22 - Whose War on Terror?

October-December 2008

Whose War on Terror?

Terrorism in Tribal Areas of Pakistan The India-US Nuclear Deal Fossil Fuel Crisis in South Asia Bollywood—Raising Resources Rural Development Practices in SAARC Environmental Consequences of Armed Conflict The UPA Government: A Report Card The Making of Bhutan's Constitution Pakistan: Services Trade Liberalisation Preventing Child Soldiering In South Asia

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S O U T H

A S I A N

Contents Editor Imtiaz Alam Executive Editor Zebunnisa Burki

Whose war is it?

Assistant Editor Bushra Sultana

In This Issue

Consulting Editors Bangladesh Reazuddin Ahmed India K K Katyal Nepal Yubaraj Ghimire Pakistan I A Rehman Sri Lanka Sharmini Boyle Publisher Free Media Foundation Facilitator South Asian Free Media Association (SAFMA) Designed by DESIGN 8 Printer Qaumi Press Editor’s Post E-mail: sajournal@gmail.com

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Terrorism in Tribal Areas of Pakistan Khaled Ahmed

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The India-US Nuclear Deal Prabir Purkayastha

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Fossil Fuel Crisis in South Asia Dr Mukul Kulshrestha and Dr Tripta Thakur

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Bollywood: Contract Enforcement and Raising Resource Amir Ullah Khan and Zafar H. Anjum

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Rural Development Practices in SAARC Countries Dr Rama Bashyal

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Environmental Consequences of Armed Conflict Vandana Asthana and Dr A.C. Shukla

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The UPA Government: A Report Card Manoj Joshi

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The Making of Bhutan's Constitution Lungten Dubgyur

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Pakistan: Services Trade Liberalisation Mehnaz Ajmal Paracha

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Preventing Child Soldiering in South Asia S. Y. Surendra Kumar

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Book Review: “Behenji—A Political Biography of Mayawati” Yoginder Sikand

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Documents SAARC Journalists Summit Declaration Freedom and Safety of Media in Conflict Situations

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South Asian Women in Media (SAWM) Memorandum of Association

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Whose war is it?

In their fight against terrorism, both Pakistan and Afghanistan are coming under expanded terrorist attacks from sanctuaries along their porous border which has become the epic centre of terrorist theatre. The so-called “Mujahideen” of yesteryears, prompted by the Free World to fight “Satanic Soviets” and groomed by the intelligence apparatuses of Pakistan to extend their “strategic depth” to Afghanistan and “bleed India in Kashmir”, turned their guns on their erstwhile masters. The spymasters' efforts to keep away loyal jihadis (warriors)—considered “strategic assets”—from internationalists led by Al Qaida were met with total disappointment.

Former President General Pervez Musharraf had to admit his mistake of launching Pakistani Taliban to fight Afghan Taliban when they, instead of fighting their ideological comrades, turned some of the Federally Administered Tribal Areas (FATA) into safe havens to fight back their sponsors. If General Musharraf's dual strategy of “running with the hare and hunting with the hound” has miserably failed, so has the lack of ownership in the Pashto-speaking provinces of Afghanistan of the war on terror conducted by foreign troops failed to win hearts and minds of the people. A war widely seen as “aggressive” and “unjust” and conducted by “forces of occupation” cannot become popular as opposed to the local resistance sustained with a degree of support at the grassroots. Combined with ethnicity (Pakhtun), tribal pride, revolutionary sentiments and reactionary ideology, the Afghan Taliban have not only survived but expanded their influence across the Durand Line among their Pakhtun brothers of “faith” in FATA. The partnership between the two Talibans across the border provides a much needed space for maneuverability, mobility and flexibility to the combatants. As commanders on both sides fail to suppress the insurgency, they blame the other side for “not doing enough”. Diverting men and resources to Iraq created an all round deficit to fight a more difficult war in a warravaged country where fighting foreign forces has become a profession for power, pride and living. Destabilisation, anarchy, uprooting of traditional tribal structures, a long tradition of valour to fight foreign forces, widespread militant ideological nurseries (religious seminaries) to recruit the willing to embrace “martyrdom” and easy funds from flourishing narcotics trade, sustain Taliban in protracted guerilla warfare. Widespread antiAmericanism creates a favourable environment for religious extremism to grow and sympathy for the insurgents to be sustained. A purely conventional military strategy helps kill one terrorist and creates fifty rebels out of massive collateral damage.

Alignment with the military dictator in Pakistan and cooption of warlords and other unscrupulous elements in the power structure of Afghanistan have alienated the common citizen who longs for peace, rule of law and development. Violation of Pakistan's territorial limits by US forces arouses public sentiments against the US. Hence, the confusion over whose war this is.

In Pakistan, rejection of the military dictatorship backed by the Bush administration brought the broader democratic movement into conflict with whatever the former dictator did. Even some of his sane decisions, such as reversing Pakistan's support for Taliban and joining the war on terror and initiation of normalisation process with India, came under criticism for

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conceding too much against little returns to perpetuate his rule. The ethnic imbalance created with the exit of the predominantly Pakhtun Taliban, despite the election of President Hamid Karzai—an ethnic Pakhtun, increased the alienation of the dominant Pakhtuns, helping the Taliban to play up this deprivation. Failure of maintaining law and order and rampant corruption compare badly with an otherwise brutal Taliban rule which was credited to bringing peace and wiping out corruption during their puritanical totalitarian regime.

However, because of their reactionary and backward creed and barbaric tactics they are becoming increasingly unpopular and unacceptable. They have opened too many fronts due to their maximalist ideology and isolationist tactics. Guided by Al Qaida, they are challenging the whole world and not sparing even their Muslim brethren who are falling to their guns more than the Americans. They pose a serious threat to not only Kabul, where power is in the hands of the erstwhile “Mujahideen” who fought against the Soviets, but also Islamabad.

Targeting of civilians, hospitals, girls' schools, barber shops, video centers and other civic facilities and large casualties and destruction caused by suicide bombing have increasingly isolated the Taliban. Even the Islamic traditionalists and conservative clergy detest their kind of faith and abhorable tactics. They pose a great threat to civil society, economy, democracy, constitutional structures, modern civilisation, faith and writ of the State. The Taliban do not present a model of Islam that a faithful could emulate. They reject democracy, the nation state and civilised conduct and represent a most medieval creed. Therefore, they are not acceptable to a great majority of the peoples of Pakistan and Afghanistan. Their designs and activities pose a serious threat to the survival of Afghanistan and Pakistan.

In post-Musharraf Pakistan and post-Bush America, strategies would have to be redrawn to suit the national interests of Pakistan and Afghanistan to fight the menace of terror. The countries of the region, especially Pakistan, India, China, Central Asian Republics and Iran, have to put their stakes together and become part of a regional consensus on bringing stability to Afghanistan and FATA, instead of promoting proxy wars. This is what President Asif Ali Zardari and President Hamid Karzai are looking for. The Parliament in Pakistan has unanimously reached a national consensus on how to fight terrorism, as has the mini PakAfghan jirga (assembly) recently held in Islamabad. This is our own war—whoever the original perpetrator might be (Al-Qaida or the US under UN mandate to bring to justice the perpetrators of 9/11), since it threatens our peace and security. This is also the international community's war as long as the Taliban-Al Qaida combine poses a threat to world peace. A new synergy has to be found to bring the real stakeholders on board and win the hearts and minds of the people in their pursuit of lasting peace and tranquility.

Welcome democracy With the February elections in Pakistan, October elections in Maldives that defeated the oldest dictator of Asia and introduction of constitutional monarchy in Bhutan, democracy now prevails in most of South Asia with the exception of Bangladesh which must join the democratic ranks soon. The path shown by the people of Nepal, who threw away the yoke of decadent monarchy, has set a direction for others to follow. While Sri Lanka must find a peaceful democratic solution to its civil war, Pakistan and Afghanistan must join hands in achieving peace and consolidating democratic gains. It is now time to move towards a South Asian Parliament as a deliberative body on issues of common concern.

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In This Issue (The views expressed in this journal are solely those of the authors)

Terrorism in Tribal Areas of Pakistan

The India-US Nuclear Deal

Fossil Fuel Crisis in South Asia

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Khaled Ahmed, consulting editor at The Friday Times, provides an overview of terrorism in the tribal areas of Pakistan. Outlining the geography of Pakistan's Federally Administered Tribal Areas (FATA), the author says that a large part of these are outside the country's control. For Al Qaeda and its offshoots, killing Muslims, according to Mr Ahmed, is more useful in terms of persuasion and influence since Islamophobia becomes an intra-Muslim value. The author concludes by stating that Pakistan as a State has been leeched of its “monopoly of violence� by the madrassa. For those living in FATA, the country has also failed to protect them, as a result of which their support has swung in favour of Al Qaeda.

Prabir Purkayastha, an engineer and power expert, critically analyses the recently signed India-US civil nuclear deal.

Reflecting on how much energy India will get from the nuclear route as well as the cost of such energy, the author concludes that India stands to lose more than gain from it. According to Mr Purkayastha, India becomes a junior partner in the US strategic scheme and most of the technology embargoes stay.

The author feels that this deal the US makes India a party to the discriminatory fuel cycle programme of the US, all for the benefit of choosing an expensive and dependent route for development of nuclear energy; which, in his opinion, is of marginal importance in the energy scenario.

Kulshrestha and Thakur from Maulana Azad National Institute of Technology, India, present an overview of the fossil fuel production and consumption patterns in South Asia, reviewing the likely fallouts of the current fuel crisis that has now engulfed much of the world. The authors explore the genesis of the fuel crisis, and follow it up by assessing its implications for South Asia. They conclude that the current fuel crisis can lead to significant economic, social and political turmoil in the member countries. However, the current fuel crisis also provides the countries of the region with an opportunity to realign and reformulate national policies for implementing better demand-side management, ensuring deployment of technologies that are fuel efficient, evolving new fuel mixes with focus on renewables, bio-fuels etc, and by shifting focus from oil to natural gas.

Bollywood: Contract Enforcement and Raising Resources

Rural Development Practices in SAARC Countries

Environmental Consequences of Armed Conflict

Amir Ullah Khan, fellow at India Development Foundation, and Zafar H. Anjum, editor and writer based in Singapore, look at Bollywood—India's most powerful form of popular culture. The authors recap the Indian cinematic trends since Independence, demonstrating the long journey of the Indian film industry. Drawing on similarities with Hollywood, the authors explore the inner workings of the biggest film industry in the world—from pre- to post-production. The authors opine that since being granted industry status in 1999, the process of film-making has become far more organised, allowing corporate players to enter the industry for film financing, and local financial institutions to take risks on risky ventures.

Dr Rama Bashyal of Tribhuvan University, Nepal, gives a comprehensive overview of some innovative rural development practices in the SAARC region, focusing particularly on self-employment and entrepreneurship development programmes. Dr Bashyal maintains that the goals to alleviate poverty through the implementation of proper development strategies at macro and micro level have not been achieved even though the governments in the region had pledged to overcome these challenges. The author is of the view that sharing of innovative and successful programmes of rural development strategies among South Asian countries will help in attaining the SAARC Development Goals and United Nations Millennium Development Goals (MDGs).

Dr Vandana Asthana and Dr A.C. Shukla of Eastern Washington University, USA, explore the direct and indirect impacts of war, militarisation and terrorism on the environment in South Asia. The paper looks at destruction of resources like oil, defoliation and impacts on the ecosystem caused by war in India, Pakistan and Sri Lanka. The authors feel that peace processes and concern towards environmental impacts of these conflicts are essential for the survival of both nature and the people of South Asia. Cooperative agreements on environmental monitoring, coordination of data from different satellites, translation of environmental variables to e c o n o m i c m o d e l s , a n d l i n ka g e o f e c o n o m i c a n d environmental models through sensitivity analysis are suggested by the authors to mitigate war-zone environmental damage.

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The UPA Government: A Report Card

Manoj Joshi, comment editor at Mail Today, reviews the five years of United Progressive Alliance's government led by Prime Minister Manmohan Singh. Joshi recaps the government's achievements on social and economic issues, legislation and India's foreign policy—especially its relations with the US, China and Pakistan. Joshi opines that though the UPA government has achieved enough to remove the label of “one issue� prime minister from Manmohan Singh's collar, the last year of the government has been marred by continual economic pressures and violence against minorities.

The Making of Bhutan's Constitution

Lungten Dubgyur, judge of Royal Court of Justice, Bhutan, gives a detailed account of the process that led to the historic drafting of Bhutan's first constitution. According to the author, King Jigme Singye Wangchuck ensured that the new constitution was drafted by a committee adequately representing all sections of society. The primary aim of drafting the constitution, Dubgyur writes, was to secure individual rights and freedom of the Bhutanese people and to further strengthen the devolution of power to empower the people at the grassroots level.

Pakistan: Services Trade Liberalisation

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Mehnaz Ajmal Paracha, project associate at SDPI, Islamabad, analyses Pakistan's domestic preparedness in light of the GATS negotiations and subsequent commitments. Studying the current domestic consultation process that underpins the multilateral negotiating stance, the paper provides an overview of the services sector, with details on linkages of services with employment, trade, GDP and FDI. The author discusses Pakistan's schedule of commitments, as well as sector-by-sector liberalisation efforts, the domestic regulatory environment relating to foreign service providers and the role of sectoral regulatory authorities in defining specific sectoral commitments at GATS. Finally, Ms Paracha provides suggestions to strengthen the domestic policy framework and ensure that it supports multilateral rule-making and negotiation.

Preventing Child Soldiering in South Asia

S.Y. Surendra Kumar, lecturer at Bangalore University, India, looks at the phenomenon of employing child soldiers in South Asia's many conflicts. Focusing on militant groups in Pakistan, Sri Lanka and Nepal, the author says that a permanent resolution to the ongoing conflicts/political turmoil can bring the exploitation of children in war conditions to an effective end. He suggests that the government of these States need to provide security, basic education, and employment to citizens to lessen the uneven development gaps which make children join these armed groups. The author also calls for an even wider application of the UN war crimes tribunals to prevent any militant forces from recruiting children.

Book Review

Yoginder Sikand, freelance writer, reviews Ajoy Bose's biography of Kumari Mayawati titled “Behenji—A Political biography of Mayawati”. As the first full-length biography of Mayawati in English, the book describes the origin and development of her party and her controversial political career.

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Terrorism in Tribal Areas of Pakistan Khaled Ahmed Introduction Terrorism in the Tribal Areas of Pakistan is a result of state policy. The territory was used in the covert and deniable wars against India and the Soviet Union. It was kept administratively separated from the rest of Pakistan. Because of lack of the normal outreach of the State, the region's economy gradually delinked itself from the national economy. The tribal economy, therefore, was not strictly legal. This gave rise to the tendency of accepting “money for services” without regard to the legality of the handout. The tribal people plied smuggling as normal commerce. They even gave shelter to fugitive criminals from the settled areas of Pakistan. This last activity paved the way for the relocation of Al Qaeda inside Pakistan.

The above factors cleared the decks for the transformation of the Tribal Areas as a stronghold of Al Qaeda and its foreign legions. The commitment of those who served Al Qaeda was strictly contractual, on the basis of a characteristic of the tribesmen otherwise located in a society of “low trust”. The additional important factor was the commitment of the Pakistan Army to defend the State against India and the pursuit in this connection of “strategic depth” in Afghanistan. The bringing to power of the clerical alliance Mutahidda Majlis Amal (MMA) in 2002 played an important role in the consolidation of Al Qaeda in the Tribal Areas.

Geography of Terror The following brief description of the Federally Administered Tribal Areas (FATA) will suffice for the purposes of this paper: FATA, 27,220 square kilometres in size, shares a 600 kilometre border with Afghanistan. With a predominantly Pashtun population of 3.17 million, according to the 1998 census, it has seven administrative agencies: Bajaur, the smallest in size, 1290 sq. km., with a population of around 595,000, the largest in FATA, borders on Afghanistan's Kunar province. Tarkani and Utmankhel are its two main tribes. Khyber Agency, 2576 sq. km. in area, draws its name from the historic Khyber Pass, which links NWFP and Afghanistan's Nangarhar province. The Afridis and the Shinwaris are the major tribes; the population is about 547,000.

Kurram Agency, 2576 sq. km. in area, with a population of around 450,000, is inhabited by the Turi and Bangash tribes and borders Afghanistan's Nangarhar province in the northwest and Paktia province in the southwest. Mohmand Agency, 2296 sq. km. in area, gets its name from the majority Mohmand tribe. The population is some 334,000 sq. km. Bajaur agency is to the north; the Malakand division of

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NWFP to the east. Peshawar, NWFP's capital, is to the southeast and Afghanistan to the west. Orakzai, 1538 sq. km. in area, the only FATA agency that does not share a border with Afghanistan, derives its name from the majority Orakzai tribe and has a population of 225,000. Kurram agency lies to the west, Khyber agency to the north, Kohat district to the south and Peshawar district to the east.

South Waziristan, the largest of the agencies, 6,620 sq. km. in area, has a population of around 430,000. The two main Pashtun tribes are the Wazirs and Mehsuds. North Waziristan Agency and Dera Ismail Khan district are to its north and east respectively, while Balochistan is to the south and Afghanistan to the west. North Waziristan, the second largest agency, 4707 sq. km. in area, has a population of about 361,000. The two main tribes are the Wazirs and Dawars. South and North Waziristan Agencies border Afghanistan's Paktika and Khost provinces.1 The Tribal Areas of Pakistan are known as “ilaqa-ghair” (not-included area). Since there is no way for the census officers of ever knowing how many people dwell in houses sealed to scrutiny by tribal laws, the figure was always a kind of “guesstimate”.

Today the population of FATA could be more than what is officially accepted. There is free movement in and out of the region and no one can be sure about the frequent “injections” of foreigners into the seven “agencies” that FATA comprises.

The non-extension of the Political Parties Act into FATA is but one factor in keeping the region as a “badland” of law and order, a kind of Bermuda Triangle of the writ of the State suited for any adventurer like Osama bin Laden armed with money and ideology to make his base there. There are draconian laws like the Frontier Crimes Regulation (FCR) that raise the hackles of anyone minimally moved by a sense of human rights. FATA is also a black hole of government revenue. Pakistan's electricity authority WAPDA has to write off its bills there and has been forced to supply free electricity to an area where it can not send its meter-checking staff.

It is true that, in 1948, the tribal jirgas (assemblies) of the FATA region had reached an understanding with the founder of the nation, Quaid-e-Azam Mohammed Ali Jinnah, over the retention of their “special status”. However, that did not mean that Pakistan was doomed for ever to retain the region as a “tribal museum” where no law applied. In 1947, tribal warriors had been used as “proxy” fighters in Indianadministered Kashmir, but that policy of the State, coming to full flower in the 1980s and 1990s, was allowed to run without much long-term analysis. Today, it is the potential undoing of the State itself, as the “irredentism” of FATA spreads into the settled areas of the NWFP. Among the federally administered areas, the “non-tribal” Northern Areas have the benefit of the Political Parties Act. The advent of the “politics of the plains” has introduced a kind of pluralism there which still stands as an antidote to the stateinduced sectarian conflict. Even in the Provincially Administered Tribal Areas (PATA) the functioning of political parties with their different agendas under the constitution has allowed—as in the case of the recent ANP-dominated Swat jirga—the prevention

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of the terrorists of Al Qaeda from taking over directly.

Factor of Taliban Ascendancy A large part of FATA is out of Pakistan's control and the rest of it is under severe pressure. The TTP, presiding over an “emirate” in South Waziristan and Bajaur, has nailed its theses of “conditions” on the wall, well before the new government in Islamabad puts in place its mechanism of “negotiation” with it. After a period of intense suicide-bombing well inside Pakistan which persuades the public, politicians and officialdom in favour of the Taliban/Al Qaeda jihad, there is a period of what is called “switch-off”. When the offensive is on, people say “it is not our war”. Cessation in suicide-bombing is equally persuasive in favour of the killers through the sensation of relief. This tactic persuades the people that it is the return to democracy in Pakistan that has stopped the terror.

The Tribal Areas also include the Provincially Administered Tribal Areas (PATA) with Malakand Division and its centre Swat under special spotlight because of the infiltration there of the Taliban. The NWFP government wanted to negotiate and capitulate to some extent by allowing the sharia (Islamic law) the Taliban decreed.

But each time it sat down to talk peace, the “Taliban-plus” invaders regrouped and renewed their assault on the population. Knowing that there was not much to negotiate, the Peshawar government then began “anticipating” what the militants would ask for. But it was never sure what the militants would be ready to “give” in return. Warlord Fazlullah is back on the scene after a retreat in the face of the army, and would have nothing less than his hegemony re-established there.

Pakistan appears scary to outsiders because charismatic leaders like Benazir Bhutto and generals like Mushtaq Beg can be killed near the capital without much willingness on Pakistan's part to analyse the phenomenon objectively. In fact, civil society in Pakistan is too busy with its own sporadic outbreaks of meaningless violence to grasp the fact that South Waziristan's warlord Baitullah Mehsud is wanted by an antiterrorism court in Rawalpindi for the assassination of Bhutto. Behind Pakistan's demand for investigation of the assassination of Bhutto by the United Nations is an unspoken desire to somehow spare Al Qaeda and pin the assassination on the establishment that has ruled Pakistan for eight years by keeping the two mainstream political parties out of the country.

This is how a latest book on the subject describes the FATA: “Today, seven years after 9/11, Mullah Umar and the Original Afghan Taliban Shura still live in Balochistan province. Afghan and Pakistani Taliban leaders live on further north, FATA, as do the militias Jalaluddin Haqqani and Hekmatyar. Al Qaeda has a safe haven in FATA and along with them reside a plethora of Asian and Arab terrorist groups who are now expanding their reach into Europe and the United States”.2

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Intimidation as Policy of Terror The embedding of Al Qaeda and its foot soldiers in Pakistan may not move Pakistani people just because it worries the world outside. However, if Pakistan somehow lets the terrorists find some kind of power-sharing inside Pakistan—which is happening in some areas within the NWFP—it may be facing a crisis outside its capacity to overcome. And it is not only the US and Europe which will be upset, but Pakistan's neighbours in Central Asia and neighbour towards its west, too, as happened when it was exploring “strategic depth” in Afghanistan with the help of the Taliban. There is no running away from the “negotiation phase”, but Pakistan should know where it will end. After the negotiation phase has collapsed, Pakistan will need all the help it can get from the world to save itself from the brainwashed killers dynamiting schools and destroying culture.

Al Qaeda's preference for killing Muslims should be understood. If it kills Americans through suicide-bombing, the US will not join Al Qaeda. If it kills Pakistanis through suicide-bombing, the surviving Pakistanis will become adherents of Al Qaeda. Killing Muslims becomes more useful in terms of influence and persuasion; and Islamophobia becomes a positive intra-Muslim value. Operating in non-Muslims areas of Russia, Al Qaeda's soldiers have encountered nothing but hatred.

Islamophobia has two sides: in the non-Muslim world it is a prejudice that results in hatred, in the Muslim world it is actually a fear that leads to conversion.

The Islamophobia that Pakistanis feel about Baitullah Mehsud's emirate in South Waziristan and Bajaur persuades them to ignore the possibility that he may have killed Benazir Bhutto. According to Federal Interior Secretary Syed Kamal Shah, the teenaged bomber, Aitezaz, arrested in DI Khan made a startling disclosure: that he was one of the five men charged by the warlord of Waziristan Baitullah Mehsud to kill Benazir Bhutto on 27 December 2007 in Rawalpindi. He disclosed that the man who fired three shots at Ms Bhutto was named Bilal and it was Bilal who later triggered the explosives vest he was wearing. He also named a third terrorist Ikram as part of the five-man team. Thus all the three named by him conformed to the names appearing in the intercept of a phone conversation of Baitullah Mehsud already made public by the government.

No sooner was the revelation released on the TV channels than a spokesman of Baitullah Mehsud got on the phone and denied the warlord's involvement in the events. Maulvi Muhammad Umar denied his group had links with Aitezaz, and said he had not been dispatched by Mehsud to kill Bhutto: “It is just government propaganda.

We have already clarified that we are not involved in the attack on Benazir”. Maulvi Umar also declared as false the army's claim that it had killed 90 of Mehsud's militants in South Waziristan: “The army is killing innocent people in our area, and we will avenge it”.

Here is yet another revelation that sheds light on the controversy growing around Bhutto's assassination. Because of the past involvement of the state intelligence agencies with the jihadi militias now carrying out executions inside Pakistan, many

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observers and analysts take the official vision of what happened with a pinch of salt.

The CIA's “finding” that Al Qaeda had attacked Bhutto is interpreted by most analysts on the TV channels as a “supporting” statement for President Musharraf.3 Earlier, however, the UK and Russia had expressed more or less the same view. From the start, more credence has been given in Pakistan to the denials issued by warlord Baitullah Mehsud than to the government's version.

Significant support to Baitullah Mehsud's denial has come from the ex-interior minister Aftab Ahmad Khan Sherpao, who told a TV channel that the CIA statement was “unwise and before time”4. He said it was not right to accuse Mehsud of a deed he had not done. He of course spoke before the news of the arrests in DI Khan had reached him. Sherpao was attacked twice in his hometown in Charsadda with suicidebombers assumed by most people to have been sent by Baitullah Mehsud, one certainly after the Lal Masjid incident which had extracted a word of anger from Osama bin Laden himself after a long period of silence. His Uzbek lieutenant hiding in South Waziristan, Tahir Yuldashev, had repeated bin Laden's threat when he declared that shariat would be imposed on Pakistan and the deaths of Lal Masjid avenged.

It appears that outside Pakistan more and more people are becoming convinced about the complicity of Al Qaeda in the assassination of Benazir Bhutto. This means that there will be less and less chance of the Pakistan Peoples Party's (PPP) effort at getting her death investigated by the UN through a Security Council resolution.

FATA—The “Lost Territory” The state of Pakistan perhaps finally reacted to loss of its territory to Al Qaeda with the military operation launched in Khyber Agency on 28 June 2008. One says “perhaps” because the “political enclave” may decide to “break away” and renege on the commitment made to the army that it will stand behind the operation. In 2007, when the army got involved in the Lal Masjid operation, the political party in power got divided over it, and Al Qaeda was able to isolate the commando group involved in storming the mosque in Islamabad and subject it to a suicide-bomber attack with no one in Pakistan mourning for the martyred commandos.

The problem now facing Pakistan is that once a State tolerates loss of territory, getting it back is possible only with an invasion of the said territory. The “invasion” itself then begins to entail its own consequences, one being the hostile reaction of the population now living under another “pax”. Pakistan lost its territory to foreign invaders; now its army has to become an invader to get it back. By September 2008, however, military operations began to separate the Taliban from Al Qaeda although the civilian government had the Advisor to the Prime Minister on Interior Affairs Rehman Malik saying that the two bands of Taliban and Al Qaeda were actually one.5 The growing anti-Americanism among the media and the population outside FATA has inclined the Pakistan army to become more assertive vis-à-vis the United States and the NATO-ISAF forces in Afghanistan. The “nationalist” upsurge appears divorced from the economic needs of the country.6 Thus another chapter has opened

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in the American war against terrorism, unless a new administration in Washington changes tack in 2009 and adopts a different policy to tackle Pakistan's growing tendency to avoid confronting Al Qaeda in FATA, especially Al Qaeda's Taliban-led activities across the Durand line in Afghanistan.

Dr Farrukh Saleem has outlined the extent of the lost territory around Peshawar: “Haji Mangal Bagh Afridi [the warlord of Khyber Agency] controls most of what is west of Peshawar. Dara Adam Khel, a mere 35 kilometres south of Peshawar, is controlled by Baitullah Mehsud's loyalists. Charsadda and Shabqadar, both less than 30 kilometres north of Peshawar, are controlled by Commander Umar Khalid, TTP's leader in Mohmand Agency”7.

Outside the Peshawar region, there is more lost territory, and the operation will not be complete unless this “hinterland” is won back too. Dr Saleem writes: “South Waziristan now belongs to Baitullah Mehsud. Hafiz Gul Bahadur is the Taliban supreme commander in North Waziristan […] Commander Umar Khalid is the boss in Mohmand. That's [sic] some 20,000 sq-km of physical Pakistan terrain”. The Tribal Areas are bound to get whatever is left of Pakistan into trouble with the rest of the world. Almost three “theoretical models” of invasion have become applicable to the situation.

“Loss of territory” or “loss of effective control” of the Tribal Areas lays Pakistan bare to invasion because of cross-border infiltration of Al Qaeda and its warlords into Afghanistan. There is the first aspect of “loss of sovereignty”. John Stuart Mill, whose theorising has contributed to international law, forbids invasion of a sovereign State aimed at making it internally benign. All internal change, he thinks, should be “selfdetermined”. However, this ban becomes weak if a “community” wants out of the sovereign system. In Pakistan's case, the lost territory is becoming home to a growing community wishing to opt out of the benign State.

A Case for Intervention The next aspect is that of intervention after evidence of threat from a State to a sovereign territory outside becomes available. This evidence is being carefully gathered and saved as a part of future case-making against Pakistan. The third aspect is that of pre-emptive invasion, based on the observation that Pakistan, by reason of its loss of control, poses a future threat to the region. One is not talking here of law but of practice.

One can see a regional consensus developing against Pakistan, counting within it States like India, Iran, Afghanistan, Uzbekistan, Russia and even friendly Turkey. Out of these, Russia will react to Chechen terrorists being trained and sent into Dagestan; Uzbekistan will react to Islamic Movement of Uzbekistan's (IMU) terrorists being trained and sent to Tashkent. China will possibly keep quiet but tacitly support a reprisal attack because of the training its Uighurs receive in Waziristan.

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Paramilitary forces, whose personnel warlord Mangal Bagh used to take for ransom freely, moved on 28 June 2008 into the Khyber Agency in the neighbourhood of Peshawar and destroyed the warlord's house and made his “hundred-thousand strong” army flee from its strong-hold. What started three years ago and swelled into a near autonomous State is finally being challenged by the State of Pakistan. It will be adjudged to be a late operation by historians and blame will be apportioned to the rulers of the day.

Warlord Mangal Bagh fled to Tirah, the high altitude valley that Pakistan was ever proud of calling a tribal no-man's land. He became the ruler of Khyber after killing those who resisted him. He got his income by imposing heavy fines on the local inhabitants for petty neglect of pieties and began recruiting his army. The syndrome that surfaced in Khyber is the same as appeared in South Waziristan and Swat: intimidation followed by “empowerment” of those abandoned by the state of Pakistan as soldiers and suicide-bombers of Islam.

When his “government” became too big for Khyber's capacity to generate revenues to pay for it, Mangal Bagh descended on Peshawar, cherry-picking rich parties in borderline Hayatabad for extortion, then threatening the rich of Peshawar into paying him big cash. The snowballing of his business of death gave him the charisma he needed. As he killed innocent people in the Agency, people owing allegiance to his “Islamic order” increased by the day in the NWFP and in other parts of the country.

He began courting the TV channels when he saw that the rest of Pakistan too was ready for the plucking.

A hundred years ago a water-carrier Batcha Saqao arose in Afghanistan, holding aloft the banner of Islam, and actually toppled the throne in Kabul to establish his rule there. The only difference today is that in Pakistan, 20 years of jihad, allowed by the state itself, has softened it for adventurists. The sacrifice made by Pakistan for jihad was not spiritual but political: an unwise abdication from its internal sovereignty.

Jihad brought Al Qaeda to Pakistan as the generals sought “strategic depth” in Afghanistan.

Historical Roots of Tribal Jihad The warlords of the Tribal Areas gain sustenance from the umbrella control of Al Qaeda which can supplement the income of anyone who has exhausted his capacity to live off the retreating authority of the state and the helplessness of the citizens the state has abandoned. There are other more lethal “losses” to consider, however. What all these Al Qaeda warlords—who call themselves the Taliban—know may not be a part of our consciousness. They know that they have conquered the minds of the rest of Pakistan and its political elite through their methods of intimidation. Ayesha Jalal traces the jihad in the Tribal Areas to an earlier jihad in history and feels the Taliban identifying themselves with earlier “martyrs”: “The geographic focal point of the jihad of 1826 to 1831 [waged by Sayyid Ahmad Shaheed and Shah Ismail Shaheed] on the northwest

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frontier of the subcontinent corresponds to the nerve centre of the current confrontation between Islamic radicals and the West. The jihad movement directed primarily against the Sikhs was transmuted in the course of the war into a conflict pitting Muslim against Muslim. This feature of intrafaith conflict in a jihad as armed struggle has not diminished its appeal for contemporary militants, who evidence many of the same failings that undermined Sayyid Ahmad's high ideals. The martyrdom of those who fell at Balakot continues to weave its spell, making it imperative to investigate the myth in its making”.8 In April 2008, Baitullah Mehsud convened a big conference of the TTP in Aurakzai Agency near the tomb of Haji Turangzai to proclaim that his emirate had come to stay.

He was himself not there for fear of being killed by a US drone but his deputy representing Bajaur was there as were warriors from all other tribal areas including Malakand in the NWFP. Haji Turangzai actually stands at the axis of change in the spirituality of the Tribal Areas and his war against British Raj fits him for the homage of those who are fighting the global hegemony of the US and punishing with suicidebombing such US allies as Pakistan.

Fazl Wahid Haji Sahib of Turangzai (1842–1937) carried forwards the legacy of the teachings of Mujaddid Alf Sani and Shah Waliullah. Turangzai is supposed to have gone to Deoband in India's Saharanpur to learn the Quran where he saw the most militant of all clerics Maulana Mahmudul Hasan preparing a group of pupils to go to Hijaz in Saudi Arabia. He insisted on going to haj (holy pilgrimage to Makkah) with Maulana Mahmudul Hasan and seemed to have repeated the experience of Shah Waliullah himself when he came under the Wahabi influence of Haji Imdadullah in Makkah.9 Baitullah Mehsud suspended all peace talks with the army in June 2008 and declared that he will attack Sindh and Punjab. The politicians cringed. They will have to decide whether to support the government in this action or hang on to the reprieve they won earlier this year by dismissing the war in the Tribal Areas as “not our war” and by focusing on the lawyers' movement where they even swore to lay down their lives for the sake of democracy in Pakistan. In a way, leaders are leaders today because they live under the “pax” of Al Qaeda.

The Falling Out with the US On the other hand, the US began in August 2008 to tire of Pakistan's acceptance of the pax of Al Qaeda in FATA and the CIA sent its first commando team into South Waziristan attacking a house in Angur Adda on 3 September 2008, killing a couple of Arab terrorists along with the “collateral damage” of people the “militants” were probably using as shields. This led to the great falling out between the Pakistan Army and the United States. It also sent the Pakistani politicians scurrying to the side of the GHQ to prevent being seen defending the US action whose basis was described by an American scholar as below:

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“With the United States now full swing in its 2008 presidential and congressional election campaign and Pakistan's elected government still trying to find its legs, there is a danger of drift and uncertainty at the political level [...] Prior to the heliborne assault, there have been other actions blurring the issue of Pakistan's territorial sovereignty – strikes against hit-and-run fighters retreating from Afghanistan, and pre-planned Predator missile attacks attempting to kill Al Qaeda leaders where they would gather […] But the issue of putting American boots on the ground in Pakistan – a more indelible red line – needs to be dealt with very carefully and not be driven by momentary needs […] That said, the new elected leadership in Pakistan should understand that there is a limit to American commanders willingness to take lethal punishment from guerrilla forces just outside their reach and stand by helplessly. Any government which promises one thing and does another, or fiddles indecisively or cynically while American blood is being shed for the betterment of a neighbouring country, and while taking good money paid for Pakistan's assistance to boot, would do well to weigh the opportunity costs”.10 What has followed the split between the Pakistan Army on the one hand, and the NATO-ISAF command and its backers in Washington on the other, has tilted Pakistan's national politics into its familiar internecine pattern. London's International Institute for Strategic Studies (IISS) may have inadvertently fuelled the fires of antagonism with its latest annual report that says, “Zardari's major challenge will be to gain the trust of the army and build a consensus among the political establishment against terrorism and extremism”11. The opposition politicians were already carefully wording their criticism in such a way that showed the PPP ploughing a separate furrow from the army. Pakistan Muslim League-Nawaz's (PML-N) leader of the opposition in the National Assembly, Chaudhry Nisar Ali Khan was gradually zeroing in on the subject.

Khan said on 18 September: “The US media is reporting that some agreements between the US and the Musharraf-led government had allowed incursions into the Tribal Areas. We hope that Asif Ali Zardari would give a clear policy to cope with the situation at our borders. We demand that being the powerful civilian president, he announces to scrap such agreements”. Thinking he was drawing close to the army line and isolating the PPP, he added: “The statement of [US army chief] Michael Mullen that US drones would continue to launch aerial strikes is not acceptable to us. We will neither accept an airstrike nor a ground offensive inside our territory”12.

If this was not enough politics-as-usual, Brigadier (Retd) Shaukat Qadir, who once headed a think-tank under former President Musharraf, wrote: “When COAS Gen Kayani recently met Gen Mullen, it seemed as if Mullen understood Pakistan's position and agreed not to permit strikes across the Durand Line. However, there is a fairly reliable rumour afloat that newly elected President Zardari has given carte

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blanche to the Bush administration to attack Pakistani territory at will”13.

Conclusion In Pakistan, the State has been leeched of its “monopoly of violence” by the madrassa with a stranglehold on the people no matter what opinion they hold about Al Qaeda and suicide-bombing. For instance, it would be useless to poll the citizens in Islamabad when 80 madrassas hold power over them and scores more have sprung up since the state's face-off with Lal Masjid in 2007.

Another distortion that sets Pakistan apart is the “lost territory” in FATA and the Provincially Administered Tribal Areas (PATA). The population living under Al Qaeda here were first unsure about who they supported, but after the failure of the state to protect them they have generally swung in favour of Al Qaeda. Whereas in the Tribal Areas there is no difference between Al Qaeda and Osama bin Laden, in the rest of the country bin Laden is set apart as the symbol of Islam's struggle against the US. Al Qaeda was “facilitated” on the basis of the agreed military “doctrine” pronounced

by General (Retd) Pervez Musharraf in his address to the nation on 20 September 2001 after he had decided to join the US' global “war against terror”. His speech was lynch-pinned to this reference to India: “What do the Indians want? They do not have common borders with Afghanistan anywhere. It is totally isolated from Afghanistan.

In my view it is so surprising that the Indians want to ensure that if and when the government in Afghanistan changes, it shall be an anti-Pakistan government […] I would like to tell India: lay off”.

It is based on this “foundational” speech that the policy on war against terrorism was fashioned. It committed Pakistan to retain the “proxy” of the Taliban acquired during Pakistan's pursuit of “strategic depth” in Afghanistan against India. Al Qaeda came in as a part of the bargain. After the 2002 election, the MMA was brought to power to underpin this policy. When the MMA brought an Islamising legislation call the Hasba Bill to the NWFP Assembly, it inserted in its first draft a reference to the Taliban “guests” and replicated the idea of the moral squad that had hounded the citizens in Kabul. It is during the MMA's tenure in Balochistan and the NWFP that Al Qaeda became entrenched in Pakistan. The madrassas all over Pakistan, which became the backbone of Al Qaeda and its foot soldiers, were not—or could not be—purged.

Khaled Ahmed is consulting editor of The Friday Times, Pakistan.

Endnotes 1. International Crisis Group Working Paper, Asia Report No 125, Working Paper, 11 December 2006.

2. Ahmed Rashid, Descent into Chaos: How the War against Islamic Extremism is being Lost in Pakistan, Afghanistan and Central Asia (London: Allen Lane 2008), 401. Ahmed Rashid is fair when he says Musharraf did not let go of his policy of backing the Taliban and through them domination of Afghanistan because he thought Americans would cut and run soon enough, leaving Pakistan holding the bag. Rumsfeld was proving him right all

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the time (p.335) 3. “The Central Intelligence Agency has concluded that the assassins of Benazir Bhutto, the former Pakistani prime minister, were directed by Baitullah Mehsud, a Pakistani militant leader in hiding, and that some of them had ties to Al Qaeda”. New York Times, 19 January 2008.

4. “New discoveries on the security front”, Daily Times, 22 January, 2008 Editorial.

5. “Al Qaeda: a three-in-one challenge”, Daily Times, 3 September, 2008 Editorial.

6. “Careful while reacting to US policy”, Daily Times, 19 September, 2008, Editorial. “Those who recommend that Pakistan should stop logistical support to the 70 thousand odd NATO-ISAF forces in Afghanistan – 'without fuel they can't last a day' – should also know that this 'reimbursable logistics and fuel supply arrangement', which has accounted for a significant fraction of the $11 billion of 'military assistance' to Pakistan for the last nine years, is also needed by us to fight the real 'land invasion' of foreign terrorists.

Commentators who angrily suggest abandonment of the War against Terror should take a close look at the alternatives available to Pakistan in case we quit the international coalition”.

7. The News, 29 June 2008.

8. Ayesha Jalal, Partisans of Allah: Jihad in South Asia (Sang-e-Meel Publications: Lahore 2008) 16.

9. Sana Haroon, Frontier of Faith: Islam in the Indo-Afghan Borderland (Hurst & Company: London 2007), 159.

10. Rodney W Jones, “American boot, Pakistani soil: solution?”, The Friday Times, 12–18 September 2008, Jones is President, Policy Architects International, Reston, VA, USA. 11. “Zardari could face threat from the army”, Daily Times, quoting IISS, 19 September 2008.

12. Daily Times, 19 September 2008.

13. “Fighting a Hydra”, The Friday Times, 12–18 September 2008. The author also opines: “Despite the knowledge that such operations might, in the long run, be counter-productive, the Pakistan army is compelled to undertake high profile, visible operations, claiming exaggerated successes in the hope that this might prevent more US incursions, the consequences of which are much worse”.

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Abandoning Independent Foreign Policy: The India-US Nuclear Deal Prabir Purkayastha

T

he India-US civil nuclear deal has been painted in India by its supporters as necessary for securing fuel and technology for India's nuclear energy programme and nothing else. However, the US officials1 have made it clear from the beginning that lifting nuclear sanctions was a concession they were willing to give India in lieu of India entering into a “strategic partnership” with the US. In addition, selling India reactors from their moribund nuclear industry also meant billions of dollars in orders and thousands of jobs for Americans.2 So when we look at the nuclear deal, we need to look at both sides of the equation: what is it that India is getting and what is the price that it is paying for this deal?

The Hyde Act and the subsequent 123 Agreement spelt out the price India would have to pay in terms of strategic relationship with the US. The flip side—the lifting of sanctions—would allow India to import reactors and uranium and ease the restrictions on nuclear energy. The question is how much energy is India going to get from the nuclear route and what would be the cost of such energy? Even by most optimistic accounts, the total energy from nuclear plants would be at best 6–8 percent of India's energy needs and that too at costs that would roughly be 2–3 times the cost of electricity from other sources such as coal. The imported reactor3 route is the most costly of India's energy options, a conclusion that was reached also by the Planning Commission4.

Strategic Background of the India-US Nuclear Deal The larger strategic vision that the US has on Asia is spelt out in its various strategic documents. It has identified India as a crucial strategic partner in Asia and the nuclear deal as a key element in this strategy. William J. Burns, under secretary of state for political affairs stated on 18 September 20085 that the nuclear sanctions were the principal obstacle in India-US relations. “By addressing, and thus surmounting, the principal obstacle that has, for decades, stood in the way of better relations, the nuclear agreement is not only important on its own terms but has moved our relations farther and faster forward than any other step.” He added, “Establishing and strengthening our strategic partnership with India has been a key foreign policy priority for the Administration [sic], as it was for our predecessor and as, I suspect, it will be for our successor.”

The need for close strategic ties between India and the US has been articulated by all key officials of the Bush administration. The value of India aligning with the US and

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abandoning its non-alignment policy is obvious. Given that the US has very few landbased allies in the entire arc from East Asia to South Asia, India joining Japan and Australia as partners to the US would have enormous significance. With West Asia increasingly becoming the focal point of global contradictions, even if the US gains India's tacit support there and not an active one, it is a huge bonus for the US. That is why there is continuous pressure on India to toe the US line and not line up with nonaligned countries on Iran.

The other issue in West Asia has been that of Israel. Though India has continued to formally support the Palestinian cause, it has emerged in recent years as the largest arms buyer of Israel, bigger than even the Israeli armed forces. As the Palestinian activists have pointed out, this is an enormous subsidy to the Israeli arms industry, making India virtually complicit in the Israeli occupation of Palestine.

Even without the nuclear deal, India and the US have been growing closer to each other. A part of this thrust comes from the shared neo-liberal economic beliefs; the other being the understanding of the Indian strategic establishment that in the post Soviet Union world, India needed to come to terms with the US—the unquestioned global hegemon. Not that this shift in policy has been easy or without resistance. A number of forces in India, including the Left are still articulating a foreign policy objective of a multi-polar world and an independent foreign policy. However, there is little doubt that there has been a slow and steady shift in the Indian foreign policy towards the US. One of the major steps in this shift was the signing of the New Framework for IndiaUS Defence Relationship Agreement in Washington on 28 June 2005, just prior to the joint statement of President Bush and Manmohan Singh of 18 July 2005. The Defence Framework Agreement envisages a host of strategic and military relations—joint exercises, joint planning, joint operations, and defence procurement. The agreement also states, “U.S.-India defence relationship derives from a common belief in freedom, democracy, and the rule of law, and seeks to advance shared security interests”. For India to talk about a shared belief in democracy at precisely the point in time the US had occupied Iraq, sat strangely with India's past foreign policy.

There are three more agreements that are currently being negotiated. These are: Logistics Supply Agreement (LSA) that would allow US ships and aircraft to use Indian berthing and refuelling facilities; End User Verification Agreement, under which Americans will carry out annual on-site inspection of all systems sold to India from American defence firms; Communications and Information Security Memorandum of Agreement (CISMOA), which will allow the US to monitor and access communications equipment sold to India. The last two would allow the US to monitor and exercise some control over defence equipment it sells India, something that India has resisted till now.

The Logistics Service Agreement was always a part of the India-US Nuclear Deal's composite package. India gets US support for lifting nuclear sanctions, while India

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accepts that the US fleet and air force can now freely access India's ports and other facilities.6 It was proposed at the same time that the India-US nuclear deal was mooted and could not be signed due to the domestic opposition in India.

The India-US Civilian Nuclear Deal First, let us look at a brief chronology of the deal. The India-US nuclear deal originated from an offer that the US made in early 20057 to India to lift nuclear sanctions on India. The joint statement of President Bush and Prime Minister Manmohan Singh of 18 July 2005 reflected this offer, which was further elaborated in the Separation Plan of March 20068 during Bush's visit to India. The Hyde Act,9 which was the enabling provision for any civilian nuclear agreement between India and the US, was passed by the US Congress in December 2006. The 123 Agreement was negotiated and finalised by the two governments in mid-2007.

The next steps for converting the agreed text of the 123 Agreement was that India would first sign a safeguards agreement with International Atomic Energy Agency (IAEA) for putting its civilian reactors under safeguards, then the Nuclear Suppliers Group (NSG) would lift sanctions on India. Only after these steps were completed, would the 123 Agreement go to the US Congress for its passing.

Soon after the 123 Agreement was negotiated, the Left parties, which saw in it various strings to tie India to the US interests, made it clear that they would not let this agreement go through. As the United Progressive Alliance (UPA) was then in power in India courtesy the support of the 59 Left MPs in Lok Sabha, the deal could not proceed further. It was only after the UPA was able to cobble together outside support including defections from Bharatiya Janata Party (BJP) and other parties, that they could push the deal through the next two steps—International Atomic Energy Agency (IAEA) and the Nuclear Suppliers Group (NSG). At the time of writing this paper, the deal is now before the US Congress, where presumably it will be passed.

In India, the deal has come under two main lines of attack. One is that of the Left, who have opposed it as they see it as a centrepiece of a larger strategic alignment that Manmohan Singh government wants to build with the US. For them, the lifting of nuclear sanctions is the carrot with which India is being enticed into the US “tent”.

Their criticism has been two fold, one to show that the lifting of the nuclear sanctions on India is hedged with so many conditions that it will build dependence on the US for nuclear energy. The other has been to bring out the strategic ties that India and the US are simultaneously entering; the deal in their view is a package deal and not just a civilian nuclear energy one.

BJP's criticism has been quite different. Their argument has been that this deal will stop India from further testing and, therefore, affect India's long-term weapons programme. In their view, also echoed by some strategic analysts, India needs to test more if it wants to join the big guys in the nuclear club. BJP has no problems with a strategic alliance with the US, something it has been advocating even in its precursor Jana Sangh days. Therefore, the two opposition streams to the 123 Agreement differ

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significantly on why they are opposing the deal.

