Costs and benefits
Pakistan has failed to achieve substantial FDI growth despite having a very liberal regulatory regime
By Hussain H Zaidi
The major factors that promote or restrict foreign direct investment (FDI) inflows include the level of demand in the host country, absence or presence of created assets, protection of investment and assets, overall investment climate, economic environment and socio-political situation. We begin with the level of demand in the host country, which depends mainly on two factors: the purchasing power of the consumer and the size of the market.

A lot has been said in recent days about the need for Pakistanis to come together and help 'internally displaced people' (IDPs). The response of the common people after the 2005 earthquake has been invoked repeatedly by all and sundry to no avail. Many commentators have expressed dismay at this apparent callousness of society to the plight of the hundreds of thousands streaming out of Malakand. But I am not surprised at all.

The earthquake was a natural disaster, whereas the refugee crisis we currently confront is very much human-made. It is strange that the prime minister and newspaper columnists alike expect so much from the TV-watching public, given how much energy has been devoted to creating an environment in which large-scale displacement has been deemed necessary for the greater common good. Indeed, in the narrative of counter-insurgency even those who have become refugees perceive their plight to be unavoidable.

It might be recalled that after the 2005 earthquake the Muttahida Qaumi Movement (MQM) was at the forefront of relief efforts in Karachi (I will not speculate on the extent to which the party was genuinely concerned about human suffering). Now MQM leaders such as Farooq Sattar make front-page statements warning that the Taliban may be masquerading as refugees. In other urban centres, even while there are calls being made to help those fleeing the violence, Pakhtuns face harassment and intimidation just because they are Pakhtun.

Those who argue that the fate of the current phase of the so-called 'war on terror' will be decided by the fate of those who have fled their homes are only partially right. In fact, this is true not only of the present conflict but of all such conflicts in recent history. What is happening to the people of Malakand right now has been happening to Pakhtuns and non-Pakhtun Afghans for the best part of 30 years. Almost everyone in war is forced to take sides and in Afghanistan the primary fault-line of the conflict is ethnic. It appears as if Pakistani state functionaries and their American patrons are hell bent on creating such fault-lines on this side of the border as well.

As the hopelessness of the refugee situation becomes clearer in days to come, it is very likely that the 'othering' that started in earnest long before the recent military onslaught will simply intensify. On the one hand, the 'civilised' elite in major urban centres has been completely won over by war propaganda. This elite is well-versed in the ways of self-isolation. It will further barricade itself into physical and psychological ghettoes such as DHA, Clifton, Gulberg and F-8. On the other hand are the common working people who are prone to xenophobia, primarily because refugees can be depicted as stealers of jobs and public space. During and after the original Afghan war in the 1980s, hate-mongering against Afghan refugees was commonplace.

In the few days since the bombardment of Malakand started, the number of Pakhtun voices talking about 'ethnic cleansing' and 'profiling' has increased rapidly. Even those who might have been in favour of using the Big Stick against the Taliban have been shocked at what this has equated to in practice. There are already indications that refugee camps will become hotbeds of a reinvigorated militancy, because it has been religio-political organisations that have headed the relief effort. The brains behind the military operation would do well to read about the emergence of Hamas from within Palestinian refugee camps.

Pakhtuns are a strong and proud people who have a long history of resisting attempts to enslave them. In recent times many commentators have conflated Pakhtun resistance with pan-Islamism. It is, of course, difficult to separate the two in light of the internationalisation of jihad that took place during the original Afghan war. But scholars such as Oliver Roy have noted that the Afghan Taliban (at least in their original incarnation in the early 1990s) should be thought of as an expression of Pakhtun nationalism rather than a genuinely pan-Islamic movement.

Those that have followed American engagements in Afghanistan since 2001 know that ethnic Pakhtuns are unhappy about the nature of the power-sharing arrangement that the Washington-backed Karzai government has fashioned. The Taliban insurgency that has intensified over the last two to three years reflects this dissatisfaction. With the war spreading into Pakistan and the growing feeling among Pakhtuns that they are the bearing the brunt of a cynical struggle for strategic control waged by forces that do not represent them, it is not at all beyond the realm of possibility that Pakhtun nationalism emerges with renewed force.

The Pakistani state has spent the best part of 60 years attempting to displace secular Pakhtun nationalism with the nationalism of the Taliban variety. Now the conditions are being created for the latter to become even more deeply entrenched, but it is a matter of conjecture whether the state will be able to control and manipulate it as it has done for decades. Either way, I cannot understand how the overnight creation of a refugee crisis will help in stemming radicalisation.

As an endnote it is important to draw attention to the most disturbing consequences of the military onslaught. There are preliminary indications that human traffickers have already set up shops within the refugee camps. Those who benefit from this most abhorrent of practices recognise that the desperation of the refugees will create conditions conducive for the sale of children and women's bodies. This is just the tip of the iceberg and it is imperative that those who remain gung ho about the need for full-scale military operations in Malakand come to terms with the fact that there are real and long-term fallouts to which such operations give rise.

