South Asian integration?

I SUGGESTED in this column last week that it is in India’s interest to develop closer and less hostile relations with Pakistan. Does the same hold true for Pakistan? The answer is most definitely yes. In fact, I would argue that for Pakistan, given the geographic space it occupies, living in peace and harmony with India will bring many economic, political, and social rewards.

The benefits it will derive will be even more than for India. It is in Pakistan’s interest, therefore, to persist in the efforts to quickly normalize relations with its neighbour even if India seems somewhat tardy in pursuing the same objective. In building my case for a more proactive role Pakistan’s part, I will start with the economic benefits that would result from good relations with India.

The first dividend of peace will be in the area of trade. At this time South Asia is unique among the large regions of the developing world in the sense that there is a small amount of trade among the countries located in this geographic space.

In fact, South Asia is the only economic region in the world where the “gravity model” of trade does not seem to apply. According to that model, the amount of trade between countries is determined by the distance between them and also by their size.

For obvious reasons neighbours should trade a great deal with one another. However, when one of the neighbours is a large country, as is the case with India with reference to South Asia, trade as a proportion of domestic product will be much smaller for that country relative to that for the smaller states. This is the case for such continental economies as the United States, Russia and Brazil. China is the only exception since its model of development is based on an aggressive pursuit of foreign markets.

The gravity model — or some variant of it — helps to explain the pattern of trade among most countries in different regions of the world. If the model were to hold for South Asia, India would be the most important market for the countries around its periphery. Bangladesh, Bhutan, Nepal, Pakistan and Sri Lanka would trade a great deal with India. For the moment this is only true for Bhutan and Nepal.

For these two countries, India has a dominant presence but that is more the result of their geographic situation than the working of the gravity model. Both Bhutan and Nepal are landlocked countries with the only natural access to the rest of the world available through India. They have no choice but to trade with India. That notwithstanding, India has been quite grudging in allowing even these small countries an open access to its markets.

That the gravity model does not work for South Asia is largely the consequence of the bitterness that has prevailed between India and Pakistan ever since the two countries became independent nearly 60 years ago. (I touched upon this subject in this space last week.) There was considerable trade between the areas that were carved out of British India to form the states of India and Pakistan.

What is now India imported food grains, raw cotton and other agricultural products from what became today’s Pakistan. Cement was the only large industry that was in place in the areas that later became Pakistan and a significant part of its product was exported to India. Some of the electric power consumed by such large urban centres as Lahore came from generating stations located in what became India. The parts of British India that are now in Pakistan purchased textiles and other semi-manufactured and manufactured products from today’s India.

Trade between the areas that were to become India and Pakistan was conducted by both road and rail. In fact, a great deal of investment made by the British during their rule over India was meant to facilitate the movement of agricultural commodities between the food surplus provinces of Punjab and Sindh and the food-deficit areas that are now part of India. The British also invested heavily in the port at Karachi which became active in coastal shipping between northwest India and the ports of Bombay, Madras, and Calcutta.

In 1948, the first full year after the departure of the British from South Asia, India was the source of more than one-half of Pakistan’s imports and the destination of an equal amount of Pakistan’s total exports. Had that remained the pattern, the structure of the Pakistani economy and the design of its communication infrastructure would have been very different from what they are today. But these economic and trade relations were disrupted by the rapid deterioration between the relations of the successor states.

While the poor relations between India and Pakistan were one reason for the low level of intra-regional trade, there were other reasons why trade among the countries in the region — in fact trade in general — was not an important part of the development model pursued in this part of the world. Led by India, all South Asian nations followed the import substitution model in the belief that they must build their economies by producing at home the goods they needed.

This approach was exactly the opposite from the one followed by the “miracle economies” of East Asia. They hitched their economies to those in the developed countries, producing goods that had demand in the international market place while letting imports serve domestic markets.

