Political and Internal Developments

Despite noisy protests from the opposition and some allies in the ruling coalition, the PPP government has tabled the Reformed General Sales Tax (RGST) bill in Parliament. But it is not clear if the government will be able to garner the votes required to get the bill passed with allies like MQM and ANP opposing it. The government is now believed to have approached the PMLQ for support in getting the bill passed.

Since the fate of the government is linked to the bill, there is a feeling in political circles that the government will ultimately manage to get the bill cleared. As things stand, there is a lot of confusion and conflict over the bill. For instance, in Punjab, while chief minister Shahbaz Sharif has vowed not to let the bill get passed and PMLN leader Nawaz Sharif has issued instructions to his party to oppose the bill, the Punjab finance minister (a PPP nominee) has said that he will be presenting the bill in the provincial assembly soon. Meanwhile, the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has called the RGST bill ‘anti-people and anti-business’ and a ‘recipe for destroying business and trade in Pakistan’.

What must be galling for the people of Pakistan is that even as the government has removed all exemptions granted to critical sectors of the economy, the property and household items of rulers of Gulf states in Pakistan will continue to enjoy exemptions under the ‘reformed’ tax scheme. Perhaps this can be justified as a ‘business expense’ considering that Pakistan receives hand-outs from the Gulf states, the latest example being the $ 400 million aid announced by Saudi Arabia at the Pakistan Development Forum meeting in Islamabad last week. Meanwhile, the speaker of the Balochistan assembly has accused the Prime Minister of pressurizing the provincial government to sell around 70,000 thousands of hectares of land in Lasbela to Arab princes for hunting.

Getting the RGST proposals cleared is important because the IMF has made it clear that merely the tabling of the bill is not enough to get the next tranche of $ 1.7 billion from the $ 11.3 billion Standby Arrangement loan programme. While the RGST bill hangs fire, the government has increased electricity tariffs by 2.2% as part of the power sector reforms to which it has committed itself to multilateral lending agencies.

Against the backdrop of a lukewarm response from the international donor community to the $ 2 billion UN appeal for flood relief and rehabilitation work, the Pakistan Development Forum (PDF) held its meeting in Islamabad last week. In tangible terms there was very little new aid promised to Pakistan. Except for Saudi Arabia ($ 400 million) and Japan ($ 500 million), all other donors appeared quite tight-fisted. While the Americans announced a $ 500 million package, this money was not a new commitment but would be part of the Kerry-Lugar aid package.

Top Pakistani leaders took totally opposite stands at the forum, with Interior Minister Rehman Malik demanding a debt write-off and finance minister Hafeez Shaikh taking the position that ‘no wise man could demand a debt write-off’ and that Pakistan would honour its international commitments. The Pakistan government presented a revised budgetary framework before the international donors which included a blue print to cut expenditure (by nearly Rs 300 billion) and raise more revenue so as to keep fiscal deficit at the 4.7% level. Most of the cuts would come from the development expenditure. Addressing the PDF, Prime Minister Yusuf Raza Gilani admitted that there were major governance and corruption issues dogging the government but assured the international community that the government was introducing reforms for which it needed the support of the donors.

Even as the government struggles on the economic front, the Supreme Court has suddenly become active in the case of 11 alleged terrorists who are believed to have been picked up by the intelligence agencies from inside the Adiala Jail despite their having been acquitted by the High Court. Failing to get a satisfactory response from either the Attorney General or the Punjab Chief Secretary, the Supreme Court has issued notices – for the first time in Pakistan's history – to the chiefs of the ISI, MI and IB to find out the whereabouts of the missing persons.
On the political front, the move by former prime minister Zafarullah Jamali to unify the Muslim Leagues received a setback after the PMLQ president, Shujaat Hussein asked Jamali to first ensure the return of the legislators who have deserted the PMLQ to support the PMLN before he agrees to hold a dialogue with the PMLN leader Nawaz Sharif. Other PMLQ lawmakers who are seeking to rejoin the PMLN are however continuing efforts for a rapprochement with the PMLN leadership.

Nearly three years after the assassination of the former prime minister Benazir Bhutto, the Joint Investigation Team of the FIA has submitted the challan in the case. The challan has absolved the Musharraf regime of any complicity in the murder, which it has blamed on the terrorist group Tehrik-e-Taliban Pakistan and its now slain leader, Baitullah Mehsud. In short, the PPP government has endorsed everything that the Musharraf regime had claimed in regards to Benazir Bhutto’s murder.

