DESPITE a series of domestic and external shocks such as unprecedented drought, the events of September 11, and the military build-up of India, Pakistan’s economy has made commendable progress during the last three years.

The economy is now more stable, economic policies are transparent and predictable; confidence of the private sector has been restored; expatriate Pakistanis are bringing their capital back; stock market is buoyant; external balance of payments is in comfortable position; foreign exchange reserves have crossed $9 billion and are sufficient to finance ten and a half months of imports; exchange rate is stable; inflation is low and interest rates are declining.

Likewise domestic and external debt have declined; fiscal deficit has been lowered and the current account balance is in surplus; tax collection is growing; exports have picked up, governance has improved and corruption at the top levels in the government has been eliminated; and lastly, Pakistan’s credit rating in international capital markets has improved.

These economic achievements owe heavily to sound economic policies, good governance and deft economic management. This fact is, by and large, accepted by stakeholders within and outside Pakistan. There are, however, some commentators who are unwilling to give credit to government’s economic policies for the above listed improvements. They argue that Pakistan’s economic turnaround owes principally to the events of September 11, 2001, resulting in windfall gains from large foreign capital inflows. In particular, a substantial increase in donor assistance, debt rescheduling and an increased flow of workers’ remittances, as a result of September 11, are primarily responsible for the economic turnaround in Pakistan.

In this article, an attempt is made to set the record straight and show that economic turnaround owed principally to sound economic policies, good governance, and deft economic management. In fact, as will be shown later, the events of September 11 have had adverse effects on the economy of Pakistan. While explaining my points, I shall concentrate on two important areas, namely, net foreign capital inflows and workers’ remittances.

Prior to May 1998, Pakistan used to receive, on average, net foreign capital flows of around $ 2.1 billion from bilateral and multilateral sources. This amount supplemented the country’s foreign exchange earnings in meeting its debt servicing obligations. The main donors and creditors were Japan, the US, UK, World Bank and Asian Development Bank. The country used to borrow new loans to repay the old ones and contracted additional loans to finance the persistent current account deficit and also to build up the foreign exchange reserves. This situation continued throughout the 1990s and resulted in almost a doubling of external debt from $ 20 billion to $ 38 billion.

The imposition of economic sanctions in the post May 1998 resulting in suspension of all foreign capital inflows changed the above picture. The withdrawal of foreign donors and creditors created a gap between the debt-servicing obligations and the debt servicing the country could afford to pay. This gap could be filled only through debt rescheduling and new money flows from the international financial institutions The then government entered into an agreement with the IMF, successfully negotiated debt rescheduling under the Paris Club and obtained additional new money from the IMF, World Bank and Asian Development Bank. On the other hand, Japan, the US and UK, the main bilateral donors, along with others, decided not to provide any new money. Japan was a substantial donor in the 1990s with an annual commitment of $ 500 million.

When General Pervez Musharraf took charge of the state of affairs, initially almost all new inflows dried up. Pakistan had to find resources from its own modest means to service its debt and for the first time had experienced negative net capital flows of $ 185 million — that is, the inflows from all foreign sources were lower than outflows from Pakistan. In the year 2000-01, after the Stand-by Arrangements were reached with the IMF and the Paris Club rescheduling was obtained, there was some relief but Pakistan still had negative net capital flows of $115 million.

It is only in 2001-02 that this trend of negative net flows reversed and Pakistan received positive net capital flows of $306 million. On average, these three years witnessed an annual net in flow of capital from outside after accounting for debt reprofiling, grants, new soft loans, etc., to the extent of $ 100 million-significantly lower than the average of $2.1 billion during the preceding nine years of the 1990s.

Is it then accurate to attribute the reserve build-up from $1.2 billion in October 1999 to $3.2 billion in July 2001 (much before September 11) and nine billion dollars in November 2002 to the events of September 11? The fact of the matter is that this level was achieved mainly due to (a) an increase in exports of goods from $ 7.6 billion in 1998-99 to nine billion dollars in 2000-01 and 2001-02 and narrowing of the trade gap; (b) a rise in workers’ remittances from $ 1.0 billion to $ 2.4 billion; and (c) reprofiling of debt stock under the Paris Club and saving debt servicing of one billion dollars annually. None of these has anything to do with September 11.

