gas pipeline from Iran’s South Pars gas complex in the Persian Gulf. In addition to further isolating Iran, the resultant interdependence and benefits of cooperation might act as a catalyst for peace between India and Pakistan. Russia, too, has indicated interest in the project, in spite of the public opposition raised by Turkmenistan. It has, thus far, kept itself out of post-9/11 Afghan issues. However, in January 2011, it entered into an understanding with the Afghan government during President Hamid

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Robert M. Cutler, ‘Turkmenistan-Afghanistan-Pakistan-India Gas Pipeline Gets Official Four-Way GoAhead’, Central Asia-Caucasus Institute (19 January 2011), www.cacianalyst.org/?q=node/5479. Accessed on 25 January 2011. Participating countries have held numerous high-level planning meetings during the past eight years with Asian Development Bank (ADB) sponsorship and multilateral support. See, John Foster, ‘Afghanistan, the TAPI Pipeline, and Energy Geopolitics’, Journal of Energy Security (23 March 2010).

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Karzai’s visit to Moscow. In a joint statement, both countries expressed willingness to cooperate in a range of energy projects including the construction of the TAPI pipeline. As Russia tries to wrest control of the energy-abundant former Soviet Union states, the new states are assertive in trying to break free from such control. Turkmenistan in particular has been working to create an alternate pipeline network and to lower its dependence on Russia for certain gas exports. In October 2010, Russia had claimed that Turkmenistan had agreed to allow the Russian gas giant, Gazprom, to participate in the TAPI pipeline, only to be rebuffed by Ashgabat. However, Russia’s backdoor entry into the TAPI project rides heavily on its ability to delay or derail it. India favours Gazprom’s participation as a supplier for the pipeline along with Azerbaijan, Kazakhstan and Uzbekistan. For Pakistan, apart from fulfilling its energy requirements expected to reach 177 million toe (tonnes of oil equivalent) by 2020, TAPI will convert the country, for all practical purposes, the US gateway to Central Asia, thus augmenting its strategic invincibility. Alongside this enhanced status, the American commitment to help develop its economy and buttress its security needs in the long-term4 is bound to follow. Afghanistan, for obvious reasons, has much to gain from the project. For an external aiddependent ‘rentier state’, the pipeline would provide opportunities for sparking economic growth, generating revenue and employment – a recipe for long-term stability. It is projected that the government in Kabul could earn upwards of US$1.4 billion in transit fees annually. Moreover, this project allows Afghanistan to reduce its dependence on Iran, from where it sources almost 2,400 tonnes of gasoline per day using the land route. Such dependence has come at a price, at least in the recent past, providing the dominant supplier an instrument even to control Afghanistan’s ability to use the purchased product. In early December 2010, Iran had imposed a fuel blockade on Afghanistan on the grounds that the oil it supplies is used by US and NATO forces operating in Afghanistan. The Karzai government insists that the fuel has only been used for civilian purposes. Notwithstanding security concerns over much of the territory through which the pipelines pass, President Hamid Karzai has promised to ‘expedite’ the project’s completion and provide troops for securing the pipeline. Afghan Minister of Commerce and Industry Wahidullah Shahrani has said that the government would deploy 5,000 to 7,000 security personnel to safeguard the pipeline route. Not surprisingly, TAPI has ignited fears in Iran of being left out in the new energy export economy and the region’s rapidly developing web of natural gas and oil pipelines. Iran itself needs ever-growing supplies of Turkmen natural gas for its winter heating and fuel requirements and to pump gas to pressurise its aging oil fields to keep them productive. If 4

M.K. Bhadrakumar, ‘U.S. brings Silk Road to India’, The Hindu (24 December 2010), www.hindu.com/2010/12/24/stories/2010122464031600.htm. Accessed on 25 December 2010.

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TAPI is built, Turkmenistan’s dependence on Iranian export routes would be considerably reduced. Iran, therefore, would be unable to pressure Turkmenistan to accept energy deals on Tehran’s terms. For several years, India and Pakistan have been negotiating with Iran for another pipeline project to bring Iranian gas to their countries. With an estimated capital cost of US$7.5 billion, the pipeline would be similar in cost to the TAPI project. Since the April 2008 meeting of Indian and Pakistani petroleum ministers in Islamabad to resolve a pricing issue and clear the way for signing agreements, and Iranian President Mahmoud Ahmadinejad’s visit of Islamabad and New Delhi, Iran and Pakistan have gone ahead and signed the initial agreement without India. In February 2010, Iran’s Foreign Minister Manouchehr Mottaki, affirmed that China is keen to join the project.5 Much to India’s consternation, China too appears to have carved out a role in the TAPI project as well, albeit at the behest of the ADB, the lead partner in the project. India has hinted that it would like its own companies to have a significant role in the pipeline’s construction and this had been reportedly approved by Turkmenistan’s President Gurbanguly Berdimuhamedov.6 India concerns stem from the fact that any involvement of Chinese companies would deny opportunities to the Indian companies and could possibly provide China an ‘avuncular arbiter of peace role’7 between India and Pakistan and a larger role in South Asia. The ADB, however, favours Chinese participation, taking into account the experience of Chinese firms in building such extended pipelines. The prospects for the pipeline looks rosy at the moment, but there are thorny issues at hand. In spite of the convergence of strategic, political and commercial interests, factors like political instability, issues of pricing, corruption and security considerations will continue to impinge directly on the fate of the project. Since the birth of an independent Central Asia, the region has been plagued by political instability as witnessed by various ‘colour revolutions’. Similarly, in Afghanistan, the near absence of an effective police force could turn this project into a lucrative protection-racket or cash cow for insurgents and local warlords. Warding off those challenges would inevitably lead to a dependence on private security armies and contractors, with little being done to build on Afghanistan’s national security institutions. The participating countries and the regional stakeholders alike will have to arrive at an arrangement not just to ensure the building of the pipeline, but also to keep it free from disruption. On-time completion and ‘come on stream’ of the pipeline will reflect on the ability and commitment of the Afghan government and the international community to 5

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John Foster, ‘Afghanistan, the TAPI Pipeline, and Energy Geopolitics’, Journal of Energy Security (23 March 2010). Robert M. Cutler, ‘Turkmenistan-Afghanistan-Pakistan-India Gas Pipeline Gets Official Four-Way GoAhead’, Central Asia-Caucasus Institute (19 January 2011), www.cacianalyst.org/?q=node/5479. Accessed on 25 January 2011. Jayanth Jacob, ‘TAPI pipeline: India opposes Chinese role’, Hindustan Times (17 January 2011).

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transform this economic opportunity into tangible benefits for the people of the region. It would be another instance of integrating Afghanistan more firmly into the South Asian community and reviving its role as a ‘land bridge’ between Central and South Asia. .....

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ISA S Brief No. 195 – 15 April 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Prospects for ‘Transition’ in the Afghan Security Sector: A Reality Check? Shanthie Mariet D’Souza1

Abstract As the talks of transfer of authority gains currency, the Taliban insurgency wants to demonstrate its capacity by systematic targeting of the new and fragile Afghan security forces. The gradual reduction of international forces is slated to coincide with the ascendancy in the capabilities and presence of the Afghan National Security Forces (ANSFs) that will be responsible for securing the country against insurgent attacks. Will these forces – product of a rushed, under-resourced and frequently revamped recruitment and training procedure – be able to deliver? There are serious reasons for worry. The rush to pass the responsibility to relatively new and fragile force might prove disastrous for the country and the region. This paper while assessing the effectiveness of the ANSFs argues that a sustainable transition in the security sector can only be achieved by long-term vision and efforts in institution building.

In the afternoon of 2 April 2011, a sizeable crowd gathered around an operations centre for the United Nations Assistance Mission in Afghanistan (UNAMA) in the relatively stable and peaceful northern city of Mazar-e-Sharif. Protesting against the burning of the Holy Quran by an extremist pastor in Florida, the demonstration was one of the several that had taken place across the country that day and was expected to be peaceful. However, by 4.30p.m., the nature of the protest suddenly changed. Armed men among the demonstrators took over. 1

Dr Shanthie Mariet D‟Souza is Visiting Research Fellow at the Institute of South Asian Studies (ISAS) at the National University of Singapore (NUS). She can be reached at isassmd@nus.edu.sg. The views reflected in the paper are those of the author and not of the institute. The findings and views are based on author‟s discussions with security personnel, government officials, academia and locals during field visits to Afghanistan in October 2010 and March 2011.


Even as the Afghan National Police (ANP) personnel kept firing into the air, the peaceful demonstration degenerated into a violent attack on the UNAMA facility leaving three United Nations (UN) staff members and four Nepali security guards dead. At least five Afghan protestors were also killed. Among other things, the incident seriously exposed the lack of crowd management, riot control abilities and general level of preparedness among the ANSFs in a traditionally peaceful area. Mazar-e-Sharif, incidentally is one among the seven areas that will be transferred under the jurisdiction of the ANSFs by July 2011, beginning of the much publicised Afghanisation of security in the war-ravaged country. July 2011 will mark the commencement of the United States (US) President‟s December 2009 promise to pull out troops from the „Long War‟ in Afghanistan, a process President Barack Obama wishes to complete by July 2014. Even though the pace of such drawdown has been subsequently linked to the security conditions on the ground, the US and the international community is hopeful of achieving this goal through a process of „Afghanisation‟ of the security structure by making the ANSFs predominantly responsible for the security of the country by 2014. Notwithstanding such hopes and ambitions, experts and reports from the field point at the continuing weaknesses and deficiencies among the ANSFs.

Chronic Deficiencies Indiscipline, high level of illiteracy, drug abuse and corruption among the ANSF recruits are some of the commonly identified problems that are said to afflict the performance of the ANSFs. As of March 2011, the Afghan National Army (ANA) is said to have 159,000 troops while the ANP is estimated to have 122,000, both are considered to be far too large to be either managed effectively or properly funded by the Afghan government. There are serious concerns of creating a „hyper-militarised‟2 state, particularly when the appropriate model of civil-military relations is not chalked out, the civilian leadership is considered weak and the Taliban are going to gain ascendency in the power structures through the process of reconciliation and the international community‟s rush towards the „end-game‟. The rapid pace at which recruitment for both the ANA and the ANP has been made is said to have compromised the quality of the personnel recruited. Analysts suggest that the ANA and the ANP are already „unmanageable‟ and hence, term the expansion nothing but a „paradox‟.3 The illiteracy among the ANSF recruits is estimated to be at least 86 per cent, making them unfit to understand and master the finer aspects of military training. The North Atlantic Treaty Organization Training Mission-Afghanistan (NTM-A) of late has introduced 2

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Julian Glover, „Few politicians say it, but most think it: our Afghan war is a disaster‟, The Guardian (11 April 2011), www.guardian.co.uk/commentisfree/2011/apr/11/afghanistan-strategy-failed. Accessed on 11 April 2011. Thomas Johnson and Matthew Dupee, „Transition to Nowhere: The Limits of “Afghanization”‟, Foreign Policy (22 March 2011), http://afpak.foreignpolicy.com/posts/2011/03/22/ transition_to_nowhere_the_limits_ of_afghanization. Accessed on 5 April 2011.

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compulsory literacy crash courses, but these are unlikely to bring in drastic improvements in the quality of the personnel‟s ability. The grooming of leaders and development of officer corps among the ANSFs, thus, is likely to continue to be a long-term problem. Illiteracy and lack of leadership, combined together, has led to rampant indiscipline among the forces, which have further resulted in phenomena like desertion and a high and unacceptable level of attrition rate. The ANP serves as the single law enforcement agency across the country – which includes uniformed police, border police, highway police and the criminal investigation department – has reported a significant rate of desertion among its personnel. British Foreign Office statistics had shown that nearly 20,000 ANP personnel left service in 2010.4 While the attrition rate among the ANP was estimated to be at 18 per cent in 2010 – which included losses caused by deaths, desertion and dismissals, often due to positive drug tests – ANA personnel loss was estimated even higher at 32 per cent. As a result, only two-thirds of the men recruited for duty remain available for some sort of engagement.5 To be effective in an ethnically fragmented Afghanistan, the ANSFs need to mirror the numerical strength of the ethnic groups. Predominance of any particular group, either at the personnel or the leadership level, is bound to antagonise other groupings, thus leading to a lack of cohesion and camaraderie among the forces. Afghan expert Antonio Giustozzi points out that nearly 70 per cent of the ANA Kandak (battalion) commanders are Tajik, which is a throw back to the times of the Northern Alliance. Historically, the Pushtuns have retained dominance in both political and security sectors. Any perceived imbalance works towards further alienation among the Pushtuns.6 The Afghan Ministry of Defence has set for itself personnel target numbers of 42 per cent Pushtun, 27 per cent Tajik, 9 per cent Uzbek, 9 per cent Hazara and the remaining 13 per cent others to make up the ANA. However, the zeal to reach the magic number of 171,000 by the end of 2011 might be undermining any such ethnic considerations. For a number of years, training of the ANA and the ANP was carried out under the „lead nation‟ arrangement under which separate countries developed the training programmes, based on their own national models and with little or no considerations of the local needs and specificities. A lack of consensus was apparent not only among the international community but also between what the „lead nations‟ considered useful and what the Afghans needed. Subsequently, the American model of conventional training for the ANSF was hailed as a 4

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Rajeev Syal, „Afghan police crisis threatens British withdrawal as thousands quit force‟, The Guardian (12 December 2010), www.guardian.co.uk/world/2010/dec/12/afghan-police-crisis-threatens-british-withdrawal. Accessed on 5 April 2011. Thomas Johnson and Matthew Dupee, „Transition to Nowhere: The Limits of “Afghanization”‟, Foreign Policy (22 March 2011), http://afpak.foreignpolicy.com/posts/2011/03/22/ transition_to_nowhere_the_limits_ of_afghanization. Accessed on 5 April 2011. This purported dominance by the Pushtuns, however, has been questioned by other groups, especially since there has been no census in Afghanistan for the past three decades. Based on discussions by the author with locals during a field visit to Afghanistan in October 2010 and March 2011.

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success, until the need and consequent inability to undertake „hold‟, in place of the „clear and sweep‟ operations punctured such claims. The training programme conducted by the European Union (EU) remained affected by a plethora of problems. In February 2011, the British House of Lords EU Committee‟s report concluded that the decade-long training EUPOL-Afghanistan (European Union Police Mission in Afghanistan) was too small, too bureaucratic, too disconnected and, being largely confined to Kabul, geographically too restricted from The North Atlantic Treaty Organization (NATO). It summed up that the EUPOL-Afghanistan is „unlikely to succeed in its overall mission of achieving a literate, noncorrupt Afghan police force.‟7 In 2009, the NATO Training Mission-Afghanistan (NTM-A) was created to implement an accelerated goal of putting adequate boots on the ground. Since then, the NTM-A along with the Combined Security Transition Command-Afghanistan (CSTC-A), have „subsumed several separate training endeavours and synchronized those efforts across both the Ministry of Defence [building the ANA] and the Ministry of Interior [building the ANP].‟8 However, several problems persist. The NTM-A still has a want for training centres outside Kabul. Short-term deployment of trainers by NATO countries prolongs the problems of continuity in the training programmes. Although, the ANA training programme is considered to be more successful than that of the ANP, a shortage of trainers remains to be a problem area. Training, to a large extent, continues to be performed by contractors, thereby inhibiting the prospect for a self-sustaining national army.9 Moreover, the training programme for the ANA and the ANP remains roughly similar. The lack of policing abilities among the ANA, as a result, is being reflected in incidents like those on the 2 April 2011. Although both the ANA and the ANP have participated and on occasions led anti-Taliban operations, they have been targeted by the Taliban, which has lead to demoralisation among the forces and frequent desertions. On 26 March 2011, in an area by Mehter Lam, the Taliban kidnapped 50 people, mostly police officers, and reportedly negotiated for a swapping of imprisoned Taliban fighters for the captured men. On 7 April 2011, six ANP personnel were killed as Taliban insurgents detonated a bomb hidden in an ambulance at an ANP centre near the city of Kandahar. On 9 April 2011, a suicide bomber detonated explosives strapped to his body targeting an ANA bus in Kabul, wounding seven soldiers and three civilians. The demonstrated targeting and success of such Taliban attacks on the ANSFs has further posed questions on the ability of these men to withstand the repeated onslaughts of insurgency. Such attacks are projected to grow in months to come. 7

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Lisa Curtis and Sally McNamara, „Afghanistan: Time for Political Strategy to Capitalize on Military Gains‟, The Heritage Foundation (15 March 2011), http://thf_media.s3.amazonaws.com/2011/pdf/bg2530.pdf. Accessed on 2 April 2011. Lt. Gen. William B. Caldwell, „A response on the training of Afghan Forces‟, Foreign Policy (29 March 2011), http://afpak.foreignpolicy.com/posts/2011/03/29/a_response_on_the_training_of_afghan_forces. Accessed on 2 April 2011. Lisa Curtis and Sally McNamara, „Afghanistan: Time for Political Strategy to Capitalize on Military Gains‟, The Heritage Foundation (15 March 2011), http://thf_media.s3.amazonaws.com/2011/pdf/bg2530.pdf. Accessed on 2 April 2011.

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During the July 2010 Kabul Conference, President Karzai had made the announcement that by 2014 the ANSFs „should lead and conduct military operations in all provinces‟.10 Keeping with the promise, in a speech on 22 March 2011, Karzai announced that by July 2011, coinciding with the beginning of the pullout of US forces, ANSF will take control of the security in seven areas. Karzai said, „The people of Afghanistan no longer desire to see others defend their country for them. This day will be a defining moment in the history of the country.‟11 While four of these seven areas – Herat, Bamyan, Mazar-e-Sharif and Panjsher – have been traditionally peaceful, ANSF abilities will be put to test in the remaining three – Mehter Lam in Laghman, Lashkar Gah in Helmand and Kabul. The persisting weakness among the ANP is bound to affect the ANA performance. The ANP is expected to perform counter-insurgency, security, law enforcement, border protection and counter-narcotics functions. Since the role of the police is in „hold‟ operations and intelligence gathering – as provider of security in areas cleared of insurgent presence – which is of paramount importance, a weak ANP institution is bound to remain a chink in the securities armour. This can be ignored only at the cost of making the security operations merely counter-terrorism and not counter-insurgency. Stop gap measures of recruiting the tribal militias and surrendered insurgents under the Afghan Local Police (ALP) 12, would only run contrary to efforts of long term institution building in the security sector. Moreover, efforts to improve governance in Afghanistan must accompany any reform in the security sector. To expect both the ANA and the ANP to perform effectively in an environment of weak and failing government institutions would be simply unrealistic. Credibility and sustainability of the military institutions can only be judged in tandem with that of the civilian government and administration.

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„Afghans to get full control over security by 2014‟, Daily Times (21 July 2010). Muhammad Tahir, „Sorting through the Hype in Afghanistan‟ Radio Free Europe: Radio Liberty (1 April 2011), www.rferl.org/content/gandhara_tahir_afghanistan_karzai_security/3543785.html. Accessed on 5 April 2011. In his briefing to the US Congress on 15 March 2011, General Petraeus stated that the „Afghan Local Police initiative was an important addition to the overall campaign‟ to secure the war-torn country and deny the Taliban control in key districts. C.J. Radin, „Afghan Local Police vital to General Petraeus' strategy‟, The Long War Journal (26 March 2011), www.longwarjournal.org/archives/2011/03/afghan_local_police.php. Accessed on 29 March 2011. Also see, Mujib Mashal, „Rogue militias abuse rural Afghans‟, Al Jazeera (12 January 2011), http://english.aljazeera.net/indepth/features/2011/01/201111114112880358.html. Accessed on 15 January 2011.

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ISA S Brief No. 196 – 9 May 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Post-Osama: Is it the Beginning of the ‘End’ in Afghanistan? Shanthie Mariet D’Souza1

Abstract The killing of Osama bin Laden has sent a chilling message to its affiliates in the region. However, at the same time, it has initiated speculations that having achieved their objective of eliminating Osama, the United States (US) can safely commence the ‘drawdown’ of forces. Will the US abandon Afghanistan, yet again, as it did when it shifted focus to Iraq? Will it stay put and focus on the groups like the Lashkar-e-Taiba (LeT) and the Pakistani Taliban who have vowed revenge? Will it pursue the Quetta Shura so that they become amenable to the reconciliation process underway in Afghanistan? If the goal of the US is to pursue the region, answers to these questions remain vital for the prospects of stabilisation in Afghanistan and Pakistan.

The killing of the Al-Qaeda leader, Osama bin Laden on 2 May 2011 is seen as a significant achievement of US counter-terrorism policy. The elimination of this iconic figurehead is said to have sapped the morale of the Al-Qaeda, while it has boosted the image of the Obama presidency and prospects for his re-election. The timing of the incident is significant as it coincides with the purported drawdown of forces, to commence in July 2011. At the same time, this event has brought to the forefront the tumultuous relationship the US has with its frontline ally, Pakistan. A situation which surfaced with the Raymond Davis scenario and now further complicated with the fact that Osama was harboured right under the nose of the Pakistan authorities.

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Dr Shanthie Mariet D‟Souza is Visiting Research Fellow at the Institute of South Asian Studies (ISAS) at the National University of Singapore (NUS). She can be reached at isassmd@nus.edu.sg. The views reflected in the paper are those of the author and not of the institute.


Amidst the chaotic claims and counter-claims, several theories have emerged, pointing fingers at the possible harbourers of Osama. While the initial circumstantial evidence suggests that bin Laden was effectively being housed under Pakistani state control, 2 the possibility that the military used Osama as a bargaining chip to accrue large amounts of US aid for almost a decade cannot be ignored. Irrespective of the fact that the identities of the people or establishments harbouring bin Laden may never be established, Pakistan has emerged as a weaker and more vulnerable state than it was when the hunt for bin Laden began. 3 The processes of addressing these weaknesses – divisions between the military, intelligence and administration and an unending desire to use „terrorism‟ as a matter of state policy – will continue to be issues that a new US policy towards the region will have to take into account as it moves towards an „end game‟ in Afghanistan.

Impact on Al-Qaeda and its Affiliates The killing of Osama bin Laden, the symbolic figurehead of the Al-Qaeda, is a definite blow to the movement and to the global Jihadi network. It is variously argued that the incident may have only limited impact on the operational aspects of the organisation. Post-9/11 Al-Qaeda has functioned as franchisees and local chapters – Al-Qaeda in the Arabian Peninsula (AQAP), Al-Qaeda in Iraq (AQI), and Al-Qaeda in the Islamic Maghreb (AQIM). The AlQaeda movement has been operating through local groups. Bin Laden did continue to provide the inspiration and ideological content that indirectly generated funds and recruits, but there is very little evidence to suggest that Osama controlled or provided directions for other local operations. The movement had indeed become amorphous, and hence could absorb the losses of key leadership roles (Abu Musab al-Zarqawi, Mustafa abu al-Yazid, Abu Zubaydah and Khalid Sheikh Mohammed) over the years relatively easily. Despite the killings of Al-Qaeda‟s third and fourth in command, the local chapters were able to continue with their operations. Early responses on jihadist internet forums underline the determination of Al-Qaeda members and supporters to continue their struggle.4 A number of key Al-Qaeda figureheads who could play a similar leadership role in the movement in the future are Ayman al-Zawahiri (currently the second in command), Abu Yahya al-Libi (of Libya), Naser al-Wuhaishi (in charge of AQAP), Anwar al-Awlaki (of Yemen). These leaders, however, lack the charisma and wide appeal of Osama bin Laden. Thus, a scenario of succession battles and lesser known groups vying for 2

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Steve Coll, „Notes on the Death of Osama bin Laden‟, The New Yorker (2 May 2011), www.newyorker.com/online/blogs/newsdesk/2011/05/notes-on-the-death-of-osama-binladen.html#ixzz1LGSIUoCO. Accessed on 2 May 2011. Ahmed Rashid, “Pakistan and al-Qaeda‟s Future”, New York Review of Books (3 May 2011), www.nybooks.com/blogs/nyrblog/2011/may/03/pakistan-and-al-qaedas-future/. Accessed on 2 May 2011. Aaron Y. Zelin, The bin Laden aftermath: The Internet jihadis react, The Af-Pak Channel (2 May 2011), http://afpak.foreignpolicy.com/posts/2011/05/02/the_bin_laden_aftermath_the_internet_jihadis_react. Accessed on 2 May 2011.

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more prominence cannot be ruled out. For instance, groups like the LeT are said to be making a bid to replace Al-Qaeda, by expanding its focus to joining the fight against US forces in Afghanistan, launching terror attacks against India, participating in the global jihad and furthering non-violent activism in Pakistan.5 Osama‟s death has indeed opened up a vacuum, for which there are too many capable claimants.

Is the ‘Timing’ Right for the Drawdown of Forces? Invariably, much of the US policies towards Afghanistan and Pakistan will have its impact on the security and stabilisation efforts in the region. In Afghanistan, Osama‟s death has vindicated President Karzai‟s long-held stand that the problem of Afghanistan is rooted in Pakistan and the present war on terror has erred by not focusing enough on the terrorist sanctuaries and support structures. He said on 2 May 2011, „We said many many times, and continue to say every day, the fight against terrorism is not in Afghanistan's villages, the fight against terrorism is not in the houses of poor and oppressed Afghans, the fight is not in bombing women and children… The fight against terrorism is in its sanctuaries, in its training camps and its finance centres… Today, this has been proven right.‟6 It remains to be seen whether Karzai‟s renewed calls will bring about a correction in course to the war on terror. It has been argued that Osama‟s death has led to the desired political and strategic conditions for the drawdown of US forces from Afghanistan. Pressures have started mounting for the Obama administration to declare victory, much as it did in Iraq, and ensure that the US troops in Afghanistan are brought home. It has also lead to a renewed debate in America on the US role and objectives in Afghanistan and Pakistan? A drawdown of forces is slated to begin in July 2011 and culminate by July 2014 with a „transfer of authority‟ to the Afghan forces. July 2011 will also mark the beginning of the process when the international forces will confine themselves to counter-terrorism while gradually allowing the Afghan National Security Forces (ANSFs) to do the bulk of the counter-insurgency duties. Osama‟s death has altered US domestic perceptions regarding the Afghan War. According to an opinion poll on 2 May 2011, about 45 per cent of the Americans now think that the Afghan war has been worth fighting. Polls conducted in the months prior to bin Laden‟s death showed that as many as two-thirds of Americans felt the war was not worth the loss of life and money. 7 The Obama administration would like to 5

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Stephen Tankel of the Carnegie Endowment for International Peace has told US lawmakers that LeT had not been able to shake off its regional dynamics, but may plot a larger international terror role after bin Laden‟s death. See, „LeT may plot to replace al-Qaeda as terror umbrella outfit‟, The Economic Times (4 May 2011). Aunohita Mojumdar, „Osama dead: Afghans see it as another chapter in conflict‟, Economic Times (3 May 2011). Richard Solash, „U.S. Afghan Mission Under Scrutiny After Bin Laden‟s Death‟, RFERL (3 May 2011), www.rferl.org/content/us_afghan_mission_under_scruntiny_after_osama_bin_laden_death/24090602.html. Accessed on 4 May 2011.

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augment the new found public support by keeping true to the date of the promised troop pullout.

Is the ‘Time’ Ripe for Talks? What would be interesting, however, is to see if the US will use enough force or diplomatic finesse to influence the Quetta Shura of the Afghan Taliban leadership to the negotiating table, before it ventures on a retreating mission. The Taliban have announced the launch of its spring offensive. A spike in violence during the post-Osama period will provide tale tell signs of Taliban‟s future intentions and disruption capacities without the blessings of the figurehead. US Secretary of State, Hillary Clinton, has said that Osama‟s death could advance efforts to reach a political resolution for the war in Afghanistan, because it might convince the Taliban and Al-Qaeda to come to the negotiating table. She further commented, „In Afghanistan, we have to continue to take the fight to Al-Qaeda and its Taliban allies. Perhaps now they will take seriously the work that we are doing on trying to have some reconciliation process that resolves the insurgency. So our message to the Taliban hasn‟t changed; it just has even greater resonance today. They can't wait us out, they can't defeat us; they need to come into the political process and denounce Al-Qaeda and renounce violence and agree to abide by the laws and constitution of Afghanistan.‟8 She also speculated that Osama‟s death would make Al-Qaeda and the Taliban more likely to strike a deal with Afghanistan, because of their lack of a grand leader to rally around. Similar thoughts have been expressed by experts predicting a positive political change within Afghanistan. For example, Anne-Marie Slaughter, the former director of policy planning at the State Department, said that the death of Osama „may change the willingness of some Taliban to negotiate. With [bin Laden] gone, that may create some political space. It's at least worth exploring.‟ 9 At best, these are early thoughts and possible moves to pre-empt an inclination for the US to stay present in Afghanistan. However, the fact remains that without dismantling the sanctuaries and terrorist infrastructure in Pakistan and breaking the linkages of these groups with Al-Qaeda, it would be foolhardy to predict an early end to the conflict in Afghanistan. In the absence of a US policy towards addressing the anomalies within the Pakistani state, the latter would retain the ability to maintain its linkages with these groups, which would further ensure a lingering conflict in Afghanistan. This would make the prospects of „complete withdrawal‟ a difficult proposition 8

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Josh Rogin, „Clinton: Taliban more likely to negotiate after bin Laden‟s death‟, The Cable: Foreign Policy (4 May 2011), http://thecable.foreignpolicy.com/posts/2011/05/04/clinton_taliban_more_likely_to_negotiate _after_bin_laden_death. Accessed on 4 May 2011. Richard Solash, „U.S. Afghan Mission Under Scrutiny After Bin Laden‟s Death‟, RFERL (3 May 2011), www.rferl.org/content/us_afghan_mission_under_scruntiny_after_osama_bin_laden_death/24090602.html. Accessed on 4 May 2011.

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for the US. These are serious concerns for the US to address. Mullah Omar and Al-Qaeda‟s second in command, Ayman al-Zawahiri, probably enjoy refuge in Pakistan. The location of Mullah Omar, in particular, is believed by US officials to be well-known to some Pakistani military and intelligence officers.10 Whether the US pursues these terrorist leaders, with the same seriousness as it inked Operation Geronimo (the killing of bin Laden) remains to be seen. Beyond the „use of force‟ to eliminate the Al-Qaeda leadership, it is critical to address these conditions and break the nexus that bred and nurtured such groups, if the objective of stabilisation in South Asia is to be realised. .....

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Steve Coll, „Notes on the Death of Osama bin Laden‟, The New Yorker (2 May 2011), www.newyorker.com/online/blogs/newsdesk/2011/05/notes-on-the-death-of-osama-binladen.html#ixzz1LGSIUoCO. Accessed on 2 May 2011.

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ISA S Brief No. 197 – 16 May 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Census 2011: The Curious Case of Changes in Tamil Nadu Demographics Pratima Singh1

Abstract The latest 2011 census shows that Tamil Nadu is the only state to experience an increase in the decadal population growth rate, from 11.7 per cent in 1991-2001 to 15.6 per cent in 2001-11. The category of child population within the age of zero to six years constitutes 9.5 per cent of the state’s population, a decline from the 11 per cent in 2001. Thus, the growth in population is due to a sharp rise in numbers, aged seven years and above, the causes for which can only be verified once age group wise data is released for the 2011 census. Studying district wise data reveals that the most likely explanation for this population increase is in-migration of labour, especially in districts with high industrial activity.

Decadal growth rates in population have shown consistent downward trends in Tamil Nadu since 1961 and as a result the state has been hailed as a success story in population management. Decadal growth rates have gone down from 22.3 per cent in 1961-71 to 11.7 per cent in 1991-2001. In the latest census, however, Tamil Nadu was the only state to show a major increase in the decadal growth rate at 15.6 per cent, a 33.3 per cent rise from the previous census.

1

Pratima Singh is Research Associate at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore (NUS). She can be reached at isasps@nus.edu.sg. The views reflected in the paper are those of the author and not of the institute.


Figure 1 shows the reversal of population trends in the state. Figure 1: All India and Tamil Nadu Percentage Decadal Variation in Population 30 25 20 15 10 5 0 1961-71

1971-81

1981-91

Tamil Nadu Percentage Decadal Variation

1991-01

2001-11

India Percentage Decadal Variation

Source: ‘Provisional Population Totals Paper 1: 2011’, Office of the Registrar General and Census Commissioner, Ministry of Home Affairs, Government of India, www.censusindia.gov.in/2011-provresults/census2011_PPT_paper1.html. Accessed on 13 May 2011 .

This sudden increase in state population is unusual, given that the decadal growth rate in the country has also reduced from 24.8 per cent in 1961-71 to 17.6 per cent in 2001-11.2 Tamil Nadu can, therefore, be considered an outlier in the country. A thorough study of this issue entails breaking up the population into age groups and examining which age group saw the largest increase in numbers. The category of population in the age group of zero to six years is used to shed some light on whether the birth rate in the state went up, increasing total population as a result. The population between zero to six years comprised of 9.5 per cent of the state’s total population, a decline from both 13.3 per cent in 1991 and last decade’s 11 per cent. This is in line with India’s population between the age of zero to six years as a proportion of the entire population, which fell from 17.9 per cent in 1991 to 15.4 per cent in 2001 and further to 13.1 per cent according to the 2011 census.3 It can be concluded that the population increase is not a result of high birth rates in the state and the increase is in the age groups of seven years and above. 2

3

‘Provisional Population Totals Paper 1: 2011’, Office of the Registrar General and Census Commissioner, Ministry of Home Affairs, Government of India, www.censusindia.gov.in/2011-provresults/census2011_PPT_paper1.html. Accessed on 13 May 2011. Ibid.