It is irresponsible to simply call for blood and then ignore what follows. It is perverse that so many people are asking for charity to help the 'victims of terrorism' and not instead demanding that terrorism itself be stopped. And whether we are willing to admit it or not, in this war the American and Pakistani armies are just as, if not more, guilty as those who they claim to be fighting.

Prof Dr Ihsan Ali is vice-chancellor of Hazara University. After getting a British Council fellowship in 1989, he did his PhD in Archaeology from the University of Cambridge in 1999. The topic of his thesis was Archaeology of Peshawar Plain. He has done excavations on important archaeological sites in the UK, Italy, France and Pakistan. He has also delivered lectures at leading universities in the US, Italy and the UK. Recently, he has been invited by more than 20 universities of high repute in the US to deliver lectures there.

Dr Ihsan Ali is author of the journals Ancient Pakistan (4 volumes) and Frontier Archaeology (4 volumes). He has published more than 50 research papers in national and international journals; the most important among them being Charsadda, The British-Pakistan Excavations At The Balahisar and Gandhara Sculptures in the Peshawar Museum (Life Story of Buddha). Moreover, he has to his credit the establishment of 11 museums, including two at Hazara University campuses in Mansehra and Abbottabad.

Dr Ihsan Ali was made vice-chancellor of Hazara University, which was completely destroyed in the Oct 2005 earthquake, in May 2006. He rebuilt the university within a short span of time at an overall cost of Rs2.5 billion. Moreover, he established two new campuses of the university in Havelian and Haripur. Keeping in view his experience, the NWFP government has also given him the extra charge as vice-chancellor of Abdul Wali Khan University that is being established in Mardan. The News on Sunday interviewed Dr Ihsan Ali recently. Excerpts follow:

The News on Sunday: How rich is Pakistan, especially the NWFP, in archeological terms and which civilisations had remained dominant here?

Ihsan Ali: Pakistan is the only country in the world where one can find two great civilisations -- the pre-historic Indus Valley civilisation and Gandhara civilisation. The Indus Valley civilisation started about 4,500 years ago circa 2500 BC, in Harappa and Mohenjodaro, and came to an end about 1,000 years later circa 1500 BC. Extended to India, this civilisation had its contemporary civilisations -- such as Sumerian, Babylonian, Assyrian, Egyptian and Greek -- in Iraq and Egypt. Script, images and symbols were introduced during this period. The script of the Indus Valley civilisation has not yet been deciphered, though it has been done in the case of Egyptian, Sumerian and Babylonian civilisations. There are more than 2,500 sites of this civilisation throughout Pakistan, mostly in Punjab, Sindh and Balochistan. However, India has more sites of this civilisation than Pakistan. The second great civilisation in Pakistan was that of Gandhara. It started about 2,600 years ago circa 600 BC with its first capital in Charsadda. After Alexander the Great invaded this region and conquered Charsadda in 327 BC, Greeks ruled here for over two centuries, though local people also became kings during their era. It is interesting to note that almost 200 Greek kings, with four of them women, ruled during the Gandhara civilisation. Peshawar, known as Kanishka Pura at that time, became the second capital of the Gandhara civilisation circa 100 AD. The Kushan family and King Kanishka were the most popular rulers of this period, during which fine arts reached new heights. King Kanishka's stupa in Shahji ki Dheri was excavated by the British and all his belongings are available in the Peshawar Museum. Around 500 AD, the downfall of the Gandhara civilisation started when White Hunz from Central Asia invaded this region. They dealt a severe blow to the rulers of Gandhara, and also destroyed many monasteries and stupas. In the sixth century, Turk Shahis from Afghanistan attacked Gandhara and the capital was shifted from Peshawar to Hund (Swabi). It remained here for the four centuries until 998 AD. The Turk Shahis ruled in the sixth and seventh centuries. But, with the revival of Hinduism, Hindu Shahis conquered the region in the eighth century and their rule lasted for the next two centuries. The Gandhara civilisation came to an end in 998 AD when Mahmood of Ghaznavi invaded the region and fought three wars -- one in Peshawar and two in Hund. Though Buddha was born in India, his first statue was made in Gandhara after 550 years of his birth. After this, this art form developed in India and Tahktbhai, Jamal Garhi and Katlang became important centres of statue making. This art form and the Buddhist religion spread to as far as China, Korea and Japan. Covering all aspects of life, the objects of Gandhara art are available in almost all the major museums of the world. For example, Ohio State University in the US alone has about 35,000 pictures of Gandhara art. A collection of about 22,000 pieces of Gandhara art are also on display in different museums of Pakistan. Gandhara also served as a seat of learning, and Charsadda, Peshawar, Takhtbhai and Swat have many Buddhist seminaries.

TNS: Which museum in Pakistan has the best collection of the Gandhara civilisation?