Consequently, the structure of the economies in these two parts of Asia evolved differently. While the East Asians became progressively integrated into the global economic system and into the rapidly changing global system of production, the South Asians became increasingly isolated. It was only in the 1990s, following a deep foreign exchange crisis in India and followed by those in Pakistan and Bangladesh, that the South Asians began to open their economies.

However, because of the persistent difficulties between India and Pakistan this openness did not result in significant intra-regional trade. As noted below, not only was intra-regional trade as a proportion of regional product very low in South Asia - in 2004, intraregional trade in South Asia accounted for less than five per cent of the total - trade as such did poorly.

One result of the inward looking policies followed by the countries in the region and continuing difficulties in India-Pakistan relations was that South Asia fell behind other developing regions in terms of regional integration. East Asia and the Pacific reflect the most integrated of the world’s developing regions. In 2002, intra-regional trade in East Asia was equal to 26.5 per cent of the regional gross domestic product.

Eastern and Central Europe was the next most integrated region with intra-regional trade equivalent to 15.3 per cent of the combined regional product. Latin America and the Caribbean was the third most integrated region in terms of trade, with intra-regional trade equal to 6.4 per cent of the total incomes of the countries in the region. Sub-Saharan Africa’s intra-regional trade was 5.3 per cent of its combined product while that of the Middle East and North Africa was 3.5 per cent. South Asia came in last at only 0.8 per cent.

Removing the barriers to trade will have profound consequences not only for the pattern and quantum of trade of intra-regional trade. It will also significantly affect the structure of the regional economies. Of the seven countries in the region, Pakistan will be the most deeply affected. It will see a sharp increase in international trade with India which will become the country’s most important trading partner, displacing the United States from that position. The fact that the United States currently occupies that position is a major distortion, the result of politics and not the consequence of economics. Improved relations between the two largest economies of the region will remove this distortion and South Asia will begin to function more as an economic entity than as a region torn by deep conflicts.

The decision at the Islamabad summit of the Saarc nations in January 2004 produced the most ambitious attempt to date to integrate the economies of South Asia. The heads of government and state agreed to establish a free trade area in the region by progressively reducing tariffs and adopting some trade facilitation measures. But given the past history and persistent suspicion, the launch of the South Asia Free Trade Area was to proceed with considerable caution.

The member countries were allowed to draw up “sensitive lists” in order to cushion the impact on their economies of the free movement of goods among them. They also agreed to define the “rules of origin” in a way that only the goods that were manufactured mostly within the exporting countries would be allowed duty free access into the importing states.

Of all the countries in the region, India seems to be the most ambivalent with respect to Safta. While agreeing to launch the free trade area, it is aggressively pursuing other initiatives that will bring about greater integration of its economy with other regions of the world. It is also working on some other regional initiatives that seem designed to exclude Pakistan.

The most important of these is a regional arrangement called the BIMSTEC which is an association of Bangladesh, India, Myanmar, Sri Lanka and Thailand. The inclusion of Thailand in this initiative will serve as a bridge between South Asia excluding Pakistan and Southeast Asia. India is also actively engaged in associating itself with the Asean group that includes all the “miracle economies” of East Asia.

Another embryonic Asian regional bloc could develop by 2020 into a free trade area stretching from New Zealand to India. The 16-member East Asian community designed to foster close links among countries of Asia and the Pacific will hold its inaugural meeting in Kuala Lumpur, Malaysia in December. It is believed that Pakistan is not invited to attend. The community includes the 10 countries of South East Asia plus Australia, China, India, Japan, Korea and New Zealand. Australia lobbied hard to be included in this grouping. It is doubtful whether Islamabad put much effort to have itself invited.

It appears to me that Pakistan will need to play a much more active role in helping South Asia to better integrate its economies. The Indian inhibition in bringing this about may be the result of a number of factors including the desire on the part of some segments of the country’s political leadership and bureaucracy to continue to isolate Pakistan. There are also some serious issues concerning the evolving structure of the Indian political and administrative systems.