2


A second explanation to this phenomenon could be increases in the life expectancy in Tamil Nadu, compared to the rest of the country. This longevity would indicate that due to better healthcare facilities in the state people are living longer. Unfortunately, upon corresponding with the census commissioner of India, it was found that the age wise breakdown of the 2011 census data will not be available for at least two years. Thus, there is no way to check which specific age group (above seven years of age) has experienced the highest increase in population and therefore no way to verify the validity of the argument indicating that the people in Tamil Nadu have started living longer. A final possible explanation to this sudden increase in population growth is the prospect of migration in search of employment. Tamil Nadu is one of the fastest growing states and every year thousands of labourers migrate into the state in search of work. Since these migrants are included in the total population of the state, this may explain the surge in Tamil Nadu’s population figures. The unemployment rate for Tamil Nadu (as of 2004-05) was 1.2 per cent for rural areas, lower than the all India 1.7 per cent, and 3.5 per cent for urban areas which is also less than the all India figure of 4.5 per cent.4 The per capita gross domestic product (at current prices) also grew at the rate of 10.6 per cent in 2008-09, making Tamil Nadu a very attractive destination for migrant labourers.5 Delving further, the district level data supports the argument crediting migration as a possible cause. The district of Kancheepuram experienced an increase in its decadal population growth rate from 19.2 per cent in 1991-2001 to 38.7 per cent in 2001-11. Thiruvallur’s decadal growth rate increased from 23.1 per cent in 1991-01 to 35.3 per cent in the last census. Coimbatore increased from 17 per cent to 19.1 per cent while Tiruppur increased from 25.3 per cent to 28.7 per cent in 2001-11 (Table 1).6 All of these districts are major hubs of industrial activity, specifically information technologies and manufacturing, indicating the influx of non Tamil labourers from around the region and even other states (refer to Table 1). Indeed another related reason could be the returning labourers, particularly plantation and construction labourers, from neighbouring states like Kerala. The Madurai district saw an increase in decadal population growth rate from 7.4 per cent in 1991-2001 to 18 per cent in 2001-11. The Sivaganga district also experienced a similar rise from 4.7 per cent to 16.1 per cent. 7 These districts, despite not having much industrial activity, saw their populations 4

5

6

7

Compiled from the statistics released by Rajya Sabha, ‘Unstarred Question, No. 828’, Indiastat (29 November 2006), www.indiastat.com/labourandworkforce/380987/employment/85/unemploymentsituation /281124/stats.aspx. Accessed on 13 May 2011. ‘Per Capita Net State Domestic Product at Current Prices’, Planning Commission, Government of India (9 September 2010), http://planningcommission.nic.in/. Accessed on 13 May 2011. ‘Provisional Population Totals – Census 2011: Tamil Nadu’, Office of the Registrar General and Census Commissioner, Ministry of Home Affairs, Government of India, www.censusindia.gov.in/2011-provresults/prov_data_products_tamilnadu.html. Accessed on 13 May 2011. Ibid.

3


increasing as labourers migrated from neighbouring states to these districts as Tamil Nadu started progressing economically. Table 1: District wise percentage decadal variation in population for Tamil Nadu Percentage Decadal Variation State/District

190111

191121

192131

193141

194151

195161

196171

197181

198191

199101

200111

Tamil Nadu Thiruvallur Chennai Kancheepuram Vellore Dharmapuri Krishnagiri Tiruvannamalai Viluppuram Salem Namakkal Erode The Nilgiris Coimbatore Tiruppur Dindigul Karur Tiruchirappalli Perambalur Ariyalur Cuddalore Nagapattinam Thiruvarur Thanjavur Pudukkottai Sivaganga Madurai Theni Virudhunagar Ramanathapuram Thoothukkudi Tirunelveli Kanniyakumari

8.6 7.2 3.9 7.2 9.3 4.7 4.7 16.0 12.2 3.5 3.5 7.1 5.1 7.1 7.1 9.3 8.5 8.5 8.5 8.5 12.2 5.4 5.4 5.4 6.5 6.8 15.4 15.4 12.1 8.1 8.1 8.1 17.5

3.5 5.1 3.0 5.1 2.9 -4.5 -4.5 7.7 -1.8 7.9 7.9 6.3 6.7 6.3 6.3 4.3 4.1 4.1 4.1 4.1 -1.8 -2.0 -2.0 -2.0 4.2 3.1 4.1 4.1 5.5 0.3 3.2 8.7 17.0

8.5 8.5 23.9 9.2 12.9 16.7 16.7 13.6 5.8 12.6 12.6 11.4 33.8 11.4 11.4 5.7 0.7 0.7 0.7 0.7 5.8 2.9 2.9 2.9 -5.6 6.3 12.0 12.0 6.9 8.0 6.8 7.6 17.8

11.9 9.8 20.3 9.8 17.2 15.6 15.6 9.6 6.3 19.1 19.1 15.0 23.9 15.0 15.0 13.4 12.8 12.8 12.8 12.8 6.3 7.4 7.4 7.4 8.6 8.7 13.1 13.1 3.9 11.7 8.3 10.8 16.4

14.7 7.7 59.8 7.7 16.4 12.7 12.5 4.3 6.4 20.3 20.3 17.2 48.7 17.2 17.2 11.2 14.3 14.3 14.3 14.3 6.4 15.9 15.9 15.9 13.1 3.9 20.6 20.6 11.9 -4.6 5.2 12.4 22.1

11.9 10.7 22.1 13.1 8.4 10.5 33.0 8.6 7.1 12.2 2.1 9.5 31.3 19.2 7.4 8.7 6.7 10.1 7.6 9.9 13.5 10.4 9.4 7.3 6.6 11.4 12.7 12.0 13.1 27.4 9.9 8.4 20.7

22.3 30.0 45.2 30.3 22.7 29.8 22.8 14.8 17.2 24.4 15.0 22.5 20.7 25.7 19.1 18.6 7.5 26.6 18.7 17.4 20.7 14.1 16.4 20.9 26.2 18.6 25.5 23.8 18.4 17.2 16.7 17.6 22.6

17.5 30.5 27.0 28.2 17.8 17.8 20.1 17.2 15.9 13.7 17.7 17.2 27.6 17.5 17.1 11.9 10.1 15.1 12.4 11.5 16.5 13.4 12.9 16.0 22.1 12.4 18.1 14.7 16.5 21.4 11.6 11.7 16.4

15.4 31.5 17.2 26.1 15.1 24.5 19.2 14.4 16.1 13.4 12.8 13.6 12.7 12.5 15.7 12.5 12.9 15.6 17.9 11.2 16.1 11.7 12.0 11.1 14.7 10.7 17.5 13.0 16.7 12.1 7.7 12.6 12.4

11.7 23.1 13.1 19.2 14.9 15.3 19.6 7.0 7.4 17.2 12.9 11.8 7.3 17.0 25.3 9.2 9.5 10.1 9.5 9.3 7.7 8.1 6.3 7.9 10.0 4.7 7.4 4.3 11.9 6.1 7.9 8.9 4.7

15.6 35.2 7.8 38.7 13.0 16.0 20.7 12.9 17.0 15.4 15.2 12.1 -3.6 19.1 28.7 12.4 15.1 12.2 14.4 8.2 13.8 8.4 8.4 8.4 10.9 16.1 18.0 13.7 11.0 12.6 9.1 13.7 11.2

Source: ‘Provisional Population Totals Paper 1: 2011’, Office of the Registrar General and Census Commissioner, Ministry of Home Affairs, Government of India, www.censusindia.gov.in/2011-provresults/census2011_PPT_paper1.html. Accessed on 13 May 2011.

The figures above (Table 1) represent certain geographical concentration of employment and population growth that are likely to lead to several economic, and social consequences. The belt around metropolitan Chennai, which would cover the Kanchipuram and Tiruvellore districts, appears to be growing the fastest. This urban agglomeration now consists of educated and skilled employees who are demographically young, and migrants from other 4


states. A natural consequence would be the rise in consumption expectations and standard of living, putting pressure on urban infrastructure, and a significant growth of entertainment, housing, and hospitality related services, as well as retail and consumption expenditures. Pressure on infrastructure would manifest in rising demand for power, water, waste management and transportation. In a smaller measure, this would also be true for Coimbatore and Tirupur. The growth in Madurai and Sivaganga are likely to have slightly different consequences. These are rural districts with low industrial bases and are unlikely to be areas of full employment for returning migrant workers. Two alternatives are possible, either they set up service industries in these small towns, much as the returning workers in Kerala towns have done, or workers may migrate to bigger cities in search of employment. In either case, the standard of living for the returning workers will be higher than the districts they return to or once again there will be a pressure of consumption led growth. All of these hypotheses can only be verified once the Registrar General of India makes the census 2011 age wise population data available. However, there is strong evidence that these trends would require a new set of development initiatives that would focus on these fast growing regions within the state. On the one hand, it may be necessary to focus on infrastructure, especially urban infrastructure in these areas. On the other, there may be a need to spread the economic development initiatives more broadly to other regions in the state, through policy measures to incentivise economic activities in other regions. In either case, the demographic changes require attention and policy changes. .....

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ISA S Brief No. 198 – 16 May 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Tamil Nadu Election Results: An Assessment S. Narayan 1

Abstract The Tamil Nadu election results are important not only for the significant mandate for change but also for indicating a distinct change in voter perception. There appears to be a strong antipathy to poor governance and nepotism, and an expectation that good governance would deliver more people friendly policies. Cash for votes or freebies do not appear to have swayed the electorate. This seems to be a sign in the right direction for democracy.

Table 1: Tamil Nadu Elections Party Wise Results Won Leading Communist Party of India Communist Party of India (Marxist) Indian National Congress All India Anna Dravida Munnetra Kazhagam (AIADMK) All India Forward Bloc Dravida Munnetra Kazhagam (DMK) Pattali Makkal Katchi (PMK) Others Source: ‘Assembly Elections May 2011’, Election http://eciresults.nic.in/Statewises2216.htm. Accessed on 14 May 2011.

1

Total

9

0

9

10

0

10

5

0

5

150

0

150

1

0

1

23

0

23

3

0

3

33

0

33

Commission

of

India,

Dr S. Narayan is Head of Research and Visiting Senior Research Fellow at the Institute of South Asian Studies, an autonomous research institute at the National University of Singapore. He was the economic adviser to the former Prime Minister of India, Mr Atal Bihari Vajpayee. He can be contacted at snarayan43@gmail.com. The views reflected in this paper are those of the author and not of the institute.


The results of the Tamil Nadu assembly elections were announced on Friday the 13th, a day that brought bad news for the ruling DMK-Congress alliance in that state. The AIADMK alliance, led by Ms J. Jayalalitha has secured 203 seats in the 234-member assembly, leaving the DMK combine with the lowest performance in the last twenty years. The Congress Party that had allied with the DMK was able to win only five of the 63 seats that it contested, this being its poorest record in the state. There have been expectations of an anti-incumbency sentiment, and the Tamil Nadu electorate has a history of voting for a change in government within the state every five years. However, the final tally of an overwhelming sweep for the AIADMK has been a surprise. Victories for the DMK candidates have been by only small margins, whereas the AIADMK candidates have by and large trounced their opponents with very large margins. This has been a decisive mandate for change and there have been several interesting aspects to this election. First, governance issues have been at the forefront in these elections. The DMK-Congress alliance had calculated that the fallout of the 2G spectrum scam would not be felt in rural areas and would only affect the literate urban electorate. DMK stalwarts had moved away from urban constituencies to contest in rural areas but the results have proved otherwise. The focus of the AIADMK campaign was on the corruption in the DMK. Furthermore, the AIADMK had pointed out, the nepotism of the DMK chief, in governing through family based politics, with a number of family members given high political rewards. These members were also seen to be responsible for garnering a share of rentals in several sections of the economy. The argument that the DMK had distributed a number of freebies to the poor, including rice at `1 per kilo and free television sets, did not sway the electorate, which has decided that these represent only a small portion of the ill-gotten gains that has been distributed. Therefore, poor governance and corruption issues have moved the electorate significantly. This is a sign of a healthy trend. Second, the Desiya Murpokku Dravida Kazhagam (DMDK), a new party formed in 2005 by cinema actor Vijaykanth, has emerged with significant vote bank in the state. This party appeals to younger generation, who has not been witness to the charismatic era of M.G. Ramachandran (popularly known as MGR), the film icon who founded the AIADMK. This greater appeal among the youth was manifest in an eight per cent vote starting in 2006 assembly elections and then again in the 2009 Lok Sabha elections. Though the party did not win a single seat in 2009, its ability to draw away voters from the traditional DMK and AIADMK vote banks was evident. This time around, a strategic alliance with the AIADMK, though not without hiccups, has enabled it to win a substantial number of seats, even more than the DMK, making it the second largest block in the assembly. In short, this would be a party to watch in the future, with the DMK in decay.

2


Third, the caste and community based parties have recorded a poor showing. The PMK, which represents the Vanniyar community in the northern districts of Tamil Nadu, has had its poorest showing with only three wins out of the 31 seats contested. This party had its heyday in the late eighties and nineties, and has had the ability to secure enough of a mandate to get two ministerial positions in the Government of India, but its lack of clear ideology, the opportunistic nature of its politics and a record of corruption has cost it dearly. Another new caste based party competed for six seats around Coimbatore, for the first time, and was unable to win even one. It perhaps indicates a maturing of the electorate that is better educated, more urban (Tamil Nadu is the most urbanised state in the country, with over 40 per cent of the population living in urban areas), that is looking beyond narrow caste and community considerations. Fourth, the Sri Lankan Tamils issue, an emotive issue in Tamil Nadu, has failed to translate into votes. The Viduthalai Siruthai party, a strong Tamil Tigers supporter, has failed to garner even a single seat. It appears that the sympathy with the Sri Lankan Tamils is much more due to emotional bonding, than due to issues of governance. In short, the electorate has perhaps realised that there is very little that Tamil Nadu can do, without the Government of India’s support, to help the cause of the Sri Lankan Tamils. Fifth, the election commission was very vigilant during these elections. Strict enforcement of the law on election related expenditure, seizure of money in transit for payment to voters, and strict adherence to code of conduct for elections has resulted in this election being free from any untoward incident of intimidation or false voting. Even though all the cash meant for distribution could not be apprehended, it was reduced to a trickle. The voters have also decided that cash would not be a criterion for voting. A combination of transparent well managed elections and lack of cash incentives to sway the voter, were significant factors in these elections. Sixth, the four state elections have demonstrated a maturing of the Indian electorate. Voter turnout has been the highest ever in almost all the states, indicating that the urban educated voter is prepared to go out into the streets to cast his vote. If this trend is maintained it would represent a turning point for the democratic process. No longer would political parties be content with relying on the uneducated poor for their victories – issues of governance and development would need to be addressed. This conclusion is further strengthened by the fact that in Assam, where there has been reasonable development under a benevolent government, the voters have been willing to vote this government back to power for a third term. By the same argument, in West Bengal, there has been an outcry against the poor governance by the left, inciting a wave for change. Even in Pondicherry the electorate has voted for a new party that is a breakaway from the Congress, but headed by an individual who is seen to be transparent and people friendly.

3


In short, these elections are a call for all parties to listen to the people and their aspirations, rather than to focus on the narrow arithmetic of caste, religion and vote banks. The same phenomenon was visible in the Bihar elections last year, when the Janta Dal (United) of Nitish Kumar won a resounding victory based on good governance and development performance. In Gujarat, the electorate has done likewise. These are also trends towards a future of healthy democracy. In terms of policies, the AIADMK government is not likely to differ significantly from the earlier government. Industry friendly policies of attracting new investments and foreign direct investment are likely to continue, as well as the social welfare programmes that have been the hallmark of Tamil Nadu since the days of MGR. Ms J. Jayalaitha has said that all election promises would be redeemed. The state is under fiscal stress, and the law and order situation needs to be corrected. In her maiden appearance, she has said that these two needs would be of her utmost her priority. It is important that the victors learn a lesson from these results. So they may realise that the aspirations of the voters have changed, there is need to pay closer attention to their needs and expectations, and most importantly, that administering through a highly educated bureaucracy would not be a substitute for listening to the people. .....

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ISA S Brief No. 199 – 18 May 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

How the Red Fortress was Won: An Analysis of the West Bengal Assembly Election Ronojoy Sen 1

Abstract That the Left Front, the longest-serving democratically elected Communist government, was voted out in West Bengal did not come as a surprise. The margin of victory for the Mamata Banerjee-led Trinamool Congress was, however, not anticipated by many. The Trinamool rode on the strong desire for change among West Bengal voters. Among the other factors for the Trinamool’s thumping victory were discontent over the Left Front’s land acquisition policy, the transfer of allegiance of Muslim voters to the Trinamool and the inability of the Left to comprehend the extent of voter dissatisfaction. It would not be an overstatement that the 2011 West Bengal Assembly election verdict was a historic one. The world’s longest-serving democratically elected Communist government was shown the door on 13 May 2011 by the Trinamool Congress led by Mamata Banerjee. The Communist Party of India (Marxist) (CPI[M])-led Left Front, which had governed West Bengal for a record 34 years, was reduced to a mere 62 seats in the 294-seat Assembly while the Trinamool surged to 184 seats, well over the majority mark. The Trinamool’s ally, the Indian National Congress, won 42 seats. The magnitude of the Left’s defeat can be gauged from the results of the last Assembly election in 2006. Then the Left Front had won 233 seats to the Trinamool’s 30. The turnaround for the Trinamool was in the making for some time. In elections first to the panchayat or local-level bodies in 2008, then the 2009 Lok Sabha elections and finally the 1

Dr Ronojoy Sen is Visiting Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore. He can be reached at isasrs@nus.edu.sg. The views reflected in this paper are those of the author and not of the institute.


civic polls in 2010, the Trinamool Congress had steadily increased its vote share in both rural and urban Bengal. The national Lok Sabha elections, where the Left Front’s share of seats fell from 35 to 15 while the Trinamool Congress’ jumped from one to 19, was a clear indication of the erosion of the Left’s support. In the 2011 Assembly elections, there was a 12 per cent swing in the vote share in favour of the Trinamool, while the Left Front suffered from a little under 9 per cent swing away from it. There were several reasons for the defeat of the Left Front in the Assembly polls. Perhaps the most critical was the strong momentum for change blowing in West Bengal. This was summed up in the Trinamool’s slogan of ‘poriborton’ or change which struck a chord with the voters. Voter discontent was high because by every possible indicator Bengal was lagging behind other states. Beginning in the 1970s, there was a flight of industry from the state, which was once an industrial powerhouse. By 2007-08, the share of manufacturing in the state’s net domestic product had fallen to 7.4 per cent compared to 13.6 per cent in neighbouring Orissa. At the same time, West Bengal’s share in employment in the manufacturing sector fell from 13.3 per cent in 1976-77 to 5.0 per cent in 2008-09. Agriculture and land distribution was one of the early success stories for the Left Front, but even agricultural production had flattened out long ago. Along with the exit of capital, Bengal suffered from a brain drain with students, who had the wherewithal, leaving to better their prospects. The Left Front did not help matters by doing away with English for several years in government primary schools. But what was most shocking was the state of health and education, the two areas where a Communist government was expected to have the most impact. The number of hospitals beds per 100,000 people in rural Bengal is 3.8 compared to an all-India average of 17.5. In education, the dropout rate of students is over 75 per cent compared to an all-India average of 60 per cent. More worryingly, the education system had been completely taken over by CPI(M) party apparatchiks. What, however, decisively swung the mood in favour of the Trinamool were the agitations around the industrial projects in Singur, the site for the Tatas’ Nano factory, and Nandigram, the site for a chemical hub to be operated by an Indonesian multinational. Both projects foundered on the acquisition of land, which was owned by small to medium farmers, by the Left Front government. The compensation package offered by the Government was rejected by many of the farmers. Mamata used the discontent to mobilise support among the rural peasantry, which had traditionally been one of the most die-hard supporters of the Left. Beginning with Mamata’s 26-day fast from 3 December 2006 on behalf of farmers in Singur, who were protesting acquisition of their land, and culminating in crippling protests in 2008 that eventually led to the relocation of the Nano project to Gujarat, Singur became emblematic of the Trinamool wave that has since swept the state. In between, on 14 March 2007 the police, reportedly along with CPI(M) cadre, fired on protesting peasants, an incident 2


which caused a real dent in the Left Front’s rural support. In this period there were several other incidents of political violence in the state. Singur and Nandigram were critical events in other ways. There was an outpouring of anger against the government’s policies by Kolkata’s intellectuals, who have traditionally been Left-leaning. Street marches were organised and the famous slogan of the 1970s – ‘Tomar naam amaar naam, Vietnam Vietnam (Vietnam is your name and mine)’ – was resurrected in another guise: ‘Tomar naam amaar naam, Nandigram Nandigram (Nandigram is your name and mine)’. Mamata, whose support base had so long been confined to the urban underclass, was now being vociferously backed by both the intelligentsia and the rural poor. There were three other reasons for the landslide victory for Trinamool. First, Muslims – who comprise nearly a quarter of Bengal’s population and are heavily concentrated in the countryside – have traditionally supported the Left. But over the past two years they have switched their allegiance to Trinamool, partly because of Nandigram and partly due to the Left’s failure to improve their lot, a fact highlighted in the Sachar Commission Report commissioned by the central government. Second, the high turnout of nearly 84 per cent, aided by a six-phase election with unprecedented security, allowed many citizens who had not voted in earlier elections out of fear of reprisals to vote this time around. This worked to the Trinamool’s advantage. Third, the attitude of the Left contributed in no small measure to Mamata’s success. During the election campaigning, CPI(M) leaders kept insisting that that their party had recovered from the reverses of the past three years. Even a day before the results were announced, a party assessment predicted that the Left Front would win a narrow majority. Clearly the CPI(M) – which won a mere 40 seats and saw most of its prominent leaders, including chief minister Buddhadeb Bhattacharjee, bite the dust – was living in denial. Such was the anti-Left sentiment that even its traditional bastions in south-west Bengal were not left untouched. However, the Left Front still won just under 41 per cent of the vote share showing that it might be down but not out. Whether the CPI(M), the leading light of the Front, will take meaningful measures to connect with the people or take refuge in these numbers, as indicated by its central leadership in the immediate reaction to the election result, remains to be seen. Mamata clearly has the mandate to bring about change in Bengal. Unusual for a regional party, the Trinamool had issued a vision document before the election which sets out a timebound agenda for reviving the state. While the goals, such as reviving industry and agriculture, are laudable, getting fresh investment for the state in the wake of Singur and Nandigram will be a real challenge. Besides, the Left Front has left the state’s finances in a mess and West Bengal is saddled with a huge debt burden, which is among the highest in the country. There is also the threat of political violence, which has been a recurrent feature in Bengal over the past decade, not to forget the Maoist threat in the state’s most under3


developed and tribal dominated regions bordering Jharkhand. How the CPI(M) cadre, used to the benefits of state patronage for over three decades, and the Trinamool workers flush with victory will react over the next few months, will be critical to the state’s future. Despite the challenges, there are a few things going right for Mamata. Being a crucial coalition partner in the Congress-led United Progressive Alliance government at the centre gives her the leverage to get central funds and investment for West Bengal. She has strategically offered ministerial berths to the Congress in West Bengal despite having the numbers to form the government on her own. But more than anything else, she has the backing and goodwill of a large portion of Bengal’s citizens who have seen the state stagnate and fall behind the rest of India over the past two decades.

.....

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ISA S Brief No. 200 – 23 May 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Kerala: Communist Survival – Now What? Robin Jeffrey 1

Abstract Contrary to predictions, Kerala’s Left Democratic Front (LDF) led by the Communist Party of India (Marxist) [CPI(M)], came within a whisker of retaining power in state elections, the results of which were announced on 13 May 2011. For 40 years, Kerala voters have made it a tradition to change governments at each election. That tradition continues, but the 2011 result will install a rickety United Democratic Front (UDF) government led by the Congress Party. Oommen Chandy will return to the chief minister’s position he occupied from 2004-06. The Congress performed disappointingly, winning only 38 of the 82 seats it contested. It will need all six of its alliance partners to retain power. Kerala’s economy and social cohesion are vital issues for the new government. Its tiny majority and disparate character lead to doubts about its ability to handle such problems effectively or to complete its five-year term.

The state of Kerala, which gave the world its first elected communist government in 1957, now provides one of the world’s last bastions for communist parties that voters support. Less than a year ago, observers predicted that Kerala’s LDF government, led by the CPI(M), would be decisively defeated in state elections. That was the fate of the CPI(M) in West Bengal, thrown out of office after 34 years in power.

1

Professor Robin Jeffrey is Visiting Research Professor at the Institute of South Asian Studies, an autonomous research institute at the National University of Singapore. He can be reached at isasrbj@nus.edu.sg. The views reflected in this paper are those of the author and not of the institute.


A remarkable comeback, inspired by an 88-year-old chief minister, brought the CPI(M)-led Front to within a whisker of retaining office in elections held in April 2011 but whose results were announced on 13 May. The LDF won 68 out of 140 seats, only four behind its Congress-led rival, the UDF. True, the CPI(M) had lost 16 seats – down to 45 from 61 seats in 2006. True, also, that the UDF, led by the Congress Party, will form the next Kerala government. But with a majority of only four seats, the stability of the UDF government is uncertain. Only a reckless punter would bet on its completing a full five-year term. The CPI(M), which controls a number of wealthy institutions, including a newspaper and a television channel, is well-placed not just to survive, but to be back in power inside five years. Far from being swept away, as many had predicted six months ago, the LDF won 45 per cent of the vote, only one per cent less than the UDF. It lost five seats by fewer than 500 votes. Table 1: Kerala Assembly, Seats Won, 2011 and 2006 elections Party

Seats 2011

Left Democratic Front (LDF) Communist Party of India (M) Communist Party of India RSP Janata Dal (Secular) National Congress Party LDF-backed Independents United Democratic Front (UDF) Indian National Congress Muslim League Kerala State Committee Kerala Congress (M) RSP-B KC-B KC-J Socialist Janata (Democratic) Party Others

Seats 2006 45 13 2 4 2 2 68

61 17 3 5 1 87

38 20 9 1 1 1 2 72 140

24 7 7 15 53 140

Source: The figures have been extracted from Mathrubhumi-Malayam Daily (14 May 2011).

The pre-election predictions were dire. The CPI(M) had been pulverised in Kerala’s localgovernment elections in 2010 and in the national elections in 2009. Indications were that the same fate awaited the party in state elections.

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The Congress Party has reason to be disappointed. It won only 38 seats and will need to be especially solicitous of its alliance partners, the Muslim League (20 seats) and the Kerala Congress (Mani), a Syrian Christian-based party strong in central Kerala and revolving around K.M. Mani (born 1933), which won nine seats. The Muslim League’s tally was the best in its 60year history. For 40 years, Kerala politics has been built around rival alliances, one anchored to the Congress Party and the other to the CPI(M). The two parties provide a relatively stable core with only occasional deserters. But minor parties scurry in and out of alliances as chance presents itself. The new Assembly provides plenty of opportunity for scurrying. Five of the UDF’s 72 seats are held by ‘parties’ that in fact are individual enterprises and travel under names such as the Revolutionary Socialist Party (Bolshevik) [one seat] and Socialist Janata Dal [two seats]. The two top Congress leaders come from different religious backgrounds but the same social circumstances and locality. The new chief minister will be Oommen Chandy (born 1943), previously chief minister from 2004 to 2006. He is a Syrian Christian, the most aristocratic Christian tradition in India which traces its origins to the time of Christ and comprises about 10 per cent of Kerala’s people. Chandy received his higher education at Church Missionary Society (CMS) College, Kottayam, founded by the English CMS nearly 200 years ago. Ramesh Chennithala (born 1956), president of the Kerala Provincial Congress Committee, is a Nair, the largest high-status caste in Kerala, perhaps as much as 15 per cent of the population. He is a product of Nair Service Society (NSS) College, Changanacherry, the flagship educational institution of one of India’s most successful caste associations, the NSS founded in 1914. It is half an hour down the road from Chandy’s CMS College. Achuthanandan, the remarkable 88-year-old, has a different but impeccable pedigree for a Kerala communist. He is an Ezhava by caste. In the old days, Ezhavas were held to be a low caste (but not the lowest), associated with the cultivation of the coconut palm that abounds in Kerala. They constitute perhaps 20 per cent of the population, and their struggles for civil rights in the twentieth century drew many to the Communist Party. The unions that formed around the coconut industry, particularly the manufacture of coir, became a communist backbone. Achuthanandan worked in coir production as a youth, joined the party and spent five years in jail in the 1940s and 1950s, when the Communists attempted unsuccessful revolts against Indian governments.

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Today, partly as a result of its fiercely competitive two-alliance system, Kerala has the best social statistics of any state in India. It has high literacy rates, both for men and women, long life expectancy, low infant mortality and a low birth rate. Virtually every child goes to school. But Kerala’s most profitable exports are its people. Kerala nurses work all over the world, and the Arab states of West Asia have been serviced by hundreds of thousands of Kerala workers for 40 years – the past two generations. In Kerala itself, the economy in the twenty-first century has grown at a slightly faster rate than India’s as a whole, but the state retains its reputation for sluggish growth and as a tough site for investors, tested by aggressive unions and litigious citizens. The state’s worthy social and medical systems are underpinned by remittances from Kerala people working overseas. There is little budget room for infrastructure. The state of Kerala’s roads is abysmal, though a blitz on road repair early in 2011 may have helped bolster the government’s reputation sufficiently to keep it close in the recent elections. Two vital questions arise from these elections. How will the result affect Kerala’s (1) economy; and (2) social cohesion? It is difficult to see the new government making economic breakthroughs. Though Kerala’s education system creates a highly literate population, higher and technical education are undistinguished. Kerala is a long way from being seen as a knowledge hub like Bangalaru. The UDF’s 44-page election manifesto is a long checklist aimed at ticking the dance programme of every group in the state. It contains few ideas, but plenty of undertakings such as: 1. Procurement price of agricultural products will be raised proportionate to cost of production (p. 5); 2. Public Sector Units will be strengthened (p. 11); 3. Rules will be framed to entrust ownership right of Public Sector Units with the public (p. 11); 4. Due to high density of population and scarcity of land, service sectors like tourism and information technology offer better development prospects to Kerala than agriculture and industry. To achieve development in this sector, dearth of infrastructure needs to be solved expeditiously (p. 14); 5. The pay and pension of State Government employees will be revised ensuring Central parity (p. 36) 6. A free medical scheme will be introduced to the State Pensioners and their dependents (p. 36).

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It concludes that ‘the most suited industry for Kerala is information technology (IT)’ (p. 13) and places much hope on being able to expand Kerala’s IT capacity. But there is little suggestion of breaking with the long-standing Kerala pattern of promising more government services, even if they are often under-funded and patchily delivered. Kerala is socially complex. Muslims make up about 23 per cent of the population, concentrated in the north of the state. Malappuram is one of only about 20 districts in India where Muslims are a majority. The Muslim League won 12 of Malappuram’s 16 seats, and the UDF took 54 per cent of the votes cast, the highest score in any district. Christians make up another 19 per cent of the population, and the other successful partner in the UDF is the Kerala Congress (Mani), a Christian-based aggregation that revolves around the wily K.M. Mani, a fixture in Kerala politics, playing both sides against the middle, for 50 years. Mani’s Congress won nine seats; eight of his winners are Christians. Castes and religion are explicit, understood and integrated into Kerala’s politics, and they have not led to significant violence for more than 80 years. One has to go back to the Mapilla, or Malabar revolt, of 1921 to find such events. In the past few years, there were allegations that the CPI(M) was flirting with radical Muslim organisations in an attempt to win favour with Muslim voters. If this were so, the idea was disastrous. The Muslim League has never done better than in these elections, and the three biggest majorities all went to Muslim League candidates. The largest margin in the state was 44,500 votes in the district headquarters town of Malappuram. Political affiliation has been more likely to lead to violence. Indeed, on the day the poll results were announced (13 May 2011), a CPI(M) worker in north Malabar was murdered and a local Congress leader taken into custody, allegedly as the killer. Kerala confronts substantial social problems. Because it is highly literate and effectively administered, it records data more reliably and publishes its problems for all to see. On the basis of such data, the state has the highest per capita alcohol consumption and second highest suicide rates in India. Alcohol production and consumption connect with powerful political interests in the liquor business; suicide appears to be linked to the large numbers of migrants and resulting dislocation of households and personal relationships. The most significant result of the 2011 elections is the survival of the CPI(M). That is not a bad thing. In spite of the puzzling devotion of intelligent people to graven images like Lenin and Stalin, party members often display a rare dedication, honesty and courage. The All-India 5


Democratic Women’s Association (AIDWA) is one of the bravest organisations in the country. In the Kerala survival story of 2011, much appears to be owed to the old proletarian battler, Achuthanandan. Whether men and women half his age can construct a radical party for the twenty-first, and not the nineteenth, century is a question that Kerala’s future will answer. .....

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ISA S Brief No. 201 – 24 May 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

A No-Win Situation for Pakistan: A Dilemma for the US

Sajjad Ashraf1 Abstract The United States (US) raid that killed Osama Bin Laden has raised many serious questions and has put the Pakistani ruling elite at serious odds with the public. Pushing Pakistan to the corner is not the optimal choice for the US’ long-term interests in the region.

Commentary Credible news reports in Pakistan indicate that US Senator John Kerry, Chairman of the US Foreign Relations Committee, who visited Pakistan late last week, laid out two options on the table for Pakistan. He said, ‘Work with us or else Washington will resort to unilateral action anywhere in Pakistan to take out targets.’ Earlier, in an unusual candour he said that his goal in coming to Pakistan is ‘not to apologise’ for a unilateral US raid on Pakistan, rather find a way to manage this important relationship. The joint statement issued at the end of Senator Kerry’s visit confirmed that ‘Pakistan agreed to take several immediate steps to underscore its seriousness in renewing full cooperation effort with the US.’ Back in Washington, Kerry declared to the media that Pakistani leaders pledged new efforts to cooperate with Washington. He added, ‘These measures are concrete, they are measureable and they are in many cases joint – and we will know precisely what is 1

Sajjad Ashraf was Pakistan’s High Commissioner to Singapore from July 2004 to December 2008. He currently serves as Adjunct Professor at the Lee Kuan Yew School of Public Policy and is Visiting Senior Research Fellow at the Institute of Southeast Asian Studies (ISEAS), Singapore. The views reflected in the paper are those of the author and not of the institute.


happening with them in very, very short order.’ This statement echoes Bush’s ‘you are either with us or against us’ ultimatum to Pakistan in 2001. Pakistan’s Response The Government of Pakistan seems to have caved in within three days of an angry parliamentary resolution, demanding revisiting ties with the US. Only last week, Prime Minister Syed Yousaf Raza Gillani said in a Time Magazine interview, ‘[that] continuing to work with the US could imperial his government unless Washington takes drastic steps to restore trust and win over 180 million Pakistanis.’ Wikileaks on the contrary, points to the Government’s complicity with the Americans. The Government’s credibility is, therefore, very low. With intense US pressure to comply and deliver Pakistan ruling elite puts it on a very slippery slope once again. The statement issued by Pakistan, after Senator Kerry left Pakistan and Hillary Clinton called President Zardari, said, ‘Both sides agreed to resolve the issues amicably and move forward.’ Although this statement seems to read more like – to move forward on American terms and according to the American dictates. The leader of the parliamentary opposition has reacted and demanded an explanation both from the civil and military authorities on agreeing to this new ‘code of conduct’ with the US, without taking the parliament into confidence. Commentators and the public at large were already shell shocked at the meek Pakistan response and are now incensed at yet another capitulation to US demands.

Troubling Questions and Pakistan’s Problems Everyone wants an answer to the question of, ‘How could Osama Bin Laden stay undetected in Abbottabad within 1.5 kilometres of Pakistan Military Academy for over five years?’ Did he go undetected or was there complicity? How and why is it that Pakistan’s military, touted with a larger than life status within the country, failed to detect the US helicopters flying in and out of Pakistan, and staying on the ground for nearly 40 minutes? Why is there so much expense if the military is unable to tackle these incursions? The list of questions is endless for now. Within days of Osama’s killing, Pakistan suffered one its worst suicide bombing attacks, when two bombers killed 82 and injured 142, mainly young recruits at the Frontier Constabulary Centre near Charsadda, a town close to Peshawar. The five US drone attacks in Pakistan’s Federally Administered Tribal Areas, killing more than two dozen people, does not make it easier for Pakistan. Despite the debates that will rage within Pakistan, both 2


confidentially and in public forums, the problems for Pakistan going forward have become much larger obstacles. It must be psychologically shattering for Pakistan to hear from the Indian Prime Minister, during a visit to Kabul, that India was not contemplating a US type operation in Pakistan in pursuit of fugitives. Nonetheless, India issued a list of 50 men, it wants extradited to stand terror charges in India. These include two serving majors of the Pakistan Army, whom India alleges, gave direction to Mumbai attackers.

