Saturday, January 31, 2009

India Loses Luster at Davos

The economic growth numbers and the rising stock markets during 2004-2007 persuaded many investors to buy into the Bollywood style "Shining India" hype made in Mumbai. However, now that the growth has slowed and the Mumbai stock market is returning back down to earth, the passive consumer of India's well-cultivated image as "peaceful, stable and prospering" investment destination is beginning to scrutinize the reality behind the hype.

Many are surprised to learn from the National Counter-terrorism Center (NCTC) in Washington that the death toll from terrorist attacks in India between January 2004 and March 2007 was 3,674, second only to that in Iraq. (In the same period, 1,000 died as a result of such attacks in Pakistan, the "most dangerous place on earth" according to the Economist, Newsweek and other vendors of geopolitical insight.) The recent Hong Kong-based Political & Economic Risk Consultancy Ltd. has rated India as the riskiest of 14 Asian countries, not including Pakistan and Afghanistan, it analyzed for 2009. Add to that the abject poverty, the continuing and multiple large-scale insurgencies and the lax corporate governance, and you have reasons to worry about the "emerging superpower" called India.

As part of its well orchestrated hype with the assistance of friendly western media, India has effectively used the annual World Economic Forum in Davos, Switzerland as a showcase for its new image as an exciting and dynamic place in the throes of change, a must destination for international investment. In Davos, the Indians have thrown the best parties, laid on the most stimulating discussions and, generally, they have been impossible to overlook. That has added to a flood of international publicity, most of it flattering.

But this year, the shine's off, according to Time magazine. The worldwide economic crisis has refocused the attention of the 2,000 plus delegates in Davos on critical issues of financial stability and governance, in which India is only a peripheral player. India's growth is still relatively strong, but no longer stellar. Exports are down, as is the rupee. Outsourcing and foreign direct investment are out of fashion. Security is suddenly a pressing issue after the Nov. terrorist attacks in Mumbai. And worst of all, the country is now plagued by a huge corporate scandal, at outsourcing firm Satyam, that has fairly or not put a dent in the reputation of India Inc.

According to various media reports, the lavish parties and the elaborate sessions put on by Indians have attracted sparse attendance. Here's an excerpt from Time magazine describing Indian presence at Davos 2009:

There are two obvious signs of this change in Davos. First is the social scene, which the Indians dominated ever since 2006, when several companies bandied together to launch a marketing assault that included handing out iPods to all delegates, flying in the country's best chefs and plastering "India Everywhere" posters around the Swiss mountain town. This year, the Indian parties so far have been conspicuously empty. I went to a Wipro cocktail at the Hotel Europe last night hosted by chairman Azim Premji that attracted no more than 20 people in the hour I spent there. Premji was a charming host, although he moved on quickly after I asked him whether the Satyam scandal was affecting Wipro. Another party thrown by the auto firm Bajaj didn't pull a big crowd either, I was told by a couple who dropped by.

More seriously, this morning, Deutsche Bank hosted a breakfast about India that featured an all-star cast of speakers, including Montek Singh Ahluwalia, a key government planning official, and industry titans Anand Mahindra, who runs an industrial empire and telecoms magnate Sunil Bharti Mittal. Instead of the self-confident message of the past three years -"We are the new global force to be reckoned with" - the tone was a lot more muted. India's still a great place with a great future, they said, but it has some important issues to work through in the short term. Anshu Jain, the London-based head of Deutsche Bank's global markets division who chaired the meeting, summed it up aptly when he said, "It felt like India was all the rage. The question now is whether the pendulum has now swung the other way."

As for India's neighbor Pakistan, there is even more focus on "terror" and continuing talk of doom and gloom. “I assure you and I assure the house that I will never ever allow my soil, Pakistani soil to be used for terror activities,” Pakistan’s Prime Minister Yousuf Raza Gilani said at the World Economic Forum. In spite of the negative attention, Mr. Gilani did try and court foreign businesses and investors to come to Pakistan.

“Investing in Pakistan is investing in future,” the Prime Minister said while addressing a lunch he hosted for the leading businessmen here on the sidelines of the World Economic Forum. Gilani said Pakistan’s sound fundamentals offered the investors an opportunity to explore the country’s economic potential in diverse fields. He emphasized the need for more foreign investment coming into Pakistan and benefit from its investor-friendly economic policies. He said Pakistan’s liberal economic regime with zero import duty on raw material provided equal opportunities for the local and foreign businessmen. He said Pakistan was though confronting with a number of challenges including economic crisis, however the democratic government was struggling to improve the situation.

“Despite all the challenges, economy continues to be buoyant and vibrant in Pakistan,” the Prime Minister said, adding the country’s mineral and work-force resources had the great potential to be fully tapped.

Gilani said the government had converged its focus upon the development of agriculture sector to utilize it particularly during the recession phase. “It will be just a matter of time that Pakistan will become a regional hub of economic activity,” the Prime Minister told his audience. He said the improved economic plan for civil aviation, customs and logistics would substantially enhance the country’s trade activities. The Prime Minister said Pakistan had the capacity to join hands with partners in food security, being a major food producer and the fourth largest milk producer in the world.

Gilani said the government was taking a number of strategic measures, and mentioned increased trade with Afghanistan and improved regional mechanism with the SAARC countries. He said a deep seaport at Gwadar had been established for greater economic activity among the Central Asian and Asian states.

He said the government was using the trade policy prudently by pursuing growth. “Our economic strategy rests on strengthening the trade dividends and ensuring a business-friendly environment in the country,” he said.

Prime Minister Gilani said in WTO context, Pakistan would support substantial reduction on tariffs in the developing countries.

There are reports that the Pakistani prime minister's lunch was not particularly well attended. Prime Minister's critics are of the view that Gilani's visit was an expensive public relations exercise during which he met very few international leaders or spoke to the international media that was willing to talk to him. It's not clear how much planning and preparation was made prior to the prime minister's arrival in Switzerland. The lack of Pakistan's private sector participation at the forum is also troubling.

Regardless of the results of this year's Davos forum, it is important for both India and Pakistan to continue to participate and project their nations in the best possible light. With their large populations and significant growth potential, the South Asian nations must not let up in their efforts to bring peace and prosperity to their impoverished people.

Here's a video of Prime Minister Gilani at the Davos 2009 Summit:

Here's a video of Montek Singh Ahluwalia at Davos 2009:

Related Links:

Musharraf at Davos 2008

Mumbai's Economic Impact

Satyam Scandal Hurts Confidence in India

Jinnah's Pakistan Booms Amidst Doom and Gloom

An Expensive Trip to Davos

Labels: , , ,

Tuesday, January 27, 2009

Hallibuton to Settle Nigeria Corruption Case

Halliburton is the latest in a string of Western companies settling charges or paying fines in connection with bribing foreign officials to get contracts. The company has agreed to pay $559 million to the U.S. to settle charges that one of its former units, Kellog, Brown and Root, bribed Nigerian officials during the construction of a gas plant, according to media reports.