The Indians now allow much greater autonomy to their states than is the case with several other South Asian states including Pakistan. Even if New Delhi wishes to work with its neighbours, that may not be the case with the political and bureaucratic leadership in bordering states. Often the capitals of Bihar, Bengal, Uttar Pradesh and Punjab may have a much more pronounced impact on the relations with Bangladesh, Nepal and Pakistan than the policies and practices followed by Delhi. Pakistan should lead the rest of South Asia into an economic union.

US pressure on Syria

THE continuing violence in Iraq and the escalating tension over Iran regarding its nuclear programme have diverted attention from another country in the region, where US policies could create a situation that in its consequences, may prove to be a watershed in the history of Middle East, significantly altering the political landscape of the region.

Syria has been declared part of the “Axis of Evil” by the Bush administration, and was placed on the priority list, for pursuance of the Bush doctrine of regime change. The neocons in Bush’s administration appear determined to pursue a militaristic approach towards President Bashar Al-Assad, against whom the charge sheet is being updated with every negative or disruptive development in the region.

It may be recalled that Syria came under severe US pressure for withdrawal of its troops from Lebanon immediately after the re-election of Bush. Finally, vide Security Council Resolution 1559, Syria was asked to withdraw its troops from Lebanon stationed there since 1989, under the Taif accord following the civil war that raged for 15 years.

Syria complied with the demand and withdrew the troops in April thus averting a crisis. The murder of Lebanese Prime Minister Rafik Hariri on February 14, however, provided the US with yet another opportunity. Syrian complicity in the assassination was widely reported and to maintain pressure on Syria, the UN secretary general was prevailed upon to take cognizance of the assassination. Accordingly, Kofi Annan appointed German prosecutor Detlev Mehlis to conduct an investigation and submit his findings.

Detlev Mehlis’s team conducted an intensive search and four senior Lebanese intelligence personnel, including the head of the Lebanese presidential guard were arrested. The Lebanese security services and the Syrian military intelligence have been accused of “primary responsibility for the lack of security, protection and law and order in Lebanon”. No Syrian suspect has been identified as yet, but it is widely reported that General Gazzaleh, then head of Syrian intelligence in Lebanon, and Maher Assad, brother of President Bashar are to be interviewed by Detlav for possible complicity.

Concurrently, the US has kept up its relentless pressure on Assad, and the latest charge sheet includes allegations of Syria “allowing its territory to be used by terrorists bent on sowing murder and mayhem in Iraq” as stated by the state department spokesman Adam Ereli. Syria has been warned of “serious consequences”. Syria is also blamed for “association with terrorist elements in Gaza and West Bank - that are bent on sabotaging the peace process.”

These threatening statements are part of the policy of Bush administration that seeks regime change in countries deemed to be hostile to US interests in the region. US ambassador Zalmay Khalilzad in Baghdad also fired a salvo in this campaign last week and warned that “US patience is running out with Syrian interference across the border”. He also refused to rule out either a military strike or UN sanctions against Syria. Condoleezza Rice, during the current General Assembly session, has reportedly held close discussions with European counterparts to isolate Syria.

President Bashar had planned to attend the UN summit meeting, but was thwarted in his bid, as his US vita was delayed and later by Detlev’s visit to Damascus on September 10. The purpose was to deny Bashar any opportunity to interact with the leaders in New York to plead Syria’s case.

That Syria is a prime candidate for regime change is apparent from US policy and actions. In May, Bush had categorized Syria “as an unusual and extraordinary threat”, and had imposed a ban on exports. He also severed banking relations with the Commercial Bank of Syria and froze Syrian assets. Syrian flights to and from the US have been suspended. Other measures such as stopping Iraqi oil exports through Syria’s pipelines, imposition of strict economic sanctions and blocking European trade agreement have seriously affected Syria’s economic growth.