Pakistan’s Past Actions and Consequences Pakistani rulers, in their obsession with India, surrendered Pakistan’s sovereignty back in the 1950’s, by playing an American pawn in the Cold War, giving airbases and airspace in return for military hardware and God knows how many kickbacks. The Pakistani ruling elite has shamefully sacrificed their nation’s interest for their own. Pakistan’s first military ruler, Ayub Khan, inexplicably dismisses any compromise of sovereignty in his book ‘Friends Not Masters’, claiming that since these facilities were available to the Americans with Pakistan’s acquiesce there was no violation. From that point on, Pakistan kept giving in. Another military ruler, Zia ul Haq, was given legitimacy by the US to be a surrogate force while fighting the Soviets. Similarly, Musharraf suddenly became a buddy after he succumbed to the US threats and switched sides, making Pakistan the biggest victim of extremism and consequent violence. Even now, when the Americans pay for ‘hired guns’, they demand full service. Pakistan’s sovereignty is severely curtailed. Having allowed the camel in the tent, Pakistan’s dilemma is how to get out of American tutelage.

Going Forward While the civilian leadership was already explicitly blamed for blindly following the US, people now openly question the military’s ability to stand its ground against foreign incursions into the nuclear armed Pakistan. Apologists who argue for maintenance of relations with the US, claiming realism, warn that with so many economic woes Pakistan is better off toeing the US line. Otherwise, the US will pressurise all international lending institutions to deny financial aid to Pakistan, leading to free fall of currency and default on payment with its attendant consequences. Lawmakers on Washington’s Capitol Hill have already asked the US administration to stop aid to Pakistan until it demonstrates more commitment to fighting Al-Qaeda and the Taliban.

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Others believe, with a lot of justification that US demands on Pakistan are now escalating to impossible levels. The US aid money benefits only a little. Such a state, it is rightly argued, cannot be sustained indefinitely. Pakistanis believe that the US will jettison their country as soon as US goals are met. The Chinese have advised caution with regards to the US. Public mood is turning towards anger that can lead to an Iran-like situation. Such a situation of rapidly growing discontent against the ruling clique, reflecting popular national aspirations, can overthrow the yoke of those who represent the American agenda. The US will then be the big loser in this new Great Game. The US better not push Pakistan into a corner if it wants to maintain its influence in this region in either the medium- or longterm. The US should recognise that ‘two Irans’ will be very hard to handle. .....

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ISA S Brief No. 202 – 26 May 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

India-Australia: Moving beyond the Periphery Suvi Dogra1

Abstract India and Australia have traditionally been at the periphery of each other’s foreign policy. However, with the recent high level ministerial meetings, clearly the two countries are now trying to engage each other with reinforced vigour. The recent agreement to begin formal negotiations for a Comprehensive Economic Cooperation Agreement (CECA) has given much needed impetus for stronger bilateral relations. This paper discusses India-Australia relations against the backdrop of the proposed CECA.

The year 2011 witnessed a resuscitation of India and Australia relations with India’s Minister of External Affairs S.M. Krishna’s visit to Melbourne for the Australia-India Foreign Ministers’ Framework Dialogue on 20 January 2011. The Minister discussed bilateral, regional and global issues of mutual interests with his Australian counterpart, Kevin Rudd.2 India’s Minister for Commerce and Industry, Anand Sharma subsequently visited Canberra in May 2011. The three-day visit not only resulted in the agreement to begin formal CECA negotiations but also signalled a renewal of bilateral interest between India and Australia on all fronts. As early as August 2007, India and Australia had decided jointly to embark on a feasibility study in pursuit of a free trade agreement (FTA) between the two countries. The Joint Study 1

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Suvi Dogra is Research Associate at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore (NUS). She can be reached at isassuvi@nus.edu.sg. The views reflected in the paper are those of the author and not of the institute. ‘Joint Statement of Australia-India Foreign Ministers’ Framework Dialogue’, Ministry of External Affairs, Government of India (20 January 2011), http://meaindia.nic.in/mystart.php?id=530517077. Accessed on 18 May 2011.


Group submitted its recommendations in May 2010 and after a year the start of CECA negotiations have now been officially announced. The first round of the CECA talks is scheduled to be held in June 2011 in New Delhi. The CECA is aimed at liberalising and broadening the base of merchandise trade, removing non-tariff trade barriers that impede trade in services, and facilitating two-way investments between the two countries.3 The trade ministers also discussed other areas of engagement including double taxation, social security and film co-production agreements. Following his meeting with Australian Trade Minister Craig Emerson, Anand Sharma met the Australian Prime Minister Julia Gillard and five other senior Australian Cabinet Ministers. During the meeting, the ministers announced the setting up of a Chief Executive Officers' (CEO's) forum which would be cochaired by Naveen Jindal from India and Lindsay Fox from Australia. The first meeting is expected to take place this year. Bilateral economic and trade engagement in the past has been limited to commodities and mineral resources such as coal, copper, nickel and gold. However, with the improving dialogue between officials from both the countries, relations are now expanding beyond trade to political and strategic engagements with cooperation in international forums

Trade Relations In 2009-10, India became Australia’s third largest export market after China and Japan, while Australia is India’s eighth largest trading partner.4 The two-way trade has been growing at an average of 25 per cent over the last five years. With CECA in place, bilateral trade will double from US$20 billion to US$40 billion over the next five years.5 In 2009-10, Australia's share of India’s imports was 3.5 per cent. Australia exported about 8.1 per cent of its total exports to India and imported around 0.9 per cent of its total imports from India. The trade balances, continue to be strongly skewed in favour of Australia primarily due to India’s demand for natural resources. Despite the trade deficit, the overall growth in India-Australia trade underscores the importance and strength of the bilateral relation. Trade in services between the two countries has also increased. India’s service exports to Australia moved upwards from US$123 million in 2000 to US$519 million in 2008. India’s main services exports to Australia are computer 3

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‘India- Australia CECA Pathway to Closer Economic Integration: Anand Sharma’, Press Information Bureau, Government of India, http://pib.nic.in/newsite/erelease.aspx?relid=72106. Accessed on 19 May 2011. For trade details see, Ministry of Commerce, India, http://commerce.nic.in/eidb/iecnttopn.asp and the Department of Foreign Affairs and Trade, Australia, http://www.dfat.gov.au/geo/fs/inia.pdf. Accessed on 24 May 2011. Sujay Mehdudia, ‘India, Australia to announce launch of FTA negotiations’, The Hindu (11 May 2011), www.thehindu.com/business/Economy/article2009259.ece. Accessed on 18 May 2011.

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and information services, and tourism. Main Australian service exports to India are education, education-related travel and tourism. Indian investments in Australia are growing and high profile investors such as Aditya Birla Group, Reliance, Tatas, Adani Group, Lanco Infratech, Infosys, Satyam Mahindra, Tata Consultancy Services (TCS) and Hindustan Computers Limited (HCL) have expanded their presence in Australia.

Other Engagements While it may seem that these bilateral engagements gained significant momentum only in 2011 the India-Australia Joint Ministerial Commission was in fact established as early as 1989 with twelve meetings to date. The two countries have also signed the Bilateral Investment Promotion Agreement (BIPA) in 2000. The BIPA will now be realised under the proposed CECA which can provide a more liberal investment environment. In 2009, India and Australia signed an agreement to elevate the bilateral relation to a ‘strategic partnership’. Under the agreement, Australia and India issued a Joint Declaration on Security Cooperation to ensure closer and more regular collaboration. In 2008, the two countries signed a series of MoUs (memoranda of understanding) ranging from defence cooperation, exchange of customs, information and communications technology, combating international terrorism to cooperation in water resource management, science and technology, air services and intellectual property The parties pursued closer collaboration with the initiation of the first biennial Australia-India Energy and Minerals Forum held in Perth in 2010. This set the stage for stronger ties, building on the five strategic Action Plans (on coal, new and renewable energy, mining and minerals, power, petroleum and natural gas) that was agreed upon in 2008.

Unresolved Issues The relationship is, however, riddled with problems, and unresolved issues of the past can sabotage the current progress. In its quest for clean energy, India has signed the US-India Civil Nuclear Cooperation and in active pursuit of similar deals with several countries. Civil nuclear cooperation with Japan was aggressively pursued but delayed because of Fukushima. Inevitably, the ban on uranium exports from Australia to India continues to be the bone of contention, causing delays in CECA negotiations. Australia has refused to sell nuclear material to India because the country has not signed the Nuclear Non-Proliferation Treaty (NPT). The uranium issue has become a ‘barometer of trust in the relationship’ for India and ‘a thorn in Australian government policy’. Australia’s minority government is under pressure to sell uranium to

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India for civilian use as it does with China and Russia to allay Indian misperceptions of Australia ‘tilting China’s way’. 6 Despite the urgency to resolve the issue, the discussions during the trade ministers’ talks in May 2011 did not address the sale of uranium. Australia’s opposition party, however, had called for the inclusion of the issue in the negotiations, ahead of Anand Sharma’s visit to Canberra. Opposition trade spokesperson, Julie Bishop made the rallying call, ‘They should take the opportunity to open negotiations for the sale of Australian uranium to India,’ .7 India's balance of trade (BOT) could have been a fudge factor in the bilateral equation but this has not found an early resolution. India’s trade imbalance with Australia is the second largest with any of its trading partners. Indian authorities have often sought wider access to Australia for exporting information technology, pharmaceuticals, fruit and vegetables to reverse the deficit. Australia, however, has already opened its markets with tariff rates and other trade restrictions which are among the lowest in any OECD (Organisation of Economic Co-operation and Development) country. The challenge is for Indian manufacturing and services sectors to penetrate the Australian domestic market and successfully compete with imports from other countries, especially China. Another thorny issue in the recent past was the spurt in crimes against Indian students studying in Australia. During his visit to Australia earlier this year, S.M. Krishna and his Australian counterpart noted the measures taken by the Australian government in 2010 to address concerns over the safety and well-being of Indian students in Australia. They agreed that significant progress has been made while acknowledging the ongoing engagement in the education sector, including the Joint Working Group on Education and the Australia-India Education Council. Further, the annual Education Minister’s dialogue will be held in India in September 2011.

Moving Ahead While the start of CECA negotiations may be a crucial step in Indo-Australia relations, the two countries need to forge a partnership beyond trade and economics. In this regard, the positive interactions between the two countries in international and multilateral forums can foster stronger bilateral ties. Last year, Australia’s Foreign Minister, Kevin Rudd, had expressed Australia’s strong support for India's bid to a permanent seat on the United Nations Security Council (UNSC) as well as its membership to the Financial Action Task Force.

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Rory Metcalf, ‘Breaking Down Old Barriers’, The Times of India (24 January 2011), http://articles.timesofindia.indiatimes.com/2011-01-24/edit-page/28369717_1_uranium-sales-securitycooper ation-natural-partners. Accessed on 18 May 2011. Peter Veness, ‘Talk uranium with India: opposition’, The Chronicle (11 May 2011), www.the chronicle.com.au/story/2011/05/11/discuss-uranium-in-india-talks-oppn. Accessed on 20 May 2011.

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Both India and Australia are members of the G-20, the Commonwealth, the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC), the Association of Southeast Asian Nations (ASEAN) Regional Forum, the Asia Pacific Partnership on Climate and Clean Development. They are both active members of the East Asia Summit (EAS). Both countries have also been cooperating as members of the Five Interested Parties (FIP) in the World Trade Organization (WTO). Australia is an important player in APEC and supports India's membership to the organisation. Australia has been admitted as a South Asian Association of Regional Cooperation (SAARC) observer since 2008. While they share similar interests at the international front, Australia’s stand on India’s membership of the world’s four non-proliferation export control regimes, namely, the Wassenaar Arrangement, the Nuclear Suppliers Group (NSG), the Australian Group, and the Missile Technology Control Regime (MTCR) remains unclear. Members are required to fulfil several requirements such as becoming a signatory of the NPT, adherence to chemical and biological weapons conventions (CWC and BWC), legally-based domestic export control system, membership to one or more of the five nuclear weapon free zones, maintenance of national export control lists which includes all the items on the list of these multilateral regimes, and other similar yardsticks. Regarding the above, India has legislated the Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act in June 2005, fulfilling its obligations under the UNSC Resolution 1540. The resolution requires United Nations member states to enact domestic legislation to better account for weapons of mass destruction materials and technology. The list of items on India’s Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) list was also upgraded to include those present in the NSG and the MTCR lists in July 2005.8 Not only does India enjoy a ‘clean’ waiver, accorded to it by the NSG on 6 September 2008, it also has the US’ support for membership into the said forums. Further, NSG has decided to include India's request for membership when it holds its annual meeting in the third week of June this year.9 The only roadblock for India’s participation in the said forums is its non-membership in the NPT. Meanwhile, the successful negotiations and implementation of the CECA and other proposed initiatives may well put substance into the words of Australian Minister for Foreign Affairs, Stephen Smith, who said in the parliament last year: ‘The era of inactivity and even neglect is over’.10 If Prime Minister Manmohan Singh accepts his Australian counterpart’s invitation to attend the Commonwealth Summit in Perth in October 2011, it would be the strongest 8 9

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The SCOMET controls the sale and trade of dual-use technologies. Sandeep Dixit, ‘NSG to include India's request for membership as special agenda item,’ The Hindu (25 May 2011), http://www.thehindu.com/news/national/article2045985.ece. Accessed on 26 May 2011 Stephen Smith, ‘Ministerial Statement on the Australia-India Relationship’, Ministry of Foreign Affairs, Australia (9 February 2010), www.foreignminister.gov.au/speeches/2010/100209_australia_india.html. Accessed on 19 May 2011.

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indication that indeed the `era of neglect is over'. All the more, if he chooses to combine it with an official bilateral visit as a next crucial step for strengthening ties. If so, this would be the first visit of an Indian Prime Minister to Australia in the last 25 years. .....

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ISA S Brief No. 203 – 17 June 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

NMIZs in India: Haunted by SEZs? Amitendu Palit1

Abstract India’s draft national manufacturing policy proposes National Manufacturing and Investment Zones (NMIZs) as instruments for revitalising manufacturing. The policy addresses major challenges for Indian manufacturing such as inflexible labour laws, multiple procedures and environment-friendly production. However, NMIZs pose several questions with respect to their relationship with Special Economic Zones (SEZs). Unless states are consulted actively, the paper argues, NMIZs might be as controversial as SEZs.

Introduction The High Level Committee on manufacturing, chaired by Prime Minister Dr Manmohan Singh, recently gave its in-principle approval to the draft national manufacturing policy.2 Prepared by the Department of Industrial Policy and Promotion (DIPP), the policy aims to raise the share of manufacturing in India’s gross domestic product to 25 per cent by the year 2025, from what is 16 per cent at present. Ministerial consultations on the policy are expected to be completed within a month, following which it will be reviewed by the Cabinet and announced formally.

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Dr Amitendu Palit is Head (Development & Programmes) and Visiting Senior Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore. He can be reached at isasap@nus.edu.sg. The views reflected in the paper are those of the author and not of the institute. ‘PM Chairs High Level Committee on Manufacturing’, India’s Prime Minister’s Office (9 June 2011), http://pmindia.nic.in/pressrel.htm. Accessed on 11 June 2011.


The change and dwells at length on how production in NMIZs will be encouraged to be ‘green’. Considerable attention has also been devoted to inflexible provisions in India’s different labour laws and the options available to manufacturers in NMIZs for overcoming these inflexibilities. The policy also highlight of the policy is its emphasis on NMIZs as principle instruments for enhancing manufacturing output and exports. The policy takes note of India’s imperatives in tackling climate addresses two critical constraints of Indian manufacturing – shortage of skilled labour and complying with multiple procedures – and offers various suggestions for overcoming the constraints.

What are NMIZs? A discussion paper prepared by the DIPP, which is the basis of the new manufacturing policy, explains NMIZs.3 These are proposed to be dedicated areas devoted to manufacturing and will not only include industries producing manufactured items but also public utilities, logistics, residential complexes, environmental safeguards and other administrative services. Like SEZs, NMIZs will have distinct ‘processing’ and ‘non-processing’ segments; the former will house core production facilities backed by logistics and production-related infrastructure, while the latter will comprise of the institutional infrastructure such as residential, commercial and social facilities. The policy expects the Central Government and state governments to meaningfully coordinate the development of NMIZs. The main responsibility of the Central Government, other than approving establishment of the zones, would be to connect them with external physical infrastructure facilities such as rail, road, seaports, airports and telecommunications. This will be done through appropriate public-private-partnerships (PPPs), wherever necessary. State governments, on the other hand, will be responsible for identifying and acquiring land, and ensuring supply of electricity, water, sewerage, state road connectivity, health facilities and safety measures. The governing authorities for NMIZs will be in the form of special purpose vehicles (SPVs)4 with participations from developers, industry associations and the major manufacturers in zones. The SPVs will be responsible for preparing master plans for the zones, specification of land use, demarcation of processing and non-processing segments, identifying industries that can emerge in the zones, approving establishment of units within zones, planning and developing internal infrastructure and determining user charges for various facilities. The SPVs will also be responsible for 3

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‘National Manufacturing Policy: A Discussion Paper’, Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce and Industry, Government of India, www.dipp.nic.in/NMP_DiscussionPaper /NMP_DiscussionPaper_2010.pdf. Accessed on 11 June 2011. SPVs are business associations of individuals or other legal entities formed with well-defined and specific objectives. Technically, these are companies as they have to abide with all regulations under the Companies Act, though within their specified focus. Promoting companies, while setting up SPVs, hive off chunks of their assets into SPVs de-linking these assets from the parent company. Thus prospects of the latter do not affect those of the former thereby making it simpler for SPVs to raise funds from investors.

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choosing the developers for the zones and those developers can be either government, private agencies or PPPs.

‘Green’ Production, Labour Laws, Skills and Procedures ‘Green’ production is heavily emphasised in NMIZs with such production encouraged by specific fiscal incentives. Those fiscal incentives include cheap loans for investing in projects with green technologies, creating earmarked funds for supporting research on green manufacturing and investment subsidies for independent power plants in NMIZs using green technology. In addition to incentivising green manufacturing, the policy also contains suggestions for making labour absorption and retention in NMIZs a more flexible process. Several exemptions for NMIZ industries have been proposed under the Industrial Employment (Standing Orders) Act of 1946, the Industrial Disputes Act of 1947, the Employees State Insurance Act of 1948, the Factories Act of 1948 and the Payment of Gratuity Act of 1972. NMIZ enterprises have been proposed permanent ‘public utility’ status so that they are unaffected by production disruptions from unexpected strikes and lockouts. Subject to specific conditions, the Trade Union Act of 1956 and other laws relating to trade unions will be inapplicable to NMIZs. The policy has tried to address the Indian manufacturers’ demand for uninterrupted supply of skilled labour, by recommending establishment of training centres in NMIZs through PPPs with training curricula addressing specific needs of industries located in the zones. Training will focus on building three skill pools; an abundant pool of minimally trained workers, a sizeable body of well-trained personnel and a select group of highly specialised employees. In an attempt to reduce the significant transactions cost involved in obtaining multiple clearances and complying with various procedures, producers in NMIZs are proposed to benefit from ‘single-window’ clearance systems for both the Central Government and state government clearances.

Unresolved Questions The new manufacturing policy attempts to address some major challenges confronting industrial production in India. Over the years, these challenges – inflexible labour laws, multiple procedures, shortage of skilled labour and energy-inefficient carbon-intensive production – have assumed chronic proportions, casting serious doubts over manufacturing’s ability to increase output in a cost-efficient and sustainable fashion. The proposed NMIZs are expected to do exactly this by providing manufacturers enabling environments comprising quality infrastructure, effective logistics and incentivising green production. 3


While objectives behind proposing NMIZs are laudable, they raise a few questions. First and foremost, with NMIZs coming up, what happens to SEZs? Five years ago, SEZs were launched with almost identical objectives. Now, 133 SEZs are functioning in India, including several manufacturing zones. 5 Many of these are focused on manufacturing. The question is will introduction of NMIZs lead to lesser roles of SEZs in India’s industrial strategy? The DIPP paper suggests NMIZs can include one or more SEZs. This ‘inclusive’ nature of NMIZs can create complications. For example, given a choice, where would industries prefer to be located – SEZs or NMIZs? Incentives are likely to influence the choice. By locating in SEZs, industries not only enjoy duty-free imports but are also exempt from paying income tax, central sales tax, service tax and other state taxes. ‘Single-window’ clearance facilities are also available to SEZs. In contrast, general incentives for NMIZ industries, such as tax exemption on expenditure incurred in obtaining international certification like the International Organization for Standards’ ISO 9000, or subsiding expenditure on filing of patents, while useful, might fall well short of the fiscal largesse available to SEZ enterprises. This might create difficulties in incentivising industries to move to NMIZs, unless they are in SEZs within NMIZs. A particular incentive proposed for NMIZ producers, distinct from SEZ industries, is the assurance of purchase preference in government procurements. While this could be encouraging for producers and draw industries to the zones, it might, in the long run, be incompatible with procurement rules of the World Trade Organization (WTO). WTO rules do not encourage discriminatory treatment for specific enterprises in government procurement. Availability of land and issues surrounding its acquisition will remain in full public glare as NMIZs take shape. If NMIZs include SEZs – along with additional logistics, support services, and processing and non-processing segments – they can hardly be small in size. As in case of the bigger SEZs, land can be a critical factor in curbing expansion of NMIZs. Other than a handful states and private developers with large land banks, obtaining land for large NMIZs will be a daunting task for both government and private agencies. More so, given that the policy expects states to bear the initial funding of land through either low-cost loans from international agencies or by raising resources from the market through long-term tax free bonds with land as the security. Poor maintenance of land records for establishing title rights to property and India’s relatively underdeveloped bond market make land a rather risky asset for issuing bonds against. The SEZ experience underscores the importance of consulting states before implementing an industrial policy that depends heavily on active participation of states. India’s SEZs could 5

‘List of Operational SEZs of India’, Department of Commerce, Ministry of Commerce and Industry, Government of India, www.sezindia.nic.in/writereaddata/pdf/ListofoperationalSEZs.pdf. Accessed on 15 June 2011.

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have avoided much of the controversies they generated had the consultations between the Centre and states been deeper and wider. Success of NMIZs will depend upon how far the states have been consulted on the policy and to what extent they are keen on pursuing it. Hopefully the ongoing consultations on the policy will involve states as well. Otherwise, NMIZs might become as despised as SEZs and can be assumed by most as ‘land grab’ efforts by greedy real estate developers, as opposed to being virtuous vehicles for industrial growth. .....

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ISA S Brief No. 204 – 13 June 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

The Challenge of Ethnic Federalism in Nepal Hema Kiruppalini1

Abstract Following the 5-point Agreement, on 29 May 2011, Nepal’s main political parties – the Unified Communist Party of Nepal-Maoists (UCPN-Maoist), the Nepali Congress, and the Communist Party of Nepal-United Marxist Leninist – agreed to extend the Constituent Assembly (CA) by another three months. The promulgation of the constitution is seen as an important step forward in the country’s struggle to facilitate a peace process. More importantly, the state restructuring process on the basis of ethnic parameters threatens to endanger national cohesion. The writing of the constitution, which has not been completed in the last three years, is expected to be drafted within the next three months – a feat that will strongly depend on the nature of negotiations and the extent to which the respective political parties are willing to compromise and reach a political consensus for the larger interest of the nation and its people. One key challenge that Nepal is encountering is the political incompetency to simultaneously address the various disputes. Both the promulgation of a new constitution, and the integration and rehabilitation of the People Liberation Army (also known as Maoist combatants) into the Nepal Army, continue be sore issues. Importantly, the inability to resolve the ethnic-based federalism, formation of governance and state-restructuring, issues have intensified the interparty and intra-party political tensions. The successful completion of the constitution impinges upon political consensus of staterestructuring and the modality of a federal structure. The criteria and process of redrawing the internal boundaries and delineating federal provinces require massive cadastral projects that 1

Hema Kiruppalini is Research Associate at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore (NUS). She can be reached at isashk@nus.edu.sg. The views reflected in the paper are those of the author and not of the institute.

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in turn require political will, compromise and consensus. This task is inextricably tied to the rise of identity politics with ethnic groups clamouring for fair representation in order to avoid the negative impact arising out of the 1990 constitution. Highlighting the limitations of the 1990 Constitution, David Gellner argued that the Bahuns and Chhetris continued to dominate the higher echelons of the state despite the constitution enshrining the rights of individuals and banning discrimination on the basis of ethnicity, caste and gender.2 During the period of the civil war, the Maoist insurgents galvanised minority ethnic groups and mobilised ethnic grievances to garner votes during the 2008 CA elections. The ethnicisation of politics is bourgeoning in Nepal and it appears to shape the inevitable outcome of a political structure based on ethnic federalism. In particular, the Madhesi struggle that gained momentum in 2007, has gained significant political clout. Mahendra Lawoti argues that ‘if it had not been for the Madhesi movement, federalism would not have been incorporated in the interim constitution’.3 Ethnic groups such as the Madhesi, Tharus, Magars, and Tamangs share similar sentiments about their exclusion from various organs of the state and the ethnic federalism that is perceived to create a base for competitive democracy. As such, this concept harbours the hope of reducing the preponderance of highcaste Hindus. However, the fruition of this is questionable since ethnicity, caste and class intersect in myriad ways thus undermining the possibility of ethnic equality and inclusive governance. Arguably, the primary issue is not just about the promulgation of the constitution but the political direction that Nepal is headed towards – in the context of carving out the country on the basis of ethnic federalism. The ethnicisation of politics in Nepal has fuelled the interparty and intra-party cleavages. In addition, the re-conceptualisation of provincial boundaries on the basis of ethnicity will undermine Prithivi Narayan Shah’s unification of the various states in 1769. In this regard, the political experiment with ethnic federalism will firstly, debilitate the consolidatory efforts of Prithivi Narayan Shah and secondly, bring a sharper focus to the ethnic differences among the various communities. While there are imminent prospects for separatist movements to gain ground if ethnic federalism is not asserted, there is also a serious need to analyse the feasibility of such a structure. Federalism requires mature leadership which Nepal lacks, and dividing the country along ethnic lines will fuel inter-ethnic hostility. As an ethnically diverse country, a state structure based on ethnicity will, in principle, give credence to ethnic pluralism. However, it may not translate into inclusive governance and address all negative forms of exclusion. It is crucial that Nepal’s political leaders garner the support of the public to strengthen the prospect of organising the country based on ethnic pluralism. 2

3

David Gellner, ‘From Group Rights to Individual Rights and Back: Nepalese Struggles over Culture and Equality’, in Jane K. Cowan, Marie-Bénédicte Dembour and Richard A. Wilson (eds), Culture and Rights: Anthropological Perspectives. (New York: Cambridge University Press, 2001). Mahendra Lawoti, Federal State-Building: Challenges in Framing the Nepali Constitution. (Kathmandu: Bhrikuti Academic Publications, 2010), p.150.

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Furthermore, the communist ideology that captured the imagination of the public is at risk of being undermined, due to Nepal’s ethnic quandaries. The ‘People’s War’ was fought on the basis of an ideological struggle to overthrow feudalism and the monarchy. The spirit of Maoism in Nepal evokes a sense of empowerment and resonates with the strong undercurrent of egalitarianism. During the inception of the communist movement, federalism was not on the political agenda for the UCPN-Maoist party. In fact, in 2007, when the parliament passed the interim constitution, ‘there was no mention of federalism although the commitment to state restructuring was apparent’. 4 The centrality of the UCPN-Maoists leadership will change based on their ability to tactfully adapt to the challenge of ethnic federalism, whilst retaining their communist ethos. In the process of undergoing a political revamp, Nepal faces the threat of a counter-revolution. Since 2006, the procrastinated transition for a ‘New Nepal’ has worn the patience of the people, which has far-reaching consequences in the long-run. There is overwhelming hype over the delayed constitutional writing process. However, a more critical question that needs to be addressed is the challenge of ethnic federalism as a form of governance, in the light of Nepal’s fledgling roots in democracy. Amidst unending party politics, experimenting with a new political structure will sink Nepal into a deeper turmoil. Within the context of an upsurge in ethnic politics, it is integral for political actors to reconcile their various rightist and leftist ideologies and undertake a pragmatic approach in their state restructural process.

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4

‘Nepal: Identity Politics and Federalism’, International Crisis Group (13 January 2011), p.8.

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ISA S Brief No. 205 – 23 June 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

The ‘US-Pak’ Relationship: A Complex but Categorical Imperative Iftekhar Ahmed Chowdhury1

Abstract The ‘rollercoaster’ nature of the ‘US-Pak’ relationship is a complex one. Yet for both Pakistan and the United States (US), it is a categorical imperative, one of ‘necessity’, rather than one of choice. It is transactional rather, than spontaneous. It is bred not in love, but in need. It is a difficult equilibrium, but one that needs to be maintained in appropriate balance for the sake of security, regional and beyond. That is the challenge both parties confront. Pakistanis tend to become perturbed by the expression ‘Af-Pak’. This is a neologism, a new word coined by hyphenating two existing ones. The term ‘Af-Pak’ is owed to Richard Holbrook, the US Special Envoy. Pakistanis want their country to be regarded by the US as worthy of attention by itself, as a standalone, powerful and sophisticated ally. They resent being suffixed, or linked by a hyphen, with the feudal tribes next door. The US is perhaps wrong to use it on this count. Americans claim that it is not a bureaucratic shorthand that reduces the eight syllables. They say it implies the perception of Afghanistan and Pakistan as being a single theatre. They are also wrong on this count because it is not. The stage needs to provide space for many other actors such as India, China, Iran, the Central Asian Republics and Russia, just for starters. There may well be others who are deus ex machina (God out of the machine). These are players who appear late in a Greek Drama but have sufficient impact to alter the course and

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Dr Iftekhar Ahmed Chowdhury is Senior Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore (NUS). He was the (Foreign Advisor) Foreign Minister of Bangladesh from 2007-2009. He can be contacted at isasiac@nus.edu.sg. The views reflected in this paper are those of the author and not of the institute.


conclusion of the story. Afghanistan is a play, perhaps a tragic one, whose finale is still nowhere in sight. The gung-ho attitude of the US and the North Atlantic Treaty Organization’s (NATO) invasion has long since evaporated. The Western allies saw this as the justum bellum (just war), a concept that dates back to the ideas of the Roman thinker Cicero. Perhaps it was just or perhaps it was a quagmire that they were lured into. This is something that only history can tell with any modicum of certitude. The US idea, as pronounced by President Barrack Obama, was to ‘disrupt, dismantle and defeat’ the Taliban and Al-Qaeda. At the present time, that goal seems stupendously ambitious. The relationship between NATO and President Karzai is now both strained and strange. It is one between an uneasy guest and an uneasy host. Both want the transition to occur soon and the outsiders depart, just as many others – the Greeks, the British, the Russians – have come and gone through ages. Leave, yes, but what kind of Afghanistan are they to leave behind? Afghanistan is a made-up nation, a collection of nomadic tribes and ethnicities, whose territorial claims against each other are uncertain, and unresolved. The British wanted it because they saw the need for a buffer between Russia and India. The Russians wanted it as part of their drive to warm waters. The Americans wanted it to deny the extremists of a safe haven. Pakistan wanted it, or at least wants it under friendly control, to obtain strategic depth vis-à-vis India. India is anxious to prevent it. China wanted its investments there protected. So what has been called ‘The Great Game’ goes on. But the players in the game must know they all have a price to pay if they wish to continue exercise of power, which they can only do in the face of implacable hostility. Trapped between its history and geography, Pakistan is paying a heavy price in this respect. No country in the world suffers as much from terrorism as Pakistan does. Reportedly there had been 12,244 attacks in the country in 2010, a more than five-fold increase since 2006. With the killing of Osama bin Laden, and now Ilyas Kashmiri, it is the Pakistanis who have to bear the brunt of reprisals. Yet, it is alleged that the Pakistani Military or Inter-Services Intelligence use their own chosen extremists or fundamentalists in order to be able to install a regime of choice in Kabul. Only 14 per cent of Pakistanis appear to have a favourable view of the US as an ally. Yet, it is one that the entire country, and most certainly, its powerful army is largely funded by. This funding, if the mood of the US Congress is any yardstick, is being provided with increasing reluctance. The ‘US-Pak’ (yet another neologism) ‘trust deficit’, already palpable before the Osama bin Laden raid, is ever expanding. Friendship proposals appear to be written in disappearing ink. It is difficult to predict if the situation will hasten the elections in Pakistan, now due for 2013 and even that is subject to change. Neither the Pakistan Muslim League of Nawaz Sharif nor the army appears to want to inherit the thorny 2


mantle of governance, especially in the case of the army, when its reputation has taken a beating. Right now, given the nature of Pakistan’s governance, it is perhaps as important to see who inherits the mantle of the army, rather than the Government itself. Some would suggest it is more. True, with the Osama bin Laden and allied issues, the army has taken a beating, but not enough to cause its demise. The meek and half-hearted attempt of the civilian leaders to capitalise on the army’s vulnerability, by putting it on the carpet in the Parliament, has been a touch pathetic. While the Army will survive, Chief of Staff General Ashfaq Parvez Kayani may not. Even now, he is due to retire on 28 November 2013. Analysts are already watching out for possible successors. A favourite is the current Chief of General Staff (CGS), Lieutenant General Waheed Arshad. He has a War Studies degree from Quaid-i-Azam University, Islamabad, and strong Turkish connections. He was in Singapore recently for the Shangri-La Dialogue. But Pakistan’s military politics is equally complex. In order to make it to the top, General Arshad must play his cards with caution and circumspection. Otherwise, he may be kicked upstairs like his predecessor as CGS, General Khalid Shameem Wynne, who was made Chairman of the Joint Chiefs of Staff Committee, a position long in title but short on power. The visit to Pakistan by US Secretary of State Hilary Clinton shows that the US is eager to mend fences. As for providing shelter and succour to bin Laden, Clinton has said she has no evidence that the Pakistani leadership was aware of it at ‘the highest levels’. She obviously lets the President and the Premier off the hook, but does she consider the army chiefs as ‘leaders at the highest levels’? It is unclear, as it was possibly meant to be. She was followed by the current the current Central Intelligence Agency Chief and future Defense Secretary, Leon Panetta. Pakistanis are usually generous to a fault with regard to protocol, but Panetta did not exactly have the red carpet rolled out for him, and was not received at high political levels, the way someone of his status would have been at happier times. It is widely believed that the lower echelons of the Pakistan military are deeply penetrated by extremists. Some are even ready to forgo the US financial support. Once, the now seen as jihadist, former President Zia ul Haq had deprecatingly described it as ‘peanuts’; recently even Kayani urged that it be diverted to civilians, perhaps this is the army’s way of saying they do not need it. Though, the problem is that the US may need it, if only to keep the Pakistan Army tied to it in some way, by fair means of foul. This need is too strategic to allow it to fall by the wayside. The US, and the world, simply cannot allow Pakistan to morph into a ‘Jihadistan’, any more than it already has. So the ‘US-Pak’ relationship continues, at times amidst nuanced jibes. It is a ‘transactional relationship’ now, based on outcomes of negotiations, rather than one that is spontaneous. Pakistan, for instance hits the Taliban just 3


enough to keep the US tolerably satisfied, but not so hard that its own objectives are undermined. It is a complex but categorical imperative. It is also an equilibrium that is not easy to maintain. But the security of the region, and much of the wider world, depends on the will and ability of both parties to try and maintain it. The relationship thus remains complex. Also, to paraphrase the philosopher Emmanuel Kant, it is a ‘categorical imperative’. The security of the region, and much of the wider world, depends on the will and ability of both parties to try and maintain it. The Pakistanis have sought to indicate to the Americans that they are committed, but not wedded, to the relationship. When piqued, as is often the case these days, they keep pointing to other options, and closer friends. China, for instance.

