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Pakistan: A firmer footing

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Pakistan: A firmer footing
By James Lamont and Farhan Bokhari

Published: April 4 2010 19:53 | Last updated: April 4 2010 19:53



Yusuf Raza Gilani, Pakistan’s prime minister, likes to receive visitors in the library of the prime ministerial mansion in Islamabad, its bookshelves decorated with ceremonial swords, daggers and other armorial objects. On the leonine crest of one small shield, a gift from Singapore’s Nanyang Technological University, is the motto: “Ponder the improbable”.

The words are apt for Mr Gilani, and for the country’s leadership as a whole. The civilian government led by him and President Asif Ali Zardari has defied the odds by staying in power and taking on militant Taliban groups that have struck the country’s main cities and even the army’s high command in Rawalpindi. Pakistanis have held their breath for the past two years, awaiting a regime change orchestrated by General Ashfaq Pervez Kiyani, the powerful army chief. In a country blighted by military rule for most of its 63 years, such a move would not be unprecedented.

However, Gen Kiyani has opted to work with the political leadership rather than against it. Indeed, the Pakistan People’s party administration is on course to become the first democratically elected government to serve a full term for three decades. It has galvanised the nation for a fight against militants. Most recently, Islamabad has basked in the embrace of Washington as both countries tried to rebuild a troubled partnership.

The combination of these three developments puts Pakistan in one of its strongest positions for two decades. The US is left with few choices but to back the country as it seeks to win the war in Afghanistan. But to become a credible and stable American ally for the long haul, Pakistan has to reform its economy, scale back the influence of the army and improve its relationship with India, its mighty southern neighbour. Gen Kiyani, a shrewd tactician, appears to be the man on whom this depends.

Not long ago, civilian rule looked shaky. There was speculation about “Minus One”, a code in Islamabad political circles for the removal of Mr Zardari, husband of slain opposition leader and former premier Benazir Bhutto. A government stand-off with the judiciary and the opposition, which caused protests in Lahore, the second largest city, almost invited the army to step in to restore order in March last year. In addition, the Taliban came within 90km of Islamabad after capturing the Swat valley, a tourist destination.

Failure to implement reforms troubles donors


Most Pakistanis were at a loss a month ago as to who was going to present the national budget, which must be delivered by the end of June. Shaukat Tarin, the finance minister, had unexpectedly quit. His reason was that his own troubled banking group needed his attention. But he could be excused for feeling the challenges of turning around the economy were just too great.

Many of his colleagues were unnerved by the timing of his exit. The coming budget is a crucial one, as the country struggles to win donor support and international credibility. The budget deficit is estimated by some to be running well above a target of 4.9 per cent. Efforts to improve government revenues have faltered, while defence spending has risen. Even the State Bank of Pakistan describes the fiscal outlook as “especially challenging”. Economic growth is a little over 2.5 per cent for the current financial year, which finishes at the end of June; foreign investment has fallen heavily over the past year.

The shortcomings will trouble the country’s financial backers. The International Monetary Fund in late 2008 provided a rescue package worth about $11.5bn to prevent a balance of payments crisis amid depleted foreign currency reserves. In return, Islamabad withdrew some energy subsidies, and promised to improve its low rate of tax collection – under 1 per cent of the population pay an income tax – and introduce a value added tax for the financial year beginning in July. Concerns are mounting over the government’s commitment to implementing these reforms. Officials justify delays on the grounds that they would provoke unrest at a time when stability is at a premium.

“The issue of economic governance is a major problem in Pakistan. All over the world, people never happily want to pay their taxes but they are forced to do so. In Pakistan, they have never been forced,” says one economist in Islamabad.

The failure to push reforms harder will lead to a tougher approach by the IMF. But it will disappoint many western donors including those, like the US and Europe, faced with a list of requests for preferential market access, accelerated delivery of funds and resources to fix the chronic power deficit. “Unless Pakistan can step up the pace of reforms, there will be little sympathy from the outside world,” says economist Sarfraz Qureshi, former head of the government-run Pakistan Institute of Development Economics.

