Political and Internal Developments

The difficulties of the PPP-led coalition government increased last week after one of the alliance partners, JUIF, quit the government and decided to sit on the opposition benches. The immediate provocation for the move was the sacking by the Prime Minister of two cabinet ministers, one belonging to the PPP (religious affairs minister Hamid Saeed Kazmi) and the other from the JUIF (Science and technology minister Azam Khan Swati). The ministers were fired after they refused to end their very public spat over the Haj scandal in which Swati levelled charges of corruption against Kazmi and even appeared in the Supreme Court with ‘evidence’ of Kazmi’s corruption. In retaliation, Kazmi accused Swati of targeting him out of sectarian prejudice – the former being a Barelvi and the latter a Deobandi – and as part of a conspiracy to snatch the religious affairs ministry for the JUIF.

Although the JUIF chief, Maulana Fazlur Rehman, has blamed the failure of the Prime Minister to even consult him before sacking a minister from his party for the decision to quit the government, there are reasons to believe that there is more to the decision by the wily Maulana than merely the violation of ‘coalition dharma’ by the Prime Minister. There are reports that there was pressure from the Saudi Arabian government to introduce Saudi religious books as part of the school curriculum in Pakistan, and that the government of Pakistan was resisting the Saudi pressure on this count. The Maulana was also feeling the need to reclaim his religious political space by distancing himself from the growing unpopularity of the PPP-led government. Of course, if in the process of mounting pressure on the government, the Maulana manages to get some of his political wishes fulfilled, then he could even reconsider his decision and rejoin the government.

Even as the JUIF exited from the government, pressure was also being ratcheted up by another restive coalition partner, MQM, which has given a 10 day ultimatum to the PPP to clarify the remarks of the Sindh Home Minister Zulfikar Mirza who in a fiery speech before Karachi’s business community blamed the MQM (along with other political parties) for patronising ‘target killers’ and running extortion rackets in Karachi. If the MQM also quits the coalition, the government would be reduced to a minority; but it is still not clear if it will collapse. There was some succour for the government from PMLN chief Nawaz Sharif who despite hardening his opposition to the government is probably still not entirely convinced that the time is right to force the government out and go in for a mid-term election. As a result, Nawaz Sharif has said that he will oppose any unconstitutional and undemocratic move against the government and even said he will support the government if it “fights corruption and implements the Charter of Democracy”.

The PPP has meanwhile started weighing its political options and has open up lines of communication with the various factions of the PMLQ. While the ‘like-minded’ faction has not given any indication as to which way it will lean, the faction headed by the president of the party, Shujaat Hussein, has sent out mixed signals. On the one hand Shujaat has said that there is no question of joining hands with the PPP government which is on its way out, he has, on the other hand, also said that the party is not going to bring any no-confidence motion against the government and if approached could lay down conditions on which basis it could lend support to the government in parliament.

More worrying for the government are the incipient moves to once again coalesce the right-wing, religious parties on a common platform – a sort of ‘MMA plus’ – which is raising the spectre of another 1977 like Nizam-e-Mustafa movement that led to the martial law of Gen Ziaul Haq. Indications of such a movement came during a conference in Islamabad where all Islamist parties came together to ‘protect the blasphemy law’ through a ‘Tehrik-e-Namoos-e-Risalat’ movement. A protest campaign has been announced at the conference to prevent any amendment in the blasphemy laws. While the JUIF and the Deobandi mullahs were the moving force behind the Islamabad conference, the protest campaign will be headed by a Barelvi mullah, which reaffirms the possibility of bringing all the reactionary and Islamist forces under a common umbrella. The presence of sectarian and terrorist groups like the Sipah-e-Sahaba Pakistan (in its new avatar of Ahle Sunnat wal Jamaat) and the Lashkar-e-Taiba (in its avatar of Jamaatud Dawa) at the conference raises suspicions of the involvement of the ISI and Pakistan army in reviving the infamous military-mullah alliance.