IA: The Peshawar Museum leads the rest in this regard. About 1,200 statues / relics are on display in the Peshawar Museum, while another 3,500 are in store. In all, statues and relics of the Gandhara civilisation are available in 20 museums of the country, 12 of which are in the NWFP.

TNS: How many archaeological sites have so far been excavated in Pakistan and in the NWFP?

IA: More than 2,000 sites of the Gandhara civilisation are among the 3,200 sites of different civilisations, including that of the Stone Age, excavated in the NWFP. In other provinces of the country, there are 3,000 recorded sites with half of them dating back to the Indus Valley civilisation.

TNS: Are any excavations currently in progress in the country?

IA: To my knowledge, no excavation is currently underway in the country, mainly due to the shortage of resources / funds and the worsening law and order situation.

TNS: Can you identify some of the areas of archeological interest in Pakistan?

IA: As concerns the pre-historic age, the Gomal valley is the richest in the NWFP, followed by the Bannu district. As for the Buddhist period, there are countless potential sites in Swat, Dir, Peshawar, Mardan, Swabi, Haripur and Mansehra.

TNS: Do you think the Buddhist ruins are being properly preserved?

IA: No, I don't think so. The Takhtbhai ruins are on the world heritage list, but only three watchmen are deputed there. The walls of the monument are crumbling because they have been damaged by rains. Due to the lack of resources, the ruins in Jamal Garhi, Sari Balol, Shahbaz Garhi, Aziz Dherai, Hund, Charsadda and Balahisar are also in bad shape. Some funds have been provided by Unesco for their maintenance, but they are inadequate considering the importance of these historical sites. As an archeologist, I can say that we are not doing any justice to these precious sites.

TNS: As regards preservation of the Buddhist ruins, Korean monks want to develop the ones in Takhtbhai as the most revered place of their religion. Is it possible and what benefits will this accrue to Pakistan?

IA: I don't think the Korean monks will be discouraged if they want to develop the site as the most revered place of their religion. To me, it looks more of a political statement. I think there is a lack of sincerity on the part of Koreans, because they will find the Pakistani government more than willing to help them realise their dream provided they bear the cost. It's a fact that the Takhtbhai ruins have the status of the most revered site for Chinese, Korean and Japanese Buddhists, so they should come forward to develop them. Besides Takhtbhai, Swat, Hund, Charsadda, Peshawar and Taxila are religious sites that Buddhists cannot find elsewhere in the world. Being a common heritage, it is the collective responsibility of the world to assist Pakistan in preserving and developing these sites. I will be the first person to convince the federal government in this regard, because such a move will also prove to be a shot in the arm for Pakistan's economy.

TNS: Do you think the Buddhist ruins are under threat from the Taliban?

IA: I think lack of peace threatens everything. To me, destroying the Buddhists ruins is not Islam, but some elements may do so to put pressure on their opponents. In Bamyan, too, the Buddha statues remained intact for six years under the Taliban rule. However, when the Taliban were pushed to the wall, they blew up the Buddha statues in 2001. They thought Japan and some other countries may stop a looming attack on them if they threaten to blow the Buddha statues in Bamyan, but this did not happen.

TNS: What do you have to say about the smuggling of precious artefact from Pakistan? Where are they smuggled to and who is involved in this crime?

IA: The whole world is plundering our heritage. The US, Japan and European countries have opened markets in London, New York, Los Angeles, etc to buy these precious artefact at paltry rates. We never hear that statues have been smuggled to Pakistan from other countries; such items are always smuggled from here. No specific country but international gangs are involved in the smuggling of artefact.

The prompt convening, according to a media report, of the Joint Working Group of Pakistan and Afghanistan in Islamabad on May 14 to start the process of renegotiating the Afghan Transit Trade Agreement (ATTA), signed in 1965, makes one thing absolutely clear: the MoU signed in Washington on May7 was no ordinary MoU. The date of the meeting was part of the script, as also is the stipulation to conclude and sign a revised agreement by Dec 31.

It is no secret that Pakistan has shied away from any revision of substance for good 44 years due to its India-centric policy. The old agreement is not without reservation. There is a negative list of goods that cannot be traded. It is argued that goods that may be smuggled back to Pakistan to hurt its industry cannot be allowed. Nor can goods with no known demand in Afghanistan be permitted, their obvious ultimate destination being Pakistan.

Goods enter Pakistan only through the sea route and Karachi is the only port of call. Transport through Pakistan is restricted to Pakistani means of transport and, before the National Logistic Cell (NLC) took over, railway was the exclusive mode. Afghanistan allows Pakistani trucks into its borders, but Pakistan does not reciprocate. Afghan exports are allowed overland through Wagah, but imports are not.

Afghans have all along protested these restrictions. What to trade and with whom to trade has to be their decision as a sovereign country. Again, the responsibility to stop smuggling is Pakistan's, not theirs. In the past decade and a half, steep tariff reductions in pursuit of a liberal agenda have discouraged smuggling significantly. What Pakistani businesspeople fear now is that the higher duties imposed on luxuries in the last budget, and the transport cost advantage in the case of Indian merchandise entering from Wagah, may well improve the incentives to smuggle.