The India-US Nuclear Deal and The NPT Regime In order to understand the deal itself, one has to briefly look at the Nuclear NonProliferation Treaty (NPT) regime and its relation to India. India had refused to be a signatory to the NPT, stating that it was essentially a discriminatory arrangement.

India's refusal to sign the NPT and its subsequent Pokhran explosion in 1974, structured a global response of isolating India on nuclear issues and putting it under technology sanctions. The sanctions regime continued to be strengthened by at least three further steps: with the formation of the NSG in 197510 and further tightened in 1992; the Missile Technology Control Regime (MTCR) in 198711; and the Wassenar arrangement in 199612. Each of these was an attempt to create a regime in which sensitive and dual use technologies would be unavailable to some countries.

“Sensitive” technologies are those which are directly related to military use, fuel enrichment, reprocessing or heavy water production, while “dual use” technologies are those used in these processes but could have uses outside nuclear applications as well.

There is little doubt that the technology controls regime had serious repercussions on India's nuclear energy programme. It was only after prolonged delays that India was able to overcome the technology deficit it had in 1974 and build up capability in a wide range of technologies required for nuclear plants. The Department of Atomic Energy (DAE) not only had to reinvent the wheel but also had to pioneer new technologies. It is precisely this work by an entire generation of the nation's scientists and engineers that ensured the fresh sanctions imposed in the wake of the 1998 nuclear tests did not hurt India as much as the original 1974 sanctions did.

The capability built in a wide range of dual use and advanced technologies meant that Indian industry could compete on equal terms with major international companies.

While the sanctions would certainly inconvenience the Indian industry, they would also create opportunities for Indian organisations in domestic as well as international markets. Conversely, the sanctions also put certain sectors of the Indian market out of bounds for global corporations. With China and India emerging as huge markets for power plants including nuclear plants, the sanctions on India also means giving up this market for major international nuclear equipment suppliers. The sanctions regime would henceforth cut both ways.

Within the NPT regime, the compact between the weapons and non-weapons states was a two-fold one. On the one hand, non-nuclear weapons countries gave up their right to nuclear weapons on the condition that they would have full access to the technology for peaceful uses of nuclear energy including the fuel cycle.13 The other part of the compact was that nuclear weapons states would hold good-faith negotiations on nuclear disarmament, a commitment that they have not kept over the last 40 years.

The US now claims in its strategic doctrine the right to use nuclear weapons against even non-nuclear weapon states and has refused to give a no-first use pledge till date.

The NPT succeeded in moving the discourse on disarmament into one on non-

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proliferation: nuclear disarmament seemed to have disappeared from the radar screen to be replaced by focus on only non proliferation.

By the 1990s though, the non-proliferation regime itself was unravelling. One reason was US polices towards countries it designated as “rogue States”. Its publicly stated intention of regime change for countries such as Iran, North Korea and Iraq, the NATO bombing of Serbia, occupation of Iraq and Afghanistan, have all contributed to making nuclear weapons an “attractive” option for countries at the receiving end. In this scheme, nuclear weapons are seen as a low-cost counter to the US high-tech offensive capabilities. In West Asia, the US threats are coupled with Israel's possession of nuclear weapons. Faced with two aggressors—Israel and the US—both armed with nuclear weapons and with long histories of mounting pre-emptive attacks, it is not surprising that other States feel threatened.

The second new element is the US position of now limiting nuclear technology to only weapons States and a few of its trusted allies. This takes the form of denying to most of the NPT signatories the right to the nuclear fuel cycle, even though it is explicitly sanctioned by the NPT. The current stand-off with Iran is part of this thrust. The US had argued in the last NPT review, for the need to restrict this right of the fuel cycle to countries that already have it and deny it to others. The NPT Review meeting did not accept this view. In the NSG also, the US has been arguing similar bars on Enrichment and Reprocessing (ENR), which is really another way of talking about the fuel cycle.

In the NPT regime, India was always a problem for the US, though it did not identify India as a “rogue state”. Setting up NSG in 1975 and then tightening of the export controls regime in 1992, the US had clearly identified India as the key hold-out of the NPT regime and, therefore, the principle target. Pakistan, the other hold-out, had always stated that it would sign the NPT if India did. Israel's nuclear programme in any case was under the benign umbrella of the US and, therefore, Israel as a non signatory to the NPT did not bother the US. The US policy was expressly designed to tighten the noose around India and bring it into the NPT fold.

Faced with increasingly tighter sanctions and discussions on new treaties such as Comprehensive Test Ban Treaty (CTBT) and Fissile Material Cut-off Treaty (FMCT), India was under pressure to either sign the NPT or declare itself a nuclear weapons state. Faced with a continuous tightening of the screws, the pressure to declare it a nuclear weapons state grew within the Indian strategic establishment, who were in favour of nuclear weapons. It is now known that India on two prior occasions had made preparations to test and had backed off. With BJP having won the 1998 elections, it made the decision to test, leading to Pokhran 2 followed by Pakistan soon after. The NPT regime had either to adjust to two more nuclear states and hold the rest of the firewall or try and put India and Pakistan back into the NPT fold as non nuclear weapons states. The second was obviously not likely—if it could not be done over a 30 year period, it was unlikely to take place after the Indian tests. The US, therefore, had to adjust the NPT regime to give some kind of legitimacy to India's nuclear weapons programme.

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The Pakistan issue has been less with how to adjust to the nuclear weapons in Pakistan and more to do with how it is viewed in the US. Pakistan's key problem—in the mind of the western strategic establishment—is the long-term stability of Pakistan and, therefore, the safety of its nuclear arsenal. If these issues are addressed, then quite possibly the Indian example could be used for a similar deal with Pakistan also.

The India-US nuclear deal has to be placed within the context of the ongoing “readjustment” of the NPT regime. In the old days, by questioning the logic of nonproliferation and asserting the need for global disarmament, India was looked upon by the US as a troublemaker for the NPT regime. If India were to come under the US nuclear umbrella, the troublemaker would then become a willing ally. That this is already coming to pass, even before the nuclear deal is clinched, is clear from India's two votes against Iran at the IAEA in 2005 and 2006. While explaining its rationale for the votes against Iran, India did not argue in terms of Iran's acts of omission or commission, but argued that India did not want another nuclear weapons state near its border,14 thereby implicitly accepting the American argument that Iran should not have the right to enrichment of uranium. It is now admitted from the American side15 that India's votes against Iran were obtained by arm-twisting.

India's position on Iran has also shifted further with the 5 September 2008 statement of Pranab Mukherjee, delivered just before NSG gave its final seal of approval for lifting sanctions on India. India had always held that Iran had a right to the fuel cycle under NPT. In a complete reversal of this, Pranab Mukherjee’s statement says India will now “support international efforts to limit the spread of ENR equipment or technologies to states [sic] that do not have them”. This obviously includes the fuel cycle and, therefore, enrichment and reprocessing. With this one statement, India is not only a part of the NPT regime on the side of the nuclear weapons states, but has also endorsed the NPT plus stand of the US. The Hyde Act and the 123 Agreement The Nuclear Non-proliferation Act (NNPA) of 1978 passed by the US Congress barred India from nuclear commerce with the US. Any adjustment of the NPT regime for India needed, therefore, for the US Congress to first lift its bar. Henry J. Hyde United States-India Peaceful Atomic Energy Cooperation Act of 2006 (the Hyde Act) was passed by the US Congress and signed into law on 18 December 2006 to enable nuclear commerce with India. The Hyde Act had numerous provisions that immediately raised controversies in India. Specifically, it contradicted assurances given by Manmohan Singh to the Indian parliament on the substance of the India-US nuclear deal.

In summary, the key issues on which the critics found the Hyde Act to contradict Manmohan Singh's assurances are as follows: l l

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Fuel supply assurances including reserves for lifetime operation of the reactors.

India's submission to IAEA safeguards to be in perpetuity only if there are fuel supply guarantees and right to withdraw from safeguards if fuel supplies fail.

l l l l

No extraneous conditions.

Recognition of India as nuclear weapons state with the same rights and obligations as other nuclear weapons states.

Access to full civilian nuclear technology and lifting of all technology sanctions.

Clean and unconditional lifting of existing sanctions.

On all these counts, the Hyde Act had serious riders or outright denials. It made clear that the lifting of sanctions was a one time exception and if India tested again, it would immediately come under sanctions and would also have to return all fuel and equipment supplied to it. It also contained provisions that the fuel supply assurances were only for market failures and did not cover termination of the contract (the Obama Amendment). The Hyde Act also required India to place its civilian reactors under IAEA Safeguards in perpetuity. Further, aligning with US foreign policy and cooperating with the US on Iran were both spelt out as a requirement for India. It denied India access to technology for enrichment, reprocessing and for heavy water. It also made clear that if the deal was terminated not only would US fuel supplies stop, the US would also work with other suppliers to ensure full stoppage of supplies to India. Annual presidential review and report to the Congress was required to see whether India was fulfilling its “obligations” under the Hyde Act. The Left was the most serious critic of the Hyde Act. It had earlier made a clause by clause analysis of the two versions of the Hyde Act that were being steered in the House of Representatives and the Senate, which finally emerged as the Hyde Act. It had pointed out that the prime minister's assurances in the parliament were quite different from what the US Congress had passed and asked the UPA government to step away from the deal. The UPA government's position was that the Hyde Act was only an enabling legislation and India should wait to see the actual 123 Agreement before taking any decisions on the issue. They also stated that a large part of the Hyde Act to which the opposition parties were referring to was advisory in nature and did not affect the duties and obligations of the US Executive. For this, they based themselves on President Bush's signing statement, in which he made the distinction of what he considered non-binding.

The 123 Agreement that the government negotiated with the US became the major dividing line between the UPA government led by the Congress and the Left, on whose support the government was running. The UPA's position, echoing that of the prime minister was that India had secured an agreement that was in full conformity with what the prime minister had stated in Parliament on the nuclear deal including fuel supply guarantees. According to them, all the adverse clauses of the Hyde were either “immunised” by the 123 Agreement or only advisory in nature.

The Left made clear in its 7 August 2007 statement that if the government proceeded to take the next steps to operationalise the deal it would withdraw support. It also pointed out that the 123 Agreement was in full conformity with the Hyde Act and did not agree with the UPA that it had fuel supply guarantees as claimed. The Left's detailed analysis16 of the 123 Agreement clearly highlighted the sharp divergence of

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views on the nature of the 123 Agreement. The Left also coupled its criticism of the 123 Agreement with the Logistics Service Agreement, which was also being negotiated between the Indian and US government, of the shift taking place in India's foreign policy.

At one point, it appeared that the two sides were unlikely to compromise on this issue and the government was going to fall. The political parties appeared to have switched to an election mode, with the prime minister making public pronouncements, interpreted by the media as calling the Left's “bluff”. The Left, in turn, had made preparations of withdrawing support if the government moved any further on the deal. With the Left and the Congress going head to head, midterm elections appeared to be on the anvil.

The resistance to the UPA government's falling on the issue of the nuclear deal came from the Congress allies within the UPA. Other parties, Sharad Pawar's Nationalist Congress Party (NCP), Lalu Prasad Yadav's Rashtriya Janata Dal (RJD), Dravida Munnettra Kazhagam (DMK) counselled against going forward with the deal and having the UPA government fall on this issue. Instead, the solution proposed was that a joint committee of the UPA and the Left would examine the Hyde Act, the 123 Agreement and their implications.

The UPA-Left committee held nine meetings between September 2007 and June 2008. A number of notes17 were exchanged by both sides. However, the key differences between the two sides remained unchanged. The Left held that the 123 Agreement was cleverly drafted to make Indian people believe that all their concerns were being met; the reality was that the language and other clauses in the agreement would render all these so-called commitments to a nullity. In its six detailed notes to the UPA, it dissected the 123 Agreement clause by clause and showed how the US assurances were devoid of any legal teeth, while India's obligations were all binding legal commitments. It also pointed out that the termination clause was an omnibus one—the US could terminate the agreement unilaterally and cease all cooperation immediately. All the fuel supply assurances would amount to nothing in such a scenario and India would go back to the Tarapur position of having to beg for fuel for its imported reactors, otherwise face the spectre of these reactors shutting down.

However, under such a situation, India would not be able to take the corrective measures of taking the reactors out of IAEA safeguards.

On the foreign policy and security issues, the Left's critique of aligning with the US and Israel was similarly stone-walled by the UPA. It even compared the increased military exercises it conducted to be similar to that it conducted with a number of other countries.18 The situation remained deadlocked for these 10 months, with both sides unwilling to give ground and yet not willing to break with the other. In its 16 November 2007 meeting, it was decided that the committee would examine the IAEA safeguards agreement also, and with a view of this, allowed the government to hold discussions

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with the IAEA Secretariat for a draft agreement. In the meeting it was also agreed that the draft Safeguards Agreement would be submitted to the committee and its recommendations would be taken into by the government before operationalising the deal. The draft agreement was never submitted to the committee, the UPA arguing that it was a confidential IAEA document. It instead placed before the committee what it claimed were substantive contents of the draft. The Left recorded its opposition to the draft and also asked that it be made public.

The committee deadlock continued over the 123 Agreement and now the IAEA safeguards agreement. The change in this scenario was the UPA's ability to wean the Samajwadi Party (SP), with its 38 MP's to its fold. With this, it now was a distinct possibility that the UPA could ride out a withdrawal by the Left of its support. The Congress took the decision that it had sufficient insurance on its numbers and, therefore, could go ahead with the deal. The government placed the safeguards agreement text before the IAEA board in early August leading to the immediate withdrawal of support by the Left. On 21–22 August 2008, the parliament debated the confidence motion placed by the UPA, which became a debate on the nuclear deal.

Finally, it was able to squeeze through with a slim margin based on the SP support and switching of sides by some individual members of mainly the National Democratic Alliance (NDA) parties. The worst sufferer of these defections was the right wing BJP, which had to expel eight of its members after the confidence vote. For the first time, the UPA could claim that it had a parliamentary majority on the nuclear deal, which it had lacked till then.

The IAEA Safeguards and the NSG Waiver Immediately after the confidence vote, the deal moved at break-neck speed through the IAEA and the NSG. The IAEA board consisting of 45 nations passed the IAEA safeguards agreement, with countries expressing their reservations on what they considered a major violation of the NPT regime. However, they did not convert their reservations to a formal no vote.

Once the IAEA agreement was passed, a debate over whether the safeguards were in perpetuity over the facilities offered by India to IAEA sprung up. A number of commentators argued that the preamble had enough provision for India to pull out of safeguards, a claim denied by others.19 In this context, the opponents of the deal pointed out that the Article 32 of the text explicitly states, “Safeguards shall be terminated on a facility listed in the Annex after India and the Agency have jointly determined that the facility is no longer usable for any nuclear activity relevant from the point of view of safeguards”.

The next step in the journey of the deal was the NSG. Here, the opposition to the deal was sharper, with countries such as Austria, New Zealand and Ireland arguing for an explicit re-imposition of sanctions in case India tested again and also for periodic review. These countries, along with others also wanted an explicit provision barring India from access to ENR technologies.

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The NSG in its first meeting in 21–22 August 2008 had noted that there were serious objections from a number of countries on giving India the required waiver on sanctions. A number of conditions were asked to be incorporated before the NSG would consider the waiver. The US side played a relatively quiet game in this meeting, stating that India would have to climb the NSG mountain on its own and they could only be the “sherpas”. By the second NSG meeting 4–6 September 2008) things had changed considerably. One was the draft itself, where various conditions were additionally introduced. The second was a far more aggressive role the US took in getting the waiver through.

The reason for the US playing a much more aggressive role is not difficult to discern.

India declared its intentions to align with the US on Iran publicly. The 5 September Statement of Pranab Mukherjee, committed India to joining “international efforts to limit the spread ENR [enrichment and reprocessing] equipment or technologies to states [sic] that do not have them”, an obvious reference to Iran. Pranab Mukherjee's statement in which India agreed to uphold the NPT regime that it had till now described as discriminatory, became a part of the text. Like all other nuclear weapons states, India would henceforth preach disarmament to others while keeping nuclear weapons for itself.

The discussions and the country statements made in the NSG made clear that the moratorium on tests had been now been made multilateral, and sanctions would follow if India tests again. The access to enrichment and reprocessing technologies were hedged in ways (referring to NSG Guidelines paras 6 and 7) that India has very little possibility of getting such technologies. The US made clear in its statements to the NSG that it was not proposing to supply this to India and this was endorsed by all countries20 that do have such technologies. However, though it did not secure the clean and unconditional waiver it was seeking, India could very well argue that it had finally broken the nuclear sanctions regime.

While the Indian establishment and the media were celebrating what they perceived as a victory in breaking the nuclear sanctions regime, some rude shocks followed soon after. The Presidential Determination21 that Bush submitted to the US Congress asking it to now pass the 123 Agreement, made public the US administration's authoritative interpretation of the 123 Agreement. On 2 September 2008 a few days before the NSG meeting, Congressman Berman, who heads the Foreign Relations Committee of the Congress had made public22 the answers of the State Department to 43 questions asked by the committee. The Presidential Determination and the documents accompanying it left no doubt that in the exchange of notes between the UPA and the Left, the Left's reading of the 123 Agreement was much closer to the truth than the UPA's. The US declared that the fuel supply assurances were not legally binding; the fuel reprocessing consent was only notional and would require a subsequent agreement on procedures and arrangements; it had not committed to any life time supplies; the right to terminate the agreement was unfettered and all cooperation could cease immediately if the US so willed; the ENR technologies were “sensitive technologies” and India would not have access to them and so on. It also noted

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approvingly of India having aligned with the US on the Iran issue. All in all, it was a blow to the claims that the UPA government had been making.

While the Indian government has officially yet to react to the US Presidential Determination and its accompanying documents, in private it has been fuming about US duplicity. The problem with the UPA government and Manmohan Singh is that having placed all their eggs in the US basket, it has virtually no room to manoeuvre. If it says it was misled by the US, it will have to walk out of the deal with nothing to show for risking their government over it. The US can now turn the screws on the Manmohan Singh government without any fear of repercussions. The only recourse for this government is now to claim that once the 123 Agreement is over, they can then utilise the NSG waiver to get better terms from other suppliers if the US goes back on its commitments. The reality is that once having walked into the US net, it will find it very difficult to walk out of it again.

Disarmament and NPT From the Nehru period down to Rajiv Gandhi, India had stood for nuclear disarmament. It opposed the NPT regime as discriminatory, allowing the nuclear weapons States to maintain and even augment their nuclear arsenals while preaching the virtues of abstinence to others. The phrase “nuclear apartheid” originates from India's view of the NPT regime. It was in June 1988 that Rajiv Gandhi, addressing the UN General Assembly, had proposed a bold plan for nuclear disarmament: “Nuclear war will not mean the death of a hundred million people. Or even a thousand million. It will mean the extinction of four thousand million: the end of life as we know it on our planet earth [sic]. We come to the United Nations to seek your support. We seek your support to put a stop to this madness.”23 Even during the Comprehensive Test Ban Treaty (CTBT) discussions, India had indicated a willingness to sign the treaty if the nuclear weapons States were willing to give a definite timetable for disarmament. It was under the BJP-led government that the first shift in position on NPT and disarmament took place. Post 1998, the argument was advanced that India's opposition to NPT was merely because it was not accepted as a nuclear weapons State. This is exactly what India's critics had earlier argued: that India was essentially hypocritical in its opposition to NPT. The UPA government under Manmohan Singh has continued this line,24 with only lip service to disarmament. India is now in the same company as the nuclear weapons states, proclaiming disarmament but practicing non-proliferation.

The 123 Agreement is the first international agreement in which India is formally accepting the goal of non-proliferation. The Preamble to the 123 Agreement states, amongst other things, that the two signatories are “mindful of their shared commitment to preventing the proliferation of weapons of mass destruction.” This is also the refrain in the 5 September 2008 statement of Pranab Mukherjee quoted earlier.

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Non-proliferation is no longer taboo or an expression of nuclear apartheid. India is willing to join the American bandwagon to promote non-proliferation; from an opponent of non-proliferation, India has now become its latest champion.

However, the goal of nuclear disarmament cannot be put on the back burner any more. Nuclear weapons are a dangerous and a persistent threat to the existence of all life on the planet. The argument that the proliferation firewall can be held indefinitely is a dangerous illusion. As the technology of the fuel cycle becomes easier to acquire, it is impossible that the regime of technology controls that the US is proposing and India has now joined, will continue to hold. It is only the very short-sighted who believe that a complex system of sanctions and restrictions will allow the continuation of nuclear weapons in the hands of only a few countries. By this, they are courting global disaster as it is only driving other countries down the path of acquiring nuclear weapons. Even the completely amoral proponents of the realist school of national interest such as George Schultz and Henry Kissinger, are now arguing for immediate measures for nuclear disarmament.25 Either the US and other nuclear weapons states take steps to disarm, or there will be many more declared and undeclared nuclear weapons states. If this eventuality comes to pass, the world will become an infinitely more dangerous place.

If India wanted to break out of its nuclear isolation, was this the only way? India basically needed nuclear fuel. For securing nuclear fuel, a much better strategy would have been to engage with the other countries that are also members of the NSG and not just restrict this engagement to the US. This would have preserved India's policy of non-alignment, while not compromising on disarmament.

If India has to take measures for its energy security, its primary concern must be to secure oil and gas supplies.26 It is in this context that peace and stability in West Asia are of such vital concern for India. The US pressure on India on the Iran-PakistanIndia pipeline is well-known. It seems short sighted even in energy terms on India's part to focus on nuclear energy while giving up access to Iran's gas and oil.

If we take stock of what is happening, it is clear that India stands to lose more than it will gain from the deal. India becomes a junior partner in the US strategic scheme, most of the technology embargoes stay, it becomes a party to the even more discriminatory fuel cycle programme of the US, renounces cheap gas from Iran all for the dubious benefit of choosing an expensive and dependent route for development of nuclear energy, which, in any case, is of marginal importance in the energy scenario.

India has abandoned its long-held positions of an independent foreign policy and nuclear disarmament for primarily a seat at the high table, courtesy the US.

Prabir Purkayastha is a qualified engineer and power expert.

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Endnotes 1. See R. Nicholas Burns, “America's Strategic Opportunity With India: The New U.S.-India Partnership”, Foreign Affairs , November/December 2007.

2. Condoleezza Rice, testifying before the Senate Foreign Relations Committee (5 April 2006), “This initiative will create opportunities for American jobs. Nuclear cooperation will provide a new market for American nuclear firms […] The initiative may add as many as three to five thousand new direct jobs in the United States and about ten to fifteen thousand indirect jobs in the United States, as the United States is able to engage in nuclear commerce and trade with India.”

3. It is known that India is negotiating for four French and four Russian reactors. The testimony of William Burns in Senate states that India is planning to procure 10,000 MW of reactors from the US and two sites have already been identified for them. Statement of William J. Burns, Under Secretary of State for Political Affairs, 18 September 2008, Senate Foreign Relations Committee. A detailed account of the energy issues can be found in Prabir Purkayastha, “Coming out of the Nuclear Cold”, in Prabir Purkayastha, Ninan Koshy, MK Bhadrakumar, Uncle Sam's Nuclear Cabin, (Leftword Books, November 2007).

4. Integrated Energy Plan, Planning Commission, 2006.

5. William Burns, Statement to the Senate Foreign Relations Committee on 18 September 2008, http://foreign.senate.gov/ 6. Interestingly Overseas Basing Commission already lists India as providing "cooperative security locations (CSL)", one category of US bases. The Defence Framework Agreement and the pending Logistics Service Agreement obviously envisage this kind of support to US Armed Forces. Details on CSL can be found in the Report of the Commission on Review of Overseas Military Facility Structure of the United States, 2005 http://www.fas.org/irp /agency/dod/obc.pdf.

7. Nicholas Burns article quoted above states that this was the substance of the offer that Condoleezza Rice made along with the offer to de hyphenate US relations with IndiaPakistan.

8. The Separation Plan is the key document that is referred to by both the IAEA and the NSG. http://www.dae.gov.in/press/sepplan.pdf.

9. H.R. Conf. Rep. No. 109–721, at 22 (7 December 2006) Hyde Act Joint Explanatory Statement of the Committee of Conference.

10. International Atomic Energy Agency (IAEA), Communication of 10 May 2005 received from the government of Sweden on behalf of the participating governments of the Nuclear Suppliers Group, INFCIRC/539/Rev.3 Date: 30 May 2005.

11. http://www.mtcr.info/english/index.html 12. The Wassenaar arrangement came as a post-cold war successor to the COCOM export control regime as can be seen from the Genesis of the Wassenaar Arrangement from its official website url: http://www.wassenaar.org/introduction/origins.html 13. The Article IV of NPT makes it clear that the fuel cycle for nuclear plants is a right of the NPT signatories. Non-proliferation Treaty. http://www.un.org/events /npt2005 /npttreaty.html 14. As the Prime Minister put it, “our security concerns arising from proliferation activities in our extended neighbourhood have shaped our position.” Manmohan Singh, suo moto Statement on India's Iran vote in Parliament, 17 February 2006.

15. Stephen G. Rademaker former assistant secretary, US State Department stated “the best illustration of this is the two votes India cast against Iran at the IAEA,” he said, adding: “I am the first person to admit that the votes were coerced [in] India's anti-Iran votes were coerced”, Siddhartha Varadarajan, The Hindu, 16 February 2007.

16. Details of Left Party's objections can be found in the documents here: http://www.cpim.org/nuclear/09042007-nuclear-deal.htm

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17. The terms of reference of the committee was to “look into certain aspects of the bilateral agreement, the implications of the Hyde Act on the 123 Agreement and self-reliance in the nuclear sector; the implications of the nuclear agreement on foreign policy and security cooperation”. Reproduced in the “Left Stand on the Nuclear Deal”, July 2008.

18. In a piece in Hindu, M.K. Bhadrakumar writes “the UPA government cannot pretend that the sort of 'strategic partnership' it is gearing up for — via the 'Malabar Exercises' or the 'Red Flag' exercise in Nevada in August — is no different from what India has with Albania.

(Yes, believe it or not, this was exactly what the UPA leaders maintained with the Left parties within the four walls of their famous committee cogitating over the nuclear deal).”

22 September 2008.

19. For the view that the safeguards would be in perpetuity, Prabir Purkayastha, “Does the IAEA agreement hide us from the Hyde Act?”, The Hindu, 14 July 2008. For the contrary view, see Siddhartha Varadarajan, “Parsing the India-specific safeguards agreement news analysis” , The Hindu, July 12 2008.

20. “A 45-nation group that governs trade in nuclear equipment and materials privately agreed last weekend that none of its members plans to sell sensitive technologies to India, according to sources familiar with the discussion. The agreement undercuts one of the Indian government's key rationales for seeking a civilian nuclear deal with the United States—that it would open the door for 'full civil nuclear cooperation' with the rest of the world”, Glenn Kessler, Washington Post, 12 September 2008.

21. The set of documents sent by President Bush to the US Congress can be found here: http://www.internationalrelations.house.gov/press_display.asp?id=555 22. http://www.hcfa.house.gov/110/press090208.pdf 23. “A World Free of Nuclear Weapons”, Prime Minister Rajiv Gandhi at the United Nations General Assembly. New York, 9 June 1988. http://ww.indianembassy.org /policy/Disarmament/disarm15.htm .

24. Completing What NDA Had Begun, J Thiagarajan, People's Democracy, 26 October 2007 25. The Wall Street Journal in its issue of 5 January 2007, published a call for nuclear disarmament from four former Cold War veterans of the US, including Geoge Schultz and Henry Kissinger.

26. Even Perkovith, no great admirer of the India-US Nuclear Deal finds the US attempts to block the Iran-Pakistan pipeline against India's energy interests. “Perversely, the United States is trying to block a highly cost-effective way to get natural gas to India, via an overland pipeline from Iran through Pakistan.” George Perkovich, “Faulty Promises: The U.S.-India Nuclear Deal”, Policy Outlook (Carnegie Endowment for International Peace, September 2005) No. 21.

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Fossil Fuel Crisis in South Asia Dr Mukul Kulshrestha and Dr Tripta Thakur

T

he South Asian region, comprising Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka, is notable for its large and rapidly growing population which now exceeds one-fifth of the world total, amounting to over 1.4 billion people. Despite rapid economic growth since the 1990s, the nations in the region are typically characterised by lowest per capita incomes in the world. South Asia, with a gross national income (GNI) per capita at $594 in 2004, is home to 47 percent of the world's poor living on less than $1 a day (The World Bank Group 2007). South Asia represents a region where 35 percent of children do not get proper primary education (Inter Press Service News Agency 2003), and the infrastructure remains abysmally poor. The region is home to more than 200 million people lacking access to safe drinking water and 800 million without proper sanitation services (Davis 2004). Compounding this infrastructure deficiency is the fact that the region also includes several countries ranked in the lower quartile of Transparency International's Corruption Index (Transparency International 2007).

Despite significant progress in the last decade-and-a-half, South Asia still lags behind other areas of the world, and is the second poorest performer after Sub-Saharan Africa (Asian Development Bank 2007). On a per capita basis, the region shows the lowest estimated investment per person for land, network and bulk infrastructure, housing, schools and health clinics, and community development (UN Millennium Project 2005; Mukul Kulshrestha and Tripta Thakur 2007), indicating that the region comprises weak social and environmental indicators (Ahmed and Bery 2004; Mukul Kulshrestha and Atul K Mittal 2005).

All of this indicates that South Asia remains significantly relevant to the global well being of humanity, making the development of this region absolutely vital. In a world where economies, financial markets and resources are being increasingly felt to be globally linked, no development can come about without substantial energy inputs.1 It is no wonder then that South Asia is experiencing rapidly increasing energy demands, and has been recognised as a growing contributor towards global emissions of carbon dioxide (Asian Development Bank 2008).

Apart from the likely environmental constriction, there remains another significant constraint to the possibility of accelerated development in the region, and this has emerged in the form of the ongoing fuel crisis that is now engulfing much of the world. Considering the sheer population and the abysmally weak social and economic conditions prevalent in South Asia, and the resultant pursuit of member countries to accelerate development, for the region this global fuel crisis is likely to impose

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significant fallouts.

For the first time since 1973, the world has been hit by a combination of record oil and food prices, both of which are intimately linked. Such oil and food prices are destabilising elements for the global economy because of their potentially severe growth, inflation and distributional effects, and in terms of their impact on income distribution, inflation and poverty (World Bank 2008). However, the challenge of crafting appropriate policy responses is made much harder in the context of rising oil prices and ensuing fiscal and balance of payments pressures. Continued high and volatile food and fuel prices will aggravate inflationary pressures, constrain fiscal expenditures for vulnerable groups and further endanger the poor. The high food and energy prices pose a serious challenge to global economic stability and growth, and risk reversing years of progress in many poor countries, including those in South Asia.

Genesis of the Global and Regional Fuel Crisis The current fuel crisis has been triggered by an unprecedented rise in crude oil prices, and the extreme volatility associated with these prices. Oil is a particularly efficient source of energy, and the last hundred years or so of its widespread use have given humankind a huge energy roll-over prize. That energy has gone into much more than petrol and diesel fuel for transport by having gone into producing food on an industrial scale—food that has created a massive worldwide population explosion. Oil does not just power the machinery that tills the soil, plants and tends the crops, and harvests them. It is also the key ingredient and power behind the manufacture of the fertilizers and pesticides without which modern agriculture cannot be conceived. It is again oil that provides the energy that transports the crops grown, processes them and ships them around the world for distribution. Likewise, modern cities cannot function without vast amounts of cheap energy since modern services in urban centres depend on huge inputs of energy.

Thus, while the initial phase of oil decline will merely create massive economic instability and hardship, as the process advances it threatens to cause the very fabric of the modern world to unravel. Contrastingly, the optimists talk of the benefits to be had from a simpler lifestyle that is closer to nature, more sustainable and more about deep-rooted values than short-term consumerism.

Are we Into the Peak Oil? "My father rode a camel. I drive a car.

My son flies a jet-plane. His son will ride a camel." — A Saudi Saying Oil is essentially a finite and limited resource, formed millions of years ago from the remains of vast numbers of microscopic sea creatures, under certain geological conditions. Geologists have now become adept at spotting rock formations that might contain oil and, consequently, it is possible that most of the really big fields that are readily explorable have already been discovered. Apparently, the oil fields that are

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easiest to exploit, and which contain the best quality oil, have largely been used up.

What is left is harder to get at, of poorer quality and less valuable as an energy source, and such fields are therefore likely to impose greater environmental hazards than ever before. Hence, even though some new fields are still being discovered, the overall production is set for an inevitable decline. At the same time, with the careless consumerism of the developed nations and the quest for rapid industrialisation amongst the developing countries, global demand for oil is rising sharply.

Peak oil is the time when oil production achieves a brief peak, almost a plateau, and then goes into decline, and in the meanwhile the demand for oil keeps rising. This will inevitably result in steep price rises, which can lead to recession and to a temporary crash in demand for oil and hence a temporary drop in the price of oil, making it harder to develop reliable alternative sources of energy. However, the increase in the world's population, and the increasing pace of economies being much more industrialised2—and hence oil-dependent—will again ensure that the worldwide demand for oil will outpace worldwide production of oil by a significant margin. As a result, the price will again skyrocket, oil-dependant economies will crumble, and resource wars and eco-conflicts may explode. The issue is not one of "running out" so much as it is not having enough to keep our economies running. Oil-based economies such as ours do not have to deplete their entire reserve of oil before they begin to collapse. A shortfall between demand and supply as little as 10–15 percent is enough to wholly shatter an oil-dependent economy and reduce its citizenry to poverty. The effects of even a small drop in production can be devastating. For instance, during the 1970s' oil shocks, shortfalls in production as small as five percent caused the price of oil to nearly quadruple.

Thus the post-peak world faces a roller-coaster of price gyrations, which will be made worse by the fact that oil speculation will become evermore intense. A look at the oil prices in recent times (Figure 1), reveals such wild fluctuations; the oil peaked at $147 a barrel in July 2008 before cooling off to below $100 mark in September 2008, and again fluctuating to cross $105 a barrel mark at the time of writing this paper in September end, 2008. Speculation is already rife that a serious oil supply crisis is looming, which could push prices above $200 a barrel in less than a year.

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Figure 1. Crude Oil Prices since 1970 (Source: BBC, 2008a)

A number of factors may be responsible for such soaring oil prices:

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

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Weakening dollar as the US struggles to tackle its financial crisis. Dollar weakness encourages financial investors to look for other more lucrative investment opportunities, with oil topping their list. More so because the oil is traded in dollars.

Crude supply concerns: Analysts say growth in global supplies is failing to keep pace with growth in demand. While supplies from countries such as Russia are thought to have peaked, countries like Saudi Arabia with spare capacity have been reluctant to boost outputs substantially.

Demand growth: Global thirst for oil is intense. Demand has risen by about 3 million barrels a day since 2005, and is expected to rise by 32 million barrels a day in the next two decades. The US remains the world's largest oil consumer and high individual fuel usage continues to put pressure on crude stockpiles. Besides, rapidly growing China and India are forecast to account for 40 percent of the growth in oil demand by 2030, as industries grow and demand for travel and transportation increases.

Political instabilities: Much of the world's oil is concentrated in volatile regions, leading to fears of frequent and unpredictable disruptions to supplies. Despite oil output being at a six-year high, Iraq is still beset by violence while militant groups in Nigeria's main oil-producing region have recently impeded about a quarter of its output.

Market speculation: Oil experts say the price surge cannot be explained by the fundamental ratio of supply to demand and point their fingers at market speculators, who are making huge amounts of money betting on the direction of

타prices,

in turn forcing prices higher. Traders may also be simply hedging their investments against future market developments to reduce risk. The International Monetary Fund (IMF) is already examining the role of traders in the price spike.

Energy Overview for South Asia Economic and population growth have led to rapid increases in energy consumption in the South Asian region in recent years. In 2003, South Asia accounted for approximately 4.0 percent of world commercial energy consumption, up from 3.1 percent in 1993. Despite this growth in energy demand, South Asia continues to average among the lowest levels of per capita energy consumption in the world, but among the highest levels of energy consumption per unit of gross domestic product (GDP), indicating large process inefficiencies.

The Energy Information Administration (EIA) estimates of South Asia's primary energy consumption showed an increase of as much as 52 percent between 1993 and 2003 for commercial energy sources. Figure 2 represents South Asia's commercial energy mix in 2003. However, there exist significant variations within the region (Table 1). A common feature of this variation is member countries' large dependency on petroleum oil, indicating their vulnerability to the fuel crisis triggered by rising oil prices.

6.0%

1.0% 0.3%

13.1% 44.2%

35.4%

Coal

Petroleum

Natural Gas

Hydroelectricity

Nuclear

Others

Figure 2. Commercial Energy Mix in South Asia (Year 2003) (Source EIA 2006)

Table 1. Dominant Energy Mix for Commercial Energy Production in Countries of South Asia (Year 2003) (Source: EIA 2006)

Country Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka *Year 2004-2005 data

Dominant Fuel Type Natural Gas (80 %)* Hydroelectric power (82%) Coal (52%), Petroleum (34%) Petroleum (100%) Petroleum (44%), Hydroelectric power (37%) Natural Gas (41%), Petroleum (38%) Petroleum (84%)

36

Figure 3. Share of Total Primary Energy Supply in South Asia (Year 2005) (Source: IEA 2007)

The countries in South Asia remain net importers of oil and coal, while India, the largest player in the sub-continent, also imports natural gas (Table 2). Significant proved reserves are available for most of the fuels in the member countries. Table 2 also indicates that the heavy dependency on fossil fuels has led to significant CO2 emissions from the region.

It may be noted that animal waste, wood, other biomass, and renewables, account for a large proportion of the total primary energy supply in South Asia3 (Figure 3).

Geothermal, solar and wind sources presently comprise only 0.1 percent of the total supply. Hence the current fuel crisis is likely to enhance research in these areas, and will probably drive national policies in the region to encourage applications of solar, wind and geothermal energies to an unprecedented degree. The environmental benefits resulting from such policies are the only good news in an otherwise gloomy situation triggered by an unparallel rise in oil prices. In this sense, the ongoing fuel crisis in South Asia presents a new opportunity for the region to review its choice of energy mix, and to pursue policies that shield it from such future incidents, even as the experts predict that oil may in its next cyclical upturn touch $200 a barrel.

The proportion of nuclear energy for commercial inputs remains at a paltry one percent, and is now likely to accelerate, subsequent to the near certainty over the ratification of the Indo-US nuclear deal for civilian cooperation, and a clearance by the Nuclear Suppliers Group (NSG) to its members to do nuclear commerce with India.

37

Table 2. Energy Production and Consumption, and CO2 Emissions in South Asia (Data Source: EIA 2008a) 2007

834.6

2005

2572

688.6

853.6

2006

F

2722

697.5

880.5

2007

5

0

0

2005

5

0

0

2006

F

6

0

NA

2007

17

0

0

2005

17

0

0

2006

17

0

NA

2007

345

65.63

68.22

2005

345

65.67

68.26

2006

340

65.2

68.7

2007

84

0

-0.51

2005

86

0

-0.5

2006

0

-0.5

2007

Srilanka

NA

2438

664.6

Pakistan

1

0

Nepal

0

F

Maldives

0

India

0

1

2006

0

Bhutan

6.75

1

2005

94

6

2007

6.75

F

2006

6

Bangladesh

6.75

90

2005

6

F

Country Year

86 83 33 0.028

87 33

0.4

0.1 0.1

0 0 0

0

0

1 0

0

0 0

0 NA 0

0

0

1 0

NA

NA NA

NA NA

NA

0

F

1 0

1018.8

473.2 507.3

1055.9 1066.5

1603 2255

497.2 542.8

1269.2 1348.7 213.3 NA 32525 38880

5.417

1075.3

5.848

1718 2255

NA

NA NA

NA NA 37960

NA

5.625

2256

F1841

0

0 0

0 0 0

0

0

5 0

0

0 0

0 NA 0

0

0

5 0

NA

NA NA

NA NA

NA

0

F

6 0

7.4

0 0.3

0 0 0

0

0

17 0

7.2

0 0.3

0 NA 0

0

0

17 0

NA

NA NA

NA NA

NA

F

F

0

17 0

77.9

5.4 8.5

0.289

277 269

5.6 8.3

1112.4

0.289

277 269

NA

NA NA

1087.7 1112.4 NA 0 NA NA 26830 28153 28000

1087.7

68.6

NA

0.289

269

F271

F

2.8

0 0.1

0 0 0

0

0

85 48

2.9

0 0.1

0 NA 0

0

0

87 50

NA

NA NA

NA NA

NA

F

F

0

529.7

NA

Natural Gas (Billion Cubic Feet) Production (Dry natural gas) Consumption (Dry natural gas) Net Imports ** Proved Reserves

Coal (Million Short Tons)

NA NA

NA NA

2 0.4

NA NA

NA NA

661.6 488.5

NA NA

NA NA

0.2 0.2

NA NA

NA NA

2.4 1.9

NA NA

NA NA

89.8 67.1

NA NA

NA NA

8.4 7.1

NA NA

NA NA

89 50

NA NA

494.4 529.7 NA 0 NA NA 10600 5000 5000

494.4

0 0.8

NA

Petroleum (Thousand Barrels per Day) Total Oil Production * Crude Oil Production

79 33 0.028

0 0.8 14.6

88

Consumption

0.056

Production Consumption

14.6

Net Imports** Refinery Capacity Proved Reserves (Billion Barrels)

Net Imports ** (Trillion Btu)

21.3 19.5

NA NA

NA

NA NA

NA

0 0.2

NA

3

NA NA

NA

NA

NA NA

2280

NA

1.6 2.3

NA

19.4

NA NA

NA

NA NA NA

5326.1

NA

NA 0 0.1

NA

NA

0.6 NA NA

NA

12.38

NA NA NA

1580.2

NA

NA 0 0

NA

NA

0 NA NA

NA

121.5

NA NA NA

7044.8

NA

NA 11.7 16.2

NA

NA

137.6 NA NA

NA

2.95

NA NA NA

4000.9

NA

NA 0 0

NA

NA

0.5 NA NA

7437.9 NA

0.76

NA NA NA

NA

NA

NA 0.5 0.7

NA

NA

4.7

Electricity (Billion Kilowatthours) Net Generation Net Consumption Installed Capacity (Gw)

Production Consumption

1118

Total Primary Energy (Quadrillion Btu)

Energy Intensity***

1165.7

Carbon Dioxide Emissions (Million Metric Tons of CO2) NA

NA

0.32

NA

NA

Total from Consumption of Fossil Fuels

***Energy Intensity=Total primary energy consumption per dollar of F implies forecast value; NA implies data Not Available

39.8

*Negative value indicates refinery processing loss; **Net Imports = Exports-Imports..; gross domestic product using purchasing power parities (Btu per (2000) U.S. Dollars

38

The Fossil Fuel Crisis The Oil Crisis: Implications for South Asia South Asia contains around 0.5 percent of the global reserves, amounting to 6.2 billion barrels of oil. In 2005, South Asia consumed around 3.09 million barrels per day (bbl/d) of oil, and produced approximately 0.93 million bbl/d, making the region a net oil importer of around 2.2 million bbl/d (EIA 2006). Much of South Asia's oil production comes from India (around 858,000 bbl/d in 2005). Most of the remainder of South Asia's oil production comes from Pakistan (around 62,000 bbl/d in 2005).

With growing demand for transportation fuels and industrial power being behind the growth in South Asian oil consumption, South Asia's oil imports are projected to more than double by 2020 (EIA 2006).

For South Asia, the global oil crisis has large implications as the region is endowed with the lowest global proved oil reserves (Figure 4), and with its large population concentration, poverty, and rapid development, it is likely to suffer the most. It is no wonder that protests over rising inflation and food prices have been fuelled in India, Pakistan and Nepal, and have been widely reported in the media.

Figure 4. Proved Global Oil Reserves* (2006) (Source: BBC 2008b)

The countries in the South Asian region remain very highly dependent on oil, and this dependency has increased over the years (Figure 5). They also remain significant net importers of oil (Figure 6), with India—a growing net importer of oil—and Pakistan

39

Net Import (Thousand barrels per day)

Figure 5. Evolution of Oil Products Consumption in South Asia from 1971 to 2005 (Source: IEA 2007)

2005

2006

2007

2000 1800 1600 1400 1200 1000 800 600 400 200 0 Bangladesh

Bhutan

India

Maldives

Nepal

Pakistan

Srilanka

Country Figur e 6. Net Import of Oil by various Countries in South Asia (Data Source: EIA 2008a)

being the largest importers, and hence being likely to be affected to a greater extent.

As a result, the fuel subsidy burden, which is very high across countries in South Asia, threatens to only mount up.

Response of the Governments While the Indian government—that imports nearly 75 percent of its crude oil requirements, but subsidises the cost of domestic fuel products to help contain inflation and protect the poor—has passed on some of the global price increases to domestic consumers in recent months, changes to the subsidy regime have been modest. There have been two increases in petrol and diesel prices this year, the most recent a 10 percent increase in June 2008, sparking protests. As the fiscal burden on the government becomes increasingly severe, the case for further reform has become compelling. However, the Indian government is cautious about phasing out fossil fuel subsidies, primarily because of the impending elections. Yet, the inflation figures have jumped from near 4 percent levels to above 12 percent in less than a year, causing

40

wide resentment. The government, on its part, has announced austerity measures that will curtail all non-essential spending, a move aimed at saving $1.4 billion. Ministries and government departments have been advised to cut down on foreign and air travel and not to hold meetings in five-star hotels (BBC 2008c).

The case of Pakistan is a bit more complicated. For the Pakistanis there were as many as five price rises in four months. Soaring oil and food prices have pushed inflation in Pakistan to its highest level in more than 30 years (BBC 2008d). “Under severe pressure as the economic climate deteriorates, the government in Islamabad has announced the abolition, by December, [sic] 2008, of fuel-related subsidies. However, to bring domestic petrol prices in line with international market prices, Pakistan would have to raise the price of petrol by about 20 percent. Prices of diesel and kerosene, which are more commonly used, would have to be raised even more�

(Oxford Analytica 2008). It remains to be seen if such subsidy cuts will actually be implemented, as increase in prices of fossil fuels could be politically costly for the coalition government which is already struggling with security problems and disquiet over food price rises.

In Bangladesh, diesel and kerosene prices went up by 37.5 percent a litre, while the price of a cylinder of cooking gas by 66 percent by July 2008. Over the past year Bangladeshis have already seen the price of staple foods like rice double (BBC 2008d).

With diesel going up to 80 US cents a litre, the cost of transporting food and other goods around the country will become much more expensive. Even so, the government will still spend almost $1.5 billion on subsidising fuel during the next one year.

Similarly, in the first six months of 2008, rising global oil prices made the fiscal burden resulting from Sri Lanka's subsidy regime unsustainable, and as a consequence retail petrol prices were increased by 25 percent during this period and diesel prices by 35 percent. However, the sharp rise in global and national food prices has brought about wide public resentment.

In Nepal, the resentment over increased prices is reflected in bus operators' strike over rising fuel prices, as the government prohibited the transporters to put fares in line with the price of fuel, which rose by 25 percent in June 2008 (BBC 2008e). The government's position was that price rises are needed to pay for Indian fuel supplies, since India has raised fuel prices due to rising world prices. Anger over fuel caused chaos in Nepal, with strikes and protests by a number of different groups. For several days groups of students affiliated to political parties attacked government vehicles, burned tyres and threatened drivers in Kathmandu. Finally, the authorities had to announce that students would receive a 45 percent discount on fares (ibid.). The fuel price protests add to the government's troubles as it struggles to keep its administration together after Maoist ministers said they were resigning from the cabinet.

41

Fallouts of the Oil Crisis Thus, the immediate fallout of such increases in oil prices could be a build-up of national turmoil in respective countries, furthering to the problems of the weak/coalition governments. Price rises in the region can lead to political turmoil, public protests and violence, throwing the civil society into deep chaos. However, long-term impacts could be as severe: rising oil prices would fuel inflation that would adversely affect the large population of the poor; lead these countries into fiscal burdens that would affect national currency rates, the imports and the exports; and adversely affect the industrial growths very significantly. Food prices may skyrocket, and can form a potential trigger for further political instabilities in the region. Such instabilities in a confined region can spell doom for political relations amongst neighbouring countries of the region, as governments often try to distract public away from the immediate domestic concerns to security concerns with neighbouring countries. In short, oil price rise can only bring large turbulence into the entire region on virtually every front—political, social, and economic.

Case of Other Fuels

Dry Natural Gas (Billion Cu. Ft.)

Natural Gas Since 1980, the world's proved reserves of natural gas have increased at an average annual rate of 3.4 percent (compared with 2.4 percent for oil), owing to a number of exploration successes and improved assessments of some existing fields. The volume of proved gas reserves has more than doubled during this period (WEC 2007).

