FOREIGN investors want political stability in Pakistan so that they can make large direct investments in the country. President Musharraf says the same, but his approach to political stability and its definition is not the same as that of the political leaders. He regards himself as the arch stone of the political structure while continuing as the chief of army staff.

Foreign investors want political stability so that there is uninterrupted continuity of economic policies and that too without the perpetual agitational politics. They want the kind of political stability which can ensure continuity of the mutually agreed fiscal pattern. And they want a government which is responsive to their genuine needs for smooth corporate growth.

In the global scenario, Pakistan’s economy, like that of other states, faces constant challenges which keep changing. That is becoming apparent to the Pakistani investors as well. “Foreign direct investment is the dire need of the hour for keeping up the momentum of economic growth,” says Dr Salman Shah, advisor to the prime minister on finance. He says that in the wake of record FDI of $3.5 billion received last year, six to seven billion dollars could be attracted this year in various sectors. He says the current account deficit could be reduced through primarily enhancing the FDI.

Both foreign and domestic investors want the kind of political stability that can ensure continuity of economic policies which is essential for speedy economic growth. In a highly competitive world they cannot perform well if they have to face constant agitational politics with frequent strikes and shutdowns, outburst of violence, disruption of supplies and frequent work stoppages.

Foreign investors already face the problem of shortage of power and its frequent breakdowns. And they have to suffer too many infrastructural deficiencies. So they cannot, in addition to that, afford to face agitational politics with its periodic violent manifestations and protest shutdowns. They would prefer safer and peaceful countries where their plants could work without interruptions and social climate was more congenial. If we do not strive for such a political, social and economic environment, our vision of six to seven billion dollars of FDI would remain a dream.

The minister for privatization Zahid Hamid has come up with a very long list of public sector units to be privatized soon, including the Pakistan State Oil, the two gas companies and NIT. We want foreign investors to bid for those units so that they can get attractive prices and further investment for expansion.

The Gulf investors who are showing more interest in the units are not accustomed to agitational politics and frequent violent demonstrations and repeated shutdowns and strikes. In the case of the KESC, the fear of agitational politics made the first winning Arab bidder to opt out and the actual buyer is experiencing a score of problems because of the decayed state of the utility network. Many of the units to be privatized like the Pakistan Steel and the heavy engineering units are in a run-down state, and like the KESC they need heavy additional investment.

Pakistan is heading towards becoming a middle income country, having already achieved a per capita income of 850 dollars, says Prime Minister Shaukat Aziz . Achieving and sustaining such levels of income on a national scale needs political stability and continuation of economic policies.

Unlike the western countries, a change in the government in Pakistan can mean a sudden change in the economic policies or in their major details. A change of government through election is often highly contentious and the winners are not accepted gladly or peacefully. And the new government may repudiate the policies of the ousted government, freeze them or come up with its own half baked policies in haste. Valuable time may be lost in such exercises and the investor can lose heavily.

When a country has a proper political system and changes in government are smooth and non-acrimonious, the investors are not exposed to such convulsions or unacceptable changes. What that calls for is a mature leadership based on the will of people and a two or three party system, not numerous parties and parties within parties not strong enough to uphold any system successfully or for long.

Mature leadership knows that unless it commands a majority in parliament, it cannot get any major legislative measure passed, enforced and made a success of. Such a leadership is realistic or pragmatic. But in a country where military rule is frequent and long and elected civilian rule brief, mature leadership is rare, more so when military presence at the levers of power is all pervasive.

The US administration wants not only political stability in Pakistan, but also the rule of law and transparency in decision making, says the visiting US ambassador for the Bureau of Economic and Business Affairs who is finalising the negotiations for the bilateral investment treaty.

The three objectives are among the major concerns as expressed by the Pakistan leadership at the highest level. The US wants them to become real and enduring. Among the other factors affecting US investment in Pakistan are the relative economic advantages, size of the market and the tax system, he says. And these factors weigh with the investors before they take any decision of investing in any country.

He agreed that the investment climate in Pakistan is conducive, but asserted that the US government cannot tell the investors where to invest. He said in spite of the US official travel advisory against Americans visiting Pakistan; a large number was actually visiting the country. Meanwhile, the president and the prime minister have asked their economic ministries to get the high rates of the utilities reduced, particularly of gas and power to encourage domestic investors. Both of them have also called for a removal of a plethora of administrative barriers to investment. Amongst such deterrents are corruption, red tape and high cost of inputs.

