Second Opinion

Heading into 2014: Challenges Ahead

Date: January 1, 2014

The foremost challenge to Pakistan remains extremist creed and violence and concomitantly socio-economic development. Addressing these twin challenges will require clear commitment and perseverance. 2014 is a year of transition around us, bringing expected changes in India and Afghanistan, as well as in Iran-US relations. While all these trends are likely to have a profound impact on Pakistan, the situation in Afghanistan is poised to be a main source of trouble. For Pakistan, the lessons are apparent: after Afghanistan, the thirty-year conflict has hurt Pakistan more than any country. Playing favourites, however seductive or in response to regional rivalries, will only fuel the conflict, and such an activist policy can only bring harm. Pakistan should have confidence in the strength of the Islamabad-Kabul relationship that is fused with shared history, demography and geography. We should also avoid posturing ourselves as guardians of Afghan Taliban leaders, who should be free to interact with Kabul or anyone else. While the Taliban leadership enjoys our hospitality, it should not abuse it by causing disruption externally or within Pakistan. If a stable Afghanistan is in our interest, we should make a concerted effort to promote that objective.

The foremost challenge facing Pakistan in 2014 is the poor health of the economy. Signs of an ailing economy are legion: stagnant exports, rising imports, dwindling foreign exchange reserves, a depreciating rupee, severely reduced FDIs, crippling energy shortages and galloping inflation. These factors have the combined effect of further stifling the trajectory of economic growth. Unless the government makes a concerted effort to reverse these negative trends on a war footing, the country’s social stability cannot be guaranteed. The IMF bailout package is only a temporary Band-Aid measure that does not adequately address the structural roots of the Pakistani state’s fiscal crisis. The only silver lining to the dismal state of Pakistan’s economy is overseas remittances that have crossed the USD 13 billion mark. Unfortunately, instead of using this steady pool of foreign exchange earnings wisely, the government is on a senseless spending spree, investing in dubious mega projects which neither create employment nor bring long-term benefit to the country. Pakistan’s fragile economy is extremely vulnerable to exogenous shocks. A cut off in American aid, another oil shock and upheaval in the Middle East, leading to the expulsion of Pakistan workers from oil-rich countries, could just deliver a fatal blow to the economy and ignite a social implosion.

There is certainly no good news in store for Pakistan as the 2014 deadline for the withdrawal of the US-led coalition forces from Afghanistan draws closer. A nightmarish scenario is unfolding for Pakistan; the country faces an existentialist threat from rising militancy that has already claimed thousands of lives. The argument that the withdrawal of foreign forces from Afghanistan may bring an end to the militant war in Pakistan is flawed. This withdrawal, in fact, may just lead to a further intensification in terrorist violence across the country. It would not be an exaggeration to say that the post-2014 environment may bring more disaster for Pakistan’s weak and politically fragmented state. Sadly, it is a disturbing reality that radical Islamic elements have as much if not more power over Pakistani society than the state. While the state has failed to develop a national narrative against militancy, an obscurantist ideology still holds sway.

The key to future stability is for the army and government to agree on a counter-terrorism strategy and implement it. The main theme of such a strategy must be zero tolerance for terrorism, while the strategy itself must include issues such as economic development, education and reconciliation programmes in the militancy’s core recruitment areas – particularly FATA. Simultaneously, there must be a political solution to the FATA conundrum by bringing the tribal areas into the mainstream of the body politic instead of allowing the region to become a No-Man’s land. Equally, the counter-terrorism strategy must also aim to deal with those Punjabi militant groups that have been fighting in Indian-occupied Kashmir. A significant part of a counter-terrorism strategy must also be an overhaul of foreign policy, aimed at developing good neighborly relations with India, Afghanistan and Iran.