Worldwide, the total natural gas consumption is likely to keep increasing in future, the projections forecast it to increase from 104 trillion cubic feet in 2005 to 158 trillion cubic feet in 2030 (EIA 2008b), with natural gas remaining a key energy source for industrial sector uses and electricity generation throughout the projection.

World oil prices are expected to remain high, and as a result natural gas replaces oil wherever possible. In addition, because natural gas produces less carbon dioxide when it is burned than coal or petroleum, it emerges as the preferred option for 1600

Production

Consumption

1400 1200 1000 800 600 400 200 0 Bangladesh

India

Pakistan

Note : Bhutan, the Maldives, Nepal, and Sri Lanka do not currently produce or consume any natural gas Figure 7. Production and Consumption of Dry Natural Gas in South Asia (Year 2006) (Data Source: EIA, 2008)

42

governments implementing plans to reduce greenhouse gas emissions.

In South Asia's endeavour to diversify from expensive oil imports, natural gas has been perceived as a potent option for generating power from upcoming power plants in the region. As a result, natural gas usage has increased rapidly in South Asia over the last decade, growing about 67 percent between 1993 and 2003. However, the consumption of natural gas is confined to India, Pakistan and Bangladesh, with India being the dominant consumer (Figure 7), and a net importer. Bhutan, the Maldives, Nepal, and Sri Lanka do not currently produce or consume any natural gas. At present, all natural gas production in South Asia is consumed domestically.

In 2006, South Asia's proved natural gas reserves were estimated at 62.1 trillion cubic feet (Tcf), approximately one percent of the world total, with potentially larger resources suspected but unproved. India's and Pakistan's reserves are 38.9 Tcf and 28.2 Tcf, respectively, while the only other South Asian country with reserves, Bangladesh, contains approximately 5.0 Tcf. Foreign energy companies including Shell and Unocal believe that Bangladesh’s reserves may be higher than the official figure. There are estimates that Bangladesh contains 32.1 Tcf in additional “undiscovered reserves” (US Geological Survey 2001). If these estimates prove to be correct, Bangladesh could become a major gas producer and supplier to the potential market in neighbouring India.

Indian consumption of natural gas has risen faster than that of any other fuel in recent years and accounts for approximately seven percent of the country's energy demand. At nearly 1.0 Tcf in 2003, Indian gas demand is projected to significantly and rapidly increase, reaching 2.5 Tcf in 2025.4 Like India, Pakistan also plans to increase the use of natural gas for future electric power generation projects, a move that will necessitate a sharp rise in production and/or imports of natural gas.

If long-term projections of rapidly increasing gas demand for South Asia are correct, the region will require significant increases in production and/or imports. Gas imports would require construction of infrastructure—either cross-border pipelines or liquefied natural gas (LNG) facilities—and their success would likewise hinge on the successful construction of domestic gas pipeline infrastructure. A number of such infrastructure projects have already been proposed in India and Pakistan. However, these projects entail high capital costs, incurred in transmission of gas over large distances. Security concerns in the light of terrorism and political tensions amongst neighbouring countries also remain a significant risk to such projects. The IndoPakistan-Iran pipeline project has been one such case that has been pending for years now (Tripta Thakur 2006).6 It is also possible that increased demand for gas can trigger cost increases like in the case of oil. However, a diversified fuel mix is more likely to buffer fuel cost risks, than the case where a country remains dependent on a particular fuel.

43

Coal In 2005, coal accounted for 27 percent of world energy consumption of which 63 percent was shipped to electricity producers, 34 percent to industrial consumers, and most of the remaining 3 percent went to coal consumers in the residential and commercial sectors. Coal's share of total world energy consumption is projected to increase to 29 percent in 2030, and its share in the electric power sector is projected to rise from 42 percent in 2005 to 46 percent in 2030 (EIA 2008b). Thus, this rise is not likely to be as high as that seen in case of natural gas. Rising environmental concerns over global warming through greenhouse gases also cloud the choice of coal as the future fuel.

South Asia contains coal reserves of 105.3 billion short tons or approximately 11 percent of the world total, accounting for 44 percent of South Asia's energy consumption. However, nearly all of the coal in this region is produced and consumed

by India, the only South Asian country with significant coal reserves (102 billion short tons) and the world's third largest coal producer after the United States and China.

Despite its production, India still remains a net importer of coal, importing annually around nine percent of its domestic production. Power generation accounts for about 70 percent of India's total coal consumption, followed by steel and other industries.

Despite the fact that Indian coal is generally of poor quality—i.e. low in calorific content and high in ash—and primarily located far from major consuming centres, Indian coal consumption is expected to increase to 544 million short tons (Mmst) by 2010, up from 431 Mmst in 2003. As a result, South Asia's carbon emissions are expected to increase sharply in coming years.

Pakistan has limited coal reserves of 3.4 billion short tons, and therefore coal currently plays a relatively minor role in Pakistan's energy mix (six percent in 2003).

However, the discovery of large volumes of low ash, low sulfur lignite in the Tharparkar Desert in the Sindh province is expected to have a positive impact on consumption levels by fuelling large electric power plants.

Bangladesh has small coal reserves, and has consumed little coal in the past.

Bangladesh began commercial coal production in April 2003 with the opening of the Barapukuria Coal Mine, which is expected to produce one million short tons of coal per year, principally for electricity generation. Another possible coal mining project at Khalashpir is under consideration as well.

Sri Lanka has practically no coal reserves and currently consumes very little coal. Sri Lanka has approved the development of its first coal-fired plant (300 MW) on its northern coast but plans to use imported coal for fuel.

Thus with the exception of India, coal does not appear to be the future fuel for the South Asian region. The only consolation for India is that even though historically the coal prices rose sharply between 1999 ($25.89 per ton) to 2004 ($54.7 per ton), the outlook for coal prices is more positive than for oil.

44

Concluding Remarks Even as energy inputs remain vital to the underdeveloped South Asia, the region has been a hostage to the tide of rising prices of oil. This spells a grim note for regional development, and as governments try to tackle the crisis by passing on the cost increases to the people, in the short run, there could be build-up of political, social and economic instabilities in the region throwing the civil society into turmoil. The long-term impacts of pursuing the current policies, and a failure to effect change, could be disastrous for South Asia, fuelling inflation, poverty, food shortages and undermining much of the rapid development achieved in the last few years. Worse, such volatile economic and social situations can lead to simmering political tensions and conflicts, adding to the security concerns amongst the countries of the region.

However, on the flip side, the current fuel crisis also provides the South Asian countries with a never before opportunity. While prudence would dictate tightening of respective economies through fiscal measures, this is also the time when governments need to reassess and reformulate national policies in the emerging scenario. Such policies can hinge on better demand-side management; deployment of technologies that are more fuel efficient; evolving new fuel mix for the industry with focus on sources of energy such as renewables, use of bio-fuels etc.; and shift from oil to natural gas. All of this would also lead to significant reduction in the carbon emissions, something the region is often accused of.

In particular, such policies may also necessitate greater regional cooperation. South Asia can emerge with a far more integrated and interlinked energy market, taking advantage of its regional/local strengths, and through greater cooperation by ensuring that energy commodities such as natural gas are brought to the region from outside (e.g. Iran and Burma) and from within (e.g. Bangladesh). All of this, however, will require a prior addressal of security concerns and promotion of measures that foster mutual trust.

Mukul Kulshrestha is research scholar at Department of Civil Engineering, Maulana Azad National Institute of Technology, India. Tripta Thakur is energy consultant and a faculty member at the Department of Electrical Engineering, Maulana Azad National Institute of Technology, India Endnotes *Proved resources are those that the industry considers can be recovered in existing economies and operating conditions.

1. Energy is central to sustainable development and poverty reduction efforts. It affects all aspects of development (social, economic, and environmental) and affects livelihoods, access to water, agricultural productivity, health, population levels, education, and genderrelated issues. None of the Millennium Development Goals (MDGs) can be met without major improvements in the quality and quantity of energy services. Energy for sustainable development supports the achievement of the MDGs, especially the target to reduce by half the proportion of people living in poverty by 2015.

2. The global output continues to rise—it rose by 5.2 percent in 2007, led by China (11.4 percent), India (9.2 percent), and Russia (8.1 percent) (CIA 2008).

45

3.

4.

5.

6.

“South Asia continues to rely heavily on biomass (i.e. animal waste, wood, etc.) for residential energy consumption, particularly in rural areas. According to the International Energy Agency (IEA), biomass accounted for about 80 percent of residential energy consumption in 2000 and will account for 70 percent of total residential energy consumption by 2020. Because the primary end uses of biomass are cooking and heating, the expansion of electricity access, used primarily for lighting, is not expected to have a significant affect on biomass use in the near future” (EIA 2004).

“Although India's Foreign Investment Promotion Board (FIPB) approved 12 prospective LNG import terminal projects, several were delayed or cancelled in 2001 following the government's decision not to extend payment guarantees to power projects which were to have been the largest LNG consumers. An import terminal at Dahej received India's first cargo of LNG in January 2004. Construction on LNG projects in Gujarat and Kerala has proceeded, with completion dates extending through 2007. The nearly complete Dabhol LNG plant was delayed due to a cancellation of the second stage of the Dabhol Power Project and financial concerns. In November 2004, Shell began operation of an LNG terminal at Hazira, which is estimated to cost $660 million to build. The LNG facility is owned 74 percent by Shell Hazira and 26 percent by Total of France. Several other LNG terminals are in planning stages. A recent natural gas find in Burma is also seen as a potential source of supply for India. Bangladeshi officials stated in June 2004 a willingness to consider a pipeline running across Bangladesh from Burma to West Bengal in India” (EIA 2006) “Pakistan expects its discoveries, including one in January 2004, to add about 1 billion cubic feet per day (Bcfd) to its natural gas production. Pakistan may also be linked into the Dolphin Project, a scheme to supply gas from Qatar's North Dome gas field to the United Arab Emirates and Oman via a subsea link. Although Pakistan has signed an agreement to eventually purchase gas from Qatar, it seems unlikely that Pakistan will be included in the project in the near-term due to financial weakness and uncertainty about sufficient demand growth. A third possible gas pipeline would link gas-rich Turkmenistan with Dalautabad in central Pakistan via Afghanistan and continue into India. Although the governments of Pakistan, Afghanistan, and Turkmenistan have reached an agreement to develop the pipeline, financial and security challenges are likely to prevent its development” (EIA 2006).

In mid-2000 and again in 2001, Pakistan's government stated that it would permit a gas pipeline linking Iranian gas reserves to rival India to cross its territory. Pakistan would earn transit fees for Iranian gas supplied to India and be able to purchase gas from the pipeline itself. While Iran and Pakistan have shown great interest in the project, India has been reluctant to move forward due to continuing political and military tensions with Pakistan. The improvement in India-Pakistan relations over the past few years has increased interest in the plan.

References l ADB.2007. “Social Sectors in Transition”, South Asia Economic Report, Asian Development Bank, Publication Stock Number: 071307, Philippines l ADB.2008. Key Indicators for Asia and the Pacific 2008. 39th Edition. The Asian Development Bank. Philippines l Ahmed Sadiq and Bery Suman.2004. Introduction, Annual Bank Conference on Development Economics 2003: South Asia Component. Bangalore: World Bank and National Council of Applied Economic Research. l BBC. “Oil hits $100 barrel”. British Broadcasting Channel. News Channel.2008a http://www.bbc.co.uk/ l BBC. “Global oil industry in figures”. British Broadcasting Channel. News: Business.

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l l l l l l l l l l l l

l

l l l l l

l l

l l

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2008b. http://www.bbc.co.uk/ BBC. “India ministries to tighten belts”. British Broadcasting Channel. News: Breakfast.

2008c. http://www.bbc.co.uk/ BBC. “South Asians face fuel price rise”. British Broadcasting Channel. News: Breakfast.

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Kulshrestha, Mukul and Atul K. Mittal. “Water And Sanitation In South Asia In The Context of Millennium Development Goals.” South Asia Economic Journal. (Sage Publication, 2005) Vol. 6, 99-115.

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UN Millennium Project. A Home in the City. Task Force on Improving the Lives of Slum Dwellers, Earthscan, London.2005 US Geological Survey. PetroBangla Cooperative Assessment of Undiscovered Natural Gas Resources of Bangladesh. Report by USGS-Bangladesh Gas Assessment Team, Petroleum Systems and Related Geologic Studies in Region 8, South Asia. In U.S. Geological Survey Bulletin edited by Craig J. Wandrey, (2001), 2208-A. WEC. 2007 Survey of Energy Resources. World Energy Council 2007.

World Bank. Double Jeopardy: Responding to High Food and Fuel Prices, Report Number 44951, Working Paper for the G8 Hokkaido-Toyako Summit 2008.

Contract Enforcement and Raising Resources: A Bollywood Perspective Amir Ullah Khan and Zafar H. Anjum “Well, we are in the process of being Americanised. That's a general term to signify consumerism apart from other serious repercussions depending upon your world view. However, the fundamental tenet of a consumerist culture is that everything is a product. And the function of any product (film) is to serve only its basic need – [sic] in today's case it is entertainment. Now, there is nothing wrong with entertainment. There never has been. To entertain in itself is a great art. And yet ‘to entertain’ in today's times, there is a difference – [sic] there is no aesthetics involved. So, no qualms in making films based on videos, rip-offs, lift-offs, etc, etc. Aptly today's films are called popcorn movies. Eat the popcorn and throw the cardboard box away. See the movie and forget about it once you're out of the hall.”

Kundan Shah1 Hundred Years of Film Making With more than one thousand films a year, the Indian film industry is clearly the biggest in the world.2 Hindi cinema has now come full circle with the entry of big corporate players. Large firms like Reliance, Adlabs, Eros and Sony invested close to a billion dollars in nearly 150 films in 2007. Red Chillies, Shahrukh Khan's company, is getting ready for an Initial Public Offering (IPO) and will be listed on the stock exchange.

In its early days, following the First World War, the Hindi film industry was dominated by corporate entities. Film stars, directors, writers and technicians all worked for fixed salaries with big studios and the entire value chain was integrated.

Entities like the Bombay Talkies, Ranjit Movietone, New Theatres, the Imperial Film Company and Wadia Movietone ran the industry in the 1920s and 1930s. The industry was then making more than 200 films a year, with a rather well defined organisation structure and a distribution system that was run by the production firm.

Contracts were drawn up and enforced and each unit of production was tightly managed.

This paper looks at India's most powerful form of popular culture, namely Hindi cinema, also referred to as Bollywood.3 With its large audience, it is strange that this form of popular culture has been the most neglected in any serious study.4 Indian cinema is seen not only in India but also in at least 100 other countries in nearly 13,000 cinema halls, and by nearly 100 million filmgoers every week all over the

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world.

Early film-making relied on mythology, a safe area where the colonial government and its censorship laws would not worry about rebellious messages being passed.

Cinema in India came of age almost immediately after the 1947 independence and, remarkably so, kept pace with changes in the political economy. In the 1950s, movies celebrated independence and envisioned a bright future. The 1960s reflected the trauma of war, drought and food scarcity. The 1970s witnessed a goliath of government and films squirmed as they sought to grapple with dictatorial policy. In the 1980s, disillusionment had set and films vocally expressed the public's anger. The 1990s celebrated globalisation and a new openness that returned to the country after several decades of inward-looking policymaking. Cinema in the twenty-first century has continued this trend.

The Second World War turned the entire operation topsy turvy; what was completely market driven now saw increased state intervention. A few film producers were granted permits. This new system killed the studios. The market became fragmented as films entered the state list in the constitution and each state drafted its own film policy with differential rates of taxation. At the federal level, the censorship laws—brought in by the British—became tighter and import duties went up on various inputs like film stock. The partition of the country saw a massive churn as some big stars, writers, producers and directors moved to Lahore across the border.

Governance suffered, as the earlier institutions died out and the state could not set up any institutional mechanisms to back its interventions. What resulted was an entirely home grown, underground—but remarkably efficient—system that governed the world's largest film industry for more than five decades.

The film sector in the 1950s and 1960s receded into a state of disorganisation. Film financing became scarce as institutional finance was not available. The big studio with its large negotiating strength had died and individual producers were negotiating at various fronts with starts, technicians, writers, distributors and bureaucrats.

Entertainment taxes went up to nearly 150 percent of ticket costs. Ticket prices were fixed by the government. Power supply became erratic and electricity tariff kept going up. The 1970s and 1980s in India were difficult years, and not just for the film industry. The entire economic policy was confused. Controls became very stringent, duties kept going up, interest rates had reached dizzying heights and the lack of enforcement made a weak copyright law even weaker. Technology proved to be the bane of cinema as video recorders made copying simple and inexpensive. An entire nation could now avoid poorly maintained cinema halls and watch the latest releases on television, which has recently turned colour.

Economic reforms in the late 1980s and the early 1990s changed this dismal scenario.

Satellite television brought in private channels hungry for content. The fixed ticket price regime was over. Investments moved in and new air-conditioning made cinema halls more hospitable. Exports grew as the foreign market started demanding Indian cinema. Insurance companies, now freed from earlier shackles and competing for new

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business, started covering films. The film industry was granted industry status and could now access institutional finance from banks. Today foreign investment norms, now reformed, allow 100 percent foreign direct investment (FDI) in the film industry.

Sony Pictures, 20th Century Fox and Time Warner are all investing in the Indian film industry.

India today is a fast growing economy, the largest free market democracy registering an average GDP growth of 5.7 percent for the last 25 years. It has made tremendous strides in the areas of information technology, biotechnology and entertainment.

Exports have risen dramatically, industrial production has registered a steady increase year after year and the foreign reserves situation is, to make an understatement, comfortable. India is now seen as among the most attractive destinations of foreign investment by a variety of big-ticket investors.

The Winds of Change In the wake of change and reform, film financing has also undergone drastic changes.

Earlier, films were largely backed by private financiers. These money-men were, all too often, from the underworld with criminal links. In some ways, this has helped small films without big producers or stars get finance.5 Even institutions which finance films prefer to back big productions with reputed directors or stars that can, and sometimes do, raise the finance through other avenues. Institutions rarely loaned money to small film-makers. Distribution financing, wherein distributors put down money for a film, goes the same route as big institutions but with the film markets opening up, many new players have entered the game.

Film financing, though still a high risk activity, is not considered a shady enterprise anymore. Music companies in the boom years of the early 1990s began financing feature films; TV companies such as Zee and UTV entered the market. Zee had a huge hit with the film Gadar. UTV joined with Fox Searchlight to produce Mira Nayar's The Namesake. The fact that the Indian government granted industry status to the film industry in 20016 has also helped. Today, financers come from all walks of life, from venture capitalists to institutions like the Industrial and Development Bank of India (IDBI) which has created specialised film funds to invest to individual investors. As a result of granting industry status to Bollywood, various corporate houses have stepped into the film business. Because of their entry into a hitherto unorganised sector, the process of film production has become far more organised. However, the system is still star-driven.7 Similar to Hollywood, corporate houses have also brought in the culture of bound scripts and the development process. This has had a direct impact on the development and funding aspects of film-making in Bollywood.

The corporate houses focus on how they are going to raise funds so that if and when they come across concepts and stories, they are able to develop them into films.

According to Ravi Gupta, CEO of Mukta Arts, typically the corporate houses seek projects from outside and also develop projects in-house. The development of the inhouse project, however, is left to the in-house creative department. Corporate houses receive many project proposals and they have to “separate the rubbish from the gems

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that need to be polished”.8 The corporate houses identify the right projects which appear to be both financially viable and would aesthetically turn out to be good.

Simultaneously, they are always working on the funding aspects of a project and trying to put the funding together.

Earlier, film-making in Bollywood was a family-oriented business and the cost of making movies was not so high. In those days, people depended on their own resources or resources from family or friends and also on professional money lenders.

Typically a project would start off on the basis of available funds and once one got the project going, one could approach a financier, indicating to him that the project was partly done or was work in progress. Funding was then typically provided against some kind of collateral. Funding could also be provided without any collateral but then the interest rates were extremely high, going as high as three percent per month (Ravi Gupta in an interview). Over a period of time, many of these institutions have been replaced, in most cases, by banks and financial institutions. Banks and financial institutions were not allowed to fund anything that was not recognised as an industry.

When that hurdle was removed it opened up the gates for people to approach institutional finance. This also happened in the background of a lot of money flowing from questionable sources.9 Therefore, in a way, the government's decision to provide Bollywood the industry status helped the flow of legitimate and appropriate funding and curbed the flow of illegitimate funding.

Going the Hollywood Way Film-making has become increasingly expensive. The system is moving towards the Hollywood model where money is raised through institutions.10 In Hollywood, money has also reportedly been pouring in from the Wall Street. Investment firms and hedge funds have been gambling on Hollywood. Starting from Marc Cuban and Bob Yari putting money into Hollywood film production business, investment firms and hedge funds from the Wall Street also got interested in the business. “The studio business historically returns around 12% [sic] or 13% [sic] a year, and the feeling is that, with the explosion of home video and the potential of new technologies, this is probably just the base,” said producer Michael London, whose credits include Sideways (2004) and The Family Stone (2005).11 Some examples of such deals include: Paramount raising $230 million in 2004 through the Melrose Partners fund put together by Michael Blum, head of Merrill Lynch's global structured-finance division; Credit Suisse First Boston (CSFB) had raised $135 million and created a $370 million line of credit for Kingdom Films, a company CSFB had set up to invest in a slate of Walt Disney Co. movies; Bob and Harvey Weinstein's the Weinstein Co. raised about $490 million in equity and secured a $500 million credit line as part of a deal put together

by Goldman Sachs, giving the brothers a $1 billion fund to make and distribute films.

However, there are reservations at Hollywood's banking on the Wall Street for funds as various funds and investment companies have taken a hit in the aftermath of the subprime mortgage crisis in the US. Indian director Shekhar Kapur noted this issue in his blog: “Hollywood [is] as usual in complete denial [of the financial crisis in the US] and will soon have to come to terms with cost cutting as hedge fund financing dries

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up. I think personally it will be good for Hollywood to cut down drastically on overheads. Too much money never gets on the screen.”12 Similarities with the Hollywood system in contracts include fixed fees and sharing contracts, which will be discussed a little later.

In India, the "coming of Hollywood" has sparked a fresh bout of excitement in Bollywood's up-and-coming directors, especially those who do not belong to established film production houses, such as Yashraj Films, which is run by veteran film-maker Yash Chopra and his son Aditya. Emerging Bollywood writer and director Anurag Kashyap cried on his blog: "Believe me, there is going to be a change in order in this Hindi film industry […] which is why Ronnie Screwvala is on the cover of Newsweek, not Aishwarya Rai or Amitabh Bachchan." For the likes of Kashyap, the entry of Hollywood symbolises the end of the dominance of the few "mom-and-pop" variety of film-making houses in the Hindi movie industry.13 Bollywood film-maker Mahesh Bhatt once said that Bollywood is connected to Hollywood by some invisible umbilical cord. Well, now, the umbilical cord is becoming increasingly visible, thanks to Bollywood's rapid expansion. In 2006, India's film business grossed about US$2 billion, up from US$1.5 billion in 2004, reported Newsweek. Bollywood's gain in the overseas market has been stupendous.

Some Indian producers are realising up to 30 percent of their earnings from the overseas markets, with the United States, Canada and the United Kingdom as major export destinations. Other territories such as Japan, South Africa and the Middle East are fast becoming important markets for Indian films. On the other hand, Hollywood has not been able to increase its box office share in the Indian entertainment sector, swinging between five and eight percent.

The only way it can increase its box-office profits in India, Hollywood big guns reckon, is through financing Bollywood films. For their part, the whopping success of Bollywood movies has inspired Indian film-makers to think big, think global. So, when film-makers such as Screwvala start looking for overseas investors, Hollywood is ready for them. "Our ambition is to be a global Indian entertainment company — there's no reason we can't make big-budget Hollywood movies, too," Screwvala told Newsweek. His rise has been spectacular. He was the man behind last year's super-hit, Rang De Basanti, and has co-produced The Happening, a US$57-million sci-fi thriller directed by M. Night Shyamalan. An impressed Disney bought a 15 percent stake in Screwvala's UTV company for US$14 million last year.14 Apart from Disney, other players, such as Sony Pictures and Viacom, are also getting into the Bollywood game in a big way. According to Hollywood Reporter, following Sony Pictures Entertainment's debut of a Bollywood production Saawariya (2007), the company was expanding its Indian production base, planning to produce at least six films a year for Indian audiences.15 Another interesting similarity is how long-term relationships are maintained in today's Bollywood, with stars and star directors.

According to Weinstein, if producers and studios are interested in maintaining good relations with the limited pool of very talented top performers, there is another role

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for sharing contracts, which serves the purposes of bonding the executives with the stars. He writes: “We see examples of a related phenomenon, that studios provide expensive, non-contracted for, bonuses when a film is successful. For example, it was widely reported that after the initial success of The Firm, the studio gave each of the major stars and the director a new car of a type featured in the movie.”16 The Media and Entertainment sector has been growing handsomely.17 The eighth PricewaterhouseCoopers Global Entertainment and Media Outlook has ranked India as the fastest growing market in the world for spends in entertainment and media in the next five years. India will be one of the key drivers in pushing the global entertainment and media industry to US$2 trillion by 2011. The study also points out that a compound annual growth rate (CAGR) of 18.5 percent makes the Indian entertainment and media industry the fastest growing in the Asia-Pacific region.

Another report by PricewaterhouseCoopers shows that revenues across the Indian media and entertainment segment grew by 20 percent in 2006 to US$9.71 billion and the country's overall advertising spending grew by 23 percent to US$3.62 billion.

Ernest & Young (a professional services organisation) explain the growing interest of the US and other overseas investors by estimating that the industry will reach US$3 billion in 2008 a growth rate of more than 15 percent a year for five years.

Hindi films generate 5 percent revenue from home video businesses compared to the 35–40 percent of Hollywood's revenue in the US. Overseas revenues are pegged at 15 percent for Hindi films as compared to 25 percent for Hollywood films. Significantly, domestic revenues for Hindi films are 50 percent compared to 20–25 percent for Hollywood fare. Hollywood, then, with all its sophistication and genre-specific filmmaking, can never match the reach of Hindi cinema. One obstacle to its growth in the Indian market is language. English is still not spoken by the majority of the Indian population. To overcome this linguistic barrier, Hollywood started dubbing its films, giving them local language voice-overs. Jurassic Park was the first film to be dubbed in India. In 2003, 11 out of the 311 Hollywood films released were dubbed; 7 of these films were dubbed in 4 languages. Despite this, Hollywood films occupy barely five percent of the domestic market.18 Regulation The film industry in India is governed by a number of federal and state laws.

Entertainment is a state or provincial subject, so it is the local government that makes up most of the laws on screening and local taxation. However, federal legislation governs the larger issues. The Dramatic Performances Act of 1986, amended in 1963 and the Cinematograph Act of 1918 amended in 1952 govern film-making. Intellectual property issues are governed by the Copyright Act of 1957, amended in 1994. In 1981, after several strikes and boycotts by cinema workers, the Cine-Workers Welfare Cess Act, Cine-workers Welfare Fund Act, Cine-Workers and Cinema Theatre Workers (Regulation of Employment) Act were passed.

However, the issue of enforcement is quite another story. In a sector where the working is indeed chaotic, where payments are still made in cash and where

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reputations matter more than written contracts, most issues are sorted out through intermediaries and networks. This is a fascinating area of study as the entire filmmaking exercise is a mix of the art and the technology, and success depends as much on a good product as the people who write, direct and act. In a big industry that depends to a large extent on star power—and where there are only four or five stars who are bankable—film production is risky business, to make an understatement.

Barely five percent of films made through the year could qualify as blockbusters and a little more than twenty percent would break even. Several interests clash—more than one producer depending on one star, the timings of film releases so that they do not clash with each other, holiday seasons and examination timings—must be considered; spoils must be shared in some fashion and so on.

Therefore, the film sector in India is a unique case study on self regulation. An industry that employs nearly five million people—and a large number of simultaneous processes while also making huge investments that go into extremely uncertain projects—must find its own ways of handling problems. This it has done through a system of unwritten contracts, intermediaries who guarantee timelines and commitments, distribution chains that work on trust, accounting practices that make the back of the envelope exercise into a hugely developed science, while also allowing space for the new entrants that come by way of corporations19, moneyed businessmen who want a piece of the glamour, television firms, advertisers and others. Hollywood is a close parallel in the way the industry developed amidst tight state regulation, the mafia and protection.

The Process and the Intermediaries Each year, Mumbai announces at least four hundred new films. A hundred of these never go beyond the announcement stage. Some are canned after a few songs or a few scenes are filmed. Between 150 to 200 finally get completed and barring a few20, the others get released. Just as in the Hollywood of the 1950s, the beginnings of a project are fuzzy. Budgets are uncertain, costs could vary wildly, the story line could change a dozen times, actors may drop out and the writer may change halfway through. Usually the producer is the one who doubles up as the financier. Some big stars with confidence in their appeal could also become producers and, therefore, are able to bring in financiers.

In this huge array of possibilities there are some trends that could be grouped together and compartmentalised. The simple form that is seen in some cases is where the film gets commissioned. These are usually low key and low budget films. This trend started with the government setting up a film development council called the National Film Development Corporation (NFDC) to finance meaningful cinema. This has now been replicated by television firms that want films friendly to their medium.

Where the government was concerned this meant a few people deciding on contracting work out to special groups, leading to a great deal of criticism on the discretionary powers being misused, especially where the product turned to be a disaster.

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The second and a little more complicated procedure is where films are self-financed.

Large film producers, usually family run and managed, put in the initial investments themselves. This is how major business houses and foreign firms enter the movie world in India. Once the initial investment is in, a big star hired and a story line identified, the film is pre-sold to distributors. The music is sold to music companies in India and abroad and television rights auctioned. If, after all this, there is a shortfall or the budget is overshot, the production firm again steps in and arranges for the money, sometimes through borrowing at commercial rates of interest. These big negotiators are also able to leverage their strengths and ask for credit lines from vendors and stars and advances from other parties. Some of these films are also insured. One interesting development by way of new sources of funding, coupled with the development of multiplexes in urban centres, is the possibility of getting funding for non-mainstream, smaller films. Films like Khosla Ka Ghosla, Mithya, Bheja Fry, Iqbal and Dil Dosti Etc. perhaps could not have been made if the funding situation had not changed.

Earlier, getting funding for such films would be a Herculean task. Take the example of Mira Nair making her remarkable debut feature, Salaam Bombay (1988). She said in an interview: “It was very tough to get the initial investment for this movie. Channel 4 supported me through this project. They said they will give 50% [sic] raise grant, that is, the money they will fund me will be equal to the amount I raise. NFDC gave $1,50,000, I put it in $1,50,000, so channel 4 gave me $1,50,000. So the total was 4,50,000. This movie got me fame and recognition. From them onwards it is smooth sailing with no major hurdles. Now I can say that my movies make more money than Karan Johar movies.�21 In another scenario, funding comes from the distribution sector, and it could come in at any phase: before the film is made, or when it is being made or after it has been made. Earlier, the country used to be divided into several territories for distribution purposes. Even if corporates buy the film they still sell it to these smaller territories.

The producers most often do not have to deal with distributors all over the country.

Jha cites his own example of dealing with distributors and how things have changed now: "I had to deal with distributors for all territories for Mrityu Dand (1997) and Gangaajal (2003). Apharan (2005) was relatively much easier. Now that I have started working on a project, buyers have already started to come in even before the shooting. There are country rights, world rights, limited rights [...] so what happens is that a distributor becomes your partner in the project. He brings in the funds."

In Hollywood, this system is known as pre-sale, a major form of debt-financing. Its broad definition is selling the right to distribute a film in different territories before the film is produced based on the script and cast. Typically in Hollywood, once the deal has been made, the distributor will insist the producers deliver on certain elements of content and cast. However, if there are significant changes in the content or cast, financing may collapse for the project (as happened on Terry Gilliam's The Man Who Killed Don Quixote when lead actor Jean Rochefort fell sick). This can also explain the need for item numbers in a Bollywood film as distributors might demand

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such content to hedge their risks. Just as in Hollywood, the increasing reliance on presales explains Bollywood's dependence on major stars and their huge salaries, in addition to perks and a percentage of the gross profits.

Contrastingly, in the Hollywood system, production money from the distribution side spelled the “virtual elimination for a long time of bank and institutional lending as a source of financing of motion pictures.”22 In such an arrangement, the distributors would acquire percentages of the profits, addition to the distribution fees, ranging up to 50 percent.23 When a film-maker approaches a bank or financial institution (FI) for funding, typically the banks and FIs ask for corporate guarantees and in some cases they may also ask for personal guarantees. They do not give it against just the negative rights as was done by the NFDC. The NFDC would give funding against purely negative rights, and no collaterals were sought. But the NFDC was a government fund, and was run by a bureaucracy that decided what kind of films should be made and how.

According to Gupta, the reluctance of banks and financial institutions to lend money to film-makers against the negative rights is also partly to do with the fact that FIs and banks do not fully understand intellectual property valuation. They do not know how to evaluate intellectual property rights nor do they understand how evaluations are done. Naturally, in their line of business, they are far more comfortable with tangible securities. So, when they deal with films they find that they are not geared up to handling intangible assets. Therefore, they still insist on collaterals. “I do have a feeling, over a period of time as they are able to better understand and appreciate intellectual properties, they may not insist on such collaterals,” he said. However, 100 percent funding is not given for any film. Funding is usually provided for up to 75 percent of the project.

Another model gaining ground is by way of the sale of rights to a single investor who now owns the global rights to the product. This owner puts up nearly 50 percent of the entire budget and the rest is again met through distribution rights and sale of music rights. The “world rights controller” typically takes a return of ten percent of all sales.

Accounting concerns are addressed jointly by all parties, and by third parties where disputes arise. The gross revenue is estimated and all production costs, marketing expenses and others are deducted before the spoils are shared. This arrangement works only with the really big projects. Big corporate houses usually have their own distribution setup. They distribute their films themselves. Alternatively, they may give it to an outside party if the deal offered is palatable.

Big star-cast movies are sold (their distribution rights pre-sold) even before they are made. Typically 50 percent of the financial commitment is paid up during the production stage. And the balance is paid at the time the film is delivered. Other films are either financed by a group of friends coming together loosely in a partnership for sheer speculation or where some star producer of huge repute takes the risk, gets in a film processing laboratory or another third party to act as some kind of an escrow holder and then brings in all other players who accept token payments and then wait

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for the final outcome to earn their dues. This is indeed the most popular form of filmmaking in India and, therefore, is a web of unwritten contracts that are made based on established contacts, reputation, pledging of rights and future sales. This also depends to a great extent on how smoothly the project runs and how the producer is able to raise resources during the duration of the project to ensure completion. There is also great risk as interest rates in such an economy are far higher than prevailing rates.24 Distribution similarly is a complex exercise. In some cases, there are now a few large chains that buy film rights. In other cases, cinema halls need to be reached through distributors who control various territories within India and outside. This exercise could either be through outright sale of prints, or through a minimum guarantee of royalty payments, an advance payment based contract or on a commission basis. The entire operation is entirely disorganised. Each project works out a new method of sharing costs of marketing and advertising and calculating net revenue. The producer and distributor are brought together through a film broker or a film agent who arranges a preview for the distributor and then works out the transaction. Some films are easily sold as they are reliable, but a large chunk has to go to great lengths to ensure distribution. Each project is speculative and distributors play a key role in allowing new film-makers entry into the business. There have been a few new entrants who have been successful but against great odds.

After distribution comes the exhibition of the film. Cinema halls are few and far between. Of the 13,000 cinema halls for a billion film enthusiasts, nearly a fourth are travelling cinema halls or temporary structures. Film prints need to reach these makeshift cinemas and viewers be informed. Only now have cinema owners been allowed to construct smaller halls and these multiplexes have helped in rescuing some small films differentiated for special audiences. Distributors make their way to the audience through either hiring cinema halls where a basic rent is fixed and if collections are higher, the revenue is shared. Sometimes the rent is fixed and the distributor pays regardless of success or failure. The arrangement could also be through minimum guarantees or through a fixed commission ratio on the proceeds.

Conclusion The future, however, seems to be large corporate houses that run a chain of multiplexes and through sale of music rights. Indian films are strong on music, song and dance and very often films make up nearly a third of their costs through the sale of the music rights alone. Some now make money through advertising of products placed in films, which has proved to be very successful for consumer goods that reach out to millions through a film and the film star. Satellite television is also a big buyer and nearly 20 percent of revenue could come from selling television rights alone.

Export markets are big too and the DVD market, though small is growing. The economy is getting increasingly monetised and cash transactions are being reduced by the day. Financial institutions are ready to take risks and with increasing liquidity, there is more money to be lent to new and historically risky ventures. With foreign players coming in, domestic business houses showing interest and an entertainment

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sector that is growing at a fast clip, it is matter of time when the entire film industry learns the fundamentals of corporate governance and is able to raise large amounts of legitimate funding.

Amir Ullah Khan is an economist and director at the India Development Foundation.

Zafar H. Anjum is a Singapore-based writer and editor. He currently works as an online editor with Fairfax Business Media's Asia Pacific division.

Endnotes 1. Kundan Shah is a well-known film-maker in India. http://passionforcinema.com/comedyfilms-today/ 2. In the United States, Non-Resident Indians (NRIs) have made Hindi films a $100 million industry. In the United Kingdom, Hindi films regularly figure as top-earners on the global chart. In Iraq, 30 percent of all films sold are Hindi films. Hindi movies are aired nearly three times a week on cable network in Israel. Even in the 1960s, at least 111 Hindi films were exported to Greece. During the period 1954–1968, 35 Greek movie theaters were showing Hindi films.

3. India's film industry, often mistakenly called Bollywood, is the world's biggest and beats Hollywood in terms of production and viewership. India's “distilleries of pleasure” based in Mumbai, Chennai, Hyderabad, Kochi, and Kolkata, belt out about 1000 movies every year, estimated to be worth $3.5 billion, although only a drop in the $300 billion ocean of global entertainment industry. It reaches a global audience of 3.6 billion, a billion more than Hollywood's.

4. “The sheer talent on display in India's film industry is truly dazzling. The tunes are captivating, the lyrics are still astoundingly powerful. Yet again, the media, with the endless boring fixation on which star is sleeping with whom, are failing to capture the talented society of Bollywood by needlessly focusing on starry romances. Bollywood is not just gossip, it needs serious coverage. The lyricists, directors and writers must be known, their styles explored, their motivations reflected on. Richard Corliss of Time magazine has taken film criticism to a fine art. But Indian media critics, busy with their tiny jealous diatribes, have failed to take film appreciation to the levels it has been achieved elsewhere,” Sagarika Ghose, “The Talented Society”, The Hindustan Times, 27 October 2005 (http://www .hindustantimes.com/news/181_1531555,0035.htm).

5. Vaastav (The Truth) directed by Mahesh Manjrekar and based on the characters in the underworld, was said to be one such film. Chori Chori Chupke Chupke was another where the producer was actually charged and sentenced to imprisonment for dubious sources of financing.

6. The industry status was provided in the 1998-99 budget. See http://www.highbeam.com /doc/1P1-17815456.html 7. According to Prakash Jha, “film production is far more regulated than it used to be. The film production, time, the artists and the technicians are more committed to the product, to the timeframes. There is a definite time-frame. There is a process of distribution also in place. This has happened because kind of corporate culture has come. Of course, it is still star driven, meaning that if you don't have saleable actors it would be difficult to market the film. Yet there are production houses that are making smaller films. There should be a good script and if a saleable artist is attached with the project it becomes easier to make the film.”

Interview appended with the paper.

8. Ravi Gupta, CEO of Mukta Arts. Vide Ravi Gupta interview in the appendix.

9. “At least there was a feeling that money was flowing in from undesirable sources,” says Ravi Gupta. Vide Ravi Gupta interview in the appendix.

10. See Ravi Gupta's interview.

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11. Stephen Galloway, The Hollywood Reporter, http://www.hollywoodreporter.com /hr/search/article_display.jsp?vnu_content_id=1002315007 12. http://www.shekharkapur.com/blog/archives/2008/03/subprime_greed.htm 13. Zafar Anjum, “Bollywood Brew,” The Weekend Today, Singapore, 27 October 2007.

14. Jason Overdorf, “Hooray for Bollywood”, Newsweek, 10 December 2007, http://www.newsweek.com/id/72719/output/print 15. http://www.hollywoodreporter.com/hr/content_display/asia /india/ e3i93b 11000 fba32 0fc4d c29bb 4e9d3de85 16. Mark Weinstein, “Profit-sharing Contracts in Hollywood: Evolution and Analysis”, Journal of Legal Studies XXVII, (January 1998).

17. By the year 2001, the Indian entertainment industry was worth US$3.5 billion. According to a TIME ASIA cover story in 2003, the Indian film industry had a worldwide audience of 3.6 billion people as opposed to Hollywood's 2.6 billion. By 2004, over 1000 films per year were being made in the country, in all of 20 languages. Every day, 14 million Indians see a film in one of 13,000 theaters in the country. The films, specifically the ones made in Hindi, are exported to 100 countries.

18. Though the market share of Hollywood in India is growing (in 2004, its collections were over Rs 250 crore), it is in no way close to the Hindi film market. Then again, certain Hollywood films become top grossers; Spiderman I grossed over Rs 35 crore in the Indian market in 2004. Hollywood's market is growing in India, but India still ranks only 15th for collections in theaters worldwide.

19. There are more than 30 listed companies formed by film-makers, actors and distributors now.

20. Some completed films never see the light of the day as distributors do not want to touch projects they see as complete disasters.

21. http://passionforcinema.com/an-evening-with-mira-nair/.

22. Mark Weinstein, Journal of Legal Studies, (1998).

23. Ibid.

24. Typically the interest rates here are between 24 to 36 percent per year.

Bibliography l Chakravarty, Sumita S. National Identity in Indian Popular Cinema 194–1987. New Delhi: Oxford Univers ity Press, 1998. l Masud, Iqbal. “The Great Four of the Golden Fifties.” In Frames of Mind: Reflections on Indian Cinema, edited by Aruna Vasudev. New Delhi: UBSPD, 1995. l Nair, P. K. “In the Age of Silence.” In Frames of Mind: Reflections on Indian Cinema, edited by Aruna Vasudev. New Delhi: UBSPD, 1995. l Khanna, Amit. “The Business and the future of Indian Cinema”. Encyclopaedia Britannics, Delhi, 2003. l Rajadhyaksha, Asish. “Introduction”. Encyclopaedia of Indian Cinema. New Delhi: Oxford University Press and British Film Institute, 1994. l Vasudev, Aruna. ed. “Introduction”. Frames of Mind: Reflections on Indian Cinema. New Delhi: UBSPD, 1995. l Weinstein, Mark. “Profit-sharing Contracts in Hollywood: Evolution and Analysis.”

Journal of Legal Studies, Chicago. vol. XXVII, January, 1998.

Appendix Timeline – Regulation of Cinema 1918 • Indian Cinematograph Act – Censorship and cinema licensing system • Provocation to crime, nudity, love scenes (including kissing) forbidden.

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•

Indian Cinematograph Committee (Rangachariar committee) to further “Empire films” to counter American dominance.

1943 • • • • • •

Information films of India Indian News Parade Factual films produced by Government of India for promotion of war effort Showing of news reels and documentaries made compulsory Theatres obliged to pay rental fee Restriction on raw film stock and length of films (11000 square feet)

1947 • • • • • • • • • •

1948 – Censor codes in Bombay and Madras 1949 – All India protest day against taxes Formation of Patil Film Enquiry Committee Cinematograph Act amended to provide for 'A' and 'U' certificates 1951 – Central Board of Film Censors 1963 – Indian Motion Picture Export Corporation established 1972 –1975 - Film imports from United States stopped 1980 – NFDC – To encourage production of 16 mm films Video boom – 100,000 video libraries Satellite boom – estimated 50 million cable connections

Indian Economic Policy: A Timeline The late 1940s Following the Bengal famine of 1943, there is the trauma of Independence and Partition. As a result of Partition, 81 percent of the total cultivation of raw jute goes to East Pakistan. Land devoted to wheat and cotton (especially long and medium cotton staple) cultivation is in West Pakistan and a major merchant city is lost in Karachi.

The first half of the 1950s Several elements change in the first half of the 1950s, the most important being the First Five-Year Plan (1951) and the dream of an industrialised India. However, the spectre of poverty and starvation looms large and the shadow of a great famine lurks perilously.

The second half of the 1950s With the Second Five-Year Plan (1956), there is a sharper switch to Sovietstyle import-substituting and capital goods based industrialisation. The 1956 Industrial Policy Resolution circumscribes private sector involvement and life insurance is nationalised in the same year. States are re-organised using an interesting linguistic formula. In 1957 a Wealth Tax is introduced.

The first half of the 1960s This is perhaps the five-year period when disenchantment begins to set in. In 1962, there is a war with China and another one with Pakistan in 1965,

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followed by two severe droughts in 1965–66 and 1966–67. The Food Corporation of India (FCI) is set up in 1964 to manage buffer stocks.

The second half of the 1960s This is a period that marks the beginning of the worst excesses of State intervention in the economy, a trend that spills over into the 1970s. The rupee is devalued in 1966 and in 1969, banks are nationalised and the Monopolies and Restrictive Trade Practices (MTRP) Act passed in 1966 and the Green Revolution begins to happen. The first advertisement for Amul butter is created.

The first half of the 1970s The State intervention continues. General insurance is nationalised in 1971.

The late 1960s and early 1970s witness a modernised agriculture with new equipment and farm technology. New fertilizers lead to high yielding varieties, tractors replace cattle and the immediate result is that the production of crops such as wheat and rice increases remarkably. But growth is far from uniform.

The first half of the 1980s This period begins badly, since six more banks are nationalised in 1980.

There is a whiff of liberalisation as the industrial licensing policy is liberalized in 1982. In the same year, the government signs an agreement with Suzuki Motors and Doordarshan launches a national television network. However, 13 textile mills are also nationalised in 1982. Through the decade of the 1980s, the real rate of GDP growth shoots up to an annual average of 5.5 percent from the historical “Hindu” rate of 3.5 percent.

The first half of the 1990s Driven by a balance of payments crisis in 1990–91, this is the period of intensive economic reforms, till 1993–94. From 1991 to 1992, there is industrial delicensing with 100 percent private equity in core sectors, the controller of Capital Issues removes restrictions on issue pricing, foreign institutional investors are allowed to invest in capital markets and satellite television makes its debut. After devaluation in 1991, the rupee becomes convertible on the current account in 1993.

From 1995 to 2008 There are further reforms, with more of industrial delicensing. The Indian economy is clearly on a growth path, and the pace of economic growth seems to have stabilised in the six percent plus range for sure. This means that per capita growth is remarkable and consumer surplus is quickly getting generated. Indirect taxes are getting further rationalised and direct taxes contribute more to revenue growth that ever before. The rural urban divide is no longer as stark.

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Prakash Jha on financing in Bollywood What flow chart does filmmaking follow?

Film production is far more regulated than it used to be. The film production, time, the artists and the technicians are more committed to the product, to the timeframes. You don't have films like getting started and like [going on for years]. There is a definite timeframe. A process of distribution also is in place. This has happened because kind of corporate culture has come. Of course, it is still star driven, meaning that if you don't have saleable actors it would be difficult to market the film. Yet there are production houses that are making smaller films.

There should be a good script and if a saleable artist is attached with the project it becomes easier to make the film.

Are the traditional moneylenders still in the market?

That is all finished. These days, if there is a good project, there is always a distribution house which is ready to buy the distribution rights before a film is a made.

The funding comes from the distribution sector, and it could come in at any phase: before the film is made, or when it is being made or after it has been made. Earlier, the country used to be divided into several territories for distribution purposes. Even if corporates buy the film they still sell it to these smaller territories. The producers most often don't have to deal with distributors all over the country. I had to deal with distributors for all territories for Mrityudand and Gangajal. Apharan was relatively much easier. Now that I have started working on a project, buyers have already started to come in even before the shooting. There are country rights, world rights, limited rights [...] so what happens is that a distributor becomes your partner in the project. He brings in the funds.

If an upstart filmmaker has a script and a star attached to the project, can he go and seek finance from banks and coprorate houses?

Corporate houses yes, but banks no. IDBI has been sort of financing movies and funding partially. They have a process in place.

How are rates negotiated?

It is individual negotiation, depending on your need to work with certain artists and technicians.

What kind of contracts are made?

They are never oral now. They are all written agreements. As I said, the industry is far more regulated now. There are no cash transactions. You see these actors. They have a fee and sometimes they demand a certain percentage. That's how actors are earning 20 crores. There is nothing hidden or money passing hands on the sly.

