A few weeks ago I asked a Pakistani diplomat what was, among the multiple threats facing the country, the single biggest challenge?
It wasn’t al Qaeda or the Taliban, it wasn’t the United States as many Pakistanis believe. And it wasn’t even India, for long the existential threat the military and succeeding generations of politicians have invested blood and treasure to checkmate.
It was the economy which has virtually ground to a halt as the global recession erodes exports and investment, the diplomat said. Fix the power shortages, win investors back and get the economy moving, the tide of militancy could begin to be pushed back.
You could of course argue that the miitancy itself has sapped the economy and if it weren’t for the militants, Pakistan would have done far better . So tackle them first, and the economy would take care of itself. In the light of the attacks of last week and this, that certainly would seem to be an overiding immediate objective.
But the diplomat’s point was that the opportunities created by an expanding economy would, in the longer term, make it a bit less likely for young men to gravitate to a hate-filled career of violence in the name of religion.
The suicide bomber who struck in Shangla near the Swat valley on Monday was apparently in his early teens, one report put his age at 13. Was he from the impoverished masses that the Taliban have increasingly turned to, to carry out the attacks ?
Pakistani Foreign Minister Shah Mehmood Quereshi told National Public Radio that the Taliban had been “extracting out of poverty and the misery of people.” If the people were educated and enlightened they wouldn’t join them, he said. And it doesn’t stop at Waziristan or other parts of the northwest where the Taliban and al Qaeda are operating out of. It may well be also Punjab in the very heart of Pakistan; its poverty stricken, feudal dominated southern part with a large illiiterate population a huge pool to tap.
Yet another year is coming to an end and independent India's idea of being a republic is a year older. But is it any wiser?
On many counts, 2008 was both tumultuous and memorable for India, testing its men and the manner in which they confronted the challenges.
It was a year which saw the Manmohan Singh government face some of the toughest questions in its 4-year rule.
For that matter, some of the questions were directed at the people, the polity and the nation itself, which is still on edge after horrific images of a militant rampage on Mumbai made headlines around the world in late November.
It was a promising start to the year with the economy growing at well above 8 pct and the Sensex touching a staggering 21,000 points in late January.
Inflation was the only worry as global crude prices were near the 100-dollar mark.
For its part, the govt was confident about handling inflation and announced a 60,000-crore rupee debt relief package for farmers which became the highlight of the annual budget.
But global crude prices showed no signs of moderation and India's inflation too crossed the double digit mark.
What added to the govt's problems was pressure from its coalition allies. The Communist parties pulled out over India's historic civilian nuclear deal with the United States and the govt's survival was put to the ultimate test.
But parliamentary politics in India dipped to a new low when wads of cash were whipped out in the well of the house. Opposition MPs claimed money was used to buy support. The allegations did not stick and the Manmohan Singh govt survived the trust vote.
But the problems were mounting. The global subprime crisis took its toll and the stock markets started crashing as FIIs pulled out billions of dollars. The Sensex has lost more than 60 percent this year and is now hovering around the 10,000 mark, making it one of the worst performers in the Asian equity scene.
The economy too was no longer insulated and growth estimates for one of the world's fastest growing economies have been revised downwards. Multi-billion dollar stimulus packages have been announced and an aggressive rate-cut campaign has been initiated by the Reserve Bank of India. But economists and analysts say more needs to be done to salvage India as the rest of the world sets off on a road to recession.
Corporate India too had its share of highs and lows. While Tata wowed everyone with the Nano, the world's cheapest car, the company was forced to move its plant out of West Bengal thereby delaying the car's roll-out.
Investor confidence was on a razor's edge throughout the year. While India's top private lender ICICI's share price dipped more than 70 pct as concerns arose over the health of its books, IT major Satyam Computer Services faced some tough questions about corporate governance after a botched attempt to buy two of its sister firms for $1.6 billion.
Indian airlines struggled too amid soaring fuel costs and dwindling passenger numbers. Carriers like Jet Airways faced staff ire over efforts to downsize and survive.
More than anything else, it was the internal security situation that took a turn for the worse. Hundreds of lives were lost as a series of blasts shook various Indian cities.
If the bombs in Bangalore, Ahmedabad, New Delhi and Guwahati were blamed on Islamist militants, the needle of suspicion in the Malegaon blasts pointed to Hindu extremists. A serving officer of the Indian army is still being interrogated.
