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What prospects does the Shanghai Cooperation Organisation hold for India?

Niranjan Marjani

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The Shanghai Cooperation Organisation (SCO) Summit which will be held in Qingdao, China on 9 and 10 June is being looked at with a lot of expectations. This is the first time that India and Pakistan will be attending the summit as full-fledged members. At the time when India is trying to redefine its position in the emerging world order it is important to analyse India’s participation in this summit through two major perspectives. One is Prime Minister Narendra Modi’s keynote address at the recently concluded Shangri-La Dialogue. Though Shangri-La Dialogue covers only Indo-Pacific, Modi’s speech must be looked at as India’s efforts towards defining and playing a constructive role in the world order. The second perspective is India’s outreach with Central Asia.

Considering Modi’s speech as the basis for India’s policy orientation in the future it is pertinent to examine its alignment with India’s participation in the SCO. The SCO was formed on June 15, 2001 in Shanghai by China, Russia, Kazakhstan, the Kyrgyz Republic, Tajikistan and Uzbekistan. The purpose of formation of the SCO was stated as strengthening mutual cooperation in the areas of economic development and security in the region. However some observers believe that the SCO was formed to counter the influence of the United States (US) in Central Asia. India’s participation in the SCO may be considered as a balancing act since India is also closer to United States. But the SCO certainly does not fulfill India’s condition of a multi-polar order.

Modi in his speech at Shangri-La Dialogue mentioned that any system must not be directed against any one country. With reference to Indo-Pacific Modi’s statement implied that sharp polarisation in any region would give rise to conflict. Similarly strategic competition with the US as a policy creates similar polarised situation in the Central Asian region. Like Indo-Pacific there is a possibility of India becoming an instrument in the strategic posturing between different powers.

The strategic posturing against the US in the SCO is bound to increase this time since Iran would be attending this summit in the capacity of an observer. It presents China and Russia with an opportunity for closer engagements with Iran since the US has walked out of the nuclear deal. This situation only adds to India’s challenge of building a strong foundation in the grouping. The SCO is an organisation having a strong influence of China. The presence of Pakistan makes addressing of India’s strategic concerns difficult. In recent times with Russia’s leaning towards China has meant that India has to work hard and compete with China to sustain Russia’s friendship. India has close relations with Iran independent of the former’s relations with the US. Iran is strategically important for India on two counts. One, India is involved in development of the Chabahar port. This port is being developed in response to China’s development of Gwadar port in Pakistan. Secondly, Iran is India’s gateway to Central Asia. Iran is a part of International North South Transit Corridor (INSTC) which runs from Iran to Central Asia.

Closer engagements with Iran would benefit China on two fronts. It gives China an edge against the US. The second benefit would be it could potentially dilute the competition from India. Last year India opened a trade route through Iran to Afghanistan. With this route India is able to circumvent Pakistan.  This is an important strategic milestone for India since it can pose challenge to China’s encirclement of India.

Security is another important aspect for India both at national level and international level. Terrorism emanating from Pakistan is a major security concern for India. Similarly security threats for India in Afghanistan are of equal concern. Attacks on Indians in Afghanistan weaken India’s prospects of outreach to Afghanistan and Central Asia. The SCO has a body named Regional Anti-Terrorist Structure (RATS) to deal with terrorism, extremism and separatism. India is also facing these problems for a number of years. These problems are the cause of India’s troubled relations with Pakistan. India’s territorial disputes and strategic concerns with Pakistan and China are still unresolved. In addition China’s posturing against India and in support of Pakistan makes resolution of outstanding problems difficult. There have been a number of mechanisms and dialogue processes which have not yielded satisfactory results. In this scenario it remains to be seen how effective the SCO proves to address India’s concerns.

India’s participation in the SCO is meant to strengthen the former’s engagements in the region. However overlapping strategic interests of two major Asian powers China and India render the prospects of the SCO for India uncertain.

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Dilemma of Strengthening Democracy in Pakistan

Fateh Najeeb Bhatti

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No country can achieve political stability without the active coordination of different state institutions working within their own specified parameters. For a nation to keep moving smoothly on the road to prosperity and maintaining national cohesion, consensus among political forces and other stakeholders is mandatory. History of developed and successful democratic nations is evidence of such instances in which political stability came out as a result of collective national wisdom.

Talking about Pakistan’s political dilemma, a few things become very clear that certain impediments had always been there right from the emergence of Pakistan as an independent state. Due to the internal politics in the power corridors, Pakistan was unable to formulate its constitution till 1956. Soon after that, in 1958, as a consequence of a long spell of endless political differences of the politicians in power and related lack of efficiency in handling the government affairs, the very first Martial Law was imposed. As a result the country was ruled by the military General Ayub Khan, although in that period Pakistan was able to achieve high economic growth progress. Since then, Pakistan has faced four martial laws till date.

