Foreign Affairs

Trading With the Enemy

DAYS AFTER the second checkpost at the Wagah-Attari border was inaugurated on 14 April by Home Minister P Chidambaram and Pakistan’s Trade Minister Makhdoom Amin Fahim, the Pakistan Army hosted a dinner for a group of Indian journalists (including this reporter) at the Pearl Continental Hotel in Rawalpindi. A senior military officer described the difficulties faced by the army on the western front in controlling the Taliban insurgency. In great detail, he spoke about the human and monetary toll on the military. According to the finance ministry, the war on terror has cost Pakistan $67.93 billion since 2001.

As the evening proceeded, the issue of trade came up. Was the army on board with the civilian government when it came to promoting trade with India? The answer was quick, but also signalled an unwillingness to discuss the subject further. “The army is completely on board,” he said.

Why was the army suddenly interested in trade with a country traditionally perceived as a threat? Reluctantly, the officer answered, “The economy needs to be brought up. If business councils feel trade with India will help, we have no problem with it.” And then, almost as an after-thought, he added, “It (an improved economy) will also affect the military’s budget. Larger the cake, larger the share.”

What the officer admitted perhaps offered a glimpse of Pakistan Army’s thinking vis-à-vis the thaw with India. Just days before, when TEHELKA asked Foreign Minister Hina Rabbani Khar if the army was on the same page as the civilian government on the issue of trade with India, she didn’t seem happy. “This is old-style questioning,” she complained, “If the Pakistan Cabinet approves something, the Ministry of Defence is part of the decision.”

While the civilian government is trying hard to convey to the world that opening up trade with India was entirely its decision, media circles in Islamabad are abuzz with stories of how senior industrialists, hit by the economic slowdown, approached Army GHQ with a desperate plea to open up trade with India. The army gave in, some say reluctantly and some feel wilfully, depending on who you ask.

The speed at which the civilian government worked on improving trade ties with India has been unprecedented. From narrowing down the prohibited import list to offering India Most Favoured Nation status (despite opposition from the Islamist fringe), from working on non-tariff barriers to opening up the visa regime — the trade talks have seen major leaps in the past few months. This wouldn’t have been possible without the army’s support, argues a senior Indian diplomat in Islamabad.

Ayesha Siddiqa, Pakistan’s leading civilian-military relations specialist and author of Military Inc, a book on the military’s business empire, has a different opinion. “The army is not entirely thrilled by this bonhomie,” she argues. “It’s in a wait-and-watch mode.” She suggests the development has to be looked at in the context of the growing friction between Pakistan and its biggest financial and military benefactor: the United States. The two countries are not seeing eye-to-eye on Afghanistan.

Shushant Sareen, consultant, Pakistan Project, at the Institute for Defence Studies and Analyses, New Delhi, too, feels the Pakistan Army’s cooperation with the West and the US is more or less reaching a limit. “Their traditional dependence on the western market for providing succour to their economy is not going to happen anymore,” he says. Sareen points out a number of statements from Pakistani officials that show a shifting focus towards regional markets such as China, Iran, Central Asia and now India. “They are in a bit of a strategic shift so that they reduce their dependence on the western nations and tie their economy more closely to the region.”

IT IS not just the business community that is putting pressure on the army. Liberal trade relations with India have widespread support in the public, says an Indian diplomat closely working on the issue. The Pakistan economy is in a bad shape due to a small tax base, diminishing FDI and huge public debt. But the average Pakistani does not see India through this prism. “The answer is more psychological,” says the Indian diplomat. “On an average, Islamabad has eight hours of load-shedding a day. Lahore gets only 12 hours of electricity every day. The common man is suffering and when Prime Minister Manmohan Singh says India can provide 500 MW of electricity, it helps to change some minds.”

While these might seem as pressure points on the Pakistan Army to develop trade ties with India, the Military Inc has plenty to gain through the various business interests under its control. In industries such as cement, sugar, construction, power and gas, the military has a direct presence.

Former Karachi Chamber of Commerce and Industries chairman Majid Aziz says cement and power could be areas where the military could directly benefit. “Honestly, there is no limitation. Who knows, tomorrow the Pakistan Navy might want to import Nano cars from India,” he says. In the power sector, Aziz believes that there is a huge potential if RBI allows Pakistani investment. “Like yesteryear Bollywood actor Mahmood said, Baap bada na bhaiya, sabse bada rupaiya (It’s money that makes the world go round),” he adds.

Siddiqa, inventor of the term ‘mil-bus’ or military business, recalls a sugar scandal in 1997, during Nawaz Sharif ’s tenure as prime minister. Subsidised sugar was exported to India thereby resulting in huge profits for some companies, which included ones controlled by the Pakistan Army.

owever, there are also pockets of strong scepticism in the strategic community in Islamabad and Rawalpindi. To understand this better, one needs to visit the Institute of Strategic Studies in Islamabad. Simbal Khan, director for Afghanistan and Central Asia, insists that trade can’t be absolutely independent of other pending issues between the two countries. “How do you prepare the people for trade when other challenges exist?” she asks. Her colleague Najam Rafique, director for the Americas, says while India’s offer for electricity is welcome, “Until more doors are opened, trade might not be sustainable.”

Both Khan and Rafique downplay the benefits of trade with India. “Trade with India is not the only solution to Pakistan’s economic ills,” says Khan.

But Siddiqa believes otherwise. “If money is to be made, they will make it,” she says. “But that doesn’t change the perceived threat for the Pakistan Army.”

India fervently hopes that it does.

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