Monday, December 31, 2007

Happy New Year

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Political Dynasties & Assassinations

Benazir Bhutto's assassination is very tragic and worthy of the strongest condemnation as she was murdered while engaged in a democratic process in Pakistan. In spite of increasing levels and sophistication of security arrangements, political assassinations have remained a sad fact of life for as far back as the recorded political history. Julius Caesar, Abraham Lincoln, Liaquat Ali Khan, Mohandas Gandhi, and Martin Luther King stand out on the list of the victims. Of particular note are the assassinations of leaders in political dynasties. Among those who have suffered the most in recent history, the two families that come to mind are the Nehru dynasty in India and the Kennedys in the United States.
Political dynasties are based on a strong emotional link with the people. These strong emotions are both positive and negative. While many love them dearly, a few hate them with equal passion and are willing to use violence to act out their hateful feelings. Benazir's father Zulfikar Ali Bhutto's assassination was carried out in late 1970s using the court system in Pakistan and recoded as a lawful. Then her two brothers were killed in mysterious circumstances. The enemies of Benazir succeeded in their second attempt on her life on Dec 27, 2007. The other notable fact that characterizes such assassinations is the abundance of conspiracy theories. There are still many conspiracy theories about the JFK assassination four decades later. And, it's just starting to emerge that the Benazir Bhutto assassination is no exception. These theories are further heightened by the incompetent handling of the investigation by the government and the media fascination with conspiracy theories. The accusations and counter accusations have already started to fly among political rivals while an investigation is going on. In such an environment, this murder will probably remain a mystery in the minds of many of her supporters regardless of any inquiries, domestic or international. The Bhutto family refusal to allow any autopsy will ensure the mystery continues, if nothing else does.

Sunday, December 30, 2007

19-year-old Bilawal succeeds Benazir Bhutto

Benazir Bhutto was not only chairperson of PPP for life but designated her husband as successor for leadership in her will. Her husband decided to name his son Bilawal to succeed while maintaining effective control of the party himself as co-chairman. It all stays in the family, like the rest of their wealth and other vast possessions. This only confirms the undemocratic nature of Pakistan's elite that includes Benazir Bhutto and Nawaz Sharif, also chairperson for life of of his party PML(N).
As long as Pakistanis accept this behavior of their "leaders", they will continue to be ruled by a small elite that disenfranchises them. The only way out of this monarchical system is to let the current economic growth continue in Pakistan that strengthens the size and the power of the middle class to develop sufficient clout to bring about real broad-based democracy based on rule-of-law.
For those interested in a broader perspective of this development, please read my blog entry titled "Who Owns Pakistan".

Friday, December 28, 2007

Pakistan After the Tragic Assassination of Benazir Bhutto

The airwaves and the Internet are filled with commentary, praise, criticism, hyperbole and punditry after the tragic assassination of Benazir Bhutto. This video from News Hour with Jim Lehrer (Done By Judy Woodruff) struck me as an objective, no-nonsense commentary from both Pakistani and US perspectives.

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Thursday, December 27, 2007

Benazir Bhutto 1953-2007

Benazir Bhutto died in an apparent suicide bombing in Rawalpindi today. Inna Lillaha Wa Inna Ilaihe Rajeoon. May her soul rest in peace.

The increasing violence in Pakistan, witnessed recently, will further intensify after Benazir's assassination. Regardless of one's political views, this assassination must be condemned in the strongest possible terms and fully investigated and perpetrators brought to justice. Let us hope that the country does not descend into full-scale civil war. May Allah guide us all in this difficult period and protect Pakistan. Amen.

The Bhutto family, sitting left to right in back row: Nusrat, Shahnawaz, Zulifiqar Ali, Sanam. In front, Murtaza and Benazir.

Monday, December 24, 2007

Who Owns Pakistan?

