Imran Khan’s victory and the question of South Asian Strategic Stability

Imran Khan’s Pakistan Tehreek e Insaaf (PTI) has finally emerged as the largest party with 115 of 272 seats in the National Assembly and is set to form the government. A strong opposition led by the Pakistan Muslim League-Nawaz, the Pakistan People’s Party and the Muttahida Majlis e Amal - which denounced the results terming them as the army’s handiwork - is set to play an almost vindictive role in the Parliament. The sympathy factor Nawaz Sharif had expected did not pay off, nor did his brother Shahbaz Sharif efforts to use Nawaz’s victimization to catch the voters’ attention until the end of the election campaign. The situation parallels the 2013 election results, when it was Imran Khan who alleged poll-rigging, and led a four month long sit-in against the PML-N in late 2014.  

 

There are no doubts that the army and the judiciary had their roles in denying a level playing field to the PML-N this time; however, this should not diminish Imran Khan’s role in mobilizing the populace around corruption and governance as the sole issues driving his campaign. Over the last few months (especially after April’s Gallup poll had showed PML-N having a lead over the PTI), a closer reading of social media trends and the latest opinion polls demonstrates that not only did popular support for Imran Khan grow, but voters across Punjab, Khyber Pakhtunkhwa and Urban Sindh (where PTI won its maximum share of votes) and youth voters in general had Sharif’s corruption in mind. This is substantiated by the PTI’s performance in Punjab’s nerve centres like Multan, Rawalpindi and Faisalabad (and a notable breach in Lahore), where several PML-N bigwigs (including former Prime Minister Shahid Khaqan Abbasi and Railways Minister Saad Rafique) lost. Critics, however, contest the notion of an Imran wave claim by citing 51.8% voter turnout (lesser than the 55% in 2013), in addition to the accusations of rigging which have emerged during the ballot counting process. The alleged failure of the Election Commission’s Result Transmission System (RTS) in the midst of counting, and the resulting denial of any such failure by the National Database and Registration Authority (NADRA, the creator of RTS), does raise doubts.    

 

Poor performance by new extremist parties, especially the Allah O Akbar Tehreek (which could not win any seat) and the Barelvi Tehreek e Labaik Pakistan (which did slightly better, winning two provincial assembly seats from Karachi and a 4.2% share of the national vote) may be a relief for the Pakistanis, but in no way does this point towards the absence of religious-minded voters, which have been strong constituencies of the PML-N (in Punjab) and the PTI.   

 

Furthermore, the run-up to the elections and the post-election scene confirmed how the PTI had been reaching out to extremists, particularly the leaders of the Deobandi sect. Imran Khan’s meeting with Fazlur Rehman Khalil of the notorious Harakat network and the party’s outreach to independent Member of Punjab Provincial Assembly Muavia Azam (son of Azam Tariq, the slain chief of an erstwhile extremist organization Sipah e Sahaba) points towards a possible absorption of Deobandis into its vote bank.   

 

Besides the anti-Nawaz Sharif agenda, other factors which make Imran the army’s natural choice are his hawkish views on India and a gradual acceptance of the division of powers with the army (after spending years accusing the it of intervening in politics). The military is happy to see Imran work on improving infrastructure, curbing corruption, delivering on governance issues and restructuring the economy. However, it would continue to manage the security and external affairs by itself. For now, Imran Khan seems accepting of these terms, and will continue to support the army’s agenda unless he is compelled to carve out an independent India policy (something which may lead to a debacle akin to Nawaz Sharif’s).  

 

This became evident in his first public address a day after the elections. His words more or less matched what those in Rawalpindi wanted him to say. While his statement that "if India takes one step [on Kashmir] we will take two,” is subjective, it is imperative to understand his intentions to act in accordance with the military’s Kashmir policy. He emphasized other aspects of bilateral cooperation, but kept them conditional on the resolution of the Kashmir dispute. 

 

Likewise, his track record of sympathizing with the Taliban also falls in line with that of the Pakistani army, which pushes the case for institutionalizing Taliban’s share in running Kabul’s affairs. In a recent news discussion, senior PTI leader Shireen Mazari supported the case for mainstreaming the Taliban as Americans had failed to dislodge them from the Afghan socio-political fabric, something that possibly alludes to the party’s expected line of action.  

 

Despite mounting challenges from the Taliban this year, the success of the Eid ceasefire in June and the growing acknowledgement of the Islamic State as a common enemy (by the Washington, Kabul and the Taliban) could prompt the new government to intensify its support for mainstreaming the Taliban, thus risking Washington and New Delhi’s long-term role in assisting the war-torn nation.  

 

In short, while an enthusiastic citizenry awaits the new regime to deliver on the domestic front, the question of South Asia’s strategic stability looms large.   

 

 

- Prateek Joshi is a Research Associate with Vivekananda International Foundation, New Delhi.

Pakistan, China, and the IMF

Pakistan’s incoming prime minister Imran Khan recently tweeted to let “President Erdogan and the people of Turkey know we are praying for their success in dealing with the severe economic challenges confronting them, as they have always succeeded against adversities in their glorious history.”

While Pakistan and Turkey enjoy close historic and warm relations and many Pakistani leaders have expressed admiration for Erdogan, Imran Khan would be well advised not to mix emotions with strategy in either international politics or when looking for models of economic success. Turkey’s economic crisis has been caused by a combination of factors but principally due to a growth strategy that relied heavily on foreign debt and Erdogan’s authoritarian style of governance—a problem that was exacerbated by an overblown sense of Turkey’s regional and global importance.

The Turkish lira has fallen about 40 per cent against the U.S. dollar this year. It is not a mere coincidence that Turkey’s external debt to GDP ratio is the highest among the larger countries in the developing world, followed by South Africa, Mexico, Argentina, Russia, Brazil, and Pakistan. These countries have one thing in common: an external debt to GDP ratio of more than 30 per cent.

Much has been written about Pakistan’s current economic crisis and whether the new government will have to go to the International Monetary Fund (IMF). While financing the rapidly growing external account deficit is the immediate challenge, it would be a big mistake to blame it on just the previous government of Nawaz Sharif.

Pakistan’s economic woes are well known and are repeated ad nauseam in local and international media and in other forums. Pakistan’s current economic crisis is just another reminder that it is a dysfunctional state whose elites have used foreign money to help them ride through periodic crises without addressing the fundamental issues. Pakistan holds a world record of 21 IMF programs implemented since 1958, 14 of them after 1980. As soon as the economic situations stabilised, Pakistani policy makers went back to business as usual, pretending they were undertaking some “structural reforms.” Will this time be any different?

The immediate reasons for the current crisis include Pakistan’s hugely misconceived energy policy and the financial structure of China Pakistan Economic Corridor (CPEC) power projects. Former prime minister Nawaz Sharif’s government wanted to rapidly build additional power generation capacity to overcome the country’s chronic power shortage problem. It approved 21 coal-driven power projects with the expected total cost of $35 billion. Not all of this $35 billion “investment” is in the form of equity. The debt to equity ratio for many of the power projects is 3 to 1 (75 percent debt, 25 percent equity) with the return on invested equity reported to be as high 34.5 percent.

The projects were approved without a holistic and broader macroeconomic policy framework and were motivated by Nawaz Sharif’s desire to deliver on his 2013 election promise of preventing future power shortages. Fast forward to 2018: Pakistan’s current account deficit rose by 40 percent to a record $18 billion due to an increase of $7.6 billion in imports. By comparison, exports rose by just $2.4 billion. Around 70 percent of the rise in the import bill during 2017-18 was due to imports of energy products, capital equipment, and related raw material. For example, Pakistan imported 11.2 million tonnes (costing around a $1 billion) of coal in 2017 compared with 3.42m tonnes in 2013.

I had written for Pakistan’s daily DAWN on June 22, 2013: “Pakistan’s unfavourable high cost energy mix lies at the core of the energy crisis. Today, the plants using imported oil represent the single largest source of electricity generation due to a flawed policy of supporting oil-powered plants by guaranteeing a minimum return to the investors.”

I also wrote that the energy crisis was not about the installed capacity because the structural reasons go far beyond just the high debt levels of the energy sector, bad governance and corruption given the high level of transmission and distribution losses, idle capacity, and our inability to exploit hydro, wind, and solar resources.

Unfortunately, any criticism of the CPEC has been considered almost blasphemous in Pakistan and met with media frenzy and shrill outbursts from hyper-nationalists. It it worth explaining here why the power projects (which account for over 50 per cent of investments for the $62 billion CPEC program for Pakistan) are not investments.  It is a misnomer to call anything a “private investment” when profit is guaranteed by the government. This is the case with almost all CPEC power projects because the equity holders are guaranteed to earn rates of return believed to range from 17 to 34 percent. Such “investments” are, in effect, quasi governmental debt because the government is obligated to pay an agreed internal rate of return on invested equity regardless of whether the projects actually make money. Pakistan’s official external debt of $91.7 billion (31 percent of the GDP) does not include this quasi government debt which could be as high as $10 billion.   

A strategy financed largely through foreign currency debt which sought to build infrastructure by guaranteeing profits through projects with the government seems to have fallen apart. While the total generation capacity has increased in the last five years, it has not helped Pakistan to grow its exports, which have remained almost flat during the same period. Mr. Miftah Ismail, the former finance minister, may be right that for the next five years, Pakistan’s total annual debt repayments and profit expatriation by Chinese companies would be below $1 billion, but he has not taken into account the pressure on the external account due to the import of raw materials and capital goods related to the CPEC projects. To reduce pressure on the current account in the immediate future, Pakistan may seek medium term credits from countries such as Saudi Arabia and Kuwait for oil and other raw material imports.

The most serious consequence of providing government guarantees for profits is the distortion of the most efficient allocation of resources in an economy by encouraging the rent-seeking behaviour of its famously venal business elites. It is ironic that some large business groups who benefited from favourable tax exemptions or subsidies in the past also jumped on the bandwagon of CPEC power projects as a means to make easy money. According to the Pakistan Economic Survey 2017-18, a government publication, tax exemptions for various affluent businesses amounted to $4.4 billion in just one year. This is much more than the “corruption” of $2.5 billion Nawaz Sharif was accused of by Mr. Khan. A level playing field in a competitive economy should be free from such policy distortions.

Pakistan, for decades, has followed a set of policies that has encouraged investments in real estate, guaranteed profit projects, and allowed certain industries to enjoy unfair tax exemptions.  This has discouraged industrialisation on a broader scale, contributed to Pakistan’s failure to achieve the high growth rates achieved by many other countries in Asia, and limited its ability to grow its export rate. Since 1980, exports from India and Bangladesh have grown at a rate that is more than five times that of the growth of Pakistan’s exports.

In the most immediate future, removal of all such policy distortions and deregulation of all sectors of the economy from unnecessary government controls should be among the top priorities for the new government. If it cannot provide meaningful incentives, it should at least remove some of the disincentives faced by entrepreneurs and industrialists. This may require a detailed review and possible renegotiation of the terms of all projects, including projects under CPEC, where rate of return is guaranteed and elimination of tax exemptions is granted through ad-hoc administrative measures. However, the entrenched elites and their friends in the bureaucracy are most likely to mislead the new government into wild goose chases like “looted wealth” abroad instead of reforming a system built on patronage under the protection of a military and civil bureaucracy that seems to be incapable of  addressing the complex challenges Pakistan faces. It remains to be seen whether the IMF will once again bailout Pakistan, a country that has been described as a curious case of Dutch Disease, but without the oil.

 

The writer is a former Citigroup banker, columnist and an independent consultant.

 

 

India celebrated Modi’s ill-thought Independence Day speech but it hurt Balochistan badly

Two years after Prime Minister Narendra Modi brought up Balochistan in his Independence Day speech, there has been no sign of India’s success in raising human rights violations in the restive Pakistani province to the level of a significant international issue.

If anything, public professing of support from New Delhi without any substantive follow up actions has only reinforced Pakistan’s contentions about an Indian role in fomenting terrorism in Balochistan.

Modi’s remarks two years ago were probably not thought through. They certainly had not been discussed with India’s friends abroad, before the speech, to coordinate policies.

Had such discussions taken place, Indian diplomats would have learned in advance that most of the world does not support the notion of an India-led attempt to foment secessionist rebellions in Pakistan.

Although several Baloch leaders in exile responded positively to Modi’s remarks, their expectations of being allowed to set up shop in India were not fulfilled.