The Planning Commission chief Dr Akram Sheikh has also voiced his regret over the fact that despite numerous tax concessions and other incentives offered to the private sector in the country during the last six years, the domestic private sector has been shy and failed to make adequate investment. And yet the textile sector claims to have made a total investment of $5 billion for modernization and upgrading so as to improve its competitiveness during the last three years.

Earlier the investors said the interest rates for long term investment were too high. They reached their peak of 25 per cent during the period of Moin Qureshi as caretaker prime minister. Then the massive loan default of around Rs250 billion was revealed and large new loans became very difficult to get, except for the good borrowers with a proven track record.

Since 2001 the interest rates have been low, but the banks were not ready to come up with long term investment loans except for the very good borrowers. In such a situation the entrepreneurs had to invest not only in the manufacturing units, but also in power production units which made the enterprise far more costly. And yet the textile industry has been able to attract a total investment of $5 billion.

Now the government wants to raise the total export from $16.5 billion last year to $40 billion within the next five years. Could the exporters really make it after they could not raise the total exports to $17 billion to fulfil the target?

Meanwhile, the government is negotiating Free Trade Area Agreements with a large number of countries from Bangladesh and Malaysia to the US and China. Agreements with Bangladesh, Malaysia and Thailand are to be signed this year, while the first FTA agreement Pakistan signed with Sri Lanka has not resulted in far larger export to that island country.

Attempts to sign agreements suggest that we will have enough of an exportable surplus and of good quality, that the value added from such exports will rise significantly. Now our textile exports per pound are earning less than what those of India and Bangladesh do. This is highly unacceptable. Our emphasis should now be on exporting more and more of the value added, not merely to increase its volume by sending out more gray cloth and low count yarn.

It is good the planning commission has been reactivated and it has become active and assertive. That is because the prime minister gives it due weight so that a good deal of thinking can go in to the economic planning within a globalised economy.

We have to become very vigilant in a highly competitive world to get the best out of our exports. Setting up higher targets is the easiest part of any planning, what matters is the final achieving of the targets and even exceeding them.

The talk about Pakistan becoming a middle income country after abolishing absolute poverty along the way is not new. It has been done much earlier as well. That is what Ghulam Ishaq Khan as the finance minister hoped to achieve in the 1980s. Instead we became poorer due to political convulsions. Such goals call for sustained efforts and more so now than ever before.

THE United Nations Security Council deadline for Iran to stop producing enriched uranium expires on August 31, and UN Secretary-General Kofi Annan arrives in Tehran on September 2. Washington demands UN sanctions against Iran if it doesn’t stop, and hints at air strikes against Iranian nuclear installations if sanctions don’t happen or don’t work. Welcome to the crisis.

The media loves a crisis, but this one seriously lacks credibility. In June John Negroponte, US Director of National Intelligence, told the BBC that Iran could have a nuclear bomb ready between 2010 and 2015. But he said “could”, not “will”, and only in five or ten years’ time. So why are we having a crisis this autumn?

The US government’s explanation is that President Mahmoud Ahmedinejad threatened in May to “wipe Israel off the map,” and that nuclear weapons are the way he plans to do it. (Any that are left over would presumably be given to terrorists.) As proof of Iran’s evil ambitions, it points to the fact, revealed in 2003, that Iran had been concealing some parts of its so-called peaceful nuclear energy programme from the International Atomic Energy Agency (IAEA) for eighteen years.

But there are a number of holes in this narrative, and the first is that Ahmedinejad never said he wanted to “wipe Israel off the map.” This is a strange and perhaps deliberate mistranslation of his actual words, a direct quote from the late Ayatollah Ruhollah Khomeini, the font of all wisdom in revolutionary Iran, who said some twenty years ago that “this regime occupying Jerusalem (i.e. Israel) must vanish from the page of time.”

It was a statement about the future (possibly the quite far future) as ordained by God. It was not a threat to destroy Israel. Attacking Israel has never been Iranian policy, and a few days later the man who really runs Iran, Ayatollah Ali Khamenei, publicly stated that Iran “will not commit aggression against any nation.” While Ahmadinejad continues to say nasty things about Israel, he too has explicitly rejected accusations that Iran plans to attack it.

Of course it doesn’t. Israel has had its unacknowledged nuclear weapons targeted on Iran since Ahmadinejad was a small boy. Even if Iran were eventually to get some too, it could not realistically hope to catch up with Israel’s hundreds of weapons and sophisticated delivery vehicles. (Israel can strike Iran with aircraft, with ballistic missiles, and possibly with Harpoon missiles fired from its German-built Dolphin-class submarines and refitted to carry nuclear warheads.)