A friend of mine recently sent me a book titled "Who Owns Pakistan?" by Mr. Shahid-ur-Rahman. My first impressions and commentary after scanning this book are as follows:

First Impressions:
This seems to be a well-researched work by the author on a subject that has received very little independent scholarly attention. While it singles out Z.A. Bhutto's nationalization in the 1970s as the biggest culprit, it also includes a good description of how industrialization was stymied in Pakistan by successive governments while feudal rulers continued to take their toll on any middle class growth essential for civil society and democracy. The author argues that the Bhutto era nationalization has left such "deep scars on the psyche" of Pakistani industrialists that, to this day, these industrialists are not willing to make long-term investments in big industrial projects with long gestation periods. The military governments have, in fact, been more pro-industrialization because the military elite benefits from the manufacturing sector as much much as it does from real estate and agriculture sectors.

Top 11 Groups of Companies Account For 35% of Karachi Stock Exchange Market Cap

Comparisons with India:
Whenever we discuss Pakistan, comparisons with India are inevitable because we have such a long shared history and both countries became independent at the same time. Looking at the Indian experience, the Indian Congress governments were not particularly friendly to industries as depicted well in the Bollywood movie "Guru" based on the life of Dhirubhai Ambani. The semi-literate Ambani built a multi-billion dollar empire called Reliance Industries in India. However, Congress and Nehru were really hostile to the feudal system and brought it down almost immediately after independence in 1947 through
real and extensive land reform that reduced individual and family land
holdings to a few acres each. In spite of his deeply held socialist beliefs, Nehru was a pragmatic leader and believed in industrialization. He recognized that India needed a strong higher education system to support industrialization. The renowned IIT system was, therefore, started in 1951 by Prime Minister Jawaharlal Nehru and Education Minister Maulana Abul Kalam Azad with the first IIT in Kharagpur inaugurated by Maulana Azad on Aug 18, 1951. Maulana Azad was also the person who brought Birla and Nehru together after Liaquat Ali Khan as Finance Minister in 1938 started investigating Birla for his cash contributions to the Congress party. Recognizing the contributions of Birla and Tata to Congress in the struggle for India's independence, Nehru gave special treatment to both of the industrialists and asked them to help in India's industrialization.

Actions by Nehru and Congress in India were in sharp contrast to the policies pursued in Pakistan. There was no strategic thinking or vision to start anything like the IIT system in India or to reach out to the industrialists who chose to come to Pakistan. Instead, these policies allowed thousands of acres of land in the hands of a few Pakistani feudal families such as the Jatois and the military elite while Pakistan's leader ZA Bhutto presided over the destruction of the nascent industrial sector that had just started to take off under President Ayub in the 1960s. Like Tata & Birla, some of the Pakistani industrialists such as the Habibs and the Haroons helped in Pakistan's independence movement and, immediately after independence, Habib Bank had bailed out Pakistan Government with a huge loan in its early days to cover its budget deficit. However, Bhutto showed no recognition of their help during his nationalization campaign in the 1970s. All of Bhutto's favors were reserved for his feudal colleagues who assumed leadership positions in his administration. These are the conditions under which Pakistan could not move from feudal to industrial society and the middle class could not grow to sufficient strength to demand real democracy based on rule of law.

Privatization in Pakistan:
Nationalization had finally been recognized as a failure in Pakistan when Benazir Bhutto became prime minister in the early 1990s. During the two terms each of Benazir and Sharif, each embarked on rolling back ZA Bhutto-era nationalization by privatizing hundreds of industrial units. However, the privatization efforts by both have now been documented by author Shahid-ur-Rahman to be marred by massive corruption involving a giveaway of multi-million rupee units for the token prices of a few rupees. The sales of these units did not make even a small dent in the national debt.