As it is well known, Pakistani exports would have reached $10 billion in 2001-02 if international markets were not closed to Pakistani exporters for six months following September 11. Foreign direct investment and privatization proceeds would have been much higher had there been no ‘travel advice’ from the western governments. It is also remarkable that in this period the country was able to reduce the external debt stock from $38 billion to $36 billion.

The other popular misconception is about the workers’ remittances. Several commentators have termed these remittances as unproductive. To them the magic word is exports, which are, beyond doubt, critical. But they are either ignorant or deliberately suppress the fact that exports of a country consist of exports of goods and exports of services. Merchandize exports represent the former while exports of services consists of manpower, capital, IT, intellectual property rights, financial, consultancy, etc.

Since the 1980s Pakistan has exported about two million workers overseas and their hard-earned money sent to their families in Pakistan is very much part of Pakistan’s export earnings from services and is as productive as the earnings from merchandize exports. These remittances have fluctuated around three to 3.5 billion dollars annually as far as inflows into balance of payments is concerned.

Before liberalization of 1991 the main channel for workers’ remittances was the banking sector and they were all recorded in the balance of payments of the country as private transfers. After 1991, an additional channel was opened up and the amount from overseas workers flowing into the country got divided into two parts — foreign currency accounts (FCAs) and official remittances (through banking channels). The volume remained largely unchanged and varied between three and 3.5 billion dollars annually if both the channels were counted together. In the balance of payments, official remittances were shown under private transfers as before while inflows into foreign currency account of non-residents were recorded under the capital account.

The economic impact remained unchanged as the amount of foreign exchange available to the country was the same and it was only the presentation of accounting entries in the balance of payments heads that underwent change. The period following the freezing of the FCAs in May 1998, an additional channel which was dormant become highly active and that was the open market. As the workers lost confidence in official banking channels as a result of the freezing of the FCAs, they diverted their remittances through the money changers in the open market.

In 1999-2000 and 2000-01 the State Bank of Pakistan decided to purchase these remittances from the open market to make external payments and build up reserves. An annual inflow of two billion dollars purchased from the open market and one billion dollars through the banking channel together constituted three billion dollars of workers’ remittances annually in these two years. These purchases as well as remittances through the banking channel were shown as separate entries in the balance of payments under “private transfers”. The total amount under private transfers was three billion dollars and $ 3.8 billion for 1999-00 and 2000-01 respectively.

Since September 11, 2001, the curbs on the hundi market in the US and UAE particularly, have led to a diversion of these remittances from the open market to banking channels. Thus the official remittances increased to $ 2.4 billion in 2001-02 but at the same time the purchases from the open market declined from $ 2.4 billion in the previous year to $ 1.3 billion only. It can thus be seen that the private transfers in the balance of payments accounts for 2001-02 of $ 3.7 billion are not significantly different from those recorded in the fiscal year prior to September 11, 2001.

Thus, those who argue about the future sustainability of remittances should remember that we have been receiving around three billion to 3.5 billion dollars annually from our overseas workers for a long period of time in one form or the other. The form of remittance does not matter as it is included fully in the balance of payments, although under different heads. These remittances are the legitimate and productive earnings from the export of manpower services which will continue to flow unless some unanticipated exogenous shock takes place. The sustainability of these remittances, whatever their form, is not in doubt but it is the component of these flows representing the reversal of capital flight which is clearly one-off and not sustainable.

Any additional flows beyond the level of $3.5 billion annually would represent the balances which Pakistanis may bring back to the country. As soon as these balances are exhausted or any other negative shock takes place, this component will dry up all of a sudden. We should therefore worry about these incremental flows as these can largely be attributed to September 11 and should rightly be discounted from any future calculations of viable balance of payments.