So what has changed for both countries that they have now agreed to renegotiate? To begin with, some assumptions of the old agreement are simply not valid any more. For example, Pakistan now has three and not just one port of Karachi. Similarly, trade in services has also become important. More important, Afghanistan has become the third largest destination for Pakistani exports, the share being over 8 percent of the total. The value of exports has jumped from Rs8.4 billion in 2000-01 to Rs71.8 billion in 2007-08. In the first six months of the current fiscal year (July-Dec 2008), these exports have already touched Rs60.1 billion. Thus, the balance of trade is overwhelmingly in favour of Pakistan; the country's imports from Afghanistan in 2007-08 were of only Rs5.7 billion.

This profitable trade is now threatened by competition. The joint construction of Chabahar port by Iran and India, a location close to Gwadar, and the building of a modern road connecting Kandhar to Zaranj on the Iranian border have provided an alterative route. With special discounts on port costs and a transit agreement without reservation, Afghan trade is beginning to divert from Karachi to Chabahar. The first big ticket item was wheat from India, following Pakistan's refusal to let it go through Wagah.

When the ATTA was signed in 1965, Pakistan as the frontline state in the Cold War had no interest in trade beyond Afghanistan. The so-called 'Russian Plan' for a collective security and trade arrangement in the area was seen as subversive of national interest. Things have changed now. In addition to the existing links in the NWFP, plans have been thought up to link Gwadar to Chaman by road and build Chaman-Spin Boldak rail link with Kandhar, with an eye on the opportunities presented by the Central Asian Republics (CARs).

These opportunities of trade as well as energy links with CARs cannot materialise until Afghanistan allows transit without reservation. In return, Pakistan will have to overcome its resistance to Afghanistan's demand to import from India. The view that India is not mentioned in the Washington MoU is neither here nor there. Afghanistan has already reached entente with Iran, India and Uzbekistan. Moreover, the country has signed the TIR Convention and it is seeking the membership of the World Trade Organisation (WTO).

The choice of Washington as the venue to ink a purely bilateral understanding was not accidental. The Commerce Ministry and Federal Board of Revenue (FBR) had been in consultation to prepare a draft last year, the need for which was established under the projects related to the national corridor and trade facilitation. A draft from Kabul was also received and reviewed in November. Moreover, Afghan President Hamid Karzai had raised the issue of renegotiation of ATTA during President Asif Ali Zardari's first official visit to Afghanistan in January.

The draft was reportedly cleared by the cabinet in April and the next stage was to start negotiations with Afghanistan. It is always difficult in Pakistan for any government to be seen doing anything of cooperative nature vis-à-vis India of its own volition. The common people are allowed to perceive it as having been done under pressure. That is why an MoU related to overland trade was signed overseas in Washington. Too eager to impress upon Pakistan that its main problem is the Taliban, not India, the Americans did the Afghan bidding.

Hand-holding the two presidents, US Secretary of State Hillary Clinton termed the MoU "historic" and left no doubt about the beneficiaries: "When I look at the map of the world and see how strategically located both countries are, this is an agreement that will bring prosperity to both countries along the trade routes and beyond." The Times of India did not have to mince words in saying that the MoU "signalled for the first time that Pakistan may be pushed to working around its traditional paranoia of India."

In short, the US succeeded where India and Afghanistan had not. Afghanistan and Pakistan are both members of the South Asian Association for Regional Cooperation (Saarc) and Economic Cooperation Organisation (ECO), while India is a member of the former only. Both groupings have agreed on timetables for freeing intraregional trade. Pakistan has also been offering a free trade agreement (FTA) to Afghanistan bilaterally as well. In fact, Pakistan was also part of the group including Afghanistan, China, Iran, Tajikistan, Turkmenistan and Uzbekistan that issued the Kabul Declaration on Good Neighbourly Relations on Dec 22, 2002, and subsequently the Dubai Declaration on "encouraging closer trade, transit and investment cooperation" on Sep 22, 2003.

A World Bank study titled Trade and Regional Cooperation between Afghanistan and its Neighbours was a follow-up of these declarations and a preparation for subsequent ministerial meetings in 2004. The study "looks at prospects for and obstacles to cooperation in developing trade linkages in the region and integrating the region with the global markets." Trade and its facilitation across countries is always beneficial in an economic sense. Mutual understanding can make these gains mutually beneficial. Without saying it in too many words, Pakistan may be seeking economic -- rather than strategic -- depth as a means to peace and progress.

In one of the camps for internally displaced people (IDPs) in Swabi, a newly-born baby girl was named as Aman (Peace). God knows whether she would live in peace or meet the same fate as her parents, but those who have named her are hoping for peace and consider her birth as a good omen. In fact, the common people have attached high hopes with peace and they are expecting that the government would create conducive environment to ensure peaceful living for them.