Pakistan Under Gen Musharraf:
Since "Who Owns Pakistan" was published in 1999, the last eight years under Gen Musharraf have seen the return to annual economic growth of 6-8% with significant new domestic and foreign investment in industries, particularly telecommunications, financial services and infrastructure development. Pakistan's GDP has more than doubled. The number of telephones has soared to 50 million from a mere 600,000 six years ago. The privatization of banks has led to a huge increase in the production and sales of cars, motorcycles and, perhaps most important, TV sets. From a strictly economic standpoint, military rule in Pakistan appears to have been a lesser evil. But, regardless of what one might think about the merits of military rule, Pakistan has seen significant growth under General Musharraf and his hand-picked Prime Minister Mr. Shaukat Aziz. By all accounts, the ranks of the middle class have been swelling in Pakistan during Gen Musharraf's rule. According to Tara Vishwanath, the World Bank's lead economist for South Asia, about 5% of Pakistanis have moved from the poor to the middle class in three years from 2001-2004, the most recent figures available. As expected, the prospering middle class has demanded more than just economic benefits. The middle class is now demanding democratic reform that bodes well for Pakistan in the long run. However, this class is still small relative to the population in Pakistan. It just needs to be cognizant that impatience on its part can roll back the gains made in the last eight years.
The Higher Education Commission under Dr. Ata-ur-Rahman Khan has seen a tremendous increase in HEC budgets with the opening of dozens of new universities and large number of scholarships to study abroad. My hope is that, if the economic, education and industrial growth continues at the current pace for another decade, we can expect a much larger, more powerful middle class to emerge that will successfully challenge the feudal and military rule in the not-too-distant future in Pakistan. We might even see real land reform at some point to free the unwashed masses in rural and tribal Pakistan. Feudal system might even fizzle out by itself as the vast landholdings get distributed among the feudal offsprings over the next couple of generations.

The Indian Exception:
Among the less-developed nations in Asia and Africa such as India and Pakistan, India remains a unique example of a country that has only partially industrialized but it remains largely democratic in spite of the majority of its people not being served well by its successive governments. There seems to be only one plausible explanation for the Indian exception as a democracy: India's sheer size and diversity make it very difficult for any military to govern it but I think the early and effective land reform in India has been one of the key factors in its ability to free the average people who chose to sustain democratic institutions over other alternatives. With the recent emergence of a powerful middle class in India, India's democracy has been further strengthened.

Pakistan remains decades behind India in establishing democratic institutions by failing to limit the power of the feudal lords,the military generals and the clerics.
The recent economic growth has helped propel the middle class as evidenced by the growth of the media and the powerful resistance to military rule by the civil society including the lawyers, the media and various NGOs. However, the Pakistani middle class is still relatively small to bring about a fundamental change. It needs to grow at the current pace for at least another decade. The challenge for India is to enable sharing of its new-found wealth and opportunities with the rural folks who have not yet participated in India’s progress.

Saturday, December 22, 2007

Eid-ul-Azha Dec 2007 in Silicon Valley, CA

Eid-ul-Azha was celebrated Wednesday by the Muslim Community Association in Santa Clara and Friday by South Bay Islamic Association in San Jose. Here are some pictures of the Eid celebration at the Santa Clara County Fairground organized by SBIA in San Jose, CA. Do feel free to participate in the poll:

Friday, December 21, 2007

The Ailing US Economy: Can Asians & Arabs Rescue It?

As the widening sub-prime crisis and the resulting credit crunch in the US become serious, there are many Asian and Arab sovereign funds coming forward to help major US and European financial institutions. Citigroup, UBS and Morgan Stanley clearly stand out as the recipients of their largess. Here's a brief run-down of these three deals:

Abu-Dhabi-Citigroup Deal
Abu Dhabi Investment Authority agreed to purchase 4.9% stake in Citigroup for $7.5b in convertible debt. It's a rather complicated deal but the interest rate on this investment by Abu Dhabi works out to about 11%, an unusually high interest rate that speaks to both the risk and the reward of this arrangement. Part of the concern by the Oil-rich country is based on the fact that Abu Dhabi's reserve are held in dollar-denominated assets and the US dollar is continuing to lose ground against other major currencies including the Euro. The other concern is the impact of a US economic slowdown leading to worldwide slowdown that causes reduced demand for oil and lower prices.

Singapore-UBS Deal
The Government of Singapore Investment Corporation(GIC) announced it is purchasing 9% stake in Swiss Bank UBS for about $10b. The identity of a second investor, believed to be Saudi, was not disclosed. The rapid Asian growth has helped balloon the size of the Singapore reserves and they are looking for opportunities to invest. The other factor is that the Singaporean wealth is mainly tied to international finance and trade which they would like to support.