Who adjudicates when players renege on promises?

Everything is written down, so one has to respect that. In case of conflicts, associations and tribunals are there.

What kind of returns can one expect from financing a film?

If there is a pre-sale, you make a profit. Then there is sharing in profit once the investor or buyer recovers his cost plus commission. We released two films last year: Sudhir Mishra made Khoya Khoya Chand and Manish Tiwary made Dil Dosti Etc. We made it for a certain cost and we were able to sell both the films to Adlabs for

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distribution—all the rights were given to them, and we made a profit. Had the film become a hit, we would have shared the profit. That's how it works. All these companies such as HMV, Moser Baer, Shemaroo, UTV, Balaji Telefilms are now making movies. I have heard that even television channels are now getting low cost film-making for TV. The whole idea of making movies is like you can, even if you are doing an experimental movie, even if there is a niche market, targeted audience—you probably still have somebody ready to pick up. But in general commercial term, you want to do a big film, on a bigger canvas, you have to have a saleable actor.

The way film budgets are going up and star salaries skyrocketing, is this all sustainable?

(Laughs) I hope it is...

Well, stars are taking a big chunk of the budget because they realise that films are being sold because of their participation.

Ravi Gupta’s Interview [...] typically what happens is that as a corporate house you are both seeking projects from outside and you are also developing projects inhouse. But the development of the project inhouse is left to some of the creative writers and people, encouraging others to submit their projects and you do get a whole lot of them and you have to separate the rubbish from the gems that need to be polished. Your value addition is basically in being able to identify the right projects which appear to be both financially viable and would aesthetically turn out to be good. Parallelly you are always working on the funding aspects and you are trying to put the funding together.

Earlier what used to happen is that this was a very family-oriented business and the cost of making movies was not so high, people would depend on their own resources or resources from family or friend and also on professional money lenders that existed as an institution then. Typically a project would start off on the basis of available funds and once you sort of got the project going, then you approached a financier indicating that you had a project partly done or in the process and you were looking for funding, which was typically given against some kind of collateral and things like that. Or if it was without any collateral then the interest rates were extremely high, going as high as 3% per month or so.

Now over a period of time many of these institutions have been replaced because about 10 years ago the film sector was recognised as an industry, which meant that it allowed banks and financial institutions to fund this industry. Earlier banks and financial institutions were not allowed to fund anything that was not recognised as an industry. When that hurdle was sort of removed it opened up the gates for people to approach banks and financial institutions, and this also happened in the background of a lot of money flowing from undesirable sources. At least there was a feeling that money was flowing in from undesirable sources. Therefore to be able to curb that and

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to be able to allow flow of legitimate funding and appropriate funding, the government decided to grant it an industry status.

Now simultaneously also filmmaking over a period of time has becomeincreasingly expensive. It had really gone from the hands of individuals and families to be able to risk projects. So typically they are now more dependent on organised world, corporate funding.

Does it mean the role of of the financier of the old world has completely gone?

It is almost gone. The earlier financiers, they would be extremely few because most of the good banners today either have gone public or [are] able to raise money either in the capital market or through the banking channels. Therefore they don't need to depend on financiers who charge exorbitant rates. Therefore, it does not become commercially viable to need funding there.

Do banks and FIs also ask for collaterals?

Typically they ask for corporate guarantees and in some cases they may also ask for personal guarantees. They do not give it against just the negative rights as was done by the NFDC. NFDC would give funding against purely negative rights, and no collaterals were sought.

That is also partly to do with the fact that FIs and banks don't fully understand the issues of IPR. They do not know how to evaluate intellectual property rights or they do not understand how evaluations are done. They are far more comfortable with tangible securities. So when they deal with films they find that they are not geared up to handling intangible assets. Therefore they still insist on collaterals. I do have a feeling, over a period of time as they are able to better understand and appreciate intellectual properties, they may not insist on such collaterals.

How much funding is available?

Upto 75% of the project. They normally give up to 75%. (The rest of the amount the producer has commit from his own resources) How are negotiations with other parties for a film like with stars, directors, music directors etc. are done?

These are typically done with standard contracts. So enter into those contracts and specify what services they would offer. The rights are transferred to the producer. and they are being paid a certain agreed fee which will be spread over the performance. It will be spread over certain milestones. So the payment schedules will also be built in.

So they are fairly standard agreements. And typically within the industry, we have trade bodies and these trade bodies have set up arbitration mechanism. If there are any problems or issues with the agreements, through the arbitration of the trade bodies, these issues are settled rather than through courts because courts are fairly lengthy procedures. Although the option to go to court is available to either party, but the industry practices generally, if there are any issues between any of those who are engaged and the producers, then there is arbitration cell of the industry that looks into

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it.

Within the industry, there are trade associations. Every individual offering his services, is required to be a member of a trade body. If you are a director, you are member of a director's association. If you are a cinematographer, you are member of the cinematographer's association. Writers are members of Writers Guild and so on.

There are whole lot of associations. All these associations have an apex body on their top called the Federation of Western India Cine Workers' and Employees Association.

The producers have their own guild. So, it is between these two apex bodies that all issues are generally resolved including issues relating to minimum wages, conduct, behaviour and so on. And typically, if a person does not fall in line, he will be boycotted. So if an actor throws tantrums or does not fulfill his obligations, then the entire producers' guild might boycott him so no producer would take him. That is for him is the biggest fear. Similarly if a producer is defaulting then all the actors and technicians might boycott the producer so that he cannot make the film. Therefore, those are the threats that keep the industry going with fair amount of transparency and fair amount of conduct. It is rare to find that people are filing litigation against each other.

Arbitration goes on, but not litigation. These are almost summarily taken care of and arbitrators might give overnight decisions. When shoots are happening and somebody has not been paid for and shooting has come to a halt, I mean whatever, so the arbitration mechanism resolves this almost overnight. You can't have mechanisms that goes on for months or years for resolutions.

How are star salaries decided? Salman Khan charging 24 crores etc?

This is decided more by demand and supply rate.

What is the mode of payment?

In corporate houses, you can't make payments in cash. All payments are made by cheque.

Only cash payments and no other arrangements like sales proceeds etc?

It is very rare. There are occasions when it is done but it is not very common.

What are the kind of expected returned from a project?

Well, they [producers] all start off thinking that this is going to be the next big hit.

Frankly that's all a dream. But I think if a producer breaks even on the film in its first run, he should consider himself very happy because he has the negative rights in perpetuity so he will keep getting revenues over the life of the film. The important thing is that in the first release of the film, the film should recoup its money.

Reports say 90% of Bollywood films are flops. Is it true?

I would say about 85% of movies do not recover their money. But using a word like flop is misleading. Because what it means is that 15% of the movies are recovering their money in the first run. The balance 85% of the films are losing money but the

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loss may be minor to very major losses.

For example, what happened to Mukta Art's Bombay to Bangkok?

The movie has just broken even. So, it has not made a loss in the first run.

Does it include satellite rights, etc., from where it could earn more money?

Yes, we have just about broken even and have made all the deals. We have had only one loss in the 35 films that we have produced.

Can you tell us about the distribution channels of films? What happens once the movie has been made?

We have our own distribution set up. We may distribute it ourselves or we may give it to an outside party if we are happy with the deal that we are getting from the other party.

What about pre-sales?

Big star cast movies are sold [their distribution rights sold] even before they are made.

Typically 50% of the financial commitment is paid up during the production stage.

And the balance 50% is paid at the time the time the film is delivered.

As Bollywood grows bigger, will the current system of adjudication and arbitration be scalable to meet future demands?

Yes, I don't see any problems. They are fairly well organised. The system has been functioning fairly well, so I don't see any problems, don't see any need to replace the system.

Any similarities or differences with the Hollywood system?

Increasingly they are moving towards the Hollywood system.

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Rural Development Practices in SAARC Countries: Some Innovative Cases Dr Rama Bashyal

Regional Background This paper gives an overview of some innovative rural development practices in SAARC region focusing particularly on self-employment and entrepreneurship development programmes. The SAARC region comprises 22.36 percent of the world's population (1.42 billion), 3.4 percent of total land area and only 2.14 percent of world's income. In contrast, incomes in the high income countries of the world, where 15.8 percent of the world population live, account for 80.5 percent of the world's income. There are also wide variations in the per capita GDP and population indicators within the countries. The per capita GDP of Maldives, Bhutan and Sri Lanka are higher than other countries of the region, ranging between $272 in Nepal to $2326 in Maldives in 2005 (UNDP 2007/08, 278, 279). Population growth rates ranges between 1.1 percent per annum in Sri-Lanka to 2.0 percent in Nepal (2007).

South Asia is also the least urbanised region in the world. In 2005, the percentage share of urban areas in total population was 30.2 percent, compared to the world average of more than 48 percent. The degree of urbanisation (2003) also varies between the countries of South Asia from 8.5 percent in Bhutan to 34.1 percent in Pakistan (SAARC 2005, 11). The reduction of poverty in SAARC nations has been mainly reached in urban areas where there is access of infrastructure and basic service delivery. Hence, overall development in rural areas, where the majority of the poor reside, is one of the most pressing concerns of the region. Table 1 highlights population statistics of SAARC countries by urban/rural residence for the year 2002.

Table 1 Population of SAARC Countries by Urban/Rural Residence (for the year 2002)

*

Country Urban Population (%) of Total Rural Population (%) of Total Bangladesh 26 74 India 28 72 Nepal* 13 87 Pakistan 34 66 Sri-Lanka 23 77 Bhutan NA NA Maldives NA NA Source: Statistical Year Book of Nepal 2005. CBS, Kathmandu, pp. 447-451

Total (%) 100 100 100 100 100 NA NA

.

For the year 2004, the urban /rural distribution of population according to NLSS Report 2005 is 15 and 85 respectively

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Rural Development Concept The development of rural economy, which covers agriculture, industry, forest, animal husbandry etc., is most essential for the overall development of a country. South Asian nations are characterised with heavy dependence on rural based agricultural economy. The rural sector in these countries not only generates employment, income, and foreign exchange from agriculture and off-farm rural activities, but also provides markets, labour and raw material inputs to manufacturing and other urban industries.

Rural development assumes much greater significance in the SAARC countries' context; on an average 70 percent of the population live in rural area and nearly 80 percent of rural populations live below the poverty line (ESCAP 2008, 121,122).

Innovative Cases Bangladesh Bangladesh, a low-income country, depends highly on rural economy and has inadequate development of financial system for rural sector. Three-quarters of the country's people live in rural areas and more than 40 percent of this population live below the poverty line, making the rural sector central to the country's development.

Therefore, the government, private sector and international development agencies have focused mainly on microfinance strategy for poverty alleviation. Several nongovernment organisations (NGOs) in Bangladesh started as relief organisations and then turned into development agencies. Many of them (approximately 300 NGOs) have gradually become microfinance institutions (MFIs) by focusing on savings and microcredit programmes.

Four large NGO-transferred-MFIs, the Grameen Bank, Bangladesh Rural Advancement Committee (BRAC), PROSHIKA and Association for Social Advancement (ASA), are working towards poverty alleviation through creating jobs and income for rural people disbursing a large amount of loan to over 4 million micro borrowers with savings collection from their members (ESCAP 2007, 123). The ASA is a cost-effective MFI with a strong commitment to providing low-cost and qualityfinancial services to the poor. It is “the best, the largest, and the fastest-growing innovations in the world, which serves more than 1.7 million clients through a network of 1087 branch offices� (Hatch et al 2002, 146, 147). The Grameen Bank is a formal specialised bank for the poor, which only follows credit based programmes as its sole strategy. On the other hand, BRAC follows microcredit plus other non-lending services such as skill training, social awareness, education, health, agricultural development etc.

Grameen Bank Grameen Bank (GB) has reversed conventional banking practice by removing the need for collateral and created a banking system based on mutual trust, accountability, participation and creativity. Professor Muhammad Yunus, the founder of the GB and a Nobel laureate, felt concerned at the meagre amount earned by a landless young mother named Sufiya Begum in Jobra Village, who used to make bamboo stools labouring the whole day for other people. He came to understand the

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importance of finance for poor people like Begum and reasoned that if women could work for themselves instead of working for others, they could retain much of the surplus generated by their labour. In time, the success of Grameen bank encouraged hundreds of NGOs to start microcredit programmes in Bangladesh.

As of December 2007, the bank has reached 7.34 million borrowers, 97 percent of whom are women. With over 2468 branches, the GB provides services in 80,257 villages, covering more than 97 percent of the total villages in Bangladesh. A branch normally covers 25 to 30 villages, around 240 groups and 1200 borrowers in every province of Bangladesh. It advances loans without any collateral charging a simple interest of 20 percent once at the end of the year. As of January 2008, the total amount disbursed by the bank since its inception was (US$6,553.74 million) out of which, 89 percent is repaid.2 The bank lends out about US$2.5 million-a-day (working day) in tiny loans averaging around US$130. Its borrowers at present own 93 percent of the total equity (Yunus 2004).

Village Cell Phone Programme The Grameen Village Cell Phone Scheme has had a positive impact on increasing income levels. Clients can use their loan to buy a mobile phone and operate it as a business by selling use of the phone on a per minute basis to others in their community. Village phone-clients in Bangladesh are earning an average net income of more than $70 a month—in a country where the average annual per capita income is less than $400 (Hatch et al 2002, 146). Moreover, with cell phones, they can communicate with their distant relatives, check market price of goods, and look for other important information. By knowing the market prices of goods, they can negotiate with middlemen for better price on their products and thus increase their income. With a phone call one is able to avoid the need to travel some distant places, and therefore save the costs associated with transportation and loss of productivity.

Grameen Bank's Beggar Members Programme In late 2003, the Grameen Bank (GB) embarked on a new programme, exclusively targeted for the beggars in Bangladesh reinforcing the bank's campaign that credit should be accepted as a human right. Begging is chosen by many poor people in Bangladesh as a result of river erosion, divorce, death of earning member in the family, unemployment or disability, and for many becomes a lifetime occupation.

Beggars in Bangladesh are not reached by most of the poverty alleviation interventions and subsist on the margins of society. A typical loan to a beggar member amounts to TK3 500 ($9) without any interest charge. The goal of the programme is not only to economically empower but also boost the morale and dignity of the beggars. They are given identity badges with the bank's logo as physical evidence of the bank's support. The struggling members are welcome to save with the GB as they wish. They are covered by the loan insurance scheme under which their loans will be fully repaid by the bank in case of death. In addition, TK 500 will be provided from the bank's Emergency Fund to the bereaved family for meeting burial expenses. With this scheme, a total of 786 members have already quit begging.

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Bangladesh Rural Advancement Committee (BRAC) Bangladesh Rural Advancement Committee (BRAC) is one of the world's largest nongovernmental development organisations established by Fazle Hasan Abed in 1972. It was initially established as a relief organisation, to afford relief assistance to resettle refugees returning to Bangladesh from India after Bangladesh's Liberation War. It turned its focus on the long-term issue of poverty alleviation and empowerment of the poor, especially women, in the rural areas. Women are considered primary caregivers who would ensure the education of their children and the subsequent intergenerational sustainability of their families and households. Soon BRAC became a community development organisation providing health, family planning, education and economic support to different sectors of the rural community with particular emphasis on the most disadvantaged, such as women, fishermen and the landless.

Since 1977, however, BRAC has been working exclusively with disadvantaged sections of the community.

Though BRAC was established as an almost entirely donor funded, small-scale relief and rehabilitation project, today it has emerged as an independent, virtually selffinanced paradigm in sustainable human development. The organisation is 76 percent self-funded through a number of commercial enterprises, including a dairy and food project. BRAC now employs 97,192 people with the twin objectives of poverty alleviation and empowerment of the poor. Through experiential learning, it provides and protects livelihoods of around 100 million people in Bangladesh. It is now a multi-faceted organisation with over 26,000 regular staff and 34,000 part time teachers, working in 60,627 villages in all the 64 districts with over 7 million microfinance group members, 34,000 non-formal primary schools and more than 70,000 health volunteers. In recent years, BRAC has taken its range of development interventions to Afghanistan, Sri Lanka and several countries in Africa (Wikipedia 2008).

Increasing rural access to financial services is a major problem for SAARC countries like Bangladesh, where as of 2005, 72 percent of lending occurred only in the two cities of Dhaka and Chittagong where rural lending refers to all intermediation activities that happen outside those two cities—in all rural villages. The other problem is that as the rural population of Bangladesh increases, landlessness among people once dependent upon agriculture is a growing problem. So BRAC began to provide credit via its 81 branches in 45 sub-districts of 22 districts through the Rural Development Programme (RDP). In the following year, credit was advanced without interest to several landless groups. A BRAC Bank has also been established in 2001 by BRAC (NGO), the International Finance Corporation. The bank is possibly the only bank in Bangladesh that is serving small and medium size enterprises (SMEs).

Bhutan Bhutan's economy is largely agrarian, providing livelihood for more than 80 percent of the population. These agrarian practices consist largely of subsistence farming and animal husbandry. A landscape that varies from hilly to ruggedly mountainous has made the building of roads and other infrastructure difficult and expensive. This, and

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a lack of access to the sea, has meant that Bhutan has not been able to benefit from significant trading of its produce. The Poverty Analysis Report 2004 shows that 31.7 percent of the total population in Bhutan was under the national poverty line in 2004.

The proportion of the poor was 38.3 percent in rural areas and 4.2 percent in urban areas, poverty being largely a rural phenomenon. However, tourism and hydropower projects contribute a lot in Bhutan's economic development. Tourism contributes significantly to rural incomes through earnings from tourist transport and portage.

Tourism has also provided the impetus for the development of the service sector, including hotels, restaurants, transportation and communication. Another visible impact of tourism has been the promotion of the indigenous cottage industry and the setting up of handicraft shops in Thimphu.

Tourism Industry Bhutan's tourism industry began in 1974, introduced with the primary objective of generating revenue, especially foreign exchange; publicising the country's unique culture and traditions to the outside world, and contributing to the country's socioeconomic development. Since then, the total number of tourists visiting Bhutan has increased from just 287 in 1974 to over 2,850 in 1992 and over 7,000 in 1999. By the late 1980s tourism contributed over $2 million in revenues to the government. By the late 1990s, tourist revenues contributed as much as $7.98 million and accounted for as much as 20–25 percent of the total of Bhutan's exported goods and services (Dorji, Sustainability of Tourism). The government privatised tourism in October 1991 to encourage private sector participation in the tourism sector. After the privatisation process of tourism industry, a regulatory body, the Tourism Authority of Bhutan (TAB), now called the Department of Tourism, was established under the Ministry of Trade and Industry. For future sustainability of tourism, they have started strengthening the capacity of the Department of Tourism and establishing an effective co-ordination with private sector. Product development, a developed marketing strategy and market information are the basic requirements for developing future policies and plans regarding tourism.

Chukha Hydro Power Project Besides tourism, the sale of hydroelectric power to India is the main source of revenue for supporting Bhutan's economy. The construction of two new hydropower projects of Bhutan will help to sustain real GDP growth over the medium term. The GDP is expected to grow at about 10 percent in 2008 (ESCAP 2008, 86). The Chukha Hydropower Corporation (CHPC) with a total capacity of 4 x 84 megawatts was entirely funded by the Government of India. The construction of the Chukha project was started in 1978 from the water source—Wangchu River. It was successfully commissioned in 1988. India constructed the 336 megawatt CHPC—Bhutan's first mega power project on a turnkey basis. On completion, the project cost was estimated at NU4/IRS 2,460 million (then approximately $200 million). India provided a 60 percent grant and 40 percent loan at 5 percent per annum repayable in 15 years in equated annual instalments, the first repayment commencing three years after each withdrawal of the loan. The project was handed over to Bhutanese management in June 1991. 70 percent of power generated by this project is exported to India. The

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major beneficiaries of the power sale are India's eastern region constituents comprising West Bengal, Bihar, Jharkhand, Orissa, Sikkim and Damodar Valley Corporation.

India According to the Central Statistical Organisation, India's economic growth rate has continued to climb, averaging about six percent from 1998–99 to 9.6 percent in 2006–07, which is higher than many industrialised countries of the world. Despite this growth, an estimated 500 million people (34.3 percent) in India live on less than one dollar a day. A 2007 report by the state-run National Commission for Enterprises in the Unorganised Sector (NCEUS) found that 70 percent of Indians, or 800 million people, live on less than 20 rupees5 per day with most working in "informal labour sector with no job or social security. With a total population of over one billion and growing by 1.8 percent per year, the country lies in the category of medium human development in world's ranking with annual per capita income of $736 in 2005 (UNDP 2007/08, 279). Statistics prove that poverty in India is mainly related to high gender disparity and rural and human development matters as rural people have less access to education, sanitation and safe drinking water.

Rural Sanitation After the 1990s, India initiated some innovative approaches to increase rural sanitation through community-led total sanitation that emphasises demand for services and community action instead of supply-driven programmes of latrine construction by the government. This people-centered approach was known as community-led total sanitation (CLTS), an approach designed to build demand for improved sanitation with no subsidy provision (ESCAP 2006, 122). It is an innovative methodology for mobilising communities to completely eliminate open defecation.

Communities mobilise themselves to construct latrines and achieve total sanitation.

Sanitation improvements have immediate health benefits which quickly demonstrate the success of collective action in improving personal and community wide well-being.

The CLTS was first pioneered in Bangladesh in 1999 and has been widely adopted within the country and beyond, particularly within South and Southeast Asian countries such as Cambodia, China, India and Zambia. The CLTS is said to have both direct and indirect impact on meeting the Millennium Development Goals—directly in water and sanitation, and indirectly through combating major diseases and improving maternal health. Ten years ago Bangladesh had the lowest levels of coverage for rural sanitation. Today, it has a big plan to achieve nationwide sanitation coverage by 2010 with a target of increasing sanitation coverage of 2.4 million households.

Sulabh: Sanitation Programme for Disadvantaged Group Innovative design and marketing can bring improved sanitation within reach of even the most disadvantaged groups. The Sulabh programme is one such example in India, formed in 1970 on Gandhian principles. It has developed products aiming at some of the poorest sections of Indian society, including “low” castes and migrant workers. It is one of the world's largest non-governmental providers of sanitation facilities with great commercial viability. Since its starting period, the programme has grown from a

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modest project in Bihar state to covering 1,080 cities and towns and 455 districts in 27 Indian states. It has constructed 7,500 public toilet blocks and 1.2 million private latrines, giving access to sanitation 10 million people (UNDP 2006, 124). According to one research in Hyderabad, half the users of Sulabh facilities have below povertythreshold wages, with petty traders, manual labourers and a wide range of informal sector workers.

The Sulabh follows a business, not a charity, model. It contracts with municipalities and public sector providers to construct toilet blocks with public funds. Local authorities provide land and finance, and all other recurrent costs are financed from the users. Fees are set at about one rupee. Disabled people and children get free access in the sanitation facility. The programme also produces and markets latrines, with costs ranging from $10 to $500. Low-cost latrines designed for low-income households are marketed with the help of a government subsidy that meets half of the cost and soft loans repayable over 12 to 30 years (ibid.).

The Amul Dairy Cooperatives The cooperative began in India in 1904 with the passage of the first Cooperative Act and has, since then, made rapid strides in all fields of socio-economic activities. The cooperatives have created a strong niche in agriculture credit, fertilizer disbursement, sugar production, handloom, etc.. However, the contribution of cooperatives to India's dairy industry is enormous. The cooperatives also ushered in a milk revolution in the country. The dairy industry has made India proud in recent times, the country being the leading producer of milk in the world. Dairy cooperatives are the backbone of Indian dairy industry. Milk is the country's number one agricultural commodity.

When the cooperative dairy movement was started, the daily per capita milk consumption was 106ml. Today, it is 250ml or 90 kg per year.

Self-Employed Women's Association (SEWA) The Self-Employed Women's Association (SEWA) programme is a formal microfinance institution that has proved that poor people are also bankable; they can save, they are capable to borrow and utilise funds and they can also find a way to earn a livelihood outside agriculture. It has proved that credit extension to the poor is not a complex issue and that poverty alleviation programmes can achieve greater success without the support by government subsidy. The main goal of the association is to organise women workers for full employment and self-reliance individually and collectively, both economically and in terms of their decision-making ability. In the beginning, SEWA was a trade union organisation registered in Ahmedabad in 1972 with the objective of empowering women through income generating schemes. Today it is a national union of poor, self-employed women workers, with members from more than nine states.

Based on Gandhian principles, they follow the principles of truth, non-violence, sarvadharma (integrating all faiths, all people) and Khadi (propagation of local employment and self reliance). Any self-employed woman worker in India can become a member of SEWA by paying a membership fee of Rs 5 per year. Up to 2006,

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the total number of SEWA membership has reached to 9,59,698. The organisation started when a few dozen women came together to demand their wages to be regularised. Today SEWA is a strong organisation with world-wide recognition. In recognition of its outstanding achievements, innovative methods of operations and unconventional approach towards the poor, the Women's World Banking (WWB), a New York-based global agency has suggested the SEWA model to be adopted in other countries (WWB 2002, 270).

Nepal Nepal has the highest annual population growth rate and lowest Human Development Index rank among the SAARC countries. Statistics prove that Nepal is the poorest country in Asia and even the poorest among South Asian nations with the lowest annual per capita income of $272 in 2005 (UNDP 2007/2008, 279). Poverty in countries like Nepal is mainly caused by slow growth and productivity in the agricultural sector—the mainstay of the rural economy. Therefore, the government, private sector, and international development agencies have focus on microfinance as an access to rural finance for Nepal's rural poor particularly residing in the hill and mountain region.

Poverty Alleviation Fund (PAF) Poverty Alleviation Fund (PAF) in Nepal, an independent social fund institution based on global “best practice� approach, was initiated as a pilot programme by the Poverty Alleviation Fund Ordinance 2003 with an objective to support implementation of a new targeted instrument for reaching poor and excluded communities under the Nepal's decentralisation programme. The concept of PAF was developed with social risk management approach under the region's social protection strategy, which was the main focus of the World Bank's World Development Report of 2000. This strategy has useful insights about the nature of poverty in Nepal, where a much greater proportion of people in the hill regions are at risk of falling into poverty than those in the terai (plain area) region from a risk management point of view. The PAF now is operating under the Poverty Alleviation Fund Act, 2006 with the objective of helping to carry out programmes targeting lower segment of the population under the absolute poverty line as per the poverty reduction strategy paper of the government of Nepal.

It aims to improve access to income generation projects like micro-irrigation, microenterprises, crafts, land productivity, animal husbandry and small scale village and community/local infrastructure like village roads, footbridges, trails, schools, clinics can be managed by community groups or Village Development Committee (VDC) for the groups that are excluded because of gender, caste and ethnicity as well as for the poorest groups in rural communities. These projects could be managed by community groups or Village Development Committees (VDCs), where VDCs are the lowest local level government bodies for current decentralised planning procedure. The PAF also supports special programmes and capacity building activities, such as, mobilisation of local people with particular attention to the needs of marginalised groups.

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The PAF has started supporting programmes based on local demands with active participation of poor and disadvantaged groups through organising and institutionalising community organisations (COs), private organisations, NGOs and local institutions as the partner organisations (POs). The PAF initiated its programmes since FY 2004/05 as a pilot project in six districts of Nepal, i.e.

Darchula, Mugu, Pyuthan, Kapilbastu, Ramechhap and Siraha under the World Bank's assistance of US$15 million and grant assistance of government of Nepal.

From the beginning of the programme to date, 4615 COs have been established in 591 VDCs of 25 districts (MOF 2007, 76). Among the members who are affiliated with COs, 44 percent are Dalits (indigenous people) being 65 percent members women out of total members. Under the scheme of community infrastructure and development, 1019 projects such as drinking water, small irrigation, rural roads bridges and culverts, schools/health post buildings are under operation. Similarly, 3941 projects, such as livestock, vegetable farming, floriculture, juice processing, wool carpet woven, poultry, bamboo products etc have been operating under the income generating scheme. In the budget of FY 2007/08, a sum of Rs61.77 billion has been allocated in the PAF for the implementation of 3500 projects in the next FY under targeted programmes for poverty alleviation (ibid.).

Pakistan Pakistan was a very poor and predominantly agricultural country with 53 percent contribution to GDP when it gained independence in 1947. Today agriculture accounts for 19.3 percent of GDP and employs about 44 percent of the labour force. The services sector has the highest (53.7 percent) contribution and industry (26.8 percent) contributes in the GDP of Pakistan. With a per capita GDP of over US$3000 (PPP 2006), the World Bank considers Pakistan as a medium development country on the Human Development Index 2007. It is a middle income country with per capita income of almost US$800 and 6.5 percent economic growth rate (The Economic Survey of Pakistan 2006–2007).

In late 2001, Pakistan formulated its poverty reduction strategy with four pillars: a) sustainable pro poor economic growth, b) investment in human capital, c) improvement in governance, and d) targeted pro poor interventions. The Pakistani government has increased its fiscal expenditure (over one trillion rupees or about US$16.7 billion) mainly on promoting investment for growth and more pro-poor activities in recent years giving the economy a further boost through the privatisation of companies. With continued successful implementation of these strategies and increased government expenditure on poverty alleviation programmes during the past four years, Pakistan has reduced poverty from 35 percent in 2001 to 23.9 percent in 2006 (SAARC 2005, 184; UNDP 2007/2008, 239). However, there is still poverty in rural areas, varying across rural urban areas and provinces.

The Aga Khan Rural Support Programme The Aga Khan Rural Support Programme (AKRSP) is an innovative case in Pakistan.

By the end of 1994, the programme disbursed Rs 27 million of credit to the rural poor to promote and finance small businesses and social infrastructure projects. The

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productive investments undertaken by village organisations with AKRSP support have expanded irrigation and increased accessibility. They have opened up the economy of villages, increased production, and enhanced welfare. Fertilizer usage, plantation of fruit trees and forestry have increased the variety of produce. Programme activities have led to major advances in fruit, vegetable, potato, poultry production and in animal health.

The Khushhali Bank In August 2000, the Khushhali Bank was established in Pakistan as part of the government's poverty reduction strategy and its microfinance sector development program (MSDP), with the assistance of Asian Development Bank. It has been mandated to retail microfinance services and act as a catalyst in stabilising the country's newly formed microfinance sector. The MSDP provides an integrated package of policy reforms and means for institutional development and outreach expansion to facilitate growth of microfinance sector. It has become the largest microfinance service provider in Pakistan providing a range of loan products to over 175,000 active clients from its network of branches across 64 districts of the country.

It has also provided about Rs7 4 billion to a predominantly rural population. The bulk of active clients are in rural areas (60 percent) and one-third of the bank's clients are women (SAARC 2005, 16).

Orangi Pilot Project (OPP) In South Asia, access to improved sanitation is less than that for water. Though the improved water coverage rates in urban area in Pakistan are reported at more than 90 percent, in practice the cities of Lahore (population 5 million) and Karachi (10 million), where half the population is estimated to live in informal slum areas, unclean water is providing a constant threat to public health. But there are some success stories of community initiatives, especially for improved sanitation in urban slums with large and highly concentrated populations.

In Pakistan, housing for the poor (known as Katchi Abadis) is everywhere. In Karachi, a port city and commercial centre of Pakistan, about 60 percent of the total population of 12 million, lives in Katchi Abadis. It is demonstrated through the Orangi Pilot Project (OPP) programmes that at the neighbourhood level people can finance and manage facilities like sewerage, water supply, schools, clinics, solid waste disposal and security. The government's role is to compliment peoples' work with larger facilities like trunk sewers and treatment plants, and water in colleges/universities, hospitals, main solid waste disposals and land fill sites. The Orangi Pilot Project in Karachi is such an example of “action from below� that brings sanitation to millions of slum dwellers (WHO and UNICEF 2005). The programme is based on the two principles of shared rights and joint responsibilities for any social contract between government and citizens. The OPP, like the SPARK8 and Mahila Milan in Mumbai and Pune India, was started as a small community-led initiative and scaled up through cooperation with local governments. It has proved that the energy and innovation of the community actions can strengthen government capacity to

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deliver changes (UNDP 2006, 121; Box 3.3).

Sri Lanka Sri Lanka is a lower-middle income developing country with a per capita income of US$1,226 in 20059 ranking second highest after Maldives among SAARC nations. The Rupee is the Sri Lankan currency.10 Traditionally like other SAARC countries (except Maldives), Sri Lanka is also an agrarian country. But the share of agriculture in terms of employment has declined in the recent decades and services provide the highest percentage of employment to the Sri Lankan people. The services sector is the largest component of GDP at around 60 percent. Sri Lanka's income inequality is severe, with variations between rural and urban areas. Civil conflict, falling agricultural labour productivity, lack of income-earning opportunities for the rural population, high inflation and poor infrastructure outside the Western Province are major hindrances to poverty reduction. However, the country has achieved literacy rates of well over 90 percent with improved human development level. The literacy rate is the highest amongst the non-poor urban males, which is over 97.2 percent; while the lowest percentage (81.7 percent) is seen among poor females in the rural and estate areas.

The Savings and Credit Cooperative Movement (Sanasa) Most living in the rural community in Sri Lanka do not have access to the formal banking sector. The Savings and Credit Cooperative Movement (Sanasa) as a financial intermediary close to the rural community is able to provide financial services to the needy people. The Sanasa has made a significant impact in poverty alleviation by providing microcredit to the disadvantaged community of Sri Lanka. The organisation is well represented by all ethnic communities and there is mutual trust among members. Its members are highly concerned with the environment and lay special emphasis on a “Green Sri Lanka�; with this attitude the environmental programmes can be implemented successfully. Of the 805,000 members of Sanasa, nearly 57 percent constitute women. Among the grass roots level co-operative organisations, Sanasa has the widest population coverage. The Sanasa movement set up a bank known as the Sanasa Development Bank (SDB) in 1997 to provide sustainable microfinance to the Sri Lankan people. The SDB was registered as a licensed specialised bank by the Central Bank of Sri Lanka. The SDB bank provides funding for the most successful microfinance institutions specialising in lending to Sanasa Primary Societies. The SDB currently has 31 branches and 7 extensions centre islandwide and has plans to open more by the end of 2008 (Sanasa Federation Update in June 2007).

Conclusion Since poverty is a common problem in South Asia region, the heads of states of the region have pledged to overcome the challenges posed by poverty through the implementation of proper development strategies at macro and micro level since the Seventh SAARC Summit. But the goals regarding poverty alleviation could not be achieved. Successive meetings have endorsed the poverty issue in the form of SAARC Development Goals (SDGs), in the areas of livelihood, health, education and environment. The Dhaka Summit declared the decade of 2006–2015 as the SAARC

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Decade of Poverty Alleviation. The Fifteenth Summit held in Colombo, Sri Lanka on 2–3 August 2008 also focused on SDGs. The summit acknowledged the significant steps to combat poverty in the region through all available means, including people's empowerment and sharing each other's experiences of pro-poor poverty reduction strategies. In this context, sharing each other country's innovative and successful programmes of rural development strategies among SAARC countries will be more relevant to attain the SDGs and would further support in attaining the global United Nations Millennium Development Goals (MDGs).

Dr Rama Bashyal is associate professor at Tribhuvan University, Nepal.

Endnotes 1.

Grameen Bank Statement No 1, Issue No. 336. 13 January 2008.

2.

US$1=69 taka (as of 17 June 2007).

3.

Ngultrum (NU) is the currency of Bhutan.

4.

The exchange value of Indian Rupee in relation to US$ is US$1 = IRS 42.69 as per 23 May 2008.

5.

The exchange value of Nepali Rupee in relation to US$ is US$1 = NRS68.51 as per 25 August 2008.

6.

The currency used in Pakistan is Rupee (PKR). The exchange value of PKR in relation to US$ is US$1=76.70 PKR as of 22 August 2008.

7.

The SPARK is the Chinese model of rural development regarding the foreign participation for rural development technology and investments. The SPARK program–named after Chinese saying—a single spark can start a prairie fire to achieve rural development for job led growth.

8.

The figure is estimated by the Census and Statistics Department of Sri Lanka.

9.

The exchange value of Sri Lanka's currency (Rupee) in relation to US$ is US$1 = 107.65 Rupees as of 22 August 2008.

Bibliography l CBS. Statistical Year Book of Nepal 2005, CBS Central Bureau of Statistics, Kathmandu, 2005. l ESCAP. “Economic and Social Survey of Asia and the Pacific 2008: Sustaining Growth and Sharing Prosperity”. Economic and Social Commission for Asia and the Pacific, Poverty and Development Division, UN Building, Rajadamnern Nok Avenue, Bangkok, Thailand, 2008. l Hatch et al. “Innovations from the Field”. In Pathways out of poverty: Innovations from microfinance for the poorest, edited by S.D. Harris. U.S.A.: Kumarian Press, Inc., 2002. l SAARC. SAARC Regional Profile, 2005: Poverty Reduction in South Asia through Production Employment, SAARC Secretariat, Kathmandu. 2005. l UNDP. Human Development Report 2007/2008, Fighting Climate Change: Human Solidarity in a Divided World, United Nations Development Programme. 2007-2008 l “Policies, regulations, and systems that promote sustainable financial services to the poor and poorest.” In Pathways out of poverty: Innovations from microfinance for the poorest families, edited by S .D. Harris. Women's World Banking U.S.A.: Kumarian Press, Inc., 2002. l Webpage: http://www.saarc-sec.org/data/summit15colombo (accessed on August 2008) l Webpage: Wikipedia, the free encyclopaedia (accessed on 21 May 2008 and June 2008) l Webpage: http://www.amul.com (accessed on July 2008-07-22) l Webpage: http://www.amul.com (accessed on 22 August 2008) l Website: chukhaprojectbhutan.html).

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Environmental Consequences of Armed Conflict in South Asia Vandana Asthana and Dr A.C. Shukla

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here is considerable literature on armed conflict and its impact on the life and economy of the people but very little attention has been paid to the environmental effects of war, militarisation and terrorism. It is difficult to choose which of the two—war or terrorism—outweighs the other and pushes the world at the brink of environmental catastrophe. The collateral damage resulting from modern warfare, with its clear destructive power, has been widely discussed. Enough has been written about economic and human suffering because of war and terrorism.

However, little is known about the equally dangerous short-term and long-term environmental impacts of war, terrorism and proxy warfare raging in the Indo-Pak region of South Asia, in particular. While war is conducted by States, and terrorism by rebel groups, these definitions should not obscure the fact that unlawful acts against non-combatants are also indulged in by States. Assessment of environmental damage may be difficult due to a complicated admixture of social and environmental costs but terrorism and war have caused enormous environmental damage apart, other anthropogenic interventions in nature. Being a politically volatile region, in South Asia the focus of commentators and analysts has been more on the political and security milieu rather than the environmental consequences of these processes in the region. However, war, militarisation and terrorism also have a considerable environmental impact by altering landscapes, destroying infrastructure, vegetation and biodiversity and forests. These impacts are both direct and indirect. While direct impacts may include bombs and blast damage to settlements, rural and urban areas, destruction of resources like oil, defoliation and ecosystem destruction, indirect effects are many and varied. These range from refugee issues, land abandonment and infertility, wildlife loss and biodiversity and species extinction. This paper explores these three dimensions of conflict through examples from India, Pakistan and Sri Lanka and their impact on environmental degradation in the region.

There exists one important problematique about assessing environmental damage in most countries. Due to the lack of any environmental baseline or data in most parts of the world, assessment of environmental damage becomes vastly contested. Many scholars concerned with assessing environmental consequences of war and armed conflict tend to conclude that environmental degradation has been huge in the recent past and it not only affects the wild life, natural habitats of species but also punishes people who depend on these environments (Falk 1988; Bloom et.al. 1994). Others also argue that war zones and military training grounds provide valuable habitats. The “No Man's Land” created by human warfare often protected wildlife habitats by limiting

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human incursions within disputed territories. Ongoing wars in developing countries over disputed territorial frontiers remain as de facto refuges of flora and fauna (Keely 1996; Butts 1994). Despite these different conclusions, there does exist a consensus that armed conflict in any form leads to environmental damage.

Background The awareness and concern towards environmental consequences of war and armed conflict initially arose as a result of the environmental consequences of the Vietnam War, where massive chemical defoliation caused substantial environmental change (Westing 1984; Parsons 1998). The international community since then has realised that the hidden casualty of militarisation and war is the natural environment with long-term consequences in conflict scarred landscapes. International mandates over environment in relation to war have sought to codify these concerns in policies protection and long-term viability of the natural and human environment. The 1977 Additional Protocol I of the Geneva Convention of 1949 and 1976 United Nations Convention on Environmental Modification Techniques provides international provisions for the environmental protection during times of war. They consider deployment of chemical or biological weapons illegal and the targeting of the environment an international war crime unless required for critical military advantage. However, they do not cover peace time preparations for war, and preconflict mobilisation which, according to Ross (1994), have been implicated by some to be warfare's most camouflaged environmental casualties. Obstacles exist among other complexities about various political and economic elements of maintaining national militaries and international security. On 5 November 2001, the UN General Assembly, through its UN Environmental Partnership (UNEP), declared 6 November of each year as the International Day for Preventing the Exploitation of the Environment in War and Armed Conflict to highlight the adverse effects of war and conflict on the environment. One could argue that, although such effects are sometimes unavoidable, most often they could be prevented. Parties involved in wars and conflicts have a responsibility to observe international laws such as the Geneva Conventions, which have certain guidelines pertaining to the environment. However, environmental concerns have been overlooked in most international laws and conventions.

War can be conceived as a particular case of violence that is organised and considered legitimate by a significant number. In the Geneva Conventions provisions, war is defined as a situation of armed conflict. It is a complex phenomenon and does not exist separately from its required partnership with militarisation, a process where there exists expansion of military forces and ammunitions in preparedness for war or any defence act. Militarisation also describes the political economy of the defence budgets across the globe. Whatever the situation, the environment is one of the main victims of international armed conflict. The impact of war on nature includes damage by armed forces as they generate huge toxic wastes exempted under environmental law. Unexploded bombs, mines and other explosive devices from battlefields and theatres of war cause environmental damage to land and water (Westing 2002).

Wallersteen and colleagues (1985, 1) believe that the processes of militarisation are

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detrimental to the human, animal and ecosystem environments. More broadly, the environment is sacrificed for military preparedness, imminent threats, weapons testing and nuclear explosions and in general for national security.

Since World War II, war between States has decreased internationally, being replaced by a rise in ethnic nationalism, sub-nationalism and religious fundamentalism that has increased the frequency of armed conflict, insurgency and terrorist activities around the world. Terrorism is commonly defined as premeditated, politically motivated violence perpetrated against non-combatant targets by sub-national groups or clandestine agents intended to influence an audience (Title 22.Section 2656 of the US code of Federal Regulations). It operates by spreading fear and targeting liberal democratic values. The fear of terrorism exploits vulnerabilities and exposes the limitations of governments to control terrorism. Proliferation and expansion of lethal technologies coupled with radical ideologies have made terrorism and insurgency much more horrifying compared to war, since the former strikes by surprise.

Accordingly, one needs to explore the impact of terrorist activities on oil, water and food resources. Oil fields, dams, barrages, densely populated areas, skyscrapers, armament factories and nuclear installations present targets for terrorism. The threat of bio-terrorism against the “civilised world” sparks international debate on the use of virus, fungi, rickettsiae and their by-products causing disability or death of people, plants, and animals. One ounce of botulinum can kill 60 million people, 50 kg of anthrax or 50 kg of tularemia dispersed in aerosol over 5 million people will kill 10,000 and incapacitate 250,000 (Balchandran 2001). Unconventional and asymmetrical attacks are presumed to become a likely tactic of choice, shifting the focus to bio-terrorism. Modern weapons of terrorism include use of conventional weapons, suicide bombers, landmines, or biological and radiological material on selectively target populations. All these dimensions of conflict—potential for war, militarisation of the region and terrorism and insurgency—find a presence in South Asia where States are strife with mutual distrust towards its bigger neighbour India, and are faced with territorial issues and traditional problems.

South Asia South Asia remains one of the most densely populated regions in the world. The region constitutes almost half of the world's poor, most underfed and illiterate. With the least per capita public expenditure on health and education, low literacy levels have hindered the spread of modern rational ideas and work ethics of which they are a concomitant. The most fundamental cause of turbulence in the region is an evergrowing population and the failure of the political elite to draw its people out of the shackles of poverty. The economy is experiencing problems and defence expenditure has grown in the wake of nuclearisation of the region. Rising military expenditure, abysmal poverty, stagnating economy, inadequate redistributive measures and the inability of the leadership to tackle these problems have made the region socially and politically combustible (Asthana 1999). The region has seen three wars between India and Pakistan, internal conflict and divisiveness in Sri Lanka and separatists demands within India fuelled by external States. In an environment of internal turmoil, the region becomes more vulnerable to external influences and

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domestic pressures exacerbating divisiveness within and amongst nation-states.

These pressures have unfolded in the dangerous fangs of terrorism fuelled by subnational ideologies and religious fundamentalism. Terrorism has a broad canvas, ranging from individuals to groups sponsored by nation-states. New dimensions of terrorism encompass regionalism and global interplay. One nation's terrorist is another nation's freedom fighter. This difference in views makes it difficult to segregate terrorism from separatism, insurgency, or even proxy war in contemporary times because each of these issues is operating in tandem, especially, in South Asia.

Unfortunately, South Asia has proved to be both a breeding and hunting ground of terrorism. In the aftermath of direct and concerted action in Afghanistan, terrorist groups started taking refuge in neighbouring Pakistan and Pakistan-administered Kashmir. Insurgency and separatist demands have also influenced the northeastern region of India where groups like United Liberation Front of Assam (ULFA) are also involved in militant actions. Local issues and demands cause conflicts and promote terrorism, but are no longer confined to local support or operation. Sri Lanka has been fighting a long war with militant groups in the country who demand a separate Tamil State. Terrorism has entered into a phase of global networking and operation of international terrorist groups. Non-state militants such as Al Qaeda, Lashkar-e-Toiba, Hizbul Mujahideen, Harkat ul Mujahideen, Bodo Liberation Tigers, United National Liberation Front, United Liberation Front of Assam, Liberation Tigers of Tamil Eelam (LTTE) now operate globally.

As mentioned earlier there is no dearth of literature by scholars and researchers on all these issues and their political and economic implications. However, the environmental consequences of these dimensions have always taken a back seat. This could be attributed to the political volatility of the region. To understand the environmental consequences of these acts without any environmental baseline on the past and present data is definitely a hard task but this article attempts to explore through a qualitative analysis, the consequences of armed conflict on the environment based on experiences, interviews and newspaper analysis. To understand the impacts the following section provides an overview of the different approaches to “environment” “militarisation” and “security”.

Approaches to Environment and Security There are several approaches in the context of violent conflict and war where environment is perceived through multiple perspective and practices.

One approach considers the environment a weapon that is used against the survival of human population. The term is often tactically referred to as “environmental warfare” or “environmental terrorism” targeting the environment specifically (Chalecki 2002).

This kind of warfare operates to defeat the enemy's military forces or capacity. Peter Gleick's (2006) article on “Water and Terrorism” also speaks to the idea in great detail.

The second approach considers environment to be something that needs to be

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protected through national and international militaries as well as through subnational guerrilla activities like “ecoterrorism” and “ecotage” (Westing 1984). A major example of that is Earth First (an environmental group) that believes in the destruction of technologies or built environments that threaten natural environment and survival of humans.

A third approach argues that scarcity of natural resources, by natural or anthropogenic means, is a threat to national and international security and can lead to conflict. Growing insurgencies, separatist movements and terrorism leading to armed conflicts or war are interconnected with a scarcity of renewable resources, stress on land, ecosystem vulnerability, and sociopolitical factors. The influx of more people joining terrorist, insurgent, and separatist organisations is also a result of environmental stress leading to sociopolitical crisis among populations. Scarcity is causal of war and conflict (Homer Dixon 1999; Allenby 2000), although this opinion has been contested by scholars such as Dalby (2002) and Barnett (2001). Another perspective places the environment as an uninhabited and uninhabitable landscape characterised as zones of sacrifice (Shulman 1992) for radioactive wastes repository.

While there are different approaches and perspectives through which war, armed conflict, environment and nature are perceived, this paper takes the approach that the environment is a local or regional ecosystem, or living earth which suffers as a result of practices of war and armed conflict which may tend to include terrorism, insurgency and guerrilla activities. The following section analyses this perspective through examples from Kashmir, Kargil, Siachen and Sri Lanka where conflict has been heightened due to historical political issues in the subcontinent.

