| January 3, 2002 | Thursday | Shawwal 18, 1422 |
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SBP bifurcation
A no-win situation
IT is now obvious that New Delhi is in no mood to defuse the tension on the borders, for there is no possibility of Indo-Pakistan talks at Kathmandu. Hopes earlier aroused now seem dashed. Indian Foreign Minister Jaswant Singh, reacting to the arrest of Lashkar-i-Taiba chief, had earlier cautiously welcomed Hafiz Saeed’s detention and had broadly hinted that talks could be held at Kathmandu during the SAARC summit, though he was not clear at what level. More promising was Mr Vajpayee’s newspaper article in which he offered talks to Pakistan. There were also media reports, quoting unnamed Indian officials, that the two foreign ministers could meet on the sidelines of the SAARC summit. However, developments since then seem to have made the earlier optimism look misplaced. On Tuesday, the Indian foreign secretary ruled out talks at the level of heads of government, while Mr Singh said there was “no confirmation yet” whether he would meet his Pakistani counterpart. More blunt was the Indian foreign ministry spokeswoman, who said “there’s no chance of talks” at Kathmandu. Side by side, India has continued its arms build-up, with the air force, heavy artillery and missiles reported in battle positions. As a Pakistan spokesman pointed out recently, this offensive deployment has reached a point where it may not be possible for India to back off. Besides, there is this danger of a stray incident triggering a full-fledged war.
Since the Dec 13 attack on the Indian parliament building, Pakistan has conducted itself with a high degree of responsibility and self-restraint. Ignoring Indian bellicosity, threats of war and troop movements, Islamabad has offered to cooperate with New Delhi in solving the riddle of the Dec 13 terrorist attack. It has also cracked down on religious extremists, arresting two of the top leaders and freezing the bank accounts of a large number of extremist organizations. India, however, has not responded to these moves in a manner that could lead to a partial easing of tension. What it forgets is that Pakistan cannot crack down on the extremists to the extent Islamabad desires because of the massing of the Indian army along the border. This country simply cannot afford a large-scale internal upheaval while there are war-like conditions on the borders.
The world has commended the steps Pakistan has taken to curb religious extremism. It has done so while cooperating with the world coalition along its western borders to deal with the Al Qaeda men trying to flee into Pakistan. Western governments and the world media have also not failed to note that it is India which is solely responsible for the military stand-off and that Pakistan has only reacted to the Indian build-up as a precaution.
There is no reason why the SAARC summit cannot be used profitably to reduce tension. By ruling out talks at Kathmandu, New Delhi has made its motives clear: it wants to keep up pressure along the border, and a war-like situation in the region, for that is the only way it believes it can divert the world attention from Kashmir, where its massive troop deployment has failed to crush the insurgency. Islamabad has done well not to shut the door on talks. Whatever the level of Indian sabre-rattling, Pakistan must never refuse to talk. It is a position that stems from the justness of Pakistan’s stand.
THE bifurcation of the State Bank of Pakistan through an ordinance issued on Wednesday seems to be part of the ongoing banking reforms. The main SBP will continue to perform the core functions of a central bank. These functions are framing and execution of monetary policy — interest rate management, regulation and supervision of banks and other financial institutions, foreign exchange issues, and settlement of payments and accounts. The rest of the functions which the SBP has been performing and which involved public dealings like retail banking, all aspects of prize bonds, etc, have been transferred to the new bank to be known as the SBP Banking Services Corporation (SBPBSC). The new bank will have a paid-up capital of one billion rupees and a board of directors which will consist of the same members who sit on the SBP board but it will take decisions independently.
The need for such a bifurcation had been felt for a long time, because the size of the economy has grown manyfold since the original assignment of functions. The SBP could not devote as much attention as was warranted to the supervision of the banks and the management of foreign exchange. This lack of attention had led to the pile-up of a staggering amount of non-performing loans and caused the collapse of several financial institutions in recent years. Having been divested of day-to-day routine public dealings, the SBP officials will now have more time for policy formulations about its core functions and closer supervision of the banks. What is really encouraging is that the process of bifurcation has been completed without resorting to downsizing. As part of the reforms, commercial banks have also been given greater autonomy in respect of advances and investment. They will not have to go frequently to the SBP for the approval of actions to be taken during the course of their routine functions.
THAT recent decisions by India and Pakistan would damage their already-faltering aviation sectors had become quite obvious to most people. However, remarks by the Indian aviation minister at a press conference the other day make the picture even clearer. He said that both his country’s main carriers — Air India and Indian Airlines — and the airports authority would lose around $10 million every year because of the ban imposed by both countries on the use of each other’s air space. The minister also said that PIA would lose around Rs 2.4 billion. While PIA might dispute this figure, it cannot argue the fact that it does stand to lose substantially — and for once, for no fault of its own.
Ironically enough, only Pakistan and India’s airlines will suffer financially, since carriers of other countries will be able to fly over either country as usual and will not have to bear the extra fuel costs. This really is a ridiculous situation. The two governments have merely hurt their own airlines’ interests to the benefit of other carriers. PIA has suffered huge losses in recent years and had recently asked the government for a cash injection of Rs 20 billion. Its new management had made rather optimistic revenue and profitability projections for the current financial year, but these will now be seriously thrown into doubt. Hopefully, both New Delhi — on which rests a greater share of the blame since it instigated the measures — and Islamabad will realize that cutting air, road and rail links serves to encourage only the extremist elements and the hawks in either country. It is not as if India is an entity that can simply get up and walk to some other part of the world. It is destined to be Pakistan’s neighbour, and the sooner that is realized the better, because there is no alternative to peaceful coexistence.