China-Morgan Stanley Deal
Chinese government is buying a 9.9% stake for $5b in Morgan Stanley, one of the largest investment banks on Wall Street. China has been accumulating US dollars at an unprecedented rate with its rapidly expanding manufacturing exports to the United States and the rest of the world.

These three deals are likely to spur other, similar deals. As the rapid Asian economic growth and the commodities boom create tremendous wealth in Asia and the Middle East, these regions have a stake in maintaining this phenomenon by making larger investments in their own economies and supporting the consumers in the West.
The Asians and the Middle Easterners are likely to continue this investment/purchase strategy in the foreseeable future in spite of concerns about the growing deficits in the US and the falling value of the US currency. The only uncertainty here is how the US Congress reacts to it.

Saturday, December 15, 2007

The Unitended Consequence of Charlie Wilson's War

The soon-to-be-released Hollywood movie "Charlie Wilson's War" tells the story of behind-the-scene activities that led to the massive CIA backing of the Afghan resistance against the Soviets in the 1980s. Based on a book of the same title by late George Crile, it focuses on the efforts of a "scandal-prone, womanizing" US Congressman Charlie Wilson and "out-of-favor, blue-collar" CIA operative Gust Avrokotos who both found a willing partner in Gen Zia-ul-Haq of Pakistan. Wilson, a congressman from East Texas with almost no Jewish constituents, was a strong supporter of Israel as he saw Israelis as the underdogs surrounded by Arab enemies armed by the Soviets. His support for the Mujahedeen in Afghanistan was motivated by his hatred of communism and the Soviet Union that he saw as the evil empire. That may also be why he ignored any concerns about the unintended consequences of his actions in supporting a strongly religious band of Islamic fighters who disliked western values and culture as much as they hated communism.
George Crile connects the dots from the CIA's supply of weapons and training to the Muslim fighters in Afghanistan to the the fall of the Soviet Union and then the terrorist attacks of Sept 11, 2001, concluding that the terrorism we face today is the unintended consequence of our actions in Afghanistan back in the 80s. Crile starts with this conclusion at the very outset and then spends the rest of the book backing his conclusion with facts and figures he gathered in his research. Having been a producer of CBS 60 Minutes, Crile was well equipped to write such a book. Let's wait and see if this movie does justice to a great story. With the star-studded cast including Tom Hanks, Julia Roberts and Philip Seymour Hoffman, it should be a big draw at the box office.

The big question that will continue to loom for Americans and the world is whether we have learned any lessons to avoid even greater and more disastrous but unintended consequences of our current actions in the ongoing "war on terror".

Here's a trailer of this movie:

Sunday, December 9, 2007

Grandchildren of Z.A. Bhutto & Zia-ul-Haq Speak Out

Omar-ul-Haq, grandson of Zia-ul-Haq and Fatima Bhutto, granddaughter of Zulfikar Ali Bhutto have both written for the op-ed pages of The News, a widely read newspaper in Pakistan. Both of these young people appear to be quite interested, intelligent and articulate, and quite pessimistic about the future of democracy in Pakistan. I can understand their lack of idealism, given the fact that 50% of Pakistan's children are not in schools, but it is a sad state of affairs when the next generation seems ready to throw in the towel. Let's hope the two are not representative of the mainstream of our next generation. Following are the excerpts from their pieces:

Writing for Sunday, Dec 9 issue of the News in Pakistan, Gen Zia's grandson Omar-ul-Haq says:
"I confess that I am torn between the merits of military and democratic
regimes. While I've never been one to stand on the streets and protest
for leaders who are apparently going to save our country, I'm
definitely not in favour of seeing President Musharaff rule our nation
for much longer either. I have also given a lot of thought to
democracy in Pakistan and while it is the ideal solution, I'm still
not sure if I can see an effective democratic government in Pakistan;
a relatively new and developing nation. While I am not necessarily in
favour of a military regime, the question I pose is whether Pakistan
is ready for yet another democratic government or are we Pakistanis
just simply imagining and hoping for the next democratically elected
political figure to come and perform miracles for our nation? As
tragic as it is, most Pakistanis, including the educated elite, are
unaware of the definition of "democracy". Although we understand the
basics -- that officials must be elected by citizens and must gain the
support of the majority of the population -- do we exactly understand
how these officials get the majority of votes? Do the masses even
consider what the past leaders have given them (or should I say have
not given them) before running out on the streets and risking their
lives for them?"