The case under the U.S. Foreign Corrupt Practices Act against Kellogg, Brown & Root engineering unit stems from the construction of a giant liquefied natural gas plant on the Nigerian coast near Port Harcourt from 1996 through the mid-2000s. KBR was part of a consortium that built the facility, which at the time was the largest industrial investment ever made in Africa. Former U.S. Vice President Dick Cheney was the CEO of Halliburton during this period. Mr. Cheney is not named in the Justice Department charges and there is no evidence Mr. Cheney knew of the bribes.

The $559m payment would be the largest paid by a U.S. company in a bribery investigation, eclipsing the previous record $44 million fine in 2007 against U.S. oil-field services firm Baker Hughes Inc. for improper payments in Kazakhstan. In December, German industrial conglomerate Siemens AG agreed to pay $800 million in U.S. fines to settle bribery investigations involving alleged payments to government officials around the world to win infrastructure contracts. As part of the settlement, Siemens didn't admit to bribery allegations but it admitted to having had inadequate controls and keeping improper accounts.

There is a lot of anecdotal evidence of widespread corruption in many parts of the world. The rarity of the formal charges or convictions indicates that the behavior of large multinationals in their dealings with corrupt politicians and officials in many Asian and African countries has received only scant attention. There have been serious allegations and at least preliminary evidence to suggest that illegal payments were made to Bhutto-Zardari controlled fronts by companies in France, Switzerland and Poland. There was some action pursued in Switzerland at the request of Pakistani Government under Pervez Musharraf. However, France and Poland have not pursued the charges of corruption involving their companies in Pakistan. The only explanation being offered is that foreign corruption laws did not exist in France prior to the year 2000.

There are currently laws on the books in the West such as the Foreign Corrupt Practices Act (FCPA) in the United States. Almost all ethics classes taught in the Western management schools and company training courses cover this topic. However, the question is whether these laws are really enforced and how often are the companies held accountable? Or do they simply rely on the foreign governments to report misbehavior? It would be a fantasy to expect the officials and politicians on the receiving end to report incidents of bribery as they are the main beneficiaries. But I think the German, French, US, British and other governments of developed nations who claim higher moral positions should be cracking down on these reprehensible practices just to enforce their own laws and live up to their own higher standards. While it may be argued and it is like putting the shoe on the wrong foot, I see it as the only hope we have of containing such widespread corruption in developing nations that is robbing their people blind.

Related Links:

Bhutto Convicted in Switzerland

Corruption in Pakistan

Transparency International Survey 2007

Is Siemens Guilty?

Zardari Corruption Probe

Labels: , , , ,

Saturday, January 24, 2009

China Tops South Asia VC Investments in 2008

China continued to outperform India as a magnet for US venture capital investments in 2008. This was particularly interesting in a year that saw the venture investors feel the pinch from declining values of their portfolios. It was also a year when a company based in Pakistan became the first to receive US venture funding.

In India, the VC investment in the year 2008 amounted to $740 million across 125 deals, while it was $876 million from 144 deals during 2007. A major portion of the decline came in the last quarter of 2008 when world economy started feeling the bite of the credit crunch that precipitated the economic crisis on Wall Street.

Arun Natarajan, CEO, Venture Intelligence told SiliconIndia, "Everything got affected in the October-December quarter. VCs are much better off because the money is already available as many closed funding before the middle of 2008."

According to Srini Vudayagiri, Managing Director, Lightspeed Ventures, the venture capital space in India is dominated by non-India funds that have strong linkages to U.S., Europe and even raise funds there. That could explain the tight liquidity situation. Also, in the current environment, VCs will thrust on value addition in existing portfolio companies rather than fresh investments.

The continuing political turmoil and uncertainty made it difficult to attract serious VC investments in Pakistan. Pakistan's problem was captured well by the CIO magazine recently in the following words: "Pakistan has a serious brand problem. In the West, the mere mention of Pakistan incites images of violence, extremism, explosions, suppressed women and backwards thinking. Time Magazine called Pakistan the most dangerous place on Earth. It takes extraordinary effort and enlightened customers to realize that the actual reality on the ground is quite different." The reality is not all doom and gloom in Pakistan. For the first time in the nation's history, former President Musharraf applied tremendous focus and major funding increases for higher education in Pakistan. According to Sciencewatch, which tracks trends and performance in basic research, citations of Pakistani publications are rising sharply in multiple fields, including computer science, engineering, mathematics, material science and plant and animal sciences. Over two dozen Pakistani scientists are actively working on the Large Hadron Collider; the grandest experiment in the history of Physics. Pakistan now ranks among the top outsourcing destinations, based on its growing talent pool of college graduates. As evident from the overall results in the last decade, there has been a dramatic increase in the numbers of universities and highly-educated faculty and university graduates in Pakistan.

In spite of Pakistan's image problem, Naseeb Networks, a Pakistani online recruitment, social networking, and classifieds company, received an undisclosed amount of venture investment from two Silicon Valley VC firms, ePlanet Ventures and Draper Fisher Jurvetson in 2008. Earlier in December, 2006, PixSense received $5.4 million in equity funding, led by ATA Ventures and Innovacom. While there is a history of US venture investments in Silicon Valley technology companies founded by Pakistani founders, none of these VCs have previously funded companies such as Naseeb and PixSense which have significant R&D centers and operations in Pakistan. Last year, European VCs have shown interest in funding Pakistani startups. Vopium, a Pakistani company offering a platform for almost free calls and SMS to any part of the world, reportedly received 4.2m euros in funding from European VCs.

Even as China's economy was battered by the global slowdown, venture capital investments in the Asian country last year hit their highest levels ever at more than $4 billion, 30 percent higher than 2007, according to a new report.

If not for the global economic crisis, that growth could have been 20 percent higher, said Gavin Ni, founder and chief executive of Beijing-based research company Zero2IPO Group, who visited Silicon Valley this week.

In the United States last year, nearly $29 billion in VC funds were funneled into 2,550 deals, an 8 percent drop from 2007, according to Dow Jones VentureSource.

In China, a record $7.3 billion was raised for VC funds in 2008, 33 percent higher than the year before. It seems that China's appeal to investors is not likely to fade anytime soon, in spite of the tough investment environment. The nation of 1.3 billion people has some 624 million cell phone users — the most in the world — and 300 million Internet users, also the world's largest.

"China will definitely be one of the top two or three centers of venture capital in the world," Gavin Ni told the San Jose Mercury News this week. "Even in this down economy, the China market is dynamic."

The information technology sector received the biggest share of the investments, or 36 percent, in 2008. Traditional companies, such as retail, picked up 22 percent of VC funds, while services companies garnered 18 percent. Clean tech received 9 percent, and biotech and health care companies picked up 7 percent.

