by Shuja Nawaz
The potential for nuclear proliferation or extension of the Pakistani nuclear umbrella to the Arabian Peninsula will add to regional tensions and imbalances. China’s announced plans to use South Asia as an economic gateway to the Bay of Bengal and the Arabian Sea, if they reach satisfactory fruition, will pose new challenges to its relationship with India. Access to ports in Sri Lanka and Pakistan potentially give it a foothold in the Indian Ocean without subjecting itself to the danger of a long line of communication for its maritime Silk Road through the chokepoint of the Malacca Straits and a potentially hostile South China Sea.
Exogenous environmental factors, including massive earthquakes, a secular shift in the monsoon patterns from the Gangetic Plains northwards to the Himalayas and ending in the mountainous northern Pakistan rather than on the Potohar Plateau, could multiply the dangers that have been witnessed in recent years with the all-too-frequent appearance of ‘100-year floods’. Rain falling on deforested mountains and ravines in northern Pakistan creates speeding trains of floodwaters that cannot be contained by the dams and barrages on Pakistan’s rivers. Extreme fluctuation of monsoon patterns is another issue that will lead to uncertainty for South Asian farmers. 3 Delayed arrival of the monsoon and higher temperatures would create challenging conditions of large swathes of South Asia, according to research done at Purdue University. Noah Diffenbaugh, whose research group led the study, said the summer monsoon affects water resources, agriculture, economics, ecosystems and human health throughout South Asia.
Almost half of the world’s population lives in areas affected by these monsoons, and even slight deviations from the normal monsoon pattern can have great impact . . . Agricultural production, water availability and hydroelectric power generation could be substantially affected by delayed monsoon onset and reduced surface runoff. Alternatively, the model projects increases in precipitation over some areas, including Bangladesh, which could exacerbate seasonal flood risks. 4
Climate change, fuelled in part by local pollution, could accelerate, leading to a faster melting of the glaciers in the Pamir Knot that seed the northern rivers of Pakistan and India. Notwithstanding the powerful influence of natural and manmade disasters, overall and in the longer term, domestic issues and actions will likely play the greatest role in determining the future of South Asia as a region and in shaping the path of Pakistan.
The Near-Term Continuum
South Asia’s tradition-bound societies are not designed for rapid change. Complicated and overlapping caste, religious divisions, language and ethnic barriers, and geography that both divides neighbours within countries and from other states, all help shape the nature and retard the speed of change. Despite these and the huge demographic challenges facing the region, individual countries have shown a remarkable resilience and produced an enviable economic growth record.
As former Governor of the State Bank of Pakistan Ishrat Husain put it:
In the 1960s Pakistan was considered as a model developing country and its manufactured exports were higher than those of Thailand, Malaysia, Philippines and Indonesia. 5 While our larger next-door neighbor [India] was stuck with 3 percent growth rate Pakistan was averaging six percent annual growth rate. The Eastern wing of the country felt left behind in this rapid progress and decided to become independent in 1971. At that time Bangladesh’s economic prospects were dubbed by the international community in most uncharitable terms. 6
World Bank economist Shahid Yusuf also discovered in a review for the World Bank that Pakistan maintained a long-term growth rate that only came in second to China’s growth from the late 1970s to the early years of the 2000s, while India maintained a much lower ‘Hindu rate of growth’ hovering around 3 per cent. India, however, caught up and accelerated past Pakistan in the 1990s and is now poised to overtake China’s growth rate in the next decade, if it can maintain its momentum of change and reform. But the relative size of India’s economy will likely remain much smaller than China in the next two decades. Arvind Subramanian, then chief economic adviser to the Government of India, opined that India’s natural growth rate was around 7 per cent, ascribing the drag to rampant rent-seeking in India. 7 He later lowered the real growth rate, blaming official miscounting.
None of these shares or trends is likely to change in the short run (till around 2024). Government regulations and controls need to become more transparent and less onerous, and bureaucratic inefficiencies removed. At the same time, political rent-seeking needs to be replaced by less obtrusive governmental regulation of the economy. Only then will Pakistan change the underlying conditions that are holding it back. Evidence of sclerotic governmental behaviour of the past does not lend much optimism on this front.
Pakistan, like other countries of the region, suffers from vast inequalities in its component provinces, states or regions. Both democratic and autocratic governments have favoured a centralized command structure, despite attempts at freeing market forces to open up their economies. Local government is treated more as an afterthought than a critical foundation for a burgeoning democratic system that could foster an open economy.