Environmental Degradation Due to Armed Conflict Marked, persistent environmental impacts of war and terrorism are recorded in Kashmir and Kargil. India and Pakistan fought three wars and because of continued militant/military activity, the valley of Kashmir has had to bear environmental consequences. Fading wetlands, polluted rivers, and lakes are causing grave environmental concern. The Hygam Wetland, 50 km north of Srinagar, has shrunk to only 4.5 sq km. This wetland was once home of many migratory birds, but is now transformed into a grazing ground for cattle, reflecting not only a loss of biodiversity, but also the scenic beauty of the land. Dal Lake has remained a famous tourist attraction, but has been reduced from 16 km to 9 km despite the “Save Dal'' movement (Nizamuddin 2008). The Wullar Lake, one of the largest fresh water lakes of Asia and the unique tourist attraction of Baramulla has been tarnished into a cesspool fit only for paddy cultivation. Effluents of military weapons in the area clog Anchar Lake near Srinagar. Despite collateral destruction due to war or proxy war and terrorism the Nageen Lake is the exception to this onslaught on ecology due to the care of non-governmental organisations in Kashmir that focus on the maintenance and restoration of this lake. The conflict and violence created by the Kashmir dispute has brought near-apocalyptic results on urban and rural communities in terms of impact on the local ecology.

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During the years of conflict, jungle and forest smugglers have done extensive damage.

Deforestation is rampant in the absence of poor accountability and conflict. Poaching of wild life has increased and the presence of security forces have affected a lot of species indigenous to the region (Crook 2000). With the decrease of tourism in Kashmir due to conflict, indirect impacts on the landscape are evident. Srinagar, the capital of Jammu and Kashmir, was recently declared as one of the hundred most endangered sites by the World Monument Fund since its architecture has been threatened by vandalism, neglect and armed conflict that escalated since the 1980s (Asif 2007). Even in Azad Kashmir, due to the contentious nature of the region, the indifference of the Pakistan government to the development and sustainability of the area in general—especially in the post earthquake scenario—an increase in poaching, illegal logging, hunting and extermination of wild life and species habitat is highly visible (Rehman 2008).

Armed activity of almost thirty thousand personnel of the armed forces on its borders, four air bases in Balochistan and troops of the United States on the Afghan side of border as they engage in “hot pursuit”, impact hundred and thousands acres of land in Pakistan. The environmental damage these engagements cause definitely needs assessment.

Extermination of wild life in Kargil during the Indo-Pak conflict and continued damage to the ecology and biodiversity of Kashmir since 1950 are glaring examples of the damage caused to the environment. The extent of environmental stress can be cited using the test cases of Rajasthan, Kashmir and Bangladesh borders, wherein bombings and troop movements, coupled with land mines, have destroyed the ecology of hundreds of miles of deserts or lush green lands (Greenpeace 1992). Stationing of troops on the Siachen Glacier has led to an unexpected increase in the use of plastic bags, destroying the serenity and environment of the mountain region. Apart from damaging land in the area, conflicts like Kargil have caused a lot of pollution in the region due to explosives and bombs .

Though an eyeball to eyeball confrontation is absent between India and Pakistan, this has not stopped the armies of the two countries from hurling tonnes of explosives at each other. This continuous shelling that takes place on the borders of India and Pakistan has grave consequences for the people and ecology of border villages on both sides. In a lot of cases families have left ancestral homes in search of new jobs to avoid health and infrastructural consequences of these acts. The direct costs in terms of human casualties, collateral damage in the shape of destruction of infrastructure and standing crops are high in these areas but the indirect costs are even higher.

Environmental Consequences of Militarisation Due to the political sensitivity of the region especially on the Indo-Pak border, military preparedness and militarisation of the region is a consistent effort on both sides. At high altitudes, conflict or preparedness for conflict has huge consequences for the environment; Siachen Glacier is a case in point. This glacier is the longest nonpolar glacier in the world and stretches 77 km. It is here that troops of both countries

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stand at a temperature of minus 400C. The military aspects involve enormous costs in terms of lives and equipment with every single item flown into this area. Convoys of trucks make their way to air heads—a military term denoting either an airfield or a place from where helicopters carry supplies to the troops. It is argued that tonnes of noxious emissions are discharged into this pristine environment. Staggering pollution is also caused by spent artillery shells, castings, empty fuel containers, discarded tetra packs and aluminum packing (Cariappa 2002). Huge quantity of waste is also packed into metal drums and dropped into deep crevices. This despoilment of the glacier is not confined to the Himalayas alone. Human waste keeps piling up and pollutes the cold desert environment. Bio degradation in such cold temperatures remains impossibility. Studies found that 40 percent of the waste dumped is plastic and metal.

Hundreds and thousands of parachutes drop rations over posts in both India and Pakistan. Apart from militarisation, studies mention that the glacier is also polluted by human waste that does not decompose easily in such high altitudes (Puri 2005).

Although the Indian army has taken a step to install biodigesters at every post which burn and destroy human waste, and kerosene pipelines have been laid to reduce the use of jerry cans, the magnitude of this degradation is a direct consequence of sustained India-Pakistan political and military standoff. At the SAARC summit in Nepal, both India and Pakistan agreed to take up the issue of environmental degradation of the Siachen Glacier soon.

After the nuclear tests of 11 and 13 May 1998, the people and livestock of Khetolai, the village in Rajasthan where the explosion took place have faced serious health problems such as a specific type of itching. While these weapons and explosions are aimed to provide security, the damages involved in their manufacturing inflict enormous injury on the very people they are supposed to protect. It is contended that underground nuclear testing that tests the device at sufficient depth may contain explosion with no release of radioactive materials to the atmosphere. However, the long term effects of underground testing are more likely to arise from immense quantities of radioactive material—much of it very long lived—left below the ground, which may often lead to contamination of water. Even if the extent of contamination and its rate of spreading is slow, it must be remembered that test sites are usually located in desert environments. For example, in Pokhran the average annual rainfall is only about 32 cm. Water is precious in these places and pollution of even a few wells could have a large impact on the communities (Ramana and Reddy 2003). According to public statements by the Department of Atomic Energy (DAE), none of the tests conducted at Pokhran released any radioactivity. However, residents of the villages near the test site both in 1974 and in 1998 complained of different kinds of physical illness that can be attributed to exposure of beta radiation (Ramana and Reddy 2003).

Ten years after India exploded a series of nuclear devices in underground tests, villagers are still asking themselves whether to believe the government assurances that no radioactivity was released. In Khetolai, a village of 1,500 inhabitants about 3.5 km from the security fence that rings the Pokhran military test range, just four years after the tests villagers complained that their cows had given birth to several blind

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and diseased calves. The site of the country's second nuclear test of 1998 was hard hit by a famine. Villages in and around the actual place where the nuclear explosions took place are having a tough time trying to overcome nature's fury (Deccan Chronicle 2002). Although these claims could be contested by health authorities and the DAE, the villagers insist that these changes are an aftermath of the explosion. The nuclear tests have set India and the subcontinent adrift in unknown and uncharted scientific, medical, political, and economic territory. The radioactivity associated with the blasts and, in particular, the hydrogen bomb blast, will create enormous problems among the people of Pokhran and nearby villages, which were evacuated for a few hours on both days. Villagers recall the ailments and sicknesses they suffered in 1974 and 1998, including polio in children born since that time, nosebleeds and a specific kind of itching (Bhandari 2000).

The absolute disregard for the lives and welfare of the people comes across poignantly and harshly in the people of Baghalchur, D.G. Khan, a Baloch majority region in Punjab, Pakistan. In 2000, by the Pakistan Atomic Energy Commission's (PAEC) own admission, “mining was stopped on the exhaustion of uranium”. Since then the site was then converted into a storage and disposal site for radioactive uranium waste.

The people of Baghalchur complain that nuclear waste dumped in the area had contaminated the environment and affected the health of both humans and animals.

Some 50,000 people who live in hamlets scattered around Baghalchur and the 500,000-strong population of nearby Dera Ghazi Khan town has been affected. “The safety and environmental problems that uranium mining brings, as in the case of Baghalchur, are of two kinds,” says Hoodbhoy. “On the one hand dangerous chemical poisons (such as arsenic, uranium, molybdenum, and other heavy metals) find their way into the soil, air, and water. But still more threatening is the radon gas and its various radioactive products (Talpur 2007). It has been recently reported in a study that even a small scale nuclear war between India and Pakistan would destroy much of the ozone later, leaving the DNA of other organisms at risk. About 40 percent of the ozone layer in mid latitude and 70 percent in high northern latitudes would be lost (Brahic 2008). The above observation reveals that military preparedness has grave environmental consequences for the lives and ecology of the people that are impacted by these acts.

Terrorism, Insurgency and Militancy Actions While Kashmir and Sri Lanka are direct victims of terrorism and militant impacts on the environment, attempts to deal with insurgent groups by army operations have also met with limited success. The tentacles of insurgency are growing in the Arunachal areas of Assam and forestlands have been degraded by organisations like ULFA. Likewise, Meghalaya has an active insurgency (Routray 2002) and in India, extremist networks are a reality (Ramana 2002). Clearing forests for bunkers is a regular activity of these groups. It can be, logically said that terrorists do not have easy access to nuclear weapons, but radiological weapons are simpler to use. Radiological material can be, easily obtained from nuclear research centres (Balchandran 2001).

Even if nuclearisation of terrorism is a remote possibility, the existence of a nuclear threat cannot be ignored. The use of these tools of terror poses grave threats to

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human life and environment. Sudden, mass human killings trigger a chain environmental reaction that damages the environment. Protection against them is difficult because of unavailability of vaccines, side effects of vaccines, and the impracticality of possible vaccinations of entire populations in a short time. Terrorists kill and injure humans, livestock, and wild life using land mines and munitions.

Such use of weapons is increasing as suggested by Westing (1996). Land mines are deployed in military security areas in Sri Lanka and Kashmir. Phosphorus used in munitions causes mortality of fauna and flora. Kashmiri militants have access to landmines, and Liberation of Tamil Tigers Elam (LTTE) are capable of making its own mines. RDX (explosive nitroamine) is also used to construct mines. Damage to environment is potentially lasting and widespread. Weapons of mass destruction are difficult to obtain but amateur terrorists typically use conventional methods of terrorism against environmental targets, because they involve less personal risk and cause wide spread damage and destruction. The use of high velocity rifles by security forces in villages and forests surrounding the Himalayan Valley and the counterinsurgency by militant groups, have further added to the total of specie lives lost in an already precarious situation. Over 300 species of birds—including pheasants, quills, partridges, vultures, kites, eagles and a large number of colourful birds—residing in the lush forests of Kashmir have virtually disappeared. Today, those forests stand naked and void of any visible sign of bird life (Hulkower 2007).

Sri Lanka has been the site of an ethnic conflict since the 1980s. The environmental crisis that we see in the Tamil homeland today mainly stems from the increased militancy and military activities that have been ongoing since the last two decades.

The conflict between the Tamils and the Sinhalese that began in the early 1980s started with small groups establishing camps mostly in forests and scrub jungles for training. A consequence of their presence in the forests was the incursion of domesticated species of plants particularly food plants. The presence of the militants in the forests created significant environmental consequences. On the one hand, the forest became the home of the militants; it provided them with food shelter and training ground. On the other hand, the forest was a hunting ground for the armed forces. Both cause serious environmental disruptions in the areas.

The major effect of the explosions is the destruction of buildings, natural vegetation, trees and parks in urban areas, crops and agricultural land, domestic and wild animals and birds. As was seen in Vietnam, disruption of the soil profile has reduced the productivity of agricultural land through loss of topsoil and compaction of soil. In the sea, naval battles and the use of depth charges by the Sri Lankan Navy to dissuade underwater attacks have resulted in the death of marine life, disruption of the sea bed and localised pollution by chemicals and fuel oil. There has also been large scale clearing of mangroves in many areas of the north and east to deny shelter and protection for the Tamil resistance forces, with an indirect effect on the population sizes of many fish species, prawns and migratory birds; these use the mangroves as breeding grounds.

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Each military operation has been preceded and accompanied by concentrated bombardment of civilian areas, resulting in people fleeing their homes in panic. It is estimated that there are over 500,000 internally displaced people all over Tamil Eelam at present. Experiences of war in countries like Nicaragua and Cambodia indicate that attention needs to be paid to the effects of war on the farming systems in Tamil Eelam, even while the war is underway, in order to determine the shape of postwar agriculture and the type of support and interventions necessary in the aftermath of war (Sperling 1997). The above examples substantiate the claim that consequences of armed conflict in any form have environmental implications in both direct and indirect form. The question then arises of how to mitigate conflict oriented environmental damage.

Conclusion War and terrorism have left an extensive legacy on both the landscape and people of the world. In regions like South Asia which have a history of conflict the dangers to environmental impacts are even more. The human race has to learn lessons from recent armed conflicts. Alarm bells are already sounding, calling for immediate action.

Distinguishing between collateral damage due to war and terrorism is difficult because there is little demarcation between the damage caused by the two. The effect of war and terrorism on the environment is partially understood in South Asia. The monitoring of environmental damage is in a nascent stage and assessment of war and terrorism in isolation seems difficult. However, the grave threat posed by this violence to the environment calls for action on several fronts. It may not be an easy task for India and Pakistan to cease hostilities but peace processes and concern towards environmental impacts of these conflicts are essential for survival of both nature and the people. The efforts by Pakistan and India to contain degradation of the Siachen Glacier and the Nepal SAARC meeting are a step in the right direction.

A step toward improvement could be cooperative agreements on environmental monitoring in the conflict regions. Launching of more satellites, coordination of data from different satellites, compilation of satellite-ground base data, translation of environmental variables to economic models, and linkage of economic and environmental models through sensitivity analysis could be other efforts that can be undertaken through SAARC. SAARC could pick up this initiative again and work on protecting the environment by such acts of violence. Bilateral agreements can also help to some extent, depending on a mutual agreement on the definition of terrorism.

Military exploitation of environment vis-Ă -vis terrorism has posed grave challenges for South Asia in contemporary times. Uprooting terrorism and supporting the victims of South Asian proxy wars is of pivotal significance before nuclearisation of terrorism occurs. Passing nuclear weapons into the hands of terrorist outfits is dangerous and its usage can impair the environment beyond repair. The twenty-first century must address itself to save Earth for the continuance of the human race. In this context, the socio-political economy of South Asia is likely to suffer a financial crunch as availability of resources to sustain the cause of environmental conservation

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and restoration as an aftermath of militarisation will be limited. A preventive strategy of investigating the causes of domestic terrorism and measures to improve upon them may be a likely step in the right direction. The struggle against terrorism and extremism would not be won unless nations learn to be truly democratic and Islamic militants are no longer humiliated and oppressed for their beliefs but educated, dealt with compassionately and assimilated in mainstream of society, once they embrace peace and shun violence. Their assimilation in the mainstream with increasing efforts towards education and socioeconomic empowerment will lead to the spread of modern logical and rational ideas and a work ethic. This may help in eradicating the root cause of terrorism, the implications of which will be felt on the environment too.

Global thinking and local or regional action is the underpinning dictum in matters of environment and strong flexible partnerships between local communities, NGOs, and international institutions are critical for mitigating war-zone environmental damage.

Dr Vandana Asthana is assistant professor at Government Department, Eastern Washington University in Washington State (USA). She specialises in international relations and environmental security with a special focus on water. Dr. A.C. Shukla is currently a visiting scholar at the Department of Government, Eastern Washington University, Washington.

References l Allenby, B.R. “Environmental security: Concept and implementation”. International Political Science Review, (2000), 21(1): 5-21. l Asif, K. “Rising Kashmir”. June 30–July 6, 2007. http://www.heritageof Kashmir.org/news/index.html (accessed on August 25, 2008). l Asthana, V. India's Foreign Policy and Subcontinental Politics. New Delhi: Kanishka Publishers, 1999. l Balachandran, G. “Weapons of mass destruction and terrorism”. IPCS Article No.637 Nov 17, 2001. http://www.ipcs.org/ newPrintCountry. jsp?action= showView&kValue =637 (accessed on 15 June 2008). l Barnett, Jon. The Meaning of Environmental Security: Ecological Politics and Policy in the New Security Era. London, New York: Zed Books, 2001. l Brahic, C. “Limited war would damage ozone layer.” New Scientist. 7 April 2008. http://environment.newscientist.com/article.ns?id=dn13608&print=true (accessed on July 2008). l Bhandari, P. “Villages near India's N-test site hit by famine, livestock deaths”. India Network News Digest, 20 April 2000. l Bloom, Saul, John M. Miller, James Warner and Philippa Winkler. Hidden Casualties: Environmental, Health and Political Consequences of the Persian Gulf War. Berkeley: North Atlantic Books, 1994: 294. l Butts, Kent Hughes. “Why the military is good for the environment”. In Green Security or Militarized Environment, edited by Jyrki Käkönen. Aldershot, England and Brookfield, Vermont: Dartmouth Publishing Company Limited, 1994. l Cariappa N. “The Siachen Standoff”. The Hindu November 11, 2002. l Chalecki, Elizabeth. “A New Vigilance: Identifying and Reducing the Risks of Environmental Terrorism”. Global Environmental Politics (2002), 2(1): 46-64. l Crook, J. “War in Kashmir and its effect on the Environment.” ICE case study Number 76, 2000. www.americanedu/TED/ice/Kashmiri.htm l Deccan Chronicle. “Blind Calves born in Pokhran”. June 17, 2002. l Dalby, Simon. Environmental Security. Minneapolis, University of Minnesota Press,

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2002.

Dudley, Joseph P., Joshua R. Ginsberg, Andrew J. Plumptre, John A. Hart and Liliana C. Campos. “Effects of War and Civil Strife on Wildlife and Wildlife Habitats”. Conservation Biology, (2002), 16(2): 319–329.

Falk, Richard. “Nuclear Weapons.” In Arms Control, Disarmament and International Security. Claremont, Ca: Regina Books, 1988.

Gleick, P. (2006). “Water and Terrorism” Water Policy 8: 481–503 GreenPeace (1992).

Kashmir and environmental degradation at http://www.greenpeace.com accessed on 5 March 2008 Hulkower, S. (2007). Kashmir: Melting Glaciers, Boiling Conflicts. ICE case studies Number 208 at www.americanedu/TED/ice/Kashmiri.htm accessed on July 25,2008 Homer-Dixon, Thomas F. (1999). Environment, Scarcity, and Violence. Princeton: Princeton University Press.

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Mannion, A.M. (2003). “The Environmental Impact of War and Terrorism” Geographical Paper No 169 June.University of Reading, Whiteknights Nizamuddin, K. ( 2008). “Kashmir Tourism suffers when conflict Erupts” August 15 The WIP the women's international perspective at http:www.the wip.net/contributors/2008/08/Kashmir_touris_suffers_when_c.html accesses on August 28,2008 Puri, L. (2005). Fighting Pollution on Siachen Glacier The Hindu August 27 Parsons, Rymn James. (1998). The Fight to Save the Planet: U.S. Armed Forces, “Greenkeeping,” and Enforcement of the Law Pertaining to Environmental Protection During Armed Conflict. Georgetown International Environmental Law Review. 10 (Winter): 441– 500.

Ramana, M.V. and C. Rammanohar Reddy. (2003) Prisoners of a nuclear dream New Delhi. Orient Longman.

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Rehman, E.U. (2008). Environmental Issues and Need pf Sustainable Development in the Earthquake Affected Area, State of Azad Jammu and Kashmir, Ethnobotanical leaflets 12:130-138 Renner, Michael, Arthur Westing and Warwick Fox (2002) 'Environmental Degradation as Both Consequence and Cause of Armed Conflict' (). Environmental Awareness 25,1: 5–19.

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London, New York: Verso.

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Boston: Beacon, 1992.

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Westing, A.H. “Environmental Warfare: Manipulating the Environment for Hostile Purpose”. Presentation delivered at the Woodrow Wilson Center on 7 May 1996.

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Westing, Arthur H. (2002). In Furtherance of Environmental Guidelines For Armed Forces During Peace and War, in The Environmental Consequences of War: Legal, Economic, and Scientifi c Perspectives. (Project by the Environmental Law Institute) New York: Cambridge University Press :171–189.

Westing, A. H. ( 2002). Conventional warfare and the human environment in Taipale, I. (ed.). 2002. War or Health Dhaka University press: 407–15

The UPA Government: A Report Card Manoj Joshi

T

he Manmohan Singh government came to power through what was seen as the shock outcome of the 2004 general elections.1 Most observers had said that the National Democratic Alliance (NDA) would squeak through with a small majority. There were a number of issues—the Sino-Indian border negotiations, the India-Pakistan peace process and the Indo-US nuclear dialogue—that were premised on the near-certain return of the NDA. However, it was the United Progressive Alliance (UPA) that appeared to have a credible majority—with the support of the 65 member Left bloc. The defeat of the BJP-led NDA was ascribed to the “India Shining” theme of its election campaign. It was said that the party's policies had got caught up in the triumphalism engendered by good economic growth and that it had lost touch with the common man. But clearly the causes were deeper. In great measure the failure of the party was related to the failure of its allies—principally the Telugu Desam Party (TDP). Their failure, in turn, was ascribed by the TDP to the loss of support of the Muslim community in Andhra Pradesh because of the Gujarat massacres of 2002.

So the UPA came to power with the belief that it needed to buttress Indian secularism, battered by the years of BJP rule, as well as undertake policies that would keep the needs of the aam admi (common man) firmly in mind. The Common Minimum Programme (that the party undertook to win the support of the Left emphasised among other things that the UPA would “preserve, protect and promote social harmony and [to] enforce the law without fear or favour to deal with all obscurantist and fundamentalist elements who seek to disturb social amity and peace.” In addition, it would promote economic growth with employment; an “independent foreign policy”; enhance the well-being of farmers, farm labour and workers; empower women; provide full educational, legal and economic equality for the Dalits and religious minorities, and provide a transparent, corruption-free administration.2 Social and Economic Issues In many ways the UPA has succeeded in achieving these objectives, or has at least made a serious effort to achieve them. The period 2004–2008 has been singularly free of large-scale Hindu-Muslim communal riots that have disfigured the polity in the NDA regime. Despite the attacks on Christians—mainly in BJP-ruled states—and the communal violence in Assam, the Congress-led UPA has provided a relatively riotfree administration. It has come up with important measures of social welfare such as the National Rural Employment Guarantee Act which is the closest to a social welfare

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net that the tens of millions of Indian poor can get. Another social welfare measure was the extension of the Other Backward Classes quota to higher education in the country. Opposition to this measure in sections of the population led to a government commitment that the extension of the quota would not affect people from the general categories. In the process, the government was compelled to make a major expansion in India's higher education infrastructure. The Right to Information Act has been a pioneering piece of legislation to provide transparency where none existed—in the functioning of the government.

As for the economy, it has been ticking along at a handsome pace. The Indian economy grew by 9 percent in 2007–8 and has averaged 8.8 percent in the 2003–4 to 2007–8 which represents a decisive break from the past periods of growth. In 2008, however, a large number of factors have arisen that are likely to dampen this trend—global inflation rates, brought on by the sharp rise in oil prices, the sharp decline in credit and equity markets and the global slowdown. Even then, expectations are that growth will remain at a high 7.7 percent.

Growth—Past Performance and Projections for 2008-9 (percent change over previous year) Annual Rates

2003-4

2004-5

2005-6 5.9

2006-7 QE 3.8

2007-8 Rev 4.5

2008-9 projected 2.0

1.Agriculture & allied activities

10.0

-0.2

2.Mining & Quarrying

3.1

8.2

4.9

5.7

4.7

7.5

3.Manufacturing

6.6

8.7

9.0

12.0

8.8

7.2

4. Elect, Gas & Water supplies

4.8

7.9

4.7

6.0

6.3

6.5

5. Construction

12.0

16.1

16.5

12.0

9.8

8.5

6. Trade, Hotels, Transportation, Storage and Communications

12.1

10.9

11.5

11.8

12.0

9.8

7. Finance, insurance, real estate and business services

5.6

8.7

11.4

13.9

11.8

10.0

8. Community and personal services

5.4

6.8

7.2

6.9

7.3

8.4

Gross Domestic Product (factor cost and 8.5 7.5 9.4 9.6 constant prices) Source: Economic Outlook for 2008-9 (Economic Advisory Council to the Prime Minister)

9.0

7.7

There has been another important development accompanying this growth. The Economic Advisory Council to the prime minister has also reported that there has been a “perceptible improvement in the fiscal situation at both the Central and state levels” in the country since 2003–4.3 According to the Economic Survey 2007–2008, revenue receipts of the government have increased from Rs 230,834 crore in 2002–03 to Rs 486,422 in 2007–2008 (budget estimates). The average annual growth of revenue receipts of the central government was of the order of 16.2 percent.4 This has enabled the government to undertake vast expenditures related to the National Rural Employment Guarantee Act (NREGA), the loan waiver of Rs 70,000 crore for farmers in 2008–2009 and fund ambitious schemes such as the Sarva

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Siksha Abhiyan for eradicating illiteracy, the Mid-day meal scheme, the Jawaharlal Nehru National Urban Renewal Mission, the National Rural Health Mission and so on.

Social Legislation Despite the fact that the Congress by itself does not enjoy a majority in parliament, the UPA government has managed to pass a number of laws that have considerable significance. The first is the National Rural Employment Guarantee Act, enacted in August 2005, which provides a legal guarantee for one hundred days of employment in every financial year to adult members of any rural household willing to unskilled manual work at the statutory minimum wage. The aim of the act is to provide a social safety net to the rural poor as well as ensure that they are not compelled to migrate to cities from their normal place of residence.5 The second was the Right to Information Act which came into force in October 2005.

It mandates the government to allow citizens to inspect works, documents and records of government, take notes and certified copies of the documents or records.

The aim of the act is to make the functioning of the government transparent and thus improve governance. In a country where the citizen had no right to information, the act has already begun impacting on the relationship between officials and citizens.

On another track, the UPA repealed the Prevention of Terrorism Act (POTA). This was one of the first significant decisions of the Manmohan Singh government which came to power in May 2004. POTA had come into force in June 2002 in place of the Terrorism and Disruptive Activities (Prevention) Act (TADA) that had been allowed to lapse by the Congress government of P.V. Narasimha Rao in 1995. It had been enacted in the wake of 9/11 and the attack on the Indian Parliament in December 2001, when there was a wave of similar legislation in the democratic world.6 The draconian act allowed detention of a suspect for 180 days without charges being filed in a court, allowed the security agencies to withhold the identities of witnesses and treated a confession before the police as an admission of guilt. The main reason why the UPA took this position was that anti-terrorist legislations ended up being misused by the various state governments to harass their political opponents, and because there was a perception that the minority Muslim community was being unfairly targeted by the laws.

The experience of both laws showed that this was indeed the case. In the case of TADA some 75,000 people were detained under the act since it came to force in 1984, but of these some 73,000 cases were withdrawn because of lack of evidence.

In September 2008, the UPA government came under renewed pressure to legislate a law similar to POTA in the wake of a series of bomb blasts in Jaipur, Ahmedabad and New Delhi. At the same time, it was asked to approve a number of state legislations which were equivalent to the repealed legislation such as the Gujarat Control of Organised Crime Bill which has been pending approval with the Union government

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since it was passed in 2004.

Foreign and Security Policy The UPA government's foreign and security policy was tinged by its own past perspectives and its Left allies which felt that the National Democratic Alliance's policies were too close to those of the US. Therefore in the CMP, an emphasis was made on what was called an “independent foreign policy”, and the need to promote multi-polarity in world relations and oppose all attempts at unilateralism.

Yet, the agenda of the UPA government was essentially set by the predecessor NDA. The key areas were relations with the US, the peace process with Pakistan and rapprochement with China. In addition, New Delhi had a number of world order concerns, such as its membership in the UN Security Council, the promotion of a slew of regional agreements such as the South Asian Association for Regional Cooperation (SAARC) and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). In addition, there were issues relating to India's participation in the G-8 outreach meetings, the annual Indo-EU summit meetings, relationship with the Association of South East Asian Nations (ASEAN) and the East Asia Summit (EAS) as well as the multi-continental India, Brazil South Africa grouping (IBSA).

Formally India's strategy was to build good relations with a number of leading countries to promote a multi-polar world. But in practice, what we witnessed was an enormous effort to boost ties with the US through the Indo-US nuclear deal and as part of the process the enhancement of ties with the other countries of the western camp such as Germany, UK and Japan.

The South Asian region remained a major area of focus for the UPA government.

Crises of various kinds afflicted most of its fellow neighbours—Bangladesh, Sri Lanka, Nepal, Pakistan and Afghanistan—as well as Myanmar (Burma). Yet an engaging feature of the situation was that New Delhi was not seen, as it was often in the past, cause of the problem. In some instances, notably in Sri Lanka and Nepal, it was seen as a helpful element, an honest broker of sorts. Though in the former case, India remained an onlooker, unable or unwilling to get involved despite domestic pressure from UPA partner, the Dravida Munnetra Kazgham (DMK) of Tamil Nadu. In Nepal, despite New Delhi's preferences, the solution was worked out by the Nepalese parties themselves by abolishing the monarchy. It was also striking that through 2007, when Pakistan underwent an intense political upheaval, New Delhi was not seen as a player by any of the contending political parties. Countries of the region now see a larger strategic content in the India-Pakistan dialogue and accept that the entire IndiaPakistan peace process must be situated in a larger effort to create a South Asian Free Trade Area or, possibly, a South Asian Economic Union in the coming decades.

The UPA had criticised the nuclear tests of 1998, but when it took power, it declared that it was committed to maintaining a credible nuclear weapons programme while at the same time it committed itself to evolve demonstrable and verifiable confidence-

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building measures with its nuclear neighbours. There were no significant developments in the strategic weapons field, in the main the programmes for the missiles and other weapons moved on the momentum of the past.

The UPA also inherited a major reform package in the country's defence management through what is called the Group of Ministers Report on the defence management of the country. This involved providing funds for the country's modernisation as well as structural changes in the country's institutions like the armed forces and intelligence services. There was little unusual activity in any of the areas. The UPA failed to follow up on the reform process and did not move forward to appoint a Chief of Defence Staff, the key appointment for the restructuring of the armed forces. Similarly, the efforts to reform and restructure the intelligence services did not move forward and the intelligence agencies carried on much as before. However the two new services—the Defence Intelligence Agency and the National Technical Research Organisation—were set up and began to work, albeit without much encouragement from the higher government managers.

Pakistan The key shift in relations with Pakistan was defined by the 6 January 2004 agreement that launched the current peace process. Its key ingredient was the Indian commitment to discuss the issue of Jammu & Kashmir seriously and Pakistan's promise not to allow its soil to be used for terrorist acts against India. These commitments were situated in a wider composite dialogue to resolve other outstanding issues through a process that engaged top officials of the two governments. Observers say that the two sides are ready to clinch at least two of the issues—the Siachen Glacier and the Sir Creek dispute. However, they have not been able to find a mutually convenient moment to do so.

Officials have now begun the fifth round of the dialogue, having expressed satisfaction over the conclusion of the fourth round in the period 2007–8.7 Officials on both sides agree that the conversation has been one of unparalleled depth, intensity and quality.

The fact that this process has witnessed two political transitions—in India in 2004 and Pakistan in 2008—is a tribute to its resilience. The process itself has vastly enhanced the content of the India-Pakistan relationship by regular contact between the top leaders and officials of the two countries, as well as increased people-to-people contact. Among the key issues that have advanced, albeit incrementally, is cross border trade which has grown by leaps and bounds because of better facilitation. As a result of the dialogue, each side has been able to begin discussing issues relating to prisoners held by the two sides and have actually succeeded in establishing a judicial committee to aid the process.

China The decision to upgrade the level of the border negotiations in 2003 to the political level indicated that the two countries were earnest about a settlement. The intense exchanges between the Special Representatives—Dai Bingguo on the Chinese side, and Brajesh Mishra, then J.N. Dixit and finally M.K. Narayanan on the Indian

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side—indicated that the two countries could quickly settle the issues. This was underscored by the April 2005 agreement on the "Political Parameters and Guiding Principles” for the settlement of the border issue which was arrived at during the visit of Chinese Premier Wen Jia Bao.8 This path-breaking agreement seemed to suggest that the two sides would evolve a framework which will draw a border on the existing Line of Actual Control on an "as is where is" basis. However expectations of a quick settlement have been belied. Indian officials say that the Chinese demands on the Tawang tract make the possibility of a settlement difficult in the near term.

As a result, relations with China remain centered on economic issues.9 A measure of this is the fact that bilateral trade between India and China doubled in the period 2006–2008. The target of $20 billion set for 2008 was reached two years ahead of schedule. The target for 2010 was revised upward from $40 billion, to $60 billion during Prime Minister Manmohan Singh's visit to China in January 2008. Though the complex political issues have taken a back seat, the tensions during the Tibetan uprising prior to the Olympics in early 2008 have pointed to the dangers of leaving them there.

United States The decision to develop stronger ties with the US goes back to 1980 when the Soviet Union invaded Afghanistan. Prime Minister Indira Gandhi made a self-conscious decision to move Indian policy closer to the US. Because of the US commitments in Pakistan, the process was worked through a procedure of improving Indian access to US high technology through the Reagan-Gandhi high technology initiative and a parallel process to provide India access to US defence technology.

Almost immediately, the process got caught up in a larger shift in the US occasioned by the end of the Cold War. The US was now able to get a cooperative Russia to push its non-proliferation policy and this inevitably clashed with its goal of closer technology ties with India. This logjam was finally broken when New Delhi defied the US efforts to lock up India's nuclear weapons programme through the Nuclear NonProliferation Treaty (NPT), the Comprehensive Test Ban Treaty (CTBT) and the effort to get a 3 plus 2 arrangement where US, Russia and China would guarantee an IndiaPakistan agreement on freezing their nuclear programmes.

After an almost indecent interval, the US and India picked up the threads of the technology partnership which was really a code for a closer political relationship. The Jaswant Singh-Strobe Talbott talks led to the Next Steps in Strategic Partnership (NSSP) arrangement in January 2004 which in turn gave way to the Indo-US nuclear deal which was announced during Prime Minister Manmohan Singh's visit to Washington DC on 18 July 2005.

The nuclear deal is a vital component in the Indo-US political partnership because it is premised on: 1) a decisive break with the US policy of equidistance between India and Pakistan and 2) treating India as a “normal” state by removing the many-layered sanctions that have limited the technology relationship and hence the potential for the

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political relationship between the two countries. It has gone out of its way to address Indian complaints that US policy in South Asia has in the past systematically undermined Indian security.

The internal debates over the nuclear deal led to the Left withdrawing support from the Congress-led UPA in August 2008. This was the best measure of the extent to which the Congress sees the importance of good ties with the United States. While India clearly profits from the lifting of the nuclear trade embargo by the Nuclear Suppliers Group, just what the US gains is not clear unless we see it as part of a larger US strategy to befriend India and, as was stated by an unnamed official noted that the US goal was “to help India become a major world power in the 21st century […] We understand fully the implications, including military, of that statement.”10 While the NDA government saw the US as India's “natural ally”, the UPA government has been more circumspect and has made no public statement that would suggest that India has any special plans with the US. Indeed, UPA leaders have emphasised the need for promoting multipolarity in world relations and say that their efforts are to build strong relations with a cross section of world powers ranging from Brazil and South Africa to Russia, China, the European Union and the United States.

Conclusion The UPA government report card must be seen from the perspective of its political circumstance. It does not have a majority in parliament and it is spending its last year in an uneasy situation where the Left has withdrawn support and its majority has been cobbled through what many observers say are dubious means. Then, unlike the past, the prime minister is not the leader of the party. In that sense he operates with reduced authority, as was evidenced in crucial points of time in the political battle with the Left on the issue of the Indo-US nuclear deal, or in relation to certain senior colleagues in the Cabinet.

Yet, despite this, the UPA has achieved a great deal and, as the record shows, it is unfair to call Dr Manmohan Singh a “one issue” prime minister. However, there are also opportunity costs that must be computed—the failure to move faster to clinch India-Pakistan issues or the Sino-Indian dispute, or accelerate reform of the country's economic system.

The last year of the government, however, has been clouded by enormous political and economic pressures on the country. Some tensions have been generated by the continued acts of terrorism, leading to a sense of resentment among the country's Muslim population. At the same time, it has emboldened the opposition Bharatiya Janata Party (BJP) to step up its rhetoric of minority appeasement. The attacks on Christian minorities in Orissa and Karnataka—both states have the BJP either ruling or in the ruling coalition—have further roiled the situation. Some of these developments may be the inevitable consequence of the coming general elections, but others are disquieting trends that bode ill for the country.

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Manoj Joshi is currently comment editor Mail Today (New Delhi) and author of Lost Rebellion: Kashmir in the Nineties and more recently, Kashmir 1947-1965: A story retold.

Endnotes 1. K.K. Katyal, “Issues and Trends in Indian Elections,” South Asian Journal (Lahore: Free Media Foundation, July-September 2004) 16–26.

2. F o r t h e t e x t s e e h t t p : / / w w w . h i n d u o n n e t . c o m / 2 0 0 4 / 0 5 / 2 8 / s t o r i e s / 2004052807371200.htm) 3. Economic Advisory Council to the Prime Minister, Economic Outlook for 2008/2009 (Report submitted to the Prime Minister, July 2008) 9.

4. Government of India, Ministry of Finance, Economic Survey 2007–2008 (Government of India, 2008) Table 3.2 and p. 35 5. For an assessment of the working of the first two years of the NREG scheme see Santosh Mehrotra, “NREG: Two Years On: Where do we go from here ?,” Economic and Political Weekly, 2 August 2008, 27-35.

6. See commentary by one of the Central Information Commissioner, O.P. Kejriwal, “Right to Information Act: Loopholes and road ahead,” Economic and Political Weekly, 18 March 2006, 940–42.

7. See the Joint Statement issued after the foreign minister level review of the fourth round of the composite dialogue held in Islamabad on May 21, 2008.

8. For a text of the agreement see http://www.hinduonnet.com/ thehindu/nic/ 0041/indiachinatxt.htm 9. For a discussion on Sino-Indian relations and Prime Minister Manmohan Singh's January 2008 visit to China see Alka Acharya, “India-China Relations: Towards a 'Shared Vision',” Economic and Political Weekly, 26 January 2008, 10–13.

10. Cited in Zia Mian and M.V. Ramana, “Wrong Ends, Means, and Needs: Behind the U.S. Nuclear Deal With India,” in http://www.armscontrol.org/act/2006_01-02/JANFEBIndiaFeature.

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The Making of Bhutan's Constitution Lungten Dubgyur Introduction On the occasion of submitting the first draft constitution to King Jigme Singye Wangchuck by the Constitution Drafting Committee on 9 December 2002, the king said that: “People have expressed their skepticism on the introduction of the Constitution [sic] at a time when everything is going well, as its introduction might lead to disadvantages and undesirable effects especially the introduction of political parties.

“The experiences of the changes in the governance system have been evolving for the last 27 years. The initiative to introduce the Constitution [sic] in our country may sound new to outsiders, but it is not at all new to us. We have been gearing up for it steadily. I am confident that the Bhutanese people have the capacity to take care and govern their own country well. Many nations have adopted their constitutions in a rush and abrupt manner. But we have the time and vision to prepare during peace, prosperity and tranquility. It is important and necessary to create a sound and robust system of governance. The government must be controlled and owned by the people.”1 Some of the common questions the Bhutanese people had in their minds were: what would the constitution provide them? Would they be able to enjoy the same peace, prosperity and progress that they have so far under the leadership of their kings? The Bhutanese had every reason to worry. The democratic system in the world, in general, and particularly in the South Asian context had a demonstrative effect on the people of Bhutan especially with the introduction of the internet and television in 1999. For the people of Bhutan, often democracy has been seen in the form of violence and instability. Most of our regions today are domains of insecurity and constant threats of political instability where people are subjected to suffering. No amount of public conviction would have had any bearing on the making of the Bhutanese constitution had it not been for the king's reminder that: “We should not be deterred by the fact that democratic political systems have not been working in some countries. The principles and ideals of democracy are inherently good, and a democratic system is desirable for Bhutan. If the lessons of some democracies

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are not encouraging, it is not because the concept of democracy is flawed: it is because of mismanagement and corruption by those who practice it.”2 This paper attempts to recapitulate the process of the making of the Bhutanese Constitution. It is not appropriate to look at it as annotated constitution making. To explain the originalism3 of its making is an enormous task which justly merits separate attention.4 The Vision for a Written Constitution “As the Bhutanese saying goes “The way one listens is more important than the way one speaks”. So it is very important to understand the purpose of the Constitution [sic] that we are drafting today. What should be the basis of the Constitution [sic], which we are going to draft? What should be the source? What necessitated us to draft it? And what are the benefits that can be derived from it?”5 The fundamental values of constitution making in Bhutan are inherently a process of careful design.6 Its mandates and frameworks are drawn from institutional experience, the need for public engagement and “political wellbeing” of a nation. It is a quest for political constitutionalism emphasising process as well as substance to provide democratic governance. Democratisation and constitution making in the Bhutanese context are built on the solid foundation of initiation by the kings, with the people following them as a precious gift. The ballot paper itself in the first historic election was compared to a “norbu” or a precious jewel.7 Every nation has its own history and nations' lessons and experiences differ from one another. Generally, democratisation throughout the world has emerged in varying situations. For instance, most constitutions were written in the beset of rebellion, occupation, breakup of States, post-colonialism, self-determination, overthrow of regimes or expression of unison between multiple States. Moreover, most of the constitutions which are in existence today were written or rewritten in the last fifty years or so. This gamut of constitution-making process has generated vast academic literature. However, one thing that remains constant is its basic features; separation of powers between the organs of the government and their structure; parliamentary or presidential form of government; centralisation or devolution of powers; federal or unitary systems of government; political parties; multiculturalism; pluralism; ethnicity and the risk of conflict; as well as democracy and economic development.

In a nutshell, the vision of the Constitution of Bhutan is expressed in its preamble.

The people of Bhutan solemnly pledge to strengthen the sovereignty, to secure the blessings of liberty, to ensure justice and tranquility and to enhance the unity, happiness and well-being of the people for all time. In His Majesty's words:

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“It is my duty, as the king, to strengthen the nation so that the people can develop in security and peace, and the nation becomes more prosperous and secure than before. During the past years of reign, I have made constant efforts to empower the people by delegating authority, resources and responsibilities to them. The Constitution [sic] should not be considered as a gift from me to the people: it is my duty to initiate the constitutional process. The sovereignty, stability and well-being of the country are always more important than anything else: the country is more important than the king. The basic purpose of the Constitution [sic] must be to ensure the sovereignty and security of the nation and the well-being of the Bhutanese people for all time to come. The political system of the country must evolve so that the people will continue to enjoy peace and prosperity, justice, and the fundamental rights, which have always been enshrined in the Bhutanese system. It is important for us today to look into the future and to take the necessary steps to shape the destiny of our country. We must move with the times to ensure that our nation not only overcomes all internal and external threats but continue to prosper in the atmosphere of peace and stability.”8 “The Constitution [sic] should not ever be drafted with a view towards benefiting or favouring the King [sic]. The important objectives to be borne in mind while drafting it are (a) the sovereignty of the country, (b) the security of the country; (c) the national interest; and (d) the welfare of the people.”9 The vision of King Juigme Wangchuck was very clear to have a constitution in the time of peace and to establish a democratic political system that serves the “best interest of the Bhutanese People [sic]” and to reflect the aspirations of a rapidly modernising State ensuring security, sovereignty, peace and prosperity, justice, and to uphold the fundamental rights and well-being of the people.

“It is not that we did not have laws before; we had laws enacted by our noble predecessors as it is said that they have 'invented handle to those handle-less pots and enacted laws in the country of Lho (Southern Land) where there existed no law.' Yet our benevolent King [sic] aspires to establish a good political system through which the government and its people could enjoy continuous peace and justice and as such decreed us to draft a comprehensive Constitution [sic] for the Kingdom of Bhutan.”10 The Constitution Drafting Committee During a special audience granted by King Wangchuk on 4 September 2001, the Council of Ministers, the chief justice and the chairman of the Royal Advisory Council were briefed on the king's desire to draft a written constitution for Bhutan and the

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need for the composition of the members of the Constitution Drafting Committee to represent the cross-sections of the Bhutanese people.11 Following the royal command, the chairperson of the Council of Ministers issued directives to nominate and elect members to form the drafting committee of the constitution on 22 September 2001. The royal government was of the view that in order to carry out the monumental and historic task of drawing up the constitution, it was necessary to call upon the collective wisdom and expertise of the people by forming a broad-based drafting committee that had members from all walks of life.

Therefore, a 39-member committee was constituted which included the speaker of the national assembly, 20 elected representatives representing 20 district of the kingdom, 2 members of the clergy, 7 members of Royal Advisory Council, 5 government nominees, 3 lawyers and the chief justice of Bhutan as the chairman of the committee.

Recognising the complexities in the formulation of the constitution and the need for sufficient latitude for the drafting committee, general guidelines were also provided by the government to facilitate the commencement of the work entrusted to the committee. The guidelines incorporated in the directives included the vision of an ideal constitution which would reflect the political aspirations of the Bhutanese people, protect, preserve and promote the sovereignty, unity and integrity of the kingdom, enhance justice, freedom, equality and general welfare, provide for common defense, strengthen national identity, preserve and promote culture, national heritage, environment, ensure the benefit of a continued socio-economic progress and the people's pursuit of Gross National Happiness. The constitution would provide and define the institution of monarchy, the prerogative of the Crown and all related matters thereto. Further, the constitution would also bring within its framework the provisions relating to the powers and functions and the manner of their exercise of the three branches of the government and various other agencies, including local governments and the armed forces.

The drafting committee members desired to adopt their own working procedures to ensure the accomplishment of the important task in the most efficient manner. While drafting the constitution, the members desired to draw inspiration from the country's history and be mindful of religious, cultural, social and political values and institutions and, if necessary, refer to the constitutions of other countries. It was also desired that the members should, in order to accomplish the historic task, display moral and ethical standards of integrity, honesty, open-mindedness and impartiality.12 “All of you, the members have been chosen, from amongst the best.

You, the members – [sic] whether from the civil service, the people, or the monastic community – [sic] have not been selected on any other basis.

“The Constitution [sic] must be good enough for hundreds of years.

If it is found valid even after 40 to 50 years, it will be considered good and the members of the drafting committee will be recalled in

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gratitude by the future generations.�13 The Constitutional Conference Inspired by the king's words, the members of the drafting committee immediately sat for this historic task after the drafting of the constitution was formally launched.

Chairman Lyonpo Sonam Tobgye, chief justice of Bhutan, opened the first session by declaring that their work had to be done in earnest and that the constitution must fulfill the aspirations of the Bhutanese people enshrined in the historic document of 17 December 1907.14 The members resolved to give their best and prayed that the constitution would, under the guidance of the chairman, come out comprehensively without any lacuna.15 The members began the session by solemnly reminding themselves of the country's rich historical, religious and cultural past. The country, which was once referred to as Monyul, a land without religion, is now blessed with many renowned religious and cultural sites. Although Lord Buddha could not visit Bhutan personally, the country was visited by Guru Padmasambhava (known as the second Buddha). Thereafter, Zhabdrung Ngawang Namgyel introduced legal reforms and further spread Buddhism and preached the Buddha Dharma. Zhabdrung Ngawang Namgyel not only established a dual system in the country but also enacted Chayig Chhenmo (supreme laws) based on the ecclesiastical law.16 Thereafter the third hereditary King Jigme Dorji Wangchuck enacted several laws including the Thrimzhung Chhenmo (The Supreme Law, 1957).

During the session, the members also shared their common belief that the king's edict to draft the constitution could not be imagined by the citizens of Bhutan.17 Nevertheless, the members prayed that the adoption of the constitution would bring everlasting fortunes through the blessings of Triple Gems (Kenchosum or Buddha, Dharma and Sangha).

The most precious asset for the king is citizens, The most precious need for the citizens is peace, The root of peace is the laws, And the root of laws is the Constitution [sic].�18 The members also reminded that the constitution should not deviate from the history of Bhutan's hereditary monarchs, ancient traditions and cultural heritage. The need to refer to the constitutions of other countries, to incorporate acceptable values and lessons was also felt.19 The first and the most immediate and difficult task which the members faced was coming out with the basic framework and the outline of what should be incorporated in the constitution. The members agreed that the constitution must outline the broad parameters of power sharing between the executive, legislature and the judiciary.

Therefore, it was very important to understand the concept of power sharing or separation of powers. Separation is an indispensable means for locating responsibility

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and fixing accountability. An executive, unambiguously charged with executing a policy set by the "law-makers", can be held liable for its performance or nonperformance. If that clear line of distinction and responsibility is blurred, then personal liberty and public interest are alike in jeopardy. The members felt that the constitution must also secure individual rights and freedom. While fundamental rights were considered the sine qua non of the constitution, it was also felt that the constitution must also provide corresponding fundamental responsibilities.