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ISA S Brief No. 206 – 19 July 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

‘Ye Hai Mumbai Meri Jaan…’1 S.D. Muni2

Abstract The serial blasts of 13 July 2011 in Mumbai that shattered 31 months of relative peace in India have resulted in 18 deaths and 130 injured people. The renewal of terrorist attacks underline the revival and regrouping of those terrorist organisations who had been lying low under the international pressures and the promise of internal security revamping in the aftermath of the 26 November 2008 (26/11) cross-border terrorist attacks on Mumbai. The current blasts also expose major chinks in India’s internal security structure and point clearly to the fact that the lessons of 26/11 have not been learnt properly. While the investigating agencies are being cautious in identifying possible suspects, a more intriguing aspect of the blasts is that no terrorist group has claimed responsibility for them so far. With these blasts India has entered a more serious and complex phase of threat from terror. With growing uncertainties in the Af-Pak region following the United States (US) drawdown of forces and erosion of the credibility of the Pakistani State, India should prepare itself to receive greater spill-over of regional terror. This terror may come well-packaged in the synergised operations of internal groups like Indian Mujahedeen’s and the external forces like Lashkar-e-Taiba (LeT). India has no escape from a vigorous fortification of its internal security mechanisms on the lines demonstrated by the US post-9/11.

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‘It is Mumbai my dear...’ Professor S.D. Muni is a Visiting Research Professor at the Institute of South Asian Studies, an autonomous research institute at the National University of Singapore. He can be reached at isassdm@nus.edu.sg. The views reflected in this paper are those of the author and not of the institute.


The old Mohammad Rafi’s popular Bollywood number ‘Aye Dil Mushkil Jeena Yahan, Zara Hat Ke, Zara Bach Ke, Ye Hai Bombay Meri Jaan…,’ (Oh my heart, it is difficult to live here, remain somewhat apart, somewhat defensive, it is Bombay my dear!) is being brutalised by the terrorists to make Mumbai a really risky place to live. The terrorists seem to love Mumbai as they have subjected it to their repeated attacks since 1993. The latest attack on 13 July 2011 was the 14th in the series, with two major attacks taking place in 2006 (181 deaths) and 2008 (166 deaths). Mumbai is an attractive target of the terrorists because it enjoys a high political visibility, it is a hub of India’s financial activity, a home to the world famous Bollywood, a popular den of the international mafia groups (like Dawood Ibrahim) and a society that lives with uneasy communal relations (between Hindus and Muslims as also between local Marathi and emigrants from other Indian states). In the latest attack, seven devices exploded in three highly populated places in the south of Mumbai – Zaveri Bazaar (centre of diamond trade), Opera House and Dadar. The serial blasts took place within a period of 12 minutes, killing 17 people and injuring 131 others, with 23 of them being in critical conditions. For a government which is barely able to cope with the popular pressures on the issues of corruption, these terror attacks have come at a difficult time. They are a matter of additional concern on two counts. One is that they signal the regrouping and reassertion of terrorist forces in India. In doing so, the peace experienced in India, in general, and Mumbai, in particular, since the 26/11 mayhem in Mumbai, has been shattered. There were blasts in Pune, Chennai, Varanasi and Delhi in 2010, but they were of low intensity yielding minor casualties, except for the nine people killed in Pune at the German Bakery on 13 February 2010. It may not be out of place to recall here that a relative absence of cross-border terrorist attacks in India since 26/11 was being credited to Pakistan’s own internal preoccupation with the growing Jihadi terror and international pressures on it to keep its India targeted extremists. Now these US pressures have been eased and/or defied, as a result of strategic dissonance resulting from the Abottabad killing of Osama bin Laden. Could this have emboldened Jihadi outfits like the LeT in Pakistan and re-energised their confidence to revive anti-India crossborder operations? Some of the Pakistan-based extremists groups had vowed to wreck revenge for the Osama killing on not only Pakistan and the US but also India, due to India’s support of the Abottabad operations. Is 13/7 Mumbai an implementation of the part of that promise? India’s investigating agencies will hopefully be looking into all these question, while exploring other possibilities to identifying the culprits. The second issue of concern to the Government of India and Maharastra is that these attacks have exposed serious chinks in India’s internal security arrangements. Telecast live by New Delhi Television (NDTV) on 14 July 2011, India’s Home Minister, Mr P. Chidambaram’s assertion in a press conference in Mumbai that there was no failure of intelligence, has come under strong criticism from media, analysts and the opposition parties. That assertion was 2


indeed untenable and a poor excuse to defend his own turf. He, in the same press conference, accepted that no specific intelligence was available with regard to these blasts, though the blasts were well planned and well coordinated, and also that all the three targeted places were marked ‘sensitive’. Well if intelligence was not available, even for what is acknowledged as a case of well-planned and well-coordinated terror attack on acknowledged ‘sensitive’ places, than what it the worth of intelligence agencies? How have they improved their performance since 26/11? There is no doubt that intelligence and security infrastructure has been revamped in post26/11. National State Guard (NSG) units have been placed in all the metropolitan cities like Delhi, Mumbai, Chennai, Bangalore and Kolkata. The National Intelligence Assessment (NIA) has also been put in place, allowing both the NSG and NIA to be at hand promptly in Mumbai after the blasts. But the revamping of the internal security structure still seems to be a work in progress. In the aftermath of 26/11, the establishment of two institutions were announced, namely the National Intelligence Grid and the National Counterterrorism Centre (NCTC). While the National Intelligence Grid has been approved (only in June 2011), NCTC appears to have been almost abandoned. Even the approved National Intelligence Grid is weaker than initially proposed, as it will not have access to Financial Intelligence Unit. There are obvious turf wars between various ministries and agencies, keeping the much emphasised concept of ‘centralised intelligence sharing a non-starter’.3 The recommendations of the Ram Pradhan Committee, appointed to probe state’s response to 26/11 terror attacks, have only been partially accepted and implemented. For instance, it had asked for 5,000 close circuit TV (CCTV) cameras to be installed at sensitive places around Mumbai and a great amount of other technological upgrading to reinforce security infrastructure. Though the 13/7 targets had CCTV cameras, the full completion of these recommendations have been held up in debates of procurement procedures and changing technological parameters of the instruments. There are also other organisational and political aspects that have not been taken onboard, as of yet, by the authorities.4 A closer look at the explosives used and triggering devices employed points towards the involvement of Indian Mujahideen (IM), as the perpetrators of this crime. But if IM is involved, its links with the LeT of Pakistan and Al-Qaeda are well known. The Indian intelligence had monitored a conversation, some time back, involving the IM, wherein the emphasis was laid on using unknown operatives. Perhaps the operation was planned and packaged outside Mumbai, to keep it secret. There was a general alert issued, on that basis, to various agencies in Mumbai. Maharashtra Chief Minister Chavan had admitted that the AntiTerrorist Squad of Maharashtra received about 150 intelligence inputs that could be linked to these blasts, but they all were of a general nature without any specific or actionable 3 4

The Hindustan Times (15 July 2011). Maharastra Chief Minister, Prithvi Raj Chavan, admitted this in his exclusive interview with NDTV 15 July 2011.

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intelligence involved.5 It is clear from the available facts that while the intelligence agencies have failed to penetrate the IM or other terrorist groups, those groups have carefully developed a necessary sophistication to dodge the agencies. On the basis of available leads, the police are now also tracking any links with the Students Islamic Movement of India to ensure what role in any they played. The Government has set up a number of task forces to track the 13/7 Mumbai blasts. None of the hostile groups are being ruled out from these investigations. There were speculations that even Naxal groups may be involved in the act, as they want to expand their reach to urban areas and two of their operatives were nabbed by Mumbai police only a few days prior to the attacks. The Naxals, claiming to be an ideologically oriented political group, are expected to avoid attacking innocent unarmed people. But this is not necessarily a reality. Some of the recent train accidents that killed innocent people are suspected to be the result of the Naxal groups’ acts of sabotage. Therefore, nothing must be ruled out. No terrorist group has so far claimed responsibility for the blasts, nor has the Government named any suspect, prime or otherwise. The caution being observed by the Government, in not naming any suspects until a thorough investigation is carried out, is well deserved. On earlier occasions, hasty pointers toward cross-border terrorist groups had to be subsequently revised, such as the case of the Samjhauta Express bombing in February 2007. Recently, there have been reports indicating that Al-Qaeda played a leading role in initiating the 26/11 terror project, as they wanted to divert the Pakistani forces from operations along the border with Afghanistan, by provoking India-Pakistan tensions. For this, Al Qaeda employed the LeT, an Inter-Services Intelligence patronised Jihadi outfit. The possibility of 13/7 being staged by similar forces is very much there. There could be many reasons for this. India is labelled as one of their adversaries, especially as it is seen to be an ally of the US in the global fight against terror. Driven by their hostility towards India and also towards the present political and even military establishment in Pakistan, these groups may also have been provoked by the feeble but definite indications of improvement in India-Pakistan relations, since the breakthrough meeting of the Indian and Pakistani Prime Ministers during the Mohali cricket test on 30 March 2011. The foreign secretaries of India and Pakistan had a very positive meeting on 23– 24 June 2011 and the foreign ministers of the two countries are scheduled to meet on 27 July 2011. The foreign secretaries have discussed issues of peace and security, and explored confidence building measures (including the nuclear and missile fields). These discussions are likely to be carried forward by the foreign ministers. The Indian Foreign Secretary, Mrs Nirupama Rao, publicly acknowledged that there was a welcome change in Pakistan’s attitude towards terrorism. 6 Earlier in March and April 2011, at the foreign secretaries meeting, the Home and the Commerce Secretaries of the two countries also had positive 5 6

Ibid. The Hindustan Times (3 July 2011).

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meetings. The Home Secretaries covered a wide range of issues from 26/11 investigations to drug trafficking, coastal security and exchange of prisoners. 7 The Commerce Secretaries meeting resulted in Pakistan’s grant of Most Favoured Nation’s (MFN) treatment to India in bilateral trade relations.8 This was a radical departure from the traditional Pakistani position, which had linked the issues of Kashmir and ‘non-tariff barriers’ to the grant of MFN status. If the latest terror attack on Mumbai was aimed at disturbing the positive movement in IndiaPakistan relations, it will not succeed. Pakistani leaders, from the President down to the Home and Foreign Ministers have denounced the Mumbai attack. In India, both Foreign Minister S.M. Krishna and Home Minister Chidambaram have publicly declared that the scheduled talks between India and Pakistan at the foreign minister level will take place.9 Chidambaram assured that this dimension – that the blasts were aimed at derailing IndiaPakistan relations – is being taken into account by investigators. 10 The Indian Prime Minister’s cricket diplomacy, inviting his Pakistani counterpart to witness the Mohali Test, was a clear indication that while India would continue to seek Pakistani support in curbing cross-border terrorism, this menace would not be allow to disrupt constructive engagement between the two countries in the areas of economic cooperation, peace and security. In the months and years to come, India will have to watch out for acts of terrorism against its people. Today it is Mumbai, tomorrow it could be any other city. The challenge of terrorism will increasingly become stronger and more complicated as India is caught between the persisting internal insurgencies and hardened cross-border extremist groups. The latter will become more assertive and aggressive with the spectre of uncertainty and instability in neighbouring Pakistan and Afghanistan, resulting from the winding down of US forces and an international security presence. While the use of international diplomacy to mobilise counter-terrorism efforts collectively will help, the real answer lies in the strengthening of internal security structures and efficiencies. India’s internal security agencies will have to become apt not only in post-terror investigations and mopping operations, but in isolating the terrorist groups and pre-empting their operations. There still exists a wide gap between the promise of security and the performance of security apparatus. India would also do well to move fast on engaging and reintegrating the internal insurgencies be they in Kashmir, the northeast or of the left extremist variety, so as to deal resolutely and firmly with the crossborder terrorist menace which is expected to become more determined and formidable. It remains to be seen if India’s democratic polity, its flabby bureaucracy and turf conscious

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8 9 10

For the joint statement issued on 29 March 2011 after the meeting, see, ‘Joint Statement following IndiaPakistan Home/Interior Secretary level talks’, Ministry of External Affairs India (29 March 2011), http://meaindia.nic.in/mystart.php?id=530517483. Accessed on 18 July 2011. See Dawn (28 April 2011), Pakistan Observer (15 July 2011) and The Hindu (11 July 2011). The Indian Express (14 July 2011). The press conference was covered live by NDTV on 14 July 2011. See ‘Mumbai blasts: All hostile groups on probe radar’, Express Buzz (14 July 2011), http://expressbuzz.com/nation/mumbai-blasts-all-hostile-groupson-probe-radar/294150.html. Accessed on 18 July 2011.

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security agencies will be able to rise to the challenge. .....

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ISA S Brief No. 207 – 27 July 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Pakistan’s Afghan Dilemma: Seeking that Elusive Sense of Security Sajjad Ashraf 1 While visiting my senior colleague, Ambassador Qazi Humayun, in September 1995 when he was recovering from a mob attack, with broken teeth and with stitches on his head, after the Pakistan Embassy in Kabul was ransacked on 6 September, I asked him, ‘How is it that, every government in Kabul starts with public declaration of friendship with Pakistan but relations sour within six months?’ The attacks were allegedly supported by the Rabbani Government helped into power by Pakistan after deposing the Najibullah regime. He did not answer. The question has continued to intrigue me. Following the bonhomie shown during President Hamid Karzai’s visit to Pakistan last month, tensions have again risen between the two countries especially on the border that runs alongside the restive Afghan provinces of Kunar and Nangarhar. Afghan villagers claim being bombarded with hundreds of rockets. News reports indicate that people in these Afghan provinces are calling for ‘death to the Pakistani invaders.’ The Pakistan army spokesperson, Maj.Gen. Ather Abbas, says that ‘the Afghan provinces of Kunar and Nuristan have become sanctuaries and launching pads for attacks on Pakistan…’ Pakistan spent 12 years between the Soviet withdrawal and 9/11 clamouring that Pakistan was left to itself handling Afghanistan and its consequences. The United States (US) obliged this time. Its massive military infrastructure in Afghanistan is not going to be given away easily.

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Sajjad Ashraf was Pakistan’s High Commissioner to Singapore from 2004 to 2008. He is currently an Adjunct Professor at the Lee Kuan Yew School of Public Policy and a Visiting Senior Research Fellow at the Institute of Southeast Asian Studies. The views reflected in this paper are those of the author and not of the institute.


As the US prepares to partially withdraw from Afghanistan by the middle of next year, recent events point to dangers looming ahead. Feeling the need for strategic depth Pakistan wants to fill in the space, which other regional players are not prepared to allow. History seems to be taking full circle again. The Durand Line treaty (1893) that divides Afghanistan from Pakistan was signed between the then British Foreign Secretary Sir Mortimer Durand and Afghan Amir Abdul Rehman. Though reaffirmed subsequently the Afghans renounce the treaty. Not even the Taliban government considered closest to Pakistan recognised the Durand Line as an international frontier between the two countries. Hamid Karzai, the current Afghan President called it, ‘a line of hatred that raised a wall between the two brothers.’ At independence Pakistan inherited a major irritant on the western border while feeling insecure on its eastern border with India. Pakistan’s dilemma, as Aparna Pande has put it in her recent book ‘Escaping IndiaExplaining Pakistan’s Foreign Policy,’ is that Pakistan views each of its major relationships, including that with Afghanistan, through the prism of Indian threat. ‘These relationships have been designed to secure strategic depth against India,’ she adds. Much of the problem can be traced back to Pakistan’s narrow geographical shape and perception that India is a mortal enemy out to undo Pakistan. In 1965, when Indian forces crossed the BRB Canal, built partly in defence of Lahore, Pakistan acutely felt the need for strategic depth if it was to fight a conventional war with India. The Afghan posture of neutrality eased Pakistan’s concern that it will be constricted at the western border in case of trouble at the eastern. During this war, the Shah of Iran allowed Pakistan to park its planes in Iran, which further underscored the advantages of space to Pakistani military planners. General Zia Ul-Haq, the Pakistan military ruler, took the concept further when he aligned with the US against the Soviets, hoping to install a pliant regime in Kabul and in the process secure geographical advantage for Pakistan in any future confrontation with India. The result so far has been the opposite of what Pakistan has hoped for. Continued pursuit of this policy makes Pakistan unpopular with large segments of Afghans. Covertly interfering in Afghanistan’s affairs to secure strategic advantage is met with resistance. Afghans resent the exclusivity of influence sought by Pakistan. Given the nature of Afghan society, the policy breeds suspicion and consequent violence between Pakistan and Afghanistan. Pakistan continues to miss a key lesson of history that it is the proud people of the north, areas now comprising Afghanistan and central Asia, who descended into the sub-continent instead of the other way round.

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People who have never been colonised resist interference from outside powers. That is perhaps the answer to my question left unanswered in 1995. Pakistan is justifiably seeking to position itself as the major player in Afghanistan post the withdrawal of the foreign forces. Conflicts will erupt if Pakistan aims to deny space to other regional powers. A stable, friendly Afghanistan is of paramount importance to Pakistan if it does not want a repeat of what Ambassador Qazi Humayun went through on a national level. Pakistan should allow Afghans their space and accept that there are other countries with legitimate interests in Afghanistan. India can be the biggest contributor to this elusive sense of security, which Pakistan so badly needs to focus on its growth and help build a regional economic alliance that should include India, Pakistan, Iran, Afghanistan and beyond. Regional economic interdependence then, is Pakistan’s real strategic depth. .....

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ISA S Brief No. 208 – 28 July 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

America Attempting to Find its Way in Asia: Moving Towards the Obama Doctrine Shahid Javed Burki 1 Abstract International trade matters for development but the South Asian countries have done poorly. Their trade-to-GDP ratio is much lower than that of East Asia. One reason is that for more than four decades after achieving independence, South Asians continued to believe in the import-substitution strategy of growth. The East Asians, on the other hand, used the state to aggressively build their export industry. But there is one similarity between these two parts of the Asian continent: they have sought markets for their products in the world’s developed economies. This ‘brief’ argues that for South Asian businesses to increase their share in the global market place, they must figure out which destinations they should seek for their exports. Should they move from the crowded markets in the old world or work to cultivate customers in the more dynamic and more rapidly growing economies in Asia? The right answer to this question will depend to some extent on how Asia is shaped by the rivalry between America and China. In this context the speech by the American Secretary of State given on 25 July 2011 in Hong Kong provides some interesting clues about the evolving thinking in America concerning Asia.

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Mr Shahid Javed Burki is Visiting Senior Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore. He can be reached at sjburki@yahoo.com. The views reflected in this paper are those of the author and not necessarily that of the institute.


America’s Search for an Asian Stance America is trying hard to find its way in a world it no longer totally dominates. For two decades, from 1991 to 2011, it was the uncontested superpower, in command of the global economy and in possession of military might which made it possible to project its power in the world’s four corners. The space it then occupied was created by the collapse of the Soviet Union on the heels of the collapse of European Communism. Now, two decades later, it is finding it hard to remain the unchallenged master of the world largely because of the damage that was done to its economy by the Great Recession of 2008-09. The recession turned out to be deeper than expected. It has also brought about a profound change in the structures of both the global economy and the economy of the United States (US). The muddled way Washington handled the problem of dealing with its self-imposed debt ceiling further alerted the world to the relative decline in its power. America’s domestic savings rates are less than one-half that of the average in East Asia and there is immense political pressure being exerted by the conservative elements in the US for Washington to reduce the size of the government. The result would be that the country would not be able to invest in its future. China and other East Asian nations have been aggressively improving their human and physical infrastructure. The quality of America’s roads, railways and airports has not been keeping pace with those in East Asia. The most significant challenge it now faces is the economic rise of Asia. Washington knows that it has to accommodate Asia and create a world order which would deal with the relative decline in its own economic power along with the rise of the economies of Asia, in particular those of the continent’s two large economies -- China and India. However, it has not yet quite figured out how to manage this transition. When President Barack Obama visited Asia for the first time in his official capacity, he talked openly and frequently about a world that had two contending economies – that of his own country and China – and offered to create a multi-tiered global system. In it the world would be guided by a G2, America and China, with the G20 countries helping with the more detailed work that would be required to make the evolving system work. The rest of the world would constitute the last step on the ladder. 2 President Obama’s willingness to make space for China in the new world order did not go well with the more nationalistic elements in his own country. Many in the US continue to maintain that ‘American exceptionalism’ makes the country unique and also gives it a mission to export its social values to all parts of the world. As such it would be wrong to share its place in the world order with any other nation. As President Obama settled in his 2

For a discussion of the significance of the first visit by President Barack Obama to Asia in November 2009, see Shahid Javed Burki, ‘President Barack Obama in Asia – Searching for the basis for a partnership’, ISAS Working Paper No. 102, 7 December 2009.

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office, he also seemed to change his mind about a quasi-G2 arrangement. In November 2010, he went on his second visit to Asia, this time stopping in India where he famously declared that India was not a rising economic power but had already risen. He also indicated US’ support for the Indian effort to get a permanent seat in the United Nations Security Council. He seemed to have opted for the line taken by George W. Bush, his predecessor in the White House. Under Bush, the US embarked on a profound policy change aimed at bringing New Delhi closer to Washington – a kind of containment effort directed at China. Since then America’s relations with India have warmed even more while there has been a cooling-off with Beijing. Added to this state of flux in America’s attempts to find a new basis of working with Asia is the rapid deterioration of relations between Islamabad and Washington. This then is the context in which we should look at the important speech given by Hillary Clinton in Hong Kong on 25 July 2011. This was the last stop in her five-nation visit to the several spots of vital interest to her country. The speech, as discussed below, touched upon a number of ways in which the US looks at Asia’s rise. It also spelt out what could be called the Obama Asian doctrine.

US Recognition of Asia’s Rise Mrs Clinton had no problem recognising that Asia’s rise was ushering in a new global economy.‘The economic rise of the Asia-Pacific region is an astonishing historic achievement that is reshaping our world today and into the future…the numbers tell a powerful story…Never in history have so many climbed so far, so fast,’ she told her Hong Kong audience. Asia’s remarkable performance was good for America, she emphasised. America has been steadily building its ties with Asian countries to contribute to Asia’s growth as a major trade and investment partner, a source of innovation that benefits Asia’s companies, a host to 350,000 Asian students every year, a champion of open markets, an advocate of universal human rights, and a guarantor of stability and security across the AsiaPacific. But Washington’s approach to Asia would be comprehensive, not focused on one or two countries. In that respect she was walking away from the line taken by her president, Barack Obama, during his first visit to the continent. In the revised American strategy, the approach to Asia would not be focused on China, admittedly the continent’s largest economy and also its most dynamic. It will involve all major and minor countries in the area. According to her, ‘the Obama administration has made a comprehensive commitment to reinvigorate our engagement as a Pacific power shoring up alliances and friendships, strengthening multilateral institutions’. The Secretary of State also strongly indicated that those who in the area were suggesting that Asia now had the strength to go alone without continuing its dependence on the US were 3


making a mistake. They were misreading the dynamics of the change that was underway in the global economy. She promised that America will remain fully involved in the region. The country had strong interests in the area. American exports to the western Pacific Rim were US$320 billion in 2010, supporting 850,000 jobs in the country. ‘America’s future is linked to the Asian region. And the reverse is also true as well because the future of Asia-Pacific is linked to America’s. We are a resident power in Asia – not only as a diplomatic and military power, but a resident economic power. And we are here to stay,’ she said.

Policy Content of Relations among Nations Having laid out the groundwork for relations between America and the Asian continent, she spent a fair amount of her time in detailing what she considered to be the main policies all countries needed to pursue if they wanted to benefit from the global system: ‘Last March in APEC (Asia Pacific Economic Cooperation) meetings in Washington, I laid out four attributes that I believe characterise healthy economic competition. And these are very simple concepts, easy to say, hard to do: open, free, transparent, and fair…Fair means sustained faith in the system. That faith is difficult to sustain when countries are forced to trade away their intellectual property just to enter and expand in foreign markets, or when vital supply chains are blocked.’ Lest there was any doubt as to the direction in which her finger was pointing, she said: ‘And a number of nations, wealthy in the aggregate but poor in per capita, might even think that rules don’t apply to them.’ Mrs Clinton then went on to extol the virtues of rule-enforced multilateral trade: ‘Enough of the world’s commerce takes place with developing nations that leaving them out of the rulebased system would render the system unworkable.’ 3 She did not, however, mention that one reason the discussions in the Doha round of multilateral trade negotiations got stalled was the reluctance of the US, Japan and Europe to give up the subsidies they provided to their farmers to stay in the business of agriculture. These subsidies were against the rules of trade which laid the foundation on which the World Trade Organization was structured in 1995.

The Obama Doctrine Mrs Clinton’s Hong Kong address presented a kind of Monroe Doctrine for Asia – perhaps, some day, it will come to be called the Obama doctrine. President Monroe had declared Latin America to be the exclusive area of influence for the US, warning off from the area other rich countries that may have had designs of their own. The Clinton Hong Kong speech was not excluding other countries from playing a role on the Asian stage. It argued for inclusion 3

The quotations from Mrs Hillary Clinton’s speech are from ‘Remarks on Principles in Asia Pacific’, U.S. Department of State, http://www.state.gov/secretary/rm/2011/07/1690012.htm.

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rather than exclusion. It cautioned China not to pursue interests in the region in her immediate neighbourhood by attempting to exclude the US. The meaning for the area’s smaller countries such as Pakistan, Bangladesh and Sri Lanka was clear. They should not attempt to use China to counteract the US’ ambitions in the area. There was such an attempt, for instance, by Islamabad in response to the tightening of the screw by Washington. The US had hardened its position with respect to Pakistan since the former believed that the latter was not being helpful in counteracting terrorism that posed a serious threat to all countries not only in the Asian region but for every state around the world. The Americans believed that Islamabad needed to accept the rules that were binding for all members of the international community. Under the Obama doctrine all the major Asia-Pacific powers will be required to pursue their common interests in a framework in which rules hold sway. These rules asked for cooperation among all the parties interested in being part of Asia’s rise. .....

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ISA S Brief No. 209 – 1 August 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

India and Pakistan Foreign Ministers’ Meeting: New Hopes and Expectations Dr Rajshree Jetly 1 Abstract This paper discusses the recent meeting between Indian Foreign Minister S.M. Krishna and the newly appointed Pakistani Foreign Minister Hina Rabbani Khar in New Delhi on 27 July 2011. Unlike the previous foreign ministers’ meeting in Islamabad in 2010, the recent meeting between the two foreign ministers had a more positive feel to it. While no major breakthroughs were achieved, some confidence building measures were announced, paving the way for greater interaction between the two neighbours with a view to improve relations in the future.

Introduction Indian Foreign Minister S.M. Krishna and the newly appointed Pakistani Foreign Minister Hina Rabbani Khar held talks in New Delhi on 27 July 2011. This meeting was part of a series of high-level meetings aimed at normalising relations between the two countries and bringing the relationship back on track. There have been a number of official high-level meetings since the Mumbai attacks of 2008, but this is the second time that the foreign ministers of India and Pakistan have met after the 2008 attacks. (The first meeting between Indian Foreign Minister S.M. Krishna and the then Pakistani Foreign Minister Shah Mehmood Qureshi was held in Islamabad in July 2010.)

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Dr Rajshree Jetly is Research Fellow at the Institute of South Asian Studies (ISAS) in the National University of Singapore. She can be reached at isasrj@nus.edu.sg. The views reflected in the paper are those of the author and not of the institute.


Significance of the Meeting An important feature of this meeting was the willingness on the part of both India and Pakistan to engage with each other. The emphasis was on keeping the dialogue going without letting it become hostage to contentious issues. At the previous foreign ministers’ meeting in July 2010, for example, the issue of terrorism drove a wedge in the discussions between India and Pakistan, particularly after David Headley’s testimony implicating the Pakistan InterServices-Intelligence (ISI) in the Mumbai attacks. 2 This time, terrorism was not allowed to become a stumbling block. New Delhi and Islamabad remained committed to carry on with the talks, which came just two weeks after the triple bomb blasts in Mumbai on 13 July 2011. More significantly, both countries showed considerable maturity and restraint in dealing with the issues at hand. India resisted from jumping to conclusions or indulging in a blame game until investigations of the July 2011 attacks were completed. In a similar vein, Pakistan also resisted from making any remarks on India’s alleged role in aiding the insurgency in Baluchistan. Indeed India’s primary concerns remain terrorism and cross-border infiltration. Previously, India was reluctant to resume dialogue with Pakistan unless Pakistan took appropriate action against the perpetrators of the Mumbai attacks. However, this time New Delhi realised that unless India engaged with Pakistan in a meaningful manner, it was not likely to make any headway in dealing with terror and, much less, win Pakistan’s cooperation on this issue. Alienating the Pakistani government would also encourage the non-state actors and hardliners in the country. Indian Foreign Secretary Nirupama Rao 3 admitted as much when she said that policy-making needed to be looked at in a dynamic situation and that ‘the decision to re-engage with Pakistan ... is a very realistic approach to dealing with problems with Pakistan. 4 Pakistan, on its part, believed that ‘re-engagement was better than no engagement’ 5 and pressed for continuation of dialogue on the basis that it was itself a victim of terrorism and was engaged in its own war against the militants. Thus, instead of becoming a serious hurdle, terrorism

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According to Indian Home Secretary G.K. Pillai, US terror suspect Headley’s interrogation had revealed the complicity of the ISI and the Lashkar-e-Taiba Chief Hafiz Saeed in the Mumbai attacks and that the ISI was ‘literally controlling and coordinating it (the attacks) from the beginning till the end,’ ‘ISI behind 26/11, from start to end: Home Secy’, Indian Express (14 July 2010), http://www.indianexpress.com/news/ISI-behind-26-11--from-start-to-end--Home-Secy/646108. Accessed on 31 July 2011. Ms Nirupama Rao was the Indian foreign secretary at the time the foreign ministers’ talks were held. With effect from 1 August 2011, Mr Ranjan Mathai was appointed India’s new foreign secretary. ‘Pakistan has altered stance on terrorism: India’, Dawn (4 July 2011), http://www.dawn.com/2011/07/04/pakistan-has-altered-stance-on-terrorism-india.html. Accessed on 31 July 2011. India-Pakistan Talks, Dawn (22 July 2011), http://www.dawn.com/2011/07/27/india-pakistan-talks.html. Accessed on 30 July 2011.

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was projected as a common scourge afflicting both countries.’ 6 Accordingly, both ministers agreed to ‘strengthen cooperation on counter-terrorism including among relevant departments as well as agencies to bring those responsible for terror crimes to justice’. 7 Another highlight of the ministerial talks was the appointment of a new foreign minister in Pakistan – 34-year-old Hina Rabbani Khar, the youngest and the first woman foreign minister of the country. Ms Khar is the niece of the noted politician and former Punjab governor Mustafa Khar. She was Minister of State for Finance and Economic Affairs (2008-11) and more recently Minister of State for Foreign Affairs before being elevated to the position of Pakistan’s Foreign Minister in July 2011. Notwithstanding her relative inexperience in foreign policy matters, Ms Khar generated a positive buzz in Indian media circles, and added an element of glamour and freshness to the talks.

Achievements Embracing an open attitude, both Mr Krishna and Ms Khar struck the right chords from the start. Ms Khar hoped that the two countries would not be ‘burdened by history’ and would ‘move forward as good, friendly neighbours who have a stake in each other's future.’ 8 Mr Krishna reiterated the need for a ‘peaceful and cooperative relationship’ between India and Pakistan which he claimed ‘we owe to ourselves and to the generations to follow’. 9 As expected, given the chequered nature of Indo-Pak dialogue, no major breakthroughs were achieved. However, discussions were held on a range of issues including terrorism, narcotics control, economic cooperation, the Wullar Barrage/Tulbul Navigation Project, Sir Creek, Siachen, Jammu and Kashmir, confidence-building measures (CBMs) to promote peace and security, and greater people to people contact, with a commitment to continue dialogue in these areas in the future. Most noteworthy was the decision to hold a meeting of experts to discuss nuclear and conventional CBMs as early as September 2011.

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Pakistan’s foreign minister, Hina Rabbani Khar, reiterated that ‘we are at the forefront of the global effort against terrorism; we are also its greatest victim. Other countries also have a commitment against terrorism and that shows a convergence of views within the region.’ Anita Joshua, ‘Re-engagement is better than no engagement’, The Hindu (26 July 2011), http://www.thehindu.com/news/international/article2296376.ece. Accessed on 27 July 2011. ‘Joint Statement following meeting between S.M. Krishna, Foreign Minister of External Affairs of India, and Hina Rabbani Khar , Minister of Foreign Affairs of Pakistan,’ Ministry of Foreign Affairs Pakistan, http://www.mofa.gov.pk/mfa/pages/article.aspx?id=778&type=1. Accessed on 31 July 2011. ‘Indo-Pak foreign secretaries finalise CBMs ahead of FM-level talks tomorrow’, Hindustan Times (26 July 2011), http://www.hindustantimes.com/StoryPage/Print/725884.aspx. Accessed on 29 July 2011. ‘India wants stable Pakistan, terror free South Asia: Krishna’, The Asian Age (27 July 2011), http://www.asianage.com/india/india-wants-stable-pakistan-terror-free-south-asia-krishna-933. Accessed on 30 July 2011.