Foreign Relations / Foreign Policy

During his visit to China, President Asif Zardari met the Chinese Premier Wen Jiabao who promised to visit Pakistan in December to deepen the strategic cooperation between the two countries. While urging the Chinese to invest in water and energy projects in Gilgit-Baltistan (Pakistan occupied Kashmir) and in the Thar coal project, Zardari also expressed the desire to increase the bilateral trade from the current $ 7 billion to $ 15 billion by 2015. Incidentally, Pakistan has also sought US investment in the controversial $ 11 billion Diamer-Bhasha dam project which is to be built in Gilgit-Baltistan.

According to reports in the Pakistan media US president Barack Obama might visit Pakistan in March next year. Meanwhile, the Pakistan foreign office has once again conveyed to the US ambassador its ‘disappointment and concern’ over US support for a permanent seat in the UN Security Council for India. Interestingly, the US State Department spokesman has said that while the US had briefed Pakistan on the Obama’s announcement of support for the UNSC seat for India, the Pakistanis had not expressed any ‘particular concern’ on the issue. This clarification from the State Department has been like water off a ducks back as far as the Pakistan's envoy to the UN is concerned who has described US support for India as “inequitable, non-representative and non-transparent” and demanded that “representation should be given to the region on a rotational basis.”

Back home, in a meeting with Richard Holbrooke on the sidelines of the PDF meeting, Prime Minister Gilani asked the US to disburse its aid through locally established institutions and hoped for a faster disbursement of aid money. On his part, Holbrooke once again assured Gilani that the US administration would be working towards concluding the bilateral investment treaty and getting the ROZs legislation passed through Congress. According to Holbrooke these could be the two ‘deliverables’ during Obama’s visit to Pakistan.

Even as Gen. Ashfaq Kayani has once again told the Americans that the Pakistan army is not ready to open any new fronts against the terrorists (read North Waziristan), the US Assistant Secretary of State Robert Blake has called Pakistan ‘the main victim of international terrorism’, adding that it is in Pakistan's own interest to crack down on terrorist groups. But while Blake has called Pakistan the main victim of terror, his boss, Secretary of State Hillary Clinton has acknowledged in an interview that Pakistan used to support terrorist groups against India and Afghanistan in the past and was unable to confirm whether Pakistan has stopped using these groups now. Perhaps Clinton would have been able to confirm Pakistan's continued sponsorship of terrorist groups like the Lashkar-e-Taiba if she had seen the news report in a Pakistani paper which has exposed that the LeT was openly collecting sacrificial hides and money as part of its fund collection drive.

A bipartisan task force constituted by the Council on Foreign Relations has recommended that Pakistan be included in international forums like G20 in order to ‘familiarise’ the Pakistanis with ‘emerging norms and responsible international behaviour’. The task force has warned that US would be left with no option but to launch ‘targeted strikes’ against terrorist safe havens in the event of a terrorist attack on US soil emanating from Pakistan. Saying that Pakistan has not made ‘a decisive break with all militants on its territory’, the report calls for using drones to target Lashkar-e-Taiba hideouts if Pakistan doesn't destroy them.

Pakistan is also coming under tremendous international pressure to stop it from blocking the FMCT negotiations. According to an unnamed official of the Strategic Plans Division the Western powers are threatening to raise the issue in the UNSC and isolate Pakistan internationally if it doesn’t change its position in the Conference on Disarmament.

Relations with India

According to foreign minister Shah Mehmood Qureshi, China and Pakistan are on the same page as far as denying India a permanent seat on the UNSC is concerned. Meanwhile, the UN has clarified that Kashmir remains very much on the agenda of the UNSC. The clarification came after Pakistan raised the issue of ‘inadvertent’ omission of mention of the Kashmir issue by the president of the UNSC in the annual report of the Security Council.

The import of tomatoes and onions from India has helped to lower vegetable prices in Pakistani markets by almost 30-40%.

The prosecution has informed the court that India has refused to hand over one of the accused in the 26/11 terror attacks – Fahim Ansari – to Pakistani investigators since an appeal against his acquittal is pending before the Mumbai High Court.