Although the king had already decentralised the powers to the people, the constitution must further strengthen the devolution of power to empower the people at the village and district level without any hindrance. Therefore, it was essential to develop a mechanism under the constitution to enable people to participate in the political process through periodic elections and proportional representations. The constitution must also ensure socio-economic development as a forerunner to achieving Gross National Happiness. At whatever stage of development the country may be, priority must be given to the preservation and protection of natural resources and the environment.

Recognising the fact that Bhutan is sandwiched between two populous countries of the world, its constitution needs to strengthen its sovereignty and security for all time to come. At the same time, since Bhutan is a member of the United Nations, the constitution must also strengthen and foster good relations with the neighbouring countries and must promote international peace and cooperation.

On the issue of monarchy, members felt that they should keep in mind the fact that Bhutan's forefathers suffered extreme difficulties before they could establish the first hereditary monarch in 1907 through a social contract.20 In the absence of a unified leader, there was a frequent outbreak of internal strives, civil wars, famines and other hardships which brought immense suffering and difficulty to the common people.

Besides, Bhutan had to resist various invasions from neighbouring countries to protect and maintain its sovereignty despite its size and population. The members also felt that the kings have always introduced social welfare programmes through planned development activities that benefited each and every individual citizen of Bhutan. Bhutanese kings abolished slavery and the caste system, distributed land to the landless, improved the standard of living, introduced free education and medical services, and promoted general welfare by improving modern amenities like roads, telecommunication, rural water supply and rural electrification. Today Bhutan, like any other nation, is able to participate on equal footing among the comity of nations.

Bhutan became a member of the United Nations in 1971. Therefore, the drafting committee wanted preceding as well as succeeding monarchs to be the guiding light and inspiration of the constitution and modern Bhutan.

Constitutional Design: the Draft Constitution “Drafting of Constitution [sic] is not compelled by circumstances but by the commitment to ensure secure and peaceful future. Let us not

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only emphasize [sic] on past. Think about the future of our Country [sic].”21 To draft any constitution is not an easy task as one could imagine. Heated arguments and debates ultimately needed visionary guidance and compromise. The spirit of compromise was to fight against pride and prejudice, uphold rationality and reason; and finally “admit error” in grace and glory.

“There must be some areas where there could have been lack of consensus among you, the members of the drafting committee in the meetings, as well as points of doubt that needed to be referred to me and discussed. I would like to inquire if there were points of disagreement among you.

I have not either monitored or intended to know the proceedings and activities of the committee that took place over the last one year.

Contrary to the opinion that might be held by some of the members of the committee, I did not have preview of any drafts for I did not accept any of them before the one handed on this occasion. I have seen it for the first time today.”23 Some of the unique features24 of the constitution are reflected by not interposing or transposing of constitutional provisions from any particular country.25 However, Bhutan has been fortunate to learn from the positive experience and mistakes of other constitutions. The best constitution should be one which is religiously followed both by the state and its people. Constitution is all about as to how it is practiced in its true spirit.26 The best of a constitution is not entirely depended on the framers. It is the history of a situation that makes great constitution.

“This Constitution [sic], I have no doubt will project Bhutan into the 21st century, by arming the people with a powerful catena of basic rights, and concerting the nation into a functioning constitutional democracy.”27 The first draft constitution was the result of nine meetings of constitutional debates spreading over a period of one year (from 30 November 2001 to 9 December 2002).

However, the committee could devote only six meetings for the constitution. The other three meetings had to be devoted to discuss and elaborate on the election laws and the electoral system, roles of the constitutional functionaries, the parliamentary laws etc., since these laws share parallel importance for ushering a complete democratic structure within the ambit of the constitution. During those six constitutional meetings, the committee sat for 56 days in total and worked an average of eight hours for each session not specifically recording the man-hours taken in its actual drafting which spread over a period of almost seven years (November 2001 to July 2008). Most of the meetings were held in Thimphu. Two meetings were held in

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Punakha and Bumthang.

The following can highlight the record of events leading to the formulation of the Constitution of Bhutan: l

l

l

l l

l

The first constitutional conference or meetings amongst the members of the Constitution Drafting Committee was convened from 30 November to 14 December 2001 at the Royal Banquet Hall, Thimphu. It consisted of reflecting over Bhutan's past, present and future glory28 and laid the basic structure and framework of the constitution.

The second meeting was convened in Punakha from 4 to 8 February 2002. The discussions in Punakha were of profound historical significance29 and centered on deliberations on important issues such as the separation of powers between the arms of the government, the role of clergy and the state viz. vie; debates on State religion, constitutional functionaries, fundamental rights and human responsibilities, social goals, freedom of press and the roles of the local government.

The third meeting was convened from 27 March to 11 April 2002 in Thimphu.

During the meeting, the first draft of the constitution—which was based on the discussions and issues raised in the earlier meetings—was tabled and discussed.

The necessary recommendations and alterations, based on the outcome of the debates, were incorporated and the second draft was produced.

The fourth meeting was conducted from 10 to 19 June 2002 and the members deliberated on the second draft and compiled a third draft constitution.

The drafting committee met for the fifth time from 9 to 18 October 2002 at Bumthang. This meeting was fundamental as, for the first time, the members discussed comprehensively the design of a political system and its needs to incorporate in the draft constitution. Thus, the third draft was further improved into a fourth draft.

The sixth meeting was convened from 23 to 25 November 2002 at Thimphu.

This meeting was technically devoted upon the improvement of the fourth draft and endorsed the fifth draft. The members finalised the first official draft constitution for submission to the Royal Government.

The Consultation Process “On 26 October 2005, the first public consultation meeting of a sacred Constitution [sic] (with the people of Bhutan) was held at a place destined of it's [sic] prophesies by name of Lungtenphu (place of destiny) in Thimphu by our benevolent King [sic]. Similarly, the conclusion of the consultation was held on 24 May 2006 at a historic place of Trongsa.”30 The constitution making process is the most important part. Its legitimacy and content is founded on people's participation and the role they played in its making. A workable constitution is one which is ultimately accepted by the people. The most important aspects of the making of the Constitution of Bhutan is the wide spread

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public engagement with it. Most significant is the fact that draft copies were circulated in a way rarely done before in the history of constitution making. Thousands of copies were sent out for public discourse from 26 March 2004, soliciting comments. Each copy of the draft contained both English and Dzongkha text and was distributed to every household across the kingdom. Copies were also circulated to the cabinet ministers, civil servants, government and educational institutions, corporate and private entities, and international organisations in Bhutan. International organisations like the United Nations, UNICEF, Liaison Office of Denmark, Canadian Office, Helvetas (Liaison Office of Switzerland), etc., engaged several constitutional experts to comment on the draft constitution. Detailed and compressive papers were referred to the chairperson of the drafting committee, most of them praising the document.

“In fact, the present draft is not just a copy of other recent constitutions but blends in a fascinating way ‘imports’ from other constitutions with solutions that are adapted to the specific needs and the specific context of the country. The drafters of this document must be commended for their very innovative and independent approach to constitution making against the background of a traditional (feudal) and strongly Buddhist society. One certainly has to take into account the unique location, history and culture of Bhutan when looking in the draft Constitution [sic].”31 Besides mass circulation of the draft, it was also posted on the internet (www.constitution.bt). Information technology and the impact of globalisation have contributed to this process as well. Therefore, engaging public participation, deliberation and receiving feedback were prime concerns during the adoption of the Bhutanese Constitution.32 Numerous comments—received officially or unofficially or anonymously posted online by critics and adversaries—were also given careful consideration by the chairperson and the crafting committee.33 The vision of the king was that the people of Bhutan must have a role and that the draft should be finalised upon consultation with the people of all the 20 districts.

“I will be personally visiting the Dzongkhags with the members of the drafting committee to discuss with our people and ensure that your views are incorporated in the Draft [sic] before it is forwarded to the National Assembly. It is important for the government and the people to work closely together in bringing forth a Constitution [sic] that will fulfill the aspirations of the Bhutanese people, promote our national interest, safeguard Bhutan's security and sovereignty, and provide a strong foundation for a political system that is most suitable and beneficial for both the present and future well being of our people and country”.34 Therefore, the nationwide public consultation on the draft constitution by Their

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Majesties the Kings (the fourth and the reigning king) with the people of twenty districts is of constitutional significance. Peoples' legitimate right to participate in the constitution-making process is central to adopt since the “people's” constitution truly reflects “WE THE PEOPLE” as enshrined in the preamble.

The Parliamentary Debates As envisaged under the draft constitution, the parliament constituted a 25-member National Council and 47-member National Assembly.35 Even before the constitution was adopted, general elections were conducted invoking the provisions of the draft constitution. Candidates for the National Council and political parties36 sanctified the draft provisions of the constitution in their entirety, campaigning on the values enshrined under it.

The motion for the adoption of the constitution written was tabled before the first historic joint sitting of the parliament in the presence of King Wangchuk, members of the royal family, members of the drafting committee, foreign dignitaries and the general public. The chairperson of the drafting committee, Chief Justice Lyonpo Sonam Tobgye moved the House with a motion to adopt the Constitution of the Kingdom of Bhutan in the following words: “This Constitution [sic] is the product of careful consideration to preserve and promote the ideals of sovereignty, nationhood, peace, stability and liberty by drawing from the strength of its cherished historical foundation and consideration for the present and the future well-being of the people and the nation. The Constitution [sic] embodies the pursuit of peace, economic progress and political transformation in the Kingdom [sic]. This Constitution [sic] is the blessing from their Majesty the Fourth and the Fifth King and it is an inviolable gift for the future generation.

“The sacred trust of Their Majesties to ordain and adopt this Constitution [sic] is entrusted to the country's first parliament. The Bhutanese people have reposed their hope and aspirations in their elected leaders and the nation trusts you to make the right decisions in making of the Constitution [sic]”.37 The parliament debated on the draft constitution with the primary purpose to understand it than to affect changes. The parliament thoroughly debated on the draft from 9–29 May 2008 before it was finally approved for its adoption.38 The Historic Signing As significant was the initiation of the drafting of the written constitution by King Jigme Singye Wangchuck, the signing of the constitution by King Jigme Khesar Namgay Wangchuck marked its completion. Under Buddhism, life is a cycle; every beginning must have an end. The completeness of this circle is accomplishment of the goal. What began as a journey since 1907, when the people of Bhutan vested the title

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to the Golden Throne, came full circle by devolving the power back to the people to be governed by themselves.

“On 17 December 1907, the whole body of the lamas, the state councilors, the chillahs of different districts, and representatives of the people met at Punakha, and unanimously elected King Ugyen Wangchuck as the hereditary king of Bhutan. All declared their allegiance to serve him and his heirs loyally and faithfully to the best of their ability”.39 For every Bhutanese it was a proud reflection of a profound moment of history. When the nation watched the historic events of 18 July 2008 unfold, the king before affixing his signature40 reminded to the people that: “This Constitution [sic] is the most profound achievement of generations of endeavor and service. As it is granted to us today, we must remember that even more important than the wise and judicious use of the powers it confers, is the unconditional fulfillment of the responsibilities we must shoulder. Only in understanding our duties will the exercise of our powers be fruitful.

If we can serve our nation with this knowledge and in this spirit, then an even brighter future awaits our country.

“It is my fervent prayer that through this Constitution [sic] we will, with our body, speech and mind work with complete commitment and conviction as we strengthen the sovereignty and security of Bhutan; secure the blessings of liberty; ensure justice and peace and enhance the unity and happiness of all Bhutanese, now and always.

Lastly, this Constitution [sic] was placed before the people of the twenty dzongkhags by the King [sic]. Each word has earned its sacred place with the blessings of every citizen in our nation. This is the People's Constitution. And today, through this, my Hand and Seal [sic], I affix on to the Constitution of the Kingdom of Bhutan, the hopes and prayers of my People [sic].”41 After the king appended his signature in golden ink on the constitution which was inscribed in gold, the members of the parliament affixed their signatures each of them representing the people of their constituencies.

The 18 July 2008 was declared a national holiday to mark the historic era of adoption of the Constitution of Bhutan. Every event of the ceremony was broadcast live. The constitution remained for public viewing for hours as the monks enchanted prays of continued peace, prosperity and happiness in front of the great Thongdroels or the large scroll paintings of Buddha and Guru Padma Sambhava hung in the courtyards of the Tashi Chhodzong.

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Conclusion “We may make the greatest Constitution [sic] on this earth. The greatness of the Constitution [sic] does not depend on what it is enshrined in it. It is the people who emulate that make the difference.”42 The Bhutanese Constitution is a product of the best statesmanship, foundation of extensive debates, careful crafting and more importantly consultation with the people.

Never in the history of any constitution making were such wide scale public consultations attempted. Constitutional experts worldwide applauded the draft, praising its many unique features and provisions.43 The document inherently reflects the aspirations of the Bhutanese people by drawing from the strength of its proud historical foundation of the past. To enshrine the latest wisdom of democracy, the Constitution embodies the vision and best achievements of peace, economic progress and political transformation in the kingdom.44 “With blessings from the Almighty, combined with human efforts and sincerity for greater future of Bhutan, I fervently pray that this Constitution [sic] will usher in the maintenance of Constitutional [sic] monarchy for unity, responsible and dynamic Legislature [sic], benevolent and dynamic Executive [sic], Just [sic] and respectful Judiciary [sic] to ensure domestic tranquility, maintain strong peaceful force to avert internal and external aggression, professional and dedicated civil servants for the service of the nation, and prosperous nation imbedded in Buddhist values. Through this Constitution [sic], I pray that Bhutan shall be a leader in the Buddhist world and a shining example of living and working democracy with enjoyment of liberty, freedom and rights. We may succeed but we cannot fail to endeavor.”45

Lungten Dubgyur is a member of the Constitution Drafting Committee and is currently a Judge of Royal Court of Justice, Paro, Bhutan.

Endnotes 1. As recorded in the personal notes when the first draft Constitution was submitted by the members of the Constitution Drafting Committee to King Tashi Chhodzong, Thimphu, 9 December 2002.

2. The king during the inaugural ceremony in the presence of the Council of Ministers and the members of the drafting committee at the Trashi Chhodzong on 13 November 2001 which marked the beginning of the initiation of the drafting of a written constitution.

3. The doctrine of 'originalism', is that the meaning of the constitution should be settled by reference to the original understanding of those who framed it. For detail readings, see T. Smith, “Why Originilism won't die – Common Mistakes in Competing Theories of Judicial Interpretation”, http://www.law.duke.edu/journals/djclpp/index.php 4. His Lordship, Lyonpo Sonam Tobgye, the Chairman of the Constitution Drafting Committee, “Commentaries on the Constitution of Bhutan,” unpublished.

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5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

Pema Dorji, member of the Constitution Drafting Committee.

His Majesty the King (9 December 2002) said that: “DYTs [District Development Council] have been established for the last 20 years, since 1981. And 11 years have passed since GYTs [Village Development Council] were introduced. There are now over 3,000 elected members of DYTs and GYTs all over the country. Budgetary resources and powers have been decentralized [sic] to the people through GYTs and DYTs. In 1998, full executive powers have been devolved to the Council of Ministers. All this time has been a period of training for the people. Therefore, it is difficult to make out whether people say that the constitution will bring disadvantage truly from the depth of their hearts or say so just to please me.”

The first historic general election was conducted on 24 March 2008. The political parties and the candidates campaigned that the right to vote is a precious gift and the ballot paper was a “norbu” or precious jewel. Some candidates even said that going to a polling booth and casting their votes was like visiting a temple to make an offering so that people will not make wrong choice.

Address to the inaugural ceremony by the king, 13 November 2001.

During the submission of the first draft Constitution to King Tashi Chhodzong, Thimphu, 9 December 2002.

Sigyel Dorji, member of the Constitution Drafting Committee.

Refer the note on the Making of Constitution, by the Honourable Chairman of the Drafting Committee.

“We the members of Drafting Committee must draft this Constitution [sic] with our utmost sincerity and capabilities. Since we are elected to represent the people of our respective Dzongkhags [Districts] we must also speak out our opinion without any hesitation and contribute to the best of our knowledge.” member Sigyel Dorji.

The king's comments to the members of Constitution Drafting Committee on 9 December 2002, Tashi Chhodzong, Thimphu.

The popular views and emotions expressed by all sections of the Bhutanese population when the first hereditary monarch was crowned in 1907 through the historic signing of Genja or social contract on 17 December 1907 in Punakha.

Venerable Drapai Lopon Kinley Gyeltshen (one of the Five Masters of the Central Monk Body), Honourable member representative of the clergy, addressing the members of the Constitution Drafting Committee, noted by quoting the Buddhist saint Tsangpa Jarey, “To create the right conditions for excellence, it is good enough to do your best” and prayed that the Constitution constitution would come out comprehensively and without any lacuna and mistakes under the noble guidance of the Honourable Chief Justice. I sincerely attribute the successful inauguration of the drafting Committee to His Majesty's benevolence, the incarnation of Chenreyzig (Avalokiteswara), wise guidance of the Honourable Chairman, the Chief Justice of Bhutan, the embodiment of Jampelyang (Manjushiri) and good wishes and prayers of the members of the Drafting Committee. For details, see the records of the proceeding of the drafting committee.

Ibid.

It may be appropriate to mention here that added a provision to the draft constitution limiting the retirement age of the kings at 65. Before the daft constitution was finally approved by the people of Bhutan, the king, on 14 December 2006, handed over the full responsibilities as the monarch and head of state to the crown prince Jigme Khesar Namgyel Wangchuck who assumed the full responsibilities as head of state as the Fifth Druk Gyalpo (King). For details see, “His Majesty Jigme Khesar Namgyel Wangchuck becomes the Fifth Druk Gyalpo”, Kuensel, 16 December 2006.

Dasho Tashi Phnutso, member of the Constitution Drafting Committee.

In drafting the Constitution of Bhutan, more than one hundred constitutions were referred to, with particular significance given to twenty most relevant constitutions.

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20. For detailed reading see supra note 4.

21. Honourable Chairman of the Constitution Drafting Committee reminding the members during the constitutional debates.

22. While historical, religious and legal sources were the most important, the Drafting Committee also referred to external sources with a view of linking the Constitution to the global context and with the view to make our Constitution the most modern Constitution of the world. The reference to historical and religious documents included various Bhutanese and Buddhist texts comprising of 7,455 pages compiled and researched under the guidance of the Hon'ble Chairman. Of all the sources, the Committee's debates and resolutions, however, became the forerunner in formulating the draft Constitution.

23. The king, on the occasion of presenting the first official draft Constitution at the Tashi Chhodzong, Thimphu on 9 December 2002.

24. “…the scholars see in the draft a fascinating mix between an old cultural tradition and the latest fashion in constitutional thinking.” For details, see “Colloquium on the Draft Constitution for the Kingdom of Bhutan” Frankfurt/Main, 5 September 2005 at the Peace Research Institute (HSFK) by Professor Michael Bothe (Constitutional Law), Professor Lothar Brock (Political Science), Mr. Olaf Melzer, University of Frankfurt; Dr. WolfgangPeter Zingel, South Asia Institute, University of Heidelberg; Michael Rutland and Dr. Manfred Kulessa. Honorary Consuls of Bhutan; Professor Manfred Gerner, Chairman, German Bhutan Himalaya Society, Ms. Margarethe Rosskopf, GBHS Treasurer, Dr. Wolf Preuss (ret. Director-General, Federal Ministry for Economic Cooperation), Bonn, Mr. Michael den Hoet, Editor “Buddhism Today”, Hamburg.

25. Dr. B. Reilly commented that “The most unusual aspect of Bhutan's draft constitution is its attempt to mandate aspects of the country's party system in the Constitution….I know of no other examples of this kind of provision in the world. For details see “Desk Review of Bhutan's Draft Constitution with Respect to parliamentary, Electoral and Political Party Systems.” Australian National University, Canberra, Australia, 2 June 2005.

26. Prof. C. Saunder commented that, “As with any Constitution, the operation and effectiveness of the Constitution of Bhutan will depend in part on the shared understanding of it and the commitment to it by the institutions and people for whom it is designed. As I understand it, the indications are that the Constitution will be taken seriously and that the obligations that it creates will attract respect.” See “Desk Review: draft Constitution of Bhutan with Respect to parliamentary, Electoral and Political Party Systems” University of Melbourne, Australia, 2005.

27. As commented to the press by K.K.Venugopal, Senior Advocate, Supreme Court of India and the constitutional advisor for the draft constitution of Bhutan, 8 November 2003, Thimphu.

28. For details see the above note on the “The Constitutional Conference: the historic commencement of the debates.”

29. The historical significance of conducting the constitutional meeting at Punakha goes beyond it only being the old capital of Bhutan, but due to its reverence as the place of signing the historic Genja of 1907, wherein the people of Bhutan established their first hereditary monarch.

30. Refer the introductory note by the Chairman of the Constitution Drafting Committee introducing the draft constitution of the Kingdom of Bhutan to the Parliament. During the period of more than one year public consultation, The kings and the chairman of the Constitution Drafting Committee personally visited all the twenty districts of the kingdom and discussed the draft Constitution with general public, local government officials, teachers and students. Thousands of them participated and numerous interventions were made expressing their concern and wishes.

31. Prof. Dr. Walter Kalin and Dr. Jorg Kunzli, “Short Comments on the draft Constitution of

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the Kingdom of Bhutan 26 March 2005”, Institute of Public Law, University of Bern, 1 July 2005.

32. To solicit comments to the draft constitution the web site www.constitution.bt was launched with special focus to receive comments. Kuensel also opened special forum dedicated to solicit debates on issues related to the draft Constitution.

33. Comments constituting about 40 pages regarding the drafting of the Constitution by the readers on Kuenselonline were recorded and noted. International press clippings, editorial comments and press statements related to draft Constitution were also meticulously recorded.

34. His Majesty's address to the nation during the celebration of the National Day on 17 December 2002 at Samtse, quoted from Kuensel issue of 21December 2002.

35. The composition of the membership of the National Assembly was ascertained with the general election result announced on the eve of 24 March 2008 on the day the election was successfully conducted.

36. The candidates referred herein are those of People Democratic Party and Druk Phunsum Tshogpa which contested the general election.

37. Moving the motion for the historic adoption of the Constitution to the members of the Parliament by the Hon'ble Chairman of the Constitution Drafting Committee, Lyonpo Sonam Tobgye, 29 May 2008.

38. For details see Kuensel, “To debate or not?”, 10 May 2008. For records or the proceedings see the National Assembly Website www.nab.gov.bt 39. Excerpts from, “Constitution to be tabled on Thursday,” Kuensel, Wednesday, 28 May 2008.

40. Having witnessed the solemn ceremony of signing of the Constitution by the king and the members of the parliament amidst prayers of good fortune by the monks, one was humbled of being part of the historic occasion. The day marked the golden era of the kings' personal sacrifices for the cause of peace, prosperity, justice, security, sovereignty and wellbeing of the people of Bhutan. This author’s silent prayers were that the Constitution be inviolable for centuries to come and be the guardian of our hope, unity, peace, progress, inspirations and the source of justice.

41. The king's address to the nation upon the adoption of the Constitution on Friday, the 18th of July 2008. Reproduced from the Kuensel issue of 19 July 2008.

42. As commented to the author by K.K.Venugopal in the late evening of 6 November 2003, Thimphu.

43. “The draft Constitution is a fascinating document, showing an effective concern for the cultural traditions of Bhutan, while seeking to avoid problems that have beset other small monarchies. Some of the provisions are quite novel and imaginative…” Comments on the Draft of 26 March 2005 by John F. WILSON, B.A. (Oxon); Consultant Law Drafter, U.K, 1 May 2005.

44. “…constitution-makers under the leadership of King Jigme Singye Wangchuck have made great strides in making Bhutan's politics democratically institutionalized.” For details see Parmanand, “Bhutan Moves Fast Towards a Codified Constitution,” South Asian Studies Foundation, New Delhi.

45. The Hon'ble Chief Justice, personal diary, September 2002.

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Domestic Preparedness for Services Trade Liberalisation: A Case Study of Pakistan Mehnaz Ajmal Paracha

A

s the fastest growing sector in Pakistan’s economy, services account for 53.3 percent of the GDP (SBP 2007) and employs approximately 42 percent of the labour force (Qureshi 2007). The significance and potential of the services sector to Pakistan’s development can no longer be ignored. Officials at the Ministry of Commerce in Pakistan say the services sector has “critical importance” due to its development implications; they have been flagging and prioritising the services sector in consecutive trade policies .

The “economic development dimension” of a strong services sector is obvious, since it strengthens and supports further development of the agricultural and industrial sector of the economy. The economic argument for liberalising trade in services is no different than liberalising trade in goods. Efficiency in the services sector will improve through increased competition, transfer of technology, or expansion of resources (particularly human and capital resources). For Pakistan, the added advantage of liberalisation of trade in services, however, is that in many cases they serve as inputs for “goods”, and increased competitiveness in services will serve to pull down prices of final products. This aspect is especially true of infrastructural services such as banking and telecommunication. It is also important to point out that the overall effort requited by the government of Pakistan to encourage and facilitate services sector productivity incurs far less cost and promises marginally less challenges as compared to the increase in productivity and growth in the agricultural and manufacturing sector.

Moreover, as in all cases of liberalisation, there are concerns of the negative effects of services trade liberalisation, which include displacement of local firms by foreign service providers, the loss of jobs and impact on social services such as education, health and culture. In order to mitigate this, evidence suggests that a "one size fits all" approach to liberalising a country’s services sector is inappropriate, and that a cost and benefit analysis of reform should be conducted by developing countries beforehand (Zutshi 2001). The liberalisation of trade in services can directly bring gains to the Pakistani economy if issues most important to Pakistan are addressed in the General Agreement on Trade in Services (GATS). For example, market access in labour-intensive services (which require temporary movement of workers) is generally more restrictive. On the other hand, Pakistan has undertaken a wide number of commitments regarding foreign participation and national treatment. It has filed MFN exemptions in banking and other financial services (Mahmood 1999).

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Under the General Agreement on Trade in Services (GATS), Pakistan has liberalised the services sector in the economy and made a schedule of commitments where horizontal, market access and national treatment commitments are specified.

Moreover, in the absence of a breakthrough in the Doha Round of negotiations, Pakistan’s commitments are confined to the Uruguay Round. Pakistan has commitments under GATS in 47 areas, which include financial (i.e. banking and insurance), business, communications, construction/engineering, transportation, wholesale and retail trade.

This paper aims to analyse Pakistan’s domestic preparedness in the light of the GATS negotiations and subsequent commitments, and to study the current domestic consultation process that underpins the multilateral negotiating stance, as well as focus on the “implementation issues” of current commitments with a possible way forward. Section 1 provides an overview of the services sector, with details on linkages of services sectors with employment, trade, GDP and FDI. In particular, its place in global services trade and its profile and significance to Pakistan’s economy is highlighted. In section 2, an overview of service trade liberalisation, development, and poverty alleviation in Pakistan is provided. Pakistan’s schedule of commitments, as well as sector-by-sector liberalisation efforts, is discussed in section 3. In section 4, the domestic regulatory environment relating to foreign service providers and the role of sectoral regulatory authorities in defining specific sectoral commitments at GATS are explained. In the final section, suggestions are made to strengthen the domestic policy framework and ensure that it supports multilateral rule making and negotiation.

Overview of the Services Sector in Pakistan Services Sector and GDP The contribution of services to the GDP growth in Pakistan is evident from the trends over the last three decades. The share of services in Pakistan’s GDP has increased from 45 percent in 1970 to almost 58 percent in 2006 (Qureshi 2007), and growth rate of services trade is 8.0 percent (PES 2007). In the same period, commodityproducing sectors (such as agriculture and industry) contributed to one-third of the GDP growth, whereas the service sector contributed to the remaining two-thirds of real GDP growth of 6.6 percent (Qureshi 2007). It is also pertinent to highlight the efficiency of the services sector as 42 percent of the workforce (including construction) contributes to 58 percent of the GDP. Almost three-fourths of the contribution to growth comes from services and agriculture sector, but their contribution to tax revenue is less than 20 percent.

Table 1 suggests that services sector growth remained at 8.0 percent during FY 2007, which was above the 7.1 percent target. The FY 2007 target had been set lower than 9.6 percent growth recorded in FY 2006 taking into account the anticipated deceleration in some of the larger sub-sectors of the services groups. However, the strong growth in services sector in FY 2006 is due to the surge in the two subsectors–finance and insurance, and social and community services. The sustained strong growth of the services sector for the last six successive years has contributed to

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a structural shift in the economy. The share of services sector was 53.3 percent in GDP in FY 2007 (SBP 2007).

Table 1: Sector-wise Growth Rates and Shares (Percent: at constant prices of 1999-2000)

Services Sector Wholesale & Retail Trade Transport Storage and Comm.

Finance and Insurance Ownership of Dwellings Public Admin and Defence Community, Social and Personal Services Source: PES (2007) and SBP (2007).

FY ’06 Growth Rates

Growth Targets

9.6 8.7 6.9 33.0 3.5 10.0 6.3

7.1 8.8 6.0 12.0 3.5 3.7 5.6

FY ’07 Growth Rates 8.0 7.1 5.8 18.2 3.5 6.9 8.5

Percent Share 53.3 19.1 10.3 5.6 2.7 6.0 9.6

Besides a surge in the above-mentioned two sub-sectors, the wholesale and retail trade sub-sector improved its leading position in the services sector (7.1 percent) in recent years mainly due to increasing openness of the economy and results in employment generation in urban areas. Wholesale and retail trade sector covers the trading and value addition (contributing around one third of the value addition in services sector). The services linked with hotel and restaurants come under this subsector. The finance and insurance sub-sectors flourished (growth rate 18.2 percent) by the vigorous growth and performance of banking sector, due to financial sector reforms and privatisation of large public sector institutions. Under transport and communication sub-sectors, telecommunication sector has concentrated more on attracting investment; however railway posted a healthy increase 23.8 percent in its value addition in FY 2007.

Share of Services Sector in Employment Pakistan has an active labour force of 50.5 million, of which, 46.9 million are employed while 3.1 million are unemployed (PES 2007). It is one of the most populous countries in the world, and according to the World Population Data Sheet, the population of the country will touch the 295 million and emerge as the fifth most populous country by 2050. The share of the services sector as mentioned in the previous section is increasing with the increase in per capita income in comparison to the agriculture sector (commodity producing sector). Despite reduction in the share of agriculture sector in job creation since 1990, it remained the dominant source of employment in Pakistan with a share of 43.37 percent in 2005-06. The services sector is contributing 36 percent in employed labour force, and if one includes the construction sector, the share of services sector in employment touches 42 percent (Table 2).

It was observed that most of the employment opportunities, as a result of deregulation, privatisation and liberalisation policies, are created or increased in the

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Table 2: Employed Labour Force by Sectors (%) Sectors Commodity Producing Sector Agriculture (Forestry, Hunting and Fishing) Manufacturing Construction Services Sector Wholesale and Retail Trade and Restaurants and Hotels Transport, Storage and Communication Community, Social and Personal Services Others Total Source: Labour Force Surveys, 2005-06

Total 63.34 43.37 13.84 6.13 36.66 14.67 5.74 14.35 1.89 100.0

2005-06 Rural 75.11 59.87 9.00 6.23 24.89 9.30 4.64 10.06 0.89 100.0

Urban 36.94 6.32 24.71 5.91 63.06 26.71 8.22 24.00 4.13 100.0

urban areas. A sector-wise break up reveals that in the services sector, women are involved in the fields of teaching, medicine and domestic work while males are employed in manufacturing, trade and services.

During the last few years, some new areas have arisen, through which the human capital of Pakistan is being outsourced to the rest of the world. The most important of them are telecommunication, auto industry, auto vending, auto service stations, showrooms, hotels and restaurants, livestock and dairy (Table 3). Other sectors significant in terms of creating additional jobs include electricity and gas, trade and transport sector. In 2006, trade absorbed the largest segment (27 percent) of the urban labour force followed by manufacturing (25 percent), services (24 percent) and transport (8.2 percent), which is one of the sub-sectors under services (SBP 2007).

Table 3: Emerging Employment Scenario in Services Sectors in Pakistan Telecom and IT Sector

Health and Education Sector

Chemical Allies Agriculture Sectors Financial Sector Transport Sector Construction Other Services Oil and Gas Source: Ministry of Labour and Manpower

Mobile Phone, Wireless loop and LDI Companies, Public Call Offices, Internet Service Providers, Broadband Service Providers, Cable Services, Electronic Media Companies, Information Technology and Internet -Related Companies and Call Centres.

Private and Philanthropic Hospitals and Clinics, Biomedical Sciences and Biomedical and Genetic Engineering, Private and Non -Governmental Educational Instituti ons, and Scientific Research and Development Organisation.

Fertilizers, Pesticide, Seeds and Agro-Chemical Distribution.

Dairy and Milk Processing Packaging and Marketing, Livestock, Fruits and Vegetable Industry, Fisheries and Feed Mills.

Islamic Banking Services, New Private Banks including Micro Financing Institutions, Risk Managers in the Financial Sector, Leasing and Insurance.

Intercity and Intra -City Coach, Bus and Transport Services, and Private Airline Companies Construction Services particularly Plumbers, Electricians and Masons Advertising, Marketing, Creative Services, Accountancy and Management Consultancy, and Electronic and Print Media Oil and Gas Exploration and Drilling, Petrol and CNG filling Station

Services Sector and Trade In the global context, Pakistan's share in world services trade rose from 0.23 percent in 2003 to approximately 0.38 percent in 2006. In 2006, world commercial services trade stood at $2710 billion while Pakistan's total commercial services trade (imports

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plus exports) amounted to $10.277 billion. From Table 4, it is obvious that the increase in trade in services is mainly attributed to the phenomenal rise (from 2005 onwards) in the import of “other commercial services”. Although there has been a sharp increase in imports of travel and transportation services as well, their rate of increase does not match that of other commercial services. Table 4 also shows that although “other commercial services” exports are also the fastest growing exports, their growth rate is not in tandem with the growth rate of service sector imports. This information is significant because it drives the fact that even though the services sector is the fastest growing in Pakistan's economy, the service sector balance of trade is also widening extremely fast.

Table 4: Pakistan’s Service Sector Trade Statistics in US$ million

Transportation Services Exports Travel Services (US$ million) Other Commercial Services Transportation Services Imports Travel Services (US$ million) Other Commercial Services Source: WTO statistical database (www.wto.org)

2002 792 97 607 1388 255 452

2003 836 122 518 1585 925 592

2004 940 179 600

2005 1076 182 785 2616 1280 3312

2006 1111 254 876 2994 1536 3505

Moreover, service providers from developing countries such as Pakistan (most of which are SMEs) face competition from larger service-providing multinationals from developed countries (UNCTAD 1999). In Pakistan, this is one of the main factors explaining the fact that growth in imports has been larger than growth in exports.

Thus, the benefits gained from growth in service sector exports under the GATS have been more than offset by the growth in service imports.

According to Figure 1, the trade balance in services is steadily showing a deficit.

Although the volume of services exports is considerably rising, the volume of imports is rising at a faster rate. Recently disaggregated statistics published by the government of Pakistan, however, show a different figure for the deficit in services trade. Pakistan faced a deficit of $4429.66 million in the FY 2006, which decreased to $4125.44 million in the FY 2007. The deficit in services account rose from $1.391 billion in JulySeptember FY 2006 to $1.535 billion in July-September FY 2007. The country received only $657 million in services account, but paid $2.192 billion to foreigners in exchange for services obtained from them, which means the debit was 3.33 times higher than credit. The difference between the WTO timesheet database and the government of Pakistan (GoP) data may lie in the method of calculation. Nevertheless, evidence points to the fact that, although exports in services are rising in Pakistan, imports in services are rising at a faster rate.

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Figure 1: Services Trade Balance (Million US$ at current process) 10000

8036 7208

8000 6000 4000 2000

3102 2095 1496

1719

1476

1719

2241

2043

0

2002 -599 -2000

2003

2004

2005

2006

-1626

-4000 -5165

-6000 -8000

-5795

Services Exports Trade Balance

Services Imports

Source: WTO timesheet database

Service Sector and FDI Pakistan has opened its economy through privatisation and deregulation and currently has a very liberal FDI regulatory regime. The regulatory framework for foreign investment consists of three laws: Foreign Private Investment (Promotion & Protection) Act 1976; Furtherance and Protection of Economic Reforms Act 1992; and Foreign Currency Accounts (Protection) Ordinance 2001.

During the FY 2007, there was a high increase in the Net Foreign Investment ($8.3 billion) in Pakistan, with the investment to GDP ratio rising to a record high of 23 percent, and the main reason of this was a sharp rise in the Foreign Direct Investment and surge in investment in the local market and GDRs issues. In FY '07, Pakistan has received $5.1 billion in FDI. The Foreign Portfolio investment witnessed a substantial rise of $2.3 billion in the FY 2007.

Table 5 indicates that major contribution in FDI in Pakistan was evident in Telecommunication ($1,899 million, which was 37 percent of total the FDI) and Financial ($930 million which was 18.2 percent of the total FDI). The wholesale and retail trade sector is growing very rapidly, especially through investment in the large multinational chains. This not only leads to modernisation but also brings new culture, management techniques and inventory system, making the competitive market for domestic service providers improve their services. In transport, storage and communication sub-sector of the services sector, during the FY 2007, significant investment was seen, due to which the sector grew steadily and attracted around 25.3 percent of the total investment in Pakistan.

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Table 5: Sector-Wise FDI Inflows (Million $) Sector

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08 (Jul-Feb)

80.7 -34.9 13.2 12.5 39.9 45.2 NA 140.9 297.5

268.2 3.6 34.2 12.8 36.4 21.4 12.8 66.2 455.6

186.8 207.4 39.1 17.6 32.8 87.4 24.3 90.4 685.8

202.4 242.1 35.6 32 -14.2 8.8 221.9 170.1 898.7

193.8 269.4 52.1 42.7 73.4 10.6 517.6 274 1433.6

312.7 329.2 118 89.5 320.6 18.4 1937.7 285 3411.1

545.1 930.3 172.1 157.1 193.4 30.2 1898.7 1092.5 5019.4

400.6 457.8 123.4 50.5 37.9 48 828 504.2 2450.4

Oil & Gas Financial Business Trade Construction Power Transport Communication Others Total Source: State Bank of Pakistan

Services and Government Revenue The sharp increase in investment in the services sector in recent years has been mostly achieved through private investment. Despite a contractionary monetary policy, credit to the private sector continued to grow strongly (12.2 percent) on the back of the improving investment climate. The Central Board of Revenue (CBR) (now known as Federal Board of Revenue) has achieved the revenue collection target (13 percent), with 18.6 percent growth in CBR tax collection. The reason for high tax collection was supported by 26.2 percent growth in non-tax revenue. During the last five years, a significant increase was evident both in tax and non-tax revenue. As Table 6 suggests, the tax revenue increased from Rs 720.7 billion in 2003 to Rs 1,298 billion in 2007.

Table 6: Total Revenue in Billion Rupees

Total Revenue Tax Revenue Non-Tax Reven ue

FY ’03 720.7 487.5 233.2

FY ’04 794.1 550.1 244

FY ’05 900.0 632.6 267.4

FY ’06 1076.6 753.0 323.6

FY ’07 1298 889.7 408.3

Source: Ministry of Finance, Government of Pakistan

Sales tax is the largest component of indirect taxes, amounting to the collection of Rs 309.2 billion in FY 2007. The major contributors in the growth of sales tax collection were telecom and services. The collection of custom duty was recorded at around Rs 132.2 billion. While the Federal Excise Duty (FED) showed the lowest share with a collection of Rs 485.3 billion in services(SBP 2007).

The major hurdles in tax revenue are narrow tax basis, unnecessary tax exemptions, tax evasions etc. Widening the tax base by reducing exemptions, incentives and concessions, as well as taxing all value additions including services are some of the guiding principles of tax policy. Tax reforms, especially expanding taxation gradually into the agricultural and services sectors, would result in greater yield. This will proportionately distribute the burden of taxes over all the different sectors in the economy. The board of revenue has taken the initiatives and the detailed budgetary

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measures made which can contribute to economic growth and cost of doing business for investors.

Pakistan in GATS Negotiations and its Implications The Uruguay Round of trade negotiations (1986-93) resulted in bringing international trade in services under common multilateral rules. The 1995 WTO General Agreement on Trade in Services (GATS) is the first set of multilaterally negotiated and legally enforceable rules that govern international trade in commercial services (i.e. excluding government services). GATS identifies four modes of supply for trade in services.

It applies to all measures by WTO members affecting trade in services. Under GATS, services include any service in any sector but excluding "services supplied in the exercise of governmental authority (WTO URL). GATS contains three different layers of obligations. The first layer consists of general obligations that bind all WTO members irrespective of whether they agree to undertake market access commitments for a certain sector or not (e.g. MFN exemptions). The second layer of obligations relate to specific commitments made by WTO members to grant market access and national treatment to services and service suppliers of other WTO members. These are made with respect to each of the Modes of Supply. The approach to making commitments is positive and highly flexible. This flexibility allows full discretion to member countries not to make specific commitments guaranteeing specific access and treatment to foreign firms. The third layer of obligations relate to several annexes on specific sectors, exemptions, and on the movement of natural persons. These exception provisions allow WTO members to depart from their obligations or commitments under the agreement in very specific circumstances. Members are allowed to take measures for prudential reasons, including the protection of stakeholders and for preserving the stability of the financial system, as long as they are not to be used as a means of avoiding commitments/obligations under GATS. Several plurilateral meetings on services sector were held after the Hong Kong Ministerial in 2007, including the bilateral meetings. It was only in Article 6.4, that progress was made on negotiations for disciplines in domestic regulations, where the member countries asked for transparency of regulations and balance between regulatory autonomy and needless excessive regulations that may nullify the market access recorded in member's schedules.

While opening up its domestic service sector, Pakistan also likes to send its service providers abroad through Mode 4 of the Agreement on Services, i.e., movement of natural persons. It also wants to benefit from Mode 1, in the IT services provision with a view to removing all barriers to market entry along with the MFN exemptions.

So far, Pakistan's experience in liberalising the telecommunications, banking and franchise/distribution sector has resulted in attracting FDI, generating employment, enhancing skill development, and most importantly, improving the quality of services offered to consumers. Despite this, Pakistan's mission to the WTO has pointed out

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that overall developing country members have not received complete potential benefits (such as commitments under Mode 4 movement of natural persons) as according to GATS fundamental principle (laid out in the GATS Preamble) “to achieve an overall balance of rights and obligations for all WTO Members� . Moreover, the imbalance was further perpetuated since Pakistan undertook autonomous liberalisation (and in the case of telecommunication, liberalisation was WTO plus) under structural adjustment programmes (UNCTAD 1998).

At the macro level, the injustice is exacerbated since developing countries' share of world services exports has only increased by a small percentage (6 percent from 1995 to 2005), while developed countries represent the top 20 exporters of services in different sectors and overall account for three quarters of world exports of services (UNCTAD 1999).

One of the biggest causes for concern is that the specific objectives of GATS Article IV (increasing participation of developing countries) have not yet been achieved.

Developing countries continue to face barriers to their services exports, which range from price-based measures (e.g. entry and exit taxes, visa fees, tariffs on goods in which services are embodied); technical standards and licensing requirements; prohibition of access to services markets (e.g. nationality, residency or visa requirements); subsidies granted to developed countries by their governments (including the high-technology sectors); and lack of transparency in government measures.

Therefore, intended benefits from liberalisation may not be realised without appropriate preconditions and policies to enhance technological capacity and assure their diffusion to help improve access to essential services for the poor (UNCTAD 2000; Word Bank 2001). Without satisfactory supporting policies, the ultimate goal of services trade liberalisation (under GATS) to promote the economic growth of all trading partners may never be realised (World Bank 2001). In this regard, domestic preparedness is one of the keys to making services sector liberalisation work for developing countries such as Pakistan.

In the post Uruguay Round period, Pakistan has liberalised its telecommunication and financial sectors with the expected benefits such as: l l

The foreign services providers will be providing high quality services at lesser cost.

It will encourage local traders and service providers to become more competitive and efficient.

This is important because at this stage of negotiations, Pakistan is in a position to organise its domestic reform agenda such that it secures commitments in areas of export interest. At the same time, securing commitments in areas of import interest could also be regulated in a way that could help foster development of the relevant domestic sector through healthy competition, shared learnings, and partnerships. In

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any case, in order to gain maximum benefits from commitments made at international forums, domestic regulations should be in line and up to date with planned liberalisation of the services sector. Pakistan has undertaken extensive autonomous liberalisation and it stresses on balanced movement in rules and market access negotiations and progressive liberalisation accompanied by strengthening of domestic regulatory frameworks. Pakistan supports “plurilateral request-offer system under services” as proposed by the Hong Kong Declaration.

Pakistan has received collective requests (from 19 WTO members) addressed to several other countries in energy services, environmental services, financial services, architectural and engineering services, integrated engineering, maritime transport, construction, telecommunication services, air transport services and logistic services.

Pakistan is examining these requests.

Pakistan's Commitments and Exemptions in GATS May 2005 initial offer Pakistan's initial offer was tabled on 24 May 2005. In the initial offer, equity limits have increased to 60 percent (from 51 percent) unless stated otherwise, and there are no restrictions on foreign entities on acquisition of real estate. Moreover, the temporary entry of business visitors has been facilitated by the categorisation of visas for service suppliers and “business visitors” and “intra corporate transfer”'. Under the initial offer, the current schedule of commitments is revised in the following way: Telecommunications: Restrictions in Modes 1, 2, 3 of telecommunications sector have been removed. Moreover, new proposed commitments in way of online services and mobile telephone services have been offered.

Financial Services: Limits on the volume of deposits and other repayable funds mobilised by foreign banks are removed. The number of branches allowed for foreign banks (existing as well as new ones) to open up is 25, while ATMs are not to be treated as a separate branch. In case foreign nationals are to be hired for chief executive, country head and key executives positions, their passing the “Fit and Proper test” is imperative. The operations of foreign banks are also allowed expansion. Permissible funds (which include foreign currency) can now be transmitted through banks having authorised dealers' license. Moreover, leasing business is allowed for foreign bank branches as well as commercial banks incorporated in Pakistan as long as it is not their core/major line of business. Portfolio management services of financial institutions can be carried out through locally incorporated subsidiaries, while financial and investment advisory services can carry on business through subsidiary companies.

Architecture, Engineering and Integrated Engineering Sector Services: In the initial offer (May 2005), new commitments are proposed in Mode 2 and Mode 3, and equity limit has been raised from 40 percent to 51 percent subject to participation of local players for architectural services, engineering services, and integrated engineering services. Moreover, joint partnership restrictions have been removed for companies

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registered with the Securities and Exchange Commission of Pakistan (SECP).

Construction and Related Engineering Services: Equity limit has been raised to 51 percent (from 40 percent) and restrictions in Mode 2 are removed.

New Commitments Legal Services: There are no limitations on market access for legal services (which is mainly in Modes 1, 3 and 4). However, for Mode 3, an Economic Needs Test (ENT) based on inquiry to gauge if direct or indirect government subsidies are provided has to be undertaken. This is to ensure a level playing field for local and foreign ventures.

Moreover, non-Pakistani nationals under Mode 3 are required to attain residency under the Legal Practitioners and Bar Councils Act 1973, its rules, and any other relevant laws. Market Access under Mode 1 is unbound, and there is no restriction on Mode 2, while Mode 4 is also unbound (except as indicated in horizontal commitments).

Accounting and Book Keeping Services (excluding Auditing Services): Under Mode 3 commitments, in its initial offer, Pakistan proposes that foreign equity should not exceed 51 percent. The service must be supplied by a natural person who is a registered resident (as required by the Association of Chartered Certified Accountants and any other laws in force at the time). In case of a registered firm, local partners must be in majority, and for a company, 70 percent of the holdings must belong to Pakistani nationals. Also, the condition of an ENT (based on inquiry) holds.

Architectural Services: In terms of market access, limitations on architectural services are similar to those of accounting and book keeping services. However, in terms of national treatment, Mode 1 is unbound and there is no restriction in Mode 2.

However, commercial presence is subject to fulfillment of all conditions applicable under foreign investor's law. Also, conditions placed under horizontal commitments apply.

Veterinary Services: Market access in this sub-sector is conditional to transparent ENT to gauge whether direct or indirect subsidy is provided. Moreover, for natural persons providing services, a residency requirement is essential. Commercial presence is also subject to fulfillment of all requirements and conditions applicable to foreign investors or judicial entities.

Services Provided by Midwives, Nurses, Paramedics and Physiotherapists: There are no restrictions to market access for those applicable under horizontal commitments.

National treatment is subject to fulfillment of conditions for foreign entities, and practice is allowed as long as the qualifications of foreign service providers match expectations of the Pakistan Nursing Council, and legal requirements under relevant laws.

