ACCORDING to Kunal Bose of the Financial Times, Pakistan has reached an understanding with Sri Lanka that would provide the latter with a privileged position in the former’s large tea market. “The Sri Lankan tea industry, which excels in tea packaging and other forms of adding value to the beverage is planning to form a joint venture in Pakistan for the blending and marketing of teas,” writes Bose from Kolkata.

Why is Sri Lanka interested in coming to Pakistan? For two reasons. Pakistan is the world’s third largest importer of tea after the Commonwealth of Independent States and the UK. However, Sri Lanka’s share has been surprisingly small in this important market. Kenya, with some 65 million kilos of exports, is by far the largest supplier of tea to Pakistan with Indonesia a distant second. Indonesia exports 12 million kilos. Understandably, Sri Lankans are interested in increasing their presence in the Pakistani market. At the moment they export five million kilos to Pakistan.

In 2000-2001, Pakistan spent $200 million on tea imports. After edible oil and refined sugar, tea was the most important item of daily consumption imported by the country. On tea alone, Pakistan spent close to two per cent of its total import bill. Not only that, tea was the fastest rising import commodity, with purchases increasing fourfold — or, at a rate of 15 per cent a year - in ten years. No serious tea producing and exporting country could ignore the Pakistani market.

The second reason for the Sri Lankan interest is Pakistan’s decision to waive duties on tea imported from that country. Pakistan recently reduced the duty from 30 per cent to 25 per cent. Further duty cuts are likely. However, in the case of Sri Lanka, the Pakistanis have decided to waive the duty altogether. This has encouraged several sophisticated Sri Lankan tea producers to explore the possibility of forming alliances with Pakistani businessmen. For obvious reasons, this strategy did not please the Indians, a large producer, consumer and exporter of tea. “The customs waiver will create considerable goodwill for Pakistan in Sri Lanka, much to India’s discomfort,” writes Kunal Bose.

India’s displeasure notwithstanding, this constitutes a clever move by Pakistan. It represents one of the few times Islamabad has played an activist role in world trade. Could this strategy be extended to other commodities of interest to Pakistan either as an exporter and importer? Could — or should — Pakistan conclude similar bilateral trading arrangements with the countries that are important to it, either as exporters or importers? The answer to both questions is yes. Before giving the reasons as to why I consider the agreement with Sri Lanka on tea to be an important development, it will be useful to look at two things: how Pakistan has fared in world trade and how global trade patterns are likely to evolve in the future.

Pakistan’s trade performance has been singularly poor in recent years. While world trade was increasing rapidly in the second half of the 1990s, Pakistan’s exports stagnated at around $8 billion a year. It was in 1996-97 that Pakistan achieved the highest level of exports in its history, slightly more than $8.4 billion. In 1997-98, the value of exports declined by 11 per cent, to only $7.5 billion. The following year, there was some recovery but export earnings did not reach the level achieved in 1996-97. Extrapolating from the earnings of the first nine months of the year 2001-2002, it appears that export earnings in the just completed financial year may be below $9 billion. The government’s target was $10 billion.

In the eight-year period between 1991-92 and 1999-00, Pakistan’s export earnings increased by 21 per cent. This translates into an annual rate of increase of just 2.5 per cent, a pathetic performance compared to the virtual explosion in global trade during this period. World trade in the year 2000 was estimated at $6.4 trillion. Pakistan’s share in that was a paltry 0.13 per cent, much lower than the 0.21 per cent share Pakistan had in total world output in that year. Since Pakistan’s exports had been increasing at a rate much smaller than the rate of increase in world trade, its share had declined significantly over the years.

Will the volume and value of world trade continue to expand as it did in the second part of the nineties? If the answer to this question is “yes,” then the strategy for a country such as Pakistan is to concentrate its attention on producing the goods and commodities the world needs the most and in which it has a comparative advantage. But there is a likelihood that we will see fairly severe obstacles placed in the way of countries which produce “politically sensitive” products.

Textiles, on which Pakistan has continued to depend to such an extent, is one line of products in which it is going to be exceedingly difficult to make further inroads. We have already witnessed the extreme reluctance of Washington to grant the Pakistani exporters a privileged access to its textile and clothing market in spite of the damage that this war on terrorism did to this industry in Pakistan. What are the options available to us?