Apart from these military takeovers and running of the governments by the military leaders for almost thirty years at different times, the elected civilian governments have also ruled the country for about 40 years. It is a popular perception among the majority of masses that the politicians adopt malpractices like nepotism, aristocratic behavior, change of loyalties etc and do not run the government affairs efficiently, which motivates the military leaders to take over the affairs of the country. However, whatever the reason may be, there is no justification to not allow the democracy to strengthen its roots, as according to Pakistan’s founding fathers, Pakistan’s future lies only in the democracy.

Although not likeable, but perceivably different military leaders took over the governments based on certain grounds, propagated mainly due to the inability of the civilian leaders to govern the country efficiently and their attitude of encouraging corruption, thus, undermining Pakistan’s socioeconomic development and its foreign and defence policy objectives. For instance, in 1958, the politicians’ inability to govern the diverse two part country inevitably invited Ayub Khan to take over. Similarly, in 1969 when Ayub’s presidential democracy failed on some accounts he had to hand over the power to General Yahya Khan.

Again in 1977, when the opposition parties failed to admit the election results and Bhutto was unable to bring the opposing politicians to negotiation tables,  Zia-UL-Haq was motivated to take over, as some politicians, including late Air Marshall (R) Asghar Khan had advised General Zia to take over reins of the government. In 1999, when the then PM Nawaz Sharif sacked General Pervez while he was on the flight from Sri Lanka, back from his visit, in reaction, General Pervez Musharraf ordered a military takeover by alleging PM Nawaz Sharif that he had tried to hijack the PIA plane carrying General Pervez Mushrraf and many other passengers, by ordering that plane to land somewhere else instead of Karachi airport.

Although, elected civilian were governing the country since 2008, in view of various apprehensions the political atmosphere remained ripe with the news stories of the civil-military divide and possibilities of the military take over being there. This situation was there because on most of the national issues and defence and foreign matters both civilian and the military leadership did not seem to be on the same page. However, apprehensions about military’s alleged role in the politics are still there, despite the current Chief of the Army Staff’s negation stating that the military supports democracy in the country.

Broadly seeing through the efficiency of the civilian political leadership in strengthening democracy by cooperative politics and working on national issues with consensus, the civilian leaders are still not working as per the people’s aspirations. Many of our politicians are involved in corrupt practices. Those who declare themselves Mr. clean have not much reliable past. So far, they have not been able to prove through their efficiency that politicians can provide Pakistan with the best form of the government that can make Pakistan a welfare state providing equal opportunities to everybody. Although, it is not an excuse for military powers to intervene in politics. Hence the problem is that how this desired sustainable and durable system will come into Pakistan, because inefficiency and corrupt practices of the politicians still offer chances to the military leaders to take over the government in Pakistan.

It is also a historical fact that Pakistan, because of its ideological mythology and geographical proximity has always been a security state. It has yet to achieve the objective of a welfare state, which is a way to address the present internal and external issues of Pakistan.  Furthermore, the public perception of military institution is as a disciplined, honest and purely nationalistic institution, which majority of our politicians’ lack. The supremacy of civil institutions is alright, but to achieve it the political pundits in Pakistan has to prove themselves loyal, honest and men of words and actions. Also, both sides have to recognize each other’s constitutional role in true letter and spirit.

Neither military nor political leadership can handle the prevailing issues of Pakistan single handedly. The need of the hour is to cooperate with each other on domestic, defence and foreign policy issues. Since, the foreign policy of any country is the outcome of its internal strength, domestic peace, prosperity and national cohesion leads to a strong and effective foreign policy. This fact needs to be understood by all stakeholders. Hence every institution should remain in its own domain to strengthen government hands to serve the county in all areas, particularly in carrying out socioeconomic development of the country and running of strong foreign and defence policies. In this context, democracy will be only sustained and strengthened if all national institutions work in their own domains and mutually cooperate to maintain a good atmosphere for development of the country.

To avoid future military takeovers, sustain democracy and develop economically, we can also learn from our friendly country, Turkey. Turkey has also suffered such political upheavals in their history, but now they have managed to restrict the influence of each institution to its own sphere. Though, Pakistan’s scenario is somewhat different, but things are not as bad as  perceived by some people in Pakistan. As a student of international politics, my personal opinion about the future of Pakistan seems very bright if our politicians follow the guidelines of our founding fathers and military establishment concentrates on its own responsibilities and always gives a helping hand to the civilian governments.