The uncertainty caused by the political developments has all but ensured that the controversial ‘Reformed General Sales Tax’ (RGST) bill is not likely to meet the January 1 deadline. Even before the jolt given to the government by the JUIF’s exit from the coalition, the numbers game in the National Assembly was loaded against the government with the PMLN, PMLQ, MQM and JUIF opposing the bill. Despite a detailed briefing given by Finance Minister Hafeez Shaikh to Nawaz Sharif, the latter has stuck to his guns and refused to endorse the RGST bill at this stage. There are reports that given the opposition to the bill, the government has decided to delay its tabling until a consensus can be built on the tax reform measure. Prime Minister Yusuf Raza Gilani has however been putting up a brave face and declaring that his government is ready to take the ‘difficult and unpopular decisions’ required to pull the country out of the mess it finds itself in.

It remains to be seen how the multilateral financial institutions react to the failure of the government to impose the RGST bill. If the IMF refuses to release the next trance of the loan facility, it could lead to an economic meltdown in Pakistan with hyper-inflation and disruption of trade and industrial activity becoming the order of the day. With weekly inflation touching 21% last week and budget deficit reaching Rs 350 billion, the economic conditions are deteriorating at an alarming rate which in turn could lead to massive civic unrest. In fact, the government has delayed a revision in prices of petroleum products after receiving intelligence reports that any further rise in prices could lead to massive street protests. Meanwhile, the Karachi Chamber of Commerce and Industry has called the trade and industrial conditions the worst ever in the history of Pakistan. Alongside the financial and fiscal crisis has come the massive energy crisis with load-shedding and gas shortages having a severe impact on industrial production. The suspension of gas supply to Punjab last week has put in jeopardy the entire textile sector which contributes around 10% to the GDP of Pakistan and comprises around 55% of its total exports. Industry estimates put the losses to the textile sector at around $ 1 billion.

The massive economic crunch has not stopped the Pakistan army from asking for ever more funds from the government to meet the rising security expenditure being incurred, ostensibly on the war on terror. The latest demand from the army is for a supplementary budgetary allocation of Rs 45 billion. If this money was only for meeting the costs of fighting terrorism, it could still be justified. The problem is that despite bankruptcy staring the country in the face, the military build up has continued apace with the Defence Minister even expressing keenness to purchase reconditioned F16 fighters from Norway which is going to replace its F16 fleet with the European Joint Strike Fighter. The Pakistan Air Force has also tied up with the Turkish Aerospace Industrial Complex for upgrading its F16 fleet.

As far as the war on terror is concerned, there are indications that the Pakistan Army might finally be giving in to US pressure to launch an operation in North Waziristan described as the ‘epicentre of terrorism’ by the US Chairman Joint Chiefs of Staff Admiral Mike Mullen. While Mullen, who in an interview has spoken about the growing ‘strategic impatience’ in the US army over the dilly-dallying by the Pakistan army, has said that decision to take direct military action inside Pakistan was not his to make, he has also claimed that the Pakistan army chief Gen. Ashfaq Kayani has said that a military operation in North Waziristan is a matter of ‘when’ not ‘if’. Reports in the Pakistani press suggest that the Pakistan army and intelligence agencies are considering a ‘limited and targeted’ operation in North Waziristan. But even as Pakistan army considers an operation in North Waziristan, the double-speak on the Taliban has continued apace with the IGFC, Balochistan, Maj Gen Ubaidullah Khan denying the presence of the ‘Quetta Shura’ in Balochistan and calling it a conspiracy to destabilise the region. Meanwhile, the Pakistan government has issued orders for freezing the accounts of 137 people linked to Taliban, 259 persons linked to al-Qaeda and 92 organisations who have been charged for facilitating al-Qaeda.

Foreign Relations / Foreign Policy

On the eve of the US Strategic Review of its Afpak policy, there was a flurry of visits from top American military and intelligence officials to Pakistan who, it is believed, notched up the pressure on Pakistan to move against terrorist safe havens in its territory. The Review itself had little new in terms of either strategy or policy. While US President Barack Obama once again repeated the ‘do more’ mantra, there was a lot of soft-peddling, at least in public pronouncements, on the double-game being played by the Pakistanis with Defense Secretary Robert Gates pointing to the floods to explain Pakistan's ‘inability’ to expand military operations in North Waziristan and Secretary of State Hillary Clinton talking of a steadily improving partnership that was yielding tangible results on the ground. On his part, Obama assured Pakistan that the US would “continue to support the economic and political development that’s critical to Pakistan's future”.

