Moment is Ripe for Some Creative Thinking on South Asia

The United States should launch a Marshall Plan-like initiative to reinforce economic cooperation between India and Pakistan

The breakdown in U.S.-Pakistan relations over the past year has put in stark relief the two core strategic conundrums Washington has vis-à-vis Islamabad, as well as the integral role India plays in both of them.  The first is to encourage a more constructive Pakistani approach as the political endgame approaches in Afghanistan, which Islamabad regards as a theater for its endemic rivalry with New Delhi.  The second is to steer a nuclear-armed but deeply dysfunctional Pakistan away from failed state status, a harrowing prospect that many believe is all too plausible unless Islamabad is convinced that its prospering neighbor to the East actually represents an economic opportunity rather than an existential threat.

The Obama administration entered office believing that Pakistani cooperation on Afghanistan was a function of addressing its acute security anxieties regarding India.  Two weeks before the November 2008 election, Barack Obama declared that resolving the perennially-inflamed dispute over the Kashmir region was one of the “critical tasks” for U.S. foreign policy and worthy of “serious diplomatic resources.”  It was a valid observation but the manner in which Washington pursued it guaranteed a quick failure.  Moves to appoint a turbo-charged envoy (in the person of Richard Holbrooke) with the mandate of mediating the Kashmir issue– similar to U.S. efforts to broker the Middle East peace talks – met with Pakistani approval but proved too much for the sovereignty-conscious Indians to accept.

For the past three years, Washington has struggled to find a way to bring the two sides together and focus them on their common interests.  Fortunately, after a hiatus caused by the 2008 terrorist strikes in Mumbai, the peace dialogue between India and Pakistan has now moved into full gear. The Obama administration would do well to reinforce this promising effort, which if it bears fruit would have a very positive impact on U.S. security interests in the region.

The annals of India-Pakistan relations are filled with numerous false dawns and the current moves could well founder upon the sharp historical animosities that regularly bedevil bilateral affairs.  But things may be different this time.  Reports out of the Pakistani capital indicate that the political class realizes the country is in desperate economic straits and that closer ties with India constitute a much needed lifeline.  The military establishment is also said to understand that the eastern border needs to be stabilized so resources can be focused on combating rising internal security threats.  General Ashfaq Parvez Kayani, the powerful army chief who has maintained a hard line vis-à-vis New Delhi in the past, now speaks of the need for “peaceful co-existence” with India and proclaims that his country “can’t keep spending on defense alone and forget about the development.”  His words follow a joint plea by one of his predeccesors and a former chief of the Indian air force for new confidence-building measures between the two militaries.

So far, the progress in bilateral relations has been most visible on the economic engagement front.  The two sides have pledged to more than double their two-way trade flows – to the $6 billion annual level – by 2015.  Islamabad has also extended “most favored nation” trade status to New Delhi, reciprocating the status India conferred upon Pakistan years ago.  This development promises to enliven the 2006 South Asia Free Trade Agreement which up until this point has been all but a dead letter.

The Indian and Pakistani central banks have announced plans to open branch offices in the other country, a move that will help facilitate cross-border transactions.  Both countries have also advanced initiatives to enhance energy cooperation, including joint development of a natural gas field inTurkmenistan.  And expert talks on expanding commerce in the electrical power and petroleum sectors have taken place in recent weeks.

The sense of bilateral optimism was on full display at last week’s inauguration of a new customs facility at the Attari-Wagah border crossing that lies midway between Lahore and Amritsar.  Indian officials used the occasion to announce they would rescind the long-standing prohibition on foreign direct investment from Pakistan.  Home Minister Palaniappan Chidambaram, a senior member of Prime Minister Manmohan Singh’s Cabinet, called for dismantling all bilateral trade barriers and hinted that a greatly liberalized visa regime for Pakistani visitors is in the works.

For his part, Shahbaz Sharif, the chief minister of Punjab province in Pakistan, effusively suggested the creation of free trade zones aimed at fostering bilateral exchange and the opening up of supply-chain links between the port city of Karachi and the Indian states of Rajasthan and Punjab.  He also proposed establishing a common market along the lines of the European Union – something that Pakistani President Asif Ali Zardari, who was once castigated as being soft on India, has also advocated – and declared that the two countries should now concentrate on waging “a war of economic competition.”

