Foreign investment

THE prime minister’s statement that a strong macro-economic performance and an improved debt profile have made Pakistan attractive to foreign investors must be accepted with a pinch of salt. Foreign investment has, no doubt, begun to trickle in, and Mr Shaukat Aziz’s claim during a meeting with some foreign businessmen in Islamabad on Friday that it is expected to reach the three billion-dollar figure may be quite correct. But this is far below Pakistan’s potential — a country rich in natural resources and having a relatively big population and skilled manpower. However, a higher growth rate — Pakistan’s was nine per cent last year — is not enough to draw foreign capital. What we tend to forget is that one reason for the flow of foreign investment in a big way in countries like China, India and the Asean nations is their political stability. In Pakistan, the problems created by lack of political stability, repeated military interventions, and constitutional crises are compounded by an acute law and order situation. Bomb blasts, attacks on religious gatherings and places of worship, the sabotage of gas pipelines, rail lines and electricity pylons, countrywide “wheel jam” strikes and the murder of foreign nationals — Chinese engineers and American journalist Daniel Pearl — have given Pakistan an image that is not very flattering and is unlikely to induce foreign businessmen to invest in the country.

Foreign investors — or for that matter Pakistan’s own businessmen — want two assurances: first, they would like to see their capital safe, and, second, they want conditions of peace in which the projects they invest in can run smoothly. So far as the first is concerned, foreign capital is quite safe in the sense that the era of nationalisation is behind us; in fact, it is an era in which publicly-owned enterprises are being privatised, as is evident from the sale of the Pakistan Telecommunication Company Ltd, Pakistan Steel Mill and the Karachi Electricity Supply Corporation. Besides, even during the heyday of nationalisation in the ‘70s, foreign-owned concerns remained untouched. But it is the other factor — that of political stability and conditions of peace — which militates against foreign investment coming in.

The first responsibility of any government is to maintain peace and ensure the safety of the life, liberty and property of all citizens. From this point of view, the government’s failure is patent. The menace of terrorism continues to stalk the land, and the security agencies have failed to smash underground networks that strike every now and then to kill and maim innocent people. In Balochistan, the issue is political, for those who resort to acts of terrorism claim to fight for the rights of the Baloch people. Whether the sardars behind this wave of terror there represent the people of Balochistan is another matter, but the fact remains that the government has failed to root out terrorism in the province. Another cause for concern is the lack of a sense of responsibility on the part of the opposition, for it often fails to make a difference between the government and the state. The three-day “wheel jam” strike following the Nishtar Park tragedy caused a loss of about four billion rupees and shows how some political parties’ behaviour lacks maturity. The cumulative cost of such strikes in a given year is staggering. Let both the government and the opposition realise that Pakistan needs foreign investment and technology in a big way, but that without conditions of peace the country will hardly be “attractive” to foreign businessmen.

Duty-free import of cement

THE government’s decision to allow duty-free and unlimited import of cement into the country should, hopefully, provide relief to the construction industry, currently held hostage by a cartel of domestic cement manufacturers. The economic coordination committee also decided that a freight subsidy of Rs 60 per kilogram would be provided, that Pakistan Railway would also give a concession of 30 per cent on its transportation rates and that it would ferry the cement imports upcountry on a priority basis. The decision is also welcome from the point of view of starting reconstruction efforts in the earthquake-hit areas. The rebuilding was to start after winter but, just around that time, the price of cement sharply rose by as much as Rs 50 per bag. The rise was all the more inexplicable because during this time the cost of inputs such as fuel had remained unchanged. Besides, in the last budget the government, in a bid to give an impetus to the housing and construction industry and to generate employment, had withdrawn excise duty on cement.

Regrettably, until now, the government has failed to persuade the cartel of cement manufacturers to reduce prices. The duty-free and freight-subsidised import of cement, along with a withdrawal of duty drawback on its export to Afghanistan, may bring prices down. In addition to this, imports have to be financed by precious foreign exchange and it would have been far better had domestic prices been brought down. For the future, however, it would be good if the Monopoly Control Authority, powerless as it is in fighting the sugar cartel as well, was suitably empowered to take decisive measures to keep cement prices in check. The cement sector is dominated by a handful of large cement manufacturers all of whom seem to wield considerable clout in the corridors of power, so much so that till now they have been successful in pursuing their profiteering interests. In addition to measures just taken, the government should persuade the cement cartel to lower prices.