At the OPEN Forum 2008 in Silicon Valley, Mike Moritz, Senior Partner at Sequoia Capital, said that Sequoia is currently not looking to go into another geography but it may consider other geographies such as Pakistan if their portfolio companies chose to open offices there. What took Sequoia to China, India and Israel were the founders of Silicon Valley companies who made a decision to locate R&D facilities in these geographies.

Speaking in a panel discussion at OPEN Forum 2008 recently organized by the Organization of Pakistani Entrepreneurs in Silicon Valley, Faraz Hoodbhoy, the CTO of PixSense, argued that Pakistani expatriates in Silicon Valley are the harshest critics of Pakistan. They are not immediately likely to ask US VCs to invest in Pakistan. However, Hoodbhoy's company PixSense has taken this path. PixSense currently has a sizable presence in Pakistan and prides itself in what Pakistani engineers have done for it to make it successful on very low budget.

Given the uncertainty of economic recovery in the United States and continuing instability in Pakistan, it will probably be a while before US-based VCs follow in the footsteps of Draper Fisher, ePlanet, ATA Ventures and Innovacom into funding a significant number of Pakistan-based startups.

Related Links:

VC Investments in India

VC Investments in China

VC Investments in Pakistan

Labels: , , , , ,

Follow Haq's Musings on Twitter

In response to readers' requests and in recognition of the popularity of Twitter, you can now follow the tweets from Haq's Musings anywhere in real time.

If you already have a Twitter account, please check out and subscribe here.

Happy Tweeting!

Labels: , , ,

Friday, January 23, 2009

China's Debt Leverage Over America

It is estimated that the continuing trade surpluses for years have helped China amass a whopping two trillion US dollars in dollar-denominated assets. Last year alone, China added US$450 billion to its reserves at a rate of over a billion dollars a day. About half of the Chinese US dollar-based assets are in the form of US treasury bonds that fund the ballooning US deficits.

Gao Xiqing, president of the China Investment Corporation, recently told James Fallows of the Atlantic Monthly, "Be nice to the countries that lend you money". Gao was clearly hinting at this new reality of " balance of financial terror" shifting in China's favor.

If history is any guide, the power of the lender over debtor nations is not just theoretical. The key moment when the world leadership passed from Britain to the United States came during the Suez crisis of the 1950s as a result of Britain's large WWII debt owed to the United States. When Britain, France and Israel invaded Egypt to take control of the Suez canal, the US President Eisenhower warned the British that unless they withdrew, he would order the sale of the United States' currency reserves of British Pounds and Sterling Bonds; thereby precipitating a collapse of the British currencies' exchange rate. Eisenhower in fact ordered his Secretary of the Treasury, George M. Humphrey to prepare to sell part of the US Government's Sterling Bond holdings. The British withdrew and ceded the control of the Canal to Egypt.

As the Obama administration pursues its goals of ensuring US national security, it has to grapple with the fact that economic strength must underpin its national security, as it has in the past. In fact, America rose to become a political and military superpower because of its rapid economic growth that made it the largest economy of the world after WWII.

Any strategy or plans that are enacted to restore economic health in America must take into account that ballooning deficits over a long period of time will imperil the US national security more than any international terrorist threats. Though there have not been any major terrorist attacks since 911, the Iraq war and the Wall Street collapse have in fact made US less secure in recent years. In Afghanistan, the Taliban have reasserted themselves and now control more than 70% of Afghan territory. Nobel-Laureate US economist believes that the eventual cost of the Iraq war alone will exceed $3 Trillion. America's Afghan war will continue to cost billions of dollars a year and there is no end in sight. In fact it is being escalated by Obama. And the multiple stimulus packages being passed by the US Congress will add several trillions of dollars to the national debt that exceeds $10 trillion already. While such a possibility appears remote, there is a constant worry about China exercising the nuclear option of massive selling of its dollar-denominate assets. Such a sale would have a devastating impact on the US currency and the US economy. Just the threat that the Chinese might not buy more US debt would send the US and European financial markets crashing in a hurry. The rest of the world will not be immune to its negative effects.

The rise of Chinese financial and economic power has significant implications for the US allies in Europe, Asia and the rest of the world. If China decides to throw its weight around, the power balance in South Asia could shift in favor of China's allies and hurt the United States and its allies politically, militarily and economically. It will represent a fundamental shift in international geopolitics.

While China has achieved great economic success, it still has ways to go in taking care of the needs of its vast population. Recently, the Chinese economy has slowed with recession hitting its export markets in US and Europe. There are reports of significant job losses in China, sending millions of migrant workers back to the farms. The chances are that the Chinese will not be hasty in flouting their new-found economic power and the Chinese government will continue to prop up the US and the world economy at least in the foreseeable future.

When the 20th century began, the U.S. was already the world's biggest economy, but the British pound still accounted for nearly two-thirds of official foreign-exchange reserves held by the world's central banks. The dollar didn't become the dominant currency until after World War II. Even then, some commodities still traded in pounds: The London sugar market didn't jettison sterling for a dollar-denominated trading contract until around 1980. The history lesson here is that, while the reserve and trade currencies can and do change, it takes a significant re-architecture of the world economy and trade and significant amount of time for it to happen. Nearly two-thirds of the world's central-bank reserves remain denominated in dollars, according to data from the International Monetary Fund, despite widespread fears of a mass exodus from the currency. The euro accounts for about a quarter -- up from 18% when it was introduced in 1999, but less than its predecessor currencies' share in 1995. Because the U.S. is such a huge trading partner for so many countries, the reserve buildup isn't easily unwound.

According to the Wall Street Journal, the dollar is also deeply entrenched in world trade. Businesses lower their transaction costs by dealing in a common currency. More than 80% of exports from Indonesia, Thailand and Pakistan are invoiced in dollars, for instance, according to the latest figures available in research by the European Central Bank, although less than a quarter of their exports go to the U.S.

While many nations want to change at least part of their reserve holdings from US dollars to euros, they know if they sell a significant share of their dollar reserves, it would weaken the dollar's value. That would potentially hurt their own trade competitiveness, and push down the value of their remaining dollar reserves. If they keep the dollars, a buildup of unwanted assets would only mount.
"There is no alternative to the dollar as a trading currency in Asia," Andy Xie, a Hong Kong-based economist told the Wall Street Journal. "Eventually, the renminbi [yuan] will replace the dollar in Asia, perhaps in our lifetime. But it will take at least 30 to 40 years."

Labels: , , , ,

Friday, January 16, 2009

Pakistan and Philippines Top Outsourcing List

Menlo Park based oDesk has ranked Philippines and Pakistan as the top two outsourcing destinations in terms of growth, value for money and customer feedback.

oDesk helps its clients with tools, technologies and services to hire and manage remote work teams. Other companies in its category, including Elance, Guru and RentACoder, create marketplaces in which employers and freelancers can contact one another. These sites often manage the payments, and make money by charging membership fees and/or take a cut of the payment. The cuts can range from 4 percent to 15 percent.