The government has turned to Abdul Hafeez Sheikh, pictured above, a former World Bank official, as its financial adviser. When he oversees the announcement of the budget, at least he can claim the failures are not his own. But whether he can do better than Mr Tarin is doubtful.
The civilian administration looks more assured today but internal security concerns, and international engagement over Afghanistan and with India, have propelled Gen Kiyani to its side.

Although once considered a weak understudy for the president, Mr Gilani is now viewed by the military as the more popular politician and has won its support for styling himself a leader of a country on a “war footing”. His ruling party is now poised to reverse vestiges of military rule by shifting powers from the presidency to the premiership, and return Pakistan to the founding vision of a parliamentary democracy.

“We have very ably completed two years with consensus in parliament,” says Mr Gilani. “The biggest success is that we have gathered the whole nation together on one platform for a fight against terrorism and that is the biggest victory ever.”

Bigger battles lie ahead. For the US, Pakistan’s neighbours and many Pakistanis, one of the most formidable challenges is reforming the pervasive security structure, which controls everything from cornflake factories to nuclear missiles. They want a decisive break with militant organisations that continue to sow discord in India, Afghanistan and Pakistan, and pose an increasingly global threat.

Many inside and outside Pakistan continue to see the army as pre-eminent, and suspect fighting India remains its priority rather than fighting old allies among the Afghan Taliban and Punjab-based militant groups.

Yet the country has won credibility, and praise, for the latter. Its clout has grown rapidly in Washington following successful campaigns against militants in South Waziristan, close to the Afghan border, and the Swat valley, and the arrest in February of Mullah Abdul Ghani Baradar, the Taliban military chief in Afghanistan, and four other prominent Taliban leaders this year. US diplomats say the relationship has been “transformed” in recent months. “Pakistan has shown its ability to give a direction to future events, and to bring the Taliban to the negotiating table,” says one.

But there is no doubt that the US and Nato allies want Pakistan to do more. On his visit to Afghanistan last month Barack Obama, US president, said: “We have seen already progress with respect to the military campaign [in Pakistan] against extremism, but we also want to continue to make progress on [civilian assistance].”

At the core of the relationship with America is the endgame in Afghanistan. While Mr Obama is anxious to oversee the return of most of his troops fighting there ahead of the next US presidential election in 2012 and present a successful end to the campaign, Pakistan wants financial help in return for assisting the US, and its role in the country’s future recognised with political power for its former militant allies.


It is the emphasis on the fight against militants that has changed Pakistan’s precarious political balance. His leading role in engagement with Washington, which he visited at the end of last month, has brought the publicity-shy Gen Kiyani a more public role in what Hillary Clinton, US secretary of state, has called an “integrated” civilian and military leadership. The shift started in February when Gen Kiyani publicly outlined Islamabad’s priorities on its western and eastern borders, addressing goals in Afghanistan and disputes with India.

“Kiyani is clearly driving the agenda of the US-Pakistan engagement,” says Maria Kuusisto of the Eurasia Group, a political risk consultancy. “In the run-up to the dialogue, Kiyani called the relevant [secretaries], including ministers of foreign affairs, finance and water and power, to his army headquarters for consultations – and during the dialogue, Kiyani has taken the lead in presenting Pakistan’s case.”

While the US has welcomed Gen Kiyani’s participation as reflecting a united civilian and military leadership, his increasingly public role carries risks for Pakistan.

First, if the relationship with Washington falls short of expectations, Gen Kiyani stands to get the blame within Pakistan for the failure of a dialogue he is leading. Pakistan went to to the US with a list of demands, including better trade access, speedy delivery of financial assistance, construction of new power stations and help on disputes with India over the contested territory of Kashmir and water-sharing agreements in a drought-prone region. The government is also pushing for a civil nuclear deal similar to the one struck with India, which gave its nuclear programme global legitimacy – in spite of Pakistan’s record of nuclear proliferation – in the interests of “regional stability”. It came away with little new, in spite of a warm reception from Mrs Clinton.

