RECENT interviews and statements on the issue of Kashmir by the national leadership and senior government officials have led to considerable speculation that Pakistan may be stepping into uncharted waters in its overwhelming desire to resolve this long-festering dispute.

Lest there be any confusion, it needs to be reiterated that contrary to official propaganda, no one, not even the government’s fiercest critics, favour a policy of hostility towards India. War is no longer an option. It never was and any pretensions of our military process melted away on the heights of Kargil.

Support for the peace process in Pakistan is wide. All mainstream political parties support a genuine peace process between the two countries that could resolve their political differences and enable their peoples to live in peace. If Islamabad and Delhi were to resolve the Kashmir dispute, it would mean the closure of an issue that has continued to bedevil relations between them for nearly six decades and prevented a billion plus people in the region from availing themselves of economic development, social services or even the evolution of a political ethos.

Therefore all efforts directed towards the resolution of political differences, especially on Kashmir, should be warmly welcomed. But there is still the need to examine dispassionately and objectively the evolution of the negotiating tactics of the two countries and their strategic approaches, especially vis-a-vis Kashmir.

Another fact which bears repetition is that since India is in possession of most of the disputed territory, its primary interest is in maintaining the status quo. Pakistan, on the other hand, wishes to dislodge the Indians from this area for multiple reasons whether emotional, historical, economic or strategic. Its efforts are directed towards changing the status quo which is always far more difficult and fraught with risks, and therefore not looked upon with favour by the international community. India’s task is easier; it has to do nothing. It has to simply stay put.

Keeping the above in mind, General Musharraf’s search for a solution to this issue is understandable. He should also be complimented for recognising that adventures such as Kargil are not going to bring Kashmir to Pakistan. If anything, Kargil was a disaster for the country and caused irreparable damage to our case on Kashmir. He also realised soon thereafter that the correlation of forces had changed radically and that the option of military adventures was out.

Moreover, he was also able to appreciate the sea change that 9/11 had wrought in the philosophy underpinning international support for national liberation movements. This led him to the conclusion that given global opposition to the use of force or violence for the promotion of national liberation, Pakistan would have to reduce, if not eliminate, its support for Kashmiri militancy. Thankfully, this was done and Pakistan’s strategy for promoting Kashmir’s freedom transformed radically.

The current buzz may have begun with General Musharraf’s interview to NDTV earlier this month in which he confirmed that he was prepared to give up Pakistan’s historic demand for a plebiscite in Kashmir, as well as its insistence on the sanctity and legality of the UN resolution as the basis for a resolution of this problem, if the four-point solution that he has been promoting is agreed upon by India.

This is not the first time that the Pakistani leader has spoken of his willingness to show “flexibility” and of his ability to “think out of the box”. In fact, ever since the January 2004 Islamabad declaration, which marked the formal resumption of the Pakistan-India peace process that had remained frozen since the October 1999 military coup, important though subtle changes have been observed in the Pakistani position on negotiations with India.

The Islamabad declaration of January 2004 itself was a major revelation of the “new thinking” in Islamabad, for it represented an unprecedented, unilateral acceptance of responsibility, namely the assurance that Pakistan would not permit any of its territory or territory under its control to be used for terrorist activity. This highly imbalanced undertaking aroused serious misgivings in the country’s national security establishment which was further alarmed to learn that the draft of the Islamabad declaration had not received input from the foreign office.

It is also true that General Musharraf has been pushing for an early solution of the Kashmir dispute and ever since the 2001 Agra summit, he appears to be a man in a hurry. With increasing frequency, he has been speaking of the urgency of finding a solution to this problem and giving vent to his frustration at the Indian inability to respond with equal flexibility and imagination.

At a 2004 iftar reception, General Musharraf gave new evidence of his willingness to go beyond “stated positions”. Then in the April 2005 Delhi summit, the Pakistani leader introduced a four-step formula seeking a phased withdrawal of troops, providing for self-governance, ensuring free movement and a joint supervision mechanism in the disputed territory that would involve India, Pakistan and the Kashmiris.

This detailed exposition of his thought process was obviously meant to shake up the Indian political system and build a groundswell of popular support in India for a political settlement of the issue. Delhi was, however, not amused by his penchant for regular public airings of his negotiating position, fearing that, more than a genuine effort to resolve the issue, these were meant for the consumption of foreign capitals. Indian officials also expressed their unhappiness at General Musharraf’s frequent reference to the inability of the Indian side to show similar “initiative and imagination”.

This led a prominent Indian journalist to comment that unlike the Pakistani leader who enjoyed supreme power and was neither encumbered by institutions nor constrained by rules the Indian prime minister had to operate within the parameters of the Indian constitution.