According to oDesk, Pakistan experienced 328% growth in its outsourcing business in 2007-8, second only to Philippines (789%) on a list of seven top locations that include US (260%), Canada (121%), India (113%), Ukraine (77%) and Russia (43%).

Pakistan ranks number one in value for money for developers and data entry and number two overall behind the Philippines where the cost of answering calls is about half of the cost in Pakistan. Pakistan is well ahead of India and just behind the number 1 ranked United States in customer satisfaction.

The growth of outsourcing within the US and Canada as well as the high customer satisfaction data for North America are particularly noteworthy. It seems to indicate that more and more North American companies are showing preference for outsourcing close to home. New technology appears to be helping close the cost gap between North America and the rest of the top seven outsourcing destinations.

In addition to oDesk's view of Pakistan as a preferred outsourcing destination, Gartner, in its 2008 report ‘Analysis of Pakistan as an Offshore Service Location’ said the major factor behind upgrading Pakistan to first tier status for outsourcing is the lower salaries and better infrastructure advantages than other offshore destinations. “The salaries of IT professionals in Pakistan are approximately 30% lower than those in India, while telecommunication costs are also lower as compared to any other offshore locations, which make Pakistan an attractive outsourcing destination.”

oDesk says that "the results … the Philippines and Pakistan rank the highest in this admittedly simplistic analysis, which must be taken with a grain of salt." It adds, "There are many factors to be taken into consideration when hiring contractors to your workteams. But, in the meantime, congratulations to providers in these two countries for topping the list! Fans of outsourcing to the Philippines and Pakistan will also be glad to know that they were also the fastest growing countries on oDesk, by hours worked, from 2007-2008."

Here are two videoclip about Outsourcing to Pakistan:

Related Links:

Jinnah's Pakistan Booms Amidst Doom and Gloom

Pakistan's Foreign Visitors Pleasantly Surprised

Start-ups Drive a Boom in Pakistan

Pakistan Conducting Research in Antartica

Pakistan's Telecom Boom

ITU Internet Data

Pakistanis Join Hunt For God Particle

NEDUET Progress Report 2008

Pakistani Entrepreneurs in Silicon Valley

Musharraf's Economic Legacy

Should Pakistanis be Proud of Their Country?

Labels: , , , , ,

South Asian Exodus From Dubai

Dubai police have found at least 3,000 automobiles -- sedans, SUVs, regulars -- abandoned outside Dubai International Airport in the last four months. Police say most of the vehicles had keys in the ignition, a clear sign they were left behind by owners in a hurry to take flight. It is believed that the owners of these vehicles are mostly foreign workers from South Asia who have lost their jobs after Dubai's real estate crash, according to a DNA report.

Dubai and other GCC countries are planning deficit-spending to stimulate their economies in 2009. Dubai will raise its budget by 11% for fiscal 2009. The city-state's finance department estimates the new spending will result in a modest fiscal deficit, Dubai's first ever. Other Gulf governments, including Saudi Arabia and Oman, have announced recently they will risk deficits next year instead of cutting back on spending, according to the Wall Street Journal.

Analysts have raised concerns about the large debt load Dubai has taken on in recent years to finance its explosive growth, mostly in real estate. Dubai is one of seven semiautonomous emirates that make up the United Arab Emirates.

Credit-rating agencies recently have revised downward the outlook -- and in some cases, the credit rating -- for a handful of Dubai-controlled corporations. Dubai doesn't have its own sovereign-debt rating. The city-state doesn't pump much oil itself, so it has depended on attracting foreign investment, especially from its oil-rich neighbors, and borrowing to finance growth.

The contagion that started on Wall Street in 2008 is fast spreading around the globe. The deepening recession in the United States and the end of speculative bubble has brought the oil price down to below $40 a barrel, down from $150 a barrel a year ago. The US consumer price index dropped 0.7% in December, 2009 from the previous month. Consumer prices rose just 0.1% compared to December 2007, the lowest calendar-year increase since 1954 and well below the Fed's 1.5% to 2% preference over the long run. The CPI swelled 4.1% in 2007. The core CPI, in contrast, was up 1.8% last year, though it did fall 0.3% on an annual basis during the fourth quarter.

A large number of families in Bangladesh, Sri Lanka, India, Nepal and Pakistan depend on remittances of tens of billions of dollars from workers in the oil-rich states.

UAE investors alone have invested over $13b in Pakistan during the last few years. The deteriorating economy of the oil-rich Arab nations will adversely impact foreign investments in South Asia in general. Major real estate developments by companies such Abraaj and
Emaar in India and Pakistan are likely to be delayed or scrapped.

While the oil price declines are going to spell significant relief for South Asians, the loss of remittances and foreign investments will also hurt their economies. It's too early to tell if the net effect will be positive, negative or zero.

Labels: , , , , ,

Thursday, January 15, 2009

Military Balance in South Asia

By Air Marshall (Retd) Ayaz Khan of Pakistan Air Force

Unfortunately India and Pakistan had adversarial relations since sixty years. After the Mumbai carnage Pakistan is under threat of pre-emptive strikes. The Fourth Indo-Pakistan war could be triggered by another terrorist attack anywhere in India. This is a dangerous scenario.

India and Pakistan have fought three wars, and war drums for the fourth war are getting louder. It is in order therefore to comprehend Indian military capabilities, and Pakistan’s ability to defend itself.

Defense capability is an interplay of economic and military potential. Indian economy is booming and its GDP growth is in double digits. The global recession has impacted Indian economy, but its defense capability remains intact. Military power and capabilities are sustained by economic and industrial potential. Geography, demography, population, oil resources and reserves, industrial capability including defense production, dollar reserves, self-reliance, education, quality of manpower and leadership have a bearing on military power. Seven lakh Indian troops are tied down in Jammu and Kashmir. India has over one hundred billion dollar reserves. The West, Israel and Russia are India’s weapon suppliers.

Pakistan is an emerging democracy, which will take time to stabilize. Pakistan’s economy is in a poor state, and the industrial and agricultural sectors are badly affected by power outages. The seventeen billion dollar reserves left by Prime Minister Shaukat Aziz have depleted to four billion and the PPP government has asked the IMF for a bailout. Pakistan has a robust defense industrial infrastructure, which has made the country self-sufficient in small and heavy arms. Pakistan is geographically linear, with north to south communications-roads and railways close to the international border, and at striking distance of the Indian Army. Pakistan’s lack of depth makes it vulnerable to thrusts by Indian armor and Rapid Action Divisions on narrow corridors.

The above Indian attributes are of advantage for a prolonged war, but for short battles, and pre-emptive strikes, and response, ready military capabilities, i.e. preparedness, deployment of forces, POL and weapon reserves, quality of fighting personnel, morale and motivation, and bold civil and military leadership are important requisites.