There is no evidence that India stepped up support to exiled Baloch groups, many of whom have limited their activity over the past two years to avoid being accused of acting at India’s behest.

In his address to the nation on 15 August 2016, Modi had said, “Today, I want to especially honour and thank some people from the ramparts of the Red Fort. For the past few days, the people of Balochistan, people of Gilgit, people of Pakistan-occupied Kashmir, the way their citizens have heartily thanked me, the way they have acknowledged me, the goodwill they have shown towards me, people settled far across, the land which I have not seen, people I have not met ever….”

The reference to Balochistan was deemed significant because, unlike Kashmir, Balochistan is not disputed between India and Pakistan.

A few days earlier, Modi had vowed to raise the issue of “atrocities by the Pakistani government” in these three areas at the international stage while speaking to an all-party delegation about the situation in Jammu and Kashmir.

India had previously made at least two public statements in 2005 and 2006, denouncing Pakistani military operations against the Baloch and had expressed concern over the “spiralling violence” in Balochistan. But Modi’s statement was the first that sought to generate fear of an Indian tit-for-tat against Pakistan’s longstanding support for Jihadi groups in Jammu and Kashmir.

Soon after his statement, Indian hawks described Modi as a “game changer”. Former foreign secretary Kanwal Sibal had said, “By raising the Balochistan issue, he (Modi) has changed the rules of the game. From the PM’s point of view, this is a warning signal to Pakistan.”

G. Parthasarathy, former High Commissioner to Pakistan, was quoted saying that while some would call it “long overdue”, he would describe it as a “necessary measure” and that “there has to be some inducement for Pakistan to fall in line”.

For several days after the initial remarks, there were reports that the Indian Prime Minister had received many messages on social media from Baloch groups and Kashmiris around the world and in Pakistan thanking him for his support. But beyond that, the spectre of Balochistan being turned into a new Bangladesh went nowhere.

It seems now that the statement on Balochistan was just a statement that was (luckily) not backed by actual plans. Any plans to step up violence in Balochistan would have delegitimised India’s case against Pakistan’s support for internationally designated terrorist groups such as Lashkar-e-Taiba and Jaish-e-Muhammed.

As India does not have geographic contiguity with Balochistan, any meddling there would need support from Iran and Afghanistan, both of whom do not want to escalate tensions with Pakistan.

The United States’ military presence in Afghanistan also ensures that Afghan authorities must consider US concerns about further destabilisation of Pakistan. There is hardly anyone in the US who wants to increase Pakistan’s paranoia about conspiracies aimed at its disintegration.

The Prime Minister’s statement and its immediate aftermath actually hurt the Baloch nationalists, many of whom found themselves tarred with the brush of being Indian agents without any benefit of Indian support.

They have legitimate grievances against the Pakistani state and bear the brunt of human rights violations. But their cause needs more support within Pakistan and from the international community without the burden of being painted as Indian-backed terrorists.

Just as Pakistan-based terrorists have ill-served those in Jammu and Kashmir seeking a different relationship with the Centre, Indian-backed threats of violence would not have had a different outcome in Balochistan.

Baloch nationalists must have flexibility in negotiating for the rights of their people. Not all of them see secession and separatism as the only choice. The impression of external support limits Baloch leaders’ ability to seek a better deal from Rawalpindi and Islamabad.

It is best to let the Baloch speak for themselves and for Pakistani reformers to support them internationally rather than adding Balochistan to the already complex menu of India-Pakistan issues.

In any case, chaos and disintegration of Pakistan are not in India’s interest nor is the international public opinion too keen on the idea of encouraging anarchy in Pakistan.

It is true that the stubbornness of the country’s military-led establishment causes frustration to a lot of people around the world, most of all Pakistanis who want prosperity rather than conflict to be their nation’s principal objective. But Pakistan’s national pride and the discourse about India being Pakistan’s eternal enemy make it impossible for India to be the agent of change in Pakistan’s policies.

Prime Minister Modi was probably frustrated with the constancy of unrest and terrorism on the Indian side of the Line of Control when he decided to throw the gauntlet over Balochistan. It was not the best of political moves.

Since then, India seems to have realised that the road to building pressure on Pakistan runs through Washington, the Financial Action Task Force (FATF), and European donors. Balochistan is not the best point of inflexion. Threats of increasing trouble there only brings greater hardship on the already battered Baloch people.

- This piece was originally published in The Print.

Blockchain: A Building Block of India's Future Economy?

Blockchain, one of the buzzwords of today’s tech industry, has the potential to make a big impact on the Indian economy and the future of financial transactions. Blockchain is most frequently associated with Bitcoin, the cryptocurrency which runs on blockchain technology. As home to the world’s third largest startup base, with tech and e-commerce a significant contributor to the number of startups, blockchain could spur economic growth in India’s burgeoning digital economy. An analysis of the most in-demand skills in the first quarter of 2018 by the Upwork Skills Indexrevealed that blockchain was the fastest-growing skill. The National Programme on Technology Enhanced Learning (NPTEL) has launched a free 12-week courseteaching blockchain design, architecture and uses. Most recently, the International Blockchain Congresstook place in Hyderabad between August 3-4 and in Goa on August 5th, in partnership with the Modi Administration’s Strategic Planning (NITI Ayog) department, and the IT and Industry departments of the Telangana and Goa state governments. Despite recent efforts, developments in blockchain technology, skill development and adoption across various industries have been limited. 

 

This is partly due to the association between blockchain technology itself and cryptocurrency, with developments in the latter halted by the Reserve Bank of India’s ban on cryptocurrency exchangesin February this year, prohibiting the use of cryptocurrencies during financial transactions and mandating that, under Indian law, coins must “be made of metal or existing in physical form and stamped by the government.”While the Indian government seeks to accelerate adoption of blockchain technology, with Finance Minister Arun Jaitley announcing in his February 2018 budget speech that “the government will explore use of blockchain technology proactively for ushering in the digital economy,” cryptocurrency is another matter. In the same speech, Jaitley stated that the Indian government “does not consider cryptocurrencies as legal tender or coin and will take all measures to eliminate use of these cryptoassets in financing illegitimate activities, or as part of the payment system.” 

 

Therefore, in July, the Supreme Court voted to uphold the RBI’s ban, citing difficulties associated with defining cryptocurrency as a medium for payment and exchange or a commodity itself, or in pricing risk. Recent volatility in the cryptocurrency market has compounded skepticism regarding the use of cryptocurrencies, with the value of Bitcoin falling by 70 percentfrom the almost-$20,000 it reached in late 2017. Meanwhile, a finance ministry panel is still formulating a system of regulations regarding cryptocurrency beyond the RBI’s blanket use, with regulations anticipated for release by the end of 2018. The delay in implementing regulations is due to the ministry’s desire to separate blockchain (a digital public ledger) and cryptocurrency. Stripped of facilitating cryptocurrency exchanges, blockchain is essentially a decentralized book-keeping system in the cloud which cannot be forged or reversed, and which is accessible to anyone. 

 

Blockchain technology has been particularly hailed as holding the potential to enhance the efficiency and reliability of cross-country financial transactions such as remittances. India is the world’s largest recipient of remittances (transfers of money by foreign workers to individuals in their home country), with the World Bank estimating that it received $69 billionin remittances in the 2017 financial year. While remittances to India constitute just 2 percent of national GDP, there is significant variation in the impact of remittance payments to households based on state, with 36.3 percentof Kerala’s net domestic product made up by such payments, according to World Bank estimates. Despite the importance of remittances to household consumption in India, under the current system, inbound remittance payments to South Asia cost 5.2 percentof each transaction, higher than the target of 3 percentunder the Sustainable Development Goals. Remittance payments can also take between three and five days to reach their recipient, leaving them vulnerable to changes in the exchange rate. The use of blockchain could make such transactions faster and cheaper; for this reason, seven private banksin India thus far (Axis Bank, ICICI Bank, IndusInd Bank, Kotak Mahindra Bank, RBL Bank, South India Bank and Yes Bank) have adopted blockchain technology to track trade documents digitally, and IndusInd Bankand Yes Bankhave partnered with blockchain enterprises to deliver cross-border payments. 

 

Other applications of blockchain technology have also been adopted in India, with the state government of Andhra Pradesh partnering with ChromaWay, a Swedish startup, to digitize its land registry system. Andhra Pradesh’s neighbor Telangana is also employing the same technology to secure its land records and revenue, as use of blockchain technology can enable more advanced tracking, analysis and automation with data. 

 

It is evident that blockchain technology has uses beyond its function as a ledger for cryptocurrency, although it is unclear whether the Indian government will maintain its ban on the latter’s use, or whether it is a temporarily rigid placeholder for the pending finance ministry’s regulations. In order to develop its digital economy and capitalize on the potential for growth that adoption of blockchain technology would allow, the Indian government must adopt a clear and pragmatic approach, both towards blockchain and cryptocurrency. 

 

 

For Imran, India might not be biggest problem

There has been considerable speculation about what prospects the advent of Pakistan’s former cricket captain Imran Khan as his country’s Prime Minister holds for peace in the subcontinent. In India, most opinion veers on the cynical, judging by Imran’s known change of persona over the last few years in the quest of his ambition to lead his country. That this has brought him far more in convergence with the Pakistan Army’s thinking doesn’t really augur well for prospects of peace. The Army’s pre-eminence in that country’s pecking order is ensured only by its deep animosity with India, something Imran is unlikely to be able to change in any hurry, or even have any inclination to change. He has willingly partnered the Army to follow its diktats. Inexperienced in strategic affairs, he will be dependent hugely on the generals for guidance, although Pakistan’s diplomatic corps is still one of its best institutions. With India’s general election due in nine months or so, the subcontinent isn’t really ready for peace initiatives now, though a dose of peace always helps any incumbent political leadership. In India-Pakistan relations, however, the opposite is also true — where the deterioration of ties leads to nationalistic passions and may also help incumbent leaders. Realistically, it is only after June 2019 that there can be some forward movement; till then Imran Khan needs to get his act together to prevent the possibility of Pakistan finally transiting the status of failing state to failed state.

 

The new government in Islamabad will need an economic bailout package and work towards releasing Pakistan from the stranglehold of the terror and radical outfits that have been mainstreamed in this election. Imran may be in for a surprise if he does a reality check. The problems he can expect from India will be way down the ladder of serious threats. India is far too involved in its own internal challenges to desire any turbulence at the borders or in Jammu and Kashmir. If the Pakistani generals choose to keep the Line of Control quiet and calibrate the situation in the Kashmir Valley to just around the current levels or less, it is unlikely to draw too much response from India, which in a few months will be deeply involved in its own election process. However, the Pakistan Army always fears that inactivity in Kashmir gives India the opportunity to regain lost ground, both operationally and in the psychological space. Therefore, calibrated efforts to maintain violence and promote alienation will probably continue. Reports indicate that the Jaish-e-Mohammed (JeM) of Maulana Masood Azhar, which managed to stay under the radar through the Pakistan polls, is expanding its training and holding facility near Bahawalpur with the security forces turning a blind eye. A bigger terror strike targeting India any time in the near future will call for a stronger response by India, especially in an election year. That is what the JeM wants to upend other groups and establish its primacy. That is where Imran’s challenge lies, and where the Pakistani “Deep State” may not be willing to assist him, bailout package or not.

 

There are other internal problems linked with Pakistan’s main partners — China and the United States — although many may challenge the notion of the US being Pakistan’s partner. The US need for Pakistan and vice versa can hardly be denied, and that steers the relationship through hot and cold. There is the political Opposition, which may have been defeated electorally but may wish to resolve issues on the streets. The mainstream parties — the Pakistan People’s Party and Pakistan Muslim League-Nawaz — once earlier got together in 2007-08 to create conditions to oust Gen. Pervez Musharraf. Given that precedent, we may not yet have seen the end of turbulence. The mainstreaming of some radical parties which took part in this election may also add to the country’s internal threats. Both these issues will not help Islamabad to obtain a bailout package.