To sum up, Pakistan has not benefited as much from September 11 as is being pointed out by some commentators. Net capital flows have turned positive in 2001-02 after two years’ of negative flows but they are still significantly short of the average flows of the last nine years. Workers’ remittances of around three to 3.5 billion dollars which in fact represents exports of manpower services, have been flowing into the balance of payments of Pakistan through one channel or the other for the last two decades. To attribute them to September 11 events and to express doubts about the sustainability of this source of inflow thus appears misplaced.

The fact, however, is that the events of September 11 adversely affected Pakistan’s economy during the fiscal year 2001-02. The affected areas include exports, imports, tax revenue, industrial production, foreign investment, and privatization. To the extent Pakistan was integrated with the world economy, the sharp downturn in global economy as a result of September 11, affected Pakistan’s exports. Furthermore, with the shifting of the epicentre of global events to Pakistan, the country was thrust into the role of a front-line state. Thus, the events of September 11 not only disrupted the normal trading activities but also increased the cost of international trade for Pakistan.

Such disruption adversely affected both exports and imports of Pakistan. The country lost roughly $ 1.0 billion in exports earnings and imports were lower by $ 600 million. Decline in imports reduced tax collection by the CBR because roughly 40 per cent taxes are derived from imports (custom duty, sales tax at import stage, withholding tax at import stage). Decline in imports also affected industrial production because of the lesser availability of raw materials. Foreign investment, particularly in oil and gas sector and in information technology as well as privatization programme were adversely affected because of the travel advice issued by the western countries for their citizens.

On the whole, the events of September 11 cost Pakistan more than two billion dollars. Pakistan was able to withstand the negative shocks of September 11 because of the structural reform programme which it had launched some three years ago. These reforms have enhanced the shock-absorbing capacity of Pakistan’s economy. To shield the economy from any future exogenous shocks Pakistan must stay on course with the reform programme launched some three years ago.

The writer is economic adviser in the ministry of finance.

A PEEP into history does not hurt. We are a nation, which does not believe in history unless it is a doctored version of events. Even if history repeats itself, we will be found napping. 1971 is the year of infamy of our national existence and a watered-down version of events covered under the Hamoodur Rahman Commission report came to the notice of the people of Pakistan, three decades later, courtesy the Indian press.

And yet even after reading those excerpts, one did not know that a shaken Shaikh Mujibur Rahman was slapped, after he had surrendered to the army team sent to arrest him. I am referring to the first-hand account of Brigadier (retd) Z.A. Khan who has given a careful and cautious version of events in his book “The Way It Was”. What stung me as the most shameful and outrageous act was the piece of information that when Shaikh Mujib “came out of his bedroom totally shaken, after the army raiding team had detonated a grenade in his house, fired a burst of machine gun and a pistol, “Havaldar Major Khan Wazir, later Subedar, gave him a resounding slap on his face”. How very shameful indeed! The author seems to gleefully recount this sordid detail of shameful behaviour of the Havaldar towards a prisoner who had already surrendered.

To quote from the book, “I later learned..... some one had fired a pistol shot into the room where Major Bilal’s men were collected, luckily no one was hit. Before anyone could stop him a soldier threw a grenade into the veranda from where the pistol shot had come and followed it with a burst from his sub-machine gun. The grenade burst and the sub-machine fire made Shaikh Mujib call out from behind the closed room that if an assurance was given that he would not be killed he would come out. He was given an assurance and he came out of the room.” That is when this shameful and totally unnecessary act of slapping took place.

The account of Mujib’s arrest, as recounted by Brigadier Z.A. Khan, goes on to say that Mujib told him on his way to his prison after his arrest, “We had only to call him and he would have come on his own.” The sad part of the entire episode leaves one depressed. For one, Shaikh Mujibur Rahman was the majority leader in the National Assembly of Pakistan and as such he was the prime minister-in-waiting for the entire country, including the minority province of West Pakistan. A slap on his face is a slap on the face of the nation. How shabbily was the nation’s representative and particularly its leader was treated by a member of disciplined armed forces leaves no room for further comment. It is sickening.

What is more depressing is that a prisoner, after he had surrendered, and mind you, not an ordinary prisoner, but a political prisoner who should have been the prime minister of the country and his captors taking orders from him, is insulted and slapped; and the officer incharge of the operation, Brigadier Z.A. Khan, seems to condone this undignified, indecent and shameful behaviour, and appears to be looking on with approval.