The 2.5 million Indian Army comprises 1,300,000 personnel in active service, 1,200,000 reserve troops, and 200,000 territorial force. The mission of the Indian military is: (1) "Safeguard national sovereignty, territorial integrity and unity of India, (2) Assist government agencies to cope with proxy wars, and internal threats and aid to civil power. The structure and strength of Indian armed forces do provide such a capability.The Indian Army and the Indian Air Force are structured into six commands, viz. Northern, Western, South Western, Central, Eastern and Southern Command. Eighty percent of troops and armor are under the Northern, Western and South Western Commands, i.e. in Jammu and Kashmir, and along Pakistan’s border. Indian Strike Corps are exercised for attacks in corridors from Southern Punjab, and Rajasthan and Thar deserts. The Indian Army has eighteen Corps with 34 Divisions including four Rapid Action Divisions, which would spearhead ground offensives.

The Pakistan Army has ten Corps and twenty-five divisions. Indian Army has eighteen Infantry, ten Mountain, three Armored, and two Artillery Divisions. Besides, it has five Infantry, one Parachute, thirteen Air Defense, and four Engineering Brigades, designated as independent formations. In addition, there are two Air Defense Groups, and fourteen Army Aviation Helicopter units. This is a sizable force, capable of launching major offensives from several fronts. The decentralized command structure will be an advantage, as compared to Pakistan’s centralized Army command organization.

The Pakistan Army has an active force of 620,000 well-trained personnel, with 528000 reservists, and 150000 para-military troops. Pakistan armed forces are the seventh largest in the world. Pakistan Army’s doctrine of "Offensive Defense" evolved by General Mirza Aslam Beg was put to test in 1989 in Exercise Zarb-e Momin. The doctrine is to launch a sizeable offensive into enemy territory rather than wait for enemy strikes or attacks.

In case of an Indian land offensive Pakistan Army and Air Force will respond with land and air offensives to gain and hold enemy territory. Before embarking on further offensive, gains shall be consolidated. In 1990 the Central Corps of Reserves was created to fight in the desert sectors, where enemy land offensives are expected. These dual capable formations trained for offensive and holding actions are fully mechanized.

The Pakistan Army has ten Corps including the newly formed Strategic Corps. The Army has twenty-six divisions (eight less than India). Two more divisions were raised as Corps reserves for V and XXXI Corps. The Army has two armored divisions, and ten independent armored brigades. Presently one hundred thousand troops are stationed on the Pak-Afghan border to fight terror. The Special Service Group – SSG - comprises two airborne Brigades, i.e. six battalions. Pakistan Army has 360 helicopters, over two thousand heavy guns, and 3000 APC’s. Its main anti-tank weapons are Tow, Tow Mk II, Bakter Shiken and FGM 148 ATGM. The Army Air Defense Command has S.A- 7 Grail, General Dynamics FIM-92 Stinger, GD FIM Red Eye, and ANZA Mk-I, Mk-II, Mk-III and HQ 2 B surface ti air missiles. Radar controlled Oerlikon is the standard Ack Ack weapon system.

The ballistic missile inventory of the Army is substantial. It comprises Ghauri III and Shaheen III IRB’S; medium range Ghauri I and II and Shaheen II, and short range Hatf I- B, Abdali, Ghaznavi, Shaheen I and M -11 missiles. All the ballistic missiles can carry nuclear warheads. Nuclear and conventional weapon capable Babur Cruise missile is the new addition to Pakistan’s strategic weapon inventory. The number of ballistic missiles and warheads are almost the same as those of India. So there is a parity in nuclear weapons, which is a deterrent.

The Indian armor is of Russian origin. Out of 2295 Indian Army’s Main Battle tanks, 2235 are of Russian origin. The main battle tanks are: 310 T-90-S Bishsma's (300 are on order), 1925 T-72M Ajeya’s.. The T-90 and the T-72 have 125 mm smooth barrel guns. T-72 though old is the backbone of Indian Armor Corp’s. 268 Ajeya’s have been upgraded with Israeli Elbit thermal imaging systems. 1000 T-72 MBT’s are awaiting up-gradation. There have been several instances of T-72's gun barrel bursting. 124 Indian made Arjun (heavy 56 ton) MBT are on order. Sixty Arjuns are in operational service. Arjun’s engine overheating problem has not been solved. Arjun has a 120 mm gun, but is unfit for desert operations.

The Pakistan Army is equally strong in armor, capable of giving a fitting response to any Indian military adventure. Main Battle tanks Al-Khalid and Al-Zarrar are the backbone of Pakistan armor Corps. Both are Pakistan made. Pakistan’s tank armory comprises: five hundred Al-Khalid MBT’s; 320 Al-Zarrar type 85 II MBT’s, 500 Al-Zarrar MBT’s; 450 79II AP (Chinese type 81 upgrade, and 570 T-80 UD MBT of Ukranian make. In addition, Pakistan has 880 Type 59, which were procured from China in 1970.This makes a total of three thousand six hundred and twenty tanks. All Pakistani MBTs except T-59s have 125 mm smooth barrel guns.

Indian armor offensives in Kashmir, Punjab, and Sindh would be effectively challenged by Pakistani armor and mechanized formations, depending on PAF’s ability to keep the skies over the battle areas clear of Indian Air Force. India’s modern air defense system has Israeli Arrow anti-missile missiles, and 90,000 surface to air missiles -SAMs.

India has one hundred nuclear armed ballistic missiles (Agni-1 and Agni II), and Brahmos the new supersonic cruise missile. The Indian Army is well trained, equipped and highly professional, and so is the Pakistan Army.

Air power is likely to play a key, if not a decisive, role in any future major or minor India-Pakistan armed conflict. The aim of Indian pre-emptive strikes will be the maximum destruction by surprise air attacks, combined with shock commando action. A possible scenario is intensive bombing of the target to be followed by attacks by armed helicopters and ground assault by heliborne commandos.

An overview of Indian Air Force and Pakistan Air Force will help comprehension of IAF’s offensive capabilities, and the defensive capabilities of Pakistan Air Force. Indian Air Force has 3000 aircraft including training, transport, helicopters and 800-1000 combat aircraft, which operate from sixty air bases, including the Farkhor airbase in Tajikistan. Six hundred IAF’s strike and air defense fighters are expected to be operational. Pakistan Air Force has 630 aircraft, which include 530 combat aircraft, with 400 operational at any time.

In 1996 India signed an agreement with Russia for the purchase of 90 Su 30 Mk-1 multi-role fighter-bombers. In 2004 a multi-billion license was signed for building additional 140. 240 Su30-Mk-1's were ordered, 120 are already in service. With a maximum speed of Mach 2.3 and range of 8000 Km with refueling and ability to carry tons of conventional munitions and nuclear weapons, it is a lethal and menacing weapon system for the strike and interception role. Other IAF’s advanced strike and combat aircraft are: 51 Mirage-2000 (of Kargil fame), 60 Mig-29's (for air defense), 250 old Mig-21's (110 have been refurbished with Israeli help), 47 Jaguars and 70 Mig-27's for ground attack. 220 LCA Teja’s under manufacture at HAL Bangalore will start entering service in 2010. IAF’s fighter pilots are well trained and have out shone American pilots during joint exercises.