A section of the US media is also carrying a sustained and virulent campaign against Syria even urging the US to take military action. The noted neocon syndicated columnist Charles Krauthammer in a recent column maintained that “Hamas and Islamic Jihad are headquartered in and assisted by Syria. Everyone also knows that Syria is abetting the terrorist insurgency in Iraq”. Repeating unfounded allegations against Syria, he recommends “ Syria is the prize. It is vulnerable and critical, the geographic centre of the axis, the trans-shipment point for weapons, and the territorial haven for Iranians and regional terrorists.”

The latest development is that Iraq has moved to seal off its border with Syria, and US forces are hunting foreign fighters crossing from Syria. The neocons believe that it is the best time to strike Syria. It is argued that Syrian forces are poorly armed. The aging Soviet weaponry is no match for US technology, demonstrated in the recent expeditions in Afghanistan and Iraq.

Ominously, the state department has rejected the suggestion that the situation could be resolved through diplomacy stating that negotiations have failed to produce any tangible results, and warning Syria that “the choice you make whether it is to do something, or not to do something, has consequences and serious consequences.”

The state department statement and other official warnings to Syria are ominously reminiscent of the time when Iraq was about to be invaded. A campaign against Syria is thus gathering momentum. Inspired stories in US media are appearing, quoting un-named sources that former President Saddam’s loyalists operating in Syria were providing money and other support to rebels fighting the US-backed interim Iraqi government. The statements of King Abdullah of Jordan and Vice President Ghazi Al-Yawar of Iraq claiming that “foreign fighters are coming across the Syrian border that have been trained in Syria” are being given wide publicity.

Bush’s neocon advisers who, in fact, are following a Zionist agenda feel that the time is right to implement an agenda to make Israel safe. Henry Kissinger once remarked that there cannot be a war in the Middle East without Egypt and peace without Syria. Israel has always regarded Syria as its most implacable enemy, and feels that an unstable Syria would help it fulfil its regional ambitions. The sabre-rattling by the US and its coercive diplomacy is a prelude to punitive action.

President Bashar is facing a dilemma. Should Mehlis report establish Syrian complicity in Hariri’s killing, he is doomed. To reject it would invite international odium and to implement its recommendations could greatly weaken his authority and provoke a national crisis. Such a scenario would offer the US an ideal opportunity to pursue its agenda of regime change.

The orchestrated campaign to isolate Syria internationally and to project it as the prime source of instability and violence in the region, could provide moral authority to US to implement the Bush doctrine to “effect change in the governance of a country that is blatantly sustaining support for terrorism.”

The writer is a former ambassador.

Privatization of health

SUPPOSE you had fallen asleep on the morning of May 1 1997, and not woken up until this week. How would you have responded to the newsitem that a new NHS (National Health Service) treatment centre in Birmingham, the UK, was being handed over to a private company to carry out 9,500 operations a year in general surgery, gynaecology, urology and other specialisms?

And this was not just a one-off decision, but one that allowed profit-making companies to bid for 24 treatment centres involving NHS premises, doctors and nurses. The response would surely have been: “My God, the Tories have won and are breaking up the NHS.”

What other thoughts would have been prompted by the chairman of the Birmingham hospital’s medical committee, who spoke of the work and time invested by NHS staff in creating the facility for one of the most deprived populations in the country, which was now to be taken over by a profit-making concern? Was the chairman right to suggest that the poorest patients are unlikely to be a priority for the independent sector, and that the idea “stinks”?

There are three reasons why even a progressive government might want to introduce more private practice into elective care. (Remember, elective treatment — hip replacements, cataract removal, varicose veins — are only a small part of hospital spending, let alone total NHS care.)

One was to end the grip that consultants with private practice held over this work and the inherent disincentives in their reducing NHS waiting lists when waiting time was such a big driver in increasing private work. Second, to increase the capacity of the NHS, because even with the record amounts of resources being invested, more time is required to train the new medical teams. And third, but more dubiously, the belief that competition will increase the cost effectiveness of the whole system.

