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Books on Pakistan
REPUBLICAN REFERENCE
Area (sq.km)
803,940
Population
162,419,946
Capital
Islamabad
Currency
Pakistani rupee
President
Pervez Musharraf
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Update No: 002 - (24/03/06)
Tribal trouble
The violence which occurred in Waziristan in March once again confirmed
Musharraf's difficulty in handling the tribal regions of his country. The
heavy-handed intervention of the army in the region not only resulted in
significant loss of life, but might well lead to heightened confrontation in the
region. The local insurgents are already beginning to target security forces
more aggressively. This, together with Pakistani brinkmanship in India and
Afghanistan, can only add to the uncertainty that international investors still
feel characterises the country. In both countries the Pakistani security
services demonstrated over the last several months that they still cannot safely
handle the insurgent groups which they support, as these often indulge in
counter-productive terrorist acts which go to the detriment to Pakistani aims.
The Pakistani leadership's control over its own security services is also
doubted by some observers, a fact which must be raising some concern in
Washington with regard to the future of Pakistan's nuclear arsenal.
A declining strategic partnership
The month of March had started well for Musharraf, as President Bush, during
his visit to the country, had showed his commitment to the reaffirmation of the
strategic partnership between the US and Pakistan and had praised the Pakistani
counter-terrorist effort. However, a few days later the announcement by the same
Bush Administration of an agreement to share nuclear technology with India was
greeted with dismay if not surprise in Islamabad. The announcement reminded the
Pakistani government that the strategic balance in the region is slowly shifting
in India's favour. At the same time, India is also discussing a settlement of
its border issues with China and an improvement in the relations between the two
countries is already evident. China has every interest in becoming more friendly
with India, as it fears that Washington's moves to isolate China from its
neighbours. Any improvement in the relations between India and China would come
at the expense of the Chinese-Pakistani strategic partnership, or so it is
perceived in Islamabad.
Nonetheless, relations between India and Pakistan are improving. Trade between
the two countries is expected to reach US$1 billion this year, up from US$600
million last year, thanks to the launch of the South Asian Free Trade Area
Agreement (SAFTA) and to the opening of a number of roads and railways between
the two countries. Previously, most of the trade between the two countries was
illegal. Smuggling was estimated at US$2 billion in 2004-05, but this year
estimates have fallen to about US$1 billion. The Pakistani government, which has
already reached an agreement with the European Union over the reduction of
duties from 13% to 5.8%, is now negotiating free trade agreements with China,
Malaysia, Indonesia and Singapore.
Threat of inflation
On the economic front more good news came through in March, as the ADB
forecasted GDP growth at 6.5-7% this year, despite a slowing of the agricultural
sector due to a decline of the cotton and sugar crops. Moreover, the latest
figures put inflation at 8%, down almost two percentage points from a year ago.
However, the prospects for inflation over the coming months are negative, as the
wholesale price index is rising fast and stands now at almost 10% on a yearly
basis, compared to 6.7% a year ago. The cause of the increase is doubtless
commodity prices and in particular oil. Another economic woe, which will
contribute to stock inflation, is the soaring budget deficit, which stands at
147.2 billion Pakistani Rupees, well above the target of 98 billion fixed by the
government for the current year. By the end of the fiscal year, it is reckoned
that the deficit will climb above 4% of GDP.
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FOREIGN COOPERATION
India, Pakistan talk to improve air links
India and Pakistan recently continued their talks, reviewing the bilateral air
services agreement in a bid to further air connectivity between the two
countries.
In the two-day talks, officials from the two sides discussed ways to increase
commercial cooperation and reduce tariff and non-tariff barriers.
The six-member Pakistani delegation was headed by additional secretary of
defence, Muhammad Ashraf Chaudhry, while the Indian side was led by Director
General of Civil Aviation (DGCA), Satinder Singh.
Currently, Pakistan International Airlines (PIA) flies to Delhi and Mumbai and
Indian Airlines to Karachi and Lahore.
Officials from the two countries will also discuss the possibility of setting up
air links between more cities and increasing the number of airlines, including
private operators.
"There are a host of issues associated with this which will also be sorted
out," said a DGCA official.
"Actually under the existing conditions, not many are interested in
operating in this sector. Certain issues have to be addressed to encourage
traffic on these routes," the official said.
While the two sides are expected to discuss issuance of visa to the passengers
of both the countries to ensure economic viability to operators, they will also
exchange views on broadening trade cooperation and removing tariff and
non-tariff barriers, a senior government official said.
During the inconclusive meeting last year, Pakistan surprised India by asking
for permission to operate PIA flights to Kochi, Hyderabad and Chennai in
addition to Delhi and Mumbai.
Pakistan has offered Islamabad and Peshawar as additional routes for Indian
Airlines and Indian private operators. India, while promising to consider
Pakistan's request for three more destinations on Indian routes, did not show
much interest in the new destinations proposed by Islamabad due to viability
factor.
The two countries resumed their air services in early 2004 after a two-year
suspension.
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