 

The China factor remains significant. First, China itself is in the throes of a reset of ties with India after last year’s Doklam crisis virtually brought the two nations to the doorstep of an armed standoff. Any deterioration in India-Pakistan ties will be counter-productive to China’s strategic needs. Second, with much at stake in one of China’s largest overseas investments, China Pakistan Economic Corridor (CPEC), Beijing doesn’t want to see any obstacles to its full actualisation. Those obstacles remain in Pakistan’s turbulent internal security, which threatens order that is so necessary for completion of the projects. The Pakistan Army’s inclination to use friendly terror groups as strategic assets against India is also something China may be actually uncomfortable about; despite its refusal to support the labelling of Masood Azhar as a global terrorist. Now, with a reset of India-China ties, this issue may become a sticking point. It recently didn’t hold back from supporting the majority at the Financial Action Task Force (FATF) decision to grey-list Pakistan. China’s relationship with Imran Khan and his PTI has not been too pleasant in recent years. The PTI has been extremely critical of the CPEC, and at one time even likened the project to a new British East India Company. The PTI’s five-month anti-government sit-in in Islamabad in 2014 had forced the postponement of Chinese President Xi Jinping’s visit at a time when he was keen to showcase some CPEC projects.

 

Yet China was the first country that Imran Khan chose to mention in his maiden speech after the election. Obviously, he is positing Pakistan closer to China, but the bailout package is not going to come from China, from where almost $5 billion has already been borrowed. He is obviously going along with popular sentiment in Pakistan, where anti-American feelings run high, but these will place him at odds with the first major issue that will confront him: the economy. Any bailout is likely to be contingent upon Western satisfaction about the measures undertaken against the extremist groups. Given this situation, Imran Khan will hardly be able to bowl at full pace; he may have to settle for a medium swing to test the waters, which are indeed going to be turbulent.

The Development of South Asia After the Fall of the Indira Doctrine

India has always felt that it has a right and a duty to protect and support its South Asian brethren. In the 20th century, this sustained belief was known as the “Indira Doctrine,” and it justified Indira Gandhi’s decision to support East Pakistan militarily in 1971, to help it secure independence and become Bangladesh. The Indira Doctrine was essentially India’s Monroe Doctrine; it declared India’s intent to keep foreign powers away from its immediate sphere of influence.  

However, globalization has taken a hold of South Asia in the decades since Indira’s reign. Chinese investment has flooded into the region for the past decade, and India can’t do much to stop it. China’s Belt and Road Initiative is characterized by the seemingly benign promise of capital, not conflict, and offers the small economies of South Asia an unprecedented amount of investment. For the first time, countries like Nepal, Bangladesh, Sri Lanka, and the Maldives find themselves with multiple suitors competing for their affections.

They also now have an out, a place to turn, if relations with India sour.

When Madhesi protesters within Nepal, who have many ethnic ties to India, blocked trade between India and Nepal in 2015, China swooped in as an alternate source of goods and funds. Nepal’s Prime Minister, K.P. Sharma Oli, signed a Transit and Transport Agreement with China, effectively ending India’s monopoly over the Nepali supply system. Since then, China has pledged billions of dollars to build a railway between Tibet and Kathmandu, and has proposed an integrated “cross-Himalayan connectivity network.” In January 2018, Chinese companies provided Nepal a new avenue for accessing the internet, which had previously been offered only through Indian companies. Oli has made his intentions to continue trading with China clear, and has reminded his country that “We cannot forget that we have two neighbors. We don’t want to depend on one country or have one option.”

However, China’s ambitions extend far past the 30 million citizens of Nepal. China has been an “all-weather friend” of Pakistan for decades, but recently placed a record-high valuation on that friendship, to the tune of $62 billion if we’re going by the price tag on the China-Pakistan Economic Corridor. To Bangladesh, on the Eastern side of India, China has invested about $31 billion to help build power plants, sea ports, and railways. This makes Bangladesh the second biggest recipient of Chinese funding in South Asia, and means China has surpassed India as Bangladesh’s number one investor.

Sri Lanka and the Maldives have also been major targets of Chinese investment. Sri Lanka recently had to give China a port to make up for its billion-dollar debt, and the Maldives’ debt to China is almost as large as their total annual GDP. And remember, Sri Lanka and India have been adversaries in the past – Lankans are certainly happy to be offered an alternative to India for their economic development.

Draw lines connecting those five countries, and you will have sketched a full circle (well, pentagon) with India resting right in the middle.

Those who fully believe in the liberal ideal of maximizing absolute gains for all nations will see Chinese investment as a boon to the region. But realists within India would be hard-pressed to see it that way.

It is possible that Indian business will benefit from the massive infrastructure improvements that China has graciously undertaken. Infrastructure cuts transportation costs and promotes efficiency, which is especially important in a developing region like South Asia. The geopolitical consequences, however, are worrisome. Not only has the Indira doctrine come and gone, but India may soon find itself holding less influence on its own home turf than China.

Despite its rapid rate of growth and growing international relevance, India will not be able to offer its neighbors the amount of investment that China is offering. As long as India and China remain peaceful, this isn’t necessarily a problem. Yet should that change, the countries of South Asia may no longer be unequivocal supporters of India. They may take a page out of the Indian playbook, and opt for nonalignment. Or worse, they may prioritize their economic interests and take the side of the authoritarian, communist power over the free, democratic one.

Imran Khan's Pakistan

The story of Imran Khan, cricketer-turned politician, is nothing short of exceptional. What he managed to achieve in one lifetime is something most people might not achieve in many. After leading Pakistan’s cricket team to the World Cup victory in 1992, Imran Khan now finds himself in the highest office of Pakistan. His recent electoral victory that will make him the next Prime Minister of Pakistan is a feat more remarkable than any of his sporting achievements.

 

Imran Khan’s ascension to the coveted office is exceptional but tainted by allegations of weaponizing the blasphemy law and courting favors from the all-powerful military establishment. While he is criticized for using religion and military’s support to target his political opponents, Imran’s use of these tactics suggest one thing for certain: his knowledge of exactly what it takes to gain power in Pakistan.  

 

Now that he is in power, his critics fear that any extremism which Imran Khan is inclined towards will manifest itself even more openly and significantly.  To give some context, Imran Khan is considered a religious extremist by some of his liberal critics. Imran Khan’s entry into national politics was marked by “quasi-religious sermons attacking feminism, atheists, politicians, ‘evil’ western values, and the Pakistani elites who aped their former colonial masters.” Also, Imran’s opposition to the Women’s Rights Bill in 2006 for it being a ”made-in-Washington Islamic system in the country” adds weight to the case for Imran Khan’s religious extremism. Furthermore, Imran Khan has repeatedly criticized western feminism on the basis that it marginalizes motherhood.

 

For Imran Khan’s detractors, his attitude at times seems anti-women and religiously conservative, but what has earned him the comparisons with religious extremists are his opposition to military operations against the Taliban and the TTP (Tehrik e Taliban Pakistan), and his sympathy for the two groups. Add to that Imran Khan’s support of the blasphemy law and the argument that Imran Khan is not a religious extremist is significantly weakened.

 

But Imran Khan’s supporters argue otherwise. They attribute most of his actions to his political pragmatism. The PTI’s (Pakistan Tehreek e Insaf) alliances with extremist political parties are justified as an attempt to attract voters from both the sides of the spectrum. His passionate views about peaceful resolution of issues in the northwestern region of Pakistan are misconstrued as his sympathy for the Taliban. Followers of Imran Khan argue that there should be a distinction between religious conservatism and religious extremism, and while Imran Khan might have conservative views, they are not anti-women as evidenced by the inclusion of Shireen Mazari and Yasmin Rashid, two women leaders within the party.

 

There are strong arguments on both the sides of the debate on whether Imran Khan is an extremist or not. But as far as Pakistan’s Afghanistan and India policy is concerned, Imran Khan’s views are relativlely inconsequential, because the future course of Pakistan’s foreign policy will be set in Rawalpindi, not in Islamabad - at least for the time being. 

 

On the domestic front, Imran Khan’s views will certainly have an influence. Let us hope that the weaponization of blasphemy issue will not continue and be discarded as just a political tool, but with unavoidable, unintended and unforeseen consequences.

 

Too much focus on Imran Khan’s pro-blasphemy law position and seemingly pro-Taliban position take away focus from the most important highlight of Imran Khan’s campaign: anti-corruption. Imran Khan led the election campaign on a narrative that involved strengthening national institutions to curb corruption. As admirable as his sentiments are, Imran Khan should be aware of the limitations of the system he will be working with and the effect of those limitations on his ability to introduce deep-rooted reforms. More than Imran Khan, his followers need to realize and manage their expectations as to what a “Naya Pakistan”  (New Pakistan) will look like, certainly not one where there is no corruption and everything works smoothly in the immediate future. But if it even remotely resembles a Pakistan with a stronger economy, a more tolerant society, and a more democratic framework, Imran Khan will have left a legacy that will dwarf his World-Cup winning legacy of 1992 in comparison.

Reckless Driving in Bangladesh: A Real Solution

In the past week, it seems as though all of Bangladesh has come alive to take part in protests following the death of two students hit by a speeding bus in the capital city of Dhaka. Enraged students have effectively brought the city to a standstill, blocking the streets, torching buses, and even attacking the car of the US Ambassador in their efforts to raise awareness of traffic deaths in Bangladesh. They accuse the Bangladeshi government, under the leadership of Prime Minister Sheikh Hasina, of ignoring the massive problem that is reckless driving in Bangladesh.

Road accidents, which WHO estimates to be responsible for more than 20,000 fatalities each year, are one of the leading causes of death in Bangladesh. Each day some 64 people die in traffic related incidents, the vast majority of them pedestrians. Poorly maintained roads, underpaid bus drivers racing to compete for passengers, and general traffic congestion make commuting in Bangladesh difficult—and potentially perilous. This problem has enormous costs associated with it, both economic and social. Some estimate that US$ 1.7 billion is lost each year due to traffic deaths, and the personal cost of losing a loved one to a reckless driver is immeasurably higher.

Dhaka’s students, angered by the lack of government response to what has now become the reality of life in Bangladesh, are pushing for major traffic reform. Though the government has been quick to criticize the unrest, with reports of police brutality towards protesting students and several arrests, as of Sunday some positive change has developed: the government approved legislation increasing the sentence for road fatalities from three to five years in prison. Seems as though the students got what they wanted—right? Not quite. While the change in the law did represent a minor victory in that it means the government is acknowledging the reckless driving problem (or at least the protests related to it), due to lack of enforcement of the current law, there remains an incentive to drive recklessly without fear of being caught.

    Before addressing real solutions to this problem, however, one must first understand the factors influencing reckless driving in Bangladesh. As compared to the 3.4 million registered vehicles in Bangladesh, there are only 1.7 million licensed drivers. This means that there are some 1.7 million vehicles being driven by unlicensed, and thus, potentially dangerous operators. Such drivers are more likely to speed or unknowingly disregard traffic rules that could help lead to safer roads. 43% of traffic accidents occur on account of a speeding driver. If there was a sufficient number of police to catch speeding drivers or conduct routine traffic stops to check vehicle licensing, a decrease in the number of traffic deaths would be expected to follow. And yet, the highway police face significant shortages in staffing. Furthermore, even if the violators were to be caught, there is no specialized agency within the police force tasked with the processing of traffic crimes. Instead, general police officers rotate through traffic management roles and there is a separation between enforcement and management, making the investigation process inefficient and unnecessarily arduous.

    In order to reduce the occurrence of unsafe driving practices in Bangladesh, there are several solutions, two of which I will focus on: the first is to implement and promote awareness of inexpensive, government-run driving schools to incentivize drivers to become licensed, and the second is to clearly outline and enforce speed limits on all roads. If driving schools were widely available and inexpensive, with students’ tuition only so much as to cover the bare minimum of operating the schools, more Bangladeshis could be convinced to undergo training that would emphasize the skills necessary for safe driving. Furthermore, if traffic laws were actually enforced, drivers would recognize the utility of getting a license, as the alternative of a traffic ticket or even a prison term would be more costly to them. This then necessitates the stringent monitoring of roads by the highway police. As the current impediment to this solution is one of insufficient manpower, technology such as traffic cameras can be used as an alternative to physical police presence on the roads. Analysts with the Police Research Group in the U.K. have assessed the cost of traffic cameras compared to physical officers in policing traffic and have determined the technology to be not only more efficient in processing traffic violations but also more cost effective. Bangladesh has already begun installing such technology along some of its roads and highways, but with the complete implementation and maintenance of traffic cameras in all areas, traffic violators will be caught more often and their cases processed with more efficiency.

It is in the interest of every Bangladeshi, driver or pedestrian, that a viable solution is undertaken to reduce the daily threat posed by reckless driving. While the protesting students have been successful in grabbing the attention of their government—and the world—there is still more work to be done before Bangladeshis can feel safe in their own streets.