R&D Services: Apart from this, R&D services on social sciences and humanities, disciplinary R&D services, renting/leasing services, printing and publishing services,

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agricultural storage services and range land services have also been opened up for liberalisation (within the business services sector) under the May 2005 initial offer.

Communications Services: Under the communications sector, an initial offer for liberalisation of courier services, online information and data processes and mobile communication services has also been made, and keeping the GATS aim of “progressive liberalisation� modifications have been suggested within the existing schedule of commitments.

Distribution Services: Another sector that has been included for liberalisation under GATS is that of distribution services, which include sub-sectors of wholesale services, retailing services and franchising. Commercial presence under all these sub-sectors is subject to ENT, the criteria for which is to include the proposed locality being covered by supplier (for wholesale trade), density if supermarkets relative to population (for retailing services), and density of establishments (for franchises). A limitation of foreign equity limit (limited to 51 percent) is also placed on retailing and wholesale trade services.

Educational Services: Educational services, which include higher education, adult education, and other educational services have also been unbound, and no limitations on market access or national treatment (except as indicated by horizontal commitments) exist.

Environment Services: Environment services that include refuse disposal services, sanitation and similar services have also been opened up under the GATS 2005 initial offer. In both these sub-sectors, the conditions on market access include an ENT based on inquiry to gauge if any direct or indirect government subsidy is provided and foreign equity is limited to 51 percent.

Gauging from the stance that Pakistan has taken in the May 2005 initial offer, it is clear that Pakistan is ready for expanding the scope of its GATS commitments as well as deepening it. The revised offer has clearly sharpened the existing commitments by embedding safeguards within the text. For example, in the financial sector commitment, the proper test is added as essential for hiring foreign staff. This proves Pakistan's commitment to ensuring that top management in foreign banks operating in the country are credible individuals and checks and balances are in place to assure the integrity of operations. Moreover, inbuilt safeguards are placed in sectors such as distribution services, the concern that small businesses would be threatened is contained by subjecting market access allowances to the ENT, the criteria of which ensure that foreign service providers would operate in areas that are not already covered by existing distribution service providers. Moreover, this ensures that consumers benefit in the end, because distribution service providers are encouraged to initiate retail and wholesale operations in areas that currently don't have them.

Also, for professional services and environment services, unfair competition will not be allowed to thrive, since the ENT criteria is to investigate where direct or indirect subsidies apply to foreign service providers.

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However, Pakistan's “schedule of commitments” as well as the initial offer are extremely open and allow for wide flexibility. As yet, market access and limitations on national treatment to most service sectors and sub-sectors are unbound, so the future negotiations leave room for “locking in” on WTO obligations.

Pakistan and the Request-Offer Process Pakistan has received many initial requests from certain countries for liberalisation in almost all sectors and has sent requests to countries in different sectors/sub-sector under Mode 3 and for the elimination of restrictions on market access and national treatment on the basis of certain assumptions. Mostly sectors with strong export potential are selected. Pakistan has so far made requests to countries from which it has received requests as well as to some additional countries, which are good potential markets for export of Pakistani services keeping in view the following factors:

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Pakistan has already made some binding commitments in the services sector during the Uruguay Round followed by additional commitments in the financial and telecom sector in 1998.

Whatever offers are made by Pakistan in response to the requests received or otherwise would automatically be available to all WTO members on most favoured national (MFN) basis.

Decision making involves an examination as to whether on a balance, would Pakistan be better off going for maximum possible liberalisation or alternatively adopt a defensive posture and liberalise to the minimum extent in order to afford maximum protection to Pakistani service providers in the domestic context.

Pakistan has received 13 request offers in the construction and related engineering services, architectural, integrated engineering and engineering services, energy services, environmental services, telecommunications, transport, logistics, education, distribution and financial services.

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Under construction and engineering services, Pakistan has received a combined request offer for liberalisation sponsored by Japan, with a view to creating employment and economic growth. The request asks for the removal of limitation (market access limitation on foreign equity, commercial presence as well as national treatment limitation related to discriminatory registration and license) in Mode 1, 2 and 3.

A collective offer sponsored by Canada, in collaboration with Australia, Chile, EC, Japan, Korea, Mexico, New Zealand, Norway, Switzerland and US, for the liberalisation of architectural, engineering and integrated engineering services was also received by Pakistan in Mode 4 focusing on contract services suppliers with request for the removal of limitation of ENTs and MFN. In the energy sector, a request was placed by EC collectively with Australia, Canada, Japan, Norway, Saudi Arabia, Republic of Korea, Taiwan, Penghu, Kinmen and Matsu, Singapore and the US. The request asks for the development of energy resources in an environmentally sound manner and

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asked Pakistan to make improved commitments. Furthermore, the request demands substantial reduction in MA and commercial presence limitations in Mode 1, consumption abroad under Mode 2 and mode of supply under Mode 3 with the removal of foreign equity, ENTs, joint ventures and discriminatory registration and licence procedures.

Australia, Canada, Japan, Korea, Norway, Switzerland, Taiwan, Penghu, Kinmen and the US with the sponsorship of EC has requested Pakistan for the liberalisation of environmental services under Mode 1 to schedule commitments and under Mode 2 for consumption abroad. In addition, under Mode 3, they requested for the elimination of limitation like, foreign equity and joint venture requirements. Horizontal commitment under Mode 4 for the movement of natural persons was also requested.

Requests Made by Pakistan: WTO members have made 20 plurilateral collective requests. While Pakistan co-sponsored four collective requests in computer and related services, cross-border supply, Mode 4 MFN exemptions, and maintained seven MFN exemptions, four in finance and three in telecom.

Current State of Domestic Preparedness GATS allows member countries to enforce regulations that meet national policy objectives (and ensure consumer safety and regulate quality of service) as long as the rules and regulations are objective, impartial, and do not unfairly obstruct market access. This is so because parties recognise that effective regulatory regimes are crucial for liberalisation of services sectors. Regulatory bodies check market failures and ensure that licensing qualification and technical requirements are in line with national policy objectives and support multilateral liberalisation commitments.

Therefore, it is vital that liberalisation commitments are benchmarked with domestic preparedness, and that steps are taken to ensure that domestic regulatory reforms are dynamic and hence, in line with multilateral commitments. In order to assess how far this is currently true, Pakistan's legislative framework for each of the services sector was examined, which should form the vertebrae of rules, regulations and policies concerning trade in services.

Communications, IT and Telecom The communication sector in Pakistan, particularly telecom, has witnessed comprehensive reforms and robust growth in recent years, contributing to a large share of services in the country's total GDP. As a result, it is often touted as one the most successful service sectors to have gained substantial benefits from liberalisation.

Regarding communications, primarily the telecom and IT industries, Pakistan has negotiated extensively at the WTO level and formulated a comprehensive schedule of commitments, further shaping Pakistan's policy framework concerning trade liberalisation in these sectors.

To assess domestic regulation, it is pertinent to examine relevant legislation that has been passed since the formulation of the Pakistan Telecommunication Authority in 1996. The Pakistan Telecommunication (Re-organisation) Act 1996, which was

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further amended in 2006, is a detailed apparatus dealing with the establishment of the authority, its functions and powers, its responsibilities, its policy directives, guidelines for appointing employees or members, its funding and financial obligations, tariffs, and, most importantly, its status as the exclusive power to grant licenses to telecommunication providers in Pakistan. The legislation dealing with licensing does not distinguish between domestic and foreign service providers, and this is mainly because Pakistan provides national treatment to all telecommunication service providers. Other regulations are quite detailed and provide a strong legal backbone to the various sub-sectors within the telecom sector.

As such, there are no safeguards “embedded” within the legal texts, but this is mainly included because any unfair practices by companies can be directly reported to the Monopoly Control Authority (MCA). Other than that, the Company Registration Offices (CROs) at the Securities and Exchange Commission of Pakistan (SECP) clearly maintains rules and procedures (embedded within the Companies Ordinance 1984) for registration and operation of foreign companies in Pakistan. These companies are also provided special facilitation in order to expedite the registration process and ensure that it is not cumbersome.

Other than this, the Telecom Deregulation Policy 2003 provides a comprehensive overview of rules and regulations, fee structures and licensing conditions relating to the telecom sector for the next five years. Salient features of this policy are appended in Annex IV. According to the SECP, foreign companies operating in deregulated sectors will be subject to the provisions of their respective sectoral policies.

Similarly, the rules and regulations within the IT sector are entrenched in the registration, licensing and taxation requirements set by the SECP and Federal Board of Revenue. Other than this, the Ministry of IT and Telecom and the Pakistan Software Export Board (PSEB) make policies within the sector. In order to ensure that Pakistan's IT industry is protected in line with global outsourcing requirements, the PSEB has drafted the Electronic Data Protection Act 2005, which aims to protect electronic data and intellectual property rights. At the draft stage, the Act is under review in order to ensure that clauses reflect legal requirements of jurisdictions such as the US etc. which constitute Pakistan's key IT export and outsourcing markets.

Aside from this, the Copyright Ordinance 1962 was updated through the Copyright (Amendment) Act 1992 and the Copyright (Amendment Ordinance) 2000, whereby all copyright protection originally available to the literary and arts works was also extended to include computer software.

All in all, as one of the services trade's “success stories”, the IT and telecom sector is strong in terms of having a solid domestic regulatory framework and proactive regulatory authorities that provide research-based, well-thought-out negotiation strategies to the Ministry of Commerce WTO cell.

Finance Another sector that has witnessed strong growth and subsequent liberalisation in

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recent years is the financial sector, particularly in banking services. Pakistan's central bank, the State Bank of Pakistan (SBP), has pursued reforms aimed at liberalisation, competition, and privatisation since the beginning of the 1990s, and has achieved considerable progress. Concerning trade, there are presently no restrictions on the establishment or operation of foreign banks in Pakistan.

The Banking Companies Ordinance 1962 and The Banking Companies Rules 1963 (as amended up to March 31, 1997) combine to create the principle legislative framework concerning the regulation of banking services in Pakistan. The powers vested in the SBP are applicable to all banks operating within Pakistan, whether they have been incorporated in or outside Pakistan. However, a few conditions explicitly differ in the case of banks incorporated outside Pakistan.

Section 26 of the ordinance also empowers the SBP to prohibit acceptance of deposits by banking companies incorporated outside Pakistan, allowing a time frame of six months to a year for the notification to come into effect. However, the central government decreed in 1965 that the provisions of this section would be rendered non-applicable to companies incorporated outside Pakistan.

As the authority that grants licenses to banking companies in Pakistan, the SBP may require to be satisfied that the government or law of a country in which a foreign bank is incorporated provides the same facilities to banks incorporated in Pakistan, which may operate in its territory (i.e. there is evidence of reciprocity). If a banking company fails to comply with any of the conditions of the ordinance, SBP reserves the right to cancel granted licenses. As a safeguard, the aggrieved company may apply for review to the central board of the SBP within 30 days of the decision.

In order to further strengthen and synchronise domestic legislative framework in relation to multilateral trade negotiations and commitments, the government of Pakistan has established a commission to review Pakistan's financial sector loan.

For the non-banking financial sector, the Securities and Exchange Commission of Pakistan (SECP) is the main regulating authority. The SECP is primarily concerned with the regulation of the corporate sector and capital market; its mandate includes the supervision and regulation of insurance companies, non-banking finance companies, and private pensions, as well as the oversight of various external service providers to the corporate and financial sectors, such as chartered accountants, brokers, surveyors etc. As the main regulating authority, the SECP also frames much of the legislative framework concerning the financial sectors mentioned above and, via the Securities and Exchange Commission of Pakistan Act 1997, has powers to make rules and regulations.

In this way, the financial sector regulatory authorities have accomplished a comprehensive task in keeping the financial sector regulatory framework up to date with regards to formation of rules and regulations governing foreign service suppliers.

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Engineering, Construction and Architecture There are various regulatory bodies governing the engineering, construction and architectural services sector in Pakistan. Those having the widest mandate include the Ministry of Housing and Works, the Pakistan Engineering Council, and the Pakistan Council of Architects and Town Planners (PCATP). The National Highway Authority and Pakistan Housing Authority (which is established within the Ministry of Housing and Works) have a narrower mandate of governing highway construction rules and regulations and low budget government housing scheme rules and regulations respectively. At another level, each local government by-law is also applicable to the engineering, architecture and construction services sector. Each city district development authority has an independent regulatory body that regulates construction plans and designs applicable to their jurisdiction Although the Ministry of Housing and Works is authorised to administer most construction and engineering-related legislation and to initiate policies on domestic and foreign consultations, the Pakistan Engineering Council (PEC) is responsible for regulating the engineering and construction services sector in the country. The PEC and its statutory mandate includes the registration of engineers and consulting engineers, accreditation of related academic programmes, establishing standards for engineering products and services, regulating the work of professional engineering bodies, etc.

The PEC's registration criterion for professional engineers is simple: possession of a BSc. Engg/B.E degree or equivalent from an accredited/recognised programme. The PEC website clearly cites rules and relations regarding foreign service providers operating in Pakistan. It defines a foreign engineering/construction consultant as “the enterprise partly or wholly owned by foreign nationals. Moreover, a consulting engineers firm registered outside Pakistan shall be considered as foreign firm irrespective of ownership by nationals and having a branch office in Pakistan or adopting a name similar to an expatriate firm”. Foreign consultants must obtain a pre-registration certificate from the PEC to be able to operate in Pakistan, and in case of bidding or negotiating for any project, must register to bid for the particular project from the PEC. Regarding foreign constructors or foreign operators wishing to perform construction or operation of engineering works on activities that are subject to engineering byelaws, a license has to be granted by the council before any activity can be commenced. Clause 2 of Engineering Works Bye-Law 7 makes it clear that a foreign provider may be granted license “only for specific projects”, which require specialised technology that is not available with a Pakistani firm. It further stipulates that the foreign constructor/operator must enter into a joint venture with the Pakistani constructor/operator, in which the share of the foreign body will be limited to the expertise and technology not available with the Pakistani firm, adding that the Pakistani firm's share must not be less than 30 percent. A foreign firm is also required to obtain a separate license for participating in bidding or negotiation for each specific project.

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Again, the regulations governing construction services aim to encourage joint ventures and collaboration with local service providers. Licenses are granted for projects where local firms do not have the requisite technical capacity. In effect, this works as a protection and safeguard to local construction and engineering firms who do not face undue competitive pressures. Despite comprehensive rules, regulation, bylaws and safeguards, the engineering, construction and architectural services sectors are bogged down by lack of coordination between federal and local governments.

Regulations are currently multi-tiered, and regulatory responsibility is also scattered.

As a result, implementation becomes difficult.

Energy The oil and gas sector in Pakistan is largely state-controlled although there are no restrictions on market access through commercial presence to private or foreign investors. While some MNCs are involved in oil and gas exploration, several stateowned or partially state-owned companies, such as Pakistan State Oil or Sui Southern Gas Company dominate the sector.

The recently established Oil and Gas Regulatory Authority (OGRA) grants licenses to companies for oil and gas distribution purposes. The National Electric Power Regulatory Authority (NEPRA) is the principle authority dealing with the regulation of generation, transmission, and distribution of electric power in Pakistan. Both the regulatory authorities do not differentiate between the domestic and foreign service providers and do not lay separate conditions for granting licenses. The OGRA also grants licenses to electricity generation or distribution providers, ascertains and regulates tariffs, oversees and approves investment, prescribes standards to be followed, levies penalties, etc.

The provisions of the NEPRA Act require that a service provider must be registered as a company in Pakistan. It can be inferred that the sector is already liberalised due to the non-existence of trade-specific legislation or regulation discriminating between foreign and domestic providers, but this can also be due to lack of trade commitments relevant to the energy sector. In any case, the existing regulatory framework suggests that there are presently no market access restrictions in Mode 3 (Commercial Presence) for private or foreign companies. Burki and Hussain (2007) are of the opinion that there is great opportunity for better quality service provision in the sector after major infrastructural improvement through use of new technology, and that improved market access for generation and distribution would provide further opportunities for FDI in the sector.

Environment The existing environmental policy framework in Pakistan is quite intricate, the most important regulatory guide being the Pakistan Environmental Protection Act 1997 (PEPA). The implementation of the act at the federal level is entrusted to the Pakistan Environmental Protection Agency (Pak-EPA), a creation of the act itself. Concerning the possibility of foreign assistance in environmental services, Section 6 of the PEPA

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(1)(h) Co-ordinate environmental policies and programmes nationally and internationally; (2)(c) Initiate with the approval of the federal government, requests for foreign assistance in support of the purposes of this Act and enter into arrangements with foreign agencies or organisations for the exchange of material or information and participate in international seminars or meetings;

The legislation clearly encourages collaboration between domestic management and foreign assistance and calls for policy synchronisation with international standards, but 'trade' in this sector has been sparse so far. Given Pakistan's high rate of urbanisation and an ever-increasing urban population to cater to, the severely underresourced local government authorities or municipalities could certainly use foreign assistance for solid waste management and sewage disposal. Pakistan clearly has an import interest here.

It may also be pertinent to mention here that there are numerous firms operating in Pakistan that carry out environmental consultancy work and environmental impact assessment for industries demanding cleaner technologies, and environmentally conscious engineering projects. Further, liberalisation commitments through Mode 1 and Mode 3 would be beneficial in terms of service quality, technology transfer and cleaner environment (Burki and Hussain 2007).

Legal The Pakistan Bar Council (PBC) is the highest body of elected lawyers in the country.

It came into being by an act of Parliament known as the Legal Practitioners and Bar Council Act, 1973. The PBC is responsible for the enrolment of legal practitioners and issuing them the right to practice in Pakistan.

Section 22 of the Act stipulates that “no person shall be entitled to practice the profession of Law unless he is an advocate”. Individuals who are nationals of other countries must obtain a license to practice law in Pakistan from the PBC, which may be granted after the PBC's qualification requirements have been satisfied. Section 26 of the Act clarifies that 'a national of any other country (who has resided in Pakistan for a period of not less than one year immediately preceding the day on which he applies for admission) may be admitted as an advocate if citizens of Pakistan duly qualified are permitted to practice law in that other country”. Section 55 of the Act further clarifies that the PBC has power to make rules about 'the circumstances in which and the conditions subject to which nationals of any foreign country may be admitted as advocates and foreign qualifications may be recognised for purposes of their admission”.

Tourism Existing rules and regulations concerning tourist guides, hotels and restaurants, and

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travel agencies are elaborated in Pakistan Tourist Guide Rules, Pakistan Hotels and Restaurants Act 1976 and The Travel Agencies Act 1976. These licenses stipulate that licenses must be sought from the federal government before any activity concerning tourism may commence. The legislation does not discriminate between domestic and foreign service providers, and the same conditions for the grant of a license apply to all.

Despite the degree of openness and the trade possibilities, the tourism sector in Pakistan remains under-developed mainly due to lack of fund allocation and poor infrastructure. Given Pakistan's rich cultural heritage, diversity, and natural beauty, meaningful reforms and improvements in the sector would definitely boost the tourism industries potential and make a sizeable contribution to the GDP. Accountancy The Institute of Chartered Accountants of Pakistan (ICAP) is a professional body of Chartered Accountants in Pakistan. Within the ICAP, members of the council are responsible to formulate key strategies and policies in the interest of the profession.

One action of the council is the institution of the Quality Control Review (QCR) programme, which is an integral part of ICAPS regulatory framework, in order to develop and maintain professional standards for auditing firms and their functions.

Other than this, ICAP requires all foreign accountants who wish to provide accountancy services in Pakistan to pass three ICAP examinations, following which they are exempted from undergoing training. Foreign accountancy services firms can easily operate in Pakistan as long as they comply with licensing and registration rules as regulations for establishment of a firm as imposed by the Companies Ordinance 1984 and the SECP. Feedback from Stakeholders In order to collect primary information on domestic preparedness vis-a-vis services trade liberalisation, one-on-one interviews with key informants were carried out to map stakeholder perceptions in Pakistan. These interviews were conducted in 2007.

The interview consisted of two sections. Section one focused on the self-assessment of the regulatory authorities and departments while the second section focused on four main aspects of trade facilitation, competition and safeguards and future outlook.

The primary role of regulatory authorities (for each service sector) is to make sound polices related to each service sector in tandem with the relevant ministries as well as overlapping bodies and associations. Within the multilateral rule-making framework, their responsibilities lie in ensuring that any commitments made at the international levels are reflected in rules and regulations proposed and drafted by them, and also that these rules provide safeguards to service providers operating within their sector, check regulations and any discouraged practices. Another key responsibility of the regulatory authorities is to liaise with the Ministry of Commerce (WTO Cell) and the relevant stakeholders in order to help prepare initial offers. These regulatory authorities overlooking the relevant sectors play a key role as they are given the

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responsibility of assessing the initial request for liberalisation, and their response is taken as representative of key stakeholders within the service sectors. Therefore, theoretically it falls on them to ensure that the initial offer is comprehensive as well as reflective of national policy priorities. However, a vast majority of the representatives of regulatory authorities contacted for the study were of the opinion that their engagement in the review process of offer was mainly to fulfil a responsibility; either they were not prepared to give well-informed comments, or their comments are not taken seriously and not reflected in the draft offer.

During the perception mapping on issues of domestic preparedness of the regulatory bodies to face the challenges of service trade liberalisation, 94 percent of the regulatory bodies were of the opinion that they are regulated, their administrative rules and regulations are easily understood by both foreign and domestic service providers. Six percent of the regulatory bodies disagreed with the view that one of the biggest problems affecting foreign service providers is that in Pakistan most rules and regulations are kept secret, leading to a lack of information.

Around 82 percent of the regulatory bodies said that the private sector has the opportunity to comment on rules and regulations during their development, while 13 percent of the regulatory authorities said the private sector was rarely involved in development of rules and regulations by the relevant departments. Rather, the regulatory bodies only regulate while their ministries/departments play a dominant role in the development of the rules and regulations without their involvement.

However, six percent of the representatives do not know about the issue.

A significant response was seen in lieu of domestic preparedness and around 82 percent of the authorities said domestic industry standard setting procedures and industry regulatory applications process are publicly available. However, 13 percent including ministries, which were of the view that Pakistan still needs to strengthen its regulatory bodies as well as its position in the services sector—keeping in view the global and regional situation—disagreed. The respondents also stressed on the need for policy coherence of the relevant ministries on the issue of services trade liberalisation. Six percent of the interviewing bodies showed lack of concern with the issue, ignoring their positive and necessary role under Mode 2, 3 and 4 of the services sector.

While asking the regulatory bodies whether government industry measures are administrated in a reasonable, objective and impartial manner and regulators inform applicants within reasonable periods of time on the status of their application, 75 percent of the regulatory bodies showed a positive response while the remaining 25 percent disagreed that neither government measures are administrated well nor regulators are receptive and approachable.

While discussing the (second section) trade facilitation, competition and safeguards, future outlook, and policymaking, some common issues were identified and it was observed that there are some rules and laws established by the regulatory bodies,

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which are compulsory for every foreign services provider to fulfil before entering into the Pakistani market.

Trade Facilitation A common mode of business entry in Pakistan is franchising and licensing in partnership with local entrepreneurs, or 100 percent equity through direct investment; and Pakistan offers an attractive and enabling environment for foreign investment in services sector. The investors are at liberty to choose any legal business.

According to the World Bank report on Doing Business on South Asia, in terms of ranking of ease in doing business, Pakistan is favourably placed with 76-index average compared to 101 in Sri Lanka and 120 in India. Likewise, on average, it takes 24 days to start a business in Pakistan compared to 31 days in Nepal and 74 days in Bangladesh. The Board of Investment, Trade Development Authority, Securities Exchange Commission of Pakistan and concerned ministries provide support and facilitation services to foreign investors interested in both tangible and intangible sectors. The information on rules and regulations is generally available on the websites of the concerned ministries and organisations which can be obtained through relevant links on the Board of Investment website and electronic government website links. Business and trade investment contracts are generally dealt under corporate law. Disputes are resolved out of court through the regulatory ministries.

For a foreign service provider who enters Pakistan, ordinance/laws/byelaws are passed by the organisations, which requires that foreign service providers need to apply to register either with the federal/national body or with the provincial council/department/organisation. For example, if a construction or architecture firm is going to practice in Islamabad, the firm has to be registered with the Capital Development Authority (CDA) or an architect could get the membership of the Pakistan Council of Architect and Town Planners. There are proper procedures to scrutinise the application and determine if the foreign firm is eligible to practice in Pakistan. Licensing procedures are very easy to follow; however, there is an inbuilt mechanism in each regulatory body. For individuals to provide their services in Pakistan, they need to have degrees from accredited universities, as well as to provide an equivalence of their academic qualification in order to assess them in line with the local law students and have to be the member of the network of the specific departments i.e. Pakistan Council of Architect and Town Planners.

Some of the sectors have the requirement that foreign service providers (firms/individuals/organisations) also need pre-registration certificate and fee, joint venture or association agreement of the parties, specifying the share of each party along with the description and scope of the project. Some of the organisations intend to apply in the bidding process (for example, the Pakistan Engineering Council). Most of the regulatory bodies have their own codes of conduct/ethics, which have to be followed/abided by the partners or service providers, violation of which leads to the penalties.

Regarding difficulties for foreign firms, they have to face language barriers, work permit for entry, environment, contacts and security problems. One of the biggest

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problems affecting foreign service providers is that most of the rules and regulations are kept secret in Pakistan, which ultimately leads to lack of information on rules and regulations. As the foreign impact is different compared to the local impact, so the foreign service providers will have to face the bureaucracy. But the Government of Pakistan is in the processing of establishing such procedures to overcome the issue of bureaucracy. For example, the Higher Education Commission of Pakistan (HEC) has granted authority to the Pakistan Council of Architect and Town Planners to get rid of bureaucracy by institutionalising the architectural services industry.

Competition and Safeguards There are no unfair practices carried out by domestic service providers to prevent foreign service providers from competitiveness and entering the Pakistani market.

However, every domestic firm has its own market/domain. This is basically because the procedure to enter the accounting service industry has very transparent rules and regulations. Domestic firms feel concerned that multinational firms would prefer a foreign accountant because of the name and reputation that specific accounting firms represent. Being well established abroad, foreign firms have access to a larger network, which can diversify their risk and obtain further expertise whenever they need. Moreover, foreign firms are allowed to repatriate their earnings to the parent company. In case of engineering and construction services, the Pakistan Engineering Council's concerns are very valid because foreign service providers use their name and reputation and most often use the same material and technology for construction purposes but charge a high cost by insisting that their work quality is good. In order to deal with such issues, the Pakistan Engineering Council took a foreign service provider to court in 1997 but the Government of Pakistan did not take any action against the Pakistan Engineering Council's concern. In telecommunication, the operators who have significant market power can enhance their profit by using unfair means e.g. by further decreasing their call rates. And there is no specific legislation that exists to protect domestic service providers, neither are any steps taken to accommodate the local service provider's concerns except those mentioned above.

There is, at present, a rapid shift towards MNCs and the corporate sector more or less works as monoploies with no constraints. Also, there are no visible checks and balances. However, some feel that there is some sort of discrimination on awarding architecture projects to certain firms by the Ministry of Housing.

On the other side, some of the respondents are of the view that domestic service providers have no reason to be concerned or threatened by foreign service providers, because most foreign firms work in collaboration with domestic firms. Even direct awards that are given to foreign firms do not threaten domestic firms because foreign firms still use domestic service providers for some barriers that they face, such as language skills, familiarity with the locality, access to cheap labour. Even though PCATP specifically states in it's regulations that a private competition cannot be held, and that all competitions should be open, the Ministry of Housing and government officials sometimes pay no attention to this criterion and abuse the system. Wellestablished foreign firms can collaborate with well-established local firms and wipe

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out smaller domestic firms if they want to. It all depends on how well a service provider is connected in the Ministry of Housing and the kind of support it has from a well-reputed foreign architecture firm to get projects passed in its favour.

Disputes resolved out of court are generally done through the regulatory ministries.

For any unfair practice carried out by foreign or domestic service providers, an investigation procedure has to be followed and accuser has to face penalty or retribution according to byelaws. Determination orders are issued by the Pakistan Electronic Media Regulatory Authority (PEMRA) through which tariffs are fixed for different services of e-media to halt the trend of imperfect competition. Preparation of code of conduct and other standards ensuring their enforcement check on the tendency of market power abuse. In the case of NEPRA, there is little local investment (only one public service provider, WAPDA, is in Pakistan) and most of the investment is international, which is entirely based on collaborations (so that the people of Pakistan would be able to know about the latest technologies). NEPRA and EDB (Engineering Development Board) have made rules to protect local service providers.

For example, there is a 15 percent price preference given to local manufacturers. In the recent past, a Chinese company offered Pakistan meters for sale at 15 percent less price compare to local manufactures, but Pakistan declined the offer to protect local manufactures. This was because in the water and power sector, 15 percent price preference is given to local service providers.

Pakistan offers one of the most lucrative investment opportunities in the services sector with none or little procedural entry barriers. There are no unspecified entry barriers, for example, foreign airlines through the Ministry of Aviation, under different freedoms of flight can/are guided for operating to and through Pakistan. It was also pointed out by the stakeholders that there are cases where domestic service providers may initially feel threatened by foreign service providers, however, in the long-run, due to increased competition they learn new ways of doing business that result in improved quality, larger variety and competitive prices. The local retail business, as elsewhere in the region, feels threatened as it is one of the largest employing sectors. Rules and regulations in Pakistan are equity-based and provide fair play opportunities. However, rules keep changing depending on the stage of development of local industry. There are no specific protection measures, only the policy of joint venture is considered a yardstick. For example, in the telecom service sector, there are no rules/legislations to protect local service providers or accommodate their concerns.

Pakistan National Accreditation Council (PNAC) deals with unfair practices by domestic and foreign service providers through consultation and awareness. To accommodate the local service providers, the council has taken initiative to train, raise awareness and provide consultation to enhance competitiveness.

Future Outlook and Policymaking The most important barrier for investment is the foreign service providers' (FSP)

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perception of Pakistan. Besides this, the Board of Investment (BoI), Deregulation Facilitate Unit (DFU) and Ministry of IT (MoIT) facilitate FSP fully in all operational requirements. The environment of investment in Pakistan is very conducive.

Therefore, due to increase in investment there is also an increasing trend in accountancy and local firms are in better condition. The Pakistan National Accreditation Council foresees tremendous potentials for growth in the sector especially in reducing Technical Barriers to Trade (TBT) and improving quality of products and services in order to build confidence of consumers, importers & exporters so that the export base of the country should be broadened. For the preparation of Pakistan's position in trade negotiations under GATS in future, PNAC is involved in: l l l

Awareness-raising of stakeholders to meet the WTO requirements.

Accreditation of various conformity assessment bodies including CB inspection and labs to meet the international requirements of testing goods.

Handling various programmes under the National Quality Policy and Plan (NQP&P) to strengthen the national quality regulatory infrastructure. (www.pnac.org.pk)

The growth potential in legal services sector in Pakistan is questionable.

Unfortunately, the legal sector has not been able to frame defamation suits to civilise the society. Social, cultural and religious norms weigh stronger than the legal framework. The law is very protracted, lengthy and expensive, which makes an individual seem it is not worth it.

There were major setbacks in the architecture industry in 1998 and 1999 due to the political crises and nuclear bomb testing. However, since 2002 (up until 2007), overall economic growth has increased steadily in Pakistan, which resulted in a boom in the construction business, and in turn led to an increase in architectural services.

Since this trend continued to grow, the architecture industry also grew, with domestic firms trying to collaborate with foreign firms to secure projects.

All mobile operators are expanding their networks at a much faster pace owing to the fact that most of the densely populated metropolitan cities are now covered with almost 100 percent penetration. These companies are now increasing their coverage to those uncovered areas where mobile networks have not reached. In 2003, the total investment in the telecom sector was $5 billion which increased to $30 billion in 2007. This sharp increase led to further increase in the market size and capital formation. Still, growth in telecommunication sector is positive and growth rate is 20 to 30 percent per annum.

The electronic and print media has shown tremendous growth over the past five years, ever since it has been opened for public licensing. There are over 150 FM radio licenses and more than 1,500 cable TV operators in the country. Furthermore, there are almost 50 licensed satellite TV channels—both foreign and local. In future, there is potential for wireless cable TV MMDs service in the country. DTH service is also

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around the corner and teleporting facility has potential for growth. Similarly, television on mobile phone is another technology which has been introduced by mobile phone service providers in the country and licensed by PEMRA. The Securities and Exchange Commission (SECP) expects its growth in mergers and acquisitions, in leasing and investment banking, as well as in the increased inflow of foreign firms in mutual funds sector.

Since health is not a priority in Pakistan, most of the people like to get treatment from government hospitals which provide free medicines. In the private sector, people want concessions in doctor's fees and medicines. Such conditions make it difficult for FSP to enter in this sector. But in the pharmaceuticals sector, it seems there will be a lot of growth, because in the span of just seven years (from 1999 to 2007), there has been an increase of 200 pharmaceutical companies because of an increase in export of Pakistan's medicines. Secondly, many firms merged into each other and formed bigger units. The most important fact is that Pakistan is an exporter of doctors, for example the US fulfils its 25 percent requirement of doctors from the third world and Pakistani doctors who have a good reputation often go to fill in the vacancies. The potential in the health sector is very prominent; doctors from India, Sri Lanka, Bangladesh and China can come because of low salaries in their countries as compared to Pakistan. Due to a sharp hike in property prices, foreign service providers will be reluctant to open private hospitals and consequently, Decentralisation Support Programme (DSP) will be protected from over influx of foreign service providers.

Pakistan is a fairly large country with a population of 150 million growing annually at 1.8 percent. The steady growth in per capita income has created affluent pockets of consumers who seek quality services that provide immense opportunities for investment in services. In tourism, there is immense potential for two and three star hotels to cater to domestic and international tourist needs particularly along the coastal belt and in northern areas.

There is a lot of potential in the transport sector; the sector's history shows a tremendous increase in profit shares, also there are less physical barriers and transit facilities are given to countries. In future, Pakistan will welcome connectivity with borders to provide trade facilitation; in this regard, the national trade corridor has been planned. In 2004, the department allowed Indian and Afghanistan bus services.

At present, international transit process agreement with Iran, Turkey and Europe is in the pipeline.

In policymaking, the Ministries of Communication and Commerce, Trade Development Authority and the Board of Investment carefully go through the GATS position. It was pointed out by almost all the regulatory bodies that there were several rounds of talks about future goals/strategies, but nothing was/is ever taken seriously.

The representatives of the departments/sectors interact with each other and review the current goals and strategies to promote the industry, but do not publish these goals and strategies, so no one knows the outcomes of these meetings. Also, a large

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number of domestic firms have no information on the WTO Cell in Pakistan.

According to 80 percent of the respondents, activities showed the growth potential as a whole in the services sector, but no future strategy has been established for the current negotiation position at GATS, neither does the MoC seek any advice from them.

With respect to GATS, no future strategies were developed, according to SECP, MoC and BoI were responsible for making these types of goals. The MoC consults BoI for any update and SECP has to follow instructions given by BoI. In order to play its part in the current negotiations at GATS, the telecommunication sector has sent a revised issue offer to the Ministry of Commerce (MoC) to be discussed at the WTO when the new round of talks come about and can take position with reference to revised issue rules and regulations.

Under the Ministry of Health, four different sectors are covered. The suggestions from all these sectors are compiled and forward to all councils, which, after incorporating their commitments and compilation, forward it to MoC. The Pakistan Medical and Dental Council (PMDC) and all other councils were involved in preparing initial offer for the WTO/MoC WTO Cell.

Conclusion It appears that, although the process that underpins GATS negotiations at Geneva exists, it is somehow weak and requires strengthening. At the first instance, key informants at the Ministry of Commerce WTO wing highlighted that response to initial requests slackened due to slow response from respective ministries/sectoral regulatory bodies. There are a few cases where awareness of GATS and its commitments are not fully understood by regulatory bodies and as a result, Pakistan cannot fully or comprehensively develop its negotiating position for that particular sector. In other instances, domestic rules and regulations are ambiguous and not clearly projected. The regulator environment is thought to be cumbersome and bureaucratic.

Although Pakistan has come a long way in terms of developing an investor-friendly environment facilitating foreign service providers, there is still room for improvement at the negotiating level as well as the national implementation level. Firstly, the consultation process between the various ministries and regulatory authorities is lengthy and, as mentioned earlier, in some cases, the Ministry of Commerce does not receive detailed research-based input (again, exceptions are in the case of services sectors such as finance and IT & telecom). In some ways, the process is also confusing since Pakistan's trade policy is not integrated: objectives and outcomes of multilateral agreements are often separate from Pakistan's bilateral commitments. Due to this, policymakers are often confused, and policies and rules are set ad hoc.

In a consultation meeting with trade related technical assistance consultants, the Ministry of Commerce (WTO Wing) personnel, Board of Investment representative, Ministry of Industries representative, and a member of the Trade Development

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Authority Pakistan (TDAP), input was taken regarding insights in the services sector and related domestic preparedness. In this regard, the issue that came to the fore was that in Pakistan's case, the services sector has an active need to strengthen support for trade negotiating facilitation and implementation of negotiated outcomes. Policies, rules and processes are informally in place, but they are not cohesive, connected, and implemented.

The major proposal in this regard was to set up an implementation task force that will be supervised by a senior advisory group, which would comprise one member from each service sector ministry. The implementation task force will operate through resource centres (for domestic and foreign service providers) in each major city, and would ensure that rules set at the multilateral and bilateral level are consistent with each other, and in line with national policy objectives. It will be ideal if members of each sector's regulatory authority are members of this board. The advantage of this three-tier structure is that stakeholders' input (via resource centres) would be transmitted to regulatory authorities, and also each stakeholder will have an information bank that will guide them with cross-cutting issues related to domestic and international regulations that apply to his/her service provision.

The following steps were proposed for domestic preparedness: l Consultation on negotiations at all levels. l Capacity enhancement of the officials indirectly linked to the regulation and policy formation e.g. Pakistan Post. l Awareness-raising of the concerned stakeholders belonging to sectors and subsectors which are directly and indirectly linked to each other, and strong policy coherence is imperative e.g. Ministry of Tourism and Environment, PMDC and Drug Controller Authority. l Data compilation according to the four mode of supply (both import and export) in sector and sub-sectors. l Protecting competitive measures/packages for domestic service providers. l Domestic service providers (staff/stakeholders) should have the understanding of international negotiations. l Improve the statistical coverage of services sector with disaggregated data to make clear to policymakers the value and shape of services trade. l In response to self-assessment, there is need to remove weaknesses in the regulatory framework. l Follow international standards both in terms of import and export. l Harmonisation of technical regulations. l Rules and regulations made by the regulatory bodies and MoC should have a balance between protection and liberalisation. l There is need to carry out in-depth research under each sector and sub-sector to find out export potential as well as investment opportunities for future development.

Another main issue is in the service provision under Mode 3 (commercial presence) and Mode 4 (movement of natural persons) of Pakistani service providers in the markets of the developed countries. The developed countries usually put barriers

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especially in education qualification and the ability of the service providers for qualifying for bids. In such cases, the Government of Pakistan should take the following measures regarding liberalising its service sector: l l

If the government is going to open up more sectors and sub-sectors, it should be liberalised with conditionality, i.e. joint ownership and transfer of technology.

The relaxation of conditions in each sector and sub-sector should be subject to provision by the other party.

Mehnaz Ajmal Pracha is project associate at Sustainable Development Policy Institute (SDPI), Islamabad, Pakistan.

Endnotes 1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

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Humayun Akhtar Khan, Minister for Commerce. Trade Policy Speech, July 17, 2006.

This is stated with reference to the political and structural challenges.

External Trade to GDP ratio increased from 25.8 percent in FY 2000 to 32.7 percent in FY ’07, after it peaked at 35.2 percent in FY ’06.

2005 World Population Data Sheet, Population Reference Bureau, Washington D.C. Trade in Services Summary, Government of Pakistan, Statistics Division, June 2007 http://www.dailytimes.com.pk/default.asp?page=2007%5C10%5C26%5Cstory_26-102007_pg5_1 The details of the budgetary measures can be seen on CBR website.

This obligation is subject to certain exceptions such as the MFN exemption lists which WTO members were free to file at the end of the Uruguay Round; economic integration agreements; mutual recognition schemes; and general exceptions for safety and security reasons, etc.

To review the extent of national treatment obligations and the level of market access, see Pakistan’s schedule of commitments at http://www.wto-pakistan.org/?p=services Communication from Cuba, Dominican Republic, Kenya, Nigeria, Pakistan, Senegal and Zambia, TN/S/W/3, 10 June 2002.

This is to ensure the credibility, integrity, competence and honesty of the people leading the institutions, and to record that the candidate under question has not indulged in criminal and unlawful activities in the past.

Pakistan has a limited scope (Mode 1 and Mode 4) in export of architectural services, and therefore encourages joint partnership in Mode 3, which could support its export interest in Mode 1. Pakistan does have experienced professionals willing to provide their services at competitive costs as compared to developed country professionals. Any joint ventures with foreign service providers would give such professionals access to foreign markets. Pakistan also has great export interest in all modes of supply in the construction and engineering sector. This is due to the interdependency of construction and engineering services in all modes of supply coupled with the fact that Pakistan is a supply source of cheap skilled labour. Consequently, at present a small number of Pakistani engineering companies have opened offices in the Middle East and Afghanistan. http://www.wtopunjab.gov.pk/gats.html This section is derived from ICTSD report on Opportunities and Risks of Liberalizing Trade in Services in Pakistan.

Other members include Australia, Canada, Taiwan, Penghu, Kinmen and Matsu, EC, Japan, Republic of Korea, Malaysia, Mexico, New Zealand, Norway, Singapore, Turkey and USA. Computer and related, cross-border supply, telecommunications, education, audiovisual,

maritime transport, air transport, postal and courier, including express delivery, distribution, logistics, Mode 4, environment, construction, architecture and engineering, legal, energy, Mode 3, MFN exemptions, financial, agriculture.

17. Protection to video films, periodicals and all forms of audio-visual works was also added within the amendment.

18. This was gauged by an interview with the Director, Ministry of IT and Telecom on 21 August 2007.

19. http://ravi.lums.edu.pk/cmer/nmpakistan/images/pak_paper.pdf 20. Pp. 35-36 http://www.sbp.org.pk/publications/prudential/ordinance_62.pdf 21. Ibid., 37-38.

22. http://www.secp.gov.pk/aboutus.htm 23. http://www.secp.gov.pk/corporatelaws/dec_26_98.htm 24. The Pakistan Council of Architects and Town Planners (PCATP) is the key governing body to regulate the architectural profession. The PCTAP advises the government on architecture-related issues as well as sets standards outlining the code of conduct for its own members.

25. http://www.pec.org.pk/fo-consultants.htm 26. http://www.pec.org.pk/consult_byelaws.htm 27. http://www.pec.org.pk/engg_byelaws.htm 28. P. 17, http://ravi.lums.edu.pk/cmer/nmpakistan/images/pak_paper.pdf 29. http://www.environment.gov.pk/act-rules/envprotact1997.pdf 30. http://www.pbbarcouncil.com/downloads/barcouncil_act_amended_2005.pdf 31. Ibid.

32 Ibid.

33. Supported by the WIPO and European Commission.

Bibliography l Burki, A.A. and Hussain, T. “Opportunities and Risks of Liberalizing Trade in Services in Pakistan”, ICTSD, Geneva. Mimeo, 2007. l Mahmood, Z. “WTO and Pakistan: Opportunities and Policy Challenges.” Presented at the 14th General Meeting and Conference, January 28-31, 1999. PIDE, Islamabad. l Pakistan Economic Survey 2006-07. l Keynote Address by the Commerce Minister of Pakistan as presented by the Additional Secretary of the Ministry of Commerce, Mr Nasim Qureshi, March 17, 2007. l SBP. “State Bank of Pakistan Annual Report 2006-07”, 2007. l UNCTAD. “Scope for Expanding Exports of Developing Countries in Specific Services Sectors Through all GATS Modes of Supply, Taking into Account their Inter-relationship, the Role of Information Technology and of New Business Practices.” TD/B/COM.1/21.

New York and Geneva, United Nations, 1998. l UNCTAD. “Assessment of Trade in Services of Developing Countries: Summary of Findings”. UNCTAD/ITCD/TSB/7, New York and Geneva, United Nations, 1999. l UNCTAD (2000), “Positive Agenda and Future Trade Negotiations”, www.unctad.org. l World Bank. "Trade in Services: Using Openness to Grow." In Global Economic Prospects, 2001. www wds.worldbank.org/external /default/ WDSContentServer /IW3P/IB/ 2002/02/ l Zutshi, B.K. “Services trade liberalization: Development dimension and issues in GATS 2000 negotiations.” In Regional Perspectives on the WTO Agenda: Concerns and Common Interests, Studies in Trade and Investment. No. 47 ESCAP, 2001 (ST/ESCAP/2161)

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Preventing Child Soldiering In South Asia: The Stumbling Blocks S. Y. Surendra Kumar

W

omen and children are generally regarded as innocent and unfortunate victims of war and armed conflict, but never treated as key actors.

However, in the contemporary world, due to the intensifying of many international and non-international armed conflicts, not only have women and children become new targets of violence and atrocities, but many have also become perpetrators.1 In this regard, direct participation of children as active soldiers in conflicts has become one of the most alarming trends in the modern day conflicts.

According to the UN Secretary-General Report on Children and Armed Conflict (2007), there are around 250,000 children under the age of 18 serving in government forces and various armed groups around the world.2 Subsequently, the number of armed groups and government forces identified as using children has gone up from 40 in 2006 to 57 in 2007.3 The recruitment4 of child soldiers is a common phenomenon in Afghanistan, Burundi, Chad, Central African Republic, Colombia, the Democratic Republic of Congo, Myanmar, Nepal, Philippines, Somalia, Sudan, Sri Lanka, Uganda and so on. Thus, children have emerged as a vital source for armed groups to sustain their struggle.

The recruitment of children by armed groups has been increasing due to the many ongoing conflicts in almost every region of the world. Subsequently, technological advances in weaponry and the proliferation of small arms have further contributed to the increased use of child soldiers. The light-weight automatic weapons are simple to operate, often easily accessible and can be used by children as easily as by adults.

Generally, child soldiers serve as combatants in a variety of roles; they are employed in the kitchens, medical and military camps and act as messengers, infantry shock troops, raiders, spies, mine detectors, trench diggers, porters and even personal bodyguards to senior cadres. In addition, children have also taken up the role of suicide bombers in countries like Afghanistan and Sri Lanka.5 Female recruits are frequently subject to sexual abuse and many are taken as “wives� by rebel leaders, a common scenario in the African region and also in South Asia. The question arises: why do armed groups and forces prefer children?

Why Children?

The main guiding factors for the armed/rebel groups to recruit children is to keep the supply line of the requisite manpower secure for the struggle to go on, given that due to long drawn conflicts many men migrate for safer places. Subsequently, children offer a variety of advantages; they have more stamina, are better at surviving in the

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bush, follow directions faithfully and complain less.6 Thus, many commanders are known to show particular preference to children due to their high level of obedience and willingness to carry out any mission including suicide attacks.

Apart from rebels forcefully recruiting children, the latter themselves join armed groups voluntarily for reasons such as having personally experienced or witnessed violence at the hands of security forces. Subsequently, those children vulnerable to constant use of aerial bombing and shelling of civilian areas by the security forces, often seek protection or revenge through joining the rebel groups. Some children even join military ranks for the challenge and excitement normally associated with military life and power of gun and prestige that come with it.7 In addition, children who have lost their parents and other family members join as means of survival. Besides, when society breaks down under the weight of a prolonged conflict, the most affected are the children who—driven from their homes and separated from family members with no where to go—often perceive joining an armed group as best chance of survival.8 Moreover, as a result of hunger and poverty, many children and their parents may often view soldiering as a path to material gains and a better life. Some children also volunteer to join the armed groups inspired by their political ideology e.g. Marxism or Islamic ideology.

