July 2005 News

Kashmir: The Economic Option

19 July 2005
The Dawn
Shahid Javed Burki

Karachi: I have suggested in three articles published in this space over the last several weeks that deep engagement in the dispute over Kashmir has been very costly for Pakistan. The country has paid a large economic price for continuing to keep the Kashmir dispute on the front burner for nearly six decades. The dispute has also enabled Islamic extremism to take deep roots in the Pakistani soil. The cost of getting the Islamic extremists involved in the dispute has been to allow the country to drift towards destructive radicalism. It is now possible for extremist groups to declare war on almost every action by the state or by individuals of which they don't approve. The state has succumbed to this pressure on a number of occasions, giving encouragement to these groups. It is obvious that Pakistan cannot afford to pay either the economic price for prolonging the dispute or continue to tolerate extremism to distort its society and corrupt its political system. Given all this, what are the options available to Islamabad at this time? I would like to emphasize the 'at this time' aspect. Today, the Pakistani economy is at the point of fulsome recovery; the country has also begun to attract the interest of foreign investors as vividly demonstrated by the recent bidding for the privatization of Pakistan Telecommunications and the government's decision to award the enterprise to a UAE company. India seems ready to do a deal with Pakistan on Kashmir in order to free itself from a dispute which has also been costly for it. By remaining unresolved the Kashmir issue would come in India's way as it begins to assert itself as a global power. President Pervez Musharraf has openly acknowledged that Islamic extremism is his greatest problem. The western world exposed to the expression of violence by the extremists - most recently in London perpetrated, it appears, by the people of Pakistani origin - cannot possibly tolerate them in their midst. This then is the right time to seriously ask the question about the right Pakistani approach towards Kashmir. Should Pakistan abandon its long-standing demand that the problem of Kashmir can only be resolved by the state's citizens expressing their will openly as was agreed at the United Nations in 1949? Or should Pakistan, awed by the multiple cost of keeping the issue alive, abandon the people of Kashmir to their fate and to political expediency? Neither of these approaches is practical; the second one in particular cannot be sold to the people of Pakistan even when they have been fully educated about the cost of the dispute and about how they will be hurt by letting it fester. The only feasible option appears to be to follow the way the ever- practical people of East Asia have dealt with territorial disputes. The Chinese have tolerated the virtual independence of Taiwan for almost as long as Pakistan has lived with the issue of Kashmir. They are prepared to continue with the status quo for as long as Taiwanese 'virtual independence' remains exactly that: virtual. The South Koreans are not particularly interested in reuniting with their brethren in the north, hoping that whenever that happens it would be less destructive for their own economy and political system. What these examples have to teach is the value of patience. There are times when it is much more prudent not to force solutions for which the environment is not ready. Such is the case with the Kashmir problem at this time. If Pakistan cannot force a solution that would fully satisfy its moral commitment, and political and strategic interests, how should it approach the problem of Kashmir at this time? One way out is to allow the gradual integration of the Kashmiri economy into its own system. The on-going effort to build a free trade area in South Asia over a period of a decade offers a unique opportunity for laying the ground for the resolution of the Kashmir problem. Under this approach, a beginning would be made within the Safta framework already agreed among the Saarc countries. An economic development programme for the state of Kashmir could be formulated that would rely heavily for its success on greater trade among India and Pakistan and Indian occupied Kashmir. Since such a plan would cost tens of billions of dollars to implement, it would require the active support of the international community. However, a development plan focused on the state's physical and human endowment would only work if it gains political acceptance from the parties involved in the dispute. For that to happen it must not change the political status of the state for some time to come, otherwise it would not be acceptable to India. At the same time, it must not suggest that the present Line of Control would become the international boundary. That would not be acceptable to Islamabad. Even with these two constraints in place there is enough space left within which an ambitious plan could be formulated. The plan would have to be ambitious to achieve its three objectives: increase economic welfare for the citizens of Kashmir, initiate a process that could ultimately lead to the resolution of the dispute, and draw foreign support for its implementation. For the plan to be ambitious in scope as well in its objectives it