When the British left India in 1947, they bequeathed what was arguably a European notion of the nation state on a region for which the very concept was alien. I say ”arguably” because anything one writes about Partition or the nation state is open to dispute. And until the financial crisis, I relegated this argument to the realm of historians – a subject that interested me personally, but did not seem relevant today.

That was until I noticed a new debate bubbling up on the internet about the future of the nation state. Will it become more powerful as countries scramble to protect themselves from the financial crisis as George Friedman at Stratfor argues in this article?  Or does the need for global solutions to the crisis sound a death knell for the nation state, as John Robb suggests here?

Let’s just suppose the paradigm has shifted and the 60-year-old model defined by the departing British colonial rulers is no longer valid. What does that mean for Pakistan and India? (more…)

After asking last month whether the media should be more positive about Pakistan – the comments on the whole seemed to suggest we should be, while not being blind to the risks– it was interesting to see that Malaysia’s top lender, Malayan Banking, had no such doubts.

 Maybank said it had bought a 15 percent stake in Pakistan’s largest listed lender MCB Bank for $680 million, the largest banking acquisition into Pakistan, as it bet on a bright economic future despite the recent political turbulence.  It said the acquisition would give it access to ”a high-growth and under-penetrated banking market with a large population”, and that it was confident about Pakistan’s political outlook.

Part of this is clearly due to the booming business in Islamic banking. Reuters Bahrain correspondent Mohammed Abbas, who covered a Reuters summit on Islamic banking and finance in February, tells me it is no surprise that a Malaysian bank would invest in Pakistan.  Pakistani bankers basically run the Islamic finance industry in the Gulf and say Pakistan has done a lot to encourage Islamic finance. Since Malaysia’s Islamic banking industry is one of the deepest and most developed, and since  Malaysian banks have been trying to build bridges with other Islamic lenders, Pakistan is an obvious place to go. ”Given how active Pakistanis are in the industry, the fact that Malaysia is finding Pakistan fertile for expansion is logical,” he says.

So what is to be made of this Maybank deal? Was it born simply out of the growth in Islamic finance, fuelled by the oil money washing into the Gulf, and a South Asian approach to banking?

Or was there a bigger shift here, one which looks beyond the United States and its battle against al Qaeda and the Taliban and its war in Iraq, into the financial flows of the future?

I noticed that Merrill Lynch’s Soofian Zuberi, who advised on the deal, said that Maybank and MCD are likely to seek future deals together and look for opportunities in Central Asia and the Middle East. “These are markets where there is a geographic and cultural proximity that both parties can work together on,” said Zuberi.