Let us first look at the direction world trade is taking. First, there is the Doha world trade round, launched in November 2001 — two months after the terrorist attack on the United States. The launching of the round had been delayed because of the work in the western capitals of a number of groups opposed to globalization. The developing world was also reluctant to participate, knowing that it gained very little benefit from the conclusion of the previous round of discussions.

Led by Brazil, India and Pakistan, developing countries wanted a fairer treatment in the new round of negotiations. The industrialized world, traumatized by the events of September 11, was prepared to be more generous. It pushed for the success of Doha.

The agreement arrived at Doha aims to produce a package of trade reforms by the end of 2004 focused on agriculture, industrial goods and services. Negotiators are expected to develop by next March the parameters of market access talks and trade ministries will review the progress made by them at a meeting in Cancun, Mexico, scheduled for September 2003. But there remain a number of hurdles that may make it difficult to stay with these deadlines. Prospects hinge on industrial countries to open their markets and also respond to poor nations’ demand for implementing in a flexible manner existing WTO agreements in areas such as intellectual property rights.

Nonetheless, some momentum has been given by the decision by US Congress to grant the American president the right to negotiate trade treaties without subjecting them to being unstitched by the legislature. The trade protection authority the president has received from the Congress strengthened his administration hands in negotiating new arrangements. Will this result in the US becoming more open to trade with the developing world? The recent trends in the American thinking and the approach it has adopted are not encouraging.

The US seems inclined to negotiate bilateral deals with the countries in which it has strong strategic interest. The Americans are in advanced negotiations on three trade agreements with Chile and Singapore. It is expected that they will be concluded some time in the next 12 months. Some time soon Washington plans to move on two deals with Morocco and five Central American countries — Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. There are also plans to consider bilateral agreements with Australia and New Zealand.

The most beneficial bilateral agreement, of course, is the one Washington had signed several years ago with Mexico, within the context of the North American Trade Agreement. The deal with Mexico has had an enormous impact on the economy of that country. Notwithstanding the continuing popular misgivings in the US, the Mexican agreement has been of considerable benefit to the American producers and consumers. This has given fresh impetus to bilateral arrangements being preferred to multilateral agreements.

Europe will follow America on trade policy. Like the US, it has strong vested interests which will not favour further opening of the countries to trade in the goods and commodities of interest to the developing world. Agriculture is a prime example of a sector in which the Europeans are not likely to want much additional penetration. Like the Americans, they are not keen to hurt the industries in which the developing countries, because of low wages, have a clear comparative advantage. These include textiles, leather products, electronic goods and basic engineering. Also, the Europeans have strategic political interests in some areas of the world which they will promote through trade arrangements. It is interesting to note that South Asia has been excluded from all the bilateral arrangements that Washington and Brussels are contemplating at this time.

What is the significance of these developments for Pakistan? I do believe that the arrangement with Sri Lanka on tea is a clever move on which Pakistan could place its future trade strategy.

Pakistan should develop a strategic approach aimed at concluding bilateral trades with the countries which are important markets for its products. It should conclude arrangements with the countries that will become serious competitors with it once the trade in textiles opens up further in 2005. This is why the Sri Lankan trade deal offers an attractive approach which should be followed and expanded.

What should be the immediate things to do if this line was to be taken? Two approaches come to mind. First, the US owes much more to Pakistan than it does to Australia, Morocco and South Africa. Pakistan should press Washington for a bilateral deal to get better access for the goods and commodities of interest to it. In return it will need to open its own economy for greater penetration by American multinational companies which is something to be desired. Second, simultaneously, Pakistan should conclude a deal with the Chinese on textiles and leather products — two product lines in which that country will out-compete Pakistan. Once the full impact of the WTO membership takes effect in China, Pakistan will find it harder to gain an increase in market share in these two lines of products vital for its economic health.

It is extremely important to come up with a trade strategy in line with the way the world seems to be moving. We have failed to take advantage of trade as a dynamic force in our economy. That shortcoming needs now to be tackled.

FROM newspaper reports, statements by the administration, and leaks coming out of the Pentagon in recent weeks, one would think George Bush was finally about to act on his long-standing threat to topple the Saddam regime.