Some of the most important developments for Pakistan in the forthcoming year will be taking place outside the country. In the 12 months between the summers of 2013 and 2014, Iran, Pakistan, Afghanistan and India will have all seen fresh new leadership teams take the helm in their respective capitals.  The two new leaderships that are already in place – in Pakistan and Iran – have already made ending their isolation from their own neighbors an important priority. In 2014, we will discover what ideas the remaining two regional leaderships will bring. Once the new regional leaderships are in place, the withdrawal of US troops from Afghanistan will quicken and the war on terror is likely to draw to a close. As the superpower’s regional presence shrinks, the new leaderships will be left largely to their own devices to see if they can come together and discover the road to a vision of shared prosperity and greater regional integration. Politics will invite economics into the regional driving seat in 2014, and the key to how this will work will lie in Pakistan. Will the government of Nawaz Sharif be able to overcome the challenges that lie in its way as it tries to normalise its relationship with its neighbors?  If yes, then 2014 can be a game changing year for Pakistan’s economy. If not, then the year will be like any other.

From the perspective of the man in the street, the economic crisis and energy shortages will continue to be major challenges facing the nation. In my view, however the foremost principal challenge will be Afghanistan and the fallout from the economic slump that the country will experience in the coming year. Two million economic refugees will pour into Pakistan if the Bilateral Security Agreement (BSA) is signed without reconciliation. Furthermore, as many as 5 million economic and political refugees will enter in the absence of the BSA, since the 352,000-strong Afghan National Security Force (ANSF) will likely fall apart and Afghanistan will descend into civil war. The challenge will be to persuade/coerce the Afghan Taliban in Quetta and the Haqqanis in North Waziristan to respond positively to calls for talks with Karzai or his successor, and to persuade the Americans to offer the incentive of prisoner releases from Guantanamo to facilitate this change of heart. The challenge for Pakistan will be to use state resources to control movement across the Afghan border using biometrics, and ignoring or strictly interpreting ‘easement rights’ that have made border control problematic in the past. If all power centers unite in combating the Afghan challenge, the TTP – our principal internal threat – will be undermined particularly when our display of firm resolve will persuade foreign donors to stop assistance to this conglomerate of disparate groups, and when our border control stems the flow of narcotics that provides another source of TTP funding.

Pakistan is challenged in a number of areas. Almost half a dozen of the challenges confronting the state can be classified as serious or life-threatening, and include terrorism, poor governance, economic ills, illiteracy, an exploding population, an exodus of young talent and finally a mounting energy crisis. However, the mother of all these problems is a weak and corrupt political leadership, which in spite of its impressive rhetoric, is comprehensively incompetent. Pakistan’s political leadership hails from the privileged classes, and is a product of the best schools both at home and abroad. Yet, Pakistan’s leadership continues to fail its people. Let us also not forget military dictators from impressive military schools of higher learning. I strongly believe Pakistan has enough honest and talented individuals, especially from the new generation, who can lead the nation. It is a travesty that the current system does not allow them to rise to the higher echelons owing to the existing political culture. Finally, while I am no fan of Maulana Qadri, I agree that unless we are able to ensure the election of honest and competent people to Parliament, we will continue to move from crisis to crisis, led by the scions of the corrupt and incompetent.

For Pakistan, can the year 2014 – with its multiple challenges ranging from internal security crisis to energy shortages, and from inflation to revenue shortfalls – inspire the incumbent leadership to develop the requisite seriousness and determination required to resolve these myriad problems? Can the business of state be run professionally and competently? These questions will dominate the next year. It also remains to be seen if the Prime Minister will decide to make full use of his Cabinet, instead of a small clique of relatives and close friends for decision-making and policy formulation. Also, the present government’s ability to put together a winning team, at multiple levels-from policy-making to implementation and communication will become starkly clear. Pakistan is in desperate need of a team of competent men and women, who can formulate policies, implement them and communicate them effectively to the Pakistani public. Indeed one of the gravest problems that currently persists is that solutions are constantly espoused, but to little effect. This existing uncoordinated and cliquish approach to policy-making, policy-implementation and public communication, cannot deliver the required results.

