Political and Internal Developments

The Wikileaks revelations have been a source of great embarrassment for the entire Pakistani political and military establishment, as also for their interlocutors in other countries, including ‘brotherly’ Muslim nations like Saudai Arabia, UAE and Turkey. Not only has the entire top civil and military leadership been exposed as supplicants and lackeys of the Americans, the deep divisions and mistrust between the top functionaries of the state have laid bare the inbuilt instability of the political system. And yet, despite their skeletons tumbling out of the cupboard of the US embassy, it is unlikely that the Wikileaks will alter the uneasy equilibrium that currently exists in Pakistan. After all, with all the relevant players – President, Prime Minister, Opposition leaders, religious politicians and the top brass of the army – having been shown up to be equally obsequious towards the Americans, it will be in everybody’s interest to duck for cover and let the storm pass them by.

The reaction in Pakistan to the Wikileaks disclosures has been along fairly predictable lines – the military maintaining a studied silence, the politicians either trying to play down the revelations or questioning the authenticity of the cables and in an attempt to deflect attention calling it a conspiracy against the Muslim world, the foreign office making a valiant effort to project the revelations as proof of Pakistan's steadfast commitment to its core national security interests (read nuclear programme), and the Americans engaged in desperate damage control by constantly talking of not letting these leaks come in the way of the relationship between the two countries which they claim are strategic allies. But considering that the documents released by Wikileaks contain assessments of US diplomats about Pakistan (most of them not very flattering), it was strange, even hilarious, to see the new US ambassador to Pakistan, Cameron Munter, say that “Pakistan-US relations are not reflected in Wikileaks....”.

The Wikileaks revelations have come even as the government is occupied with pushing through the highly contentious Reformed GST bill in Parliament. Having bulldozed the RGST bill through the Senate (with a little help from the opposition PMLQ which walked out of the Senate in protest and thereby allowed the bill to be passed), the government is now bracing for the political battle that awaits the bill in the National Assembly. Although Prime Minister Yusuf Raza Gilani has expressed confidence that the bill will sail through the National Assembly, the opponents of the bill are continuing to make a lot of noise against the taxation reform bill. Despite pressure from the US, the MQM has continued to oppose the bill and has even asked the government o withdraw the bill. The main opposition party, PMLN is going all out to build political support to block the passage of the bill. The PMLQ chief Shujaat Hussein has said that the party will issue a whip against the bill to ensure that no lawmaker from the party votes in favour of the bill. To compound the problems of the federal govt, the provinces have once again raised objections to the draft bill and demanded that their recommendations be incorporated if an integrated sales tax regime had to be introduced in the country. The only positive for the government was the support given by the 12 MNAs from FATA for the RGST bill. But this support came with the condition that FATA would be exempted from the provisions of the bill.

With not just the next IMF tranche of $ 1.7 billion at stake but also the fate of World Bank and ADB funding of $ 3 billion dependent on imposition of RGST, the government is in a big bind. Expecting delays in getting the RGST bill passed in time to meet the deadline of December 31 when the current IMF programme expires, the government has hinted that it would seek a three month extension in the IMF programme. In the event that the RGST bill is blocked and the multilateral financial institutions stop their funding, the confidence in the economy will collapse, more so with the entire financial team led by Finance Minister Hafeez Shaikh make it clear that they will resign if the RGST measure is not cleared by Parliament.

But despite the desperate economic situation, the political and business class appears adamant on blocking the RGST. Even though the government has announced a review of expenditures and a freeze on budget allocations of ministries, industry and trade associations have raised objections to the provisions of the bill and politicians have urged the government to plug leakages in the current taxation regime (estimated to be around Rs 500-600 billion annually) which will make redundant the need to impose the RGST. The leakages in the current system were brought out by the Federal Board of Revenue in a briefing to the parliamentarians where it was disclosed that the refunds claimed by non-salaried tax payers were double the tax that this class paid i.e. “no one in Pakistan wants to pay taxes” (so says the FBR chairman).

Adding to the economic crunch has been the raise in the discount rate by the State Bank of Pakistan by .5% to 14%, a measure which has been taken to control inflation but which will squeeze the private sector by raising the cost of doing business. The precarious financial situation has however had no effect on the Pakistan army which has in the first quarter of the fiscal year exceeded its budgetary limits by nearly Rs 28 billion. This has come at a time when the revenue collection in the first quarter is lower than estimated in the budget.

Even as the economic crisis shows no sign of getting resolved any time soon, the looming sectarian war between the Deobandi and Barelvi sects of Sunni Muslims has only added to the sense of disquiet in the country. Last week the Barelvi sect under the umbrella of the Sunni Ittehad Council (SIC) took out a Long March to protest against the attacks on Sufi shrines and to press for their demand on reining in the Deobandi terrorist groups behind these attacks and put a stop to government patronage to these groups. But while the Barelvis rail against ‘talibanisation’ of the country, there is little to choose between them and the Taliban when it comes to the dreadful Blasphemy law.

