Political and Internal Developments

Notwithstanding the political posturing against the Reformed General Sales Tax (RGST) legislation by the opposition and some coalition partners of the government, it appears that the bill will be passed in the parliament as well as the provincial legislatures. Apparently, at the centre, the naysayers have been given a reality check by some foreign governments that if the bill is stalled and consequently the aid tap dries up, they too will not be left unscathed by the political and economic fallout of such a development. All the provinces are expected to present their draft law on sales tax on services by the end of the current month.

The PPP government has left no stone unturned to garner support in favour of the RGST bill. While finance minister Hafeez Shaikh played the bad cop by promising to stand up to the ‘powerful lobbies’ opposing tax reform and accusing the opponents of the RGST bill of shedding crocodile tears for the poor when in fact they were trying to hide their own incomes by avoiding documentation of the economy, the Prime Minister and President played the good cop by trying to reach out to opponents of the bill, and entering into political bargains to win them over. For instance, in order to win over the JUIF, and in the face of criticism by civil society activists, the government has gone ahead and appointed a senior JUIF cleric, Senator Maulana Mohammad Sherani, as the chairman of the Council of Islamic Ideology.

Both President Asif Zardari and Prime Minister Yusuf Raza Gilani also worked the phones to convince allies like MQM and ANP to give up their opposition to the RGST bill. While the ANP appears amenable to supporting the tax measure, albeit with some conditions, the MQM is adamant in its opposition until the RGST is accompanied by a tax on agricultural incomes. The government has tried to soften the PMLQ, or at least split it on the issue, and appointed a PMLQ lawmaker as chairman of Earthquake Rehabilitation and Reconstruction Authority (ERRA). While this appointment was being seen as a sign of the growing closeness between the PPP and PMLQ, the PMLQ president Shujaat Hussein has claimed that the appointment did not have his concurrence.

The opposition from the PMLN too appears to have reduced significantly and after making a song and dance about opposing the RGST, the party has given some 38 suggestions to the finance ministry out of which the government has accepted 5. Significantly, the financial Czar of the PMLN, Ishaq Dar, has said that the party is in principle not opposed to the RGST and would only like to see the government take a number of other steps to put the economy back on the rails. The fact that the Senate Standing Committee on finance cleared the RGST bill, with notes of dissent from those opposing the bill, is a clear indication that the opponents of the bill will extract political mileage by making a public show of opposition but will ultimately make sure that the bill is passed in the Senate.

The RGST, which will include an additional 600 odd items is expected to not have more than 1% impact on inflation. But apart from paving the way for the next tranche of the IMF loan, there are serious questions about how far the RGST will go in solving Pakistan’s economic crisis. With external debt liabilities crossing the $58.4 billion mark and total public debt crossing Rs 10.2 trillion, the additional revenue garnered by the RGST is unlikely to be of much help. As far as the IMF package is concerned, the government last week abolished the boards of all power generating, distribution and transmission companies in compliance with the conditions imposed by the IMF.

Even as the government was trying to grapple with the temporal imperatives of rescuing the economy from a meltdown, it was confronted with two crisis involving the spiritual. The first was the Haj scandal, in which it was alleged that the religious affairs ministry, including the minister and top officials, made enormous amounts of money in bribes from Haj tour operators who in turn provided shoddy accommodation to the Haj pilgrims. Although the government ordered an inquiry into the matter and the official in charge of making Haj arrangements was arrested, the role of the minister, who is also a close confidant of the Prime Minister, has come under immense scrutiny. More importantly, there is talk of the involvement of the son of the Prime Minister in the entire scandal. Matters took turn for the worse after a fellow cabinet minister, Azam Swati of the JUIF, accused the religious affairs minister Hamid Kazmi of corruption and this was followed by the Pakistan ambassador to Saudi Arabia who pointing to rampant corruption in the religious affairs ministry insinuated the involvement of Kazmi in the entire sordid episode. The charge levelled against Kazmi by the JUIF minister is being seen as a political move by the JUIF to force out Kazmi, who is a Barelvi, from the religious affairs ministry and acquire the portfolio for the Deobandi sect.