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The more tangible outcomes included a slew of CBMs to enhance cross-border trade and travel along the Line of Control (LOC). A total of 21 items were identified for cross-LOC trade and the number of trading days increased from two to four per week along the Srinagar-Muzaffarabad and Poonch-Rawalakot routes. Improvements were also made to the bus service along these routes. Measures to liberalise the visa regime were discussed to boost travel across LOC for tourism and religious pilgrimage, with emphasis on accelerating the processing time for visa applications. 10 At a broader level, economic engagement between the two countries was emphasised, including ways to maximise bilateral trade. Expansion of people-to-people contacts through media exchanges and sporting events also formed an important part of the discussions. What set the talks apart from earlier events was the clear message that cooperation rather than confrontation had to be the order of the day, given the enormity of the problems confronting the region. Such was the commitment to keep the eye on the ball that even prickly issues, from India’s perspective, such as Ms Khar’s meetings with Kashmiri separatist leaders Syed Ali Geelani and Mirwaiz Umar Farooq, were not allowed to detract from the big picture. Pressure from the United States (US) also helped in spurring the process forward. Given the fluid situation in Afghanistan, regional stability is critical for US interests, considering its commitment to gradually reduce its troops from Afghanistan. With US-Pakistan relations at an all-time low after the Osama Bin Laden episode, the US would not want to risk further instability in the region arising from India-Pakistan tensions. From India’s perspective, engagement with Pakistan could enhance its image as a responsible power reaching out to its neighbours to bring peace to the region. Further, by showing resolve to cooperate with Pakistan, India may win brownie points with the US, and help it to press Pakistan to take more effective and urgent action against the perpetrators of the Mumbai attacks of 2008. 11 For Pakistan, this was an opportunity for it to demonstrate that it is equally committed to peace and stability in South Asia and is capable of taking a leading role.

Way Forward While the meeting did not culminate in substantial breakthroughs, confidence building in certain areas. Both countries pledged to communication open to take matters forward. Whether this momentum not will depend upon many factors, including the internal politics 10

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it helped promote keep the lines of can be sustained or of both countries,

‘Joint Statement following meeting between S.M. Krishna, Foreign Minister of External Affairs of India, and Hina Rabbani Khar , Minister of Foreign Affairs of Pakistan,’ Ministry of Foreign Affairs Pakistan, http://www.mofa.gov.pk/mfa/pages/article.aspx?id=778&type=1. Accessed on 31 July 2011. This issue found mention in the recently concluded India-US Strategic Dialogue in New Delhi on 19 July 2011. See ‘India-US Strategic Dialogue Joint Statement’, The Hindu (19 July 2011), http://www.thehindu.com/news/resources/article2259865.ece. Accessed on 30 July 2011.

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particularly the role of the Army in Pakistan, and the respective democratic governments in engaging each other. The strategic interests of the two countries in the region and beyond, particularly Afghanistan, where both Pakistan and India vie for influence, will also have a bearing on the Indo-Pak peace process. Hopefully, this meeting will set the stage for the next foreign ministers’ meeting scheduled for 2012 to consolidate and build upon the goodwill that has been generated. .....

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ISA S Brief No. 210 – 10 August 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

The Emerging Faultlines of the US-Afghan Strategic Partnership Shanthie Mariet D’Souza 1

Abstract The United States (US) and Afghanistan are locked in discussions to finalise a long-term security agreement that would pave the way for retention of limited US troop presence in the country beyond 2014. The secrecy surrounding the ongoing deliberations on the yet-to-be-inked US-Afghan Strategic Partnership is causing considerable disquiet both within and outside Afghanistan. However, the deal, which is seen as a security guarantee to the Afghans, seems to be mired in the emerging differences on the conditionalities and nature of the partnership. Notwithstanding the current state of discussions, the strategic partnership will have long-term implications for both Afghanistan and the region.

Introduction Since early this year, officials of the US and Afghanistan have met on several occasions, keeping such meetings far from the glaring eyes of the media, to finalise a long-term security agreement. The agreement termed as the ‘US-Afghan Strategic Partnership’ would pave the way for retention of approximately 20,000 to 30,000 US troops in Afghanistan beyond 2014, the cut-off 1

Dr Shanthie Mariet D’Souza is Visiting Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore. She can be contacted at isassmd@nus.edu.sg. The views expressed are those of the author and do not necessarily reflect the views of the Institute. The views and findings are based on the author’s interactions with key Afghan interlocutors and stakeholders in May-June 2011 and US officials, policymakers and academia in Washington D.C. in May 2011.

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year for the withdrawal of all US troops from the war-torn country. These remaining troops, based in at least five bases (termed as ‘joint facilities’) 2 in Afghanistan for the next two or three decades, would conduct specialised counter-terrorism operations and provide secondary support to the Afghan forces. According to reports from the field, the locations identified for the joint facilities are: Herat province, along the Iranian border; Mazar-e Sharif in the north; Kandahar in the south; and Jalalabad in the east, towards Pakistan. 3 Drawdown of the US forces from Afghanistan began in July 2011 and, according to the announced plan, by the end of 2012, 33,000 troops would have returned home. However, even with the commencement of the drawdown, neither the reconciliation process with the Taliban has made any substantial progress nor have the Afghan forces shown any extraordinary signs of being able to take the lead in the country’s security. The Taliban insurgency, on the other hand, has stepped up its campaign of violent retribution and targeted killings of the top political leadership, government and police officials both in northern and southern Afghanistan to create a ‘crisis of confidence’ and ‘power vacuum' of sorts as security handovers occurred in seven earmarked areas in July 2011.

Taliban Campaign of Violent Retribution and Internal Power Struggles Violence against civilians has reached a record high in Afghanistan this year, with more than 1,400 civilians killed in the conflict till June 2011, according to a recently released UN report. 4 The Taliban insurgency is responsible for 80 per cent of civilian casualties, with 14 per cent caused by NATO (North Atlantic Treaty Organization) and Afghan forces. On 29 July 2011, a roadside bomb killed 18 civilians in southern Helmand province. The minivan carrying the civilians hit an explosive device in Nahri Saraji district. In the month of July 2011, insurgents managed to carry out three major assassinations, employing suicide attackers to eliminate Ahmed Wali Karzai, half brother of President Hamid Karzai, and presidential aide Jan Mohammed Khan. Both Ahmed Wali and Jan Mohammad were influential power brokers in southern Afghanistan. The third person killed was Ghulam Haider Hamidi, mayor of the restive Kandahar province. While the killing of Ahmed Wali and Hamidi

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The term ‘joint facilities’ is used to dispel suspicion and opposition to the strategic bases both inside and outside Afghanistan. Discussions with key Afghan officials in May-June 2011 and US officials in Washington D.C. in May 2011. Joshua Partlow, Talks on long-term Afghan-U.S. partnership stalled, The Washington Post (29 July 2011), http://www.washingtonpost.com/world/asia-pacific/talks-on-long-term-afghan-us-partnershipstalled/2011/07/27/gIQAAX0AfI_story.html. Accessed on 30 July 2011. ‘Afghanistan: Mid Year Report on the Protection of Civilians in Armed Conflict 2011’, UNHCR, July 2011, http://www.unhcr.org/refworld/country,,,,AFG,4562d8cf2,4e1ee1b52,0.html. Accessed on 1 August 2011.

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took place in the restive Kandahar city, Jan Mohammad’s killing occurred in the outskirts of the national capital Kabul. On 28 July 2011, the Taliban added another successful attack to their list of achievements. A daredevil and well-coordinated bomb and suicide attack involving multiple attackers in Uruzgan province killed 21 people. Some of the areas like Lashkar Gah in the southern Helmand province have witnessed a series of violent incidents. The three major assassinations in less than a month created a power vacuum in southern Afghanistan and has consequently eroded President Karzai’s support base among the Pushtuns, particularly among the Populzai tribe he belongs to. Another important potential implication for the south would be the intra-ethno-tribal rivalry and power struggle that is likely to ensue. The Afghans are quick to point out the role of former warlord Gul Agha Sherzai in these killings. If Sherzai, belonging to the Barakzai tribe, gets appointed as governor of Kandahar, it would be an indication of dwindling support and influence of the Karzai clan. Seen in the context of the ongoing reconciliation process with the Taliban, these targeted killings both in the south and north also represent marginalisation of those who have either opposed the reconciliation process or have gained significant clout of their own. Following the killing of police commander Gen Mohammed Daoud Daoud in northern Takhar province in May 2011, there have been apprehensions that those opposed to the reconciliation process or have been effective in neutralising the Taliban are being targeted and eliminated. The community elders and officials in Mazar-e-Sharif, the capital of the northern province of Balkh, indicate that the targeted killings have been intended to marginalise them in the future power-sharing agreement with the Taliban. As a result, revival plans for the now defunct Northern Alliance as a hedge against such marginalisation is gaining ground. 5 Kabul has always been Pushtun dominated. These killings not only mark a shift in the power structures but also indicate the growing distrust among the ethnic groups in the country. The realignment of forces could pose a significant obstacle to the reconciliation process. Most northern groups reject reconciliation with the Taliban and emphasise on the need for an intraAfghan reconciliation. They have been increasingly questioning the Pushtun-dominated polity and critical of Karzai’s highly centralised presidency, are unsure of the reconciliation process, have raised the issue of sanctuary and are concerned by the waning international support. 6 5

6

In Takhar, the insurgents had published a hit list of several prominent former Northern Alliance leaders like Atta Noor, Dr Abdullah, Marshal Fahim, Yunus Qanooni, Ahmad Zia Masood, Ustad Mohaqiq, Amranullah Saleh and other similarly prominent leaders. Author’s discussions with community elders, officials and person on the street narratives during field visit to Mazar-e-Sharif, Afghanistan in June 2010. Author’s discussion with participants at the international workshop ‘Conflict and peace building in Afghanistan: current situation and prospects’, 5-6 July 2011, Dushanbe.

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The Taliban insurgency is actively exploiting the intra- and inter-ethnic distrust, tribal differences, business rivalries and other such local grievances to their advantage. Following the spate of killings and violence, many fear that the present regime could strike a power-sharing arrangement with the Taliban. Amidst such fears and the rapid pace of disengagement of the West, the Afghans are concerned that the gains made thus far would be lost and exploited by neighbouring powers. Even then, finalising a plan that envisions limited US troop presence almost indefinitely can be tricky and controversial. Moreover, the secrecy shrouding over the talks between the officials of both countries is adding to the disquiet, both within and outside Afghanistan.

The Emerging Differences and Conditions of the Strategic Partnership Publicly, American officials deny the establishment of strategic bases or presence of the US troops beyond 2014. The new US ambassador in Kabul, Ryan Crocker, has said: ‘The United States has no interest in creating permanent military bases in Afghanistan and does not want to use the country as a platform to influence neighbouring countries.’ 7 However, the choice of ambivalent words by Secretary of State Hillary Rodham Clinton that Washington did not want any ‘permanent’ bases in Afghanistan, allows the US to explore a variety of possible arrangements. 8 In the negotiations on the partnership treaty so far, the Afghans seem to be playing a delicate balancing game. They have rejected the first draft prepared by the US in its entirety, preferring to draft their own proposal. President Karzai and senior officials see an enduring American presence and broader strategic relationship as essential, in part to protect Afghanistan from the onslaught of the insurgency and its meddlesome neighbours and also to the survival of the present regime. At the same time, in newfound assertiveness, they have made it clear that Afghanistan will sign a long-term deal only if the US meets conditions set by the Afghans. Some of the main contentious issues laid out by the Afghans are: (a) the foreign troops should work within the Afghan legal framework; (b) they should not take prisoners or conduct night raids; (c) they must not own private prisons; (d) they have to equip the Afghan air force with F-16 fighter jets and Abrams tanks; and (e) US troops cannot launch operations outside Afghanistan from these bases, thus precluding the possibility of Abbottabad-type raids that killed 7

8

No permanent U.S. bases in Afghanistan: U.S. ambassador, Reuters (25 July 2011), http://www.reuters.com/article/2011/07/25/us-afghanistan-usa-ambassador idUSTRE76O0Y320110725?feedType=RSS&feedName=topNews&rpc=71. Accessed on 27 July 2011. However, in private discussions the US officials are not averse to the idea of retaining limited troop presence beyond 2014. Jason Burke, Secret US and Afghanistan talks could see troops stay for decades, The Guardian (13 June 2011), http://www.guardian.co.uk/world/2011/jun/13/us-afghanistan-secret-talks-on-security-partnership. Accessed on 15 June 2011.

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Osama bin Laden. 9 Many of these conditions, however, are directed at blunting domestic opposition and conspiracy theories in the region on prolonged US presence. Both countries are struggling to bridge the growing gap between their demands. Afghan officials appear particularly worried that as the US troop withdrawal accelerates, Washington’s commitment to paying large sums of money long into the future to support Afghanistan’s security forces will diminish. 10 The Afghans want the US to fund their security forces well into the future, despite estimates that the cost to Washington of such support in 2014 would be about US$8 billion. Though President Karzai has publicly stated that the Afghan government would be able to fund its own army from the newly discovered rich mineral trove estimated at US$1 trillion, there are several limitations for an aid-dependent country like Afghanistan to carry out mineral exploitation in areas of deteriorating security. Differences have also emerged on the pace of negotiations. The Americans would like to seal the deal early and to reassure the Afghans that they are not going to abandon them as they did in the 1990s. An early deal would also be some sort of security guarantee against the possible takeover of Afghanistan by the Taliban and would ward off interference by neighbours who continue to support the insurgency with the hope of installing their proxies in Kabul. President Karzai, on the other hand, worries that the talk of the permanent presence of the US troops would be an impediment in negotiations with the Taliban who demand complete withdrawal of foreign forces as a precondition for talks. Sceptics are quick to point out how such an important partnership, which will decide future US military and economic assistance, has been kept out of the public debate. They forewarn against rushing into a deal. At the same time, they want the US to ensure that it receives meaningful commitment from Kabul in return to address political reform and issues of governance and corruption. 11

Internal Opposition and Regional Concerns While a continuing US military presence would fend off direct interference by neighbours, it might also encourage them to sponsor a continuing insurgency focused on this ‘foreign 9

10

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Long-term deal with U.S. must be on Afghan terms: Karzai, Voice of America (26 July 2011), http://www.voanews.com/english/news/asia/south/Long-term-Deal-With-US-Must-be-on-Afghan-Terms-SaysKarzai-126177223.html. Accessed on 27 July 2011. Joshua Partlow, Talks on long-term Afghan-U.S. partnership stalled, The Washington Post (29 July 2011), http://www.washingtonpost.com/world/asia-pacific/talks-on-long-term-afghan-us-partnershipstalled/2011/07/27/gIQAAX0AfI_story.html. Accessed on 30 July 2011. Caroline Wadhams and Colin Cookman, Negotiating Afghanistan's future, The Af-Pak Channel, (2 June 201), http://afpak.foreignpolicy.com/posts/2011/06/02/negotiating_afghanistans_future. Accessed on 4 June 2011.

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presence’. Other apprehensions are that the Afghan state would cede control over foreign policy and thus lose its national sovereignty and that the US presence would simply prop up an Afghan administration that would continue with the present system of corruption, cronyism, patronage and links to the narcotics trade and organised crime. 12 These considerations are weighing heavy on the minds of the Afghans. It’s a Catch-22 situation for the Afghans. During discussions in June 2011, the Afghan officials pointed out the utility of the strategic partnership and, at the same time, were concerned about the long-term US presence in the country. The deal is crucial, for it will ensure that Afghanistan does not fall into Taliban hands even after the majority of the US troops pull out. At the same time, there are also apprehensions that the foreign forces will eternally occupy Afghanistan. Such fears have been articulated by close advisers of President Karzai from parties like Hizb-eIslami. The Hizb has close alliance with Iran and has stated that the US presence would amount to ‘eternal occupation’. 13 Within the Afghan Parliament, too, President Karzai is in conflict with parliamentarians over plans for a loya jirga or grand assembly to discuss future relations with the US. Instead of settling the matter within parliament, where support for Karzai is dwindling, the President wants the issue to be taken to a traditional assembly, which can be manipulated to derive a favourable decision. The parliamentarians for obvious reasons are not pleased with the move that undermines their authority as representatives of the people. 14 It is indeed a tricky business for Karzai and the US to balance the competing interests of the multiple players involved. These secret negotiations come amid a scramble among regional powers to retain their influence in Afghanistan in a post-US scenario. The strategic partnership allowing the US an indefinite presence in the country offsets these powers’ game plans. This indeed could mark the beginning of another great game, which some analysts have already termed as Great Game 3. 15 12

13

14

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Khan Mohammad Danishju, Afghans Debate Future US Presence, IWPR's Afghan Recovery Report, No. 395, (5 April 2011), http://iwpr.net/report-news/afghans-debate-future-us-presence. Accessed on 10 April 2011. Talks on Details of US-Afghan Strategic Deal Ended, Tolo News, (19 July 2011), http://tolonews.com/en/afghanistan/3409-talks-on-details-of-us-afghan-strategic-deal-ended. Accessed on 20 July 2011. Loya jirgas – ‘grand assemblies’ drawn from people across the country – are periodically convened in Afghanistan to debate important national issues and arrive at a consensus view. A loya jirga was held in 2002, following the ousting of the Taliban regime the year before, and a second was called the following year to approve a new constitution. Maiwand Safi, Afghan Lawmakers Tackle Karzai On Us Deal, IWPR's Afghan Recovery Report, No. 404, (27 July 2011), http://iwpr.net/report-news/afghan-lawmakers-tackle-karzai-us-deal. Accessed on 29 July 2011. Jason Burke, Secret US and Afghanistan talks could see troops stay for decades, The Guardian (13 June 2011), http://www.guardian.co.uk/world/2011/jun/13/us-afghanistan-secret-talks-on-security-partnership. Accessed on 15 June 2011.

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Fears of a permanent American presence have been articulated by neighbouring countries like Iran, Russia and China. While Iran and Pakistan are seen to be moving closer, China is watching the developments with some concern. While for the US, the proposed bases are viewed as rare ‘strategic assets’ in the heart of one of the most unstable regions in the world, bordering not just Pakistan, Iran and China, but central Asia as well as the Persian Gulf, none of these countries see the long-term US presence in Afghanistan favourably. This could lead to these countries to continue their support for proxies, to raise the ante for the US. Much of Karzai’s bargaining capacity, however, remains intrinsically linked to the performance of the Afghan forces against the Taliban in the areas that have passed under their control. If the Taliban is seen to be gaining in its violent campaign of intimidation and retribution, the President might have to accept the deal on Washington’s terms. For the US, a limited troop presence would go a long way in preventing the return of the Al Qaeda and its affiliates to the Af-Pak region. In addition, the agreement would also provide it with a deep reach in a region which is perceived to be of growing geo-strategic importance. .....

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ISA S Brief No. 211 – 4 August 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Pakistan-India Trade Shahid Javed Burki 1

Abstract With the invitation on 5 August 2011 from the Indian commerce minister to his Pakistani counterpart to visit New Delhi and hold substantive talks on improving trade relations between the two countries, groundwork may be laid for breaching the differences that have created enormous burdens of history. Trade is a good place to start but, as discussed in this brief, some serious work will needs to be done before real progress can be made.

Introduction If there is to be a thaw in Pakistan-India relations, trade is the best place to start. Those who know their history realise that at the time the two countries became independent, India was Pakistan’s largest trading partner. In 1948-49, 70 per cent of Pakistan’s trading transactions were with India, while 63 per cent of India’s exports went to Pakistan. 2 The basis for this active trading relationship was set by the British when they decided in the second half of the 19th century to turn the virgin lands of central and southern Punjab and southern Sindh into food granaries for the deficit provinces of the northeast. These provinces had suffered repeated famines resulting in the loss of millions of lives through starvation. The colonial power had become anxious lest this heavy human toll created a security problem for their rule. The British then were recovering from the mutiny of 1857 and they did not want a repeat of that experience. Not only did they bring surface irrigation to the plains of Punjab and Sindh by tapping the Indus River system, they also constructed an elaborate system of 1

2

Shahid Javed Burki is Visiting Senior Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore. He was former Finance Minister of Pakistan, and Vice President of the World Bank. He can be contacted at sjburki@yahoo.com. The views expressed are those of the author and do not necessarily reflect the views of the institute. Mohsin S. Khan, ‘Improving India-Pakistan relations through trade’, East Asia Forum (19 April 2010), p. 1.


transport to take surplus food grains to the deficit areas. As a result of what the colonial power did to the areas in the northeastern and northwestern parts of their domain, the Pakistani economy was tied closely to that of India when the two countries gained independence. That would have remained the case had a series of quarrels between the two newly independent states not resulted in the severance of trade. India imposed a trade embargo on Pakistan in 1949 when the latter refused to devalue its currency with respect to the United States (US) dollar. This was done by other countries of the British Commonwealth. The embargo was a transformational experience for Pakistan. From being a primarily agricultural economy, Pakistan quickly acquired an industrial base. It also developed new markets, mostly in distant places, for its products. First Japan and then the US became important markets for Pakistan while the commercial exchanges with India became insignificant. This development went against what economist call the ‘gravity model of trade’. According to this the largest trading partners should be those that are relatively close in terms of distance and also have large markets. According to the model, China and India should be Pakistan’s largest importers and exporters, not the US and the European Union. The potential of Pakistan-China trade may be realised as a consequence of what the two countries call an ‘all weather friendship’. 3 The heavy burden of history, however, continues to weigh on the development of trading relations between Pakistan and India. The potential for trade is enormous, not surprising considering the history of economic relations between the two parts of the British Indian Empire. A recent study using the Pearson Institutes for International Economics gravity model suggests that India-Pakistan trade could expand from its current level of less than US$3 billion to US$42 billion within a few years. However, for this to happen, normal relations assumed by the gravity model should develop between the two countries. This may come about as a consequence of the talks that have begun between the two countries in recent months. Counter-factual history is a fascinating subject, but it does not lend itself to rigorous analysis. What would have happened to the Pakistani economy had trade links between the two countries remained intact? One can speculate but whatever assertions are made would be contested. What we do know though is that if trade was to resume without constraints, gains to Pakistan would be higher than those for India. There would also be large returns for Pakistan if transit trade between India and Afghanistan and points beyond was to be allowed. In other words, the push for removing trade barriers that continue to inhibit the movements of goods and services between the two countries should come from Pakistan. Islamabad should continue to press for Indian cooperation in this area even if New Delhi, as discussed below, prefers to follow what is sometimes called the ‘Look East’ policy. 3

See Iftekhar Ahmed Chowdhury, ‘China-Pakistan Relations: Evolution of an “all weather friendship”’, ISAS Insights No. 125, 19 June 2011.

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Start of Negotiations It is a good indication of the current Indian mood that on 5 August 2011, Anand Sharma, the country’s commerce minister, invited his Pakistani counterpart, Makhdoom Amin Fahim, to visit New Delhi for discussions on trade matters. These follow on the talks held in New Delhi between the foreign ministers of the two countries on 27 July, and the discussion between the two commerce secretaries a few months earlier. In both sets of discussions, it was agreed that trade should be given considerable importance. There are indications that these talks will focus on half a dozen issues. The first of these is the grant of the ‘most favoured nation’ status by Pakistan to India. Pakistan is obliged to do that under the World Trade Organization (WTO)’s rules for its members. Its reluctance to fulfil this obligation is hard to understand. I once raised this issue with former President Pervez Musharraf who explained that the term did not translate well in Urdu. By calling India ‘nahet pasindeeda mulk’ (most favoured nation), he said, would not win him many friends in the highly nationalistic Urdu-medium press. But a lot of water has flowed under many bridges since then and public opinion has certainly softened in Pakistan about its relations with India. Pakistan’s business community also wants trade to be conducted with India without too many constraints. It rightly views with favour the many advantages of being able to reach the vast Indian market – a market that is also rapidly increasing in size.

Issues to be Addressed What are the issues that Pakistan should raise with India? Islamabad should focus on at least four issues. The first of these is non-tariff barriers that India uses not only against Pakistan but against most other countries. Some of these are allowed under WTO rules. India has been one of the more aggressive countries to make use of the anti-dumping provisions of WTO. These may be used in case Pakistan’s exports to India increase rapidly. The second issue is cross-border land trade. As trade economists point out, trade facilitation is the best way to promote commerce. All of South Asia followed the import substitution approach to economic development for about 40 years after the British left the subcontinent. Tariffs were kept very high to encourage domestic production. However, that began to change in the early 1990s as all South Asian countries began to lower their tariff walls. As Gary Pursell, a well regarded trade economist, points out in a recent article, ‘during the 1997/7 to 2002/3 trade liberalisation period, Pakistan’s tariffs were gradually reduced: the average came down from 42 per cent to 17.3 per cent’. Indian tariffs went in the same direction but from a higher level compared with Pakistan’s to a level much lower. In India’s 3


case, the decline was from 89.6 per cent in 1982/83 to only 9.8 per cent in 2007/08 4. With low tariffs there will not be much benefit if they are further reduced as is the aim of the South Asia Free Trade Area Arrangement (SAFTAA). Since the trend began in lowering tariff barriers, there is much to be gained by easing the restrictions the countries impose on their borders. The drama that takes place on the Wagah border with India is well-known. But this is not restricted to the ‘lowering of the flags’ ceremony that is conducted each evening by the two sides. There is also drama when the goods that flow from one country to the other are moved from the lorries that have taken them to the border to the lorries that will take them to the other side. Each country should allow lorries from the other side to transport the goods to their intended destinations. This will save both money and time: the latter is important for perishable commodities for which there is considerable scope for a profitable exchange for both countries. There are a number of other trade facilitation steps the two capitals could take. Most of these relate to the transport of goods and add significantly to the cost of doing business. These include easing restrictions on visas; doing away with the requirement that ships carrying goods from one country to the other must touch a third-country port before proceeding on to their final destinations; requiring that railway wagons carrying goods between the two countries must return empty; restricting the number of crossing points between the two countries to no more than two or three; and restrictions on the opening of bank branches in each other’s country. The third issue concerns investments by the two countries in linking their physical infrastructures. As discussed above, a significant amount of investment was made by the British in developing communication links between the areas that were to become India and Pakistan. For the potential to be realised in developing trade, rail and road links need to be restored and air links improved. Their electricity grid systems should be connected so that the two countries can trade power when there is surplus on one side and shortage on the other. It would also help if an agreement could be reached to extend to India the gas pipeline being built to connect Iran with Pakistan. All these developments will need a fair amount of capital which should be available from the World Bank and the Asian Development Bank. The fourth issue concerns the revitalisation of SAFTAA. This was negotiated in January 2004 at a summit of the countries belonging to the South Asian Association for Regional Cooperation (SAARC). It became effective in July 2006. However, both India and Pakistan have shown considerable lack of enthusiasm for the agreement. India would rather focus on

4

Garry Purcell, ‘Trade policies in South Asia’, in Raghbendra Jha (editor) RoutlelgeHandbook of South Asian Economics, London, Routledge, 2011, p. 228.

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what it calls its ‘Look East’ approach to developing trade relations 5. New Delhi seems more interested in working with the ASEAN (Association of Southeast Asian Nations) countries. It is assigning a relatively low priority to cementing strong economic relations with the countries in its immediate neighbourhood. On the other hand, Pakistan’s policymakers have been too distracted by other matters to pay much attention to SAFTAA. This is unfortunate. There is enough empirical evidence available from other parts of the world – from Europe and Latin America, for instance – to suggest that regional associations are a good way of developing trade among the countries that have long been rivals. .....

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Some analysts have suggested that the ‘Look East’ policy has little to do with South Asian politics and that it has evolved over many centuries. In fact the current Indian interest in looking east is the fourth phase in the development of relations that began in 12th and 13th centuries. See S.D. Muni, ‘India’s “Look East” policy: The strategic dimension’, ISAS Working Paper No. 121, 1 February 2011.

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ISA S Brief No. 212 – 15 August 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Exploding Karachi Shahid Javed Burki 1 Abstract Pakistan cannot make economic and political progress unless the different kinds of violence that have become routine in the country are brought under control. It is because of this that the World Bank in its 2011 World Development Report has included Pakistan, along with a score of other countries, in its list of fragile states. 2 In fact, there are three ongoing wars within Pakistan. There is no end in sight for any of them: they are the wars in Karachi, the war among the various sects of Islam and the war between the state and various extremist groups. This paper discusses the explosion in Karachi. All three are taking large economic and human tolls on the country.

Introduction Will Pakistan soon recover – or recover at all – from the deep malaise that currently inflicts it? There are a number of things that are hurting the country. There is good understanding about the nature and scope of some of them, such as the troubles on the economic front. Economists know what should be done to get the country to walk back from the edge of the abyss. The real problem is that the political establishment does not have the will to do what needs to be done. Then there is the problem created by unsettled politics. Various components within the society are playing what are essentially seen by them as zero-sum 1

2

Shahid Javed Burki is Visiting Senior Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore. He was former Finance Minister of Pakistan, and former Vice-President of the World Bank. He can be contacted at sjburki@yahoo.com. The views expressed are those of the author and do not necessarily reflect the views of the institute. The World Bank, World Development Report, 2011: Conflict, Security and Development, Washington D.C., 2011.


games. What one loses the other stands to gain. They do not see – at least not yet – that political give-and-take is a plus-sum enterprise. Difficult manoeuvrings by those operating in politics are to be expected once Pakistan sets itself on the course towards democratisation. This, in a way, is healthy for the development of the political system. The country is learning to find solutions through discourse and accommodation rather than allowing the military once again to put its heavy hand on politics. It is the third problem – that of the resort to violence to gain ground against opponents – that poses the most serious challenge to the country. Karachi, as discussed in the section that follows, has a population roughly balanced among three ethnic groups – the original SindhiMakrani group who lived in the city before it was chosen to be Pakistan’s first capital, the refugees who arrived from India after the 1947 partition of the subcontinent, and the constant stream of Afghan/Pushtun refugees attempting to escape violence in their areas. Each has the support of large national parties: the Sindhi-Makrani by the Pakistan People’s Party (PPP); the Muhajirs by the Mutahida Qaumi Movement (MQM) 3; and the Pushtuns by the Awami National Party (ANP). Since the election of 2008, the three groups have been represented in the coalition that governs from Islamabad. The MQM has a stronger local base than the other two.

Karachi’s Demographic Evolution The city has grown 50-fold since the country gained independence 64 years ago. Its population has increased from 400,000 in 1947 to an estimated 20 million in 2011. This means an increase of 6.3 per cent a year. This population explosion did not happen as a result of natural growth and what has been produced is not pretty. Had Karachi grown by a natural increase in population – in Pakistan’s case by 2.85 per cent a year – it would have doubled in size in about every 25 years. Had it grown at a rate normal for large urban centres – about 5 per cent a year – its population would have doubled in every 14 years. In the latter case the city’s population would be around 9 million, less than half its present size. The explosion in Karachi’s population was caused by three waves of migration that brought three very different people in search of jobs and, ironically, security. The first was the arrival of a million-and-a-half refugees from mostly the urban areas of the minority provinces of British India. Their arrival over a period of four years – but mostly in the few months after independence in August 1947 – increased the size of the city fivefold, and formed less than half a million to about 2 million within a period of a few of months. Extrapolating the increase in the size of the Muhajir population on the basis of natural growth—in their case of 3

The MQM initially called itself Muhajir Qaumi Mahaz (Refugees National Front) but changed its name once it decided to broaden its base of support.

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2.5 per cent, somewhat less than the national average – this group now has about 7 million people. This number includes hundreds of thousands of Biharis who moved to Karachi from Bangladesh after that country gained independence in December 1971. Biharis are ethnically close to the original Muhajirs. They, like the Muhajirs, are Urdu-speaking people. Factoring in the natural increases of the original inhabitants of the city and that of the Muhajir community still leaves a gap of some 12 million people. This is accounted for by the two other sets of migrations. Table 1: Ethnic Distribution in Karachi, 2011

Muhajir Sindhis Pushtuns Punjabis Other

Population (in millions)

Population Share (in %)

7 5 5 2 1

35 25 25 10 5

Source: Author’s estimates

The first was the arrival of mostly construction workers from the northern parts of Punjab and Azad Kashmir to help with the building of the country’s first capital and its largest industrial base. The second was made up of refugees from the wars in Afghanistan that now have gone on for three decades. Since no reliable data are available, the numbers involved in those two migrations can only be estimated on the basis of informed guesswork. This is the basis of the estimates in Table 1 above. There are probably two million people of Punjabi origin in the city and about five million people from the Pushtun areas of Pakistan and Afghanistan. In other words, if Karachi today has a population of 20 million, slightly more than a third of it is made of the Muhajir community, about a fourth of the original Sindhi-Makrani population, about a fourth also of the Pushtuns and the remaining one-sixth of other ethnic groups. There are supposedly one million people from Bangladesh who reside in the city. As shown in Table 2 below, Karachi’s ethnic divisions do not translate into the citizen’s linguistic preference. Urdu, a language originally spoken by the migrants who came from India, is now the dominant language used by almost one-half of the population. The reason for this is the economic domination of the Muhajir community for whom Urdu is the mother tongue. As a result it has become the language of business, commerce and finance, the three areas in which the Muhajir community has considerable proficiency. It was reported in the Census of 1998 that a significant number of second-generation Pushtuns did not have a working knowledge of Pushto, their ancestral language, and had shifted to Urdu, the language used in government and business. However, the rivalry between the Muhajir and Pushtun communities that is the main reason for the continuation of violence in the city has not been caused by the encroachment of Urdu over other languages. 3


Table 2: Languages Spoken in Karachi % of the population Urdu Punjabi Pushto Sindhi Balochi Seraiki Other

48.5 13.9 11.4 7.2 4.3 2.1 12.4

Source: Population Census of 1998

Reasons for Violence Karachi’s ethnic brew continues to churn and produce violence. The several communities that make up the city’s population have not found a way of developing an institutional response to resolve their differences. The most recent episode of violence resulted in 318 deaths in July 2011, making it one of the bloodiest months in years. Violence continued in August. On the first day of the month, 26 persons were killed. There is evidence that this violence was well planned; according to Interior Minister Rehman Malik, 18 of those who died on 1 August were the victims of targeted killing, or planned assassinations. 4 According to Faisal Aziz of Reuters, ‘most of the affected areas are home to ethnic Pushtun and Muhajirs.’ 5 The ethnic wars in Karachi started a couple of decades ago but subsided in intensity for a while. Their main cause was the inability of the city’s very diverse population to further their interests without hurting those of the rest. Violence subsided once the system of local government introduced by the regime of President Pervez Musharraf brought government closer to the people. Under the system Karachi had Nazims, elected officials who were close to the people and local community organisations. The system lasted for as long as Musharraf was in power. With his departure, Islamabad, now under a coalition dominated by PPP, attempted to go back to the old system in which local authority was in the hands of officials appointed by the government. This was a throw-back to the colonial times and Pakistan’s earlier times when the central government exercised authority through the officials – commissioners and deputy commissioners – it appointed. This change was not acceptable to the MQM. There was also a shift in the demographic compositions of the city with more

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5

Faisal Aziz, ‘Violence in Pakistan’s Karachi: 200 killed in July’, Reuters, 1 August 2011, www.reuters.com/article/2011/08/1-us-pakistan-karachi-violence. Faisal Aziz, ‘Violence in Pakistan’s Karachi: 200 killed in July’, Reuters, 2 August 2011, www.reuters.com/article/2011/08/2-us-pakistan-karachi-violence.