The year 1971 brings back some very sad memories. I was in East Pakistan, Khulna to be precise, when March 25 arrived. General Rao Farman Ali had arrived in a helicopter a day earlier, to personally deliver a message to his army units for the planned military operation on March 25, at mid night. I was told of this a few hours after the general had left by the CO of the unit based in Khulna.

Not much has been written on what caused the national ignominy; and whatever versions have appeared in Pakistan are self-serving and lack objectivity. To determine what caused this national disgrace one does not have to be a scholar or privy to the Hamoodur Rahman Commission Report, because the whole disaster struck because the then chief martial law administrator, declared a usurper after the event by our highest court, refused to accept the verdict of the people of Pakistan.

In case someone has forgotten, General Aga Muhammad Yahya Khan, the Commander-in-chief of the Pakistan Army, was heading the government then in control. It was a great betrayal. Some people are fond of saying that Pakistan was split because of the elections. Among the luminaries was the late Z.A Suleri, whom I myself heard when he was lecturing some senior officials. What a travesty of facts! Pakistan was split not because of the elections but because election results were not acceptable to the rulers.

A favourite and convenient whipping horse of the ruling classes for this national disaster is Mr. Z.A. Bhutto. In support of this warped reasoning, is quoted a statement he made following the military action on March 25: “Thank God, Pakistan has been saved”. The argument is facile and is totally misplaced because a statement could not have caused the disaster. It was a series of actions, most of them foolish or criminal culminating in the military operation that did it. If Mr. Bhutto is to be blamed for his complicity with the military government, then the main party to the conspiracy was the government. But blaming Bhutto has one great advantage: it exculpates everybody, particularly the most obvious ones.

Getting back to the story of the arrest, it was Brigadier Z.A. Khan who had been assigned the responsibility for arresting Mujib. In his own words: “Shaikh Mujib’s compound perimeter was secured, it was pitch dark. Mujib’s house and the adjacent houses had no lights.The house search party now entered the house; a guard of Shaikh Mujib was escorted out with a soldier walking by his side. After going a little distance from the house the guard pulled out a ‘dah’, a long bladed knife and attacked his escort, he did not know that he was being covered from behind and was shot but not killed. The ground floor was searched and no one was found there, the search party went upstairs, there was nobody there in the rooms that were open, one room door was bolted from the inside. When I went upstairs some one said that there was some sound coming from the closed room, I told Major Bilal to have the door of the closed room broken down and went downstairs to check if Captain Saeed had arrived and if there was any sign of a crowd.

“When I came out on the lane in front of the house I found that Captain Saeed had arrived with the vehicles but in turning the long five-ton vehicles he got them stuck in the narrow lane in front of the house. On the loudspeaker of the wireless set on my jeep I could hear Brigadier Jehanzeb Arbab, later lieutenant-general, urging one of his units to use their ‘romeo romeos’.

“While I was instructing Captain Saeed on how to sort out the vehicles, there was a shot, then the sound of a grenade exploding, followed by a burst from a sub-machine gun, I thought that some one had killed Shaikh Mujib. I ran back to the house and upstairs and there I found a very shaken Shaikh Mujib outside the door of the room that had been closed. I asked Shaikh Mujib to accompany me, he asked me if he could say good-bye to his family and I told him to go ahead. He went into the room where the family had enclosed themselves and came out quickly and we walked to where the vehicles were. Captain Saeed had still not managed to turn them around; I sent a radio message to inform the Eastern Command that we had got Shaikh Mujib.

“Shaikh Mujib then told me that he had forgotten his pipe, I walked back with him and he collected his pipe. By this time Shaikh Mujib was confident that we would not harm him and he told me that we had only to call him and he would have come on his own, I told him that we wanted to show him that he could be arrested. When we got back, Captain Saeed had the vehicles lined up, Shaikh Mujib was put in the middle troop-carrying vehicle and we started back to the cantonment.

The slap on Mujib’s face was a national disgrace and an act of abject cowardice. Also goes to show an utter contempt for civil authority.