must fully involve the state's people, the governments and people of India and Pakistan, and the international community. The main focus of the plan would be to develop exchanges - movement of people, goods and services - among the three geographical entities i.e. Kashmir, India and Pakistan. The aim would be to develop an integrated market in the region, which could later develop into a common market. Such a market could later encompass other parts of South Asia. A plan of economic and trade integration involving Kashmir and the contiguous parts of India and Pakistan could become a stepping-stone towards the establishment of the free trade area in South Asia envisioned in the Islamabad Declaration issued by the leaders at the 12th SAARC summit on January 6, 2004. The plan could be built around five central elements: developing the state's water resources with a view to generating electric power; rebuilding and expanding the tourism industry; developing forestry and high value added agriculture; improving physical infrastructure; and developing the human resource to engage the young in the more productive sectors of what would essentially become a new economic system. The first element would involve re-interpreting rather than renegotiating the Indus Waters Treaty of 1960 that distributed the waters of the Indus river system between India and Pakistan. The main aim of the treaty was to make sufficient amount of water available in the eastern rivers so that the irrigation system that relied on these rivers and served many parts of Pakistan would not go dry. The treaty was remarkably successful in that it prevented a major confrontation between India and Pakistan on the issue of the use of water from the large Indus system. Kashmir's 'accession' to India had made that country sit on top of the system of irrigation the British had built in order to turn the part of Punjab that was now a province of Pakistan into a granary for colonial India. India had plans to use its upper riparian status to irrigate the deserts of Rajasthan with water drawn from the Indus tributaries. Soon after gaining independence, it began work on the Bhakra dam project to bring new land under cultivation in Rajasthan. This would have resulted in a serious reduction in the amount of water flowing into Pakistan. With the treaty in place, India was in the position to achieve that objective without reducing the availability of water flowing through Pakistan's rivers and canals. From Kashmir's perspective, the treaty froze the development of water and hydropower resources for its own people. The question then is whether the treaty could be reinterpreted in terms of not reducing the flow of water to Pakistan but jointly developing hydroelectricity to benefit both Pakistan and Kashmir. This could be done on the basis of a careful study of the power potential of the Indus system for the purpose of developing it so that it brings benefit to the power-short regions of Kashmir, Pakistan and northern parts of India. An important component of this plan would be to build an integrated power grid to serve the three areas. This plan could aim to generate between 5,000 and 7,500 megawatts of additional power for use in the three areas. The total cost to be incurred over a 10-year period, say from 2005 to 2015, would be of the order of $10 billion. Both India and Pakistan are working separately to develop the hydroelectricity potential of the rivers flowing through their parts of Kashmir. The Indian efforts have resulted in creating considerable apprehension in Pakistan that the authorities in New Delhi are attempting to subvert the Indus treaty. Islamabad has serious concerns about the Wullar Lake, Baglihar Dam and Kishenganga Dam projects. It sees all these as attempts to draw more water from the tributaries of the Indus river than India is allowed under the 1960 treaty. Unable to have its concerns resolved by India on the issue of the Baglihar dam, Pakistan has invoked a provision in the 1960 treaty that allows for external arbitration in case a dispute concerning water distribution in the system cannot be resolved by the two governments working on their own. There is, therefore, an urgent need to summon experts from both sides to develop a plan that would tap the power potential of the rivers in Kashmir without disturbing the water distribution agreement of the Indus Waters Treaty. This is best done within the scope of a sub-regional treaty, overseen by an international agency such as the World Bank. International involvement would be helpful not only because of the large amount of money involved. It would also be useful since it would keep all the parties involved on track. A sub-regional arrangement is needed since the amount of power that could be ultimately generated is far in excess of the future demand of Kashmir. There will be the need - and an opportunity - to sell the surplus power through a regional grid to India and Pakistan which could be built inexpensively by connecting the elaborate systems that already exist on both sides of the border. I will continue for the next few weeks the subject of a formulating a special economic development plan for Kashmir and using the SAFTA mechanism to bring the disputed state's economy closer to that of Pakistan.


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