The talks were “more significant for their atmospherics than any tangible outcome”, says Maleeha Lodhi, Pakistan’s former ambassador to the US and the UK. “Important, however, were assurances conveyed to the Pakistani delegation that America’s long- term strategic interests were consistent with Pakistan’s security.”

Taking on the Taliban


Pakistan has arrested as many as 20 Taliban and al-Qaeda leaders in its territory this year, giving hope to the US and other western allies that a country that once provided shelter to the Afghan Taliban is increasing pressure on militants along its border with Afghanistan. The arrests by the Inter-Services Intelligence military spy agency, including that of the Afghan Taliban’s second-in-command, are seen as a disruption of the Quetta Shura, a Taliban leadership council.
According to Gen Mahmood Durrani, previously Pakistan’s ambassador to the US and a former national security adviser, “The general’s presence is ‘optical’ to suggest that the army is going under the civil leaders’ [authority].”

Second, a more prominent role for the army is likely to reinforce the notion that the military is the most powerful force in the land, and that the civilian leadership is near irrelevant. This would be a stumbling block for recently restarted talks between Pakistan and India. New Delhi often complains that, with a choice between a weak civilian leadership and a powerful anti-Indian army, it does not know whom to talk to in Islamabad.

Indian commentators view American-trained Gen Kiyani as a chip off the old block. They are mistrustful of his past in the Inter-Services Intelligence, the nerve centre of the security system, and of his role as a commander in the 1990s on Pakistan’s side of the Line of Control in Kashmir at a time when cross-border insurgency increased. India’s diplomats are alarmed by what they see as his calculating introduction of water as a source of dispute. Some more hawkish analysts say water shortages in south Asia, rather than Kashmir, threaten to fuel future jihadi violence.

Gen Kiyani has impressed on the global stage, however. “The bluster that marked Musharraf has been dumped for quiet gravitas,” says Indrani Bagchi, diplomatic editor of the Times of India. She believes he is capable of outmanoeuvring India and Afghanistan at international meetings, such as January’s London conference on Afghanistan, where Pakistan’s role as a partner for the US and Nato in Afghanistan was boosted.

Third, a larger role for the army is unlikely to address some of the country’s gravest issues: the economy and internal administrative reform. Failure to oversee a robust set of economic reforms is risky in a country of 180m, mainly poor, people. Pakistan has made little progress in securing better trade access to European Union markets and larger preferential quotas for entry to the US. Uncertainty is mounting over government promises to the International Monetary Fund to strengthen the economy and a widening fiscal deficit.

“Can [Pakistan’s] policies be taken seriously when we have gone through three international financial bail-outs in the last 12 years and you can still not be certain if another one in the future will be required?” says Abid Hasan, former adviser on Pakistan to the World Bank. “There are long-term issues related to the rule of law, politics, governance and the economy.”


There is a sense in Pakistan that the military is in the ascendant; and for some this is welcome. “The Pakistani army is a very sophisticated army,” says Khurshid Kasuri, foreign minister under General Pervez Musharraf. “These people have been to defence universities all over the world. They have been to security conferences.”

Those in the wider region are less enthusiastic. Lalit Mansingh, former Indian foreign secretary, says Gen Kiyani is stepping into a more political role, though it is not clear how far he will go. He says a key question will be whether he extends his term as a service chief, a decision that must be taken by Mr Zardari. Gen Shuja Pasha, ISI head and an ally of Gen Kiyani, this year extended his term on grounds that it was not appropriate to replace him in the heat of battle. Other senior generals, such as Lt Gen Khalid Kidwai, chief of strategic plans division, have not stepped aside.

Gen Kiyani is due to step down in November but now looks nearly indispensable. “The really substantive, and strategic, exchanges [in Washington] took place outside the formal dialogue process in unpublicised meetings including a dinner hosted by Admiral [Mike] Mullen [the senior US military commander] and attended by Gen Kiyani,” says Ms Lodhi.

With the army at the head of the table and its chief likely to shun retirement, “Ponder the Improbable” may yet prove to be a fitting epitaph for a civilian government once again edged aside by the generals.



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