But all the violence seemed only a dress rehearsal for what turned out to be the most audacious terror strike in the history of independent India.
Armed assailants held India's financial capital hostage for nearly three days. 179 people were killed as many of Mumbai's iconic landmarks including the Chhatrapati Shivaji Terminus, Taj Mahal hotel and the Oberoi-Trident came under fire.
The lone surviving attacker said he came from Pakistan and New Delhi has put Islamabad on notice. A worried world is watching and urging restraint as reports emerge of heightened military activity along the border separating the two nuclear-armed neighbours.
The man on the street is anxious too. There's been a clarion call for civilian activism. They want accountability, not just hollow assurances from the political leadership.
Heads did roll. Union home minister Shivraj Patil was asked to go. The Maharashtra CM and home minister were sacked too.
But did it placate the common man? Amid all the tension, five Indian states went to polls and the results showed that development was a bigger election issue than terror. It was a lesson that the main opposition party BJP learnt the hard away.
Its "Congress is soft on terror" campaign failed to win public approval as it tried to mount an assault on the Congress-led coalition ahead of the 2009 general elections.
The biggest surprise of all was the assembly elections in Jammu and Kashmir which witnessed more than 50 per cent voter turnout.
The turnaround in public opinion comes less than six months after the state was up in arms over the Amarnath land row, some thing which led some commentators in New Delhi to even question the worthiness of holding on to Kashmir.
So, does this mean that what had started off a memorable year will turn out to be one best forgotten?
Well, if you look at the sporting arena, it's actually been a good year for India.
The Indian cricket team started off winning the tri-series in Australia. The success of the inaugural IPL 20/20 league reaffirmed India's pre-eminence as one of most powerful forces in the world of cricket. India capped its season with home series wins over both World champions Australia and England and many Indians now hope India can actually become no.1 in world cricket.
2008 was also a year that saw Saurav Ganguly leave in a blaze of glory while others like Sachin Tendulkar and Rahul Dravid did enough to let a demanding but adoring public know that they remain a force to reckon with.
New heroes like Gautam Gambhir and Ishant Sharma emerged, and there was success for other Indian sportsmen too.
Abhinav Bindra made the nation proud winning India's first individual Gold in shooting at the Beijing Olympics.
While boxers like Vijender Kumar packed a punch, Sushil Kumar grappled both inner fear and pressure to add a bronze from the wrestling mat and make it one of India's most memorable campaigns in the world's biggest sporting spectacle.
Jeev Milkha Singh winning the Asian Golf's Order of Merit and shuttler Saina Nehwal's meteoric rise in the badminton world brought India more cheer.
In the field of literature, India's Aravind Adiga won the Man Booker Prize for his novel ‘The White Tiger’, a dark tale about the son of a rickshaw puller who dreams of escaping poverty.
It was only the third time in the Booker's 40-year history that a debut novel won the award. But the win also raised the question whether only the darker side of contemporary India appealed to Western readers.
So, it has indeed been a rollercoaster year for the country.
But what about 2009? What's in store for India and Indians?
Do vote... not just on Reuters.co.in but also when India goes to polls next year. Have your say. It might be your and India's best chance to set things right.
Shaukat Tarin, economic adviser to the prime minister, said the IMF had endorsed Pakistan’s own strategy to bring about structural adjustments. The agreement is expected to encourage other potential donors, who are gathering in Abu Dhabi on Monday for a “Friends of Pakistan” conference.
The government had long delayed announcing its plans to turn to the IMF for help and President Asif Ali Zardari said in September the country did not want to seek IMF assistance. Tarin said in October that going to the IMF was “Plan C” if other lenders failed to come through. “If we want to go to the IMF, we can … but only as a backup,” he said.
The times are clearly changing and in the midst of a financial crisis that has swept away some of the world’s most august financial institutions, there is no shame in admitting a need for help.
For that matter, I can remember former IMF Managing Director Michel Camdessus declaring confidently at one of the annual IMF meetings I covered in Washington in the mid 1990s that Keynsianism was dead. I challenged him at the time over his certainty, but wish I could ask the same question now that western economies are spending their way out of trouble like there’s no tomorrow.
But what will it mean for Pakistan that its new government, less than a year after elections that ushered in a new civilian democracy, has had to eat its words and turn to the IMF for help?