America is ready to wage war on Iraq. Having rid Afghanistan of the Taliban, burqas and Osama bin Laden, the US is now set to liberate the people of Iraq.

Or is it? The desire to wage war on Baghdad is certainly there: as the unfinished agenda of Bush Senior’s presidency it predated his son’s entry into the White House. Additional reasons for a second American assault on Iraq include the suspicion that Saddam Hussein is building up vast stocks of biological, chemical and nuclear weapons that he could use to carry out a 9/11-type attack on the US or sell them to others who would.

In that sense he poses a threat to his pro-Washington neighbours and that he is a despot who has suppressed his own people, etc. Add to these the popularity-boost that any president who leads his country into war gets — not to mention criticism on domestic issues being shoved under the carpet — and it is clear Bush would like to attack Iraq.

But it is one thing to desire war, quite another to carry it out. Irrespective of the warmongering rhetoric emanating from his administration, George Bush has no intention of taking on his father’s old nemesis. Such a course — as voices of reason across the Atlantic and in the Arab world have been pointing out for months — would only lead to disaster.

Jordan’s normally timorous King Abdullah pointed out recently that a US assault on Iraq would unleash a Pandora’s box of new problems. The chances — already remote — of a resolution to the bitter fighting that has been ravaging the Middle East for over two years, would shrink to zero. Israel would undoubtedly be drawn into a US-Iraq conflict, leading to the possibility of a regional war. The Arab world, which normally has little love for Iraq’s leader, would in the event of an American assault be united in its defence of him. The anti-US demonstrations seen on the Arab street after the Afghan war would be nothing compared to what would follow a war on Iraq.

The Bush administration has repeatedly cited the threat posed by Iraq’s weapons programme. The evidence pointing to this is inconclusive: satellite photographs, information from defectors, suspicions. Unless and until UN weapons inspectors go back to the country, it is impossible to say what is in the Iraqi arsenal. The chances are that Hussein has been restocking. But he is more likely to use his military might against his own people — Kurds in the north and Shi’as in the south — than against Americans. In the event of a US invasion, however, there would be nothing to stop him from attacking US forces with lethal weapons. The very danger that Bush is seeking to avert through war would therefore be realized.

Despite exhaustive investigations, no link has been established between the 9/11 attackers and the Baghdad regime. As everyone but the American people — and especially its administration — has come to appreciate, the underlying cause of the September 11 tragedy was militant Muslim anger at injustice and oppression especially in Palestine. An American assault on Iraq would further enrage that militant Islam, thereby increasing rather than diminishing the threat to US security.

Attacking Iraq would require the US to sideline the United Nations. Europe (minus Britain), Russia, China, Japan and the Arab world have all voiced opposition to expanding the war against terror from Afghanistan to Iraq. It would therefore be impossible for Washington to get Security Council clearance for its assault. Nor could it depend on the bend-over-backwards assistance it received from other countries in the Afghan war. Going it alone is not impossible, but it is not easy either.

And what of post-war Iraq? Who would replace the Iraqi dictator? All internal opposition to him is long extinct. External opponents (exiled groups) are riven by factional in-fighting and lack grassroots support. There is a real danger that after Saddam Hussein the country could degenerate into civil war, with both the north and south making a run for independence. Civil war could be prevented by an international commitment to peacekeeping and reconstruction, but — as the Afghan experience is already showing — Washington has little taste for such tasks.

All of the above are compelling reasons for the US not to attack Iraq. None of them cuts much ice with the Bush administration. Since assuming power, George Bush has set American foreign policy firmly on a course of self-seeking unilateralism in which neither the UN, Europe nor international opinion generally is important; and which pays negligible heed to the long-term causes of its actions. Sidelining the UN, creating more anarchy in Iraq and the Middle East, fuelling Muslim anger — none of these are significant impediments to the US military machine.

And yet Bush is not going to war. Why not? Why is the US president holding back? Answer: time, cost and an uncertain outcome. Crucial Congressional elections are scheduled for November. While there have been rumours of a quick strike against Baghdad before November, in practice this is not feasible. The merciless Iraqi summer rules out an assault then, and next winter is presidential primaries season — not a time to wage war. The only real opportunity for President Bush to attack is therefore in the first few months of the new year.