Pakistan is currently experiencing one of the worst humanitarian crises of its history. As a result, feelings of uncertainty and despair, as well as all kinds of fears, have crept in the minds of the people. What are the prospects of success of the military operation? What are some of the possible scenarios of the looming humanitarian crisis: whether it will be effectively managed or will it worsen? The time factor is important too. Whether the military operation will be completed in the shortest possible time or will it continue for long?

Similarly, like previous military operations, will the militants' leadership survive this time too and only the foot soldiers will be targeted? Whether the militancy will be effectively rooted out and its bases destroyed or its hardcore supporters will be allowed to mix with the people for a while and then re-organise? For how long the common people will be forced to bear the cost of blunders made by the policy-makers? Is there a viable policy or programme with the government to stop the humanitarian crisis from developing into a humanitarian disaster? These are some of the questions currently disturbing every concerned mind.

The deployment of large contingents of security forces in the region and the start of armed clashes have triggered fears and consequently resulted in mass exodus of locals from Swat. The local people are facing innumerable sufferings due to the curfew, shortage of transport and the militants' attempts to stop them from fleeing so that they can be used as human shields. Moreover, because of the curfew and closure of markets, food stocks of the local people are drying up at a fast pace.

The shortage of food and medicines, disruption of basic services such as water and electricity, unhampered curfew, and shelling and bombing are resulting in an unbearable situation. Though the authorities have allowed non-custom paid vehicles to transport people to areas outside the Malakand division, due to the ban on the entry of vehicles in Swat an acute shortage of transport still exists.

During relaxation in the curfew, one can see a flood of frightened people leaving the area in haste and desperation. A considerable number of people have taken shelter with their relatives and friends, while thousands have ended in camps set up for the IDPs. However, the lukewarm response of donor agencies and ill-preparedness of the government's departments are causing innumerable problems for those people who have fled or are still trying to flee their native areas.

The official data puts the number of IDPs from Bajaur, Mohmand and Swat at about 550,000. The figure is expected to increase to one million, because 360,000 IDPs have got registered with the United Nations High Commissioner for Refugees (UNHCR) only in the last 10 days. In addition, it is important to remember that hundreds of thousands of displaced people are living with their relatives and friends.

Dealing with such a massive influx of IDPs is beyond the meager resources of the NWFP government, thus it is appealing to the federal and other provincial governments -- as well as international and national relief agencies -- for help. Government authorities are trying hard to cope with this situation, and have started establishing new camps for the IDPs in Mardan and Swabi. However, the people living in these camps are facing many problems, such as lack of basic facilities. Anaemia, scabies, gastroenteritis, malnutrition, respiratory track infection and traumatic disorder are some of the diseases widespread in the camps of IDPs.

Not only the people are uninformed about the situation, the long curfew hours are also hampering their movement. As a result, thousands of them are still stranded in the conflict zone. On the other hand, the free movement of the militants and their high morale are sending wrong signals to the general public. The FM radio, one of the most effective tools of the militants besides being a symbol of their strength, is still functional. One of the IDPs who listened to the FM radio on May 9 said there was no sign of fear or demoralisation as far as the militants were concerned. The IDPs also hold security forces equally responsible for their miseries and hardships. Some of them even believe that the militants and security forces are two sides of the same coin.

One of the main reasons cited by the IDPs for leaving their respective areas is indiscriminate mortar and artillery shelling. There was a mixed response to the question that who was becoming the main target: the militants or civilians? Some of the IDPs complained that normally the common people become the targets of shelling and private property, including transport, is damaged.

Although everyone is talking about peace, the question is at what cost. If we look at the causality trend in Swat during the last two phases of the military operation, the results do not bode well. Despite the rhetoric about the success of previous military operations, the ground realities are different. Some people accuse the authorities of deliberately citing wrong figures to cover their failures.

According to confidential official data, prepared by one of the law-enforcing agencies, the causality rate of civilians and security forces in Swat is higher than that of the militants. The data covering the period between July 2007 and Jan 2009, including the two previous phases of the military operation, shows that a total of 763 people were killed. About 61 percent (468) were civilians, 29 percent (223) were security forces' personnel and 9 percent (72) were militants. About 48 percent (226) of the civilian casualties were caused by the shelling of security forces. As regards the injured, 63 percent were civilians, 34 percent were security forces' personnel and only 2 percent were militants.

At this critical juncture of Pakistan's history, high social and political stakes are involved in the ongoing military operation. If the military operation continues for long, the public support for it is expected to dwindle. Interestingly, a large number of the IDPs do not see an immediate end to the conflict and they think that the situation will take some time to return to the normal.

Some of the religious and political parties are already voicing their concerns and opposing the military operation. If the government fails to manage the situation in the Malakand division in the near future, the political divide could sharpen and those sitting on the fence could join those opposing the military operation. In short, the swifter the military operation, the more are its chances of success.

