Zardari's gifts come with nuclear glow
By Syed Fazl-e-Haider
QUETTA, Pakistan - President Asif Ali Zardari returned to Islamabad on Monday
with large aid pledges from Libya, Britain, the US and France at a critical
time. His country, already in a dire economic state, is facing an intensifying
humanitarian crisis as result of displacement of as many as 2 million people
from the Malakand and Swat area of North-West Frontier Province, where the
Pakistani army is undertaking a massive military operation against Taliban
insurgents.
The fighting is uprooting more people faster than probably any conflict since
the Rwandan genocide of the 1990s, according to United Nations refugee agency
officials.
Zardari's overseas tour concluded with the approval of US$1.9 billion aid by
the US House of Representatives, a UK commitment
of 640 million pounds (US$989 million) over the next four years, and an offer
from France of civilian nuclear technology after decades of embargo, in
addition to aid specifically for the immediate rehabilitation of displaced
people, according to the president's spokesman. Libya and Pakistan agreed to
establish a mechanism for cooperation in financial and banking sectors,
including the setting up of a Pak-Libya bank, Dawn reported after Zardari's
three-day visit this month. They agreed to re-energise the Pak-Libya Holding
Company by establishing a joint investment company and forming subsidiaries for
oil and gas, agriculture, banking and finance and infrastructure projects, .
Critics say that, while the conflict in Pakistan's northwestern areas is
pushing more people into poverty, officials in Islamabad are engaged in using
"war on terror" to secure more funds from the US and the international
community after the country has been put at the center of the fight against
al-Qaeda under the new US strategy of President Barack Obama.
"The wide-ranging measures announced during the visit would strengthen
Pakistan's economy on the one hand and garner international political support
to a democratic Pakistan engaged in a major battle against the militants in the
Frontier and tribal areas on the other," the Dawn newspaper reported, citing a
statement from the president's spokesman, Farhatullah Babar.
"Significantly, the approval of $1.9 billion was above the Obama
administration's own request for economic assistance to Pakistan for battling
the Taliban. No less significant was French president [Nicolas] Sarkozy's offer
of a wide-ranging civil nuclear deal to Pakistan to help it overcome its energy
crisis to make the industries run and create job opportunities," Babar said.
Cash-strapped Pakistan is not in a position to immediately provide food,
shelter and rehabilitate the 1.4 million internally displaced people (IDPs) who
have fled to Peshawar and other parts of the NWFP and Punjab.
"Pakistan needs about $600 million to $800 million to cope with the influx of
internally displaced people", Shaukat Tarin, the financial adviser to the prime
minister, told diplomats from the Group of Eight industrialized countries who
had called on him on Monday.
"It has been long time since there has been a displacement this big. It could
go back to Rwanda," AP quoted Ron Redmond, spokesman for the UN High
Commissioner for Refugees, as saying. "The newly uprooted, added to over
550,000 people who were already registered as displaced in north-west Pakistan,
means there are over 2 million people separated from their homes in the
country. It's an enormous number of people."
Pakistan needs an estimated $455 million to help the estimated 1.5 million
newly displaced or conflict-affected people through to December this year, says
a report released by the United Nations Office for the Coordination of
Humanitarian Affairs (OCHA). The expanded humanitarian actions bring the total
funding requirement for the Pakistan Humanitarian Response Plan to $544
million.
According to the report, the population flows across NWFP remain dynamic, with
some very limited spontaneous returns to areas where military operations have
officially ended, and still further displacement from those same areas.
Concerns remain as to how long those returning home can stay there, due to the
volatile nature of the conflict. Another factor is the imminent harvest season,
since the overwhelming majority of those who have fled their homes rely on
agriculture for their livelihoods. The OCHA fears the situation may deteriorate
further later this year due to expansion of the conflict to new areas and the
possibility of natural hazards such as floods and earthquakes.
In an announcement overshadowed by the announcements of aid for displaced
people, France, in addition to promising 300 million euro (US$409 million) in
economic assistance for Pakistan, pledged to hammer out a Framework for
Co-operation Agreement covering energy, trade, civil aviation and defense.