Does it bring to Pakistan the silver lining that it offered India, which when forced to accept an IMF bailout in the early 1990s began a programme of economic reforms? As noted in an earlier post, India as a result began dismantling decades of licence raj and never really looked back.
And why did Pakistan’s closest allies, including the United States, Saudi Arabia and China, let it down by leaving it to turn to the IMF for help? As discussed in an earlier post, China, with $2 trillion in foreign exchange reserves, was in a strong position to step in to head off what could turn into a deeply unpopular move. Traditionally seen by Pakistan as its most reliable friend, China appears to have decided that an IMF programme was the best medicine.
A new beginning? Or another source of instability?
Pakistan has long seen China as its most reliable friend, in contrast to the United States, whose support has waxed and waned in line with U.S. strategic interests in the region. And China in turn has long been content to provide quiet support, avoiding the brashness of the United States while building a relationship with an ally that could be used as a counterweight to India. So there is nothing unusual about a Pakistani leader making China his first choice for a bilateral trip. (more…)
Pakistan’s economy has survived three wars with India and a long history of tension with its much bigger neighbour. But this time its own domestic economic and political problems, combined with tension on the border with Afghanistan, are running smack into a global financial crisis that will make it harder for its traditional allies to bail it out.
So is it time to break the taboos and ask: Does Pakistan’s best hope of economic recovery lie in making peace with India?
President Asif Ali Zardari certainly seemed to think so when he told the Wall Street Journal in an interview last weekend that India was no threat to Pakistan and said that “there is no other economic survival for nations like us. We have to trade with our neighbours first.”
India’s Business Standard says in an editorial that Zardari is right to say India is no threat and that Pakistan needs to focus on reviving its economy. “The question, though, is not what President Zardari thinks about these issues, but whether the larger Pakistani establishment (including, most importantly, the army) shares his perspectives. At the moment, Mr Zardari seems to be running ahead of the pack,” it says.
India too is beginning to worry about the impact on its own economy of the global financial crisis, as these articles in the Hindustan Times and the Economic Times suggest. So it might also welcome the advantages of higher regional trade.
Amid the conventional wisdom that Pakistan’s economy is falling to pieces — a view reinforced inside the country by soaring food prices and frequent power cuts — it’s interesting to see that someone still sees it as a hot market for foreign funds.
The Melchior Selected Trust Pakistan Opportunities Fund, one of the first funds to target Pakistan, believes the country’s problems have been exaggerated and sees its market as having the potential of “India at half the price”, according to this Reuters story.
It quotes Naz Khan, chief executive officer of KASB Funds in Karachi, as saying there is no reason to be particularly concerned by the tensions along the border with Afghanistan. “We have locked horns with India many times along the border with them in the last few decades,” he says. “This is just a different border and it shouldn’t affect the overall economy.”
The story prompted me to hunt around to see what else is out there painting a positive picture of Pakistan’s economy.
For starters, there is an economic growth forecast of 5.5 percent for the fiscal year starting in July, according to preliminary details on the budget due out next week. That is a level that the recession-haunted west can barely remember, let alone dream about.
CPI Financial quotes Mansoor Khan, managing director of Lahore-based law firm Khan Associates, as saying that conventional banks would probably be more affected by Pakistan’s economic turmoil than their Islamic counterparts. “The conventional banks are western, risk-averse and do not understand ‘Pakistan risk.’ Islamic banks are primarily Middle Eastern or Asian and have a better understanding of the mentality of Pakistan. They will not be put off.”
Pakistan’s economy has proved incredibly resilient in the past, surviving amongst other things, military coups, three wars with India, the division of the country into West and East Pakistan (now Bangladesh) in 1971, and tough economic sanctions after its 1998 nuclear tests. So are reports of its demise premature?
The picture may be clouded by the volatility of Pakistan’s stock market, hanging on every word of the bickering political parties elected in February, and feverishly debating the future of President Pervez Musharraf. But according to the last IMF report, a boom in foreign direct investment into Pakistan (more than $5 billion in 2006/07) was driven not so much by its — until recently — soaring stock market, but primarily by greenfield investment in areas like telecoms, manufacturing and financial services.
I’ll return to the downside risks in another blog, but in the meantime would be interested in hearing whether other people out there think Pakistan still makes it as a hot, or at least warm, emerging markets destination. It’s also worth wondering whether any shift in the origins of foreign investment in Pakistan — still dominated by the United States — towards more Gulf Arab funding would affect the political make-up of the country.