 

Countering China’s Debt Trap Diplomacy in South Asia

At the end of last year, Sri Lanka was forced to give up one of its largest ports to China. The island nation owed China over a billion dollars, and its only way out was to surrender control of the port.

Unfortunately, the Hambantota port plan had been doomed from the start; analysts had predicted that it would fail, and that’s exactly what it did. But former Sri Lankan president Mahinda Rajapaksa didn’t care much for what the analysts thought, so he repeatedly asked China for loans. China repeatedly granted them. By 2017, the debt was too much for the current Sri Lankan government to deal with, so they cut their losses.

This project is one of many initiated through China’s ambitious Belt and Road Initiative (BRI), which plans to invest more than $1 trillion in developing countries over the next decade. BRI is especially exciting to China’s underdeveloped neighbors because unlike IMF loans, Chinese loans come with no strings attached. All they require is that the country pay China back – with interest, of course.

China’s Growing Sphere of Influence in South Asia

Sri Lanka is not the only country that has found itself severely indebted to China. Eight other countries around the world, including the Asian countries of Pakistan, Tajikistan, and the Maldives, are at risk of falling victim to China’s “debt trap diplomacy.” Pakistan may be China’s next victim. Newly-elected Pakistani Prime Minister Imran Khan is expected to ask the IMF for a bailout in the coming months, as Pakistan has found itself bogged down in debt as a result of China-Pakistan Economic Corridor (CPEC) projects. If the IMF doesn’t grant Pakistan the money, it is wholly possible that China will take control of Pakistani infrastructure, just as it did to Sri Lanka.

At first glance, it seems that these cautionary tales should be a wake-up call to any country that is currently taking out loans from China. But upon further deliberation, it becomes clear why countries continue to engage with China and accept their loans: China’s massive investments are simply too good to turn down. The BRI presents a unique opportunity for these countries to develop, and it is easy to see why they would be tempted to bite off more than they can chew.

Nepal, for example, continues to be enamored with China. China has already invested over 16 billion dollars in Nepal, which amounts to more than five times the amount India has offered. For a land-locked, least developed country like Nepal, it would be foolish to turn down such an opportunity.

Maldives has also been strengthening its relationship with China. Maldives signed a Free Trade Agreement with China last December, eliminating tariffs on over 95 percent of goods. Additionally, the country has accepted so many Chinese loans that about 10 percent of the annual Maldivian budget is reserved for paying China back. Unsurprisingly, the Maldivian people are not thrilled about this; in February, they took to the streets to protest President Yameen’s Chinese connection. Yameen responded by declaring a state of emergency and arresting Supreme Court judges that he felt had wronged him. Although Chinese investment certainly helped Maldives develop, the country may have been better off without it.

Nonetheless, other countries will continue to accept Chinese loans. China announced in April that it plans to expand CPEC into Afghanistan, to the tune of a 50 billion dollar investment. Considering Afghanistan’s current state, it would be astonishing if it turned the money down.

Even Sri Lankan president Maithripala Sirisena, who ran in 2015 on a platform of reducing ties with China, remarked in May that “The tremendous assistance provided by China to the economic and social development of this island nation is highly appreciated by the Sri Lankan government and its people.” Remember, May was only five months after Sri Lanka handed its port over to China.

Responding to China’s Advances

It has become clear that countries across South Asia will continue to eagerly accept Chinese loans, knowing full well that they are at risk of sacrificing their sovereignty. One can’t help but wonder: what will the global superpowers, especially India and the United States, do about it?

India has decided to step up and play China’s game. In July, the Airports Authority of India announced that it was planning to acquire a 70 percent stake in Sri Lanka’s near-deserted Rajapaska International Airport. This serves both as a business opportunity and an opportunity for India to check China’s influence, as the airport is in Hambantota, right next to China’s port.

But India, whose GDP is merely one fifth of China’s, won’t be able to contest China alone. If the United States doesn’t commit more fully to the welfare of South Asia, Chinese soft power will continue to grow, and China’s Sphere of Influence will continue to look eerily similar to that of the Soviet Union during the Cold War.

This isn’t to say the US should pursue a 21st century Marshall Plan in South Asia – it has neither the money nor the political will to freely dole out grants to developing countries. That said, it seems like common sense that the U.S. should look to increase its investment and influence in the region instead of pushing South Asia even further into China’s grasp. Unfortunately, the latter option seems to be the one this administration has chosen.

The White House released a report in June on Chinese Economic Aggression, which exposed dozens of China’s manipulative and unfair practices toward American companies. The report, which was spearheaded by Trump’s right-hand man when it comes to trade, Peter Navarro, is comprehensive and illuminating.

But the President’s response to the problems identified in the report has been directly counterproductive. Trump’s tariffs hurt countries around the world, not just in China. Thus, they have isolated America’s Asian allies and trade partners diplomatically, and pushed them toward China commercially. The tariffs certainly will hurt China, but they won’t be enough to make China back down. Instead, China will continue devaluing its currency replacing American imports with Asian ones. Additionally, China slashed tariffs on South Asian countries right after Trump raised his own, which will allow China to capture even more Asian trade. The United States is now starting to face the only threat more concerning than an aggressive China: an aggressive China surrounded by allies.

Seen from this point of view, it is no wonder that Modi has indicated in recent months that he would be interested in closer relations with China, a country that India has clashed with for decades. From the 1962 Sino-Indian War to the Doklam Standoff last summer, the two countries have had a fraught relationship to say the least. However, In the wake of Trump’s growing trade war, India offered to export soybeans to China to help them recoup their losses from rising tariffs. A couple of months later, Modi proclaimed, “I firmly believe that Asia and the world will have a better future when India and China work together in trust and confidence.”

Frankly, India’s change of course is justified. If the Trump tariffs represent the United States’ long-term China policy, a policy in which the U.S. charges at China without regard for who it tramples along the way, why wouldn’t India seek an out?

Furthermore, the American government has no clear plan to counter Chinese influence. At the moment, China is the only country with a clear strategy to gain influence in Asia and around the world. The Belt and Road Initiative, through investment and unconditional loans, is succeeding in providing China soft power, economic growth, and the opportunity to mount a serious challenge to American hegemony. Neither the U.S., nor the multilateral institutions it leads (Quad, NATO, etc), have a clear, unified, consistent plan. American policy has become alarmingly reactionary, while China is looking more like the country that drives global progress.

The Trump Administration only recently turned its attention toward power dynamics in Asia. Last week, Secretary of State Mike Pompeo announced America’s “Indo-Pacific Economic Vision” in which he promised a new investment package for the Indo-Pacific region, which amounts to $113 million. That’s a good start, but that’s million with an M – barely two thirds the value of Lebron James’s new contract. No wonder the Chinese effectively laughed off the plan; one Chinese foreign ministry spokesman responded with a Chinese proverb, noting that “it is better to take action than shout with a loud voice.”

If America wants to remain the only global hegemon, it must commit itself to its South Asian trade partners, both economically and diplomatically. It must start investing in South and Central Asia to counterbalance China’s BRI. The $113 million may be a drop in the bucket, but it is a step in the right direction. The U.S. must get rid of its tariffs regime, which will both strengthen its economic ties in Asia, and send a signal that its trade partners are valuable allies, not just collateral damage in its cage match against China.

Unless the United States commits to cooperation, it can expect China to continue expanding its influence throughout Asia and across the world. Without such a commitment, we can expect to see far more South Asian ports fall into Chinese hands in coming years. And in the long term, China may well mount a serious threat to American hegemony.

 

India's Healthcare Burden

Catastrophic spending on healthcare, defined as expenditure constituting more than 10 percent of a household’s general expenditure, is a significant burden on India’s population, particularly its low- and middle-income households. According to the World Health Organization’s Global Health Expenditure database, India is ranked as 10th out of 186 countries in terms of percentage of total out-of-pocket expenditure on health; Bangladesh was the only other South Asian country with a higher percentage. With over two-thirds of health expenditure in India coming from out-of-pocket spending, health systems in India are burdened by the complex health needs of a population plagued by communicable and non-communicable diseases (contributing to one fifth of the global burden of disease) but the cost of healthcare itself is increasingly placing a financial burden on households. 

 

The problem with the current state of healthcare financing in India is not only that expenditure by individuals and households on healthcare is double the current rate of government spending on healthcare, but also that it is responsible for pushing households into poverty and destitution. According to a study conducted by the Public Health Foundation of India (PHFI), out-of-pocket health expenditure plunged 55 million Indians into poverty in a single year. The same PHFI study also found that, of those 55 million people, 38 million were pushed below the poverty line due to spending on medication alone. While this phenomenon is not exclusive to India, in a broader regional context (with South Asians accounting for 60% of the 97 million people across the world impoverished by health expenditure), India alone accounts for over half of this population. 

 

Demand-side factors and a changing picture of India’s disease burden may have also contributed to the increased utilization of healthcare services, and thus, out-of-pocket health expenditure. An increase in the average life expectancy to 66.9 years for men and 70.3 years for women, coupled with a rise in the share of the Indian population which can be classified as elderly, means that India has a larger aging population with greater healthcare needs. Furthermore, non-communicable diseases such as cardiovascular and respiratory diseases, cancers, diabetes, and other chronic diseases associated with lifestyle and pollution, now make up 61 percent of all deaths in India, meaning that demand has increased for long-term treatment and medication to manage chronic conditions.

 

Under-investment in public health services has also been cited as a supply-side factor in the increase in catastrophic and impoverishing out-of-pocket healthcare expenditure in a 2018 report by the World Health Organization. This report also found that catastrophic health care expenditure was more common among poor households compared with rich households, as well as those with older people, and households headed by women. Catastrophic out-of-pocket expenditure was further noted as having increased in the past 20 years, highlighting the relative failure of measures such as the 2005 National Rural Health Mission and2008 Rashtriya Swasthya Bima Yojana, a government health insurance scheme intended to provide cashless health insurance cards to cover medical expenses up to $440 per family per year, for 36 million of India’s poorest families. The insufficiency of prior government efforts do not bode well for the recently-announced National Health Protection Scheme, which seeks to expand health insurance coverage to 100 million of the country’s poorest families. The Indian government has further attempted to mitigate rising rates of impoverishment from health costs (particularly due to purchase of medicines) by setting up government pharmacies across the country dispensing low-cost generic drugs under the Jan Aushadhi scheme. These pharmacies have, however, been subject to frequent stockouts, concerns about the quality of generic drugs compared with branded counterparts, and low public awareness of the campaign. 

 

Despite these measures aimed at increased health insurance coverage and reducing the crippling effects of health expenditure, an inescapable fact about public health in India remains that government spending on healthcare has remained stagnant at 1.3% of GDP between 2008 and 2015, only marginally rising to 1.4% in 2016-2017. In order to meet the demands of a population with increasingly complex health needs, including the largest number of malnourished children in the world as well as the fifth highest rates of obesity, India must increase its investment in public health facilities so as to prevent populations from seeking healthcare from more expensive private health practitioners. If the Indian government is to meet its own target of spending 2.5% of GDP on healthcare by 2025 (as outlined in its 2017 National Health Policy), it will have to increase spending by 20 percent each year, not 0.1 percent. Only then will it be able to meet the health burdens of its people, rather than burdening them further with impoverishment. 

Pakistan’s Productivity Problem

Pakistan’s economy is facing a crunch: owing to reckless foreign borrowing in last few years, declining exports, shrinking foreign remittances, and a perpetual trade deficit, the country is facing a grim short- to mid-term economic outlook. On June 20th, credit rating agency Moody’s downgraded Pakistan’s economic outlook from Stable to Negative, citing external vulnerability risks as ongoing balance of payments pressure continues to erode foreign exchange buffers. On July 3rd 2018, Fitch raised the alarm on serious risks to Pakistan’s economy, warning that the current account deficit would rise to 5.3% of GDP and the fiscal deficit would be at 6%.

This alarming economic reality is not new to Pakistan. The country continues to find itself in situations where it seeks financial bailouts to avoid complete economic collapse, and implements a few quick-fix macroeconomic reforms while leaving the fundamental problems unaddressed.

The perpetual trade deficit and shrinking foreign remittances have put pressure on the country’s foreign exchange reserves. Like many developing countries, there has been much focus on the country’s lack of productivity. However, there is one fundamental aspect of the problem that is overlooked in proposed solutions for the productivity problem: the under-utilization of available human capital.