E-mail: sshusain@hotmail.com

Last week was the fiftieth anniversary of the last of London’s great fogs, a pea-souper that killed over four thousand people.

Visibility had then dropped to about two feet (half a metre) and some died just by falling into the Thames and drowning, but most died of lung problems: for five days, the concentration of sulphur in the air exceeded 1,600 parts per billion. Theatres and cinemas closed because audiences could not see the stage, and undertakers ran out of coffins.

Everybody knew the cause of London’s fogs. Practically every house and business was heated by coal fires, and almost all electricity was generated by coal-fired power stations. Whenever cold, still air settled on the city in wintertime, the smoke from all those fires was trapped, and the result was a ‘London fog’.

In 1952, the problem was made worse by the fact that Britain, impoverished by the Second World War, was exporting its best coal and burning sulphur-laden ‘dirty’ coal at home, but the fogs went back a long time. London was already called ‘the Smoke’ two centuries ago, even before it passed the million mark and became the world’s biggest city. Sherlock Holmes’s London was famous for its pea-soup fogs, and it went on getting worse. In that fatal December fifty years ago, London had eight million people — and around three million open coal fires.

It was an illustration of what environmentalists call the ‘frog in the pot’ phenomenon. Drop a frog into a pot of boiling water, and he will promptly hop out again. Put him into cold water and bring it to the boil slowly, and he’ll sit there until he dies. Londoners had grown used to the fogs, and didn’t realise they were killing people because the victims weren’t clutching their throats and falling over in the streets. Most of those who died were very young, very old, or people with serious respiratory problems, and they mostly died in bed. So nobody did anything about it.

That’s how most environmental problems work: they creep up on you gradually, and rarely give you a clear wake-up call. Add short-term self-interest, which makes many people resist changes no matter how harmful the established way is, and you can see why most environmentalists live on the ragged edge of despair.

“The human brain evidently evolved to commit itself emotionally only to a small piece of geography, a limited band of kinsmen, and two or three generations into the future,” wrote Edward O. Wilson in his latest book, ‘The Future of Life’. “To look neither far ahead nor far afield is elemental in a Darwinian sense....For hundreds of millennia those who worked for short-term gain within a small circle of relatives and friends lived longer and left more offspring — even when their collective striving caused their chiefdoms and empires to crumble around them.” Hard-wired short-sightedness: it’s enough to make you cut your throat.

But hang on a minute. They DID do something about the killer fogs: 1952 was the last one. The British government invented an entirely fictitious flu epidemic in the winter of 1952-53 to account for the surge in deaths, but the disaster was just too big to hide. In 1956 parliament passed the Clean Air Act, the world’s first serious attempt to control air pollution. From that date, only smokeless coal (charcoal, basically) could be burned in Britain’s big cities — and by the mid-60s, London fogs were a thing of the past.

Today’s London has twice as many hours of sunshine per year as it did in 1952, and coal fires are practically extinct. London houses today are centrally heated by gas or electricity, and air pollution comes mainly from cars: Britain has gone from 4 million vehicles registered in 1952 to 28 million today. We will never run out of problems — but that doesn’t mean that we should despair.

Human beings do learn from other people’s experience in other places and times. We can even respond to purely statistical evidence of danger. Nobody has ever seen the ‘ozone hole’, for example, but for the past fifteen years the whole world has been trying to close it.

The hole went on growing until 2000, partly because the 1987 Montreal Protocol only required developing countries to halve their use of CFCs by 2005 (with a targeted 85 percent cut by 2007), but mainly because of the huge overhang of old refrigerators and air-conditioners in the developed world. “We knew they were out there and we knew they were leaking,” says Dr. Paul Fraser, chief atmospheric research scientist with Australia’s Commonwealth Scientific and Industrial Research Organisation. But Fraser now predicts that the ozone hole will start shrinking in 2005. With luck, it will have closed entirely by 2050.