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Afghan refugees arriving in the city from the troubled areas of northern Pakistan. This disturbed the ethnic balance on which relative peace rested in the early 2000s.

Conclusion Research suggests that rapid urban growth is associated with weakened social cohesions and increased risk of violence. Karachi, as discussed above, increased in size at a rate much higher than that of other megacities in the world. But despite its explosive growth, the city had one advantage: rough balance in the numbers of people belonging to different ethnic and social groups. This should have led to politics and economics of inclusion rather than of exclusion. That happened for a while when the Muhajir community gained political control of the city. Its leaders worked to develop not only the areas populated by their community but those of other ethnic groups as well. However, that balance was disturbed by the escalation of violence in the Pushtun areas of Pakistan and Afghanistan. This generated another wave of migration which has brought in more people from this ethnic group. They are now trying to find economic and political space for themselves in the city and this has led to violence once again. The solution is not the use of force; it has to be economic and political accommodation of the people who feel excluded.

As the World Bank puts it in the above cited report, ‘recent research, while still in its infancy, points to the importance of institutions in mediating disputes and reducing violence. Where societies fail to reform institutions and insulate themselves from stresses associated with violence, they risk repeated circles of violence.’ 6 This is where Karachi is today. .....

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The World Bank, World Development Report, 2011: Conflict, Security and Development, Op. Cit, p. 84.

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ISA S Brief No. 213 – 15 August 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Opportunities for South Asia in the Revolutions in the West Shahid Javed Burki 1 Abstract The knowledge-intensive goods and services the world’s more developed countries will continue to need but may not be able to produce if the states fail to invest in human skill development and physical infrastructure improvement, India and its sister South Asian states could fill the gap. Once again, the South Asian diaspora can help. They have the financial resources and knowledge and management expertise to develop new industries in what was once their homelands. But they will need help from the South Asian states to develop the instruments of finance and transfer of knowledge and management practices that would help to bring new industries to this part of the world.

There are times in human history when those who have been put in charge of public policymaking can take their societies in one of two possible directions. They can read the environment in which they are operating, see opportunities in it for their people, and adopt policies and practices to realise them. Or, like the proverbial deer in the headlights, the fastmoving events with which they must deal with paralyses them and they let the moment pass. This is such a time for the policymakers in South Asia. Their counterparts in Europe and America are taking their societies and economies in the wrong direction.

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Shahid Javed Burki is Visiting Senior Research Fellow at the Institute of South Asian Studies, an autonomous research institute at the National University of Singapore. He was former Finance Minister of Pakistan, and former Vice-President of the World Bank. He can be contacted at sjburki@yahoo.com. The views expressed are those of the author and do not necessarily reflect the views of the institute.


The great ideological divide in most of these countries have resulted in the rise of leaders who, by redefining the role of the state, will have their countries lose the centuries-old momentum that have taken their societies to unimaginable heights. The space they seem happy to vacate can be occupied by the populous countries of South Asia. These nations have a demographic advantage that economists have only lately begun to recognise. Their populations are not only large; they are also very young. If the states get properly organised they can become large exporters of goods and services that use knowledge rather than brawn and which the nations in the West will not be able to produce since the states that must help to do that, are being made to pull back. Two revolutions appear to be in the making in many parts of the West – in America and several countries of Europe. One is aimed at reducing the size of the Western state; the other to keep it large and have it focus on the deprived and the underprivileged. Most revolutions in the past were aimed at wresting the control of the state from those who possessed it by those who were excluded from it. The first of these, on the other hand, aims to achieve the opposite. The governing elite want the state to step back and create the space in which private enterprise can step in. The private sectors should now do what the state has always done. The push towards downsizing the state is not new; it was first made during what came to be called the Reagan-Thatcher revolution. The American president who had won the office by famously declaring the state was not the solution, but the problem to deal with the malaise that his predecessor, President Jimmy Carter, had said afflicted the American society. But Reagan’s pragmatism saved him from himself. As Fareed Zakaria wrote recently, the outcome of the Reagan revolution ‘reflected the American public’s basic preferences. They want big government but lower taxes’ 2. During his eight years in office (1981-89), government spending averaged 22.4 per cent of GDP, well above the 1971-2009 average. But taxes came down. By the time he left office, taxes were 18 per cent of GDP, down from about 20 per cent. Only one-half of his rhetoric, therefore, was translated into action – he reduced the tax burden but increased the size of the government. The Tea Party movement now wants to complete the other half. Its members are ‘motivated by the core belief that government has grown much too big and expensive, undermining the Constitution and individual liberty and invariably does more harm than good.’ 3 Revolutions in the past were country or society specific. The French Revolution was confined mostly to Paris, the American Revolution to the 13 colonies in North America. Although, Marxism spread beyond several national borders, it was ultimately confined to a limited geographic space. Both revolutions – the one aimed at limiting the state’s role to a few, well2 3

Fareed Zakaria, ‘The debt deal’s failure’, Time (15 August 2011), p.21. Michael Crowley, ‘The Tea Party’s Triumph’ Time (15 August 2011), p.25.

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defined functions, the other to take care of those the society and the economy are leaving behind – have quickly spread to many parts of the world. As Thomas Friedman, who coined the phrase ‘the world is flat’ 4, wrote recently: ‘…this same globalisation/I.T. revolution enables the globalisation of anger, with all of these demonstrations now inspiring each other. Some Israeli protesters carried a sign: “Walk like an Egyptian”. While these social protests and their flashmob criminal mutations rise in London are not caused by new technologies per se, they are fuelled by them.’ 5 According to Dominique Moisi, founder of the French Institute for International Relations, ‘the riots in Britain do appear less socially and economically motivated than was the case in France [in 2005]. Even so, both cases show you can only ask for sacrifices from your citizens if they feel that these efforts are going to be equally shared. If not, beware the social explosions that will surely follow.’ 6 The pressure for changing the size and role of the state came at a time when both America and Europe – in particular Europe – were in the process of absorbing within their economic systems an unprecedented demographic transformation. All developed societies are seeing drops in the rates of fertility that have no historical precedence. This reduction in the rate of increase in population – in some cases populations have, in fact, begun to decline – has inverted the population pyramid. The old now account for a larger share of the population than the young. As the populations grow older, those no longer in the working-age group are demanding services that they do not have the means to pay. Only the state can deliver the needed help. If the Tea Partiers succeed, they will reduce the size of the government but this change cannot last for long since the old have the votes to make sure that the state continues to provide for their care. Besides, a smaller government cannot deliver innovation and technological and management competence that must become the base of the new economies in the Old World. As Fareed Zakaria puts it, ‘some of these best practices used to be American. The world once looked at the US with awe as Americans built the inter-state highway system, created the best public education in the world, put a man on the moon and invested in the frontiers of knowledge. That is not the way the world sees America today.’ 7 What the world sees now is a dysfunctional political system and a dispirited citizenry. Even the Chinese who remain highly dependent on the American market for their exports and the American financial system for depositing their savings are demanding action from Washington. 4 5 6 7

Thomas Firedman, The World is Flat: A short history of the 21st century, New York. Thomas Friedman, ‘A theory of everything (sot of)’, The New York Times (14 August 2011), p.19. Dominique Moisi, ‘Burning cars in Paris and London’, Financial Times (12 August 2011), p.7. Fareed Zakaria, ‘The debt deal’s failure’, Time (15 August 2011), p.21.

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A rational approach of dealing with this demographic dilemma would have been to mobilise the energies of the remaining youth to work for the economy and the society. Only a strong and motivated state could have done that. But the political right is making the state move in the other direction. It is abandoning the youth. Numbers tell the story. Youth unemployment in the European Union is just over 20 per cent; in Britain it has risen from 14 per cent in the first quarter of 2008 to 20 per cent. In Spain 45.7 per cent of the young are unemployed. The disgruntled has coined a phrase for this and given it an acronym – NEETS, which stands for ‘not in education employment or training’. The NEETS came out in the streets of London and other British cities to communicate their message of despair to the political elite. David Cameron, the country’s patrician politician, drew the wrong message. The riots were not contained because his programme of austerity was cutting – and thus demoralising – the police force. But he attributed the rise of the street to the parts of the society that were ‘sick’ – his word – not in despair. As David Cohen of The New York Times puts it, ‘the anxiety grows when governments are slashing benefits and pushing back retirement ages in attempts to deal with spiraling deficits. A working gerontocracy hardly helps the young. Brits from Tottenham to Teeside have watched the most patrician cabinet since Macmillan cutting everything from libraries to youth counselling services. There is a “No Future” revolt.’ 8 Germany appears to be the only European country that seems to have figured out part of what needs to be done. It has been helped by remembering history when disgruntled youth, destroyed by the way the victors of the First World War, took their revenge on the German economy and reacted politically. The youth took their revenge and put the Nazis in power. According to Roger Cohen, ‘perhaps the society dealing best with these dilemmas is Germany. It has invested in a highly educated work force. It has matched workers’ skills to jobs. It has continued to make precision machinery others can’t make. It has fostered cooperation between industrialists and the government in defense of German jobs. The youth unemployment rate is under 10 per cent.’ 9 Only time will tell whether the two revolutions will neutralise each other and not produce a lasting change. But what they will not be able to deal with is the demographic transition that has opened up opportunities for the people-abundant countries in South Asia. India has already shown the way to go. The country is in the process of leapfrogging by crossing over from lowskill activities to those that demand highly developed skills. Much of its impressive performance of recent years is the result no so much of strategic design as of a series of happy circumstance. In the 1950s, Jawaharlal Nehru, the country’s first prime minister, had the state invest in and establish institutes of science and technology. These institutions produced more graduates than the slow growing Indian economy could absorb. With the less constrained immigration policies 8 9

Roger Cohen, ‘The age of outrage’, The New York Times (14 August 2011), p.19. Ibid.

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in North America in place at that time, thousands of highly trained Indians moved to the United States and Canada. There they rose in the ranks of several important corporations that specialised in new technologies. When the Y2K scare made the corporate world nervous and the old programmes had to be rewritten in the languages that were still in use in India, this work was outsourced to the firms in the country. The rest is history. In other words it was the state – the one under Nehru – that lit the spark that produced the remarkable transformation and modernisation of the Indian economy. The same kind of spark needs to be lit now and only the state can do the job. .....

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ISA S Brief No. 214 – 15 August 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Come September, Manmohan Comes To Dhaka Iftekhar Ahmed Chowdhury 1

Abstract This brief is a curtain-raiser to the visit to Bangladesh by the Indian Prime Minister, Dr Manmohan Singh, in September 2011. It argues that globalisation is leading to a change in mind-sets that, if taken advantage of during that event, would lead to positive and beneficial results for both countries. If India has a disproportionate responsibility to improve ties, Bangladesh also has its own share, for, as the Bengali saying goes, it takes two to clap hands.

Indian Prime Minister Manmohan Singh is due to visit Dhaka come September 2011. His Bangladeshi counterpart Sheikh Hasina had travelled to India in January 2010. A decent interval has elapsed since then. A return visit has been very much on the cards for some time now. In recent times, concerned desks in both countries’ foreign offices have been humming with activity. Final touches are being given to a raft of documents to be signed during the forthcoming event. As part of the preparatory process, the Indian foreign and home ministers had descended on Dhaka in July 2011. Also Sonia Gandhi, the Congress chief, is to receive a posthumous award for her mother-in-law Mrs Indira Gandhi, in a somewhat belated but justifiable recognition of her contribution to the independence of Bangladesh in 1971. Better late than never! This is not so much the acknowledgement of a historical gratitude, but a reaction to the political imperatives of the present when both sides appear keen to smooth their bilateral relationship.

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Dr Iftekhar Ahmed Chowdhury is a Senior Research Fellow at the Institute of South Asian Studies (ISAS) in the National University of Singapore. He was the (Foreign Advisor) Foreign Minister of Bangladesh from 2007-2009. He can be contacted at isasiac@nus.edu.sg. The views expressed are those of the author and do not necessarily reflect the views of the Institute.


It has always been a tricky one, often fraught with petulance and pitfalls. Despite the Indian support at independence, when Bangladesh found itself geographically ‘India-locked’, it recognised its main foreign policy challenge was to live in ‘concord with’ but ‘distinct from’ its powerful neighbour. Understandably the result was at times hostility, often exacerbated by perceived Indian indifference when the latter was seen to be more concerned with other global issues. But on occasions there has also been a tendency to a ‘pilot-fish behaviour pattern’, that is, tacking closer to the shark to avoid being eaten. For India, the need was often to live down its obvious preeminent position in the region and treat Bangladesh as equal, and at the same time get Bangladesh to respond to India’s priorities such as denial of haven to known insurgents and obtaining access to its own north eastern states through Bangladesh. For Bangladesh, a rational consequence has been a tendency to use external linkages to make up for the bilateral power gap. China and, increasingly less so, Pakistan provide the cases in point. The extent to which this is the case depends on which of the two major political parties is in office in Bangladesh. The Awami League, currently leading the coalition, is generally seen to be ‘friendly’ towards India, which is not the case with its arch-rival, the Bangladesh Nationalist Party (BNP), now in opposition. Broadly speaking, there are two constituent elements of the Bangladeshi national identity: ‘Bengaliness’ and ‘Muslimness’. The Awami League, with its predilections for secularism, is seen as representative of the first, and the BNP of the second. Of the seeming external balancers, the domestic crises of extremism in Pakistan are rendering it less relevant to the political ethos of a syncretic Bangladesh, though China remains a factor, and is often used to counter India, mainly by the BNP, though the Awami League is also keen on the Chinese links, given China’s broad appeal to the Bangladeshi masses. Bangladesh notably has one of the most vibrant civil societies in the world, and its democracy, extremely pluralistic and often noisy and chaotic, also contains a fiercely independent media. Both the civil society and the media keep a watchful and often critical eye on relations with India. Certain things are changing, though in Bangladesh, in keeping with the rest of the world. While its economic growth is slower than that of India’s, it is more equitable and its successes in the social sectors, including women’s empowerment, are more remarkable. Increasing globalisation and burgeoning contacts with the world beyond, through the marketing of its garments, its key export and migrant workers, a major foreign exchange earner, have reduced the overall focus on India as a whole. ‘Indo-centrism’ is no longer that much a factor in politics and, therefore, ‘for’ or ‘against’ India can be used increasingly less as a rallying cry by political parties. Indeed, most of Bangladesh’s 160 million people are young and eager to be rid of past political baggage. Many of them see their future linked to the rest of the world rather than to the quibbles with India. 2


The educated middle class students, a powerful driving force in politics, are keen to be associated with the current technological revolution and expanding knowledge-based industry, which implies a shift from chronic ‘anti-Indianism’, which has often been in the past as much a function of deprivation as anything else. They would be quite happy to ride on the coattails of a globally ‘rising’ India, provided, of course, India satisfies, or at least addresses with a view to satisfying, their key concerns. Sensing this changing mind-set, the ‘détente’ with India began even prior to the Awami League coming to power in 2009, by the previous caretaker government (2007-09). The visit by Manmohan Singh provides a unique opportunity for both sides to take advantage of this new and changing mood. This is as good a time as any, and better than most, to take the bull of various pending issues by the horns. On the Bangladesh side, these would comprise questions of maritime security, possible diversion by India of upstream river waters, shootings by the Indian border security forces of suspected cattle-smugglers, ballooning trade imbalance, demarcation of land and maritime boundaries, and exchange of enclaves. On the Indian side, there would be interest in enhanced connectivity, transit facilities, non-provision of haven to insurgents and greater cooperation in international affairs for such issues as support for India’s bid for a permanent seat in the United Nations Security Council. Some of these would form parts of the agreements to be signed during the coming visit. In a prudent move, Singh would be accompanied by Mamata Banerjee, the new Chief Minister of West Bengal. Banerjee is more popular in Bangladesh than her predecessors of the Left Front government, which viewed border resolution with Bangladesh with a modicum of suspicion for fear of illegal influx of cheap Bangladeshi labour. To be the largest is not necessarily to be the greatest, a fact which India will need to take on board if it is to be ready for the global role it aspires to play. India, the most blessed country in South Asia in terms of size, population, resources and power, must take the initiative to ease relations with its neighbours. For this, three things need to be done: first, the intellectual acceptance by India of a disproportionate, non-reciprocal responsibility; second, the ability to relate to and deal with the entirety of its neighbour’s population, not just a segment or a party; and third, generosity in negotiating. But Bangladesh also has its share of responsibilities, for as the Bengali saying goes, it takes two hands to clap. Should these two hands clap in September, the region and the world will applaud, and both nations would have deserved it.

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ISA S Brief No. 215 – 22 August 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Growth in the Indian Economy- Some Thoughts S. Narayan 1

The poor performance of the markets last week has again underlined global concerns over the developments in the United States and the European Union. In terms of the impact on the Indian economy, the media have been articulating both points of view - that it would have no effect, and that it would have a considerable impact. It is true that the last decade has witnessed considerable integration of the Indian economy with the rest of the world. Trade GDP (gross domestic product) ratios were only around 12 per cent in 2000 but are close to 36 per cent now, in an economy that has doubled in size in real terms during this period. Exports are no longer of traditional products like gems and jewellery and handicraft; now a significant proportion of exports is accounted for by refined petroleum products (of the order of 40 per cent) and manufactured goods, including light engineering goods, plastics and pharmaceuticals. Indian companies have invested overseas in manufacturing facilities, coal mines, oil exploration and even in infrastructure construction, and corporate results reflect the performance of overseas subsidiaries in a significant way. There is greater exposure to external debt, with external commercial borrowings of the corporate sector close to US$250 billion, an increase of 18 per cent during the first six months of 2011. Finally, the equity markets are closely integrated with the rest of the world, and investments by foreign institutional investors significantly affect market volumes and prices. It is therefore possible to argue that the impact of the slowdown in the developed markets would be felt significantly in India.

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Dr S. Narayan is Head of Research and Visiting Senior Research Fellow at the Institute of South Asian Studies, an autonomous research institute at the National University of Singapore. He was the economic adviser to the former Prime Minister of India, Mr Atal Bihari Vajpayee. He can be contacted at snarayan43@gmail.com. The views expressed are those of the author and do not necessarily reflect those of the institute.


The planning commission as well as the prime minister’s economic advisory council have scaled down GDP growth forecasts for FY 2010/11 from 8.5 per cent to 8 per cent, and some academics are pitching it even lower, at around 7.5 per cent. This has been based on several indicators. First, there is a slowing down in the index in industrial production growth figures, and in the growth of bank credit for the non-farm sectors. Though data is scarce, there is a reported slowdown in fresh capital investments. With the stock markets choppy, equityraising activity has slowed down, and is currently only around 40 per cent of the amount up to July 2010. Several IPOs have been postponed. Government has been unable to come up with a road map for dilution of shares in public-sector undertakings, which have been budgeted for in the current year’s government revenues. Second, the monsoon has not been up to expectation in all regions, and growth in agricultural production is expected to be only of the order of 2 per cent in the current year. Third, there is no sign of inflation abating, and food inflation has been in excess of 9.2 per cent so far in 2011. The Reserve Bank of India (RBI) has been tightening monetary policy for the last seven quarters, and the recent increase of 50 basis points in the July review indicates the concern that the RBI has over inflation. Monetary tightening has affected credit flow to industry as well as to the real estate sector, and home loans are now at 13 per cent or more, compared with 9.5 per cent only two years ago. Finally, there is also concern that the budgetary expectations of fiscal management may not be realised. Expenditure on subsidies and flagship programmes like the National Rural Employment Guarantee scheme continue to eat away revenues, and there is not very much to cheer from the revenue side. In short, both from the external front as well as internal macroeconomic concerns, it does appear that there is likely to be a significant slowdown in the Indian economy over the next 18 months. Interestingly, there are clear signals that this gloom is not quite justified. First, it is clear that even the most pessimistic analysts expect at least a 7 per cent or 7.5 per cent rate of growth in real terms for the economy over the next decade, representing a threefold increase in GDP by 2025. Since agriculture growth, based on long-term trend lines, has been only between 2 per cent and 3 per cent, and industry averages appear to be no greater than 6 per cent, it is clear that the services sector is likely to witness a greater than 9 per cent rate of growth. Currently, this sector accounts for more than 55 per cent of the GDP. Disaggregating this further, there are sectors that are witnessing growth rates of 15 per cent and above. These include education, health care, hospitality (hotels, restaurants), travel and fast moving consumer goods (FMCG), to name a few. In the tertiary-education sector, for example, admissions this year demonstrated the woeful shortage of good tertiary institutions. In colleges like the Shri Ram College of Commerce in New Delhi and several state-run engineering colleges of repute, the cut-off rates for admission were a full 200 out of 200. This means that all seats were filled with students scoring 100 per cent in their school leaving examinations. Private colleges that charge capitation and management fees for admission 2


have had a field day. Even distance learning institutions, like the Indira Gandhi Open University, have seen admissions growing by more than 20 per cent. On the one hand, this shows up a serious supply gap in tertiary institutions; on the other, this point to the large numbers of school leavers who are now able to afford tertiary education. The picture is similar in healthcare as well. Existing hospital chains like Apollo hospitals and Fortis are expanding fast, even in tier two and tier three cities, followed by compound growth in the pharmaceutical industry. Tourism, hotels and restaurants are growing at a compound annual growth rate of 18 per cent and the FMCG sector is not far behind. In short, consumption sectors, including mobile phones and electronics, leisure and travel, and self care, are growing at more than 15 per cent. This has been in part fuelled by healthy employment growth in the services sector in the last year. The banking sector has recruited more than 100,000 new employees, of which State Bank of India alone has recruited 25,000. The IT and other services sectors have accounted for around 500,000 in the last year. Total employment creation in the organised sectors in services has exceeded a million in the last 12 months. This immediately leads to a spurt in consumption, as FMCG, textiles and electronics grow. The next phase comes with a little extra savings— for two- or four-wheelers and then, after a couple of years, a flat. Extrapolating this forward, it is easy to see that the consumption sectors will grow far faster than the rest of the economy, and will account for a significant contribution to growth. Taking a projection up to 2025, it is easy to predict a tripling of the GDP in nominal terms, even with slow growth in the manufacturing and agriculture sectors. Growth in the consumption sectors would be at least three times this figure, and consumption expenditure would be up by eight to nine times current levels. This would be the bulwark of the projected 7 per cent + growth for the next decade. It also follows that given slow increases in agriculture and only gradual increases in manufacture, the pressure on consumption would lead to considerable price pressures. Consumer prices will continue to go up in view of the supply-demand mismatch. Commodity price increases will only exacerbate the pricing pressures. India is in for a decade of good growth and high inflation. Infrastructure will probably remain what it is today. .....

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ISAS Brief No. 216 – 8 September 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Al Qaeda, A Decade after the 9/11 Attacks Shanthie Mariet D'Souza1

Abstract No major Al Qaeda attack has taken place since the 2 May 2011 killing of Osama Bin Laden. The organisation has lost quite a few important leaders. Its operations are said to be in shambles. It is merely attempting to survive rather than expand or even plan an attack. While the Arab spring is said to have depleted the Al Qaeda of its popular appeal, the difficult fiscal situation in the United States could be directing the Obama administration’s public posturing of the outfit’s reduced threat potential. While 11 September is a time for an introspection of a decade-long counter terrorism policy aimed at decimating and defeating the Al Qaeda, a trend analysis of the threat from Al Qaeda post-Abbotabad might have important pointers that speak otherwise.

Tactical Gains, Strategic Myopia? Beginning with the 2 May killing of Al Qaeda chief Osama bin Laden in the Pakistani city of Abbotabad, the organisation has suffered a series of setbacks. On 25 June, Ibrahim al Afghani, a senior terrorist leader belonging to the Somalia based al-Shabaab, an affiliate of the Al Qaeda, was killed in a drone strike in southern Somalia. On 5 July, Saifullah, a 50year-old Australian, described to be a key aide to Osama bin Laden was killed in a drone attack in Pakistan’s North Waziristan agency. On 22 August, Atiyah Abd al-Rahman, the 1

Dr Shanthie Mariet D’Souza is a Visiting Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous Institute at the National University of Singapore (NUS). She can be reached at isassmd@nus.edu.sg. The views expressed are those of the author and do not necessarily reflect the views of the institute.


number two in the organisation was killed in yet another drone attack by the CIA in Pakistan. On 5 September, Pakistan announced the arrest of Younis al Mauritani, a senior Al Qaeda leader suspected of directing attacks against the US, Europe and Australia, along with two of his associates during a raid in the city of Quetta. This series of losses of important leaders poses serious existential challenges for the organisation, apparently compelling it into a self preservation mode, rather than expand and execute any major attack against its purported enemies. As a result, not a single symbolic high visibility attack has been carried out by Al Qaeda since 2 May. This has propelled the US to a new high and several optimistic assessments have since emerged pointing at its newfound ability to strategically defeat the Al Qaeda, once and for all.

Riding a New Wave of confidence? Not surprisingly, speaking on 31 August, White House counter-terrorism chief John Brennan described Al Qaeda as being ‘on a steady slide’, ‘on the ropes’ and ‘taking shots to the body and head.’2 Leon E. Panetta, who took over as US Defence Secretary, affirmed that American focus has narrowed to capturing or killing 10 to 20 crucial leaders of the terrorist group in Pakistan, Somalia and Yemen.3 And within less than a month of Panetta’s declaration, a more forceful pronouncement surfaced. Media reports quoting unnamed CIA sources have indicated that only ‘a relatively small number of additional blows could effectively extinguish’ the Al Qaeda. According to these new assessments, 1,200 Al Qaeda militants have been killed since 2004 and 224 killed in 2011 alone. Violence by Al Qaeda proper ‘as the global, borderless, united jihad’4 may thus end soon.

Trend Analysis Notwithstanding the public posturing, on closer examination of the trends identified by several other assessments of the Al Qaeda by different American agencies and authorities, the organisation's capacity to survive and even thrive does not, however, appear to be enormously bleak. Firstly, Al Qaeda’s core leadership and structure is intact in Pakistan. The new chief, Ayman al-Zawahiri, is suspected to be hiding in Pakistan’s mountainous tribal regions, mostly because of the safety the region provides. Even after Atiyah Abd al-Rahman's death, attempts 2

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U.S. Counterterror Chief: Al Qaeda Now on the, Fox News (1 September 2011), http://www.foxnews.co m/politics/2011/09/01/us-counterterror-chief-al-qaeda-now-on-ropes/. Accessed on 3 September 2011. Elisabeth Bumiller, ‘Panetta Says Defeat of Al Qaeda Is Within Reach’, New York Times (9 July 2011), http://www.nytimes.com/2011/07/10/world/asia/10military.html. Accessed on 3 September 2011. Al-Qaeda on brink of collapse: Report, Daily News & Analysis (27 July 2011), http://www.dnaindia.com/w orld/report_al-qaeda-on-brink-of-collapse-report_1569936. Accessed on 3 September 2011.

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to get these top leaders would prove difficult, especially with a bickering US-Pakistan relation in the background. Even with the 5 September arrest of Younis al Mauritani which appeared to have introduced some much needed sobriety into their bilateral relations 5, it is appears unlikely that a period of normalcy would return soon. This would provide the terrorist leadership a fair chance to survive and resuscitate. Second, while the Al Qaeda in Iraq (AQI) and Al Qaeda in the Islamic Maghreb (AQIM) might have weakened considerably, the terrorist group's Algerian-based North African affiliate, the Al Qaeda in Arabian Peninsula (AQAP), remains the organisation’s most dangerous affiliate. US Defence Secretary Robert Gates in March 2011 termed the AQAP ‘the most active and at this point perhaps the most aggressive branch of Al Qaeda.’6 The 2010 State Department Country Report on Terrorism released in August 2011 highlighted the growing dangers from the AQAP and noted that the group’s abilities to hatch terrorist plots outside of its stomping grounds.7 AQAP was behind the December 2009 failed attempt to blow up a Detroit-bound airliner and a 2010 plot to destroy several US-bound cargo planes. Third, Al Qaeda continues to be supported by several anti-US regimes (Iran and North Korea in Bush administration’s ‘axis of evil’ being the prominent ones) and will, thus, continue to survive the US military onslaughts. Iran has been accused by the US of aiding Al Qaeda. On 28 July, documents filed by the US Treasury Department accused Iran of facilitating an Al Qaeda- run support network that transfers large amounts of cash from Middle East donors to Al Qaeda’s top leadership in Pakistan’s tribal region8, debunking the myth that radical Shiites and Sunnis would never cooperate. The Treasury Department blacklisted six members of Al Qaeda working with Iran. In earlier times, Washington had accused Tehran of supporting militias inside Afghanistan and Iraq9 that carry out attacks against the American forces. Fourth, a chemical or biological attack by Al Qaeda and its offshoots and even terrorists laying their hands on nuclear material and weapons remains a valid threat. Mike Leiter, who retired as director of the US National Counterterrorism Centre early July 2011 said that despite the killing of Osama bin Laden there are ‘pockets of Al Qaeda around the world who see’ the use of chemical and biological weapons ‘as a key way to fight us, especially the 5

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The arrest of Younis al Mauritani could be part of Pakistan's desperate efforts to win back US affection and normalise the bilateral relations, by being extra cooperative in its anti-Al Qaeda efforts. Evan Harris, ‘Defence Secretary: Yemen Gov’t Collapse A Real Problem’, ABC News (27 March 2011), http://abcnews.go.com/blogs/politics/2011/03/defense-secretary-yemen-govt-collapse-a-real-problem/. Accessed on 4 September 2011. ‘U.S.: AQ Affiliates Have Grown Stronger’, Investigative Project on Terrorism (19 August 2011), http://www. in vestigativeproject.org/3119/us-aq-affiliates-have-grown-stronger. Accessed on 4 September 2011. Joby Warrick, ‘U.S. accuses Iran of aiding al-Qaeda’, Washington Post (29 July 2011), http://www.was hingtonpost.com/world/national-security/us-accuses-iran-of-aiding-alaeda/2011/07/28/gIQARUPxfI_story .html. Accessed on 3 September 2011. Megan Greenwell, 'Iran Trains Militiamen Inside Iraq, U.S. Says', Washington Post (20 August 2007), http://www.washingtonpost.com/wp-dyn/content/article/2007/08/19/AR2007081901394.html. Accessed on 7 September 2011.

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offshoot in Yemen.’10 While a biological attack may not end up creating a large massacre, the new breed of terrorists understand that killing a few Americans can cause as much fear as the massive symbolic plots bin Laden backed. The world has a bigger problem at hand if the unending search by the terrorists for nuclear weapons finally culminates in success. The worry of nuclear weapons falling into Al Qaeda hands in unstable Pakistan or prospects of proliferation from North Korea and other such countries remain a major worry. Fifth, a substantial number of US citizens (including those with diaspora connections and networks) have been radicalised and some have even developed links with the Al Qaeda and they may prove to be ‘strategic assets’ for the terrorist organisation within the US homeland. White House National Security Advisor John Brennan in a May 2010 speech, noted: ‘We have seen an increasing number of individuals here in the United States become captivated by extremist ideologies or causes.’11 In June 2010, two US citizens from New Jersey were arrested at New York's JFK Airport following allegations that they planned to travel to Somalia to join al-Shabaab. These arrests indicate a growing trend in which radicalised Americans have become involved in terrorism-related activities.12The presence and expansion of ‘sleeper cell’ is another worrisome development. A recent US congressional report indicates that the Somalia based al-Shabab has recruited 40 Muslim Americans and 20 Canadians13 to be part of its terrorist campaign in the African country. There is a possibility that these individuals may well return to the US undetected. Sixth, Al Qaeda is functioning through ‘sub contracting’ into regional organisations, which are no less committed and lethal than their bigger counterparts. Regional affiliates like the alShabab in Somalia are taking up responsibility for carrying out attacks beyond its known area of operation. It was responsible for the twin suicide attacks in Uganda in 2010, killing 79 people. Similarly, outfits like the Lashkar-e-Toiba (LeT), Jaish-e-Mohammad (JeM), the Haqqani network and other such Pakistani Taliban affiliated groups have expanded their attack horizons considerably and are said to have attained capacities to replace Al Qaeda as the primary terrorist formation in the Afghanistan-Pakistan region. Recent reports indicate the creation of another Al Qaeda branch in Egypt. A statement from a group claiming to be the

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Kimberly Dozier, ‘Al Qaeda WMD Use Likely, Former U.S. Officials Say’, Huffington Post (28 July 2011), http://www.huffingtonpost.com/2011/07/28/al-qaeda-wmd_n_912779.html. Accessed on 5 September 2011. Among others, five Somali-Americans that left Minnesota to fight in Somalia. Stephanie Hanson, AlShabaab , Backgrounder, Council of Foreign Relations, (10 August , 2011, http://www.cfr.org/somalia/alshabaab/p18650. Accessed on 1 September 2011. Liam Stack, New Jersey men arrested at JFK on way to join Al Shabab in Somalia, The Christian Science Monitor, (7 June 2010), http://www.csmonitor.com/World/terrorism-security/2010/0607/New-Jersey-menarrested-at-JFK-on-way-to-join-Al-Shabab-in-Somalia. Accessed on 1 September 2010. ‘Al-Shabaab has recruited more than 40 Americans, Congressman says’, CNN (27 July 2011) http://articles.cnn.com/2011-07-27/politics/muslim.radicalization.hearing_1_shabaab-somali-americansshirwa-ahmed?_s=PM:POLITICS. Accessed on 5 September 2011.

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newest Al Qaeda branch was posted online in August 2011.14 In March 2011, a Libyan antiQaddafi rebel commander admitted that his fighters included some Al Qaeda militants who had fought in Iraq.15 Such coalescence of regional affiliates and splintering/formation of new groups would make the amoebic presence of these groups hard to detect and effectively counter. Interestingly, the spectre of lone wolf terrorists adds to the complexity of existing threats. The failed plot to blow up an explosives-packed vehicle in Times Square in May 2010 was carried out by a lone Pakistani-American, trained by the Pakistani Taliban. The 22 July Norway attacks further demonstrated that capacity of a lone self-radicalised terrorist can equal or even surpass the efforts of an organised global terrorist outfit.16 Ostensibly, all these trends are derived from various recent assessments of the US government agencies and therefore it is not unconventional wisdom.