Meanwhile, in Pakistan’s western border region, the potential for economic interaction with Afghanistan still remains more a hope than a reality. Decades of distrust and the underlying Indo-Pakistani rivalry inside Afghanistan will stand in the way of better integration, despite the aspirations of the new Afghan leadership to make Afghanistan a regional trade hub and a revived terminus of the Grand Trunk Road that links Kabul to Dhaka. A Grand Trunk Road Initiative, backed, among others, by the US and other Western countries, would be a good counter as well as complement to the Belt and Road Initiative of China and help better integrate the South Asia region. It may well outdo the Silk Road initiatives that are on everyone’s lips these days.
The best that can be hoped in keeping the centre meaningfully tied to its periphery would be to work with regional political parties in crafting links with potential economic partners across international borders. For Pakistan, this means Afghanistan and Iran in the west, China in the north, and India to the east. For India, this would mean opening up trade routes and travel points into Pakistani Punjab and Sindh, and facilitating the formation of regional markets in the south to include Sri Lanka, and in the east to include Bangladesh and Myanmar. Pakistan is trying in concert with India to open up religious tourism for Sikh pilgrims from India, with either visas upon arrival or a no-visa policy, and thereby garner immense economic and political benefits. Why not extend this to opening of more border crossings in southern Punjab and Sindh?
The lesson from the Nepalese experience with India on the removal of visas for travel between the two countries could well be applied to other regions on the periphery in South Asia. Despite the presence of such an open visa regime on paper under the aegis of the SAARC (the eight-nation South Asian Association for Regional Cooperation that includes Afghanistan as well as other South Asian countries and the Maldives) grouping, there does not appear to be a strong movement towards a change in the visa regime in practice over the next five years. In the past, India and Pakistan have raised security-related concerns about visa-free travel. When I posed the question to some former DGs of the ISI in Pakistan, all of them, whom I asked whether open visas would endanger security, responded with a resounding ‘No’. The explanation one gave me was that ‘people with bad intentions don’t apply for visas. They can just come across the border.’ A new push by the Asian Development Bank to expand visa-free travel appears to be gaining some traction. But Indian and Pakistani bureaucracies and security services will likely continue to drag their feet unless bold political leaders show them the lead.
The counterfactual may support the strengthening of regional groupings at the periphery of the region that could splinter the major states of South Asia. Pakistan appears the most vulnerable, with Balochistan becoming even more restive, unhappy with what some of its native population sees as an invasion of people from other provinces and an export of its
natural resources to the Centre without commensurate benefits to the province. The continued availability of sanctuary in Afghanistan for Baloch nationalists and reported Indian assistance as a response to Pakistan’s fomenting of trouble in Kashmir raises the spectre of the separation of that province with links to both Afghanistan and Iran. But this is avoidable via more informed and inclusive policies.
The creation of new provinces in Pakistan could forestall some of these moves, especially the treatment of the 25-million-strong population of Karachi demanding greater autonomy and the splitting of the dominant Punjab into a Seraiki province in the south and potentially a Potohar province in the north. Khyber Pakhtunkhwa has seen the rise of a youth-led Pakhtun movement demanding greater citizen rights and access to the erstwhile FATA. Khyber Pakhtunkhwa might eventually see and accept the emergence of a Hindko-speaking Hazara province abutting the Punjab with which it shares a similar language. Finally, there is the issue of the future of FATA, changing it from a buffer territory ruled from Islamabad to a full participating region of Pakistan proper. The legal process has begun. It needs to be completed quickly and effectively, taking into account the needs and views of its largely youthful population and not by alienating them with threats or coercion. Successful elections in July 2019 augur well for the transition to the merger of FATA with Khyber Pakhtunkhwa. The best scenario is the emergence of a true Pakistani confederation as envisaged in the original call for Pakistan during the waning days of British India.
Kashmiris also demand more autonomy on both sides of the Line of Control. Pakistan has failed to allow its part of Kashmir to operate autonomously and has already sliced off the northern areas of Gilgit-Baltistan, in the face of strong Indian protests. Every time a government changes in Islamabad, the government in Muzaffarabad changes as well. Meanwhile, Pakistan continues to seek greater autonomy for the Kashmiri people on the Indian side of the LOC. India wants them folded into the Union.
The greatest change in the region with regard to Centre–Periphery relations has occurred in Pakistan. The 18th Amendment laid the basis for reorganizing the fiscal and financial ties between the Centre and the provinces. Concurrently, the National Finance Commission Award recast the revenue-sharing formulae, giving the relatively poorer states a larger share of federal revenues. It took eighteen years for the National Finance Commission to reach agreement on its award. While politically this is a beneficial move that will tie the provinces together, it also created a financial nightmare and raises the spectre of unfettered provincial spending and revenue generation from unpaid loans that could well become liabilities for the Centre. The Bank of the Punjab model is eagerly being emulated by the other provinces, and if not monitored closely could well become an ATM machine for deficit spending by inept or corrupt provincial governments.