“I think this shows global protocols work,” said Fraser — and he is quite right. From the moratorium on cod-fishing (almost ten years old in Newfoundland, and soon to extend to the whole European Union) to the Kyoto treaty on climate change, decisions tend to get made late, after the problem is already huge, because human beings tend to focus on the near-by and the short-term. But they do get made, in the end.

Enough people understand the need for a template for future global cooperation on environmental issues that even an inadequate document like the Kyoto treaty has already been ratified by ninety countries. We are not fully rational all the time, but we are not frogs either. — Copyright

DURING a trip to India last month, Bill Gates of Microsoft was accused of “spreading panic” by New Delhi when he warned of a serious AIDS crisis that India may confront by the end of the current decade and also announced a 100 million dollar grant towards a project designed to contain the disease in the country.

What Gates was referring to is a US government study released in September that identifies five countries, including India, where AIDS epidemic is advancing in a manner that it may soon pose security threats to their regions and also to the United States. The other countries are: China, Russia, Nigeria and Ethiopia. These countries constitute 40 per cent of the world’s population and by 2010, when the next wave of HIV/AIDS is likely to hit the world, the number of infected people in these countries will grow to an estimated 50-75 million from the current 14-23 million and will, thus, leave behind sub-Saharan Africa where the number of cases will then be 30-35 million.

The study has been carried out by the National Intelligence Council (NIC) which prepares strategic analysis of the possible developments for the US president, the CIA, the defence and state departments, the national security council and other government agencies. The new document called “The next wave of HIV/AIDS” follows a report the council released two years ago which assessed publicly for the first time the issue of the global AIDS pandemic as a threat to US security.

The argument is that such a huge number of HIV cases could harm the economic, social, political and military structures in each of the five countries by fuelling tensions over spending priorities, raising health care costs and aggravating military manpower shortages. In Russia, the next-wave epidemic is likely to help shape the contours of the post-Soviet era. Already, one-third of prospective military conscripts there are deemed unfit for service because of HIV, and chronic Hepatitis-C from drug abuse.

A similar report has been issued by a Washington-based think-tank, namely, Centre for Strategic and International Studies (CSIS) titled “Destabilizing Impact of HIV/Aids.” And yet another study undertaken by the International Crisis Group in June this year projects a much higher figure of the likely infection cases by 2005. It is 100 million. The CSIS says its study is intended to provide world leaders with “strategic insights” on emerging global issues and to “strengthen the US response to these emerging challenges.”

But many observers consider these studies as somewhat “exaggerated” in their estimates. While the second wave of the AIDS is considered an undeniable fact, the kind of havoc it may cause looks improbable. Even epidemiologists at UNAIDS, a joint body of the World Bank and the United Nations, have questioned the validity of the NIC projections. Neff Walker, an epidemiologist at UNAIDS has called the report as “a worst-case scenario” and said, “they could be right but they are not probable.”

The ‘worst-case scenario’ may be intended, in a way, to warn and demoralize the two emerging economic giants — China and India — which are likely to threaten America’s economic supremacy by the next decade. In China, the CSIS report says, the AIDS epidemic could have “major implications for China’s armed forces and for minority groups.” But, it says, the disease will pose no fundamental threat to the status of China and India of being the major regional players. Of the estimated 35 million infected around the world, 25 million live in the sub-Sahara region at present.

How real is the AIDS threat has become difficult to assess. Indian health minister’s reaction to Bill Gates’ warning was no different from South African President Mbeki’s refusal to accept two years ago that the American health establishment’s definition of AIDS was equally valid in the African situation. More controversial has been the estimates regarding scope of the epidemic as calculated by the US authorities. There is a myth that worldwide 33 million people have died of AIDS. The fact is that only three million have ever been given a diagnosis of the disease, according to World Health Organization. The likely number of HIV positive cases worldwide is sometimes cited as being 35 million and at other occasions as 42 million.

Even in case of Pakistan, the probable figure of AIDS cases continues to rise. It is 80,000 now. It was 50,000 two years ago. The fact is that only 1,700 have so far tested HIV positive while full-blown cases of AIDS are mere 230.