But while the Deobandi and Barelvi ulema and clerics were trying to outmanoeuvre each other on the issue of Haj scandal, they were together in demanding the carrying out of the death sentence that was pronounced by a Sheikhupura court on a Christian woman, Aasia Bibi, under the notorious blasphemy law. While the sentencing has restarted a debate on the blasphemy laws, and a PPP lawmaker, Sherry Rehman, has submitted a private members bill seeking to amend these laws, the reaction from clerics and politicians to suggestions to amend the law have been fierce. While PMLQ chief Shujaat Hussein has warned of chaos in the country if these laws were amended, the federal law minister Babar Awan has said that as long as he was law minister no one could even think of repealing this iniquitous law. On the other hand, Punjab governor Salman Taseer has taken up cudgels on behalf of Aasia Bibi and has not only tried to win her a pardon from the President but has also called for amending the law. While the Islamists had a fatwa issued against Taseer declaring him to be an apostate (and therefore punishable by death), his bête noire, Punjab Law Minister Rana Sanaullah has for once been on the same side as him and has raised serious questions over the manner in which the case was prosecuted and the quality of evidence on the basis of which the accused was sentenced to death.

Meanwhile, the minorities affairs minister, Shahbaz Bhatti, who is himself a Christian has however said that while the government doesn't intend to repeal the law, it will consult the clerics to amend the law so that it cannot be misused. But efforts of the government to either win a reprieve for Aasia – through a presidential pardon – or by spiriting her away from Pakistan to some Western country is simply unacceptable to the religious mafia which wants nothing but death for the alleged blasphemer. The government is clearly caught between a rock and a hard place on this issue: if they allow anything to happen to Aasia, it will invite a severe reaction from the Western countries on whose dole Pakistan is staying afloat; on the other hand, if the allow Aasia to escape punishment, they will invite the ire of the Islamists in Pakistan.

It was not just a lower court that created trouble for the government but also the Supreme Court which issued notices to the chiefs of all intelligence agencies to present themselves in the case of the 11 suspected terrorists who disappeared from Adiala jail in Rawalpindi. The intelligence agencies responded to the summons by telling the court that they were not answerable to the judiciary and that questions posed to them should be directed at the government. The Court however rejected this contention and maintained that the intelligence agencies were very much answerable to the judiciary. During the hearings, it was revealed that there was no law under which the intelligence agencies operated in Pakistan.

Even as the government is making plans for administrative and political reforms in the troubled FATA region after peace is restored there, these plans are unlikely to be implemented any time soon, even less so given the resistance of the Pakistan army to conduct a clean-up operation in terror central i.e. North Waziristan. According to reports, a meeting between the President, Prime Minister and army chief has decided that the time is not ripe for launching any military operation in North Waziristan. There are also reports that if at all an operation in North Waziristan is mounted, it will not be for another 4-6 months. Despite mounting pressure from the commander of US troops in Afghanistan, Gen David Petreaus, the Pakistan army has taken the plea that it will first complete the operation in Orakzai agency and consolidate its position in other areas before it undertakes an operation in North Waziristan.

Foreign Relations / Foreign Policy

With NATO having pushed back the date for withdrawal of troops from Afghanistan to 2014, Pakistan has warned against any move that will once again plunge Afghanistan into a civil war of the sorts that followed the Soviet withdrawal in 1989. Meanwhile, there is increased pressure on Pakistan to expand the area for drone strikes beyond FATA and also include parts of Balochistan where the Taliban are believed to be hiding. According to the Washington Post, while Pakistan has still not agreed to expanding the area for drone strikes, the compromise worked out includes allowing a greater presence of CIA in and around Quetta. A Pentagon report has also admitted that Pakistan has allowed the US military and their allies to maintain a presence in Quetta. Reacting to the Washington Post report, the Pakistan foreign office spokesman asked the Americans to revisit their drone strategy which according to him was creating a ‘drone-hardened generation’ of militants. There are also reports in the Pakistani press that Pakistan is contemplating disallowing drone strikes in FATA since, according to the Pakistan army’s spokesman, they are hampering Pakistan’s efforts to fight terrorism.