Pakistan’s Labor Participation rate is 54.4%. That means of the working age population, only half is currently participating in the workforce. Pakistan ranks 143rd globally in Labor Participation, below both Bangladesh and Bhutan. This a significant waste, given the fact that Pakistan has a large youth population; almost 2/3rd of the population falls under working age population. This low labor participation becomes more critical because Pakistan neither has a competitive or technical advantage in high value addition segments, nor does it have abundant mineral resources to export. The country’s prime source of wealth generation remains agricultural (rice and cotton mainly) or mostly low-value products (e.g. yarn) generated using agrarian outputs. Because of a lack of education and vocational training, and a very limited proportion of the population engaged in the high-skilled, high-value crafts, Pakistan’s work force mostly falls under the category of low-skilled to unskilled.

Pakistan has a population of around 208 million and of this, around 64% of the population is of working age, and the minimum monthly wage is Pakistan is around US $120. Even if Pakistan manages to deploy an additional 5% of its working age population to work at minimum wage, it leads to the generation of an additional US$ 9.5 billion to the economy or an additional 3% of GDP. If Pakistan could achieve the labor participation rate of Malaysia, 68.2%, at minimum wage, it has the potential to add US$ 25.9 billion to its GDP, or around 8% of GDP. These figures do not represent the impact of this money circulating in the economy.

One of the most significant reasons for the low labor participation rate is the social structure of joint family system whereby one or two breadwinners earn for a family of 10-12 people. This practice is especially common among middle- and lower-income households. Since the family serves as the ultimate social security net for individuals, those not in work have little incentive to seek work actively.

 

Pakistan’s policymakers have, for many decades, emphasized economic growth through value-addition. This is in stark contrast to the reality in which most of the workforce remains unskilled. If the country wants to move out of its perpetual economic trap, it needs to shift its policy focus on bringing its working age population into the workforce. This must begin with the creation of incentives and a cost structure that enables people to work.

On the incentive side, the easiest course of action is to emphasize on agriculture and peripheral industries that require low-skilled labor to produce goods that can be exported. An emphasis on agriculture requires bringing more land under cultivation. In a country facing a water shortage, this poses a challenge but also an opportunity to invest in overhauling the country’s old water infrastructure and introducing low-tech water conservation systems like drip-irrigation. Bringing people into workforce creates a chain reaction that leads to adaptation to lifestyles on an enhanced income as well as increased consumption. This opens new avenues for economic opportunity and leads to a desire on the part of the workforce to enhance their income through improving their skillset. Countries such as China and Singapore have gone through the same cycle of moving from unskilled to skilled economies. The global drive, especially among oil-rich nations, to attain food security is also an opportunity where Pakistan’s low skilled agricultural workforce can be utilized. Here, Pakistan’s government must actively pursue this avenue to compensate for the shrinking remittance forex.

The government should also introduce policies that discourage people from remaining outside the workforce. One such incentive can be to link social security benefits to participation in workforce and limiting the number of dependents per active member of workforce. This will incentivize free-riders in families to start working in order to claim basic social welfare benefits like free healthcare, education, food support etc.

There is another more important dimension of Pakistan’s low labor participation rate and that is the lack of participation of women in the workforce. Pakistan’s female labor participation rate is 25%, which is the lowest in South Asia and among the lowest in the world. In recent years, various government and non-government programs have demonstrated that when women are trusted with economic activity, it bears economic and social benefits. Even in Pakistan, the government of Sindh’s micro-finance loans for women program is a step in this direction. The allocation of land to women for farming has similarly helped to lift many families out of poverty and has helped to improve the condition of women. Thus, a key element of engaging the population to join the workforce must be to increase women’s labor participation rate.

Expanding the economy by expanding the workforce to join low-skilled and unskilled sectors is the easiest and most feasible route for Pakistan. This will allow the country to gradually and organically enhance its economy to a more high-skilled economy with high productivity and value-addition capabilities. Failing to do this will not only rob Pakistan of sustainable economic growth, but will also prevent the negative externalities caused by a high unemployed youth population.

Whose Indo-Pacific?

American grand strategy has always aimed at suppressing security competitions and the rise of a rival hegemon. The not-so-peaceful economic and military rise of China and its ambition to craft a new maritime and continental order in Asia thus pose a challenge to seven decades of American preeminence in the region—a reality that the Trump Administration acknowledged in its first National Security Strategy. In response, the Administration has often touted its “Indo-Pacific” strategy, which in practice seeks to counter China by building a network of allies and partners to contain and push back against Chinese revisionism.

U.S. Secretary of State Mike Pompeo’s speech at the Indo-Pacific Business Forum on July 30 sought to outline the U.S. strategy in the months ahead. Secretary Pompeo’s speech was akin to one made by former Secretary of State Rex Tillerson last year. This past October, Tillerson sought to lay out the contours of U.S. India policy; ten months later, his successor seeks to fill in the blanks on the wider Indo-Pacific strategy.

For some months now allies across Asia have voiced concerns about whether the United States is a reliable partner or whether it would withdraw from the region. A number of countries—including Australia, India, South Korea and several ASEAN members—have thus sought a hedging strategy with respect to China. Secretary of Defense James Mattis’s speech at the Shangri-La Dialogue in June was aimed at reassuring the region, with Pompeo’s speech as the follow-on. Secretary Mattis stated that the Indo-Pacific strategy was a subset of the broader American grand strategy for “stability, security, and prosperity” around the globe. Mattis also asserted that what underlined this strategy were “shared principles,” a “commitment to common values,” and a “shared destiny.”

One of the challenges facing the Indo-Pacific strategy has been that every country in the region has interpreted it differently. While everyone agrees with the “free” and “open” language, different countries have chosen to emphasize different parts of the Indo-Pacific concept.

Japan views it as a strategy to counter China. During a speech that Prime Minister Shinzo Abe delivered before the Indian parliament in 2007, he spoke about the confluence of the Indian Ocean and the Pacific Ocean. Five years later during his swearing in as Prime Minister, Abe spoke about Asia’s Democratic Security Diamond, emphasizing the need for India, the United States, Australia, and Japan to cooperate for “peace, stability and freedom of navigation” in both the Oceans.

Prime Minister Narendra Modi laid out India’s definition of the Indo-Pacific during his June 2018 speech at Shangri-La, where he explained both how India viewed the idea geographically—a space extending “from the shores of Africa to that of the Americas”—and conceptually, in terms of “inclusiveness, openness and ASEAN centrality.” In their recent speeches both the U.S. and Indian leadership have emphasized that the ASEAN countries are central to the Indo-Pacific vision. That Secretary Pompeo is delivering a speech at the ASEAN security meeting in Singapore today underscores this point.

But doubts still linger, both within the United States and in Asian capitals, about whether the U.S. Indo-Pacific strategy simply comprises stray speeches by key officials. While Secretary Pompeo’s speech did not flesh out a full-fledged strategy, it did send a few key signals.

First, Pompeo stressed that the Indo-Pacific remains critical to American interests and that the United States is in the region to stay. Echoing Secretary Mattis, Pompeo reiterated American support for a regional order of “independent nations” without “domination” by any one country and emphasized U.S. “commitment” to helping its partners and allies build their economies and their security. While the top American diplomat emphasized that the Indo-Pacific strategy did not exclude any country, the message was not lost on Beijing.

Pompeo also addressed queries about whether or not the United States was willing to invest economically in the region in order to counter China’s Belt and Road Initiative (BRI). At a time of economic protectionism, when the Trump Administration’s policy is to invest more money at home and ask American companies to do likewise, it is not politically feasible for the U.S. government to invest significantly more money abroad and compete dollar for dollar with China.

What Secretary Pompeo offered instead in his recent speech was a framework and a variety of existing mechanisms—including the Millennium Challenge Corporation (MCC) and the Overseas Private Investment Corporation (OPIC)—through which the U.S. government would provide targeted assistance to countries in the region with the expectation that those countries would then use that aid to build their capacities. He also touted the BUILD Act, a development-finance bill currently under consideration in the Senate, and announced a $113 million investment to boost digital connectivity, cyber security, energy, and infrastructure.

The United States will also look to its partners and allies across the region to augment American efforts in the region. In 2017 India and Japan announced the Asia-Africa Growth corridor with over $200 billion in proposed projects across the region. In April 2018, the United States, India and Japan announced collaboration in the field of infrastructure in Nepal, Myanmar and Bangladesh.

In June 2018, Prime Minister Abe committed $50 billion for infrastructure projects across Asia. With China encroaching on Australia’s backyard in the South Pacific, Australia’s commitment to the Indo-Pacific has deepened in the past few months. Just two days after Pompeo’s speech, both Australia and Japan announced a trilateral partnership with the United States for infrastructure in the region.

Secretary Pompeo’s speech sent many of the right messages, but we still lack a clearly defined Indo-Pacific strategy. Fundamental issues still need to be resolved, starting with the geographical disconnect. While India would like the Indo-Pacific to include the western Indian Ocean (the Arabian Sea and the east coast of Africa), the United States and most others have—as of now—limited the Indo-Pacific to the western shores of India or the mandate of the INDOPACOM.

Further, the United States is not investing nearly as much money as China is offering and Japan’s billions, while necessary, are not sufficient to compete either. What is required is the elaboration of a detailed counter-strategy to China’s Belt and Road so that the world, including China, understands what “our” Belt and “our” Road is.

Global reset in uncertain times

STRATEGIC policy formulation at best of times isn’t easy. There are always some factors fully under control; some are straws in the wind and others remain perched somewhere on a high shelf not within easy reach. Mid-2018 is one of those junctures when nothing seems pegged in certainty. It happened in 1989 too when the world was in reset. It seems it is in even greater reset today. A review of the indicators and symptoms will help with the uncertainty. 

 

It must start with India’s relations with the big powers. The promising Indo-US strategic partnership seems to have taken a temporary halt as the US resets in priorities and threat perception. Trump’s elation at his perceived success in the Korean peninsula is likely to give him an out-of-proportion perception of his own capability to handle intractable conflicts. During her visit to New Delhi, Nikki Haley stated that she would not be here if India was not high in US strategic priority. Yet, the second postponement of the 2+2 dialogue, slated to be held in Washington in early July, is being interpreted negatively as “buying time for reconsideration”. Quite clearly India is being coerced to come on the line on several issues. In no particular priority, the first is Iran. With Europe uncertain on how to treat future US sanctions on Iran after the US pullout from the Iran nuclear deal, and China far too dependent on Iranian energy, the US is attempting to coercively secure the cooperation of middle powers. Turkey has refused and the Middle East alone isn’t going to make any difference. It’s a big buyer such as India that will help strangulate Iran’s economy. For India, Iran is too important, not just for energy, but for access to Eurasia, Afghanistan and Central Asia, all strategically crucial regions; much time, energy and resources have been sunk into Chahbahar to make that difference. Till India does not relent on Iran in a definitive way, the US attitude will continue. India’s stance is as yet ambivalent although bordering on acquiescence.

 

The US, more than any other nation, is aware of its dwindling power under Trump. With the concept of time-tested partnerships giving way to US isolationism and “America First”, the distribution of power is up for grabs. With a “neither here nor there” dealing with Russia and an attitude hell-bent on pushing Moscow firmly into the Chinese grip, the US wants India to back off from its time-tested partner. The last straw on the back was the Indian decision to seriously consider a Rs 40,000 crore purchase of the Russian S-400 Triumf Air Defence system for six of its air defence units. One of the world’s finest air defence systems, India decided to pitch for it as part of its return to Russia as a key arms supplier and strategic partner. 

 

Resetting ties with Russia is considered a major part of the retention of balance in relationships; a virtual return to a more equitably aligned status. However, the US has informally mentioned the application of Countering America’s Adversaries through Sanctions Act (CAATSA) to India should this deal be pursued, even as Secretary of State Mike Pompeo has apparently pushed for legislative waiver for India and some other countries. The waiver is as uncertain as any US strategic policy of the current times. 