Time constraints are compounded by cost. The last Gulf War came with a $60 billion price tag, most of which was picked up by America’s ‘allies’, Saudi Arabia and Kuwait. This time Washington would have to meet most, if not all, the costs itself. Coming on top of the expensive war against Afghanistan and corporate accounting scandals that are taking a heavy toll on the US economy, the additional costs of an Iraqi campaign would be hard to sustain. As financial scandals cut into his poll ratings, Bush is coming to appreciate that old Clinton adage: ‘It’s the economy, stupid.’

Finally, and perhaps most crucially, there is no guarantee of military success in Iraq — or at least not of the clinical, single-digit US casualties kind seen in Afghanistan. Without international support, the logistics of such a war would be infinitely more complex than in Afghanistan. That in turn would rule out any element of surprise. There is no equivalent of the Northern Alliance inside Iraq to provide the human fodder for war. In short, America would eventually defeat Iraq — but it would be a protracted, messy, high body-bag victory. Such ‘successes’ do not win presidential elections: they oust you from the Oval Office.

George Bush and the hawks in his administration will keep threatening war. It serves as a useful distraction from the corporate financing scandals that are moving closer and closer to the US government.

THE development of human resource has been recognized as one amongst many objectives of long-term economic growth by most developing countries since the early fifties. But it had moved to the centre stage of development priorities by the early seventies.

It was increasingly cited not only as one of the most important objectives which the developing countries must seek to achieve, but one which required immediate attention and which in itself would make a positive and significant contribution to economic development. The reasons which brought about this shift in priorities were many but three main factors played a critical role.

The first was the general disillusionment with the purely growth-oriented development strategies pursued in the fifties and sixties focussing mainly on the directly productive sectors and the supporting physical infrastructure. There was also increasing evidence that the pursuit of such a strategy had done little to reduce poverty levels. According to the ILO report of 1977, poverty levels may indeed have increased.

The second factor emerging from the results of economic research confirmed that investment in human capital could contribute significantly and directly to overall growth and development. This was especially true for investment in skill development programmes and investment in basic health services, including access to clean drinking water. Especially important was the link between female education and declining fertility rates. This is seen as a major breakthrough in promoting a solution to the problem of high population growth, which many countries in the SAARC region continue to suffer from.

Finally, there was the realization that strategy which emphasised the provision of increasing productive employment for the labour force, as well as increasing productivity, especially in the so-called ‘informal’ sectors of the economy, would provide the best route to solving the apparent dichotomy between growth and development. To ensure this the gains of economic development were required to equitably distribute amongst the population and the different regions in the country. If investment in human capital, the second of the three factors mentioned earlier, was seen as the traditional ‘supply side’ of human resource development, the emphasis on the employment goal brought into play the crucial role of ‘demand’ in ensuring the optimal utilization of human resource.

The first Human Development Report of 1990 by UNDP, in its opening lines, gave a very good description of human development. It stated that “the real wealth of a nation is its people. And the purpose of development is to create an enabling environment for people to enjoy long healthy and creative lives. This simple but powerful truth is too often forgotten in the pursuit of national and financial wealth.”

The creator of the 1995 UNDP Human Development Report, Dr Mahbubul Haq, rightly said : “South Asia’s real wealth is its people. We can completely change the economic and political destiny of the South Asian countries if we show the imagination to invest in these people.”

SAARC region, according to Human Development Report 2000, enters the 21st century with 515 million people in absolute poverty, some 400 million illiterate adults, and approximately 80 million malnourished children. Preventable diseases kill 3.2 million children each year.

During the last half century, there has been significant economic growth in the SAARC region. Gross domestic product (GDP) per capita has almost tripled since 1960. All three major sectors — agriculture, industry and service — have witnessed reasonable growth rates over the last 30-35 years. In particular, the service sector has expanded greatly; in India, Pakistan, Sri Lanka and Bangladesh, it now contributes over 45 per cent of GDP.