Pakistan Air Force has 200 rebuilt Mirage- 3's (for night air defense) and Mirage-5's for the strike role. They can carry nuclear weapons. They have been upgraded with new weapon systems, radars, and avionics. Additionally, the PAF has 42 F-16's, 150 F-7's including 55 latest F-7 PG’s. Manufacture of 150 JF 17 Thunder fighters (jointly designed) is underway at the Pakistan Aeronautical Complex Kamra. The JF-17 Thunder is a 4th generation fly by wire multi-role fighter aircraft. Eight are already in PAF service. An order has been placed with China for the purchase of 36 JF-10, a Mach 2.3 -5th generation multi-role fighter, comparable in performance to the Su-30 Mk-1 with the Indian Air Force.

PAF is on Red Alert, and is maintaining full vigil to intercept and destroy IAF intruders. During the recent air space violation, the IAF intruders were in the sights of PAF’s F-16's, but were allowed to escape unscathed to avoid a major diplomatic crisis.

PAF pilots and technicians are well-trained professionals, who will be able to prove their mettle in the future battle with India.

A comparison of Indian Navy and Pakistan Navy reveals that Pakistan Navy could inflict substantial damage on the Indian Navy. The Indian Navy has 16 submarines. Pakistan Navy has ten, some are brand new. Indian Navy has 27 war ships, Pakistan Navy has ten. Indian Aircraft Carrier Veerat will be a menace, and must be sunk by submarine or air attacks, if it attempts to block Pakistan’s sea lanes or ports.

It is hoped that better sense would prevail and India would desists from attacking Pakistan. If it does, the consequences will be horrible for both the countries.

Source: Pakistan Link

Related Links:

Can India "Do a Lebanon" in Pakistan?

Only the Paranoid Survive

21st Century High-Tech Warfare

Indian Attempts to Scuttle F-16s For Pakistan

Attrition Rates For IAF and PAF

Mockery of National Sovereignty

Labels: , , , , ,

Monday, January 12, 2009

Family Controlled Companies Take Hits in Mumbai

Investors of Indian Companies controlled by families are growing suspicious in the wake of the Satyam scandal involving the Raju brothers. Older brother Ramalinga Raju served as chairman and younger brother Ram Raju was managing director of Satyam.
B. Ramalinga Raju admitted he had a fictitious cash balance of more than $1 billion on Satyam balance sheet and said in a letter of resignation that he overstated profits for the past several years, overstated the amount of debt owed to the company and understated liabilities. Eventually, he said, the scheme reached "simply unmanageable proportions" and he was left in a position that was "like riding a tiger, not knowing how to get off without being eaten."

In the aftermath of the Satyam scandal described as "India's Enron", shares of the energy giant, Reliance Industries, controlled by one Ambani brother, are down 19%. The smaller listed Reliance units have likewise been punished in the market. Reliance Communications has tumbled nearly 28%. By contrast, Maruti Suzuki and Hindustan Unilever -- thanks to the foreign scrutiny their names imply -- are up 3.3% and 6.5%, respectively, from their close on Jan. 6. The 30-stock Bombay Stock Exchange Sensitive Index, by comparison, is down 12%, according to the Wall Street Journal.

Indian governments handling of the crisis of confidence in publicly traded companies will hold the key to the nation remaining a preferred destination for investors. Their swift move to fire and replace Satyam's board of directors -- and the announcement by SEBI, the Securities and Exchange Board of India, that it will start reviewing auditors' work -- are steps aimed at restoring investor confidence.

One measure of how investors respond could come on Tuesday when Infosys Technologies -- considered a model of good governance in India -- announces its fiscal third-quarter earnings.

Whether shareholders' attention reverts to pure numbers or stays on the scrutiny of the quality of earnings will reveal much about how lasting this post-Satyam focus on governance will be.

Labels: , , , ,

Thursday, January 8, 2009

The Truth About India's IT Revolution

Satyam Computer Services Ltd., considered the poster child of India's information technology age, has shocked the world with a scandal of major proportions. The chairman of Satyam, a name that literally means "truth" in Sanskrit, said he cooked up key financial results, including a fictitious cash balance of more than $1 billion, raising doubts about the IT revolution hype in India that has attracted many international companies and significant foreign investments to the nation of over one billion people.

The Wall Street Journal is reporting that B. Ramalinga Raju, founder and chairman of Satyam Computer Services Ltd., said in a letter of resignation that he also overstated profits for the past several years, overstated the amount of debt owed to the company and understated its liabilities. Eventually, he said, the scheme reached "simply unmanageable proportions" and he was left in a position that was "like riding a tiger, not knowing how to get off without being eaten."

In the four-and-a-half page letter distributed by the Bombay stock exchange, Mr. Raju described a small discrepancy that grew beyond his control. “What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew,” he wrote. Mr. Raju ended his letter by acknowledging his misdeeds and said, "l am now prepared to subject myself to the laws of the land and face consequences thereof". While the Satyam scandal is being dubbed as "India's Enron", Raju's admission is in sharp contrast to Enron chairman Ken Lay's defiance in the face of massive evidence against him. Indeed, Raju's words are rare in the annals of corporate confessions and acceptance of personal responsibility by a top leader.

Deeply worried by the fall-out from the Satyam scandal, other Indian firms are downplaying it. "I'm very sure that this is just an isolated incident which has nothing to do with the industry that it is in, the business that it is in, or the country it is in. It has to do with individuals and the specific company," Mr. Suresh Senapathy of Wipro told the Wall Street Journal.

The analysts, however, are not as sanguine as Mr. Senapathy. "I think it's going to be a mixed bag for the other offshore IT-services firms," said George Price, an analyst at Stifel Nicolaus & Co. "Both investors and clients and potential clients are going to be more concerned about how stable their providers are."

In the wake of Satyam revelations, the company's market valuation has dropped by nearly 80% in two days. India's benchmark Sensex index has plunged 7.2%, as investors reassess level of risk in the Indian market amid serious concerns about corporate governance and accounting standards across Indian industry.

In Thursday trading, there were continuing fears that the Satyam scandal will affect other companies and hurt foreign investment. ICICI Bank tumbled 11%, Reliance Industries sank 13%, and Reliance Communications skidded 17%. However, shares of rival software firms outperformed the broad market, with Infosys Technologies gaining 1.7% and Wipro rising 0.2%.

Even before the Satyam scandal and despite the 55% drop in India's benchmark Sensex in 2008, relative valuations were high. The market's PE ratio, based on expected earnings for the next 12 months, is 60% higher than emerging markets as a group and 72% higher according to its price-to-book ratio. The roughly 2% yield on the Sensex
is minuscule compared to regional markets offering upwards of 5%.