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The FATF meeting: Unjustified decision for Pakistan

Uzge A. Saleem

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The threat that loomed over Pakistan since February has finally made an impact and unfortunately it is a negative one. In simpler words, Pakistan has been placed on the FATF Grey list. Optimists say that it is a rude awakening and there is still time to get a hold of matters and prevent the state from falling into the blacklist whereas the pessimists are of the opinion that the decision to sideline Pakistan like this is biased and unjustified. So far the pessimists seem to be on the logical end of the debate.

The FATF is an organization that works to keep a check on Money Laundering activities and Terrorist Financing. Pakistan is not a direct member of the organization, but is associated through the Asia/Pacific group which deals with money laundering. This is why direct impositions cannot be made on Pakistan, but APG and other financial institutions like the World Bank can be pressured not to give loans to Pakistan.

If the case is to be evaluated right from the beginning, then it can be seen that it was interest driven from the very beginning. The decision was not made in the first meeting rather a second round was called in where some members were offered incentives to vote in favor of the decision and the others were conveniently not present. This is proof of the fact that the superpower has made a decision to sideline Pakistan until and unless the state bows down to all their demands and they have gained the support of many states by one way or another. The end result of this was that in June 2018 Pakistan was finally placed on the dreaded Greylist. The injustice is evident from the fact that according to the Money Laundering index formulated by the Basel Institute there are 45 states above Pakistan in terms of money laundering of which none has been mentioned or even discussed to be placed on the FATF greylist. It is clear that the move has an agenda behind it which might be to pressurize Pakistan into following the US orders otherwise there were 45 other states to consider before bringing Pakistan into discussions regarding strategic deficiencies.

As far as Counter Terrorist Financing is concerned, it is nothing more than a mere allegation which is being propagated by the hostile next door neighbour to discredit the state’s Nuclear Program. Pakistan is not sponsoring terrorism rather it is battling terrorism on its own soil. This is being done so not to satisfy the USA but for the state’s own national security. Something which is a personal concern and a threat to the nation cannot be sponsored by the state thus all these allegations are false.

As wrong and unjust as the decision might be the bottom line is that it has been made and it will have consequences for Pakistan until and unless the state manages to get off the list. The first and most damaging consequence would be the decrease in foreign direct investment. Generally, when a state is put under suspicion of money laundering and sponsoring terrorism, foreign investors become reluctant to invest in the state because of its unstable internal conditions. It is common in the business world to opt for investment in areas with minimum chances of risk. Pakistan, with the label of the FATF grey list automatically becomes less appealing to investors. This is likely to put a strain on the country’s financial situation. Furthermore, if Pakistan fails to satisfy the organization in the future, then the FATF is at full liberty to persuade the World Bank and IMF to stop providing loans to Pakistan as well. Considering the mega projects underway in Pakistan like CPEC, foreign investment is an important aspect and any decrease in that would have a negative impact on the state.

Though it should not have been done, but since it is done, Pakistan needs to increase its efforts to change its international image and also build a comprehensive and effective plan to eradicate all issues that put the state in a position to be blamed for such matters.

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CPEC: Cause or remedy to Pakistan’s debt dilemma?

M Waqas Jan

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New times, Similar woes

Pakistan’s most recent debt and balance of payment crises have come to highlight yet again the continuing fragility of its economic and financial situation. Even despite a considerably improved security situation and a significant rise in its GDP growth rate, Pakistan’s current account deficit over the last fiscal year has neared the $16bn mark reducing its Forex reserves by nearly 40pc. This will likely further exacerbate public debt, which currently stands at a staggering 70% of GDP. Add to that the political upheaval of the current  election season; the past few year’s narrative of Pakistan emerging  as a key developing market stands in all out jeopardy, as investors both at home and abroad watch with increasing trepidation.

This bodes ominously for the widely publicized China Pakistan Economic Corridor (CPEC), which has over the last few years dominated economic discourse within the country. Having become increasingly intertwined within Pakistan’ politico-economic framework, CPEC’s detractors and supporters both at home and abroad have hotly debated whether CPEC itself is the cause, or remedy to much of the country’s economic and financial troubles.

Warnings of an impending Debt trap

For instance, the widening current account deficit over the last few years has been continually attributed to the huge import costs of machinery and related building materials for CPEC projects currently underway. This was highlighted by the government as necessary given their stance that importing such capital goods was essential to the long-term restructuring and development of the country. This was also the reason used to justify the rampant borrowing undertaken by the government. By issuing sovereign bonds and taking on expensive commercial loans, the government in effect borrowed more in its attempt to curtail dwindling Forex reserves; reserves that were, and are still crucially needed to meet the ever widening current account deficit.