If Iran doesn’t have a serious nuclear weapons programme, why did it hide two of its nuclear facilities from the IAEA for 18 years? Eighteen years before 2003 was 1987, at the height of Saddam Hussein’s US-backed war against Iran, with Iraqi missiles falling daily on Iranian cities. They had conventional explosive warheads, but the Iranians suspected (rightly, at that time) that Saddam was working on nuclear weapons as well.

So the Iranians probably decided to revive the Shah’s old nuclear weapons programme, and hid the plans for the new facilities to keep them off Saddam’s target list and to avoid an early confrontation with the IAEA. Then the war ended, and work on Iranian nuclear weapons stopped too, at the latest after UN inspectors dismantled Saddam’s nuclear programme in the early 1990s. We can be sure of this because Iran would have had nuclear weapons long ago if it had wanted them badly enough: it doesn’t take over eighteen years for a country with Iran’s resources.

The undeclared nuclear facilities remained secret because it was embarrassing to admit that Iran had concealed them, but no great effort went into finishing them. (In fact, President Ahmadinejad finally opened one of them, the heavy water facility at Arak, only this month.) But the fact that Iran hid them for so long is the only reason that anybody has for doubting the legitimacy of its current actions, since it is quite legal for a signatory of the Nuclear Non-Proliferation Treaty to develop the technologies and facilities for enriching nuclear fuels for power plants.

Iran probably does now intend to work steadily towards a “threshold” nuclear capability (the ability to break out of the NPT and build nuclear weapons very rapidly if necessary) because it is surrounded by nuclear weapons powers: India and Pakistan to the east, the Russians to the north, Israel to the west, and US forces on both its western and eastern borders in Iraq and Afghanistan. But a threshold nuclear capability is still perfectly legal, and many countries that have signed the NPT have achieved it already.

Iran’s actions are not worth a real crisis, and the situation is certainly not very urgent. Iran’s reply to the Security Council offered further negotiations on the issue, though it will not agree to stop enriching uranium as a precondition for talks. In these circumstances, neither Russia or China, two veto-holding powers, will vote to impose serious sanctions on Iran, nor will a number of the non-permanent members of the Security Council. So if the Bush administration truly believes that this is important and urgent, it will have to act alone and outside the law.

Would it really do such a foolish thing again after the Iraq fiasco? Unfortunately, it might. —Copyright

THE year 2006 marks the 55th anniversary of the establishment of diplomatic relations between Pakistan and China. A number of activities that have been arranged throughout the year in Pakistan and China are likely to culminate in Chinese President Hu Jintao’s visit to Pakistan to attend the opening ceremony of the Gwadar port. The latter has been constructed with the active support and participation of China.

Over the decades, Pakistan and China have maintained excellent and mutually beneficial ties based on complete trust and understanding. This relationship, which the Chinese leadership described as being “all-weather”, has not only stood the test of time but also gained in strength and depth. Strengthening the existing friendship with China is one of the fundamental goals of Pakistan’s foreign policy.

For its part, China, which also attaches much importance to developing relations with Pakistan, has made strenuous efforts to reinforce them. Pak-China relations have matured into a comprehensive and reliable strategic partnership that augurs well for the peace and security of the entire region.

The exchange of high-level visits between Pakistan and China have been an important hallmark of their relationship. These visits have made a valuable contribution to maintaining and further promoting relations between the two countries and opening new vistas for cooperation in the fields that have remained unexplored. They have also enabled the leaders of the two countries to hold an in-depth discussion on important regional and global issues of mutual interest.

One hopes that the Chinese president’s forthcoming visit to Pakistan will also yield fruitful results and open a new chapter in Pak-China relations. According to press reports, several agreements are likely to be signed during the visit of the Chinese president. They will cover cooperation in diverse fields that will further consolidate and strengthen bilateral ties between the two countries.

Pakistan and China signed a Treaty of Friendship, Cooperation and Good-Neighbourly Relations during Chinese Premier Wen Jiabos visit to Pakistan in April 2004. This is the first treaty of its kind that China has ever signed with a country in South Asia. The treaty provides an opportunity to Pakistan and China to impart greater content and substance to their relationship and help develop a long-term and mutually beneficial strategic partnership. Most importantly, it would ensure passing down the benefits of their cooperation from generation to generation.

Pakistan considers China as a balancing factor in the present state of international relations. It continues to remain an important partner in the economic, technological and defence fields. Similarly, China considers Pakistan an influential country in the Islamic world. Its geographical proximity with the Central Asian states has enhanced its strategic importance. In the foreseeable future, Pakistan and China will continue to need each other, particularly in view of the global transformation. Pakistan will continue to rely more on China’s moral and political support to be able to face extraneous pressures being exerted on it.