A silver lining

It is an oft repeated saying that every dark cloud has a silver lining. Even the worst of situations and circumstances have some positive outcomes. Today every Pakistani is sad at the tragic events taking place in Swat and Fata, still there are some long-term positive outcomes that are at the moment being overlooked by the media and political analysts. The rise of the Taliban in Swat and Fata, and their deeds after getting authority for a short while, have helped in breaking many myths and dispelling many impressions that had fascinated the poor people of Pakistan for a long time.

It is for the first time that our nation saw at first hand what extremist elements stand for, what ambitions they actually harbour, what strategies they espouse to achieve their goals and what is the real face of some parties within the mainstream political system claiming to be champions of democracy. Until recently, most Pakistanis had no idea what it means to be living in a territory controlled by extremist elements, and how it is going to affect their lives and lifestyles.

We had only read about this style of governance in the columns of journalists heaping praises on Mulla Omar and his ministers, who 'managed' state affairs in Afghanistan while sitting on prayer mats and wearing simple clothes. When the people of Pakistan looked at the lavish lifestyle of their rulers and the exploitation of national resources by them, they thought that perhaps they too needed such down to earth and simple rulers for solution to their problems. The media, however, failed to show the other side of the picture; those appearing simple in manner were tyrannical in nature.

The Taliban in Afghanistan were bent on imposing a particular brand of Islam on the masses. Their particular brand of Islam and Sharia has no roots in Islamic history and fiqah. They had interpreted Islam according to their limited and outdated perceptions, and they were not ready to recognise any other interpretation of the religion. The Taliban in Pakistan have proved no different. It was only when we heard Sufi Mohammad denouncing democracy and decreeing all those who believed in it as kafirs (infidels) that we realised what was in store for us.

Some of us sincerely believed that the Taliban-brand of Nizam-e-Adl was the panacea for all our ills. Thanks to the statements of Sufi Mohammad and his cronies, now the people of Pakistan understand that the Taliban and their supporters recognise only one evil in the society -- women. The Taliban and their supporters do not even consider inequality, corruption, lawlessness, poverty, and lack of access to health and educational facilities as problems.

Their Islam can make all the social evils disappear by confining women to their houses, not allowing them to see the light of the day and denying them all human rights. If the Nizam-e-Adl Regulation (NAR) had not been signed, and if Sufi Mohammad and his followers had not expressed their views openly, all these facts would have remained hidden from us. In fact, we would have continued to believe that given a chance the Taliban-brand of Islam may prove to be the answer to all our social problems.

Many religious political parties have been fooling the innocent people of Pakistan in the name of Islam and Islamic system of government since the independence. They have always claimed that they believe in democracy and want to come to power through democratic means. Though it was not clear what kind of Islamic system they wanted to impose once they came to power in Pakistan. The temporary success of Taliban in Swat and Malakand exited the leaders of our religious political parties and they inadvertently let their guards fall and exposed their real intentions to the nation.

A statement by the newly elected amir of the Jamaat-e-Islami, Syed Munawar Hassan, explains the vision of religio-political parties about the Islamic system in the country. He said the Jamaat-e-Islami and Sufi Mohammad shared the same vision of Islam and only differed in the methodology adopted. His statement indicates that the Jamaat-e-Islami had no objection to the kind of tyrannical Sharia that was imposed on the people of Swat; the only objection was to the means that were adopted for this purpose.

In fact, the Taliban and Tehreek Nifaz Shariat-e-Mohammadi (TNSM) have enjoyed the tacit support of most religio-political parties until now, thus it is not surprising that we seldom find Maulana Fazlur Rehman or Qazi Hussain Ahmed condemning the suicide attacks that kill innocent people. Even if they deign it proper to condemn the suicide attacks, they qualify them with many ifs and buts, as if offering a justification. The opposition of the Jamaat-e-Islami to the ongoing military operation in the Malakand division comes as no surprise, because it was among the beneficiaries of the Afghan war and had a major role to play in the rise of Talbanisation in the region.

Similarly, until now most Pakistanis believed that the war against the former USSR was indigenous jihad, fought by Afghans on their own. The Taliban phenomenon has helped us in realising that the war against the former USSR was as much jihad as the insurgency in the NWFP and tribal areas. The Afghan war was fully supported and funded by the US for its strategic purposes and it was fought by warlords trained by the Pakistan Army. Now a similar jihad is being carried out against the state and armed forces of Pakistan. The Frankenstein that we had created to ward off the Russian threat has now turned against its own creator.

The shattering of these myths will enable the people of Pakistan to see things in their right perspective and will ultimately lead to the retreat of these forces that had held the Pakistani society hostage for the last three decades. As a result, Pakistanis are now clearer about the type and system of government that they want. They have also seen through the designs of the extremists. In the long run, we shall be able to see the re-establishment of a liberal and pluralistic society that Pakistan had back in the 1960s and 1970s, until it was destroyed by the hypocritical policies of Gen Zia-ul-Haq.

