Lessons from China

PAKISTAN is one of the three countries — the other two being Bhutan and Nepal — that border on the world’s two largest countries in terms of population size. And yet its economic relations with China and India remain weak.

I wrote about Pakistan’s economic relations with India last week, suggesting that it would be to the country’s advantage if economic contacts were to be established between the two neighbours. China will be the subject of today’s article and those to follow over the next few weeks.

The space devoted to China can be justified on several grounds. There are lessons that Pakistan can learn from the way the Chinese were able to transform their economy. The remarkable change in the size and structure of the economy has affected its neighbours, including Pakistan. The countries in East Asia have benefited enormously. India is also pulling itself closer to the Chinese economy. Pakistan, unfortunately, has not benefited as much.Its economic leaders have not fully understood how the growth of the Chinese economy could be to their country’s advantage. Today I will describe how China turned its economy from the one managed entirely by the state to the one in which the private sector has begun to play an important role. There are lessons for Pakistan in the Chinese experience.

China’s ‘opening and reform’ programme was launched in 1987 by Deng Xiaoping when he established his leadership at the Third Plenum of the Communist Party. This was a remarkable comeback for an individual who had been banished to political wildernesses by Mao Zedong, the father of modern China. Mao died in 1976 and after two years of political uncertainty the Chinese turned to Deng to put the country back on track.

The new leader launched another revolution for China, abandoning traditional communism in the field of economics in favour of “communism with Chinese characteristics”. He told the Communist Party — and through the party the people of China — that it was “glorious to be rich”. That slogan must have made the embalmed body of Mao turn in his mausoleum. While entrepreneurship and individualism were to be encouraged in economics, in politics the Communist Party was to retain the monopoly of power it had enjoyed since it assumed control of the country in October 1949.

In economics, Deng launched an experiment that was unusual for a country of China’s size. The country was to aim for high rates of economic growth by increasing its share in international markets. The export-led growth strategy had been followed successfully by the smaller “miracle economies” of East Asia. Korea, Taiwan, Hong Kong and Singapore had grown at double digit rates of GDP increase by selecting industries and lines of products that had expanding demand in the world particularly in the West.

For China to adopt the same strategy was particularly audacious since it meant claiming a very large share of global markets. Deng believed that it was possible for China to succeed by doing two things: by inviting foreign capital and technical know-how to the country and by locating export industries close to the ports.

Two years after launching his reform programme, Deng paid a visit to Shenzhen, near Hong Kong. It was then a sleeping village with a population of a few thousand. He chose the village as China’s first Special Economic Zone, the SEZ, and provided generous tax benefits to those wishing to invest. The government also provided the zone with world class physical infrastructure and built a motorway to connect it to Hong Kong across the border. Proximity to Hong Kong proved to be extraordinarily attractive. What was then a British colony — it was to revert later to China — was running out of space to expand its rapidly growing industrial base. It was also experiencing labour shortages. Shenzhen offered exactly what Hong Kong lacked: space and cheap labour. Soon the SEZ was a bustling industrial city. It now has thousands of factories and 10 million people.

Three types of investors flocked to Shenzhen. First to come were the overseas Chinese, initially from Hong Kong but subsequently from Singapore, Taiwan and Malaysia as well. They knew the language and also knew how to do business in what was once their homeland.

Once the overseas Chinese had established themselves in Shenzhen, western companies followed attracted by cheap labour, fiscal incentives and proximity to the port of Hong Kong. The Chinese private sector was the last to arrive in Shenzhen. It had been constrained by government regulations. Once freed of government control, the Chinese private sector quickly expanded in Shenzhen.

The Shenzhen model was replicated in other coastal areas of China. Several special economic zones were established along the country’s eastern shore. The sites chosen were close to the main ports and within easy distance to some of the country’s export markets.

The export-oriented growth strategy worked for the country: within a couple of decades, as a trading nation, China went from 27th in the world to the third place. By 2007, its trade surplus with the United States was larger than what Japan was able to achieve in the 1980s. Development of exports resulted in sharp increases in wages and incomes as tens of millions of Chinese left the countryside in search of better paying jobs in the industrial sector. In 1978, when China took the reform route, annual income per capita was still pitifully low at $190. Three decades of nearly 10 per cent annual growth increased it to $2500. China is now the world’s third largest economy.

China’s phenomenal economic success, therefore, was the result of intelligent public policy. Although Mao Zedong damaged his country in several different ways by moving whimsically to keep his people on what he believed was the right track, he prepared the ground for the later rise of the country. He did this by doing away with unequal distribution of economic assets, in particular agricultural land; by bringing education and healthcare to all segments of the population; and by improving the social status of women. It was on the ground prepared by Mao that Deng was able to erect the modern Chinese economy.