 

On China, India’s earlier decisions to be seen as part of the US-Japan combine and the commitment towards the “Quad” have now given way to a re-examination, bordering on retention of bilaterals with all these nations without multilateral equations. No doubt, it’s part of the ongoing reset after the dangerous Doklam standoff. Wuhan followed by Sochi exemplified India’s perception that it may have left Chinese and Russian strategic concerns out of consideration in its eagerness to set its ties with the US. A military confrontation with China would leave India relatively isolated without fallback options. To its credit, China has not held back and has been forthcoming in this reset. Its perception of a new world order does include a greater role in India’s neighbourhood and it is attempting to formalise that through a 2+1 format, whereby both India and China can jointly engage a third regional country. There is no certainty on how China wishes to actually handle the US trade war coercion, but obviously its economy is also deeply linked with the US and brave statements may not find practical backing in an era of increasing economic uncertainty.

 

That brings us to Pakistan, which, for India, remains important notwithstanding perceptions that India should be concerned about bigger things. With smaller discomforts which draw public attention, no Indian Government can afford to ignore threats from that direction. With elections due in Pakistan on July 25 uncertainty again prevails. The completion of the electoral process holds no portend of greater stability in Pakistan if the army-backed Imran Khan and his Tehreek-e-Insaf party come to power. Even if Nawaz Sharif’s Pakistan Muslim League wins, the army will ensure its paralysis. Either way, Pakistan is not a nation with whom peace parleys can be expected anytime in the near future. No big power will go beyond FATF pressure to rein in Pakistan and India has to find the means of neutralising it without international support. 

 

The brilliant piece of Indian diplomacy at the beginning of 2018 witnessed outreach to ASEAN and effective straddling of the Middle East political and sectarian divide with Israeli and Iranian visits to New Delhi in quick succession and PM Modi’s rapid-fire moves with Palestine, Jordan, the UAE and Oman. Modi’s decision to follow with Wuhan, Sochi and Qingdao (SCO) were brave attempts at reset which should help straddle the period of uncertainty. What India needs to do is to ensure that its strategic independence is least compromised and its interests must scan issues far beyond just expression of satisfaction on FATF grey listing of Pakistan. That too bears its relevance, but imperative is keeping eyes peeled on the greater developments that are witnessing the shifting and distribution of international power. Not much may change with China, Russia or Europe, but the US has elections coming up that could significantly change the political landscape in six months. No formal new order is likely to emerge, but whatever shape it does take, India should aim to be supping at a higher table.

Imran Khan’s Naya Pakistan already has the ‘purana’ Pakistan solidly embedded

As Pakistanis welcome Imran Khan after his relative success in the disputed 25 July elections, Lebanese poet-philosopher Kahlil Gibran’s poem comes to mind. He wrote,

“Pity the nation that welcomes its new ruler with trumpeting,

and farewells him with hooting,

only to welcome another with trumpeting again.”

Khan has promised a ‘Naya Pakistan’ but he is already finding that this will not be an easy task.

To cobble together a majority in parliament, he is having to bargain with politicians from old Pakistan. In doing so, he is already compromising the principles some believe he espouses.

Independent members of the newly elected national assembly are being bought over with inducements as are members of the Punjab provincial assembly. In both houses, Khan’s Pakistan Tehrik-e-Insaf (PTI) is short of a majority. In Punjab, the PTI was not the single largest party but will still form the government.

Khan will also have as his cabinet members people he once called ‘daku’ (robber), including the Musharraf-era Punjab chief minister, Chaudhry Pervaiz Elahi, against whom Khan had initiated a loan write-off complaint.

But compromise is an essential part of politics and Khan is just doing what is essential for success and survival in politics. The problem is that it is also the reason why the rhetoric about ‘Naya Pakistan’ will amount to little as it has on several earlier occasions.

The Pakistani establishment and its apologists want the world to believe that Khan’s triumph is the result of the rise of a younger generation of Pakistanis. These young nationalists have been brought up on propaganda about how corrupt civilian politicians have deprived Pakistan of its rightful place under the sun.

As a celebrity who built a cancer hospital in his mother’s memory, after winning the 1992 Cricket World Cup, Khan was the perfect messenger of Pakistani hyper-nationalism –charismatic and untainted by corruption. Of course, when one has never been in public office, one cannot be accused of misusing public funds.

Before one starts believing in the “Pakistan has fundamentally changed” line currently being bandied about, it is important to remember that the two previously dominant political parties, the Pakistan Muslim League-Nawaz (PML-N) and the Pakistan Peoples Party (PPP) received 19 million votes between them, compared to the PTI’s 16 million votes.

The PTI’s votes included the large clan (Baradari) vote banks brought to the party through the establishment’s pre-election manoeuvrings and pressure. Thus, an element of ‘Purana’ Pakistan had already crept into Khan’s ‘Naya’ Pakistan even before he was forced by an inadequate number of parliamentary seats to start further wheeling and dealing.

Islamist parties, with more than five million votes, got little representation in parliament. But the sheer number of their voters means that they will continue to cast a shadow on Pakistani politics. Having no stake in parliamentary politics, their role from outside could be disruptive unless they are handled deftly.

The election is seen by most observers as less of a mandate and more as just the latest attempt by the Pakistani establishment to reinvent Pakistan’s political wheel. Before betting on the success of the latest plan, it would be worthwhile to examine the history of similar efforts in the past.

Let us start at the beginning. After years of difficulty in constitution-making following independence in 1947, Pakistan finally got a constitution in 1956. General elections were scheduled for the first quarter of 1959. The two leading parties at the time were the Pakistan Muslim League led by Khan Abdul Qayyum Khan and the Awami League led by Huseyn Shaheed Suhrawardy.

The Pakistani establishment disliked both the major party leaders. One (Qayyum) was seen as an unprincipled dispenser of patronage; the other (Suhrawardy) was considered too willing to accommodate India and the United States. The establishment tried to undermine the two parties by helping create the Republican Party by orchestrating defections in parliament and provincial assemblies.

But the Republican Party was deemed too weak to win an election. As a result, elections were put off, martial law imposed in October 1958, and the constitution abrogated. Ten years of direct rule by General Ayub Khan, who promoted himself to Field Marshal, followed. Qayyum and Suhrawardy were both disqualified from politics and Ayub became the leader of a revamped Muslim League.

By the time the country went to polls in 1970, Ayub’s establishment party had been politically decimated. Although Suhrawardy had died, the Awami League lived on and went on to win the election in erstwhile East Pakistan.

Ayub’s successor General Yahya Khan had to use force against Awami League’s Bengali supporters to reinstate the establishment’s writ, leading to East Pakistan forever becoming Bangladesh.

In West Pakistan, Ayub’s rebel cabinet member Zulfikar Ali Bhutto had formed a new party (the PPP), which won convincingly. Ironically, Yahya had brought Qayyum out of the political wilderness to try and reduce Bhutto’s impact as part of the pre-election manoeuvring. Ultimately, Qayyum served as Bhutto’s interior minister when Bhutto took the helm of a truncated Pakistan.

Every observer of Pakistan should know the subsequent story. General Zia toppled Bhutto and executed him; launched the career of Nawaz Sharif and helped create a new Muslim League; Bhutto’s daughter won an election in 1988 despite the establishment’s attempts to block her from power; and Sharif and Bhutto alternated in office in the 1990s until General Musharraf took over in 1999.

Just as Ayub had thought he had finished off Qayyum’s Muslim League and the Awami League, Musharraf worked on shutting down the PPP and Sharif’s PML. Musharraf created his own Muslim League, which did not survive after he was removed from power. The PPP won the first election after Musharraf stepped down as army chief and Sharif won the next.

This time the establishment’s exertions are a little more complex. They expect new explanations for demographic shifts and a younger generations’ disillusionment with politics – both factually correct – to justify a new round of engineering. But their game plan is not different, and I can write with confidence that neither will be its eventual outcome.

Young Pakistanis might not know Pakistan’s history, but they will soon find out that the Naya Pakistan they have been promised is the oldest of old Pakistans. It is managed and controlled by the Pakistan Establishment Inc., which has just brought in their cricket hero as the new PR manager.

Soon, characters from the Zia and Musharraf eras, their siblings or offspring will emerge as key players just as Ayub’s ‘discoveries’ re-emerged under Zia and some Zia’s protégé flourished under Musharraf. Establishment plans are about continuity, not change, and the continuity is ensured through key actors introduced to the political stage.

Take the example of Brigadier Ijaz Shah, formerly of the ISI, who served as Musharraf’s hatchet man and was even named by Benazir Bhutto as one of the persons trying to have her killed. Shah was most likely the covert handler of Jaish-e-Muhammad’s Masood Azhar and Omar Saeed Sheikh when they were arrested in India as terrorists.

Sheikh, lest you forget, is currently in prison after being convicted of murdering Wall Street Journal reporter, Daniel Pearl. He showed up at Shah’s place to turn himself in while the latter served as home secretary for Punjab under Musharraf. Shah went on to become Musharraf’s director general, Intelligence Bureau, and was the dictator’s main political manager.

He has now been elected to the National Assembly as a PTI nominee. It is unlikely that Shah has joined Imran Khan to change anything fundamental about Pakistan.

Optimism is a good sentiment but it is not as useful in analysis as a realistic knowledge of historic patterns.

Imran Khan's elevation won't make a dent in Pakistan's reputation as a 'crisis state'

The result of Pakistan’s 25 July election was foretold. The pre-polling environment had been muddied by the blatant meddling of the country’s all-powerful military, assisted by a judiciary eager to please the generals. The results – a disputed victory for cricketer-turned-politician Imran Khan and his Pakistan Tehrik-e-Insaaf (PTI) party– won’t make a dent in Pakistan’s reputation as a ‘crisis state.’

 

The establishment has wanted to root out the two previously dominant political parties, the Pakistan Muslim League-Nawaz (PML-N) and the Pakistan Peoples Party (PPP) for some time now. This time, it ignored international criticism of the one-sidedness of the election process and believes it has completed the job.

 

More than 24 hours after the end of polling, results have still not been fully declared. Polling agents were not provided signed returns and were even turned out of polling stations in some places.

 

The Election Commission brazenly claimed technical glitches without explaining why they delayed results even more than in the older era of fewer technical means.

 

Some of the 371,388 troops ostensibly on security duty did not care if they were photographed violating the sanctity of secret ballot or telling the polling staff what to do.

 

The army chief, General Qamar Bajwa, explained the military’s interest in the outcome of the election. “We are the target of inimical forces working against Pakistan,” he declared, adding, “We’ve come a long way in our comprehensive national effort to fail them.” The people of Pakistan were expected to show that they were ‘united and steadfast’ by voting and defeating the ‘inimical forces.’

 

The soldiers’ worldview begins and ends with ‘inimical forces’ working against Pakistan. They have convinced themselves over the years that poor leadership and corrupt civilians play in the hands of Pakistan’s enemies and need to be marginalised.

 

The Pakistani military obviously wants a civilian façade in the form of an ‘elected’ government that follows the military’s dictates on issues such as policy towards India, Afghanistan, Jihadi terrorism, and relations with China and the US. It does not want a genuinely popular civilian politician in power, backed by an electoral mandate, and certainly not one that might alter the country’s overall direction.

 

To be fair, Pakistani politicians do reveal their incompetence and corruption periodically, and there are many Pakistanis that share the simplistic view that bad politicians are the only thing that inhibits Pakistan’s greatness. Imran Khan, the cricket hero untainted by experience or political office, has galvanised the support of those who think that way.

 

But the generals — and now their ‘elected’ proteges — need to understand that the country’s low literacy, low exports, and high infant mortality are not the result of actions of Pakistan’s enemies or even the consequence of politicians’ corruption. Some of Pakistan’s domestic policy failures are the product of the military’s national security policies.

 

Pakistan’s problems have deep roots and addressing them requires a fundamental shift away from the narrative that has brought the country to its current state. That would need more than one election cycle to resolve but as Pakistani elections go, this one has set the stage for a more difficult road than normal.

 

No one can govern effectively when half the country believes they have been installed because of manipulation by the military and judiciary, and not by the vote of the people.

 

Even if it was not disputed, the result of the latest election would help change Pakistan’s fundamental direction only if Pakistan’s establishment decides to shut down its Jihad business and recognise Jihad-oriented nationalism as the source of Pakistan’s isolation and economic difficulties.

 

It is unlikely that PM Imran Khan will act decisively against Jihadis, given his sympathy for their cause, but miracles can happen. As for economic issues, Khan has offered platitudes in lieu of actual policy suggestions.

 

We have no idea how he would deal with the looming financial crisis, as Pakistan’s debt payments fall due, or the continued pressure from the UN’s Financial Action Task Force (FATF) to shut down finances of terrorist groups.