Devolution in Pakistan stopped at the provincial capitals. For it to take root and succeed, it needs to move further downward to local governments and must include the provision of services at the local community level. External threats, to Pakistan from India (and to India from China), will help hold the unions together. And as growth resumes in the region, the larger economic pie will generate a larger share for the constituent units. But much effort will be needed to make the stars align. Mere rhetoric will not suffice.
Security concerns and long-lasting territorial and natural resource issues (for example, sharing and managing of above-ground water and aquifers across borders) add to the difficulties of intra-regional trade. Opening borders would enhance the natural complementarities that exist among countries in South Asia. Enhanced trade would benefit consumers but is constrained largely due to manmade barriers that will require far-sighted political leadership to surmount. And sharing of water resources and cooperation across borders to deal with climatic changes and to stem environmental degradation that has no respect for manmade boundaries is also held hostage by politics. There does not appear to be much movement towards reaching practicable regional agreements. High tariffs and non-tariff barriers persist. The opportunity cost of conflict in the region remains high. Both India and Pakistan lose the equivalent of some 1.5 per cent of GDP because of their continuing hostilities. 8 They lose even greater proportions in wasteful expenditures and forgone tax revenues.
The near-term prospects could be bleak, if leaders remain caught up in domestic squabbles and internal security challenges. Added to these problems are sectarian and ethnic conflicts, and lack of protection of minorities and of human rights in general in all South Asian countries. If their growing urban and middle-class populations become politically aware and active over the next decade or so, they may precipitate a change in political behaviour, by wresting control from dynastic political systems. But external pressures from major neighbours like China, Saudi Arabia and distant trading and political allies like Europe and the US would be needed to alter behaviour. Saudi Arabia in particular would need to stop allowing the export of extremist jihadi ideology and cease its proxy wars against Iran in this region. Iran would also need to reduce its external footprint in the Middle East and on the Arabian Peninsula.
The rising share of the middle class in Pakistan may become another game changer for domestic and external politics and hence economics. According to the Asian Development Bank, some 32.94 per cent of Pakistan’s population falls into the middle-class category. The share of the middle class increased over the period 1990–2008 by 12.8 per cent. This trend likely will continue. 9 Though the majority of the middle class belong to the relatively lower-income brackets within that grouping, collectively they represent a growing and potentially important economic and political entity. As this growing class becomes more educated and politically active, it may produce checks and balances on traditionally heavy-handed governments and challenge also the hegemony of the security establishment.
Leading Edge of Change: Governance
The continued presence of a youth bulge in Pakistan in particular promises to be a double-edged sword. If conditions are created to provide a secure environment for growing numbers of young people and better equip them with education and the opportunities for economic activity, Pakistan will flourish. The counterfactual points to chaotic conditions and violent conflicts at the local, provincial and regional levels. The use of state force will not be sufficient to change this situation permanently, as both India and Pakistan have discovered in Kashmir and FATA respectively.
In the 2018 elections in Pakistan, some 22 million new voters entered the rolls, mainly the youth cohort that helped give Imran Khan his victory. But the census that preceded the election did not fully recognize the dominant urban landscape of Pakistan, continuing instead to cede space to rural constituencies. Yet Pakistan’s major challenges and promises lie in its burgeoning cities.
Strong and consistent governance will be the key to altering this landscape. Ceding fiscal and management authorities to local communities, creating a more balanced regional and sub-regional set of administrative structures (read new provinces in Pakistan) and greater transparency in the use of domestic and foreign resources will be critical if Pakistan is to prosper and grow in the next two decades. Domestic investment will be key to moving its economy to a higher plane. Pakistan needs to double its foreign exchange reserves, domestic investment and foreign direct investment in the next five years to transform its economic system.
All this is doable, if the government does not take a breather after successfully surmounting the immediate hurdles it faces and as it implements an IMF programme. If the government is prepared to take many of these measures on its own, before turning to external financing, Pakistan’s annual growth rate could return to the 7–8 per cent range.
As discussed earlier, the dynastic and spoils-based system of political parties that suffered a setback in the 2018 elections still remains a major hindrance to change, forcing some of the best and brightest Pakistanis to exit their own countries and head to developed countries to create new opportunities for themselves. Many of Pakista
n’s leading political parties are non-democratic in their internal structure and management. Power resides in the hands of families or individuals. The rise of the PTI under Imran Khan is a break with this trend but faces huge odds in governing a fractured polity, especially since he had to rely on imported politicians from other parties, many of whom are feudals, or politicians and technocrats associated with previous military regimes. And though the Islamists did not fare well at the polls again, they remain a threat to the progressive political order, especially if they continue to be available and are used as clients of political parties or military agencies for domestic or external purposes.