What are the lessons in all of this for a country such as Pakistan? There are several. It is hard to succeed without starting with a reasonably equitable distribution of the asset base; without educating the entire population, including women; without concentrating on building a strong export sector; and without the leadership groups submerging their narrow interests in favour of the larger public good.

Indo-Pak tensions and US options

IN the wake of the terrorist attacks in Mumbai, Pakistan’s government is scrambling to show grief-stricken Indians and the world that Pakistan is actually able and eager to mount successful counterterrorist operations.

In the meantime, India is still considering its military options, and the US is finding itself in the awkward position of biased mediator, but a mediator with options, nonetheless.

Indian ire in the immediate aftermath of the attacks was so unmistakable that it prompted Islamabad to sound the loudest alarm bell in its arsenal: insisting that it could only fight one war at a time, Pakistan warned Washington that a vengeful India would compel Islamabad to redeploy the 100,000 troops currently assisting the US war on terror in northwest Pakistan to its eastern border. Hearing the message, President Bush dispatched Secretary of State Condoleezza Rice to Delhi to calm the Indians to ensure that Pakistan has the resources and flexibility to fight the militants.

Yet from Washington’s perspective, both the political and military implications of heightened tensions between India and Pakistan — especially the kind that involves Pakistani troop movements — open many new doors to a war on terror that appears increasingly bleak.

First, India is not alone in its profuse criticism of Pakistan’s failure to fight the very terrorists it bred during the anti-Soviet Afghan jihad in the 1980s. Seven long years into the war on terror, Washington remains convinced that Pakistan is still unwilling and/or unable to make good on its counterterrorism commitments. It was difficult enough to compel Islamabad to deploy 20 per cent of its roughly half-million-man army to the northwestern border during President Bush’s first term, and that contribution only led to a steadfast resurgence of the Afghan Taliban and the near-steroidal growth of the Pakistani Taliban.

Facing dim prospects, over the last 18 months the Americans have begun taking matters into their own hands and dispatched much-resented unmanned aerial vehicles to kill senior Taliban and Al Qaeda leaders with greater frequency. With president-elect Barack Obama insisting that he will allocate more US soldiers and resources to the ‘real’ war on terror in Afghanistan and Pakistan, Washington’s relationship with Islamabad has nowhere to go but down, especially as the Pakistani Taliban rip the country apart. It is in this context that a redeployment of Pakistani troops frightens Washington.

But according to a flood of recent press reports, if India seems likely to attack Pakistan, then both the Pakistan Army and the militants they are supposed to destroy could find themselves facing the same grave threat in India. Various militant factions and supporters of the Taliban — all the way from South Waziristan to the Swat Valley — could put their wars with Nato and Islamabad on hold and find their way to Kashmir or the Indian border.

In the meantime, US and Nato forces in Afghanistan would be in the unfamiliar position of having neither friends nor foes on the other side of the Afghan/Pakistan border. And this would present Washington with equally unfamiliar flexibility.

The US presidential transition could alter this dynamic, but under these circumstances, the most likely benefit to the US would manifest in southern Afghanistan, where the resurgent Afghan Taliban would face potentially crippled supply lines of weapons and equipment, which are currently flowing from the Pakistani Taliban and the tribal clans loyal to them in the NWFP and especially Fata. If those middlemen are busy at Pakistan’s eastern border, there will be fewer available at the western border.

Another possibility is that, like their Pakistani counterparts, the Afghan Taliban might also flock to the Indian border or LoC to fight the Indians. Numerous Taliban leaders and foot soldiers are foreign-born and tied to the militant Pakhtun world by marriage and lifestyle; but many are jihadists at heart and would drool at the prospect of a glorious war on numerous fronts.

Though less likely, in either scenario, the Afghan Taliban would be stretched uncharacteristically thin without support from across the border, and the US/Nato/Afghan forces would be less hindered to improve security and perhaps earn a little loyalty from local Pakhtun tribes in southern Afghanistan. At the very least, there would be fewer obstacles to US intelligence gathering and infiltration, which is always in desperate need of a boost.

Either way, however, a substantive contingent of the Pakistani Taliban and their supporters will probably remain in the NWFP/Fata and continue supporting the Afghan Taliban. In the end, Pakhtuns are notoriously territorial, and some will not be interested in repelling the Indians from the land of their ethnic rivals in Pakistan’s eastern provinces.