The SIC has rejected a parliamentary committee formed by the Prime Minister to consider amendment in the Blasphemy law and has warned of tough resistance to any move to amend the law. The fierce resistance from the religious lobby to any amendment to the Blasphemy law has forced to the government to backtrack and the Prime Minister has said that the government has no intention to amend the law. This statement of the PM has come even as a lawmaker of the PPP, Sherry Rehman, has presented a draft bill to amend the law to prevent its abuse and misuse.

Keeping company with the SIC is the Lahore High Court which, in an unusual and highly irregular move, has barred the President from issuing any pardon to a Christian woman who has been awarded the death sentence for committing blasphemy. But the Pakistani judiciary which has become a law unto itself has started receiving its comeuppance and is also being caught in the vortex of its own judgments. For instance, even as the Supreme Court hears the defence of judges who had been charged with contempt of court for taking oath under the Provisional Constitutional Order issued by Gen Pervez Musharraf in November 2007, a petition has been filed demanding similar action against top military leaders, including the current army chief, who had violated the Supreme Court order forbidding all officials and state functionaries from supporting the Musharraf regime.

In a further sign of abdication of all control over the Pakistan army, the Prime Minister has said that the government has already given the go-ahead to the army to launch an operation in North Waziristan and it was now up to the army to decide on the timing of the operation. Meanwhile, the army chief, Gen. Ashfaq Kayani, who has begun his second three year term, has told Pakistani media persons in an off-the-record briefing that Pakistan has “transited from being the most sanctioned ally of the US to being the ‘most bullied ally’ of the US.” Kayani has claimed that US is interested in perpetuating a state of ‘controlled chaos’ in Pakistan and its ultimate aim is to “denuclearise Pakistan”.

Informing the media of the reforms in the structure of the Pakistan army, Kayani said that the army is being made more broad-based with greater representation from Pakistan Occupied Kashmir, Sindh and Balochistan and greater induction of minorities in the rank and file. But from the figures given during the talk, these changes will not make a significant difference to the ethnic composition of the Pakistan army with Punjabis representation coming down from 55.8% to 54.5% and Pashtuns representation coming down from 15.4% to 14.5%.

Foreign Policy / Foreign Relations

According to reports, during his meeting with US president Barack Obama at the time of the third round of the US-Pakistan Strategic Dialogue in Washington in September, the Pakistan army chief, Gen. Ashfaq Kayani, handed a 13 page document listing out Pakistan's core concerns which could have an important bearing on the Strategic Review of the Afghan war that the US is scheduled to unveil later this month. The reports say that Obama’s aide, Lt. Gen. Douglas Lute, has apparently been convinced by the arguments made by Kayani. Meanwhile, in an apparent tit-for-tat against the filing of a case in New York against the ISI for its involvement in the 26/11 Mumbai attacks, a Pakistani tribesman has filed a case against the CIA for a drone attack on his house killing his brother and son and has demanded damages of $ 500 million.

President Asif Zardari visited Sri Lanka last week on an invitation from the Sri Lankan President Mahinda Rajapakse. The two countries decided on an ‘overall comprehensive engagement’ which went beyond the political and military relationship and included trade, investment and cooperation in new areas. According to Pakistani foreign minister Shah Mehmood Qureshi, Sri Lanka has expressed interest in purchasing the Al-Khalid tanks and the JF17 fighter jets. During the visit, the two countries signed agreements on waiving visa requirements for officials and diplomats, cooperation in customs-related matters and augmenting cultural exchange and a memorandum of understanding on cooperation in agriculture. Zardari announced a credit line of $ 200 million for Sri Lankan exporters and made a pitch for barter trade in natural resources between the two countries.

The Chinese Premier Wen Jiabao is to visit Pakistan on December 17. On the eve of his visit, a new five year development plan was agreed to by the Pakistan-China Joint Committee on Economic, Trade, Scientific and Technical Cooperation which approved 36 projects of strategic importance to promote bilateral trade and investment.

Relations with India

In his interaction with Pakistani media persons, Gen. Ashfaq Kayani while reiterating the India-centric security paradigm of the Pakistan army has at the same time made conciliatory noises, saying that Pakistan could not afford to be in a “state of perpetual conflict with India” and has to “strike a balance between defence and development”. Kayani is also believed to have told the US President that “the people of Pakistan measure the strength of US-Pak relations on the scale of US-India partnership”, but has also indicated to him that Pakistan would reduce the size of its army if its security concerns were addressed.

But while Kayani has softened his anti-India stance a little, the Pakistani politicians seem to be taking a more hawkish stand on India. The Pakistani minister for Kashmir affairs, Manzoor Wattoo has said that if the Kashmir issue was not resolved, a nuclear war between India and Pakistan could not be ruled out. Meanwhile, the chairman of the Kashmir Committee of the Parliament, Maulana Fazlur Rehman, has been trying to drum up support for the ‘Kashmir cause’ during a visit to the UK.

According to a report in the Pakistani press, the Federal Investigation Agency has identified 20 more suspects with the names, photographs and addresses – all from the terrorist group, Lashkar-e-Taiba and almost all of them from the Punjab – for providing logistical and monetary support for the 26/11 attacks in Mumbai.

India has objected to the WTO the ‘unilateral market access’ granted by the EU to Pakistan on the grounds that it will affect Indian exports and is in violation of the MFN obligations.