Another effort to normalize India-Pakistan relations begins this week, when diplomats meet to discuss the structure of a substantive dialogue likely to follow the Indian elections in April. Conventional wisdom holds that this will be another futile effort, because President Pervez Musharraf lacks the sincerity or the following to engineer a strategic shift toward peace. In this view, the Pakistan Army cannot wean itself from the need for an adversary and for Kashmir to remain on the boil.
Given the impediments to reconciliation on the subcontinent, it would be foolish to be overly optimistic about the chances of a diplomatic breakthrough. Nonetheless, surprises – pleasant, as well as unpleasant – happen in South Asia, and it is worth questioning long-held assumptions about the Pakistan Army leadership’s objectives in the talks about to get under way.
Pakistan’s leaders have lacked credibility for so long that we have become accustomed to discount what they actually say. Over the last year, President Musharraf has been saying some rather striking things, departing from ritualistic positions on Kashmir. He has called for mutual flexibility in finding a solution, relaxed Pakistan’s insistence on holding a plebiscite, and pledged directly to Indian Prime Minister Vajpayee that he would not permit “any territory under Pakistan’s control to be used to support terrorism.” Musharraf’s repositioning on Kashmir fits within his larger vision of transforming Pakistan into a “moderate, developed, enlightened, and welfare Islamic state.”
Musharraf carried this message to Davos for the World Economic Forum last month. Pakistan prepared a slick brochure for this occasion, seeking foreign investment and trumpeting positive economic prospects. One article, “Relations thaw with India,” includes the following passages: “It looks as though commerce may succeed where diplomats have so far failed. There is no doubt that the trade benefits of peace would be massive.”
Musharraf and other military leaders have often said that Pakistan’s stability rests on two pillars – the armed forces and economics. In 2002-2003, Pakistan registered a robust 5.1% GDP growth rate in spite of a global economic downturn; record overseas Pakistani remittances of $4.2 billion and foreign exchange reserves at $10 billion; significant debt reduction at 6.2% of total external debt; and a 63% increase in foreign direct investment (FDI) to $789 million.
These advances are deceiving, however. Recent gains are largely the result of debt relief from international financial institutions and from the United States, which are connected to Pakistan’s support for the war on terror. Positive short-term indicators mask troubling domestic trends and a plethora of missed economic opportunities.
In the last fifteen years, the incidence in poverty in Pakistan has risen from 20% to 33%. Pakistan’s burgeoning population, now approximately 140 million strong, is poorly educated and cared for. According to the United Nations Development Program’s Human Development Report for 2003, Pakistan spent 1.8% of its GDP on education and 0.9% on health, compared to 4.5% on defence.
As long as Pakistan remains linked to the Taliban and to jihadi groups carrying out the “freedom struggle” in Kashmir, it will not be an attractive place to invest. US foreign direct investment in Pakistan over a five-year period from 1998-2003 averaged $202 million – or twenty times less than in Bermuda, and five times less than in Panama. Since the insurgency in Kashmir began, Pakistan’s rating of attractiveness for foreign direct investment dropped from 92 to 129 out of 140 countries surveyed by the United Nations Conference on Trade and Development.
Pakistan ought to be a transmission belt for trade and energy between Central Asia and the subcontinent, but its failed national security policies toward Afghanistan and India have forfeited both markets. In 2001-2002, Pakistan’s direct trade with five Central Asian states was a paltry $27 million. The annual volume of direct trade between the one-fifth of humanity that lives in India and Pakistan stands at $250 million – approximately equal to that between the United States and Barbados. Pakistan could earn more than twice this amount by serving as a conduit for natural gas or oil from Iran and Central Asia to India.
All of these hard facts point to the wisdom of a strategic shift in Pakistan’s approach to India, rather than to continuing support for jihadi groups that threaten Pakistan’s internal stability as well as Indian security forces and Kashmiris. Have Musharraf and the top Army brass figured this out?
It’s hard to say, because Musharraf does not execute a straight-line exit strategy from failed policies. Instead, he tacks like a sailboat in open water, shifting his sails to the winds of external pressures. We will know far more about whether we are witnessing a strategic shift or mere tactical maneuver soon enough. In the meantime, it would be pure folly for India and the West to prepare for the upcoming talks on the basis of conventional wisdom.
A shorter version of this piece was published in the Far Eastern Economic Review’s issue cover-dated March 4, 2004.