Last month, many localities in Karachi faced cyclic events of violence. Sniper shootings, acts of setting ablaze public / commercial property, attacks on transport and attempts to control neighbourhoods by rival groups were some of the common sights. As a result, the daily life was entirely paralysed and dozens of innocent people lost their lives, while properties and abodes worth millions of rupees were destroyed.

A careful review of the situation and underlying trends reveals that these acts of violence and sabotage are not disconnected from the surrounding political and strategic ailments that have been infesting the country for at least two decades. Waves of social dislocations, uneven distribution of employment opportunities, gradual saturation of labour-intensive employment options, rise of powerful interest groups and decay in educational attainment caused a peculiar socio-cultural milieu. Therefore, the ethnic, religious and social landscape in Karachi has become complex and merits an objective response.

Karachi has been a multi-cultural and multi-ethnic city ever since its inception. This characteristic was further consolidated in the post-partition period. The rapid sociological and cultural change, which ruthlessly pushed aside several ethnic and cultural groups, allowed neo-urbanites to germinate with fresh influence on the destiny of this metropolis. Because the city was the plum context of economic opportunities, the intensity of claims became more myopic with time. However, Karachi has become a site to offer asylum to various tirades of social and political upheavals. This extraordinary capacity has gradually evolved and bolstered over time.

Gujrati traders during the nineteenth century, escaping folks from the falling state of Junagadh, migrants from Rajasthan and other locations in India, Bihari settlers from the former East Pakistan, Burmese and Filipino Muslims, Afghan refugees, and Iranian citizens who escaped different forms of persecution are some of the well-known categories of immigrants residing in Karachi. Most of them stepped into the city never to go back. In other words, each one had a claim on the resources and opportunities of the city. Because the national and local political process was flawed and ruptured, the necessary political space to rationalise the contesting claims and demands could not be generated.

It must be noted that the conflict and disagreement on such issues is not unusual in large cities, most of which display multi-social composition. What matters is the existence of a governance mechanism that is capable of recognising these sociological variables, and that enacts decision-making and implementation processes accordingly. Sadly these factors were repeatedly ignored, because of which the city has experienced a sequel of ethnic and linguistic turf wars. The language riots of the 1970s, the Mohajir-Pakhtun conflict of 1986, the Sindhi versus Mohajir debacle of the 1990s and the recent conflict are all manifestations of the same phenomenon.

An undesirable outcome, which has been manifested in the settlement pattern of Karachi, is the development of ghettoes all across the urban landscape. These mono-ethnic settlements of different scales are preponderated by interest groups that use muscle / gun power as a means of manipulation. Regularised and un-regularised squatter settlements along eastern, northern and western fringes of the city; and low-lying, low-income settlements and shanty towns on main highways / roads / waterways are the most vulnerable on this count.

The new settlements with ample housing stock have also been affected by the process of ghetto development. Gulistan-e-Jauhar, North Karachi and Gulzar-e-Hijri are the cases in point. Competing rival groups attempt to occupy vacant properties by using all available means to secure strategic strongholds in these locations. As an alternative course of action, the ethnic groups and communities that are in minority tend to keep away from quasi-belligerent majority groups in respect of settlement pattern. However, many fault-lines remain visible within populous domains. Deadly friction and tension erupts at the slightest of fears and faintest of rumours. Law enforcement approaches have been found to be ineffective; they can only deal with mitigation after the actual damage has been done.

Whereas the political solution and consensus arrangements on these counts are essential to address this issue, many technical and professional assignments also need to be conducted. The first step is to devise an urban policy towards accommodating and managing migrants. This issue is of utmost important in the wake of rising number of displaced people in Swat, Buner, Fata and Balochistan. The process of physical survey, mapping and socioeconomic database preparation must be initiated on war footings. The corrective actions to contain ghetto development can only be successful if accurate and up-to-data information about them is available.

Among the various enterprises, land grabbing has become the most effective means of survival and profiteering. Movement corridors are the key locations where this activity is usually undertaken. The otherwise barren lands are targeted by musclemen irrespective of their legal status and ownership. In collusion with state functionaries or local political groups, settlement is consolidated while the writ of the state is set aside. When more than one group attempts to grab land, conflicts and feuds result out. Karachi Northern Bypass, National Highway, Super Highway, RCD Highway and Lyari Expressway are the vital locations where this dubious phenomenon is picking up.

Finally, positive-minded social organisations and community groups must be identified. It has been observed from experience that effective law and order maintenance could only be done when the local population is mobilised. The state institutions can extend strategic support to this municipal process by combing known crime dens, organising patrolling of entry points to the city and enforcing a weapon-control regime. If free flow of arms continues unabated, ghettoes shall continue to evolve.

May is one of the dullest months for investment and stock trading activities in Pakistan. This year too, trading at the country's bourses is at lower ebb, and both investors and brokers are anxiously awaiting the announcement of the next budget. Though traditionally several mini-budgets follow the annual budget in Pakistan, the taxation measures proposed in the annual budget and the changes introduced through the Finance Bill affect the businesses the most.