India's market cap overtook its GDP in May 2007. By January 2008, it had reached 180% of GDP, extraordinarily high compared to 131% for the U.S. during the dot-com bubble and 150% for Japan at its market peak. In July, the market-cap ratio dropped below 100%. What it means is that even if the Indian economy continues to do well over the next two decades, GDP would have to more than double for the market cap to return to its previous heights without an equities bubble. If the economy keeps growing at 7.2%, that doubling would take at least ten years.

Hong Kong-based Political & Economic Risk Consultancy Ltd. has recently rated India as the riskiest of 14 Asian countries, not including Pakistan and Afghanistan, it analyzed for 2009. Satyam scandal is likely to add additional risk if the Indian authorities and corporate sector fail to take measures to restore investor confidence in India's publicly traded companies.

Related Links:

Mumbai Attacks' Economic Impact

World Economy Worst in Sixty Years

Is it Time to Invest in South Asia Again?

Is Bombay Bubble Bursting?

Labels: , , ,

Tuesday, January 6, 2009

High Tech Warfare of the 21st Century

Unmanned Aerial Vehicles or Drones designed and manufactured in Pakistan have been making news since IDEAS 2008 event in November of last year. Also in the news has been the growing reliance on armed drones (aka predators) by Americans in Afghanistan and Pakistan's FATA region to target militants with increasing casualties. This post is an attempt to put these headlines in perspective for those interested in the 21st century high tech warfare.

Back in 1970, the U.S. Army Gen. William Westmoreland is reported to have said: “On the battlefield of the future, enemy forces will be located, tracked and targeted almost instantaneously through the use of data links, computer-assisted intelligence and automated fire control. … I am confident the American people expect this country to take full advantage of its technology–to welcome and applaud the developments that will replace wherever possible the man with the machine.” Is this vision from the 1970s being realized today?

The basic strategies and thought processes are the same but the methods of Sun Tzu or Carl von Clausewitz or WW2 are long gone as the modern battlefields evolve. There are still tactics such as the use of decoys, deception and the element of surprise, but today the remote-controlled Unmanned Combat Air Vehicles (UCAVs), high-tech guidance and targeting systems, mobile missile launchers and anti-aircraft systems are some of the most sophisticated technologies on the planet.

Reflecting the modern realities, the US military is targeting its recruiting efforts on a generation of Americans that has grown up with computer-based video games. The recently opened Army Experience Center in Philadelphia is a fitting counterpart to the retail experience: 14,500 square feet of mostly shoot-’em-up video games and three full-scale simulators, including an AH-64 Apache Longbow helicopter, an armed Humvee and a Black Hawk copter with M4 carbine assault rifles. For those who want to take the experience deeper, the center has 22 recruiters, according to a report in the New York Times.

On a practical level, thousands of miles away from the battlefields of Iraq and Afghanistan, American remote pilots in Nevada fly armed drones and target the perceived enemy with deadly force. In front of the remote human pilots is a live video from the Predator's camera, thousands of feet above ground. Buildings and trucks come into view. They zoom in and out, put the cross-hairs on the targets and fire missiles with ease, killing dozens on the ground.

Beyond Nevada,at Djibouti's Camp Le Monier, CIA agents and special forces troops - about 1500 personnel in all - have opened a wide-ranging but little-reported front in President George W. Bush's so-called "war on terror".

This high-tech, not-so-covert battle is part of a broader US effort against suspected terrorists. It surfaces frequently, with news of air strikes on suspected Taliban forces in Afghanistan or al Qaeda operatives in Yemen. Such warfare places heavy reliance on the accuracy and breadth of human intelligence on the ground. In Afghanistan, failure of such intelligence has often led to growing friendly fire incidents and increasing civilian casualties.

In addition to human intelligence on the ground, there is need for Electronic Warfare Support (ES). ES in military terms, is the passive detection of signals in order to detect and locate threats or target location, information necessary to conduct Electronic Attack (EA). By comparison, Signals Intelligence (SIGINT) is the related process of analyzing and identifying the intercepted frequencies (e.g. as a cell phone or RADAR). SIGINT is a combination of ELINT, COMINT, and MASINT.

On the military strategy and planning front, wargames are a subgenre of strategy video games that emphasize strategic or tactical warfare on a map. Computer wargames are generally classified based on whether a game is turn-based or real-time and whether the game's focus is upon military strategy or tactics. These distinctions divide computer wargames into four categories: real-time strategy, real-time tactics, turn-based strategy, and turn-based tactics. Wargaming is an essential part of any high-tech military campaign.

Given the nature of the broad shift to high-tech warfare in the battlefields of the world, it is understandable that Pakistan's military is beginning to take it seriously. All three Pakistani military branches have sought to build UAV capabilities. The Army has considerably increased its UAV inventory; the Air Force has formed two UAV squadrons (with the intention of fielding up to six); and the Navy tested the Schiebel Camcopter S-100 rotary UAV from a frigate in March, Defense News reports. Karachi-based Integrated Dynamics, the designer and manufacturer of drones for Pakistan Army and Air Force, actually exports its Border Eagle surveillance drone to the United States for border patrol duties. The company also makes drones for the turbojet-powered Tornado decoy, which can fly up to 200 kilometers, and emit false radar signals to confuse enemy air defenses into thinking they are attacking aircraft.

Pakistan's traditional rival India is pursuing relationships with Israel and UK to acquire UAVs. All of India's current UAV needs are met by Israel, and this partnership will ensure that will continue to be the case for at least the near future.

Related Links:

Pakistani Drones in America

India, Israel UAV Partnership

New York Times

India's UAV Technology Center

NPR Radio

Electronic Warfare


America's High-tech Warfare

It's not Your Father's Military

Labels: , , , ,

Sunday, January 4, 2009

Abject Poverty in Resurgent India

India, often described as peaceful, stable and prosperous in the Western media, remains home to the largest number of poor and hungry people in the world. About one-third of the world's poor people live in India. More than 450 million Indians exist on less than $1.25 a day, according to the World Bank. It also has a higher proportion of its population living on less than $2 per day than even sub-Saharan Africa. India has about 42% of the population living below the new international poverty line of $1.25 per day. The number of Indian poor also constitute 33% of the global poor, which is pegged at 1.4 billion people, according to a Times of India news report. More than 6 million of those desperately poor Indians live in Mumbai alone, representing about half the residents of the nation's financial capital. They live in super-sized slums and improvised housing juxtaposed with the shining new skyscrapers that symbolize India's resurgence. According to the World Bank and the UN Development Program (UNDP), 22% of Pakistan's population is classified as poor.

There is widespread hunger and malnutrition in all parts of India. India ranks 66th on the 2008 Global Hunger Index of 88 countries while Pakistan is slightly better at 61 and Bangladesh slightly worse at 70. The first India State Hunger Index (Ishi) report in 2008 found that Madhya Pradesh had the most severe level of hunger in India, comparable to Chad and Ethiopia. Four states — Punjab, Kerala, Haryana and Assam — fell in the 'serious' category. "Affluent" Gujarat, 13th on the Indian list is below Haiti, ranked 69. The authors said India's poor performance was primarily due to its relatively high levels of child malnutrition and under-nourishment resulting from calorie deficient diets.