Poverty and human deprivation pervades the SAARC region. Progress in some areas in this region has been made compared to the initial conditions at independence. But high population growth rates in some countries have neutralized progress achieved earlier. Also concern for human development has not been enough of a priority in the region. The result is that there are now increasing absolute numbers of people without adequate health and sanitation, more under-nourished children and more people who are functionally illiterate.

Also increasingly important is the withering away of traditional livelihoods as a result of unsustainable environmental practices. A prosperous future for the SAARC region is dependent on the solution of these problems, and a commitment to ensuring that all SAARC countries attain a decent and dignified standard of living.

Within the SAARC there is much to be gained from cooperation in terms of poverty reduction, social sector development, tourism, energy, transport and communication. At the tenth SAARC summit in Colombo in 1998 a social charter was proposed to deal with many social issues, combining efforts to address the many deprivations faced by the largely poor, uneducated, and under-served population in the region.

At the eleventh summit held at Kathmandu in January 2002, the heads of state or government of the SAARC countries, reiterated the need for an early finalization of the SAARC social charter and instructed the inter-governmental expert group to expedite their work on the basis of the draft submitted by the secretary-general as a working paper for its consideration and complete the draft framework of the charter as early as possible and present it for consideration at the next meeting of the council of ministers.

While drawing up the charter, they also directed the council of ministers to include the important areas of human resource development, poverty eradication, population stabilization, empowerment of women, youth mobilization, promotion of health and nutrition and the protection of children.

The SAARC region has all the potential to become the most dynamic region in the twenty-first century if there is massive investment in human development. It was through human development strategies that a major breakthrough was made by Japan in the 1940s and 1950s; by the East Asian industrializing tigers (the Republic of Korea, former Hong Kong, Singapore, Taiwan, Malaysia, and Thailand) in the 1960s and 1970s; and by China in the 1980s and 1990s. There is considerable evidence of the benefits of investment in human development also in the SAARC region. The human development report of 1998 in South Asia cited the following :

* In urban India, when mothers were uneducated, the child mortality rate was as high as 82 per thousand, but it dropped sharply to 34 per thousand when mothers were educated.

* In Bangladesh, contraceptive use was only 27 per cent for women with no education but increased to 66 per cent for women with more than secondary education.

* In Pakistan, a study has estimated that its per capita GDP in 1985 would have been 25 per cent higher if, in 1960, it had had Indonesia’s primary school enrolment rates.

* In Nepal, increasing the average education of a farmer by one year expanded agricultural output by 5.2 per cent in the Tarai region and by 5.9 per cent in the hill region.

* In India, increasing average primary schooling of the work force by one year raised output by 23 per cent.

* In Sri Lanka, high female literacy (87 per cent) has contributed to a decline in the rate of population growth to only 1.3 per cent a year.

Thus, there is clear evidence from the SAARC region’s own experience, backed up by the experiences of other regions, that investment in human development leads to many social benefits, including improvements in the standards of hygiene, reduction in infant and child mortality rates, a decline in population growth rates, an increase in labour productivity, a rise in civic consciousness, greater political empowerment and democratization and an improved sense of national unity.

The heads of state or government of SAARC member countries emphasized the need to progressively carry out SAARC activities within a broad framework of cooperation and to harmonize their efforts to ensure tangible benefits to the people of the region. Towards this end, they recognized that human resource development was one of the means of realizing the SAARC objectives. They agreed to establish the SAARC Human Resource Development Centre (SHRDC) with the main objective of undertaking research, training and dissemination of information on HRD issues and advising the member states on related policies and strategies. The government of Pakistan offered to host the centre at Islamabad in Pakistan.

The programme of activities of the centre, among other things, include networking of SHRDC and software development on database and launching the website of the centre, preparation of a directory of research institutions in the area of HRD already existing in the region and setting up nodal points in consultation with the member states for coordination of implementation of the programme of activities.

The task of the SHRDC is to organize and undertake research, training programmes and dissemination of information on human resource development for poverty alleviation as applicable to specific needs of the member states.

The forthcoming twenty-eighth session of the SAARC standing committee and the twenty-third session of the SAARC council of ministers to be held at Kathmandu, are expected to undertake a realistic appraisal of the human resource development efforts in the region and to elaborate a practical road map for the development of human resource in the SAARC region.

The writer is director, SAARC Agricultural Information Centre.