Pakistan's tax-GDP ratio is as low as 9.5 percent, though the government has announced plans to increase it to 15 to 16 percent in the forthcoming budget. Therefore, it is a foregone conclusion that that an attempt would be made to broaden the tax net, besides imposition of new taxes, in the next budget.

"Every year trading before the budget is lackluster and this year too the situation is the same," says Khurram Shahzad, head of research at Invest Capital Securities. He informs that brokers expect increase in capital value tax (CVT) and other corporate taxes, and that is the major reason that volumes in the market are very low these days. The ongoing army operation in Swat and poor law and order situation have also hampered the trading activities at the shares market, he adds.

The main talk in the corridors of the market is about the imposition of capital gain tax (CGT) on the real estate and services sectors, mainly to widen the tax net. On the other hand, the government last year gave exemption to stock markets from CGT until 2010. After stock markets, the real estate sector is considered as the second most attractive investment avenue, where one can double or triple the capital value within the shortest possible time.

However, there are chances of loss in every capital investment and the real estate sector is no exception. Therefore, both real estate brokers and investors are unhappy with the government's plans of imposing CGT on this sector, mainly because they fear further decline in the property trade as a result. Pakistan has witnessed a boom in the property trade during the last few years, but the ongoing global recession has started negatively affecting its real estate sector too.

"Instead of increasing government revenue, CGT on the real estate sector would open the gates of corruption," says Abdul Wahab Parekh, a real estate broker in Clifton, Karachi. He dispels the impression that the real estate sector is not paying taxes, because "on each transaction of property, at least 6 percent of the value of the property goes to government revenue. The government collects CVT and stamp duty at the rate of 2 percent, and committee / union fee and registration fee at the rate of 1 percent of the value of the property on each transfer."

Moreover, Parekh says like the rest of the world, the real estate sector in Pakistan is also facing recession these days. "Investors are reluctant to invest in the real estate sector because of economic recession at home, as well as the poor law and order situation in the NWFP and tribal agencies. The value of property has declined and many investors have incurred huge losses," he adds. CGT is usually charged on the profit realised on the sale of non-inventory assets that were purchased at a lower price.

The most common capital gains are realised from the sale of stocks, bonds, precious metals and property. Research analysts believe that the government's initial CGT target in the forthcoming budget would be a modest one; however, it will be increased to other sectors, including the shares market, in the Budget 2010-11. The government is targeting about Rs20-25 billion revenue from CGT on the real estate sector in the next budget. Shahzad agrees that there is a big potential to collect revenue by taxing the real estate sector.

Going into history, brokers and members of stock exchanges have been resisting the imposition of CGT on stock trading for many years. In 2003, the government had announced CGT exemption to the shares market for five years until 2008. Last year, due to buoyancy in the sector, the government had planned to impose CGT on the shares market before the budget.

The Securities Exchange Commission of Pakistan (SECP) had prepared a mechanism in which it had proposed 10 percent tax on stockholding of 0-3 months, 5 percent tax on stockholding of 3-6 months and 0 percent tax on stockholding longer than 6 months to encourage long-term investment. But the stock market crisis started at that time, thus the government had to defer the decision to announce the imposition of CGT on the shares market. Instead, it promised to exempt the market from CGT for the next two years. However, despite this promise, brokers and investors fear increase in corporate taxes, including CVT, in the forthcoming budget.

"The pre-budget recession in the market indicates that investors have held their investments and they are not ready to enter the market before the budget," says Abid Ali Habib, a leading broker and member of the Karachi Stock Exchange (KSE). He maintains that the KSE management opposes the imposition of CGT, because this type of tax is not suitable for small markets like Pakistan where stock volumes are too low. "CGT would keep stock markets depressed all the time with very low turnover. The shareholders are already paying 35 percent corporate taxes and more taxes would affect the overall investment environment," he fears.

Habib says CGT can only be imposed on markets with large capitalisation. He explains that the Pakistani market is mostly driven by a few brokers, who would try to keep the market at the lower side to avoid taxes like CGT. "When people will incur losses, they would claim their capital losses in their returns; thus, instead of generating revenue, the government would lose it."

The Pakistani market is very small and it should be allowed to grow further, Habib maintains. CGT should be imposed after at least 5-10 percent of the country's population becomes shareholders of stocks. He says there is already 0.02 percent CVT on buying and selling of shares, as well as withholding tax on dividends. The government may increase CVT to 0.03-0.05 percent in the next budget, Habib thinks.

If CGT is imposed on buying and selling of shares at this stage, the investors would run away from the market and they would divert their money to national savings or other safer investments, he believes. Despite all the apprehensions of businesspeople, the government seems determined to generate additional revenues in the next budget, mainly to increase the country's tax-GDP ratio. However, surprisingly, there seems to be no planning on the government's part to bring the less-taxed sectors, like the agriculture sector, into the tax net.