Lost Generation of South Asia South Asia is no different from other regions with regard to child soldiers. Here children are mostly engaged in various intrastate armed conflicts and most of the recruitment is successfully carried out by armed groups in countries like Sri Lanka, Nepal and to certain extent in India, Bangladesh and Pakistan. In India, around 17 militants groups are suspected of using child soldiers, in northeast regions like Assam, Manipur, Nagaland and Tripura. According to local sources, children aged between 13 and 15 are the main target of the militants. Kashmiri militants, like the Lashkar-eToiba (LeT) and Jaish-e-Muhammad (JeM) based in Pakistan, have also recruited child soldiers, but on a smaller scale. In addition, the Naxal groups operating in Andhra Pradesh, Chattisgarh and Jharkhand states are also alleged to have recruited child soldiers. The child soldier wing is popularly known as Bal Mandal (Child Forum). According to Asian Centre for Human Rights (ACHR), apart from the Naxalites, even the Salwa Judum (a state-sponsored private militia) known as “Special Police Officers” (SPOs) are involved in recruitment of children in Chhattisgarh.9 It was estimated in 2003 that the Naxals in Andhra Pradesh alone have around 75 Bala Sangams (children’s group) including an estimated 800 children; these figures might have increased now.10 In the case of Pakistan, prominent outfits like LeT and JeM are said to have recruited between 2500–3000 children since 2003 to sustain their jihad in Jammu & Kashmir.11 Subsequently, there have been consistent allegations that some madrassas (Islamic schools) involved in military related teaching are also playing a significant role in recruitment of children between 15–18 years for political activities.12 Even in Bangladesh some of the qaumi madrassas (Deoband model of madrassas) are

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suspected of becoming recruiting grounds for various Islamic groups such as Harkatul-Jihad-al-Islami (HUJI) to use children for violent political activities. For instances, the qaumi madrassas teachers have been accused of facilitating child activists to jihadi outfits to unleash the country-wide bombing in August 2005. Even the Janajuddha and Marxists-Leninist (M-L) faction of Purbo Banglar Communist Party have recruited children aged 13–15. Generally, most of the children are from the slums and are often used to make bombs and plant them at various political rallies/demonstrations and are popularly known as mastan.13 Thus, the slum and street children are more vulnerable for recruitment by the jihadi groups.

The recruitment of children by the armed groups in India, Pakistan and Bangladesh are on a small scale. However, Sri Lanka and Nepal call for serious attention with regard to recruitment of children on a large scale by armed groups engaged in conflict.

Sri Lanka The protracted conflict in the island is conspicuous for massive recruitment of soldiers especially children by armed groups like the Liberation Tigers of Tamil Eelam (LTTE), Eelam People's Revolutionary Liberations Front (EPRLF) and People's Liberation Organisation of Tamil Eelam (PLOTE). Among these groups, the LTTE and its breakaway group led by V. Muralitharan (Col. Karuna), the eastern commander of LTTE and also the head of a political party, Tamil Makkal Viduthalai Pulikal (TMVP)14 still continue to recruit children on a large scale, despite expressing their commitment towards not recruiting children below 18 years.

LTTE The child soldiers in LTTE—popularly known as “Baby Brigade”—were commandeered by Justin, a Pondicherry-trained fighter, in 1984. Subsequently, in 1987, they were integrated with adult units and were deployed heavily during the Indian Peace Keeping Force (IPKF) intervention. In addition, the LTTE also has Sirasu Puli (Leopard Brigade) one of the fiercest fighting forces composed entirely of orphan children. The LTTE has been recruiting children as young as 9 (boys) and 12 (girls) years.12 However, the average age of children recruited by LTTE is 16 years and more than 25 percent constitute girls. Although in the beginning the recruitment was “voluntary” without any physical threat, as time progressed child conscription by LTTE became involuntary and compulsive.

The government of Sri Lanka (GoSL) estimates that at least 60 percent of LTTE fighters are under the age of 18. However, more reliable information can be drawn from the UNICEF child recruitment database which has received 6,221 cases of child recruitment since 2001.16 Interestingly, the ceasefire agreement signed between the GoSL and LTTE in February 2002 has further facilitated the latter in extending conscription to the government controlled areas with virtual impunity. The latest UN report states that from November 2006 to August 2007, UNICEF received reports of 262 children recruited by the LTTE mostly from Batticaloa and Kilinochchi, of which 32 were re-recruited.17 Although the rate of child recruitment has declined, it is not that the LTTE has honoured international norms or agreements it has signed; rather

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the communities are afraid to register cases of abduction or forced recruitment, given the intensifying hostility between the conflicting parties. Thus, children are a vital source for LTTE’s struggle due to the prolonged conflict and lack of humanpower.

However, from time to time, under domestic and international pressure, the LTTE has also taken a few steps towards preventing child soldiering. For instance, since November 2006, it has consistently been working with UNICEF to release the children still remaining in its ranks. It has officially designated the Child Protection Authority as the interlocutor on child recruitment issues with the UNICEF. The LTTE even claimed to have released 227 children from November 2006 to August 2007, of which 31 were released to the Education Skills Development Centre and the rest were released to their parents.18 Ironically, the UNICEF dismissed this claim and stated that only 116 were released to parents. In May 2007, LTTE illustrated its intention to enforce the minimum age at 17 years by issuing an announcement on the Voice of Tiger Radio. On 15 October 2007, the LTTE signed an “Action Plan” in which it amended its official position of not recruiting anyone under the age of 18 years.19 Although LTTE has undertaken a few important steps towards preventing child soldiering, it is still far from translating all its words into action.

Karuna group The Karuna group, in the process of challenging the LTTE leadership both politically and militarily, has also being recruiting young children. According to the UNICEF database, as of August 2007, around 385 children between the age of 9–17 years had been recruited or re-recruited by the Karuna faction, mostly from Batticaloa, Ampara, Trincomalee and Polonnaruwa district.20 The average age of children being recruited is 16 years. Although, the Karuna group like the LTTE has been placed on the UN List of Shame for recruiting children21 it, nevertheless, continues to recruit and re-recruit children despite the international pressure and presence of UNICEF. It has also persistently denied (like LTTE) the existence of many child soldiers within its ranks.

From time to time, the international community/agencies like UNICEF have being engaging or working with the Karuna group to develop an action plan as they have done with the LTTE. The plan, however, has not been successful due to two vital reasons. First, the lack of progress made by Karuna group in fulfilling its commitments made to special representative of UNICEF in April 2007 towards releasing children from its rank and not to recruit them further. Secondly, UNICEF has not been able to continue the dialogue due to internal split in Karuna faction led by commander “Pillayan” moving with cadres from Batticaloa to Tincomalee.

Nevertheless, in January 2007, the Karuna faction issued regulations for its own military not to recruit children. Ironically, this act was more or less a cosmetic change and they still continue to recruit children to sustain its struggle.22 Nepal In Nepal the Communist Party of Nepal–Maoist (CPN-M) is involved in the recruitment of children on a large scale. Although there is no systematic monitoring and no exact figures, local groups estimate at least 3,500 to 4,500 children are part of

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the Maoist fighting forces and are known as “red devils”. Most of the children are aged between 14 and 18 years, of which more than 40 percent are suspected to be girls.23 The Maoists, like other armed groups in South Asia, have denied any presence of child soldiers in their ranks. Ironically, the Nepal army has also reportedly used children as porters and messengers in its counterinsurgency operations, and the surrendered child cadres of the Maoists have been used for intelligence gathering and logistical planning. This act by the Nepal army clearly violates the international Convention on Rights of Child (CRC), which the Nepal government has ratified.

However, the signing of Comprehensive Peace Agreement (CPA) between the Seven Party Alliance (SPA) and the CPN-M in November 2006 and Agreement on Monitoring and Management of Arms and Armies signed in December 2006 gave thousands of child soldiers hope for their future. These agreements prohibit both parties from recruiting or using persons under age of 18.24 It also includes provisions which commit the parties to reintegrate children associated with armed groups into their families. Thus, this was the first time that issue of child soldiers had been addressed within the peace process. Despite this, both sides have yet to make any formal arrangement for the removal of child soldiers from their respective ranks.25 Moreover, there are reports that many children are now volunteering to join the Maoists, since they believe that they will receive compensation of Rs 7,000–10,000 and even job training when Maoist forces are integrated into the national army.26 Thus, the number of child soldiers would increase if adequate steps are not taken by the conflicting parties at the earliest.

Against this background, it is important to know the patter of recruitment of children by the armed groups in South Asia.

Modus Operandi Generally the pattern of recruitment by the rebel groups in South Asia includes mandatory contribution, i.e., demand that “one family one child” from every district under its control. The armed groups also threaten parents into remaining silent and not report to the police/security forces about the mandatory contribution of their children. Moreover, if the families fail to contribute their quota they face severe punishment or abduction. Generally, children are abducted from homes, schools, temples, and at weddings. Unfortunately, internally displaced persons and refugees are most vulnerable to abduction, as most of the population consists of hungry, frustrated young people who may be ideologically motivated to fight against the forces that brought them there.27 This is a common tactic adopted by LTTE, Karuna faction and Maoists.

Unfortunately, schools are the main targets for the rebel groups to recruit children.

They not only militarise schools but also use playgrounds for military training.

Children's playgrounds and parks are decorated with mock weapons and designed in such a way as to give children feeling of being in a battleground. In this regard, the LTTE has been quite successful; the LTTE delivers speeches about the brutality of the Sinhalese army to inspire children to join the struggle and become heroes. The LTTE

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has also incorporated their version of history in school curricula, showcasing the glamour and prestige of a career in the LTTE's military ranks followed by compulsory tests. In the process, teachers are forced to comply with armed groups’ directives or forced out of the classroom during recruitment sessions. For example, the Maoists not only recruit children, they also abduct students and teachers from schools for both political and military training. According to a local NGO estimates, a total of 29,244 children along with their teachers have been “abducted” by CPN-M in the 10 years of conflict for ”political education”.28 The rebels also display cutouts and posters of dead cadres all over, distribute cassettes of patriotic songs, dance and theatrical performance, organise photo exhibitions on atrocities committed by the government security forces.

In addition, they conduct door-to-door campaigns to motivate people and even organise cultural programmes in villages to encourage children to join. The screening of films, commemoration of events such as “hero's day” (by LTTE) are other ways of inspiring youth for recruitment. Apart from this, the rebels confer special status on families of child soldiers like the LTTE confers “Great Hero Families” for contributing child soldiers.29 Subsequently, these families are exempted from paying tax and have access to services like security when war breaks out. Interestingly, a financial package is offered for the child soldier and their families. For example, the Karuna group provides monthly allowances to some of the children recruited upon completion of military training. The monthly allowance ranges from SL. Rs 6,000–12,000.30 In Bangladesh, the Hizbul Tawhid, a militant outfit, allegedly recruits children by giving financial incentives and in some cases it also gives them costly mobile phones.31 Thus, there are different pattern of recruiting children adopted by rebels groups in South Asia.

The Stumbling Blocks Preventing child soldiering in South Asia has become a major challenge for the state as well as for the international community, since the efforts to prevent child soldiering is confronted with many stumbling blocks such as: Denial of Truth The armed groups in South Asia have maintained double standards, which have been exposed from time to time by various national and international agencies. At first instance, the leaders of rebel groups deny presence of any child soldiers, but under pressure, they state that few child soldiers exist in their organisation and often pledge to release them as soon as possible. For instance, in an interview to BBC, Maoist leader Prachanda stated that “we have never taken the policy to recruit children into our army, but our military feed some children whose parents were martyred [...] we also do not train children below 16 years”.32 He blames monarchy for exaggeration about the ongoing recruitment of children by its ranks. Col. Karuna is one step ahead in denying the presence/recruitment of children in his ranks; he told the Human Rights Watch (HRW) that “I do not like these things, I don't like child recruitment and abduction and the minimum age to join the group is 20 and group would take action against commander involved in recruitment of persons below 18”.33 Ironically,

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the average age of recruitment in Karuna group is 16 years and there is ample evidence of abduction and mandatory contribution carried out his group.

Apart from rebel leaders denying the presence of child soldiers, they often state that they do not have full control over the ill-disciplined junior commanders of their ranks who are involved in recruitment process. Thus, the groups continue to deny the truth, despite facts pointing differently. Hence, the need of the hour is that rebel leaders should acknowledge the presence and recruitment of children in their outfits and work towards betterment of these children.

Lack of Commitment and Implementation Although from time to time the armed groups have expressed their willingness to abide by the four Geneva Conventions (1949), two Additional Protocols (1977) agreements signed with the UN agencies and government, they have failed to translate their words and agreements into action. For instance, despite the Comprehensive Peace Agreement, the Maoists have failed to release children from its ranks; rather they are steadily recruiting children even after the king was stripped of power and serious peace negotiations began. The LTTE is no different, its handing over of around 32 children from its ranks to Educational Skills Development Centre is nothing when compared to its recruitment rate during December 2006 to August 2007. The rebel groups from time to time have released children from their ranks, as a result of international pressure. However in the process they have also have re-recruited those released, for example from November 2006 to August 2007,34 the Karuna group released 23 children from its ranks, simultaneously more than 10 were re-recruited.35 Similar is the case of LTTE. Thus, rebel groups have showed little progress in their commitment towards preventing child soldiering and implementing successive agreements signed with the UN agencies and government.

Role of the Government Although the governments have undertaken necessary steps towards preventing child soldiering, they have not been successful to certain extent in implementing those steps. For example, the Nepal government has not been able to implement the CPA dealing with child soldiers effectively, as still its lacks the capacity to provide assistance and protection for released child soldiers to be reintegrated into civilian life. It also lacks juvenile justice system, thus children are treated as poorly as detained adults and kept in same detention facilities. Subsequently, the government has failed to provide any assistance to children who escape the Maoists. As a result, many children considering escaping the Maoists were effectively discouraged by fear that they would be abused by security forces and also used for counterinsurgency operations against the Maoists.36 The GoSL has established a multidisciplinary task force on children and armed conflict in April 2007. The task force focuses on harmonisation of national legislation with international laws, promotion of education, birth registration, protection and rehabilitation and reintegration for former child soldiers.37 However, so far not much progress has been made, indicating the lukewarm steps undertaken by GOSL towards

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child soldiers. Ironically, throughout 2006 the Karuna group abducted and forcibly recruited at least 200 children in the eastern district which is under the government control. Unfortunately, these abductions have taken place despite the presence of 14 military and police checkpoints and security force camps.38 Thus, transporting hundreds of children to the Karuna camps seems impossible without the complicity of those in the security forces. This issue was also raised with the GoSL by Allan Rock, the special advisor to the UN special representative for children and armed conflict. In this regard, the GoSL, in August 2007, established an interdisciplinary committee to conduct an investigation. However, so far nothing much has come out. Also, there have not been any efforts by the security forces to secure the release of children abducted, recruited and used by Karuna faction despite clear knowledge. Thus, the government has from time to time shown a low level of political accountability with regard to preventing child soldiering.

International Humanitarian Law (IHL) All the South Asian countries have signed/ratified several international instruments related to International Humanitarian Law (IHL) and Human Rights Law. They are also party to the Convention on the Rights of the Child (CRC) 1989.39 However, most of the States have not made much progress in terms of implementation and enforcement of IHL in both letter and spirit. In this regard, Nepal is no different and is far behind the other South Asian countries. For instance, it is still in the process of incorporating international treaties into domestic law. The process of depositing a binding declaration by the government of Nepal to the Optional Protocol to the CRC (2000) is yet to be finalised. In particular, the government of Nepal needs to take more concrete efforts and action on the matter of criminalising the abduction, recruitment and use of children for military purposes. It needs to establish a rule of engagement specifically on children for the security forces since the onus for ensuring compliance and mitigating recruitment rests with state parties under the optional protocol of CRC. Sri Lanka has not only ratified the CRC but was the first country in South Asia to ratify the optional protocol to CRC. Moreover, Sri Lanka’s domestic law also prohibits either forcible or compulsory recruitment of children as a crime punishable up to 20 years of imprisonment. However, they have failed take any action against the LTTE and Karuna group despite strong evidence against them; this act clearly violates the international commitment made by GOSL to international community.

Only a permanent resolution to the ongoing conflicts/political turmoil can bring the exploitation of children in war conditions to an effective end. From the government side, there should be political accountability and will to implement the laws effectively to punish the guilty. The government should address the root cause of the problem by providing basic security to citizens against human rights abuses, crime and physical violence. In the process, they should focus on providing basic education, employment and lessen the uneven development gaps which will prevent children from joining armed groups. Moreover, the government should also assist and coordinate with the international community to develop effective prevention strategies to reduce the factors that make children vulnerable to voluntary recruitment. Subsequently, efforts

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are needed towards constructing effective programmes for the demobilisation and reintegration of former child soldiers. On the other hand, the rebels should release the remaining child soldiers as early possible and stop further recruitment of children.

Efforts should be made to implement the agreements signed with government and the UN agencies in both letter and spirit. At the same time, the UN Security Council should assert more diplomatic pressure, impose sanction and expand the jurisdiction of war crimes tribunals and labour laws. If these measures are not adopted then preventing child soldiering would remain a distant dream.

S.Y. Surendra Kumar is lecturer at Department of Political Science, Bangalore University, India.

Endnotes 1. According to P.W. Singer, in World War I the civilians casualties were under 10 per cent, while in World War II the casualties increased to 50 per cent. However in modern day conflicts around 80 per cent of victims are women and children. Thus, the suffering of women and children in conflicts are on the rise.

2. Report of UN Secretary General on Children in Armed Conflict, 21 December 2007. http://www.un.org/apps/news/story.asp?NewsID=25450&Cr=children&Cr1=conflict 3. UNICEF, Press Release, 12 February 2008. www.unicef.org 4. Recruitment covers any means, formal or de facto, by which a person becomes a member of the armed forces. It includes conscription, forced recruitment and voluntary enlistment.

5. Since August 2005, there are reports of Taliban recruiting children as insurgents and possible suicide bombers. It is estimated that the Taliban might have recruited around 8000 children to fight the US-led forces in Afghanistan. UN office for coordination of Humanitarian Affairs, “Afghanistan: Eight Thousand children under Arms look for a future.” www.irinews.org/webspecial/childsoliders/afghanistan031203.asp#top.

6. Lisa Hughes, “Can International Law Protect Child Soldiers”, Peace Review 12, No.3 (2000): 399-405.

7. Michael Wessells, “How We Can Prevent Child Soldiering”, Peace Review 12, No.3 (2000): .410.

8. Hene Cohm and Guy S. Goodwin-gill, Child Soldiers: The Role of Children in Armed Conflict, (Oxford: Clarendon press, 1994), 30-35.

9. Asian Centre for Human Rights, “The Adivasis of Chhattisgarh: Victims of Naxalite Movement and Salwa Judum Campaign”, March 2006.

10. Meha Dixit, “India's Forgotten Children Of War,” 5 December, 2000. http://www.countercurrents.org/dixit051207.htm 11. Child Soldiers Global Report on Pakistan, 2004. www.child-soliders.org 12. International Crisis Group, “Pakistan: Madrasas, Extremism and Military”, Asia Report, No. 36, 29 July 2002. www.crisisweb.org.

13. Charu Lata Hogg, “Child Recruitment in South Asian Conflicts: A Comparative Analysis of Sri Lanka, Nepal and Bangladesh” (Chatham House: 2006), 25. Child Soldiers Global Report on Bangladesh, 2004. www.child-soliders.org 14. The Karuna group broke away from the LTTE on April 2004 and launched TMVP in October 2004.

15. S. Y. Surendra Kumar, “Child Soldiers in Sri Lanka”, Indian Defence Review 18, No.3, (JulySeptember 2003): 31-38.

16. Report of Secretary-General on Children and Armed Conflict in Sri Lanka, 21 December 2007, 7.

17. Ibid., 3.

18. Ibid., 16.

19. Ibid., 15.

20. Ibid., 8.

21. “Karuna and Child Soldiers: Poachers offering to be Gamekeepers”, The Island, 9 December 2006, Editorial Commentary; and “Child abductions: Who Cares”, The Island, 21 December

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2006, Editorial Commentary.

22. Report of Secretary-General on Children and Armed Conflict in Sri Lanka, 21 December 2007, 17.

23. Human Rights Watch, Children in the Ranks: The Maoists Use of Child Soldiers in Nepal, Vol.19, No.2 (c), February 2007. www.hrw.org/reports/nepal0207.html 24. Report of UN Secretary General on Children in Armed Conflict, 17.

25. Sukanya Podder, “Rehabilitating Child Soldiers in Nepal”, 3 February 2007, http://www.idsa.in/publications/stratcomments/SukanyaPodder030207.htm 26. Human Rights Watch Report on Nepal, 23.

27. Lisa Hughes, 399-405 and also Lisa Alfredson,” Child Soldiers, Displacement and Human Security”, www.ochaonline.un.org.

28. Press Release by Child Workers in Nepal Concerned Centre. cwin.org.np /press_room /factsheet/fact_cic.html 29. Charu Lata Hogg, 9.

30. Report of Secretary-General on Sri Lanka, 9.

31. “ Outlawed Parties Recruiting Slum Boys”, Daily Star, 24 July 2005.

32. Charles Haviland, “Prachanda Interview: Full Transcript”, BBC News online, 13 February 2006. www.news.bbc.co.uk/2/hi/south_asia/4707482,html.

33. Human Rights Watch, Complicit in Crime: State Collusion in Abduction and Child Recruitment by the Karuna Group, Vol.19, No.1, (C), January 2007. www.hrw.org/reports/2007/srilanka0107 34. Report of Secretary-General on Sri Lanka, 7.

35. After the Karuna group separated from LTTE, they released around 2,000 children without assistance of formal demobilisation process. However after a couple of months, they began to recruit and re-recruit children. Report of Secretary-General on Sri Lanka, 8. “Sri Lanka: Recruitment of Child Combatants Remains a Threat”, Refugee International Bulletin, October 2005.

36. Human Rights Watch Report on Nepal.

37. Report of Secretary-General on Sri Lanka, 17.

38. Human Rights Watch report on Karuna Group.

39. All South Asian countries are party to the CRC, but Pakistan, Nepal , Bhutan and Maldives have signed the optional protocol of CRC, but are yet to ratify it. V.S. Mani, ed., Handbook of international Humanitarian Law (New Delhi: Oxford, 2007), 233-243.

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Book Review Reviewed by Yoginder Sikand Name of the Book: Behenji—A Political Biography of Mayawati Author: Ajoy Bose Publisher: Penguin Viking, New Delhi Year: 2008 Pages: 277 ISBN: 978-0670082018 Price: Indian Rupees 499

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orming almost a fifth of India's vast population, the Scheduled Castes, formerly referred to as “Untouchables” and now increasingly so as Dalits or “Oppressed”, are placed at the bottom of the Hindu caste hierarchy. They are victims of the most brutal system of social discrimination ever devised by humankind—the caste system, or, as it is referred to in Sanskrit in the various Hindu scriptures, the varna vyavastha—which is provided with religious sanction by the Hindu religion. According to various Hindu scriptures, starting from the earliest extant text, the Rig Veda, humankind is divided into four groups. The Brahmins, the priestly caste, are said to be descended from the head of Manu, the first man. The Kshatriyas, or the warrior caste, are described as emanating from Manu's shoulders.

From Manu's thighs supposedly came the Vaishyas, or the trading caste. The Shudras, the servile castes, so it is said, came out from Manu's feet, suggesting their putative “low” origins. The Dalits are treated in the Hindu scriptures so degradingly that they are not even considered to have any association with the primal man Manu. Ranked even below the Shudras in the Hindu texts, they are considered, for all practical purposes, to be outside the pale of the caste system, and hence are branded and treated as “outcastes”.

The Dalit population in India could possibly be in the range of two hundred million, and is divided into literally hundreds of small caste groups, who are ranked among themselves—as also within the broader Indian society—on strictly hierarchical lines, which continues to be a major hurdle in promoting cross-caste Dalit unity. The vast majority of India's Dalits remain desperately poor and suffer from various forms of discrimination and oppression at the hands of the “upper” caste Hindu majority, as did their ancestors for literally several thousand years, ever since the indigenous people of India, the forefathers of today's Dalits, were enslaved by the invading fairskinned Aryans, whom the “upper” caste Hindus claim to be descended from.

However, even though the plight of most of India's Dalits continues, things are beginning to change, as this remarkable book indicates. The book is a detailed

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political biography of Mayawati, known to her supporters as “Behenji”—Sister—a Dalit woman who has risen from the ranks of the poor to become the chief minister of India's most populous state, Uttar Pradesh. It tells the story of the valiant struggle of this woman who, faced with deeply entrenched caste discrimination and hatred, has managed to do something that was hitherto considered quite inconceivable in India: defy the wrath and opposition of “upper” caste Hindus, mobilise a strong vote-bank for her party, and become chief minister of a state that is considered to be the bastion of the Hindu right and various Brahminical revivalist movements. And, as Bose opines, so powerful is she now that “It is perhaps just a matter of time before she does become the prime minister of this country” (p 264).

This is an intricately researched and pioneering book; there is no other full-length biography of Mayawati available in English. The author, a seasoned Indian journalist who has interviewed Mayawati on several occasions and has already written extensively on her Bahujan Samaj Party, brings together a welter of details from a wide range of sources—including Mayawati herself, her supporters and numerous detractors—to paint a picture of a maverick and populist leader who has become a major landmark in Indian politics and in the history of the Dalits.

Providing the backdrop to his description of the rise of Mayawati to the centre stage of Indian politics, Bose describes the origins and development of her party, founded by her mentor, the charismatic Kanshi Ram, a Punjabi Dalit convert to Sikhism. Bose links this to the rise of a new generation of educated Dalits, a small number of whom were able to gain access to government jobs owing to reservations in such posts for Dalits. These people were naturally no longer willing to take “upper” caste brutality lying down. Nor could they reconcile themselves to the despicable status of being less than human that Hindu society had consigned them to for centuries. Along with education and economic mobility among a tiny section of the Dalits came political awareness, drawn mainly from the legacy of Babasaheb Bhimrao Ambedkar, the Dalit hero who vehemently opposed M.K. Gandhi and the Indian National Congress in pre1947 India, whom he castigated as enemies of the Dalits and upholders of Brahminism and “upper” caste Hindu hegemony. Ambedkar sought to unite and empower the Dalits by promoting a distinct Dalit identity and political voice. This strong sense of Dalit identity was geared to promoting self-respect among Dalits, who had been taught by the Hindu religion to hate themselves. As a result, there was a spate of religious conversions among Dalits—in search of liberation and selfrespect—to such theoretically egalitarian religions as Christianity, Sikhism, Islam and, particularly, Buddhism; the last mentioned of which was chosen by Ambedkar himself, along with literally hundreds of thousands of his followers.

It was in this context that, in the mid-1970s, Kanshi Ram—then a middle-rank government servant—began a powerful Dalit government employees' federation which, later taking various other forms, finally emerged as the Bahujan Samaj Party, of which Mayawati is today the chief. Bose describes the emergence and development of the “Bahujan” ideology in considerable detail. According to Kanshi Ram, the true majority or “Bahujan” in India were not the Hindus, for the Hindus are not a single,

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monolithic community. This facile notion of the “Hindu majority”, he argued, was a crafty means to legitimise the deep-rooted economic, social, political, cultural and intellectual hegemony of the “upper” caste minority, who comprised not more than a mere 15 percent of the Indian population. The real majority community or “Bahujan Samaj” in India, Kanshi Ram declared, echoing Ambedkar before him, were the oppressed castes, or all those who were not counted among the “upper” castes. These, taken together, form some 85 percent of the country's population. They include the Dalits, Adivasis or Scheduled Tribes, the Backward Castes (a major section of the socalled Shudra castes), as well as most Muslims, Christians, Sikhs and Buddhists, whose forefathers were from various oppressed castes and had converted in search of liberation from the caste system and Hindu oppression. Since these communities, most of whom continued to suffer various forms of oppression and discrimination at the hands of the “upper” caste Hindu minority, formed the “majority community” in India; Kanshi Ram believed that they deserved to rule the country. Political power, then, was the key to the liberation of the “Bahujan Samaj” and for this they needed their own political party. No longer could they be treated as mere vote-banks of “upper” caste Hindu dominated parties like the Congress and the Bharatiya Janata Party, who relied on their votes but worked to reinforce caste Hindu hegemony and “Bahujan” marginalisation. That, in essence, was the basis of the ideology of the Bahujan Samaj Party, Bose writes. If the “Bahujan Samaj” were to capture political power, Kanshi Ram believed, they would finally be able to take on and overthrow “upper” caste Hindu hegemony in all other spheres as well.

After laying out the ideology and development of the Bahujan Samaj Party under Kanshi Ram, Bose discusses in detail the rise of Mayawati within the ranks of the party. The daughter of a low-paid government servant of the Chamar or leatherworking Dalit caste from western Uttar Pradesh who lived in a New Delhi slum, Mayawati's rags to riches story is literally astounding. From a young age she was, Bose says, fired by a passionate hatred for caste oppression and an irrepressible zeal to work for her own oppressed people. Coming under the influence of Kanshi Ram, she gave up her job as a government school teacher and her aspirations of joining the Indian Administrative Services and then plunged into politics, playing a key role in the growth of the Bahujan Samaj Party, first in Uttar Pradesh and then elsewhere in India. This, Bose says, entailed great personal sacrifice, for she was literally thrown out of her home by her father. She was forced, for want of any alternative, to live with Kanshi Ram, who remained a life-long bachelor, leading to much gossip and speculation.

The bulk of the book is devoted to Mayawati's political career, her alliances with various political parties and her eventual rifts with them, leading to her becoming chief minister of Uttar Pradesh on four occasions, a position that she continues to occupy today. This is a story which Bose tells with considerable finesse, a story of much intrigue and betrayal of ideological principles, although this is not quite what Bose reads it as. Thus, under Mayawati, the Bahujan Samaj Party established political alliances with the Bharatiya Janata Party (BJP), the political front of caste Hindu

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fascism, which, like the Congress, was castigated early in his career by Kanshi Ram as representing the Manuvadi or “upper” caste Brahminical establishment and as being viscerally opposed to the Dalits. Likewise, Mayawati, as Bose explains, considerably watered down the original “Bahujan” political agenda of her party, joining hands with “upper” caste Hindu political forces to combat the Backward Castes and political formations that they championed. Furthermore, she did not hesitate to renege on her commitment to her Muslim constituency on numerous occasions, such as by campaigning for Narendra Modi of the BJP, architect of the brutal genocide of Muslims in Gujarat in 2002 just days after the state-sponsored massacre that caused the deaths of over 2000 Muslims. She did precious little to reign in Hindutva forces in her state bent on attacking Muslims, and has hardly done anything to address the overall pathetic economic and educational conditions and the sense of insecurity among Muslims in her state.

A tragic result of the many compromises made by Mayawati in order to come to power and retain it at any cost has been the recent total abandonment of the “Bahujan” ideology of her party. She now declares that she represents not the “Bahujan”, as conceived by Kanshi Ram, but rather, what she calls the “Sarvajan” (all people), including the “upper” castes, to challenge whose hegemony the Bahujan Samaj Party was initially formed. Accordingly, she has made generous overtures to the “upper” castes, particularly the Brahmins and the Banias, and has even opened the party to them, offering several people from these communities party tickets to contest elections on. Several of her senior advisors are also now from the “upper” castes, and she has been consistently wooing “upper” caste industrialists. Alongside this, Bose says, has been a steady decline in her support base among the Backward Castes and Muslims, who, although once considered part of the Bahujan Samaj, found that her party had little to offer them in practical terms. This tragic dilution of the ideology and original political agenda of the Bahujan Samaj Party under Mayawati party has gone hand-in-hand with mounting charges against her. Bose tells us that Mayawati has been alleged to be involved in several scams and has been accused of large-scale corruption and misuse of power, so much so that, coming from an impoverished Dalit family, she is now ranked among the richest women in the country today.

Bose rightly remarks that Mayawati and her party have done little, if at all, for ameliorating the pathetic economic conditions of their core constituency—the various Dalit castes, despite claiming to be their champions. Indeed, with her authoritarian style of functioning, the absence of democratic functioning within the party, the dilution of the “Bahujan” ideology and the opening up of the party to the “upper” castes, there is even less possibility of this happening. Nor has the party engaged in any mass struggles addressing the burning economic problems of the Dalit masses. In place of this, Bose notes, Mayawati continues to engage in the politics of symbolism, such as building gigantic parks, museums and other structures to commemorate various Dalit heroes, including—not surprisingly—herself. Bose appears to imagine that this politics of symbolism serves to boost Dalit confidence and a sense of empowerment, although this argument is clearly debatable. Contrary to what Bose

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seems to argue, it is not likely that Mayawati's populist politics that are bereft of an economic agenda that is geared to addressing the growing enormity of Dalit impoverishment can be sustained for too long, particularly after Mayawati's departure from the scene. Likewise, Bose's apparent appreciation of Mayawati's ideological shifts—in effect the complete watering down of the “Bahujan” ideology and her opening the party to the very real threat of being co-opted by the “upper” castes—is also misplaced. Bose contends that this opens up the possibility of Dalits emerging, in effect, as king-makers, forcing other castes and various “upper” caste-led political parties to be dependent on them in order to come to power. He even suggests that in this way, Mayawati might herself be able to become India's prime minister. That argument is greatly debatable; one might argue that Mayawati's ideological and political manoeuvrings might actually result in quite the opposite situation—the cooptation of the party by the “upper” castes, in line with the time-tested Brahminical strategy of quashing opposition and dissent by subtle absorption. That this is precisely what is happening is evident from the fact that today there is little to distinguish the Bahujan Samaj Party from the Congress or the BJP in terms of its economic policies and agenda.

For an account of the remarkable rise of a Dalit woman from a humble family to the centre-stage of Indian politics, this book excels. It presents one major aspect of the story of the struggle for empowerment of what is undoubtedly historically one of the most oppressed communities not just in India but in the entire history of humankind.

At the same time, the book has its limitations. There is no discussion of the Bahujan Samaj Party's economic vision and policies. Nor does the book tell the reader much about how Dalits and other communities considered part of the “Bahujan Samaj” have actually fared under Mayawati's dispensation, and the reader is left wondering as to what Mayawati's rule has actually meant for these marginalised communities, with whose votes it has come to power. Overall, however, this book well serves its purpose as a political biography of Mayawati and is indispensable reading for all those interested in contemporary Indian politics and Dalit issues.

Yoginder Sikand is a freelance writer based in Bangalore working mostly on Indian Muslim issues.

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Freedom and Safety of Media in Conflict Situations Conference Declaration at SAARC Journalists Summit, Colombo, Sri Lanka July 30–August 1 2008

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e, the participants at SAARC Journalists Summit-IV on 'Freedom of media in conflict situations' in Colombo, Sri Lanka, on July 30–31, and August 1, 2008, have agreed to adopt the following Colombo Declaration on Freedom and Safety of Journalists: Deeply concerned by attacks on the freedom of media and media persons including murder, deliberate attacks, abductions, hostage-taking, harassment, intimidation, illegal arrest and detention and incitement to violence against them due to their professional activities in the conflict zones and beyond in the South Asian region; Believing that media freedom is inseparable from the fundamental human and civil rights guaranteed by the constitution and enforceable through independent judiciary in a democratic system where both the state and society respect freedoms, show tolerance to dissent and practice pluralism; Recalling Article 19 of the Universal Declaration of Human Rights that guarantees freedom of expression as a fundamental right, and confirming that freedom of expression is essential to the realization of other rights set forth in international human rights instruments, and endorsing Resolution 29 entitled “Condemnation of violence against journalists”, adopted by the General Conference of UNESCO on 12 November 1997 that calls on Member States to uphold their obligations to prevent, investigate and punish crimes against journalists, Endorsing the adoption by the Security Council of the United Nations of Resolution 1738 on 23 December 2006 calling on all parties to an armed conflict to fulfill their obligations towards journalists under international law, including the need to prevent impunity for crimes against them and further requesting the Secretary-General to include as a sub-item in his next reports the issue of the safety and security of media professionals and organisations; Taking note of hitches and obstacles to transition to full democracy in the countries of the region, such as Bangladesh, the Maldives and Pakistan; Disturbed over the deteriorating security situation in Afghanistan and the tribal belt of Pakistan and urging the concerned authorities and security agencies to take appropriate measures against extremism, terrorism and intolerance, avoiding,

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however, collateral damage to people in general and journalists in particular; Concerned about the increasing tide of intolerance by state and non-state violent elements against free expression among the member countries of SAARC; Worried over the conflict situation in Sri Lanka that has seen the most severe condition of human rights violations in the country, just as in the 1980s, the mass media now suffers from the regular assassination, assault and intimidation of media personnel and proprietors while media enterprises have been forced to shut down by means of state-originated restrictions on holding companies or outright bans. While up to fifteen journalists have been assassinated in the past two years, most of them in state-controlled parts of the country, several others have had to seek refuge outside the country. The seeming impunity with which either State-related agencies or politicians and pro-government groups have perpetrated human rights violations draws attention to the increasing collapse of law and order and public security; Welcoming the extension of the last SAARC Summit's theme of Connectivity to “Partnership for the people of SAARC� for the 15th SAARC Summit as a leap forward if translated into concrete measures to relax visa regimes and multiple restrictions on free flow of information and goods and unhindered movement of people across our borders; Call on Member States of SAARC: To take both short and long term comprehensive measures to eradicate extremism and violent practices by both state and non-state actors or any other entities against civilians and journalists in particular; To investigate all acts of violence and intimidation against media professionals in their territory and bring such persons/outfits who have allegedly committed such crimes to justice while compensating for the losses incurred by the victims; To promote awareness and train their armed forces, intelligence and law enforcing agencies to respect and promote the safety of journalists in situations of risk, and to ensure that journalists are able to work in full security and independence in their territory; To recommend to multilateral and bilateral institutions of international cooperation and financial assistance that they require from recipient countries as a specific condition of eligibility respect for freedom of expression and effective protection of the exercise of press freedom, also to recommend to these institutions that a state's failure to comply with its obligation to investigate and punish killers of journalists could be cause for revision, suspension or revocation of such cooperation; To sign and ratify the Additional Protocols I and II to the Geneva Conventions, the Rome Statute of the International Criminal Court and other relevant international instruments of international humanitarian law and international human rights law, and to take the appropriate legislative, judicial and administrative measures to ensure

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application of the aforementioned instruments nationally, in so far as they provide protection for civilians, in particular those working in journalism; To comply with the commitments of UNESCO Resolution 29 to promote legislation with the intention of investigating and prosecuting the killers of journalists and to combat impunity; To adopt SAFMA's Protocol on Freedom of Information and implement SAFMA's Protocol on Free flow of information and movement of journalists across our borders.

Call on the Sri Lankan government: To swiftly complete the investigations into a number of killings and abductions of journalists that have yet to be resolved if it is to retain credibility of its commitment to stability, public security and democracy; remove all restrictions and stop intimidation of media persons and media outlets.

Call on SAARC and Professional Associations: To struggle at all levels in stemming and eradicating the tide of intolerance and violence against one section of the people or the other, journalists in particular; To take resolute action against all expressions of intolerance towards freedom of expression and for the safety of journalists in situations of risk and to ensure respect for their professional independence; To sensitize news organizations, editors and managers about the dangers surrounding their staff when covering hazardous stories, particularly the dangers present to local journalists; To urge news associations to develop and sustain safety provisions that work regardless of whether their staff are covering domestic stories such as crime and corruption, disasters and demonstrations or health issues or international armed conflict; To promote actions that secure the safety of journalists, including, but not limited to, safety training for journalists, safety codes, healthcare and life insurance, and equal access to social protection for free-lance employees and full-time staff; To coordinate widespread publicity campaigns on unpunished crimes against journalists and other acts of violence to bring about news coverage of all violations of press freedom; To encourage journalism schools and mass communication departments to include in their curricula studies on the impact that crimes against journalists – and subsequent impunity – have on democratic societies. In addition to promote the inclusion in the curricula of subjects or specific courses on press freedom and to coordinate activities,

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including safety training, among press freedom associations, news media and journalism schools; To further encourage collaboration amongst journalists, media owners, educators, press freedom groups and appropriate development agencies, at national and global level, to ensure the inclusion of media development activities in social and economic development programmes; To act in favour of measures to better ensure application of the rules and principles of a humanitarian nature safeguarding journalists, media professionals and associated personnel in situations of armed conflict, and to promote the security of the persons concerned; To work against the emergence of new threats to journalists and media staff, including hostage-taking and kidnapping; To require that data be submitted to the SAARC Conference in a report on crimes against journalists and the number of cases that continue with impunity; To sensitize governments regarding the importance of freedom of expression and threat that impunity for crimes against media professionals represents to this freedom; To recall to member states their legal and moral obligations to comply with UN Resolution 29 and prevent crimes against journalists.

To take concrete remedial measures and remove all hindrances to connectivity, people's partnerships, people to people contact and free movement of information, goods and people across all our borders.

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South Asian Women in Media (SAWM) First South Asian all-women media association South Asian Women in Media (SAWM) is an association formed through the cooperation of women media practitioners in South Asia. SAWM is committed to working against discrimination, harassment and inequalities faced by women media-persons at the work place. The association also aims to promote balanced portrayal of women and create awareness of women-related issues through the media. With chapters across the eight SAARC countries, SAWM includes women working in the print, electronic and visual media. Its core working group and founders are: Shehar Bano Khan, Munizae Jahangir, Zebunnisa Burki and Bushra Sultana. For membership information, please contact us at: sawm.sa@gmail.com Memorandum of Association 1 Introduction The status of women in the countries of South Asia—under archaic conventions, feudal traditions, chauvinist ideologies, patriarchal family and authoritarian traditions and structures—needs to be uplifted. Women journalists face discrimination on the basis of their gender, and share common concerns with other women that can be resolved by working together towards gender equality and women's emancipation. The media have a great potential to promote gender equality by portraying women and men in a non-stereotypical, humane and balanced manner.

Unless women are given an equal chance and opportunity to effectively participate in the decision-making areas of communications and the mass media, including the management, they will continue to be misrepresented, marginalised and exploited.

We, women media professionals in South Asia, note that the Universal Declaration of Human Rights (UDHR) proclaims that all human beings are born free and equal in dignity and rights and that everyone is entitled to all civil, human and fundamental rights and freedoms without any distinction on the basis of gender, faith, colour, ethnicity or class. Yet they remain powerless and helpless. Our rights and freedoms can be acquired only through an organised struggle. We, therefore, propose to set up an association of women media practitioners called South Asian Women in Media (hereafter referred to as SAWM).

SAWM will highlight women's issues and perspectives and act as a platform where women media persons can identify and find solutions to their problems. While advocating for enhancing the rights of women, the association will focus on realising

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the rights of women media practitioners. The association aims to help media women network amongst each other and with international women's rights organisations to assert their rights and defend their interests. SAWM will also play an active role in networking, campaigning, advocating and lobbying for awareness and resolution of issues faced by women media practitioners. As the first all-women media association in the region, the association will advocate for increased participation of women in the media, equal wages, a gender sensitive environment and promotion of women related issues and a feminist outlook in the media.

The association is committed to fight gender-based violence and promote women's rights in the countries of South Asia. It is also committed to promoting the independence of the media and will campaign for greater media freedom in the region. South Asia is passing through a crucial period where journalists face many dangers and risks while performing their duties. In this volatile atmosphere, women journalists, along with their male counterparts are susceptible to danger in the absence of safety measures which should be made available to them by the owners of their media outlets. SAWM intends to devise a safety package, making it mandatory for media employers to uphold. SAWM will also serve as a venue where women media persons all across the region can interact and openly discuss the resolution of their peculiar problems.

2. Guiding Principles l l

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The ideals of freedom, democracy and equality; The commitment to the right to know and freedom of expression, recognised by the UN as being a “fundamental human right and the touchstone of all freedoms�, Article 19 of the International Covenant on Civil and Political Rights, and a basis for an informed and authentic civil society and a pluralist democracy; The right to know and freedom of expression, and access to and free flow of information ensure information for empowerment on the basis of inclusion; The freedom of the media are vital for the promotion of human rights, human security, human governance, participatory development, empowerment of the people and the hegemony of civil society through its freely expressed will, regardless of any distinction on the basis of belief, gender, social status, place of origin or residence; The international conventions concluded under the auspices of the United Nations and its specialised agencies promoting equality of rights of men and women; The concern that, despite various international legal instruments for the protection of women from discrimination, extensive discrimination against women continues to exist; The goals set forth in the Convention on the Elimination of Discrimination against Women (CEDAW); Recognition of the feminisation of poverty;

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Acknowledgment of the effects of armed or other kinds of conflict on women, including those living under foreign occupation; The media are a useful medium in promoting a positive and humane image of women and men; The media are playing an important role in politics and society and there is a growing number of women involved in media-related careers; Despite greater numbers of women joining the workforce, the media sphere have not seen women participating fully in decision making processes at work; The role of women in procreation should not be a basis for discrimination but that the upbringing of children requires a sharing of responsibility between men and women and society as a whole; There is a constant negative and stereotypical portrayal of women in different forms of media and the increase in exploitation of women as sexual objects; The lack of specific research on media portrayal as one of the most critical barriers to realistic analysis; The need to involve women in the development and dissemination of new information technologies.

3. Objectives 3.1. South Asian Women in Media aims to: l

serve as a platform for discussion on women related issues in the media;

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facilitate networking among women in the media, nationally as well as regional and international media organisations;

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sensitise media organisations and the public to women related issues;

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ensure adequate representation of women in various sectors of the media;

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develop guidelines for fair and accurate portrayal of women through the media;

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ensure equality of opportunity in media organisations;

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lobby for and introduce policies and clear guidelines for a gender-friendly working environment in all media organisations;

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work against discrimination on gender basis;

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keep up with global trends in journalism, including research and policies on gender sensitive reporting;

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devise a strategy whereby female journalists working in conflict areas will be provided adequate safety measures by their organisations.

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4. Goals 4.1. Engage women media-persons from Pakistan and South ASIA who believe in the freedom of media and agree to promote the objectives (mentioned above); 4.2. Establish broad-based chapters of SAWM across South Asia and develop networking among the various branches of media; 4.3. Plan and work for the mainstreaming of women working in the media; 4.4. Monitor the role played by the media in promoting a balanced portrayal of women, work towards sensitising the media to gender issues; 4.5. Lobby for equal wages for men and women in the media; 4.6. Develop and conduct research related to women and the media; 4.7. Initiate a blog for SAWM; 4.8. Train media professionals to better understand gender issues and gender sensitive reporting; 4.9. Solidarity with other women's rights and media organisations.

5. Organisational Principles 5.1 The name of the association will be: South Asian Women in Media (SAWM).

5.2. The logo:

SAWM

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5.3:

Membership: Any woman media professional (print, electronic and visual arts) who agrees with the objectives and goals of SAWM can become a member of the association by filling the Membership Form, subject to approval by the local committee.

5.4:

Delegate: Every member is entitled to become a delegate to the General Body of SAWM, participating in its activities, elect office bearers and freely express her opinion on all matters at various forums of the association.

5.5:

National Unit: There will be a National Unit in each country of South Asia with a National Executive consisting of all members or their elected delegates.

5.6:

The General Body: It will consist of all members in the National Unit that will set the direction and frame rules.

5.7:

The National Executive: The National Executive (NE) of each country chapter will consist of core/founding members of SAWM. It will report on all matters to the General Body and will pursue all objectives set by the Regional Conference of SAWM and set its own goals according to local conditions. The National Unit can form as many branches as are required.

It will meet whenever required or summoned at the request of five NE members. All decisions ought to be taken by consensus, but a majority decision will be binding on all members.

5.8: A Regional Conference: The Regional Conference of SAWM (RCWM) is the highest decision making body that will set the direction and make rules.

It will take all decisions with a broad-based consensus. The Central Secretariat will determine the ratio of delegates, whereas the National Unit (NU) will finalise the list of delegates from the respective countries. The Secretariat will scrutinise the list of delegates and suggest ways to the NU to rectify any imbalance in the composition of the delegation.

5.12: The Central Secretariat: This will be based in Lahore, where the initial core working group is based. All matters of the Central Secretariat will be decided by SAWM's core working group.

5.13. SAWM will have the moral and material backing of South Asian Free Media Association (SAFMA) and will send its delegates to SAFMA conferences.

The finances and accounts of SAWM South Asia shall be managed by Free Media Foundation (FMF), Lahore, Pakistan. SAWM will be completely independent in its policies and decision making, besides developing fraternal relations with other women and media organisations.

Appendix 1 The CEDAW Principles The Convention on the Elimination of all Forms of Discrimination against Women (CEDAW) is an international treaty signed by 185 States calls for substantive equality, non-discrimination and obligations of state. This is a comprehensive bill of rights for women and combines concerns that had been hitherto addressed in an adhoc manner through the United Nations system. The broad structure of the CEDAW Convention is as follows: Article 1 defines discrimination, Articles 2-4 outlines State obligations in eliminating discrimination, including sex roles and stereotyping and customary practices detrimental to women (Article 5), prostitution (Article 6), political and public life (Article 7), participation at the international level (Article 8), nationality (Article 9), education (Article 10), employment (Article

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11), health care and family planning (Article 12), economic and social benefits (Article 13), rural women (Article 14), equality before the law (Article 15), marriage and family relationship (Article 16). The CEDAW principles provide the framework for formulating strategies to advance the human rights of women and make the Articles meaningful.

* The core working group is based at the Central Secretariat and is formed by those members who conceived SAWM and worked towards building it into a regional association.

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