 

Not only will Pakistan’s reputation as a crisis-prone country not end with this election, the circumstances before the election and the disputed result, both, will contribute to a deeper crisis of legitimacy.

 

Imran Khan will need coalition partners to form a government and would eventually need to reach out to his opposition. But he is a combative, polarising figure who would need to change his personality to learn the art of compromise.

 

In helping Imran Khan fulfil his dream of becoming prime minister, the military-intelligence establishment’s objectives and script are like the one in 1990 when Nawaz Sharif was the chosen one.

 

Then, the generals believed that a pro-business conservative would help Pakistan’s international negotiating position in the aftermath of the Pressler amendment, which suspended US aid to Pakistan over its nuclear programme.

 

At that time, Sharif espoused an ultranationalist, anti-India narrative and supported the military’s Jihad in Afghanistan and Kashmir. But Sharif’s economic ambitions led him to recognise that the military’s policies were untenable, leading to a breach in his relations with the establishment.

 

Of course, the Jihad in Kashmir did not lead to the quick results Pakistan’s military and Inter-Services Intelligence (ISI) had expected nor did events in Afghanistan unfold according to their desires. But instead of recognising the overreach of their ambitions, the generals blamed the civilians for their failures.

 

Imran Khan is not Nawaz Sharif. He is 65-years-old and might opt for not challenging the short-sighted generals even after (or rather, if) he recognises the futility of their obsessions. He could be content with being Prime Minister and manage some aspects of government, without confronting the generals over altering the country’s course.

 

But if he decides to do what Pakistan really needs –a shift away from Jihad and militarism, peace and normal relations with neighbours, investment in human capital to pave the way for economic growth – then we will see a rerun of the civil-military shadow plays we have all seen before.

 

This article was originally published on theprint.com

The rise of e-commerce in the Maldives

In an economy which is greatly dominated by tourism, the exotic archipelagic nation of Maldives holds vast potential in e-commerce. Its populace has adapted to the age of internet at a better rate than most South Asian countries; with an internet penetration rate of 76.5%, the Maldives have a higher digitalization index than India, Pakistan, and Sri Lanka. Out of its tiny population of 444,259 persons, 340,000 are estimated to be internet users. With a median age of 28.4 years, the Maldivian youth is bound to grow more tech-savvy by the day. Moreover, Maldives has a potential e-commerce market of MVR 15 billion, which is expected to grow even more in the upcoming years. However, certain obstacles still exist which hinders the Maldives from reaching its full potential in e-commerce.

 

Present Situation

 

In 2009, the Maldivian public saw the entry of Ibay.com.mv, a first of its kind online marketplace. Nine years later, this June, Ms. Mariyam Wisam of Lanikea Trade officially launched koo.mv, the most advanced online marketplace in the Maldives yet. Koo is designed to eliminate the third parties that connect sellers to consumers. It is equipped with updated security features, giving the sellers the ability to sell without creating a website, as well as flexibility and accountability for the sellers by allowing consumers to pick up their goods directly from the small businesses they buy from. It also offers sellers training in subjects like merchandising, buying, packaging, and cataloging, etc.

In addtion to marketplaces, even banks have joined the digital revolution in the Maldives.  Back in 2016, the Bank of Maldives collaborated with Epic Lanka to introduce BML Mobile Pay, which enables the user’s phone to make and receive payments. The developers also made sure to make the interface as user-friendly as possible without compromising any sensitive card or account information. The Maldives Monetary Authority, too, sensed a need for a mobile payment system. The MMA suggests that, owing to the Maldives’ dispersed geography, financial services via existing mobile networks would prove to be much more cost efficient compared to setting up conventional bank branches. For this, the MMA licensed ‘Ooredoo Maldives Private Limited', which allows customers to register for a "Mobile Wallet Account" to deposit, withdraw, pay and send money in Maldives instantly through mobile phones.

 

Challenges faced

 

While legislation which regulates mobile payment services and money transfers exists, there still needs to be a trustable online payment portal which the public can rely upon. Although websites such as Koo have come up with feasible payment methods such as Cash on Delivery, the people of Maldives will need time to adjust to the rapid digitalization.

 

The lack of a well-connected postal service is also a major drawback. Being a small island nation with thousands of tiny islands scattered in a vast area of sea, transportation is an important factor in sustaining an online marketplace. A similar situation is faced in Samoa, another island nation, where an assessment from the UNCTAD (United Nations Conference on Trade and Development) suggests that a lack of a postal addressing system limits the scope of e-commerce.

 

Developments required

 

A study conducted by UNCTAD of the relationship between e-commerce and tourism in China revealed significant differences in performance between the types of tourism websites, and online travel agencies were found to perform better than other types of traditional websites.

Similarly, Maldives should employ its already dominant tourism industry to bolster the development of e-commerce. This could be done by eliminating travel agents and setting up online travel agencies, thus giving the consumer access to greater products and the ability to compare among different platforms in an immediate and convenient fashion.


The UNCTAD study also suggests that better port facilities and increased transportation options would make e-commerce less expensive. Therefore, the Maldives needs to work towards building a better infrastructure for shipping goods between individual islands and a better postal delivery service. By adopting these minute developments, the Maldives can reach its potential in e-commerce and come forth as one of the most successful e-economies of South Asia.

Pakistan election results: Imran Khan lacks political credibility

Former cricket star Imran Khan may become the next prime minister of Pakistan and achieve a personal goal, but this election and his premiership will not be good for the country, for neighbours like India and Afghanistan, or for the US. The allegations of rigging put forth by all political parties even before the release of the final results mean that Imran’s mandate is under question before he even takes over power.

 

Today, Pakistan’s military-security establishment is even more firmly in the puppet master’s seat than it was in 2008. Islamist sectarian and jihadi organizations are deeply entrenched within society, moderate and progressive political parties are on the backfoot, media and civil society fear for their lives, and the economy is in the doldrums. There is also little likelihood of Khan instituting any changes in domestic or foreign policy that will reassure Pakistan’s neighbours or the international community, including the US, or stabilize Pakistan internally. This is Pakistan’s third successive election since 2008 but it demonstrates a lack of change in the fundamental reality in the country.

 

Pakistan has spent slightly less than half of the last seven decades under military rule and there have been few elections in Pakistan that have been considered truly free and fair. However, even by those standards, there is a near consensus that this has been Pakistan’s “dirtiest” election yet. The process started almost a year before the election when former prime minister Nawaz Sharif was removed from power and banned from politics on allegations of corruption and his party was targeted in a sustained campaign involving key institutions of the Pakistani state. This was combined with overt and covert support for political novice Khan’s Pakistan Tehreek-e-Insaaf (PTI) party.

 

The Pakistani establishment—a word used for the military, intelligence and segments of the bureaucracy and judiciary—has never trusted the the country’s citizens or their mandate. Every civilian populist leader over the last seven decades has been removed from power on grounds of corruption by the establishment and its allies. Thus, every few years, the Pakistani establishment tries to get rid of the existing bunch of politicians and bring in new ones, hoping that this time round their laboratory experiment will succeed.

 

Khan is the current “favourite” of the Pakistani establishment. However, what this election has demonstrated is that while a majority of Pakistanis may have accepted this manipulation a few decades earlier, there is significant push back today by political parties and the civil society. Instead of bringing stability, the machinations during this election will only make Pakistan more unstable.

 

Pakistan ranks high on the list of countries that are dangerous for journalists and Pakistani intelligence service’s media wing, ISPR (Inter Services Public Relations) has for years framed the discourse within the media. Over the last year, there has been a blatant censorship of Pakistani news organizations and clamping down on any critique of the deep state of a much higher magnitude than has been witnessed before, and there is no sign that this will stop now that the election is over.

 

Under the cover of an order issued by the Election Commission of Pakistan (ECP), the military deployed three times the number of troops in this election than during the 2013 election. Notwithstanding the large military presence, ostensibly to protect Pakistanis, this election has actually been one of the bloodiest, with the independent human rights watchdog, Human Rights Commission of Pakistan, remarking that elections should be “gatherings” not “killing fields”. As in previous elections, the campaign rallies attacked were those of moderate political parties, not their Islamist counterparts.

 

This election also witnessed an open attempt by the Pakistani establishment to “mainstream” leaders belonging to Islamist sectarian and jihadi outfits—from global terrorist and mastermind behind the 2008 Mumbai terror attacks Hafiz Saeed to firebrand Barelvi cleric Khadim Hussain Rizvi and sectarian ideologue Aurangzeb Farooqi. Ever since the 1970s, the Pakistani intelligence has sought to push back against the more progressive and moderate civilian parties by bolstering what are often referred to as the Islam pasand parties. In earlier years it was the Jamaat e Islami and Jamiat Ulema e Islam, later the Muttahida Majlis e Amal, and today it is the Milli Muslim League (political outfit for Saeed’s Jamaat ud Dawa) and Pakistan Rah i Haq Party (political outfit for the proscribed Sunni organization Ahl al Sunnat Wa Jamaat).

 

How many of these Islamists will enter Pakistan’s national and provincial assemblies is not yet known, but their presence inside these legislative institutions will provide the Pakistani security establishment with political cover for continuing with its policy of jihad as a lever of domestic and foreign policy.

 

While Khan has been reticent to provide details about his domestic and foreign policies, what is clear is the alignment between his views and that of the deep state: sympathy for the Afghan Taliban and the Kashmir-focused jihadi groups, and belief that the US betrayed Pakistan and is close to India and that China is a more dependable ally.

 

Lacking a credible mandate and absent an overhaul of Pakistan’s foreign and security policy, a government led by Khan will be unable to reassure neighbours or the international community and avoid the path of increasing isolation, economic doldrums and domestic instability.

 

This article was originally published on livemint.com

Sri Lanka: Leviathan in an Island Democracy

“Mankind has a perpetual and restless desire for power, a desire that ceases only in death” - Thomas Hobbes

India is concerned by growing Chinese influence in the North and East of Sri Lanka. Some of this concern stems from a housing project recently awarded by the Sri Lankan Ministry of Resettlement, Rehabilitation, Northern Development and Hindu Religious Affairs to a Chinese construction company to build 40,000 houses in the North-East of the island. This infrastructure project – reflecting the Sri Lankan state’s development agenda, but to be carried out in significant part by China – will be a security concern for India.  

Fueling this concern was a speech delivered by the Chinese Ambassador in Colombo in May 2018. At a symposium titled From Millennium to the New Era: Jointly Build the Belt and Road and Embrace the Sri Lankan Dream, he stated China’s aims to boost Sri Lanka’s infrastructure as part of the former’s long-term global initiatives. 

According to Vinay Kaura’s recent commentary, part of attempts to offset China’s presence in the island, the Indian government has used the Indian C-17 Globemaster aircraft to bring Sri Lankan military personnel and their families to the Buddhist site Bodh Gaya in Bihar. A commentator has noted that this act of military-cultural diplomacy is aimed at drawing Sri Lanka back towards India’s traditional sphere of influence. Given this, the importance of Sri Lanka’s delicate balancing of these spheres of influence will be part of its idealist foreign policy. However, a realist lens suggests balancing will be a challenging task and sometimes unachievable.

China’s efforts to project power through infrastructure development and mega projects also extend underwater. For 60 years it has developed strategic nuclear submarines, nuclear attack submarines, and conventional submarines organized into submarine bases and flotillas. It has also constructed PEACE (Pakistan East Africa Cable Express),a submarine cable reaching Djibouti and Gwadar in Pakistan, many African cities, and ends in France. Laid by a Chinese company, the cable carries up to 60 terabytes per second, creating a new information super-highway. The first stage to this ambitious plan was enhancing connectivity between the Western Indian Ocean and Europe. If a second stage comes to pass, it will likely connect the Eastern Indian Ocean – encompassing Sri Lanka, Bangladesh, and Myanmar –  with east Asia. The ring of the Chinese development reverberates through continents and oceans from east Asia to Europe.  

According to international security analyst Ewen Levick, “Beijing is seeking new ways of intimidating or spying on other states.” This could occur through targeting vulnerable telecommunications cables criss-crossing the ocean bed that carry 98 percent of global internet and phone data and 95 percent of American strategic communications.