(By the way, Indian Prime Minister Manmohan Singh has outlined a similar vision for regional integration.)

Significantly, Sharif is the younger brother of former Prime Minister Nawaz Sharif, Zardari’s chief political rival.  His words signify that for all of their internecine squabbling, Pakistan’s main parties at least agree on the value of improved economic cooperation with India.

If deeper trade ties were to develop between South Asia’s largest economies, they would produce significant economic and (eventually) security dividends for the entire neighborhood.  According to various studies, a more liberalized trade regime would increase bilateral exchange at least 20 times above current figures as well as boost economic prosperity in both countries.  Two new reports by Indian business groups (here and here) argue that cross-border trade could easily quadruple in just a few years if both governments moved to increase economic linkages.  Strengthening these will be one key in securing the increasing desire in both countries for more normalized relations, especially since they work to contain the risk that episodic diplomatic frictions or military crises could escalate and disrupt overall bilateral affairs.

One heartening by-product of the intensifying economic diplomacy is a new willingness to discuss long-running territorial disputes, including Kashmir, the Siachen Glacier and Sir Creek.  Senior defense officials from the two sides will gather in the coming weeks to exchange views on these items, in preparation for Indian Foreign Minister S.M. Krishna’s trip to Islamabad this summer, possibly followed by a visit by Mr. Singh toward the end of the year.  The discussions could even pick up where the intensive back-channel peace process both sides undertook in 2004-07 left off.  Although those negotiations ultimately collapsed due to Pervez Musharraf’s political travails, they may have come tantalizing close to defusing the volatile Kashmir issue.

The United States can reinforce these hopeful stirrings by launching a Marshall Plan-like initiative geared toward the expansion of cross-border economic linkages between the two countries.  One of the keys to the Marshall Plan’s far-reaching success was the major financial inducement it gave European countries devastated by World War II to frame their economic futures in conjunction with their neighbors.  By putting an emphasis on reconstruction projects that crossed national frontiers, it was an important catalyst for the historic reconciliation between France and Germany and paved the way for the deep economic integration embodied in today’s EU.

A similar vision should inspire an U.S.effort to bolster cross-border economic cooperation between India and Pakistan.  This initiative would be aimed at helping the two countries, on a joint basis, upgrade and expand the meager transportation infrastructure presenting connecting them.  It would support projects that increase road and rail linkages, as well as the number and capacity of customs posts.  It would help provide resources for modernized seaport facilities that enable more two-way trade.  And with each country plagued by chronic power shortages, it would provide seed capital for cross-border energy projects such as joint electrical grids or the proposed natural gas pipeline connecting Central and South Asia viaAfghanistan.

The original Marshall Plan entailed a staggering sum of money – well over $100 billion in today’s terms – and an austerity-minded U.S. Congress would certainly balk at any scheme with a similar price tag.  But the initiative outlined here need only entail a modest level of expenditures – say, $50-75 million per year over a five-year period – and could be paid for by redirecting funding already authorized under the 2009 Enhanced Partnership with Pakistan Act.  Better known as the Kerry-Lugar-Berman bill, the act provides $1.5 billion annually in non-military assistance to Pakistan through 2013.  But due to a variety of factors, much of its economic development funds remain unspent.

This effort would also dovetail well with the Obama administration’s “New Silk Road” initiative that is designed to ensure Afghanistan’s economic viability by building it up as a regional trade and transit hub.  Additional countries, such as those Washington has enlisted in the Silk Road plan, also could be invited to contribute resources.

Obviously, this initiative offers no magic bullet for transforming the singular intensity of the India-Pakistan strategic rivalry or the complex security dynamics in Afghanistan.  But it would be a creative investment in nurturing promising though still fragile developments already underway in South Asia, which if they take root over the long term would help lead to a game-changing situation: One in which Islamabad looks upon New Delhi more as a partner than as an inveterate enemy.  If such a development came to pass,U.S.interests throughout the entire region would be vastly easier to safeguard than they are today.

An earlier and much abbreviated version of this post was published by the Christian Science Monitor.

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One thought on “Moment is Ripe for Some Creative Thinking on South Asia

  1. Pingback: Pakistan : The Untold Story « myglobalcommunitytoday

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