Murtaza Bhutto's daughter Fatima Bhutto writes in the same issue for the News as follows:
"The Sharifs struck a separate deal with El Presidente, so there goes
the PML (the Daughter of the West might also want to explain to her
chums the Sharif brothers why their election papers were rejected on
the grounds that they had been convicted in courts of law, while hers
were accepted-- even though she was convicted by Swiss courts in the
Cotecna corruption case.) The MMA is pretty cosy with the government.
The JUI has survived this whole spell of 'emergency' rule quite well,
they may not have a working deal with the army, but they certainly
have an understanding. So who is opposition exactly? The MQM is allied
with El Presidente. Imran Khan was, and then he wasn't. Then he hated
Nawaz, now he doesn't. Then he called Benazir a crook, now he's told
the Lahore Bar Association that he's super willing to help her drop
her myriad corruption cases if only she'll be a sport and join his
boycott. So, yes, the opposition-- or rather those commonly accepted
as the opposition-- are a morally bankrupt lot of puppeticians. They
go which ever way leads them to power; they're not opposite to
anything-- except ethics and principles. They're not even anti El
Presidente. They're enablers, the lot of them."

Thursday, December 6, 2007

The "High Confidence" National Intelligence Estimate on Iran

High Confidence
The latest US national intelligence estimate says that Iran discontinued its nuclear weapons program in 2003 and that it is currently not pursuing such a program. This report validates what the International Atomic Energy Agency and the Iranian Government have both been saying for sometime as the Bush administration has been ratcheting up its hostile rhetoric against Iran, and talking up the "dangers Iran poses to the world". What caught my attention in this report was how the NIE characterized its conclusions regarding Iran as "high confidence". After a report like this, one would expect the neo-cons would re-think the folly of their ways and accept this conclusion. Instead, President Bush, Sen Lieberman, the neo-cons and their supporters such as the Wall Street Journal have started spinning the report in various ways. The spin ranges from claiming " the need for continued US and international pressure on Iran" to outright rejection of the NIE as inaccurate or naive. Among others, Michael Ledeen asserts, since "you can't prove a negative", the NIE must be wrong. Frank Gaffney goes on to say that, since no one "outside a small circle in Iran has certain knowledge about the state of nuclear weapons program", therefore "we had better be prepared to use military force". In other words, the facts do not matter when it comes to their personal animosity toward Iran as a member of the "Axis of Evil".

International Isolation
The initial response from the Bush administration indicates that they will continue their efforts to build international support for sanctions and even military action against Iran. Russia and China have already expressed their opposition and the EU members are clearly rethinking their future course of action. I think any arm-twisting by the US at this point would be counterproductive and could lead to international isolation of the US rather than Iran. No country, even the US, can afford to be isolated in this day and age.

Iranian Reaction
In terms of what will happen next,a lot would depend on how the Iranians choose to behave after the NIE report. Iranian President Mahmoud Ahmadinejad has a way of engaging in inflammatory rhetoric, making even his friends and neighbors feel uncomfortable and insecure. Iranian President's statements about "wiping Israel off the face of the earth" not only contravene the UN charter but also invite hostility of the world. He would be well-advised to try and build confidence in his neighborhood with conciliatory gestures toward all of his neighbors and the broader Middle East. Such a policy would serve the Iranian people well and save the US and the world from another disastrous misadventure by the United States.

The Future
There seems to be almost universal agreement in the US and the rest of the world that the Bush foriegn policy has been short-sighted and counterproductive. The excessive use of the military power has been disastrous for the US and its relations with most of the rest of the world. As the US goes into the 2008 general elections, there are hopes that the end of the Bush era would bring greater emphasis on the use of diplomacy and soft power by the US. However, one can not take this for granted. The foreign policy statements by the front-runners of both parties do not seem to be particularly reassuring. Let's hope better sense will prevail once the elections are over and the reality of governing sets in for the new leader of the free world.