WHO guidelines on bird flu

INSTEAD of playing down the dangers of bird flu in the country, the government should be concentrating on the recent guidelines issued by the World Health Organisation on how to cope with what has been termed a “highly alarming situation” by the health body. The H5N1 virus may have been detected in just a couple of poultry farms in the NWFP, but considering its highly contagious nature and the absence of checks on the movement of domestic fowl within the country, it is possible that the virus could affect birds at other places too. This would increase the risk of transmission from poultry to humans. To guard against this and avoid a scenario in which the virus mutates to a point that could result in human-to-human transmissions, WHO is calling for stringent steps to monitor the situation. It has stressed the identification of high-risk areas, better diagnostic facilities, creating awareness at the public level and storing anti-viral drugs that could lessen flu symptoms.

All this is a tall order for a government that has an abysmal record in dealing with emergencies and is so far not equipped to handle a potential outbreak of avian flu. Realising the risks involved, it must come up with a plan that is realistic and that would allow the authorities to take effective short-term measures — such as limiting poultry movement within the country and from outside — while creating the necessary infrastructure for long-term solutions. This calls for a strict watch on poultry houses, which fearing losses, are not too willing to comply with WHO guidelines. They are averse to farm inspections or reporting of the incidence of disease among birds to the authorities. Here the government must not falter; for gathering data on poultry farms and keeping a strict check on them are essential elements of a preventive strategy.

Peaceful solution to Iran’s N-crisis

THE UN Security Council’s presidential statement of March 29, 2006, is the latest and most serious in the series of steps being taken at the behest of the United States and the EU countries to circumscribe Iran’s nuclear programme within parameters that are more restrictive than those provided by the NPT.

The Council called upon Iran, inter alia, fully to suspend all enrichment-related and reprocessing activities, including research and development, with the added proviso that the suspension be verified by the International Atomic Energy Agency.

As expected, Iranian leaders rejected the UNSC decision and are pressing ahead with their plans to enrich uranium, initially on a small scale with a pilot project comprising a cascade of 164 centrifuges. In a display of cool nerves and nationalistic fanfare that belies the gravity of the potential threat, President Mahmoud Ahmadinejad announced at a parade on April 11 that, “The nuclear fuel cycle at the laboratory level has been completed, and uranium with the desired enrichment for nuclear power plants was achieved.”

Coinciding with these developments, Seymour Hersh’s article in April’s New Yorker magazine reveals that the United States, “while publicly advocating diplomacy... has increased clandestine activities inside Iran and intensified planning for a possible major air attack.” Hundreds of targets are under consideration, apart from nuclear installations, according to the article.

Iranian spokesman Hamidreza Assefi has coolly dismissed the news media reports as part of American psychological warfare. President Bush has refuted the speculation that the United States planned to use nuclear weapons against Iran and reiterated the importance of finding a diplomatic solution, but his many statements and those of his associates leave no doubt that military options remain on the table should diplomacy fail.

The hard fact is that the United States and the EU appear deadset against letting Iran produce nuclear fuel within its borders. No matter how stringent the safeguards against diversion to non-peaceful uses Iran accepts, the underlying western mistrust of Iran’s intentions remains an insurmountable obstacle.

Iran is a signatory and member of the NPT. The covertly attempt to acquire enrichment capability over the past 18 years — and is subsequent exposure — has inevitably put Iran on the backfoot in exercising the right to produce nuclear fuel for peaceful purposes. Ironically, Iran’s immense oil wealth and great power ambitions would have made it a logical candidate for nuclear status, had the Shah’s government not signed the NPT. By taking this almost irreversible step, Iran initially qualified for a host of benefits, including unhindered access to peaceful nuclear technology and unlimited conventional weapons. The Shah reasoned that far more economic and political benefits could be gained by cooperating with the West than by attempting to produce nuclear weapons.

Since the fall of the Pahlavi dynasty in 1979, Iran and the United States have been locked in an adversarial position with hardly any letup. Enraged by the seizure of the American embassy personnel in Tehran in 1979, the US, far from allowing Iran to reap the benefits due to it under the Shah’s grand deal with the West, which included major nuclear power projects, subjected the new Iranian regime to sanctions and a virtual boycott. Iran received no benefit whatsoever from the hundreds of millions of dollars that the Shah invested in the nuclear industries of Europe.

During his State of the Union message of 2002, President Bush declared that Iran belonged to the “axis of evil”, a statement hardly calculated to inspire Tehran’s confidence. President Ahmedinejad’s recently denial of the Holocaust of Jews in Europe during the Second World War, and his call for removing Israel from its present location have reinforced US-Israeli fears that Iran poses a grave threat to their security and vital interests. The two presidents’ statements, and all the attendant incendiary rhetoric, may thus be regarded as having a destructive effect not dissimilar to Shah Khwarezm Alaeddin Mohammed’s decapitation of Changez Khan’s envoy in 1219. In short, the two countries may be headed on a collision course unless sober counsel prevails and a via media is found to resolve the growing crisis.