The NIC report expects the number of infection cases to surge to 20-25 million in India — highest ever in a country — from present 5 to 8 million, to 10-15 million in China from one million at present, also 10-15 million in Nigeria from 4 to 6 million, to 5-8 million in Russia from two lakh and to 7-10 million in Ethiopia from current estimate of 3 to 5 million. These estimates appear too high but the NIC contends that it is so because governments maintain low estimates as they “do not want to acknowledge the extent of the epidemic.” There is no doubt that many cases go unreported because the disease is seen as a social stigma by the patients. Mostly, the sex workers, drug users and truck drivers are the main carriers of the disease in China, India and Pakistan.

Nigeria and Ethiopia are projected to be the hardest-hit in the second wave and the epidemic is likely to decrease economic growth and discourage foreign investment. In case of Nigeria, the CSIS report says, the United States, as Colin Powell told the Senate last year, “looks to a strong Nigeria to transform the prospects of people across Africa.” The US has been providing finance and training to the Nigerian army to enable it to act as its proxy force in West Africa which is becoming strategically important as a source of oil. AIDS threatens to disrupt that strategy.

There is no doubt that weakened militaries leave a vacuum at home and abroad which gangs, terrorist organisations and guerilla groups can feel too tempted to fill. In Africa, the ICG report says, armed forces in many countries have HIV infection rates as much as five times that of the civilian population. This disease, now there is a consensus, has the potential to destroy the very fibre of what constitutes a nation — individuals, families, economic institutions, military and police forces — and have broader security consequences both for the nations under assault and for their neighbours. And if India is to suffer widespread infection by 2010, Pakistan cannot escape its effects.

It is an international security issue because of its potential to create security challenges and by its ability to undermine international capacity to resolve conflicts. And in economic terms, the World Bank says, if the adult prevalence rate goes up to 20 per cent, a nation should expect a decline in its GDP of one per cent per annum. AIDS and global insecurity coexist in a vicious cycle, says the UNAIDS chief Peter Piot. Civil and international conflicts help spread HIV as populations are destabilized and armies move across new territories.

The UN secretary-general Kofi Annan has now called for a “war chest” with the support of the World Bank president James Wolfensohn because a comprehensive response would require a commitment of at least ten billion dollars per year. Meanwhile, the UNAIDS and the ICG have signed a cooperation framework in a bid to strengthen leadership and build partnerships in the area of AIDS and security. On the eve, the ICG chief said, “We have seen that AIDS has devastated an entire generation in sub-Saharan Africa and in some countries reaching nearly 40 per cent of the adult population”.

The Horn of Africa continues to be politically important for the US. It expects Ethiopia to play a major political and military role in the region but the problem is that its army is believed to be highly infected. Many Ethiopian soldiers contracted HIV during the civil war in the 1980s by having multiple sex partners. When the war ended in 1991, thousands of infected soldiers and prostitutes, while returning home, brought HIV and AIDS to their villages and towns.

The CSIS report predicts “the disappearance of peacekeeping forces and other restraining factors and eventually of major state failure... This threat to Africa is not the one it (the US) can ignore. It’s real...” But what the US is willing to ignore is the role of its foreign policy in creating this situation. It is a hard fact is that the wars fomented by the US in the Horn of Africa have resulted in the spread of the AIDS which, in turn,has driven poor countries into poverty and debt traps.

However, China and India have the ability to contain the disease. The key source of the spread in China is migration — about 100 million villagers are currently on the move to resettle in cities. Russia’s prison amnesty programmes under which those released are mostly infected and the rise in prostitution can worsen the epidemic there. But, though the report won’t say, equally responsible has been the Russia’s abrupt transition to capitalism that has devastated the country’s economy and shattered social structure. The rise in unemployment and despair has caused an increase in drug abuse and prostitution.

Although the next-wave countries are likely to have a faster spread of the disease in the years to come, the growth of economic globalization, travel, migration and tourism can equally affect the western countries including those which have succeeded in reducing both deaths and infection during the past decade. The epidemic will also have a serious impact on the movement of capital. So, the AIDS will also create insecurity for the US citizens at home and abroad, threaten US armed forces deployed overseas and also exacerbate instability in key countries and regions in which the United States has significant interests.