Talking business

Despite the rumours, it turns out things are by and large alright between Pakistan and the United States.

Looks like the carrot just got a lot bigger.  After much speculation and rumour mongering, it turns out things are by and large alright between Pakistan and the United States.  The ongoing strategic dialogue may not have given us the kind of fireworks some were clearly expecting, but the announcement of large-scale project assistance with long gestation periods shows the alliance maybe testing itself, but is far from broken.

On every issue of concern, both parties to the dialogue could not be clearer.  There is much they still expect and want from each other, but the alliance remains strong.  Here were the words of Hillary Clinton, for instance: “The US has no stronger partner… (against terrorism)… than Pakistan.”

For quite a while, even before the strategic dialogue got underway, talk was swirling about a possible breakdown in relations, which (if true) would have had terrible economic consequences for Pakistan.  But these words, backed up by commitments of massive projects, have to mean something.

The carrot dangled before the visiting delegation wasn’t restricted to pretty language.  Twenty-seven new projects are ready to begin, including up-gradation of existing power plants, and intriguingly, a 150 megawatt wind power project for coastal Sindh.

But the other side of the story was also there in the language.  First and foremost, this sentence merits a close reading:  “The military working group has had productive discussions this week about our work together to combat terrorism and eliminate violent extremism and the organisations that promote it that are operating in Pakistan.” (Italics added)

No surprises what this language must have been referring to.  Someday, years down the road, when all this will hopefully be part of our irrelevant and distant past (remember we have very short memories here!), some uniform with a ghost author is going to write a ‘book’ which tells us all that this sentence wishes it could.

In the meantime, we can only infer that it refers to the American push to get the Pakistan army to wage a military operation in North Waziristan and help eliminate the Haqqani network. But the army is not the only institution that was asked to ‘do more’ to live up to the generosity of the carrot dangling before them.  For the civilian government, there were these words:  “Now, reforming Pakistan’s tax system is one area in which tough decisions will have to be made…” No surprises there either.

In fact, the secretary of state had made it clear long before that countries who do not tax their own citizens but ask for handouts are her ‘pet peeves’. I can only hope that our foreign minister, chummy as he likes to be around Hillary Clinton, understands the meaning of those two words.

No free lunches were promised to the power sector as well.  As soon as she finished listing the various projects that would comprise American assistance to Pakistan in this critical area, she added this important caveat:  “As these projects come on line, we will look to the Pakistani government to implement systematic reform of their energy sector.”  Again no surprises.

The details of these reforms have been amply reported by now and the reluctance of the government to undertake them has been equally well noted.  The inability to undertake power reforms is a case study worthy of textbooks.

I suppose we should be allowed some solace in the fact that many other countries have stumbled on this road as well.  But there is no escaping the fact that our power sector needs investment and tighter management, and the state is in no position to provide either.

So, overall the story of Pakistan’s courtship with America is a happy one thus far, or at least a functional one.  The relationship has been tested to the hilt ever since that fateful helicopter incursion and the blockage of Nato supplies.

But if the projects are moving forward, if long-term engagements are still being worked on, it means both parties continue to see a future in continued engagement.  But the caveats are becoming increasingly urgent.  The military caveats are the subject of another column.  But tax and power sector reforms are no policy picnic either.  It’s time to get cracking.

the writer is Editor Business and Economic policy for Express News and Express 24/7

Published in The Express Tribune, October 25^th, 2010.