While China is expanding its global foot print developing infrastructure, across the world, internal political struggles are rife. The liberal values and norms upheld by US hegemony which undergird the international order are being questioned. The withdrawal of the US from the UNHRC revealed a sinister ethos behind the global decisions taken by the Trump administration. In response to tariffs imposed by the US on EU goods, EU import duties on US products have also opened another dialogue between China and the EU, which have agreed to form a group to update global trade rules. Trump’s weak policies recall Noam Chomsky’s 2006 characterization of the US as a ‘failed state’ due to deficit of democracy. Chomsky refers to President Bush, who redefined what a failed state looks like, “the failed state include all aggressive, arbitrary or totalitarian states those with democracy deficit, lacking the institutions that work to fulfill the principles of democracy which Chomsky argues that the description fits US itself due to deficit of democracy.”   

In Sri Lanka also, deficit of democracy got the previous government out of office two years before the tenure. The change to the previous regime was based on not adhering to well defined limits of power and not respecting the limits of power. During the last presidential election the polity was in favour of policies geared towards recalibrating the Executive, Legislative, and Parliamentary powers and define clearly its boundaries to reset the centralized authority of individual power towards the institutions. Today, three years later, there is a tendency the same polity has decided to revisit what was lost and resurrect the centralized authority, shaming the executive who pruned his own power as a failure of delivery. Political discourse is shifting towards the next presidential election. Local voters may then create an enforcer, in the manner of Thomas Hobbes’ 17th century Leviathan, in the hope that life will be better with more centralized power than is presently the case.  

The willingness of people to move to a stronger centralized authority could turn into a nightmare within a token democracy. In an expression of politics through religion, a Buddhist monk in a private religious ceremony called upon former Defence Secretary Gotabaya Rajapaksa to resurrect the authoritarian role he once carved out for himself and delivered results. This statement drew national attention and criticism from many camps. Many speak of the possibility of a presidential bid by Gotabaya Rajapaksa’s for 2020, but a decision is yet to be made formally by Rajapaksa himself.  

Apart from geopolitical influence Sri Lankan polity in the next presidential race is certain to grapple with the twin thoughts, creating a centralized leader or a leader who believes in separation of power between the executive and legislature. As Lock’s Second Treaties of Government states, It is also worth to remember due to human fragility abuse of power is certain if powers are vested in one individual. The Island nation has experienced this in the past. To the pursuit of authoritarianism through the ballot, is a section of Sri Lankan voters actively consenting to the rise of a Leviathan?

Originally posted on southasiajournal.net

Srikrishna Commission Report: Key recommendations

Last year, the Supreme Court of India ruled that individual privacy is a fundamental right guaranteed by the constitution. That decision had strong implications on how the government and the private sector handle the data of the Indian people. Also, there has been a push for data privacy legislations throughout the world. Against that backdrop, a committee was formed under Former Justice Srikrishna to recommend a way forward for India in terms of protecting individuals’ right to data privacy. A few days ago the committee submitted its final report. A recommended bill also accompanied the report. Together, the report and the bill are the most comprehensive effort to protect personal data in India.

According to the report, the accompanying bill’s jurisdiction should include all processing of personal data in India. The government might grant exception to some companies if the data they process is of foreign nationals not living in India. The law should not have any retrospective applicability. Instead, it should be phased in gradually and applied only to data processing that takes place after the law is passed.

For the enforcement of the law, the commission recommends that a DPA (Data Protection Authority) should be set up as an independent regulatory body. Responsibilities of the DPA should include monitoring and enforcement of the data privacy laws, legal affairs, policy and standard setting, research and awareness, and inquiry, grievance handling and adjudication.

In a positive development, the report recommends that consent should be required for processing of all personal data. Consent would be invalid if it is not informed, specific, clear, and capable of being withdrawn. Further, the report specifies that explicit consent is required for processing of any sensitive personal data, which it describes as “passwords, financial data, health data, sex life, sexual orientation, biometric and genetic data, and data that reveals transgender status, intersex status, caste, tribe, religious or political beliefs or affiliations of an individual.”

In an attempt to make Data Fiduciaries (data collectors/processors) more responsible, the committee recommends that Data Fiduciaries should communicate clearly with Data Principals (whose data is being collected/processes) and report any data breaches to DPA and in some cases to Data Principals. It further stipulates that Data Fiduciaries must store at least one copy of any data they process inside India. While hoping to make Data Fiduciaries more responsible, the report also grants Data Principals specific rights. It highlights that people should have the right to access and correct their data if need be. Individuals are given the “right to be forgotten” on the basis of the sensitivity of their data, scale of disclosure, whether the data is publicly recognizable, the relevance of the personal data to the public, and the nature of the disclosure.

Provisions for transfer of personal data are also found in the committee’s recommendations. Cross border transfer of personal data is allowed as long as the transferor is held accountable for any violations that cause harm to the Data Principal. To ensure accountability, the committee proposes to have model contract clauses which penalize the transferor in case of any violations. However, not all data should be transferred abroad. Any sensitive personal data that is deemed to be critical to India’s strategic interests should be strictly prohibited from being transferred abroad.

Since there are different statutes in existence that deal differently with data processing in India, the commission’s recommendations include proposals to standardize the data privacy legal code across those statutes as well. As a result, the proposal includes some amendments to the Aadhaar Act and the RTI (Right to Information) Act. Recommendations to the Aadhaar Act aim to make the UIDAI (Unique Identification Authority of India) more autonomous for better data protection. Key recommendations include the introduction of offline verification of Aadhaar numbers and new civil and criminal penalties on violators. However, the complaints could be filed by UIDAI only. With regards to the RTI act, the committee proposes that section 8(1)(j), which requires individuals to reveal personal information related to public interest, should be amended to account for the harm caused to the individual in case the data is accessed for personal interest.  If the assessment reveals that harm caused to the individual is greater than the public interest, then the individual cannot be pushed to reveal the personal data.

While the committee’s effort to propose a comprehensive legislation for data privacy is commendable, some of its recommendations have already drawn criticism. One main criticism is that the proposals are at times vague at defining key terms like critical personal data. The composition of the governance structure of DPA has also raised concerns regarding its independence. Some commentators think that the penalty enforced on companies in case of violations is too lenient. Also, the “right to be forgotten” allows an individual to ask the companies to stop further use of his/her data instead of deleting it, which is a common practice in the EU. The stipulation for companies to have at least one copy of any data stored locally means that many companies would need to invest heavily in storage servers inside India. This need effectively acts as a barrier to entry for small firms which cannot afford to spend on local servers and would rather store data on servers abroad at a much cheaper price.

All these criticisms suggest that the Srikrishna Commission Report require further tuning. Ravi Shankar Prasad, union minister for electronics and IT, law and justice, said that the government would thoroughly go through the proposed legislation but will also “apply its mind” and take all stakeholders’ considerations into account. The minister reassured that “the entire Parliamentary process will be followed”. Ravi Prasad’s comments indicate that there is still quite some time before the law is formally adopted. Before that happens, let us hope that through further consultations and reviews, the final bill adopted is one that addresses most of the criticisms. But for now let us give credit where it is due: the Justice Srikrishna Committee has provided a comprehensive framework to ensure the protection of data privacy as a fundamental right guaranteed by India’s constitution.

Imran Khan-led Pakistan won't mend ways on Kashmir, but need for financial bailout may force course correction

If one has to go by Imran Khan’s statements, after the establishment of his near certain future status as prime minister of Pakistan, most analysts in India would dismiss them as platitudes. We have heard much of these before, but not to be missed is the fact that early enough, Imran has expressed some concerns on Jammu and Kashmir. If these had been about alluding to potential peace and measures he would take towards promoting it, they may have probably reverberated quite positively in India. But what he spoke could be considered as stepping on Indian toes rather early. To have a measure of what may lie in store for the situation in Jammu and Kashmir in the future, we need to briefly delve into trends of the immediate past.

Imran Khan’s first speech was on 26 July 2018, coincidentally the anniversary of India’s victory over the Pakistan Army at the Kargil heights, an event which had completely fractured even the remnants of trust between the two countries. Over the last 19 years, Pakistan has given India little reason to restore any trust. Attempts by its political leadership to mend fences have invariably been scuttled by the all-pervading presence of the Pakistan Army. So that’s two elements that play a role in the India-Pakistan relationship with specific reference to Jammu and Kashmir – the Pakistan Army and the trust deficit. The third is the idea that by promoting calibrated violence in Jammu and Kashmir and sponsoring separatism, Pakistan can keep India on the back foot; the subset of this is an international campaign to paint India red on the issue of human rights in Jammu and Kashmir in an attempt to keep the issue alive in the eyes of the international community.

So is there anything Imran Khan is likely to do to dilute these issues? His election (if considered free and fair) cannot escape the stigma of the army’s support; if not by direct intervention, then at least, the deep influence it ensured through coercion of other parties. To build that partnership with the Pakistan Army, Imran Khan had to undergo a serious makeover from the international playboy image to one of a radical Islamist, fetching him titles such as Taliban Khan and Jihadi Khan. The promotion of Islamism (a euphemism for Islamic radicalism) has long been the Pakistan Army’s strategy to fight in Jammu and Kashmir through proxy using the jihadi route. It went wrong when some jihadis started to target Pakistan itself, but that has been largely corrected through hard internal security operations, against the so called ‘unfriendly jihadis’, where human rights were the last consideration. With all this, is there any likelihood that Imran Khan will go against the interests of the Pakistan Army which wishes to perpetuate its hold over Pakistan’s foreign and security policy and still retains another strain of radicals – ‘friendly jihadis’, to execute that.

Of course, it is not as if the arrival of Imran Khan is going to immediately lead to a drastic increase in attempts at enhancement of levels of violence at the LoC or the hinterland. However, an indicator that he continues to believe in Kashmiri separatism and will work towards that end is likely to give encouragement to elements in Kashmir to increase their pace of activities and work counter to our efforts to mainstream Kashmir’s society. The common thread still remains the Pakistan Army, which essentially orchestrated the rise of Imran Khan because the other mainstream parties got bolder as they experienced power for a longer duration. So, unless Imran can break out of the shackles of the Pakistan Army early enough, nothing is going to change as far as Pakistan’s India policy and specifically the Jammu and Kashmir policy is concerned.

Are there any chinks in this strategy, or the conditions which support it? Possibly three, with very slim openings. First are the strictures that the Financial Action Task Force (FATF) has placed on Pakistan just a few weeks before the election while grey listing it. Pakistan is required to showcase measures it has undertaken to reduce or eliminate the financial networks for the support to terror links. It is well understood that its economy is now approaching a situation where a bailout may be necessary by international financial institutions; a bailout effort would be linked to the FATF strictures. It will therefore need to get more serious about displaying its intent of reining in all sponsored terror elements that it controls while targeting India and Afghanistan. However, much will depend upon India’s ability to network and dilute the large international support groups that Pakistan has been able to get on its side through constant lobbying over many years. It is through these networks that Pakistan has always escaped more serious targeting and sanctions from the international community.

The second slim opening is with relation to China, which has warmly welcomed the election of Imran Khan. China has invested a substantial amount of money in the China Pakistan Economic Corridor (CPEC) in the hope that its efforts to reach the Indian Ocean through a safe and stable corridor will eventually fructify. That vision does not appear to be in the process of realisation, given Pakistan’s restive internal security situation. With a reset underway as far as Sino-Indian relations are concerned, China could be the one entity which could exercise greater influence towards a corresponding reset in India-Pakistan relations. It is unlikely to happen through an initiative from within Pakistan and will have to be externally driven with many nudges and pushes.

An economic collapse of Pakistan is the last thing China would wish to see, and to that end, it could play an important role to make the Pakistan leadership see the light as far as the positives of co-operation with India are concerned. This is unlikely to happen in a hurry as Pakistan’s India policy is too deeply embedded and linked to the interests of the Pakistan Army.

The third one is a shot in the dark. The more virulently anti-India jihadi elements that made attempts at political mainstreaming have not succeeded. Can this change their relationship with the Pakistan deep state? Perhaps just placing them in cold storage could be an option for Pakistan, which will also meet its needs for projecting a straighter face to the FATF. Weeding them out at this stage will be risky and unlikely to be palatable to a new government. That could at best be a temporary reprieve.

With some emerging order in Jammu and Kashmir with Governor’s rule, the Pakistan deep state could well opt for attempts to calibrate the situation to an upward spiral of violence both at the LoC and the hinterland while blaming India squarely, a game it is adept at. That would quite easily scuttle any fresh ideas that Imran Khan may have and get him more aligned with the Army’s strategy.

 

- This article, reproduced here with the Author's permission, was first published in Firstpost on 31st July 2018.