Economic Importance of 2 FM’s visit (July 22. 2010)

Indian External Minister S.M Krishna and US Secretary of State Hillary Clinton descended on Islamabad. Which visit has more economic importance for the people of Pakistan? That is the question.

At the face of it Indian External Minister’s visit was to discuss a number of contentious issues between the two countries, so many people may ask where does the issue of impact on the economy comes from. Yes, Madam Clinton did bring with her a gift hamper which she announced sitting next to our gleaming Foreign Minister Makhdoom Shah Mahmood Qureshi.

Let’s take the Indian External Ministers visit first, although it ended without taking the normalization of relations between the two countries any further. Both Qureshi and Krishna sat glum-faced next to each other because they could not move any further owing to pressure from their respective hawkish lobbies.  Even a small gesture did not indicate that both sides have progressed an inch.

To me the normalisation of relations between the two countries is more important an economic issue, than the goodies package of Hillary Clinton. Pakistan has budgeted around $5 billion for defence expenditure and India has allocated $32 billion for the same this year. Now that makes every move towards peace and normalization between the two countries an economic issue. Let’s say in the first go we could cut our defence budget by 30% if we have better relations with India. This would amount to $1.5 billion, the same amount which the US is offering us on record, actual delivery is another story. And this amount we could have used for poverty alleviation. India could have saved an even larger amount.

The hawks’ argument on both sides is that higher defence budget is needed for number of reasons. Agreed. Pakistan is fighting the Jihadi Leviathan, which is devouring its own masters. Almost 150,000 army personnel have been mobilized to fight the selected Talban groups. This costs a lot. But if we have better relations with our neighbour in the East, we wouldn’t have bought multi-billion dollar F-16s, Swedish Reconnaissance planes and other expensive war machinery that is India specific. Enormous benefits of normal trade and investment relations between Pakistan and India are not discussed here because of space limitation.

The same is true for India which says that it has to balance against China but spends a lot on Pakistan specific defence expenditure.

The defence expenditure in the budget is not the full story, billion of rupees that are spent by both the countries on the mad race of making nuclear bombs and missiles are not disclosed to the suffering millions of Pakistanis and Indians.

Remember while Pakistan has 30%, India has almost 40% people living below the poverty line. So when Foreign Minister Qureshi is reckless in the comments after the talks to score numbers with the establishment, he is not helping the poverty stricken people of Pakistan which he supposedly represents. His party in any case has laid down its leader’s peace policy to appease the real masters of Pakistan in a Faustian trade off.

Similarly, the Indians are also not realizing that linking progress on talks with the issue of terrorism and people like Hafiz Saeed they are playing into the hands of these Jihadi organisations. By taking bold peace initiatives alone they can defeat these forces and their case officers.

Now we come to Hillary’s $500 million package, which was announced following the “strategic dialogue.”  The issues raised by some electronic media commentators, anchors and newspapers’ analysts were amusing. Our sovereignty champions asked why she picked up the projects on which the US1.5 billion assistance would be spent. Perhaps they missed all the reports that the projects were identified by the Pakistan government.

The major question that should have been asked was that how much of this $1.5 billion is going to actually come to Pakistan. Past experience is that almost 70% of the US financial assistance has gone back through back door in the form of consultancy fees and purchase of US equipment at high cost. Not only US but most the Western countries give tied assistance where the end beneficiary is mainly the suppliers of equipment and contractors of the donor country. If the US is not following the same policy this time, Hillary Clinton should have clarified at the very outset.

So compared with the long-term economic benefits of normalization of relations with India, the five years $7.5 billion US economic assistance package is peanuts. The trouble is that in our country economic, political and social development has to be subservient to the defence strategy, while world experience proves it should be otherwise. (

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