Early Declaration of Victory? The inordinate hurry to declare a military victory against the Al Qaeda and even write its obituary is as much to do with the difficulty of financially sustaining an unsustainable military effort against a thoroughly dispersed enemy, as deriving political benefits from an assumed victory. In the backdrop of rising American disenchantment against such wasteful war efforts in economically difficult times, such public posturing would augment President Barack Obama’s re-election bid in 2012. Opinion polls suggest that American citizens are no longer interested in the country's offshore wars, when there are pressing economic difficulties at home. However, underplaying a latent but potent threat from the Al Qaeda and its affiliates exemplifies a hasty retreat, especially when the conditions for such organisations to revive and thrive have been least addressed. The existing infrastructure, training, funding, support networks and hold of the organisation, especially in Pakistan, Yemen and Somalia remain factors to be reckoned with, in the immediate future. There are obvious requirements for engaging the radical Islamists, and launching effective preventive programmes of deradicalisation as a part of the counter terrorism effort. These initiatives must continue along

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‘Group Claims to Hoist al-Qaida Flag in Sinai’, Investigative Project on Terrorism (5 August 2011), http://www.investigativeproject.org/3084/group-claims-to-hoist-al-qaida-flag-in-sinai. Accessed on 5 September 2011. Praveen Swami, Nick Squires and Duncan Gardham, 'Libyan rebel commander admits his fighters have alQaeda links', Telegraph (25 Marc 2011), http://www.telegraph.co.uk/news/worldnews/africaandindiano cean/libya/8407047/Libyan-rebel-commander-admits-his-fighters-have-al-Qaeda-links.html. Accessed on 7 September 2011. Bibhu Prasad Routray, ‘The Power of a lone terrorist’, The Straits Times, 29 July 2011.

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with the sustained and coordinated politico-military ‘whole of government approach’ with host nations, and not without it. .....

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ISAS Brief No. 217 – 8 September 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

The Meaning of Anna Hazare’s Movement Ronojoy Sen1

Abstract Social activist Anna Hazare’s 13-day hunger strike demanding a strong anti-corruption authority in India has made him a global name. His movement has been responsible for bringing back corruption to top of the agenda in India, which has seen several scams in recent times. It has also galvanised a large number of people who are not usually known to take to the streets for political causes. However, the tide of positive coverage of the event has glossed over some problematic aspects of the goals and methods of the movement.

With the Indian activist Anna Hazare having retired to his native village in Maharashtra there seems to a feeling that the denouement of his 13-day fast in New Delhi for a strong anticorruption agency, or Lokpal, was a win-win situation for Indian democracy: Hazare and his supporters got their way, or at least most of it. The people made their voice heard. Parliament, too, had its say in asserting its right to frame the Lokpal legislation. Unfortunately in real life, feel-good endings are rare. There were of course several positives to emerge from the movement. One was the mobilisation of people, and this wasn’t just the middle classes, who normally would not take to the streets.

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Ronojoy Sen is Visiting Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore. He can be contacted at isasrs@nus.edu.sg. The views expressed are those of the author and do not necessarily reflect the views of the institute.


Two, the flexibility of Indian democracy was displayed when despite the initial bungling by the government, the protests not only took place, it even influenced the lawmakers inside Parliament. Three, the protests were a wake-up call for India’s elected representatives. Perhaps the only real loser was the Congress Party-led UPA government which initially overreacted by arresting Hazare and then showed a lack of leadership at critical moments. More people came out into the streets to protest than they might have if the hunger strike was allowed to proceed normally. The opposition parties, too, found it a handy stick with which to beat the government. However, the Hazare-led movement has left more questions than answers in its wake. The most obvious one is regarding the utility of the Lokpal in weeding out corruption. It is now commonly accepted that an extra layer of bureaucracy is unlikely to solve a phenomenon that permeates all levels of society. Indeed, it is ironical that same middle classes, who are so sceptical of the corrupt state, want to further increase its reach. The implicit faith of the multitudes that rallied behind Hazare, demanding a Lokpal that could strike hard at corruption, says something about the love that middle-class Indians have for quick fix, authoritarian solution. There is also the contradictory impulse of a consumerist middle class fetishising a saint-like figure – or at least someone with the trappings of one – and pinning their hopes of a corruption-free idyll on him. This is not entirely surprising. In a detailed survey on the state of democracy in South Asia done some years ago, an unexpectedly large number of people in India, approved rule by a strong leader without any democratic restraints. 2 It follows that Indians, particularly the middle classes, envy China’s efficiency so much. But here’s a sobering thought. Even in China, where corruption can mean a bullet in the head (incidentally Hazare has advocated death for corruption and severe thrashings for lesser crimes like alcoholism) graft is rampant. The latest instance is China’s former Railway Minister Liu Zhijun who is accused of embezzling US$120 million, besides other misdemeanours. So it’s apparent that tough laws and punishment themselves are no deterrent to corruption of the sort where vast numbers of Indians are complicit. Then there was the antipathy towards politicians and politics that came through so strongly among Hazare’s core team as well as his supporters. There are several problems with this. While the reputation of politicians have plummeted in India – and indeed all over the world – tarring the entire political class with one brush is as unfair as it is simplistic. In that sense, the comparison that some are making between the Tea Party in the United States and Hazare’s movement is wrong. The Tea Party is most concerned with reforming the 2

The State of Democracy in South Asia: A Report, New Delhi: Oxford University Press, 2008, pp.13-14.

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Republican Party and contesting elections. But more importantly, the tendency by the Hazare supporters to regard themselves as ‘apolitical’ or ‘non-political’ is absurd. This results in three things. First, it is becomes easy for Hazare’s flock to stick the ‘corrupt’ label to politicians and bureaucrats absolving themselves of any role in corruption. Second, it breeds impatience with existing institutions like the Parliament or the judiciary which could be dangerous for Indian democracy. Third, it gives Hazare’s movement a purity that is somehow not tainted by politics in the conventional sense of the term, and the belief that theirs is the only solution to corruption. This self-righteousness has been termed by political commentator Pratap Bhanu Mehta as the ‘tyranny of virtue’. 3 This manifested itself in the Ramlila ground where no politicians, irrespective of whether they were honest or not, were allowed on to the stage while several dubious elements had a field day playing to the gallery. The distinction between the ‘political’ and ‘non-political’ is of course fairly common in India. In a recent interview, founder of the IT company Infosys, Narayana Murthy, appealed for a set of ‘non-political’ people, such as retired bureaucrats, retired judges and academicians, to draft an acceptable Lokpal Bill. 4 By reducing politics merely to party affiliations, Murthy, like Hazare’s followers belittles the idea of the political. Finally, much has been made of the spontaneity of the Hazare movement. Much less has, however, been said about the carefully choreographed political theatre of Hazare’s 13-day fast. The idea of a fast unto death has obvious Gandhian connotations, but whether it is permissible in a democracy is debatable. Indeed, some core members of the Hazare movement, such as social activist Swami Agnivesh and former Supreme Court judge Santosh Hegde, expressed their reservations about the length of his hunger strike. The connection to Gandhi was, however, strongly emphasised with a giant picture of Mahatma Gandhi used as a backdrop to the stage in Ramlila ground, where Hazare was fasting. Then there were the made-for-television moments like a Dalit and a Muslim girl giving Hazare coconut water to break his fast. All this was relentlessly covered by the media, which resulted in all the television news channels showing a significant spike in viewership during the period of Hazare’s agitation.5

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Pratap Bhanu Mehta, ‘Time to step back,’ The Indian Express (16 August 2011), http://www.india nexpress.com/news/time-to-step-back/832365. Accessed on 7 September 2011. ‘Let-nonpolitical-citizens-body-give-a-draft-says-narayana-murthy’, The Indian Express (2 September, 2011),http://www.indianexpress.com/news/let-nonpolitical-citizens-body-give-a-draft-says-narayana-murthy /837474. Accessed on 7 September 2011. ‘Anna Hazare drives up news viewership,’ Mint (26 August 2011), http://www.livemint.com/2011/08 /25235016/Anna-Hazare-drives-up-news-vie.html. Accessed on 7 September 2011.

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But there were elements that struck a discordant note, too. It is now known that the followers of Sri Sri Ravi Shankar and Baba Ramdev, both of whom are yoga gurus with a considerable following, played a substantial role in mobilising support for Hazare.6 The daily slogans of ‘Bharat Mata ki Jai’ (‘Glory to Mother India’) and a picture of Mother India on the Ramlila stage, with strong Hindu connotations, rubbed some people the wrong way. 7 What was even more disturbing was the easy equation between the flag-waving jingoism of Hazare’s supporters and civil society activism. A Lokpal, acceptable to most people, will most likely come into existence soon. As of now, the government version of the Lokpal is before the Indian Parliament and being considered by the standing committee for law and justice. The Parliament has passed a sense of the House resolution on three sticking points raised by Team Hazare: Putting the lower bureaucracy under the Lokpal, establishment of a Lokayukta (state-level anti-corruption bodies) in all states and a citizen’s charter. The principal opposition party, the Bharatiya Janata Party, has already given its approval to these clauses. There is, of course, no guarantee that all these points will be in the official Lokpal Bill but it might be difficult for Parliament to wriggle out. But what of the future of the Hazare movement once it has outlasted the issue of a Lokpal? Hazare has hinted that he will take up issues such as electoral reform and land acquisition in future. It is unlikely that such issues will resonate as strongly as corruption - which affects almost everybody in India - with the urban middle classes who form the backbone of the Hazare movement. This in turn will affect the numbers that can be mobilised as well as the media hype. .....

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Amita Baviskar, ‘A Tale of Two Movements,’ The Times of India (6 September 2011), http://timesofin dia.indiatimes.com/home/opinion/edit-page/A-tale-of-twomovements/articleshow/9875 905.cms. Accessed on 7 September 2011. ‘I, the people,’ The Economist (27 August, 2011), http://www.economist.com/node/21526904. Accessed on 7 September 2011.

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ISAS Briefs No. 218 – 18 October 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

India-Afghanistan Strategic Agreement: Opportunity for Peace and for Pakistan Sajjad Ashraf1

Afghanistan President Hamid Karzai’s statement in New Delhi that ‘Pakistan is a twin brother, India is a great friend’ is unlikely to assuage Pakistan’s concerns over the real nature and implications of the Indo-Afghanistan Strategic Agreement for Pakistan. The deal was signed on 4 October. He added, ‘With our friend will not affect our brother’. In a brief low-key response, Pakistan Prime Minister Yousuf Raza Gillani said, ‘Both are sovereign countries and they have the right to do whatever they want to’. The Foreign Office spokesperson, though maintaining the same theme, suggested avoiding ‘steps that may affect regional stability’. Pakistan was still studying the details of the agreement, the spokesperson added. This new all-embracing strategic partnership agreement is intended to develop ties across a range of areas and seeks to ‘create an institutional framework for our future cooperation’, said Indian Prime Minister Manmohan Singh at a joint press conference with President Karzai, after signing the agreement.

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Sajjad Ashraf was Pakistan’s High Commissioner to Singapore 2004-2008. He now serves as Adjunct Professor at the Lee Kuan Yew School of Public Policy and as a Visiting Senior Research Fellow at the Institute of Southeast Asian Studies. He can be contacted at sppsa@nus.edu.sg. The views expressed are those of the author and do not necessarily reflect those of the institute.


The agreement read carefully suggests a regional approach by developing Afghanistan as a hub linking Central and South Asia, (Afghanistan qualifies to be in both sub-regions) through ‘strengthen(ing) regional cooperation under SAARC (South Asian Association for Regional Cooperation)’. In the backdrop of Pakistan’s troubled relations with Kabul and New Delhi attempts aimed at developing closer relations between them, especially training of security personnel, a bane for Pakistan, will be viewed with suspicion by Islamabad. The troubled Pak-Afghan relations are the consequence of Pakistan’s undeclared policy to seek strategic depth in Afghanistan only in the military sense, rather than economic. The Afghans, resistant to outside veto wielders, are mindful of this desire reaching its nadir with former army Chief Mirza Aslam Baig, at one time, suggesting placing Pakistan’s military and other assets in Afghanistan – meaning acquiring military bases there. Pervez Musharaff’s (Former Pakistan President) lament in Washington that India wants to ‘create an anti-Pakistan Afghanistan’ adding that ‘not one man has come to Pakistan for training’ when he offered should be a reason for introspection for Pakistan instead of rage against others. Pakistan needs to find out as to why the ‘twin brother’ refuses the embrace? In fact, Pakistan’s own reaction against India’s ‘big brother’ attitude is an appropriate illustration of why within months of coming into power successive Afghan governments turn belligerent towards Pakistan. Unable to contain resistance, the United States (US) and Afghan government are concerned at the inadequacy of security apparatus when the US forces withdraw from active combat role in Afghanistan in 2014. India is concerned, which everyone should be, at the return of a medieval Taliban-like regime in Kabul that could become a staging ground for cross border extremism into India. It is not in India’s longer-term interest to keep Pakistan’s borders on the boil. India’s involvement in Pakistan’s unstable western borders could land India, with no contagious borders with Afghanistan, into an expensive and unwinnable war. If not handled deftly, India too will find to its own chagrin, the limits of its involvement in Afghanistan. India is conscious that peace in Afghanistan is the key to exploiting the vast economic potential of Central Asia. As India’s economic stakes grow in the region, this may be Pakistan’s chance to demonstrate some subtlety in pursuit of its longer-term aims and obtain peace on its western borders. Pakistan should feel confident that it is in landlocked Afghanistan’s interest to maintain friendly, working relations with Pakistan. ‘There can be no lasting peace in Afghanistan 2


without a measure of Pakistan’s support,’ admits Raja Mohan, the respected Indian analyst, writing in The Indian Express. With reassurances coming both from Kabul and Delhi, it is also for Pakistan to perceive this evolving relationship. Maintaining the current approach, Pakistan will continue to follow policies that have failed to bring in peace and thwarted Pakistan’s own internal structures. Pakistan’s attempts to import electricity from Tajikistan and develop economic relations with the region will falter. After all India cannot be blamed for the follies of Pakistan’s weak kneed military rulers for twice joining the US wars in Afghanistan. Letting India develop Afghan capacity in the present environment can be a double-edged sword. If the three countries can reach an understanding and let India develop Afghan capacity leading to regional economic integration, Pakistan too becomes a winner. In the age of globalisation, following any other course will result in Pakistan lagging behind. Commenting upon the Agreement, Express Tribune in Pakistan said in its editorial on 8 October 2011 ‘the region would have benefitted as a whole had the three members of the SAARC come together and made the India-Afghanistan agreement a tripartite accord…’ As Pakistan seeks security through a friendly government in Afghanistan, the onus lies on the three countries. India and Afghanistan should demonstrate that the deal is benign and not against the ‘twin brother’. Pakistan needs to respect Afghan choices, recover some lost decades and understand that security encompasses a much wider spectrum than military space. There is no other way except to work together for peace in Afghanistan leading to wider regional engagement. .....

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ISA S Brief No. 219 – 2 November 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Pakistan, India and the Security Council: Thinking the Unthinkables Iftekhar Ahmed Chowdhury1

Abstract Pakistan has just been elected to the Security Council with India’s support. This may have been in the face of wariness on the part of some of Pakistan’s traditional Western allies. This is at a time when Pakistan’s relationship with the United States (US) and the West are deteriorating rapidly. India has displayed maturity by not seeking to exploit it. Indeed this falling out with the West may be inversely aiding Indo-Pak relations. But this also creates challenges for New Delhi that will call for considerable diplomatic artfulness and finesse.

Introduction Most observers of United Nations (UN) politics will agree that we are in for an interesting year ahead. In 2012, both India and Pakistan, known to be sworn rivals in the international scene, will be sitting in the Security Council. India was elected for a two-year term last year. Pakistan secured its own election on 21 October for the same length of time and will be taking its seat starting January 2012. So, for a period of one year, their membership to the UN’s most powerful body will coincide. A normal expectation would be that we are in the cusp of great fireworks in that body in the months ahead. This essay will argue that contrary to those expectations, it is not likely to be so. 1

Dr Iftekhar Ahmed Chowdhury is Senior Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous institute at the National University of Singapore (NUS). He was (Foreign Advisor) Foreign Minister of Bangladesh from 2007-2009. He can be contacted at isasiac@nus.edu.sg. The views expressed are those of the author and do not necessarily reflect the views of the Institute.


A Prognosis with a Difference The reasons are as follows: First, India was early in its expression of support to Pakistan. This was owed to the sagacity of its Permanent Representative in New York Ambassador Hardeep Singh Puri. He was able to successfully persuade his capital, New Delhi, that Pakistan’s victory was inevitable Kyrgystan was the other contender and was obviously no great threat – and therefore, a show of early endorsement would be taking advantage of a rare opportunity to generate a fund of goodwill. Second, Puri and his Pakistani counterpart, Ambassador Abdullah Hussain Haroon, enjoy excellent personal rapport. Haroon, a non-career public figure of patrician bearings with close links with the Pakistani ruling elite, does not appear to be constrained by the usual ‘doubting Thomas’ syndrome that has always tended to dog South Asian professional diplomats in intra-regional relations. Puri has shared these positive sentiments in public and private. Third, while the two countries diverge on issues in the region, on many global subjects, they still see eye to eye. Both have a penchant to be seen as supportive of ‘righteous causes’. On thematic issues such as nuclear non-proliferation, both have a common interest in tweaking the norms to accommodate their own nuclear weapon status. Finally, India will be extremely cautious not to risk in any way its claim to a permanent seat in the Council by clashing with a regional power on any topic of national interest. This is not to say this cosy state of affairs between the two will not be without pressures and strains. First, the mindset of the two envoys may not be entirely shared by the back-stopping bureaucrats of their respective foreign offices and their political masters. In the Indian system, unorthodox behaviour pattern of an individual diplomatic agent, however positive the results, is frowned upon by the peers, whose patience for out-of-line thinking is limited. In Pakistan, the General Head Quarters of the Armed Forces have a major say on critical foreign policy issues. The UN is not a priority except for its interest in sending peacekeepers, but it is unlikely to allow their Mission in New York free play on ‘core interests’. Second, in the Council, both countries have their respective patrons among the big powers, China in the case of Pakistan, and some say, now the US in the case of India. But as yet China has been playing a very responsible role in the Council, in total consonance with (former Chinese leader) Deng Xiao Ping’s dictum ‘hide your capabilities and bide your time’, and is not unlikely to drag Pakistan into any unsavoury situation. As for pandering to the US, India has most certainly been taking an independent line, often to the former’s, though unstated, chagrin, such as during the vote on Libya. Still, it is very 2


possible that from time to time, the enthusiastic amity in New York framed by their diplomats may be reined in by the policy makers at home.

Politics of Flux in the Region Yet, what is happening in New York, between India and Pakistan, is not entirely delinked from developments in the region itself at this time. The series of events including the US-led Osama bin Laden raid and the subsequent pressures on Pakistan, unheeded to date, to tighten the noose around the Haqqani network insurgents, and the numerous attacks in Pakistan on NATO (North Atlantic Treaty Organization) supplies for Afghanistan, have severely strained the relations between Pakistan and the West. This is also said to be reflected in the 55 votes that Kyrgystan secured against Pakistan; where, for instance, did these come from? India, as we have seen, was not among them. Most Pakistanis now see the West, rather than India, as the principal adversary. Even if the all-powerful Pakistani Armed forces should need an enemy as its ‘raison d’être’, the West may fill in for India, and indeed might be a better substitute, with even wider public support against it, if polls are to be believed (not counting chronic Indophiles such as some religious extremists). A recent important confidence building measure was the Pakistani cabinet’s decision to accord India Most Favoured Nation treatment in trade. India has provided the same to Pakistan in 1996, but Pakistan has been dragging its feet because of Kashmir and other issues. So this is now seen as a big step. In fact, recently, the Pakistani Army Chief Pervez Kayani has said he could not rule out a US attack on Pakistan, just as Bruce Riedel, an adviser to the US President Barack Obama, talked of ‘containment’ of Pakistan (which Pakistanis interpret as seizure through some means of its rapidly growing nuclear stock-pile). Pakistan has just test-fired a Hatf V11 stealth cruise missile, capable of carrying nuclear weapons, which is a low-flying and terrain hugging, with high manoeuvrability, pinpoint accuracy and radar avoidance features, with a range of 700 km. The timing of the test coincided with Kayani’s assertions that the US would have to think ‘ten times’ before making any further incursions into Pakistan, because the latter was not a weak country like Iraq or Afghanistan, but a strong one with nuclear power. Pakistan and the US have been allies for so long, dating back to the days of Baghdad Pact, CENTO (Central Treaty Organization), and SEATO (South-East Asian Treaty Organization) in the 1950s that such scenarios appear unthinkable thoughts, but the twists and turns of history are such that they are no longer improbable. 3


Conclusion Ironical as it may seem, there is a likelihood of Pakistan’s relations with India developing in an inverse ratio, vis-à-vis, its relations with the West and the US. This is not lost on the leadership of both countries and they are playing their cards extremely cautiously. Pakistan’s Foreign Minister Hina Rabbani Khar, who, despite her youth and inexperience has been taking the world unexpectedly by surprise with her diplomatic prowess, has been holding out the olive branch to India. India is by no means gloating over Pakistan’s falling out with the West, and its Foreign Minister S M Krishna has already spoken of the ‘devastating consequences’ such a situation may have for the region. India obviously is not looking to exploiting it to its advantage. For one thing, it would drive Pakistan further into China’s arms. For another, conflict with the West will turn Pakistan horrifically chaotic, which could destabilise India as well. India’s interest would lie in a stable Pakistan, not inimical towards it, but it seems only way this would come about is if Pakistan’s relationship with the West is adversarial. But it would be in India’s interest that this adversarial relationship does not spill into a warlike situation of actual conflict. All this would call for substantial diplomatic finesse and sophistication on the part of New Delhi. There could be glimmerings of this in the support to Pakistan for the Security Council seat, perhaps in the face of Western opposition. Demands of diplomacy can often make strange bedfellows!

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ISA S Brief No. 220 – 21 November 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

India and Pakistan Prime Ministers’ Meeting: Looking to the Future Rajshree Jetly1

Abstract This brief discusses the recent meeting of Indian Prime Minister Manmohan Singh and Pakistani Prime Minister Yousuf Raza Gilani on the sidelines of the 17th SAARC (South Asian Association for Regional Cooperation) Summit in Maldives. While no substantial gains were made, the meeting ended on a positive note and laid foundations for further talks and greater cooperation between India and Pakistan in the near future.

Introduction On 10 November 2011, the Prime Ministers of India and Pakistan met along the sidelines of the 17th SAARC Summit in the city of Addu in Maldives. The meeting was as eagerly awaited as the SAARC Summit itself, coming as it did in the wake of the recently conferred MFN (Most Favoured Nation) status to India by Pakistan. The two Prime Ministers, Manmohan Singh and Yousuf Raza Gilani, had earlier also met along the sidelines of the last SAARC Summit in Thimpu, Bhutan in April 2010. The Addu meeting was significant in terms of building on the spirit of dialogue and cooperation that has characterised most of the recent high-level meetings between India and Pakistan.

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Dr Rajshree Jetly is Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous institute at the National University of Singapore (NUS). She can be contacted at isasrj@nus.edu.sg. The views expressed are those of the author and do not necessarily reflect the views of the Institute.


Significance of the Meeting Continuing in the same spirit as the last Foreign Ministers’ meeting in July 2011, where both parties underlined the need to rise above the acrimony of the past, the recent Prime Ministerial meeting spoke of starting a ‘new chapter’ in the relations between the two countries. The sincerity of the two parties in wanting to make progress was evident from the fact that the meeting of the Prime Ministers was preceded by high level delegation-level talks between the two sides.2 The discussions touched on a range of issues affecting both countries, including water, terrorism, Sir Creek, Kashmir and Siachen. What made this meeting significant was that it was conducted in the context of an important development, namely Pakistan’s decision to grant the MFN in principle to India.3 It is to Pakistan’s credit that it was able to make the bold move despite pressure from some vested interests within Pakistan that were opposed to granting India MFN status. The MFN was initially contingent on movement on the Kashmir issue for Pakistan, but while Kashmir still remains an issue between the two countries, Pakistan has shown political courage and vision in moving forward in exploring this economic avenue. This action by Pakistan is a positive confidence-building measure which has the potential for opening up trade and business opportunities, and bringing in a new era of cooperation in all aspects of Indo-Pak relations. At the meeting both sides agreed to liberalise the visa regime, re-energise the Indo-Pak joint commission that has not been functional since 2005, and work out the details for the Preferential Trade Agreement.4 The Prime Ministers also decided to move expeditiously on cross-LOC border movement of people and trade as per the terms agreed in the Foreign Ministers meeting of July 2011. Terrorism, which remains a major concern for India, also featured in the discussions. India reiterated its apprehensions about terrorism and its desire for the perpetrators of the 2008 Mumbai attacks to be brought to justice. The request was received sympathetically by Pakistan, which promised to send a judicial commission to India to assist with the investigations and expedite progress on the case. Pakistan’s Interior Minister Rahman Malik made another supportive gesture of reaching out to India by calling one of the perpetrators and the lone survivor of the Mumbai attacks, Ajmal Kasab, a ‘terrorist and non-state actor’ who should be sent to the gallows. The Indian Prime Minister reciprocated

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The delegation comprised of high-ranking officials including the Indian and Pakistani Foreign Ministers, S.M. Krishna and Hina Rabbani Khar; Foreign Secretaries Ranjan Mathai and Salman Bashir respectively; the Indian National Security Adviser Shiv Shankar Menon and Pakistan’s Interior Minister, Rahman Malik. India had offered MFN status to Pakistan in 1996. Harsh Pant, ‘Indo-Pak ties, Can Economics Trump Politics’, Business Standard (13 November, 2011) http://business-standard.com/india/news/harsh-v-pant-indo-pak-ties-can-economics-trump-politics-/455230/ Accessed 13 November 2011.

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Pakistan’s sentiments and called Gilani ‘a man of peace’ who was willing to work with India. Significantly, the talks moved away from ‘accusation and counter accusations’ to focus on charting the future.5 Neither side allowed any one issue to colour and/or obstruct the proceedings. Instead, the emphasis was on accommodating each others’ concerns with an eye on the future. The talks ended on a positive note with the expectation of a series of further discussions to make real progress on all outstanding matters affecting Indo-Pak relations.6

Incentives for Moving On Building upon the wave of goodwill generated by recent confidence building measures, 7 both India and Pakistan appear keen to realise the huge advantages of cooperation as opposed to confrontation that has proved costly and debilitating for both countries. In addition to the bilateral dynamics, there is also the regional dimension where improved Indo-Pak relations would have a beneficial impact on all SAARC countries. From Pakistan’s perspective, there may have been additional considerations. It is plagued by political and economic challenges, and its relations with the United States (US) are also at an all-time low. All of this is putting Pakistan under considerable pressure, and if ever there was a time to reduce tensions with India, this was it. The impetus to reach out to India is not limited to the civilian administration alone, with the Pakistan military also getting behind the initiative.8 This was evident from the army’s endorsement of granting the MFN to India. The Pakistan army have traditionally been seen as benefiting from strained relations between India and 5

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Ministry of External Affairs, India Media statement by Foreign Secretary after meeting of PMs of India and Pakistan (10 November 2011), http://meaindia.nic.in/mystart.php?id=100018504&pid=2413. Accessed 13 November 2011. Ministry of Foreign Affairs, Pakistan, ‘Pakistan positively evaluates Maldives Bilateral Summit with India’ (11 November 2011), http://www.mofa.gov.pk/mfa/pages/article.aspx?id=988&type=1. Accessed 13 November 2011. Apart from the grant of the MFN, other gestures include the release of an Indian helicopter and the crew that had accidentally strayed into Pakistan-administered territory. India also supported Pakistan as a nonpermanent member of the Security Council, and Pakistan has endorsed India’s candidate for the post of Commonwealth Secretary-General. Sandeep Dikshit, ‘Pakistan Military is on board, says Manmohan,’ The Hindu (12 November 2011) http://www.thehindu.com/news/national/article2622010.ece?homepage=true. Accessed 13 November 2011. Also see Javed Naqvi, ‘Pakistan Army on Board, Says Singh’, Dawn (13 November 2011) http://www.dawn.com/2011/11/13/pakistan-army-on-board-says-singh.html.

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Pakistan, as it helps justify their disproportionately greater role in Pakistan’s power politics. The army’s endorsement of this move is a positive signal for spelling out the contours of the Indo-Pak relationship in future. For India, reduction of mistrust with Pakistan is equally necessary as it enables a peaceful environment within its borders and allows it to play a more constructive role in reaching out to its neighbours and lifting SAARC out of the current state of inertia.

Looking Ahead The recent meeting should be seen as an important step in building better relations between India and Pakistan. That there were no tangible outcomes is understandable given the complex relations between India and Pakistan; it would be unreasonable to expect a dramatic turnaround. Given the fragile nature of the Indo-Pak relationship, it is important to build and invest in the relationship in a steady manner. There is no denying that core issues such as Kashmir, terrorism and Afghanistan are still to be resolved. For Pakistan, Kashmir remains a question on the uppermost issue on its agenda; for India, terrorism is the potential dealbreaker. Afghanistan has re-emerged as another arena of competition with both India and Pakistan competing for strategic and economic influence in anticipation of US withdrawal from the region. However, the fact that both countries are reaching out to each other and willing to keep up the momentum is a welcome sign. This momentum must be sustained for the Indo-Pak peace process to become a reality.

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ISA S Brief No. 221 – 21 November 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

The Afghanistan Enigma: Jostling for Influence will Jeopardise Peace Sajjad Ashraf1 Political grandstanding aside, the message after United States Secretary of State Hillary Clinton’s visit to Islamabad later in October indicates that the two sides are prepared to work together over a plan of action to engage Taliban (read Afghan resistance) in creating a postUS withdrawal structure in Afghanistan. When Pakistan ruled out military action, both privately and publically, Secretary Clinton could only acknowledge on Fox TV upon return to the US that ‘help with a negotiated settlement is perhaps the best the US can hope for from Pakistan’. Though publically insisting upon the policy of ‘fight, talk and build’, the US is now ready to let Pakistan use its contacts in getting the Afghan resistance groups, including the latest American nemesis, the Haqqani network to the table. In a volte face from the earlier threats of ‘consequences’ if terrorist-safe heavens are not dismantled, a message from Secretary Clinton to the US Congress on Friday urges the Congress to continue providing financial assistance to Pakistan. The report accompanying the message admits that disengaging Pakistan ‘would undermine America’s national security interests’.

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Ambassador (R) Sajjad Ashraf served as Pakistan’s High Commissioner to Singapore from 2004 to 2008. He is currently Adjunct Professor at the Lee Kuan Yew School of Public Policy, National University of Singapore and Visiting Senior Research Fellow at the Institute of Southeast Asian Studies, Singapore.


As the US grudgingly comes round to Pakistan’s approach, stark differences still remain. Pakistan reportedly believes that a ceasefire must precede negotiations. Following the Vietnam template, the Pentagon wants to fight and talk simultaneously, hoping to force terms on the Afghans. The US wants the Afghans to renounce violence and accept the Afghan constitution as a pre-condition for talks to which Pakistan remains resistant. The Afghan resistance, on its part, wants withdrawal of foreign forces before talks on restructuring begin. President Barack Obama, struggling with an all-time low approval rating and looming presidential election next year, needs to urgently demonstrate progress in Afghanistan. The Americans are rattled by recent heavy weapons attacks on their Embassy in Kabul Red Zone, and the suicide car attack, killing 17 people, 12 of them Americans. Attacks, such as these, raise alarming doubts regarding the ability of Afghan forces to sustain a security system left behind by the US. Pakistan’s fears on being marginalised in the post-US Afghanistan are exacerbated by the recently signed Indo-Afghan Strategic Agreement that provides for security training to Afghan personnel by India. Refraining from any meddling comments, Pakistan’s security establishment fears that this collaboration can lead to encirclement of Pakistan. The just concluded Istanbul Conference called to map out Afghanistan’s future arguably confirms the fears that the US desires to control Central Asian energy resources through longer term military presence. Instead of focusing on the Afghan peace process, the US being the principal promoter of the conference, put up with Turkey a draft which suggests a security mechanism under western leadership, complete with a ‘contact group’ to mediate intraregional disputes. Any suggestion of deeper American engagement is viewed with suspicion by regional power brokers, Russia and China. A much whittled down Russian draft got these two countries together with Iran and Pakistan and became the basis of final declaration that only rhetorically ‘vows to respect Afghanistan’s sovereignty’. The Istanbul results cast a serious doubt if the Bonn meet of 90 countries and 15 United Nations (UN) agencies, scheduled for early December, on the 10th anniversary of the first Bonn conference on Afghanistan, will be of any substance. For a country that has the most to gain or lose, Pakistan’s interest lies in winning the trust of all stakeholders both within Afghanistan and outside, especially India. With an unsettled Afghanistan, India’s dream of a trade corridor into Central Asia will not materialise. Pakistan’s natural advantage of contiguity and culture should be able to neutralise the perceived threat from India. Forcing a choice on Afghans works to Pakistan’s detriment. It has proven to have poisonous effect on Pakistan and, remains so. And, Pakistan with an unsettled frontier in the west will remain an epicenter of extremism with its consequent effects on the region and afar. While individually Pakistan and India do not have the ability to force peace in Afghanistan, each has the ability to act as a spoiler. However, as partners they become a formidable force for stability in the region. 2


The reconciliation process should be Afghan-led with outside powers acting only as facilitators. Pressurising the Afghans to suit their interests remains unacceptable to them. Given the past tendencies, Pakistan and the US should specially guard against this temptation. Given the battle-scarred region, the international community, led by the UN agencies, should join in supporting the settlement process that should focus on reconstruction and economic rehabilitation efforts. It is in the interest of all parties that they exit Afghan imbroglio with a degree of prestige and security, leaving the Afghans to fashion their own lives. Jostling for advantages will keep the area up in arms.

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ISA S Brief No. 222 – 30 November 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

The Mohmand Mayhem and its Impact on Pakistan-US Alliance: For the Friendship a Blush, for the Ties a Tear! Iftekhar Ahmed Chowdhury1

Abstract The implications of the recent incident in which 24 Pakistan soldiers were killed on the Pakistan-Afghanistan border by NATO military action are likely to be far-reaching. It will severely dent Pakistan’s relationship with the West. But this may not mean crossing the Rubicon. At the end, there will need to have a Modus Vivendi. But for now, an age-old alliance is in tatters!

The Incident Forty Pakistani troops, asleep in two Pakistani check-posts on the rough terrain of Pakistan’s Mohmand Agency were rudely awakened at the start of this weekend, on Saturday, 26 November 2011 at 2.00pm local time, by a sudden hail of shelling from NATO helicopters and aircraft. Within minutes, 24 of them according to some reports, including two officers, lay dead, with pretty much the rest, injured. The fire was returned, with no damage to the other side. But that return-fire is likely to be the first of the many reactions to follow from the Pakistan side, with grave implications for the relationship with the United States (US).

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Dr Iftekhar Ahmed Chowdhury is Senior Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous institute at the National University of Singapore (NUS). He was the (Foreign Advisor) Foreign Minister of Bangladesh from 2007-2009. He can be contacted at isasiac@nus.edu.sg. The views expressed are those of the author and do not necessarily reflect the views of the Institute.