But this latest move breaches various important principles that were set down when the use of the private sector was first agreed. First and foremost was the “additionality” rule. This was why earlier contracts with private companies required them to bring in their own medical teams. Now, not only are the private companies to be allowed to poach NHS medics and nurses, but NHS premises too. This latest move “stinks” because it fails to provide “additional” capacity. It is not the first breach of the old principle, but it is by far the most blatant,and establishes a dangerous precedent. A second reason why such generous terms did not need to be extended to private companies bidding for these new treatment centres is that the grip which consultants once held has already been broken. Only this week there was a further report of shrinking private practice in the wake of dramatic falls in NHS waiting lists.

The third factor — more competition — has been far too little debated. Delegates to next week’s Labour party conference should insist on putting it on the conference agenda. Ministers are ignoring the “costs” of competition — the administrative cost of multiple numbers of providers, the spare capacity that competition requires, and most serious of all, the need of by far the biggest group of patients, the 17 million suffering from some form of long-term medical condition, for integrated health care between primary and second providers. This will be much more difficult to achieve if hospitals are in sharp-elbowed competition.

—The Guardian, London

I’ll drink to Fema

ROTHMAN and I were drinking margaritas, just like Michael D. Brown after he was dumped as the head of Fema (Federal Emergency Management Administration).

I said, “I am frightened that I will never be evacuated out of Washington if the balloon goes up.”

“Not to worry. Fema has a plan.”

“What is it?” I wanted to know.

Rothman took out a pamphlet. He showed it to me.

I read from it, “The most important thing is not to panic and have a full tank of gas.

“Tell me Rothman, why should I not panic?”

He said, “Because Fema is there to help you. That’s their job. When the balloon goes up you call their private toll free number and leave a telephone number where you can be reached. If you don’t hear from them in three days, it means they are very busy, and you are on your own. It’s all in the pamphlet.”

I said, “I need another margarita.” I made one for myself and one for Rothman.

I raised my glass, “Here’s to Fema, which is part of Homeland Security, and blessed by the Bush administration.”

Rothman said, “I’ll drink to that. Let’s study a map and see what is the best way to get out of town.”

We studied an AAA road map. “My suggestion is that we go out to the beltway after crossing Key Bridge and getting on the George Washington Parkway,” Rothman said.

“Have you ever tried to get to the Beltway during rush hour?” I asked.

Rothman replied, “We will leave at midnight.”

“But if we leave at midnight and their sirens go off, everyone else will leave at midnight, and the cars will be bumper to bumper. It will take us six hours to get out of town.”

“Then we will go by bus. Fema will supply people with busses. It is part of their plan.”

“How will the busses get out of town if the cars can’t?”

“They will have National Guardsmen on each one, and if you don’t have the correct fare they have orders to shoot you.”

I said, “Let’s have another margarita.”

Rothman agreed, “Things look so much better when you’ve had several margaritas.” We drank them down.

I asked, “Where do we go?”

Rothman studied the map. “West Virginia?” “I have never been to West Virginia. Will they give us shelter?”

“Fema will say they have to. If the people there refuse, they will set up tent cities.”

I said, “Fema is prepared for every situation. That is why they always get such a good press. What do we do for money?”

“The government will declare us poor and will give us money slated for the Defence Department or the CIA.”

“I don’t want to be classified as poor,” I said.

“Nobody wants to be poor. The media won’t you leave alone,” Rothman said. “They are always looking for poor people for the evening news.”

I said, “We’re dealing with a hypothetical. That’s why we’re getting drunk.”

Rothman poured himself another drink. He slurred, “Fema makes me proud to be a taxpayer.”

“Let’s toast Bush’s disapproval ratings.”

Rothman said, “I’ll drink to that.”
—Dawn/Tribune Media Services