The biggest challenge for Pakistan in 2014 will be dealing with the fallout from the continued security crisis in Afghanistan ahead of the drawdown of foreign troops there.  The fledgling reconciliation process is not likely to yield any tangible results. This will only result in mounting frustration in Washington, which in turn will aggravate US relations with Kabul and also force Pakistan to hedge its bets in anticipation of a stalemate. The hedging (i.e. alleged relations with the Haqqani Network) is already a source of consternation in the US Congress where lawmakers such as Congressman Ed Royce, the Chairman of the House Foreign Affairs Committee, are labeling Pakistan as a double-dealer   paying lip service to cooperation with the US while simultaneously undermining DC’s primary objective of bringing Afghanistan under the control of a democratically elected government. This view of Pakistan in Congress resonates in New Delhi, which fears that hardened, trained jihadi fighters could start shifting over to the Indo-Pak border once US forces withdrew. India is also increasingly obsessed with the Lashkar-e-Taiba (LeT) and its mercurial, anti-India supremo Hafiz Saeed. Converging Indo-US reservations are likely to bring greater pressure on Pakistan for doing away with its policy of hedging, and to be more transparent in its cooperation on Afghanistan. Prime Minister Nawaz Sharif promises cooperation too, but the extent to which a paranoid military establishment will adjust itself to the tunes of the peace-singing prime minister remains to be seen.

Major 2014 challenges include managing regional stability and security as the US begins its roll-back in Afghanistan; achieving IMF-agreed programme goals to preempt inflation and worsening Rupee depreciation; and managing energy supply growth effectively. Given particular sensitivities, favourable outcomes here need a convergence of policy views within the Pakistani state. To the observer, clarity on the firm policy needed – between political leadership and institutions, between the political parties, and between government and businesses – appears unformed.

The APC ‘consensus’ seems to have withered, showing little evident progress in the agreed dialogue process. Sharply different party positions exist on related matters, such as how to react to drone strikes, and with respect to the alleged shelter given to extremists. Regarding IMF undertakings, the government has withdrawn some committed fiscal actions in the face of protests by the business community, and rising government debt imperils inflation stability. Regarding energy, switches in policy such as the apparent decision to provincialise power distribution, and the return of circular debt, continue to impede prospects for early progress. Thus, the biggest challenge for Pakistan in 2014 is for the state to achieve clearer resolve and unity of purpose, and to stay the course without fear or favour.

The foremost challenge facing Pakistan today is systemic state dysfunctionality. This is a progressive political condition which need not end in state demise, but in dysfunctional state equilibrium – an even worse prognosis. Faiz Ahmad Faiz expressed this poignantly shortly before his passing when, in response to a question about how he saw the future of Pakistan, he said he feared it would remain more or less as it was. The proof of this condition is the vehement denial of its existence, accompanied by a determination to do nothing about it and to oppose any attempt by others to do something as evidenced by existing political immaturity. So what, then, are the possible solutions?

Double the tax base, drastically reduce the printing of money; climb ten places in the ratings of Transparency International, human resource development indices and human rights protections; assert the writ of the government, prosecute massive and high profile corruption including tax evaders starting with all the dead beats in Parliament; assert elected civilian political supremacy; bring regional, political, religious and sectarian minorities and women into the political system; do away with one-line approvals of the defence budget; de-politicise the ISI; and ensure that defence, administration and debt-servicing do not consume more than half the revenues collected.

More than a forecast, it is the imperatives for 2014 that should matter. Any crystal ball will reiterate the significance of several critical foreign policy and domestic challenges facing the country. But while tackling these issues, it would be important for the new government to make a distinction between manifestations, and their determinants. The latter, invariably governance-related, often remain unaddressed. Most of Pakistan’s issues —extremism, militancy, terrorism, sectarian ethnic strife, organised criminal activity, informal economy, cycle of debt, societal polarisation, energy crises, widening inequalities, and poor economic and social indicators — are all manifestations. Just as fever indicates underlying disease and flash floods herald climate change, these issues are indicative of deep-seated governance distortions: eroded capacity of institutions, institutionalised rent seeking, endemic collusion, lack of attention to decision making accountability and transparency undermine prospects for improvements. Unless this systemic malaise is tackled and treated at the core, we will continue to be mired in crisis after crisis and remain detracted from the core mission of national progress and human development.