In this case, Washington would be able to test Pakistan’s claim that — as limited as Islamabad’s assistance has been since 2001 — the war on terror would be in a far worse state without Pakistan’s help. Wilfully testing this claim has always been too risky for the US because the price of being wrong could be frightfully high. But if Islamabad refuses to keep its contingent of soldiers on Pakistan’s western border anyway, then as a silver lining, Washington might be able to test this notion and use it as a basis for strengthening or drastically altering the US-Pakistan relationship.

After all, even if every observant western official already knows that little will change on the ground without the Pakistani soldiers, then mounds of supporting evidence for such assertions would be critical for the Obama administration to justify greater and deeper incursions into northwestern Pakistan to eliminate Al Qaeda and its support structure.

Naturally, Washington will have to test these waters more before diving in, but the situation in Pakistan is likely to get much worse before it gets any better.

Given the presidential transition in Washington, it is still unclear if the US will be in a position to improvise its military approach to southern Afghanistan, at least in the near term. Nevertheless, if tensions remain high between India and Pakistan, the US might benefit in the long term from the internal solidarity in Pakistan and the decreased intensity of conflict in the tribal regions on both sides of the Afghan-Pakistan border.

Obviously, a calamitous war between the two South Asian rivals is far too high a price to pay to obtain a temporary calm in western Pakistan that may or may not benefit anyone. But if escalation is the path that India chooses — despite Washington’s calls for restraint — then high-octane sabre-rattling on both sides of the Indo-Pak border (especially if it lasts for many months) could actually suit Washington rather well.

The writer is a Washington-based analyst and blogs at www.justwars.org.

Obama to end US unilateralism

BARACK Obama will mark a radical break in American foreign policy this week by unveiling a team of diplomats tasked with ushering in a new era of dialogue with enemies abroad.

As Hillary Clinton prepares for Senate confirmation hearings this week, she will head a group of advisers who are virtual opposites to the appointees made by President George W Bush. While Bush favoured aggressive neoconservative ideologues, Obama has selected people whose doveish credentials seem impeccable.

They will be responsible for reversing the political unilateralism of the Bush years and opening direct negotiations with hostile states, potentially ranging from Syria to Cuba and Venezuela and maybe including Iran and even the Islamic militant group Hamas, now fighting Israel in Gaza.

The Obama foreign policy team that has emerged is focused on knowledge and experience — often gained during the Clinton era. Many of the appointments have a clear focus on the Islamic world. Former UN ambassador Richard Holbrooke, who brokered a peace deal in the Balkans, will be appointed a special adviser to Afghanistan and Pakistan.

Former Middle East negotiator Dennis Ross will be a special adviser on Iran and the surrounding region, showing that Obama is keen on opening a diplomatic front in America’s dispute with Tehran. Ross has a history of personal involvement in Middle East peace talks, including numerous negotiations between Palestinians, Arab states and Israel.

Other picks are Kurt Campbell, another former Clinton official, who will be an assistant secretary of state for east Asia and the Pacific, and Philip Gordon, a former member of the National Security Council, will be assistant secretary of state for Europe. “These are people who reflect Obama’s worldview that sees the world less from a power-projecting perspective and more from looking at problems and seeing how to solve them,” said Michael Fullilove, a fellow at two independent think-tanks, the Brookings Institution in Washington and the Lowy Institute in Australia.

Obama’s choices back up his stated aims during his presidential election campaign. During the Democratic primaries, Obama said he would hold direct talks with hostile states. Despite a firestorm of criticism in the media — including from his then rival Clinton — Obama held to his position. Now Clinton will be in charge of implementing it. “He showed he would not be dictated to by the foreign policy establishment. He also showed he would stick to his guns,” said Fullilove.

The list of potential enemies for America to talk to is long. First and foremost is Iran, whose nuclear ambitions are the subject of deep suspicion in Washington and many other world capitals. Obama has held out the prospect of negotiating directly with Tehran about its programme, reversing years of open hostility from Bush’s White House. At the same time a thaw could also be likely in relations with Cuba, where a half-century-old embargo has failed to weaken the communist government but where signs of openness are beginning to show under the new rule of Raoul Castro.

Other states where diplomatic relations could improve include Syria, Venezuela and North Korea. The list could also include non-state groups such as Hamas. Last week the Guardian reported that Obama officials were open to having direct contacts with the Islamic militant group as a necessary step in trying to push forward the Middle East peace process.

But a new, softer American diplomacy is also likely to challenge countries such as Syria, Cuba, Venezuela and Iran as much as present them with an opportunity.

Another issue is that while many diplomats, especially in Europe, might breathe a sigh of relief at a new style of foreign policy in Washington, it is not likely to be entirely straightforward. The fundamental fact of America’s sole superpower status will remain in place, despite its economic troubles.

The country will remain a vocal backer of Israel, even in the face of the war in Gaza.

— The Guardian, London