The president’s comments on Kashmir, contained in his NDTV interview, have raised fresh concerns. It was, however, the foreign office spokesperson’s remarks that upset many people. In particular, her statement that “Pakistan never claimed Kashmir to be an integral part of Pakistan” jolted some. When pressed to confirm whether this represented a shift in Pakistan’s stand on Kashmir, she did add that “our legal position is based on the UN Security Council Resolution”. Such a categorical assertion took the media and practitioners of diplomacy by surprise.

Regrettably, however, some of our political observers chose to focus on the messenger, rather than on the message. This was most inappropriate, for the spokesperson was merely stating what had been determined by the leadership. An intelligent and highly competent diplomat, she could not have added or subtracted anything on her own on an issue as sensitive as Kashmir. Of course, she would have been on safer ground had she engaged in diplomatic obfuscation, but then her statement was obviously meant to convey to the people of Pakistan the distance that had been travelled in the search for a resolution of the Kashmir issue.

Happily, for the first time, there are positive signals emanating from Delhi. Last week, Indian External Affairs Minister Pranab Mukherjee advocated flexibility in border talks with both Pakistan and China, saying that such disputes could not be resolved without making some adjustments. It was, however, Prime Minister Manmohan Singh’s comment that he was willing to consider Musharraf’s latest four-point formula to advance the peace process forward that is encouraging.

In a speech in Amritsar the other day, Singh confirmed that he had closely followed Musharraf’s NDTV interview, adding that he welcomed all ideas and thoughts expressed by Pakistan. More importantly, he spoke of his vision to see India and Pakistan “agree on a treaty of peace, security and friendship.” Pakistan should welcome this comment, take it at its face value and then press India to demonstrate in concrete terms how Singh wishes to concretise his vision. We should also seize this opportunity to promote a dialogue focused more on political issues and less on confidence-building measures.

However, even if Singh genuinely wants a political settlement, he will face enormous problems, both from his own party and from the opposition. Nevertheless, there is some evidence of “fresh” thinking in India as well. In this context, it should be recalled that the governor of the state of Kashmir confirmed last week that differences with Pakistan were “narrowing”. He explained that while India would not be agreeable to changing borders, these could be made “irrelevant”. It also appears that the major powers, in particular the US and the EU, have been urging India to resolve its differences with Pakistan. They have been impressing on Delhi that it is no longer simply an issue of whether it can carry the burden that the occupied territory represent for it.

More importantly, this is keeping India from playing the political and moral role that it believes is its right and preventing its friends from expressing support for Delhi’s candidature for a permanent seat in the Security Council.

Be that as it may, our concern lies with the fact that in our eagerness to present ourselves as both flexible and imaginative, we may be gradually eroding our negotiating position. Whether or not this represents a paradigm shift on Kashmir, described as the core issue for the past 60 years, the fact is that we have travelled a long distance from Agra where General Musharraf had staunchly refused to countenance any compromise on this issue.

After having made the UN Security Council Resolution and the June 3, 1947, partition plan “sacred”, we are now at a stage where we are willing to give these up, even before we have entered the negotiating room. In the process, Islamabad’s promises to the people of Kashmir and assurance to Pakistanis of its irrevocable commitment to the cardinal principle of self-determination as enshrined in the UN Charter have also been abandoned.

But from those with experience of negotiating with Indian leaders, there is a word of caution. In our anxiety to ensure a speedy resolution of the Kashmir problem — because that is what the great powers wish — we appear to be ignoring the fact that Kashmir is neither a real estate problem nor a border dispute. It is a question pertaining to the inalienable rights of self-determination of the Kashmiri people, pledged to them by the international community, including India and Pakistan. Once we deviate from this principle, we lose both our moral position as well as our legal right to be a party to this dispute.

It is, however, still not too late. While remaining faithful to the centrality of our position, we should be willing to be “imaginative” in our negotiations. There must, however, be no dilution in our fundamental position that the people of Kashmir must not be denied the opportunity of exercising their right of self-determination. At the same time, Islamabad needs to reinforce its negotiating position by ensuring that there is no “daylight” between it and the Kashmir political leadership.

Equally important is it for the government to build a national consensus at home. This should include a detailed briefing to the Senate and the National Assembly as well as to the major political leaders of the country. Without such a consensus, the government would be well advised to refrain from any major initiative on an issue as sensitive as the destiny of the people of Kashmir.

The writer is a former ambassador

THE train that has been carrying the baggage of industrialisation of Pakistan’s economy for over 50 years is now running out of steam. The onward journey towards the global economy has to be performed on a different broad-gauge train and not on the monorail that has done its duty and brought the country’s economy as far as it has.

For years, however, we have been trying to revive the stalled engines of this monorail with new paint jobs and decorations — fiscal and financial incentives — hoping its beautification would compensate for engine failure.