While the US chairman Joint Chiefs of Staff Admiral Mike Mullen has once again called the border areas of Afghanistan and Pakistan as the epicentre of international terrorism and said that the Pakistan army continues to remain ‘India-centric’, he has at the same time maintained that Pakistan needs to take more practical steps against terrorism. The US defence secretary, Robert Gates, has meanwhile said that the US doesn’t want to send troops into Pakistan and would prefer to let the Pakistanis do the job of taking on the Islamist terror groups operating from inside Pakistan.

With US pressure mounting, and given the growing closeness between the US and India, the Pakistani reliance on China as a counterweight appears to be increasing. According to a report, it was decided at a meeting between the President, Prime Minister and army chief to effect a “shift in reliance from the US to China as far as the country’s defense and economic needs were concerned”. The decision of the Pakistan Air Force to equip 250 JF17 fighter jets that it is buying from the Chinese with Chinese avionics is part of this growing reliance on China for defence equipment. The Pakistanis are also planning to buy 4 surface-to-surface missile systems from the Chinese. These purchases are being made even as Pakistan starts to induct the Chinese made AEW&C aircraft in its fleet.

Foreign Minister Shah Mehmood Qureshi was on a tour of the Far East last week undertaking an effort to increase the level of cooperation between Pakistan and the ASEAN countries. He was assured by Indonesia of support for according Pakistan Full Dialogue Partner status in ASEAN. During the visit, Qureshi spread Pakistan's ubiquitous begging bowl and called on the international community to support politically and economically Pakistan's democratic government to fight against terrorism.

While Qureshi was seeking FDP status in ASEAN, Prime Minister Yusuf Raza Gilani was attending the Shanghai Cooperation Meeting (SCO) in Dushanbe where he sought full membership to the organisation. Gilani also met the Russian Premier Vladimir Putin on the sidelines of the SCO summit. While calling Pakistan and Russia ‘allies in every sense of the word’, Putin made a pitch for Russian participation in the oil and gas sector in Pakistan. Gilani suggested a bilateral dialogue between Pakistan and Russia on Afghanistan and also expressed interest in purchasing MI35 attack helicopters from Russia.

Relations with India

The US state department has said that the US is encouraging “India and Pakistan to ‘ultimately resolve’ the ‘vitally important’ issue of Kashmir” and called upon both countries to support the transition process in Afghanistan. Meanwhile, the Pakistan foreign office spokesman has continued with his diatribe against India on the issue of Kashmir. In the latest salvo, the spokesman said “it was time for India to realise that it could not continue suppressing the will of people of Jammu and Kashmir...however powerful India might be but that did not give it right to suppress the legitimate and peaceful struggle for right of self-determination.” The Indian High Commissioner for Pakistan has meanwhile called upon Pakistan to not mix trade with politics because trade is the only way to minimise political tensions in the region.

On the eve of the second anniversary of the 26/11 attacks in Mumbai, India issued a strong reminder to Pakistan to cease its dilatory and delaying tactics in bringing the perpetrators of the dastardly attacks to justice. Demanding “substantive and verifiable progress [in] bringing all the perpetrators and masterminds of the heinous attacks to justice,” India asked Pakistan to give a time frame within which action would be taken against the culprits.
Pakistan once again is trying to create trouble in Punjab by inciting Indian Sikhs against their own country. The latest evidence of this came during the visit of a Sikh jatha to Pakistan for Gurpurab celebrations. The Pakistani authorities organised a seminar in Lahore in which all efforts were made to project east and west Punjab as a united entity which was being denied its rightful share of water by the Indian authorities.