Indian media's headlines about the newly-minted Indian billionaires need to bring sharper focus on the growing rich-poor gap in India. On its inside pages, The Times of India last year reported Communist Party leader Sitaram Yechury's as saying that "on the one hand, 36 Indian billionaires constituted 25% of India’s GDP while on the other, 70% of Indians had to do with Rs 20 a day". "A farmer commits suicide every 30 minutes. The gap between the two Indias is widening," he said.

Today's San Jose Mercury News has a pictorial about grinding poverty in India done by John Boudreau and Dai Sugano. This heartbreaking pictorial illustrates the extent of the problem that India faces, a problem that could potentially be very destabilizing and put the entire society at the risk of widespread chaos and violence.

Here's a video clip from the Mercury News story:

Here's a video clip on world poverty:

Please make your contribution to the Hunger Project or Hidaya Foundation or Edhi Foundation to help alleviate hunger and poverty in South Asia.

Related links:

Poverty in Pakistan

A Broken People in Booming India

Poverty News Blog

Grinding Poverty Defies China's Boom

Begging for Pakistan's Needy

UN Millennium Development Goals in Pakistan

Labels: , , , ,

Thursday, January 1, 2009

Year 2008 in Review-Pakistan

The year 2008 was a year of great turmoil in Pakistan as the prior year ended with the tragic assassination of former Prime Minister Benazir Bhutto on Dec 27, 2007. It began with Bhutto's widower Asif Ali Zardari taking over the reins of Pakistan Peoples Party, Pakistan's largest political party, and ended with rising tensions in South Asia in the aftermath of Mumbai terrorist attacks.

Some of the key events that shaped the year for Pakistanis included:

1. Major defeat was dealt to pro-Musharraf forces in free, fair and democratic elections in which Pakistan Peoples Party won the most seats in parliament followed by former Prime Minister Nawaz Sharif's Pakistan Muslim League as the second largest political force.

2. President Musharraf was forced out of office and replaced by Asif Ali Zardari who won the parliamentary approval by an overwhelming majority.

3. With rising militancy in all parts of the country, suicide bombings in 2008 surpassed last year’s figures, with 61 attacks killing at least 889 people and injuring 2,072 others, according to Pakistan's investigation agencies.

4. Pakistan's economy suffered greatly as the confidence of consumers, businesses and investors in the country plummeted to new lows. Pakistan was forced to seek and accept an IMF bailout with stringent conditions and close scrutiny.

5. Barack Hussein Obama was elected first African-American president of the United States in a historic landslide. The president-elect, who takes office in January, 2009, signaled a renewed focus on the Afghan war and South Asia as his priority. With the continuation of Robert Gates as defense secretary, the Pentagon started beefing up the US troops strength in Afghanistan.

6. With deepening distrust of the US and Karazi government among Afghans, increased funding from poppy cultivation and rising civilian casualties, the Taliban insurgents made significant gains in Afghanistan, controlling 72% of the territory and tightened their ring around Kabul, the capital of the country.

7. The US blamed Pakistan for providing sanctuaries to the Taliban in FATA region. The American forces in Afghanistan intensified air strikes and ground incursions inside Pakistan to target the Taliban and Al-Qaeda fighters, killing many innocent civilians. The US military supply lines were repeatedly hit by the militants in Pakistan.

8. A British commander of NATO forces in Afghanistan told the press that "we can not win this war" in Afghanistan.

9. Pakistan's stock markets took a nose dive along with the major markets around the world. KSE-100 dropped about 50% in 2008. Those who invested in KSE stocks in 2001-2 did as well or better than those who invested in NY, London, Mumbai or Shanghai. KSE increased 10-fold 2001-2007. Even after a 50% drop in KSE in 2008, investors have made 500% gain since 2001.

10. The telecommunication, information technology, higher education, media and the middle class progress started during Musharraf-Aziz years continued to have its impact in 2008, in spite of horrible governance, lack of vision and absence of real leadership by corrupt and inept politicians.

11. Pakistan's food and energy crises took a turn for the worse as the prices soared. There were widespread blackouts and brownouts. Wheat shortages forced the expensive imports and the government had to cut back on subsidies as the foreign exchange reserves dwindled and the rupee rapidly lost its value.

12. History was made when Pakistan elected its first woman speaker of the National Assembly in 2008. But Pakistan's human rights and social justice situation continued to shock the conscience of the civilized world with the live burial of women by the tribesmen in Sind, the murder of Ahmadis encouraged by a fanatic TV host and the inclusion of some of the perpetrators as federal ministers in Prime Minister Gillani's cabinet.

13. Peaceful Kashmir protests erupted again after several years of quiet while President Musharraf attempted to settle the core issue between India and Pakistan. As usual, Indian security forces responded with lethal force, killing dozens of peaceful protesters.

14. People of Baluchistan continued to suffer as an earthquake struck and the local insurgency continued. Women and children were the worst affected among the victims.

15. India blamed Pakistan as terror struck Mumbai, driving India-Pakistan relations down to a new low. War rhetoric pushed the solution to the major issues dividing India and Pakistan into the background. The Indian media whipped up the anti-Pakistan frenzy with the demands for "doing a Lebanon" in Pakistan. Some in India started talking about a limited war under "Cold Start" doctrine with "surgical strikes" inside Pakistan. In response, Pakistan has put its military on alert with troop movements on the ground and fighter jets in the skies.

In the absence of any visionary and pro-active political leadership in the nation, Pakistan will likely continue to be heavily influenced by external factors and events in the foreseeable future. The change in Washington and potential change in Delhi in 2009 will likely have a far greater impact on Pakistan than anything Pakistani leaders say or do.

I am hopeful that people of Pakistan, especially the young entrepreneurial and the professional classes, will continue to do their best to help extend the positive legacies of Musharraf-Aziz years. I believe it can be safely said that the communications revolution (accompanied by dramatic growth in the vociferous electronic and new media) as well as a significant enlargement of the middle class in Pakistan helped sow the seeds of the end of arbitrary actions by President Musharraf. In other words, Musharraf pulled a Gorbachev (a la perestroika that unleashed uncontrolled energies) by enabling powerful resistance to his arbitrary rule. Some of these changes that Musharraf brought are durable and I hope will make our rulers more accountable. There will still be abuse of power but the media spotlight will hopefully shine brightly on it to the detriment of the abusers. Eventually there will be real participatory democracy to serve all Pakistanis with appropriate checks and balances imposed by a much larger and more powerful and aware middle class essential for true democratic governance in Pakistan, or anywhere else.

Here are two video clips of Pakistan's progress in the last few years:

Related Links:

Pakistan Statistical Yearbook 2008

Start-ups Drive a Boom in Pakistan

Suicide Bombings in 2008

Higher Education in Pakistan

Pakistan Trade Policy Review 2008

Labels: , , , ,