Since the end of the Cold War, there has been a discernible change in China’s foreign policy. Pragmatism has been the determining factor of this change. Among the foremost tasks of China’s foreign policy has been the successful handling of its relations with the United States and other advanced countries as well as with its immediate neighbours, regardless of the quality of its relations with them during the Cold War era and despite any unresolved disputes.

China took major steps to restore its relations with Western Europe which had suffered a setback in the wake of the Tiananmen Square incident. Relations with the United States have been normalised and are continuously on the upswing with Russia. China has also developed friendly and cooperative ties with all its neighbours, including India.

However, there is concern in Beijing over the continued strained relationship between Pakistan and India over the Kashmir issue. Although China is rapidly developing its relations with India as part of its policy of developing peaceful and stable relations with all countries along its periphery, it has always publicly endorsed Pakistan’s position on Kashmir. No other major power has adopted a similar principled position on this issue. Pakistan must, therefore, value China’s perception.

Being a permanent member of the UN Security Council from Asia, China is expected to contribute to facilitating the resolution of the long-standing Kashmir dispute which has the potential of endangering world peace. There is awareness there, that while Pakistan is fully committed to a peaceful resolution of this dispute through dialogue, India’s negative stance and dilatory tactics are obstructing the attainment of this goal.

Fortunately, there are no irritants in relations between Pakistan and China. Consequently, their relationship has the potential to expand further. Pakistan and China have mutual interests which may be sufficient to ensure that future ties between the two remain promising. At the same time, it must be realised that no relationship, however strong and vibrant, can be sustained at the desired level unless more substance is instilled in it, from time to time, to save it from stagnation.

The writer is a former ambassador.

THE Red Cross has just announced a new disaster-response partnership with Wal-Mart. When the next hurricane hits, it will be a co-production of Big Aid and Big Box. This, apparently, is the lesson learned from the US government’s calamitous response to Hurricane Katrina: businesses do disaster better.

“It’s all going to be private enterprise before it’s over,” Billy Wagner, emergency management chief for the Florida Keys, currently under hurricane watch for tropical storm Ernesto, said in April. “They’ve got the expertise. They’ve got the resources.” But before this new consensus goes any further, perhaps it’s time to take a look at where the privatisation of disaster began, and where it will inevitably lead.

The first step was the government’s abdication of its core responsibility to protect the population from disasters. Under the Bush administration, whole sectors of the government, most notably the Department of Homeland Security, have been turned into glorified temp agencies, with essential functions contracted out to private companies. The theory is that entrepreneurs, driven by the profit motive, are always more efficient.

We saw the results in New Orleans one year ago: Washington was frighteningly weak and inept, in part because its emergency management experts had fled to the private sector and its technology and infrastructure had become positively retro. At least by comparison, the private sector looked modern and competent.

But the honeymoon doesn’t last long. “Where has all the money gone?” ask desperate people from Baghdad to New Orleans, from Kabul to tsunami-struck Sri Lanka. One place a great deal of it has gone is into major capital expenditure for these private contractors. Largely under the public radar, billions of taxpayer dollars have been spent on the construction of a privatised disaster-response infrastructure: the Shaw Group’s new state-of-the-art Baton Rouge headquarters, Bechtel’s battalions of earthmoving equipment, Blackwater USA’s 6,000-acre campus in North Carolina (complete with paramilitary training camp and 6,000-foot runway).

I call it the Disaster Capitalism Complex. Whatever you might need in a serious crunch, these contractors can provide it: generators, watertanks, cots, port-a-potties, mobile homes, communications systems, helicopters, medicine, men with guns.

This state-within-a-state has been built almost exclusively with money from public contracts, including the training of its staff (overwhelmingly former civil servants, politicians and soldiers). Yet it is all privately owned; taxpayers have absolutely no control over it or claim to it. So far, that reality hasn’t sunk in because while these companies are getting their bills paid by government contracts, the Disaster Capitalism Complex provides its services to the public free of charge.

But here’s the catch: the US government is going broke, in no small part thanks to this kind of loony spending. The national debt is $8 trillion; the federal budget deficit is at least $260bn. That means that sooner rather than later the contracts are going to dry up. Insiders call it the “homeland security bubble”.

When it bursts, firms such as Bechtel, Fluor and Blackwater will lose their primary revenue stream. They will still have all their hi-tech gear giving them the ability to respond to disasters, while the government will have let that precious skill wither away - but now they will rent back the tax-funded infrastructure at whatever price they choose. —Dawn/Guardian Service