France, a major exporter of nuclear technology, has agreed to transfer civilian
nuclear technology to Pakistan, which is suffering an energy crisis and needs
nuclear power to guarantee its electricity supply. Pakistan's existing civilian
nuclear energy program, with one working power station and another under
construction, was developed with Chinese aid. The offer to Pakistan comes after
France agreed in February to supply India with between two and six modern
nuclear reactors. France backs a wide-ranging civilian nuclear deal allowing
Pakistan to buy nuclear equipment along the lines of one signed by the US with
India, according to Foreign Minister Shah Mehmood Qureshi.
"France has agreed to transfer civilian nuclear technology to Pakistan. Mr
Sarkozy had told Mr Zardari that he want Pakistan to be able to buy nuclear
equipment. They have agreed that Pakistan should be treated like India,"
Qureshi told media in Paris last week. He said negotiations on the nuclear
technology accord would be held in July this year and a new framework agreement
and memorandum of understanding were likely to be signed during a visit by
Sarkozy to Pakistan in September.
Concern is growing worldwide that the expanding Taliban presence and the
country's near economic collapse could result in Islamic extremists taking over
nuclear-armed Pakistan. The economic chaos could play into the hands of
al-Qaeda and allied militant groups seeking to destabilize the country.
Analysts believe that the poor and unemployed are more prone to join the
Taliban camp. Hence, the key to combating extremism and Talibanization in
Pakistan's border areas with Afghanistan is to fight poverty through
stabilizing the economy and creating employment opportunities for the jobless.
Yet the crackdown on the Taliban in northwest Pakistan could result in a
significant increase in the number of suicide attacks inside the country,
increasing the human and economic toll. The military bills will steadily
increase, foreign investors will have even fewer reasons to put money into the
country, and imports and exports will be adversely affected, according to local
analysts. At least 4,000 people have lost their lives in terrorist attacks in
the country in the past two years, according to the official sources.
Critics say the country has already lost billions of dollars due to the US-led
"war on terror", besides huge indirect losses to the economy.
Pakistan needs up to $50 billion over the next five years to avoid an economic
meltdown, according to a report recently released by The Asia Society, a US
think-tank. The report said the global economic crisis risked further weakening
Pakistan's civilian government, which has little control over tribal areas that
have become safe havens for al-Qaeda.
"Perhaps the most urgent priority is to prevent economic collapse, which could
undermine state authority even in major urban areas in the next few months,"
the report said.
One challenge to the government is to meet is revenue collection target, due to
a decline in key revenue-generating sectors including large-scale
manufacturing.
The large-scale manufacturing sector production fell 8% in the first nine
months of the current fiscal year, which runs to the end of June, compared with
a 6% increase during the year-earlier period. The production decline is
attributed to energy shortages, higher costs, lower demand at home and slower
demand overseas - - and security issues.
The global economic recession has hit export-driven industries hard, including
textiles, which make up more than 60% share of exports.
Inflation, meanwhile, is surging, with the Consumer Price Index (CPI) gaining
22.4% in the nine months through April compared with inflation of 10.3% in the
year-earlier period, according to the Federal Bureau of Statistics. Food
inflation stood at 17% in April, while prices of non-perishable items surged
16.2% and perishable items by 22.7% from April 2008.
The International Monetary Fund (IMF) removed a government revenue target of
1.327 trillion rupees (US$16.4 billion) after Pakistani authorities concluded
talks with the IMF in Dubai last week. But while the IMF agreed to relax the
country's fiscal deficit target for 2009/10 to boost growth, it wants no less
than 20% growth in tax collection next year. Critics say an IMF-dictated budget
for the next fiscal year will further hit the poor in Pakistan, where 40% of
the population is already considered to be living in poverty.
Pakistan had asked the IMF to allow an increase in the fiscal deficit target to
4.5% of GDP instead of earlier target of 3.3% for the new fiscal year,
according to a recent report in The News. This would give the government up to
180 billion rupees more to spend on development projects as well as raising
salaries and pensions by around 15% to 20% as relief for public sector
employees.
The IMF has slashed its forecast for the country's GDP growth rate to 3.5% in
the fiscal year starting in July from 4% previously. The previous 5.6% GDP
growth target for the present fiscal year has been cut to 2.5%.
Syed Fazl-e-Haider(sfazlehaider05@yahoo.com) is a Quetta-based
development analyst in Pakistan. He is the author of six books, including
The Economic Development of Balochistan (2004).
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