Meanwhile, in what is quite clearly a tit-for-tat response by the Pakistanis to the suit filed in a New York court against the ISI chief for his involvement in the 26/11 attacks in Mumbai, a Pakistani tribesman from North Waziristan, has sought $ 500 million compensation from the US government for a drone attack on his house in which his brother and son were killed. The tribesman has made the US defense secretary, the CIA chief and the CIA station chief in Islamabad as respondents. The station chief, Jonathan Banks, has reportedly left Islamabad.

President Asif Zardari visited Turkmenistan for the signing ceremony of the Inter-Government Agreement and the Gas Pipeline Framework agreement for the $ 7.6 billion, 1680 km long, Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline. In his meeting with the Afghan president, Hamid Karzai, Zardari “expressed the hope that the pipeline would bring the four countries closer and enable them to fight poverty and illiteracy.” Although sceptics doubt if the pipeline will ever be built, the Pakistani petroleum minister, Naveed Qamar, is optimistic that the all-important Gas Sale and Purchase Agreement will be reached by April 30, 2011. Qamar also said that the TAPI pipeline is not an alternative to the Iran-Pakistan pipeline. But relations with Iran went down a few notches after Iranian Deputy Minister in charge of security at the Interior ministry accused Pakistani officials of involvement in the bomb attack in Chabahar in which around 40 people were killed last week.

Pakistan is attaching very high expectations from the visit of the Chinese Premier Wen Jiabao. Prime Minister Yusuf Raza Gilani has not only welcomed a “Chinese role in bringing India and Pakistan to the negotiating table” but has also hinted at handing over the Gwadar port to the Chinese for making it ‘fully operational’. The Chinese who have submitted a bid for the gold and copper mines at Reko Diq in Balochistan are eyeing the Gwadar port for shipping gold and copper also from the mines it has taken in Afghanistan. There are also reports that the Pakistanis will ask China to revive the Coastal Oil Refinery project in Gwadar. The Pakistanis are also seeking Chinese investment in Public Sector enterprises like Heavy Mechanical Complex and Pakistan Machine Tool Factory. But concerns have also been expressed by Pakistani officials over the burgeoning trade deficit with China which has crossed $ 3 billion in a total bilateral trade of around $ 5 billion.

Pakistan has reacted strongly to the remarks on terrorism emanating from Pakistan by the German Chancellor and the French President during their meetings with the Indian Prime Minister Dr Manmohan Singh. The Pakistani foreign office issued demarches to the French and German envoys in which it said that ‘blaming Pakistan for terrorism was unwarranted’.

The civilian nuclear deals being struck by various countries with India and the growing pressure on Pakistan to stop blocking the consensus in the Conference on Disarmament has also been commented upon by the National Command Authority of Pakistan. In a statement the NCA said that Pakistan “would not accept any ‘discriminatory treatment’ that undermined its strategic deterrence”. The statement said that “revisionism based on strategic, political or commercial considerations accentuates asymmetries and would perpetuate instability, especially in South Asia.”

Relations with India

While the Pakistan minister for Kashmir affairs has claimed that back-channel talks were underway between India and Pakistan, a report in the Pakistani media has said that while the current Pakistani establishment wanted talks between the two countries on Kashmir to start from scratch, the Indian side wanted that they should start from where they were left off during the Musharraf era which the Pakistani establishment finds unacceptable.

The Pakistan government has replaced its Indus Waters Commissioner because of internal squabbles and differences between the Commissioner and the PMs advisor on water resources. The removal of the IWC comes even as Pakistan has filed a case against India on the issue of the Kishenganga hydel power project being constructed by India.

Pakistan has pleaded with the EU and US to make India withdraw its objections to the trade and tariff concessions given by the EU to Pakistani products. India has taken the issue up at the WTO as being in violation of the WTO regulations.
The Pakistan foreign office has claimed that Indian Air Force violated Pakistani air space 20 time in 2010 and 182 times since November 2007 but has dismissed as ‘baseless’ Indian defence minister’s statement on air space violation by Pakistani aircraft.