Perhaps the most cogent and reasoned defence of Iran’s position was an article by Iran’s permanent representative to the United Nations, Javad Zarif, which appeared in the New York Times of April 6.

One may discern that Iran’s quest for nuclear capability is propelled by three major forces: national pride, economic necessity to reduce dependence on a rapidly depleting, finite natural resource — oil and genuine security concerns. Unless the western powers address Iran’s concerns, it may be impossible to arrive at a peaceful solution. The United States, by granting India extremely liberal facilities in the recently concluded nuclear deal, has set an invidious precedent that is bound to spur other states in the region, including Pakistan, to intensify efforts to protect their vital interests. The US-India deal shows that double standards are being applied, which negates US efforts to occupy the moral high ground in the dispute with Iran.

Iran’s leaders, like other Muslim rulers through the ages, have now been called upon to make a momentous decision that could alter the course of events. Leaders truly judged great by history have been those who acted with wisdom and boldness in the face of peril. Others who failed to assess the situation correctly foundered and brought disaster to the Muslim world.

The tumultuous 20th century abounds in examples of egregious blunders by Muslim rulers, starting with Turkey’s decision to join the Central Powers against the Allies in 1914, to the Taliban regime’s refusal to ask Osama bin Laden to leave Afghanistan even after the 9/11.

We in Pakistan have experienced a fair share of policy setbacks. With a history of less than six decades of independent existence, as compared to Iran’s 26 centuries, Pakistan is fortunate indeed to have acquired nuclear capability. It may appear presumptuous, therefore, to advise our more experienced Iranian neighbours on how they ought to defend their national interest in the face of peremptory demands and dire security threats.

Pakistan is a friend and neighbour of Iran, bound to it by historical, religious and cultural ties. The continued well-being and prosperity of the Iranian people is very much in Pakistan’s interest. A military attack against Iran would wound the sentiments of the Pakistani people. Worse, it would greatly weaken the Islamic world by neutralising Iran’s growing strength.

The bombing of Iran might destabilise Pakistan’s economy by increasing the international price of oil to unknown heights, and by disrupting Pakistan’s prospects of enhanced economic and commercial ties with its western neighbour. Unquestionably, a peaceful, honourable resolution of the deadlock over Iran’s nuclear programme would be most welcome to Pakistan and to other countries in the region.

To protect Iran’s national interests at this time, its leaders have to be clear in their minds as to what they want to achieve. Do they wish Iran to become a great power or a nuclear power? What appears important at this stage is that the Iranian economy be strengthened and confrontation with a stronger power avoided. Nuclear capability brings security to a weaker country only after it is developed and matured. Iran’s nuclear capability is at a nascent stage.

The Bush administration, too, should avoid falling into the trap of the law of unintended consequences. By relying on its overwhelming air capability, the United States could take out most of Iran’s nuclear installations, and set the country back by 20 years. But can bombing destroy the will of the Iranian people? Embedded in the Iranian psyche is a powerful martyrdom syndrome, which could well be unleashed if Iran is attacked. Countless Iranians would be ready to sacrifice their lives to avenge any outrage against their nation. The world and the region would know no peace for years to come.

As IAEA’s director-general, Mr ElBaradei, said in Oslo a few months back, “You cannot use force to prevent a country from obtaining nuclear weapons. By bombing them half to death, you can only delay the plans, but they will come back, and they will demand revenge.”

What options do the western powers have to break the deadlock over Iran’s nuclear programme? As a signatory to the NPT, Iran appears to be in no mood to accept an abridgement of its legal rights to make nuclear fuel. But it is certainly worth exploring whether Iran may be more flexible in return for unhindered access to peaceful nuclear technology and other benefits promised to it at the time that it acceded to the treaty.

Would Iran be more willing to make concessions if the western powers were to agree to grant facilities similar to those the United States promised to India? Realistically, this would entail a dramatic change in the behaviour patterns of the two sides. Why not, then, make the normalisation of US-Iran relations and EU-Iran relations an integral part of the solution? Should Iran be permitted the token enrichment that it has started with 164 centrifuges, with appropriate safeguards? The director general of the IAEA had recently spoken in favour of such a compromise solution.

How the West and Iran handle their current nuclear standoff will carry major consequences for the international community. Neither side can afford to be adamant or hasty. Hopefully, several months grace period may be available to reach a compromise solution after which the use of force could become more likely.

For Iran the stakes are particularly high because it is the weaker party. The choice placed before the proud Iranian people should not be one between outright surrender and humiliation or widespread destruction and indefinite privation. Perhaps China and Russia, who oppose the use of force and UN sanctions, could help bridge the differences between Iran and the West. A peaceful solution would enable Iran to convert its ample though finite oil wealth into self-sustaining agricultural and industrial power, second to none in the region.