Colonel Gary Kolb, spokesman for the NATO-led International Security Assistance Force (ISAF) described it a ‘coordinated action’, but there was no doubt that it would be the US that would mainly draw the Pakistani flak. According to the Pakistani media, the NATO airpower penetrated deep into the Salala area of Tehsil (an administrative unit in Pakistan) Baizal, some 25 km west of Ghalnai, the headquarters of the Mohmand Agency of the Federally Administered Tribal Areas (FATA) of Pakistan and ‘completely destroyed’ the two outposts, with The Pakistan Observer, an English daily, calling it ‘naked aggression on the part of the US-led forces’. NATO said it was investigating, and its commander General John R. Allen offered his condolences to the family of any Pakistani soldiers who ‘may have been killed or injured’ (though, that casualties occurred is beyond doubt), but his, and those of senior Washington-based political leaders, words were likely to, as they did, fall on deaf ears on the other side. Instead, Pakistani Foreign Minister Hina Khar made an angry telephone call to Secretary of State Hillary Clinton.

Immediate Reactions The Pakistani Prime Minister Yusuf Raza Gilani, immediately called an emergency defence committee meeting. His government is already reeling under pressures emanating from the ‘memogate affair’, in which his President Asif Ali Zardari is seen as acting in cahoots with the former Ambassador to the US Husain Haqqani (since sacked) to try with the US authorities to clip the wings of the Pakistan army, which many, within and beyond the Army in Pakistan, see as a ‘highly treasonable act’. So the civilian government cannot simply afford, or be even seen to, harbour any softness at all. Gilani’s ‘condemnation in the strongest terms’ is expected to be the first of a series of reactions. And so it was. Three more followed swiftly. The first related to supplies to the NATO. Pakistan is a vital land route for nearly half of NATO’s supplies to its troops in Afghanistan, to Kabul through Torkham in the north and to Kandahar through Chaman in the south. Both were promptly stopped. The reason given was ‘for their safety’, which also cannot be dismissed entirely, for if history is any guide, much of Pakistani (combined with insurgent) ire would also be directed against these trucks and tankers. In the past, when these were torched for one reason or another, the maxim of ‘Nelson’s blind eye’ was highly applicable to the authorities. A second action was a demand on the US, to vacate the Shamsi Air Base in south-western Baluchistan. The US is suspected of using it to launch the deadly unmanned drones and other observation aircraft, often with either a nudge and wink from the Pakistani army, or with it looking the other way. In any case, serious diplomatic intervention is now inevitable. As of now, though, Pakistan’s powerful Army chief, General Ashfaq Kayani, has matched the tone of his nominal civilian masters saying that ‘all necessary steps will be undertaken for an effective response to this irresponsible act’, without, understandably, elaborating on what they might be. The third was the announcement of the boycott of an all2


important Afghanistan Reconciliation Conference scheduled to take place in Germany in early December. The last action would severely limit the outcome of the event.

Long-Term Implications There is an old French saying that tragedy but rarely comes singly. In contemporary international relations, nowhere is evidence of this more stark than in US-Pakistan ties. It is born of need, and of history. Crafted during the Cold War, it has brought too many mutual benefits to both sides to easily ignore. For the US, Pakistan has been an ally then against the Soviet Union, and conduit to China, and at present a partner to contain and constrain Islamist extremism. For Pakistan, the US has been a source of military hardware and material support, and for its important middle classes, of certain values and intellectual nourishment. But as always, in politics as in physics, everything is in a state of flux. Recently the alliance has come under severe strain. The differences on dealing with the Taliban, the Osama bin Laden raid, the Raymond Davies incident, the memogate saga, have been, it appears, relentlessly contributing towards this downturn. On the broader international matrix, Pakistan has moved closer to China, and the US to India (though an unexpected, though not inexplicable ‘black swan’ effect has been a loosening of Pakistan-India relations!) After the mayhem in Mohmand, there will be public cries in Pakistan to cease all cooperation, political, diplomatic and even intelligence, with the US. Effigies and flags will burn, and sticks and stones will be hurled.

Conclusion Would all that mean that the Rubicon of the ties will be crossed, as Caesar had famously done, and what need and history have wrought, would be torn asunder by soldiers and politicians? Perhaps unlikely, if interests are the main determinants of policy-making in international relations. Yet, through the annals of man, passions of nations have led to the inflicting of pains on themselves, as on others. Both the US and Pakistan will need to act, with both swiftness and sophistication, to limit damage. The horse and the rider are on the Rubicon, and both countries must ensure they turn back without actually crossing. It will test skills and patience, but not working together for them, at least in the foreseeable future, is not an option. However, right now, one might aptly paraphrase Lord Byron on Greece in commenting on Pakistan-US alliance: For the friendship a blush, for the ties a tear!

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ISA S Brief No. 223 – 15 December 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Atomic Fuel for Australia-India Synergy P. S. Suryanarayana1 Abstract The governing Australian Labor Party’s latest vote to lift the ban on uranium sales to nuclear-armed India for its civilian atomic energy programme has economic and strategic overtones. On the economic side, though, New Delhi may not be able to make precise estimates of its long-term uranium needs until and unless the Indian civil society comes to terms with civil nuclear energy as a safe bet. At the same time, Australia is keen to quiz India on the unrelated but strategically important nuclear safeguards issues. Overarching these cross-currents is the political fact of both New Delhi and Washington welcoming the Julia Gillard administration’s new India initiative.

By voting to clear the way for the potential sale of Australian uranium to India, the governing Australian Labor Party (ALP) has authorised the Julia Gillard administration to raise its strategic partnership with New Delhi to a new high. However, the narrow margin of the vote at the party’s conference on 4 December 2011, hardly hides a message to Australia’s Prime Minister Gillard. She must be careful in going forward with her new India initiative. The ALP’s policy shift raises the possibility of Australia supplying uranium to India for its civil nuclear energy needs – exclusively for this sector. India does not, of course, seek to fuel its atomic weapons programme by procuring nuclear materials and/or knowhow from 1

Mr P. S. Suryanarayana is Editor (Current Affairs) at the Institute of South Asian Studies (ISAS), an autonomous institute at the National University of Singapore. . He can be contacted at isaspss@nus.edu.sg. The views expressed are those of the author and do not necessarily reflect the views of the Institute.


external sources. At the same time, the abundance of Australian uranium is a matter of considerable interest to the now-rising India as it seeks to expand its electricity generation for economic growth and for a fair distribution of the national wealth.

Welcome Initiative India’s External Affairs Minister S.M. Krishna, away in Frankfurt at the time of the ALP’s vote, quickly underscored its importance by saying ‘we welcome this (Australian) initiative’.2 He noted further that ‘bilateral cooperation in the energy sector is one of the important facets of our multifaceted ties with Australia’. A newly significant aspect of India’s nuclear scene will, however and also inevitably, come into focus in any immediate scenario of Australia-India cooperation for the peaceful uses of atomic energy. The national public debate in India over the need for civil nuclear energy is far from over in favour of this atomic route. Known across the world, indeed, is the recent spiral of public protest over the perceived inadequacy of ‘safety’ measures at the Kudankulam atomic power project site in southern India. Until and unless the current wave of public concern over the desirability of mass production of electricity through the nuclear route subsides, New Delhi may not be able to make precise estimates of its long-term uranium needs. To this extent, it is too early for Australia to foresee how much of its uranium could be exported to India over time. Compounding such near-term uncertainties on the Indian side is the possibility of Canberra finding it tricky to negotiate a mutually binding ‘nuclear safeguards agreement’ with New Delhi before it can receive any Australian uranium at all. Australia is surely familiar with the complexity of the Japan-India civil nuclear energy talks, which were complicated too by the disaster at the Fukushima plant in Japan that was ravaged by the March 2011 earthquake and tsunami. Surely, the Fukushima shadow over the Japanese national mood will not apply to Australia as and when it tries to firm up a bilateral uranium deal with India. Yet Canberra will be aware that Tokyo and New Delhi traded irreconcilable perceptions about the centrality of the multilateral Nuclear Non-Proliferation Treaty (NPT) to the purely bilateral sphere. Those conversant with the issues at stake know that the ALP had, until its latest vote, espoused a categorical policy of not selling uranium to countries, inclusive of India, which had not signed the NPT. So, the party’s new move makes it possible now for Australia to 2

India’s Ministry of External Affairs (4 December 2011), http://www.mea.gov.in Speeches/Statements EAM welcomes Australian Labour Party’s decision to clear path for Uranium sales to India. Accessed 4 December 2011.

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supply uranium to India despite its relentless opposition to the ‘discriminatory NPT’. And, a point of utmost interest to India is that Canberra, an ardent advocate of the NPT’s enduring value, is not expected to take a Tokyo-like stand on every detail of the possible AustraliaIndia talks for a bilateral civil nuclear deal.

China-India Comparison As if setting the tone for the Australia-India bilateral talks on ‘nuclear safeguards’, Gillard told the ALP delegates on 4 December 2011, that it would not be rational to continue denying Australia’s uranium to the Indians, while selling it to China. Obviously, she sought to equate India with China as two states with nuclear arsenals and with large economies of material significance to Australia’s economy. In the process, she overlooked the differences between China and India, not just in their systems of political governance. To her way of thinking, Australia can, in its present and future uranium deals, live with the facts that China, a late entrant to the NPT arrangement, is still an adherent, while India has stayed outside the NPT from its inception. It is this aspect of adherence or non-adherence to the NPT that lends credence to the assertions by Australia’s Foreign Minister and former Prime Minister Kevin Rudd about the way forward for any uranium deal with India at this time. He has called for ‘fundamental commitments from the Indian government’ and for a ‘bilateral nuclear safeguards agreement’3 between India and Australia. It requires no insight to discern that the ‘safeguards agreement’ will be designed to provide for non-diversion of the Australian uranium, as basic material and in its processed forms, to any of India’s military-related nuclear facilities. Any such Australia-India ‘safeguards agreement’ need not cover aspects relating to the physical ‘safety’ of India’s atomic power plants and other nuclear facilities. Rudd has struck an emphatic tone that ‘as the (likely) principal negotiator’ with India, he ‘would take a hard line’. He would do this just as he ‘would take (a hard line) in any bilateral nuclear safeguards arrangements with any country’. His approach would be determined, ‘in particular’, by the fact that India ‘lies formally outside the provisions of the (Nuclear) NonProliferation Treaty’. In addition, he said he would look for ‘comprehensive Indian commitments concerning their arrangement with what’s called the Nuclear Suppliers Group (NSG), which was a set of policy changes put in place globally in relation to India several years ago’.4

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Australia’s Department of Foreign Affairs and Trade. http://www.foreignminister.gov.au/transcrip ts/2011/kr_tr_111127_sky_news.html. Accessed 1 December 2011. Ibid.

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It was in 2008 that the NSG made a rare gesture of granting India an exemption from the international cartel’s commercial guideline of not doing business with the states outside the NPT purview. The guideline, which does not apply to India since that time, forbids the NSG members from supplying even civil nuclear materials and equipment and/or knowhow to countries with atomic weapons, except the five states, inclusive of China, whose nuclear arsenals are recognised as legitimate under the NPT. Before the NSG’s gesture to New Delhi, this writer, then the Singapore-based foreign correspondent of an Indian newspaper, asked Rudd, then Australia’s Prime Minister, about his country’s likely stand on India in that elite forum. He was emphatic that Australia would ‘not stand in the way’ of the United States (US)-piloted move in favour of India in the NSG at that time. Since then, Australia has moved a long way towards accommodating India’s atomic energy aspirations, not to be confused with New Delhi’s nuclear weapons programme on a parallel but different track. In fact, a continuous assessment of India’s nuclear non-proliferation credentials, seen by the larger international community as being ‘impeccable’, has prompted the Gillard administration to make a new gesture towards New Delhi now. So much so, Gillard has not been accused of ‘irrational exuberance’, as in the free-market economic domain, for eyeing the Indian demand for uranium by overlooking New Delhi’s continued possession of nuclear weapons.

The American View As Australia is a steadfast ally of the US, there is speculation that Canberra’s new gesture towards New Delhi was actually scripted by Washington. Unsurprisingly, therefore, US President Barack Obama has already shot down any such thesis. Asked about the issue, even before the ALP’s vote, Obama, speaking in the presence of Gillard in Canberra on 16 November 2011, said: ‘We (the US) have not had any influence (over Australia on this issue)... I think, without wading into the details, the discussions (in Australia)... around...the nuclear issues with India are ones that are compatible with international law’.5 He was also of the view that any move to sell Australian uranium to India would be compatible with the 2008 decisions by the NSG in relation to New Delhi. Transcending public diplomacy, though, is the new reality that the US, now a participant in the East Asia Summit, is looking at ways to come to terms with the rise of China. In doing so, and while preparing for all scenarios including stable ties with Beijing, Washington is

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US White House, http://www.whitehouse.gov/the-press-office/2011/11/16/remarks-president-obama-andprime-minister-gillard-australia-joint-press. Accessed 1 December 2011.

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encouraging its allies to widen their circle of friends. With India being a recently-discovered ‘strategic partner’ for Australia, the Gillard administration has had no difficulty in thinking of this uranium-laced move towards New Delhi. At the same time, Canberra is keen to keep its political ties with a giant economic partner like China in good repair. Noticeable behind all such balancing acts by Australia and the US is a certain reputation that India has come to enjoy. Echoing New Delhi’s reputation, Michael Yahuda has written, in the 2011 edition of his book, ‘The International Politics of the Asia-Pacific’, that ‘India is too independent a great power to be willing to balance against China’ on behalf of other powers’. Despite such reputation, India is often seen under a Pakistan-oriented prism. Responding to questions about whether Australia would now be willing to sell uranium to Pakistan, another country outside the purview of the NPT, Canberra has said Islamabad cannot be bracketed with New Delhi for this purpose. Australia cites the obvious difference that Pakistan, unlike India, has not secured the required nod of the NSG and the International Atomic Energy Agency. In yet another contrast between India and Pakistan, the Australian Defence Minister Stephen Smith has now refocused attention on the ‘strategic partnership’ between Canberra and New Delhi. After holding talks with the Indian Defence Minister A.K. Antony in New Delhi, Smith said, on 7 December 2011, that the two countries have agreed to enhance ‘practical cooperation’ on security-related issues, particularly with reference to the Indian Ocean region.

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ISA S Brief No. 224 – 27 December 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

US-Pak relations: Reflecting on 2011 Rajshree Jetly1

Abstract This brief looks at Pakistan-US (United States) relations in 2011 and examines the reasons for the steady deterioration in ties in the course of the year. It discusses the strategic divergences between the two countries, as well as the compulsions for them to cooperate with each other.

US-Pak relations took a turn for the worse on 26 November 2011 when NATO (North Atlantic Treaty Organization) forces killed 24 Pakistani soldiers on the Pakistan-Afghanistan border. While firing and skirmishes along the border have been a recurring phenomenon, this incident brought US-Pak relations to a head. Condemning the attacks in the strongest terms, the Pakistan Chief of Army Staff, General Kayani warned that any future aggression will see Pakistan responding ‘with full force, regardless of the cost and consequences’.2 The anger was so intense that the Pakistan government has contemplated reframing its terms of engagements with the International Security Assistance Force (ISAF). Pakistan also publicly 1

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Rajshree Jetly is Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous institute within the National University of Singapore (NUS). The author can be reached at isasrj@nus.edu.sg. The views expressed are those of the author and do not necessarily reflect those of the institute. Saeed Shah, ‘Pakistan military ordered to return fire if attacked by Nato forces’, The Guardian (2 December 2011) http://www.guardian.co.uk/world/2011/dec/02/pakistan-military-return-fire-nato. Accessed on 6 December 2011.


rejected the invitation to attend the Bonn Conference on Afghanistan, demanded the eviction of the US from the Shamsi air base in Baluchistan and blocked NATO supply routes through Pakistan. The Bonn Conference, held on 5 December 2011 was intended to secure Afghanistan’s political future, but ended up with little in terms of specific commitments.3 Pakistan’s absence was significant as it has real influence with the Afghan Taliban and has the best chance of bringing them to the negotiating table. The US has tried to mitigate the diplomatic crisis by withdrawing from the Shamsi base and halting drone strikes since 26 November 2011, but relations continue be tense.

Deteriorating Relations The November 26 incident was clearly a low point in Pakistan-US relations, but Pakistan’s anger had been building steadily through a series of developments from the beginning of 2011. The year began on a tense note with the controversial Raymond Davis affair when an American CIA contractor shot dead two young Pakistani men in broad daylight in Lahore. The US pressed for Davis’ release on the ground that he was protected by diplomatic immunity. Despite strong public disapproval, Pakistan’s government took recourse to Sharia law to acquit Davis and find a way out of the impasse. The acquittal evoked strong criticism of the Government for failing to take a firm stand and for appearing to accommodate US interest. Few months later, relations between the two countries were tested again with the killing of Osama bin Laden in Pakistan in May 2011. This killing was seen as a serious violation of Pakistan’s territory and sovereignty, as the raid was conducted unilaterally by US forces, without the consent or knowledge of Pakistani authorities. Relations dipped precariously again in October 2011, when the outgoing Chairman of the US Joint Chiefs of Staff, Admiral Mike Mullen, accused Pakistan’s intelligence agency, the ISI, of having strong links with the Haqqani network, calling it a ‘veritable arm’ of Pakistan’s ISI.4 The US also alleged that the government of Pakistan had permitted safe havens for the Haqqani group, which the Pakistani government vehemently denied. Barely recovering from that accusation, Pakistan found itself in the grips of the Memo gate scandal when a PakistaniAmerican businessman, Mansoor Ijaz, alleged that he was asked to deliver a memorandum from the former Pakistani Ambassador to the US, Hussain Haqqani, to Admiral Mullen on 10 May 2011. The memo was controversial as it contained request for US intervention to curtail Pakistan’s military in return for undertakings by the civilian government on several key

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Bonn Conference Offers Few Details for Afghanistan Past 2014 (6 December 2011) http://www.voanews.com/english/news/asia/---Bonn-Conference-Offers-Few-Details-on-SupportingAfghanistan-Past-2014-135103068.html Accessed on 26 December 2011. ‘Haqqani network is a ‘veritable arm’ of ISI: Mullen’, Dawn (22 September 2011) http://www.dawn.com/2011/09/22/haqqani-network-is-a-%E2%80%9Cveritable-arm%E2%80%9D-of-isimullen.html Accessed 6 December 2011.

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matters pertaining to national security, including, amongst other things, establishing an independent inquiry to investigate any involvement of Pakistani officials in harbouring Osama bin Laden and senior Al Qaeda operatives; handing over of known Al Qaeda and Haqqani leaders; and stopping ISI cooperation with the Taliban.5 These conditions are at the centre of US-Pak tensions, and ceding to any of these would be tantamount to acquiescing to the US and compromising on Pakistan’s sovereignty. In a climate of rising anti-US sentiments, any US intervention in Pakistan’s domestic affairs would be extremely provocative.

Contentious issues Both Pakistan and the US joined hands in the war on terror to combat the challenges of militancy and terrorism. However, the growing anti-US sentiments in Pakistan and divergences in strategic interests have prevented the two from fully cooperating with each other. The threats to US security come primarily from Al-Qaeda and its allies such as the Haqqani network which are hostile to US interests. Pakistan, on the other hand, is more concerned with the Tehrik-i-Taliban Pakistan (TTP) which has been responsible for attacks within Pakistan. Indeed, the US has accused Pakistan of providing sanctuary to members of the Afghan Taliban such as Mullah Omar and the Haqqani network and believes that Pakistan views these groups as its strategic assets. Pakistan naturally needs to look to the future after the US withdraws from the region, leaving a power vacuum, which will attract many contenders, including India, which is of particular concern to Pakistan. Given the tenuous nature of IndiaPakistan relations, Pakistan cannot afford to open another hostile front on its West and would want a pro-Pakistan government in Afghanistan. It is in Pakistan’s interest to hedge its bets and maintain some relations with the Afghan Taliban and the Haqqani network who may be the potential future players in Afghanistan. Thus, while there have been some instances of US-Pak cooperation with the arrest of some key Al Qaeda figures including the capture of Younis al Mauritani in September 2011, Pakistan has been reluctant to carry out any operation in North Waziristan where the Haqqanis are based. US-Pak differences are further inflamed by the continuing drone attacks by the US to hunt leaders of Al-Qaeda and other related organisations.6 These attacks come at a huge cost of high collateral damage and casualties including civilians and children. For the US, however,

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For details see ‘Text of Memo’, Pakistan Today (6 December 2011) http://www.pakistantoday.com.pk/20 11/11/text-of-memo/ Accessed 7 December 2011. There were 70 drone attacks up to November 2011. In 2010, there were 118 drone attacks which were more than the combined attacks of the past 6 years. See New America Foundation, ‘The Year of the drone An Analysis of U.S. Drone Strikes in Pakistan, 2004-2011’ http://counterterrorism.newamerica.net/drones Accessed 6 December 2011.

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despite the growing unpopularity of the drone attacks, they remain an effective means to attack the militant organisations and their leadership. The drone strikes have proved successful in killing several high profile Al Qaeda leaders such as Ilyas Kashmiri and Abu Zaid al-Iraqi and a senior Haqqani commander Khan Mohammad. Just as Pakistani leaders are under political pressure from the public, there is domestic pressure in the US making it difficult for the Obama administration to provide unconditional assistance to Pakistan. In September 2011, the US Senate Committee passed a bill making financial assistance to Pakistan contingent upon its cooperation against the Al Qaeda and its associates such as the Haqqanis. This kind of action by the US is inflammatory in Pakistan which sees the US acting in a high-handed manner, whether in terms of military strikes or threats to withhold assistance.

The Need for Cooperation Despite their differences, the two countries find it difficult to move away from each other. Pakistan is dependent on the US for weapons and training of its military. In addition, Pakistan receives a massive package of economic and humanitarian aid, making it one of the largest recipients of US foreign assistance. It has received US $22 billion in military and economic assistance since 2001. For the year 2011, USD 2.4 billion was earmarked for development, humanitarian aid and security related programs.7 The US’ financial assistance also remains crucial to curb rising militancy within the country. The US also needs Pakistan to achieve success in its war on terror and in its strategy towards Afghanistan. While the US has reservations on how much Pakistan is doing at its end towards combating terror, it realises that in view of its commitment to gradually wind down its operations in Afghanistan beginning July 2011, it needs Pakistan to bring the Taliban to the negotiating table. Washington believes that Islamabad wields enough influence with members of the Afghan Taliban to help in brokering a deal with Kabul. In addition, the US has also relied on Pakistan’s cooperation and intelligence to target top Al Qaeda leaders. Notwithstanding divergences in their strategic interests, US-Pak cooperation is critical to continuing the war on terror and to ensuring stability in South Asia. The problem however is that events in 2011 have taken US-Pak relations down a disastrous slope. There is tremendous mistrust between the governments, the intelligence agencies and the general public on both sides. Anti-US sentiments in Pakistan are at a point that US involvement in Pakistan seems to have

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K. Alan Kronstadt, ‘Pakistan-U.S. Relations: A Summary’, Congressional Research Service, Table 1. Direct Overt U.S. Aid Appropriations and Military Reimbursements to Pakistan, FY2002-FY2012 (21 October 2011) http://www.fas.org/sgp/crs/row/R41832.pdf. Accessed 6 December 2011.

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outlived its welcome. This deterioration in relationship is not in the interest of either party and political pragmatism must prevail. Both countries have to take steps to salvage the relationship as there is too much at stake. Pakistan needs to allay US apprehensions on its commitment to fight terrorism in the region. The US needs to back down from its highhanded approach, particularly in terms of its military forays in Pakistan. Effective though the drone strikes may be, this may be one of those instances where the battle is won, but the war is lost. .....

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ISA S Brief No. 225 – 28 December 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

The Lokpal Bill: An opportunity for the Government and the Economy S. Narayan1 The Lok Sabha (Lower House of Parliament) passed the Lokpal Bill on 27 December 2011, marking an end to the drama that gripped the media, the public and political parties for over four months in India.2 The Bill, to create a Lokpal (ombudsman) structure to oversee complaints of corruption against public officials, has been over four decades in the making; and it is widely acknowledged that the recent spate of scams that have engulfed the Government galvanised civil society, led by the activist Anna Hazare, to launch mass protests against the rampant corruption in public service. Yet in getting the Bill passed through Lok Sabha, the Government seems to have regained some initiative that it had lost in the earlier months. First, it demonstrated a willingness to legislate on this contentious issue, notwithstanding the concerns of several of its own partymen who are facing investigation. It was also able to demonstrate that the opposition is divided, and that its own support base remains secure. Second, by allowing the constitutional amendment that would give constitutional status to the Lokpal to fail, it avoided the trap of establishing a constitutional authority that could oversee Parliament - a lesson learnt from the recent reports of the Comptroller and Auditor General, a constitutional authority that has, in recent times, embarrassed the Government.

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Dr S. Narayan is Head of Research and Visiting Senior Research Fellow at the Institute of South Asian Studies, an autonomous research institute at the National University of Singapore. He was the economic adviser to the former Prime Minister of India, Mr Atal Bihari Vajpayee. He can be contacted at snarayan43@gmail.com. The views expressed are those of the author and do not necessarily reflect those of the institute. The Bill can become law only after it is passed by the Upper House of Parliament (Rajya Sabha) as well.


In short, the Bill has been passed, and yet the new structure would lack much of the teeth that civil society has been asking for. Among these is the accountability of the Central Bureau of Investigation to the Lokpal - a demand resoundingly rejected by the Prime Minister, Dr Manmohan Singh. There are also several clauses that the opposition has been protesting against, which appear to reduce the effectiveness of the new structure. Government has also been quick to perceive that the civil society activism is weakening, with much smaller crowds at the Anna Hazare fast in Mumbai, as compared to the earlier mass presence in Delhi. Most importantly, the ability of the ruling UPA (United Progressive Alliance) coalition to close ranks and to implement a political strategy, and to demonstrate the weaknesses of the opposition parties, is itself a strong signal that the UPA story is far from over. Ruling Congress strategists have positioned the party well in the forthcoming state elections also. In UP (Uttar Pradesh), the Congress has 22 seats in the Assembly, and is sure to increase its tally substantially, and this will enable it to claim a massive victory for Rahul Gandhi’s leadership of the election campaign. The clever alignment of the Jat votes in western UP by bringing in Mr Ajit Singh’s party into the UPA is likely to give it strong results in western UP. The Mayawati government, suffering from anti-incumbency, is also fraught with the problem of certain caste blocs moving away from it. The Samajwadi Party of Mulayam Singh is set to increase its tally substantially. While Mayawati’s party may well emerge as the largest party, and perhaps have a majority, the tally of seats for the other parties would be significant - there may even be a possibility of a coalition of parties forming the next UP Government. In Uttarakhand, BJP (Bharatiya Janata Party) has a thin majority, which may get eroded during this election. In Punjab as well, Congress appears to have an advantage. The first quarter of the year is likely to bring cheer to the Congress ranks from these states. For the Congress, the advantage of these political activities has been to turn public attention away from the pressing problems of the economy. Inflation is still high, but food inflation is coming down, partly due to good harvests, and also due to the base effect of last year’s figures. Monetary tightening is starting to have an impact on consumer behaviour and on liquidity. Government borrowings have sucked out considerable liquidity from the economy. Banks are wary of fresh exposures, as they are facing growing lists of nonperforming assets, especially in the infrastructure sector. Indecision over issues of production and allocation of coal, disputes on gas availability, hold-ups in land acquisition and environmental clearances have slowed down infrastructure activity considerably, and are putting pressure on bank exposures. New capital is hard to find, and there are only a few corporates that are sitting on cash balances. The political developments have pushed these concerns to the back burner for the moment: yet these concerns are likely to persist and to re-emerge before the budget of 2012. On the positive side, Government is on a surer footing, and they have managed to push through quite 2


a few pieces of legislation in the current session of Parliament. It is unlikely that there would be a repeat of the political events of 2011, and Government should be able to focus more on governance. There are signs that inflationary pressures may be weakening, though it would not be anywhere near the numbers that the government is expecting. Overheating of demand and consumption is likely to come down, and capacity utilisation is increasing. The stock markets, after considerable volatility is, starting to settle down, and investors can clearly identify several good picks with strong and sound fundamentals. The growth rate of seven per cent appears achievable for the next year, and growth of skilled employment continues to be good. There is an opportunity available for the Government to grow on these positives. The budget gives an opportunity to focus on infrastructure funding and constraints, on incentives for exports, and further liberalisation in the financial markets to open up further instruments for trading. These are fairly simple options, unlikely to cause a storm, but of considerable practical value. The energy picture can change rapidly, if several power stations, almost ready to start generation, are given access to fuel, either local or imported. After a dismal 2011, there is a chance for the UPA to redeem itself in 2012. .....

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ISA S Brief No. 226 – 30 December 2011 469A Bukit Timah Road #07-01, Tower Block, Singapore 259770 Tel: 6516 6179 / 6516 4239 Fax: 6776 7505 / 6314 5447 Email: isassec@nus.edu.sg Website: www.isas.nus.edu.sg

Politics, Strategy and the Lokpal Bill S. Narayan 1 India’s much-anticipated Lokpal Bill (designed to set up an ombudsman) was introduced in the Rajya Sabha (upper house of parliament) on 29 December 2011, but the United Progressive Alliance (UPA) government had to beat an ignominious retreat as it could not gather enough numbers in the house for the passage of the bill. Earlier the bill was in fact passed by the more powerful Lok Sabha (lower house of parliament), but both houses are now adjourned. It is possible that the government may send the bill and all the suggested amendments to a parliamentary committee for consideration before reintroducing it in the next session of parliament. It is also possible to conclude that the strategists of the Congress party, the main constituent of UPA, attempted to do too much in this exercise and that a wary opposition has been able to erect some stumbling blocks. First, from the UPA government’s standpoint, there was the need to counter the civil society activism against corruption in public service, spearheaded by the Anna Hazare movement. The government had to bring in legislation, and had to take care to protect its interests. This resulted in a draft that was not acceptable to many inside and outside parliament. However, the government, and the Congress party in particular, needed to demonstrate its willingness to tackle this issue before the run-up to the state elections, to prevent this becoming an election issue. After a dismal 2011, government needed to demonstrate its willingness to act. The bill was introduced, debated and passed in the Lok Sabha.

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Dr S. Narayan is Head of Research and Visiting Senior Research Fellow at the Institute of South Asian Studies, an autonomous research institute at the National University of Singapore. He was the economic adviser to the former Prime Minister of India, Mr Atal Bihari Vajpayee. He can be contacted at snarayan43@gmail.com. The views expressed are those of the author and do not necessarily reflect those of the institute.


Second, the government was sure that the opposition was divided and that the amendments proposed by different parties lacked coherence and could be defeated for want of a unified opposition. It was proved right, and the amendments failed, and the bill was carried in the Lok Sabha. Third, the government did not want this anti-corruption authority to be constitutionally enshrined – having become wary of constitutional authorities like the Chief Election Commissioner and the Comptroller and Auditor General, and hence allowed the constitutional amendment bill to slip – in fact 12 of its own MPs – all from Congress, were absent at the time of voting. Avoiding the constitutional amendment bill was perhaps, in itself, a strategy. Fourth, the draft bill contained provisions that constitutional experts have questioned. The bill mandated that every state would have a similar ombudsman (Lok Ayukta). The opposition’s argument was that under article 252 of the constitution, this was interference in the domain of the states. The government advanced the ingenious argument that it was merely ratifying the United Nations convention on corruption for the whole country, which it could do under article 253 of the constitution. Given the federal nature of the constitution, the legality of such a mandate would be debated in court – and there was possibly an attempt at a double finesse. If the bill was struck down as unconstitutional, then there was an opportunity to back away from the legislation, as well as to lay the blame on the activism of the judiciary. The Congress has, for some time now, been waiting for an opportunity to reduce judicial activism, and this could have proved to be a useful tool to criticise the judiciary. Fifth, the bill itself was unlikely to have been an effective piece of legislation in curbing corruption – which made Anna Hazare go back to fasting in Mumbai. Government cleverly perceived that the movement had been hijacked by the opposition parties, and hence could be dealt with politically. It was right, as support for the activist’s fast dwindled. Thus the government was able to push through a weak legislation through the lower house. The Central Bureau of Investigation, the premier investigation agency is to be kept outside the purview of the Lokpal, and it will continue to operate under executive control, a single step that would arguably reduce the effectiveness of functioning of the Lokpal. Prime Minister Manmohan Singh strongly ruled out the possibility of bringing the CBI under the Lokpal. Next, it was quite obvious that even several Congressmen viewed the Lokpal structure with apprehension, and hence some amount of internal dissent on the bill had also to be tackled by assuring all that that the bill was not the one that civil society had demanded. Finally, these political strategies would put the economic issues on the backburner, yet these concerns are likely to persist and re-emerge in 2012. There is some relief in the easing of food inflation, and monetary tightening as well as the weakening rupee is starting to cool 2


consumption demand. There is an opportunity for the UPA to redeem itself in 2012, and this legislation would have been the first step. It is clear that the agenda was quite large, and perhaps overambitious. The opposition was able to realise that it was losing the initiative to the government. Faced with the petering out of civil society protest and waning public attention, it had to fight to retain its position in Parliament. It had the disadvantage of lack of unity, but the advantage of numbers in the Rajya Sabha. The Trinamool Congress has always been a wary supporter of the UPA coalition, and, in this case, felt that the autonomy of the state was being eroded. It opposed the bill in the Rajya Sabha, leaving government with no option but to allow the bill to be carried over. In fact, towards the end of the debate, when it was obvious that the legislation would not pass, speakers from the treasury bench resorted to filibustering, and the day ended with the house proceedings being disrupted by a member, much to the relief of the treasury benches. The opposition, of course, claimed that this was all pre-planned. There is a deeper thinking behind these moves. The Congress and the opposition Bharatiya Janata Party (BJP), the two largest national parties realise that it is unlikely that they will be able to generate a swing in their favour in the next parliamentary elections, and that this situation would prevail for some years. At the same time, regional parties are looking forward to a decade in the sunshine, with the AIADMK (All India Anna Dravida Munnetra Kazhagam) in Tamil Nadu, Trinamool in West Bengal, Janata Dal in Bihar, BSP (Bahujan Samaj Party) in UP (Uttar Pradesh), Biju Janata Dal in Orissa all looking at improved prospects in the 2014 national elections. It is becoming clear that the future scenario is one of a weak centre and strong states, with the national parties needing the support of groups of regional parties to secure any semblance of central power. It is therefore natural that the state politicians would be reluctant to cede any ground to the centre, and the Lokpal bill as well as the GST initiative, are but two examples where the states are flexing their muscles to see how far they can push. Subtly, they are assessing the strengths and weaknesses of the national parties to determine the room for manoeuvre that they would have. They have also no wish to hand over executive or legislative flexibility to the centre. Perhaps the Congress was not able to sense this, and faced embarrassment. However, it is unlikely that the Congress would rest. It is likely that the next initiative will come from the economic front. Food price inflation has started to fall, commodity prices are looking less volatile, and monetary tightening has started to show results. Fundamentals of the economy are good, and there is reasonable expectation that the economy will continue to grow at around seven per cent. 2012 is likely to be a year where economic initiatives would show quick results. The government may hope to take advantage of these factors and position itself for the political battles ahead. ..... 3


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