February 2006 News

Major Kashmir study sees trade as the road to peace

4 February 2006
The Daily Times
Khalid Hasan

Washington DC: A new study released on Friday proposes the creation of a special economic zone in all of Kashmir, with duty free access to India and Pakistan, along with an institutional framework for joint investment. This and a large number of other recommendations are contained in the report authored by Teresita Schaffer, head of the South Asia programme at the Centre for Strategic and International Studies (CSIS) entitled ‘Kashmir the economics of peace building’, the study was financed by Farooq Kathwari, whom the author describes as a “dedicated son of Kashmir and a passionate believer in the American dream.” Kathwari is the founder and financier of the Kashmir Study Group which has produced a number of reports on Kashmir, some of which have contained a number of imaginative and “out of the box” proposals. The report was unveiled at a meeting with two discussants, former Indian Foreign Secretary Salman Haider, currently at the US Institute of Peace as a senior fellow, and Farooq Kathwari. After Ms Schaffer had outlined the main features of the report and following presentations by Haider and Kathwari, the floor was thrown open for a lively question-answer session. Ms Schaffer, a former US ambassador and a leading US authority on South Asia, writes that the recommendations made in the 68-page report aim at improving the economy and increasing the linkages between the regions of Kashmir and between Kashmir and the surrounding countries. This is sought to be ultimately accomplished through “a more vigorous private economy” which, in turn, is unlikely to pick up until security conditions improve. The absence of a settlement in Kashmir and the remoteness of Azad Kashmir and the Northern Areas also discourage investment. Some of the steps suggested can be taken without coordination between India and Pakistan. The report recommends that employment must be increased in both Indian and Pakistani-administered parts of the former princely State through such public works as road building and environmental cleanup. In Srinagar, business services are needed in order to expand trade, including a one-stop fully equipped dry port. This will play a leading role in the expansion of trade between Kashmir and India and Pakistan, as well as with the outside world. Srinagar airport should be designated an international airport with the full range of services for making direct exports, charter tourist flights and, ultimately, travel to destinations on both sides of the Line of Control. Refugee settlement plans should be established for Pandits driven out of the Valley and refugees living in camps in Azad Kashmir. India should be encouraged to open up the State to foreign bilateral aid donors. The report says, “The most powerful engines of economic growth and integration require joint action and, in several cases, private support.” Some of the steps suggested, it adds, are practicable today, while others should be considered as ingredients in an eventual Kashmir settlement. The report recommends that earthquake relief and reconstruction activities across the LoC should be integrated and plans developed for future disasters. The road between the two Kashmirs for trade and truck traffic should be opened, while joint initiatives on water management and the environment under which local authorities from AJK and Indian Kashmir should meet periodically. A joint Kashmir tourism development board should be set up, composed primarily of representatives of tourist-related industries in AJK, the Northern Areas and the rest of the State. The electricity grids on both sides of Kashmir should be linked as hydropower is one of the most important resources in Azad Kashmir and an important potential resource in Indian-administered Kashmir. An ecological science park near the Siachin and Baltoro glaciers should be established. “It would serve as a powerful symbol of a new India-Pakistan relationship … It would have to be preceded by an understanding between the Indian and Pakistani armies on demilitarizing the Siachin area,” according to the recommendation. Describing the final recommendation made in the report as “ambitious,” the author writes that the establishment of a special economic zone in all of Kashmir, with duty-free access to India and Pakistan, including a framework for institutional investment, would build on the trade liberalisation agreements reached within the SAARC. It would provide not only for duty-free exports to India and Pakistan, but also for duty-free imports of inputs, for appropriate tax breaks and especially regulatory simplification for participating enterprises, and for accelerated creation of the necessary infrastructure. The tourism, transportation, electric power and information technology sectors would be promising areas for investment. “Such an arrangement could be implemented under a variety of political and territorial settlements of Kashmir,” marking a departure from current economic policies in India and Pakistan and from the patterns prevalent in Indo-Pak relations. The author points out that the recommendations for joint action require more Indo-Pak cooperation than is in evidence today. The special economic zone would require “major changes” in the domestic economic polices of both countries and a new way of looking at economic relationships. The report also includes a series of recommendations for academic and cultural exchanges, which, if implemented, would help lay the groundwork for what the author calls “this more ambitious vision of what Indians, Pakistanis and Kashmiris might accomplish together.”


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