The problem of inelasticity in our exports lies in the inefficiency of our production systems. Of the four classic factors of production — land, labour, management and capital — our entire preoccupation for more than 50 years has been with tying all our policy knots around one factor — capital — as if no other factor has a contribution to make in the creation of wealth and value in the economy. Over the years, this neglect has snowballed into severe distortions which are applying brakes on our plans to push the economy towards the next stage of efficient industrialisation.

The history of industrialisation tells us that the primitive and first stage of industrialisation was built around an “extensive” mode of production, meaning thereby that large volumes of inputs of land, labour, capital and management resources were being consumed to produce more goods and services.

But no country can afford to go on consuming high volumes of inputs for low-value products unless that country happens to be running an empire — in which case it could dump low-value goods upon colonies under its control and charge exorbitant prices for them. But for countries like Pakistan, even domestic markets are fair game for producers from anywhere in the world and no more the monopoly of its own industry in this age of globalisation.

As the economy grows, competing demands upon the country’s finite resources are made by other sectors also. It thus becomes inevitable to shift from an “extensive” mode of production towards an “intensive” mode utilising a lower or the same stock of inputs for producing more value.

The issue is addressed by using a variety of policy instruments which require that greater contributions to value addition be made by the other three factors of production as well — more precisely by creating an environment that rewards efficient management of land resources, improves skills and the work ethics of the labour force and enhances the role of technology and professional management in production systems.

But this shift also involves a shift in the power structure and the influence of the players in production systems. That is exactly where our search for efficient industrialisation has been stuck for years with recourse to supporting the status quo often taken with bailouts and interventions that overlook inefficient and wasteful use of the other factors of production.

A look at our treatment of land resources shows that the economy has acquired characteristics that are closer to Central American than Asian models of industrialisation. This writer had the opportunity to evaluate some private and public investment projects in El Salvador. It seemed that most urban, suburban and strategically situated land assets in that country had been sold out by governments to its favoured ones, not because the latter had some promising investment projects on the table but as spoils distributed for future windfall profits whenever a serious investor came by and needed that piece of land for commercial or residential purposes.

Even the governments which had originally sold these parcels of land at throwaway prices were obliged to pay market prices to buy back the same land — even for public welfare projects like schools and hospitals.

A similar situation has been developing in Pakistan where large tracts of land assets have been cornered for speculative purposes. By artificially raising the land prices for genuine investors, several good investment projects, based upon normal rates of return, have become unviable in big cities. By the same token, land for labour housing has rocketed beyond the reach of several enterprises as have the costs for providing infrastructure and support utilities.

But the history of successful industrialisation in other economies also tells us that the answer to these problems lies in the relocation of industries to less costly towns and industrial centres to recapture the profitability of enterprises which would otherwise be bankrupted by the market forces of competition. For instance, even though cities like Manchester, Boston, Philadelphia and New York were major textiles centres in the UK and the US in the early stages of industrialisation, no one would be naive enough to look for textile mills in these cities today.

As these cities developed into major urban centres, land prices rose and the need for the provision of utilities like water, drainage, roads and other infrastructure grew, which cut into the profitability of enterprises, specially for industries like textiles and steel-making that consumed large quantities of these inputs.

In fact, in the US there were several textile and steel towns established outside major urban centres to cut costs and improve the profitability of enterprises. As competition grew, even further relocation became necessary and many low-value industries in the US moved out of costly urban centres of the northeast to the rural southern states of Alabama, Mississippi, the Carolinas and ultimately out of the UK and the US to low-cost countries like Honduras, Nicaragua, Indonesia, Bangladesh, Pakistan and others, because these low-value products could only remain competitive if produced in low-cost locations. Outsourcing is the logical extension of the same strategy.

For successful industrialisation, Pakistan can’t remain an exception to the economic logic followed by the rest of the world. It cannot continue utilising high-cost land assets, infrastructure and utilities of big expensive cities and still produce low-value goods and expect to be competitive in world markets. This means that the production of low-value goods should be relocated to smaller industrial towns where all inputs are available at low costs while high-cost land assets should be utilised for producing high-value and high-tech goods and services.

Actually the market forces would have worked out solutions in favour of efficient users of land and other factors of production but for frequent government interventions and bailouts which have protected and even promoted the inefficient and wasteful use of finite national resources.

Even though we may not have all the features of a “command economy”, there are several instances in the way we conduct our economy and make public investment decisions — including governance through “directives” — which show that the command economy still occupies centre-stage in our system of governance. This is hindering moves towards efficient industrialisation as it denies a level playing field to all, protects speculative and monopolistic practices and allows bailouts of inefficient private businesses with public money.

Without removing the mismatch between the high-volume consumption of expensive inputs and the low-value production of goods and services and allowing efficient takeovers of inefficient enterprises, the march towards the second stage of efficient industrialisation — and increasing export earnings and reducing the widening trade gap — will not be easy.

The writer is a former federal secretary.
Email: smshah@alum.mit.edu