In a similar vein, critics both in and outside of Pakistan have pointed out the potential of CPEC turning into a ‘debt trap’ for a structurally and financially weak Pakistan. Parallels are often drawn against the Sri Lankan experience of having China fund and build the Hambantota sea port only to have it included as part of a debt-for-equity swap, when low revenues and high liabilities left it unfeasible for the Sri Lankan government to own and operate it. The massive liabilities being incurred on behalf of CPEC projects are often compared to this example.

This is especially true considering Pakistan’s increasing reliance on both public and private Chinese banks for financing CPEC related projects. This over-reliance on Chinese funding has in fact extended beyond CPEC projects with the Chinese government repeatedly offering small bailouts to the Pakistani government. The most recent one being the $1 billion emergency loan released at the end of June to help cover Pakistan’s unsustainable import bill for the next few months.  Thus as CPEC’s detractors have pointed out, there is certainly a growing dependency on Chinese funds that can in turn be used as leverage against Pakistan on the geo-political front.

Age-old cycles of debt induced poverty

On the other hand, despite criticisms identifying CPEC as a potential threat to Pakistan’s politico-economic autonomy, it is extremely difficult to argue that the Pakistani economy would be any better off without CPEC. Owing to deep seeded politics and decades old economic structural failings, Pakistan has been unable to mount the sort of economic turnaround seen in the other post-colonial yet newly industrialized Nations of Asia.  This is in spite of the comparisons tinged with nostalgic ‘what ifs’, which are often drawn against the economies of the East Asian tigers and even China for that matter.

Yet, there has been little if any effort to emulate the export led growth strategies of the above countries backed by a strong industrial and manufacturing sector. In fact, both exports and manufacturing have instead declined over the last few years, serving as the most glaring examples of the Pakistani economy’s structural failings. Moving beyond short term measures of financing the deficit through loans and bailout programs, expanding the country’s exports is in fact the only viable and sustainable solution to the country’s widening Current Account deficit.

This is in contrast to prevailing policy measures that have continued to relinquish the country’s politico-economic autonomy to its creditors. The only difference being that policy makers, in light of deteriorating relations with the US over the last few years, have preferred to slowly substitute China for the Bretton Woods institutions as its major source of credit. As has been for decades, the economy’s reliance on external funding remains the same even in light of dramatic shifts in the global political economy.

Still, even amidst mounting public debt and new credit lines from Chinese sources, Chinese officials stationed in Islamabad have gone to great lengths to point out that, out of the $19 billion used to finance CPEC projects so far, only 31.6% has comprised of loans to the government in the form of preferential buyer credit. The rest of the financing has been doled out in the form of aid, interest free loans and loans secured by private investors from commercial banks, all of which are mostly outside of Pakistan’s debt servicing obligations. Taking into account both ongoing and completed early harvest projects, the same officials have placed the overall burden of CPEC projects at around 10% of the country’s overall debt servicing obligations. They too point out that the primary factor behind Pakistan’s worsening fiscal and external accounts is more due to its economy’s inherent structural limitations and challenges; the same challenges that have plagued Pakistan and the surrounding region for decades.  They argue that it is overcoming these very limitations and challenges that CPEC as a part of the overall vision of the Belt & Road initiative aims to address over the long run in a holistic, sustainable manner.

Of Grand visions and dreams

Coming back to Pakistan’ gaping debt crisis in relation to CPEC, it is unlikely that debt under CPEC has played a major role in bringing the economy to its present position. Despite being a slave to geo-political tensions, Pakistan’s economy has suffered more from years of mismanagement and structural failings that have moved beyond the security dynamics of the South Asian region.

What CPEC instead does, is offer in concrete terms, a viable chance for the country to prioritize its economy as the basis for its power and influence within the region, in the same way China has done at a global level.  It offers perhaps the only realistic chance for Pakistan to move beyond its Agrarian focus and develop a robust manufacturing sector to help add greater value to its exports. By successfully leveraging the massive investments in energy, transport and communications infrastructure as well as the financial opportunities under corresponding SEZs, Pakistan can use CPEC as an opportunity to break free of its present structural limitations that have so far reinforced the ensuing cycles of debt and poverty.

This however, is only possible if the underlying, decades-old problems of the present debt crisis are correctly identified and remedied in accordance with a sustainable long-term approach. While all of this is unlikely to materialize overnight, policymakers and administrators overseeing CPEC need to re-prioritize the development of long-term sources of revenue, as opposed to the short-term sources of credit that have come to characterize CPEC in day to day politico-economic discourse. If not, then the entire CPEC initiative is reduced to being just another excuse to borrow more funds to keep the economy afloat. This serves neither Pakistani nor Chinese interests in the long run.

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