The global financial crisis which had been brewing for some time began to unfold in the middle of 2008. Stock markets around the world have nosedived, large financial institutions have collapsed or been bought out, and governments of even the wealthiest nations have had to come up with rescue packages to rescue their financial systems. The crisis stemmed from the collapse of the US sub-prime mortgage market and the reversal of the housing boom in other industrialised economies. There are concerns that the global financial meltdown will affect the livelihoods of almost everyone in this globalized world.

An indication of the scale and intensity of this crisis was the summit meeting of the Group of 20 held at Washington DC on November 15, 2008. These 20 countries together account for 90 per cent of the global economy. The summit outlined a series of steps to end the global financial crisis. Another summit has been planned for April 2009 to finalise the policies. Policies proposed at the summit include tighter financial regulation, greater transparency of markets, and an end to excessive salaries for top executives, though it will be up to individual governments to implement their own schemes.

That the United States called a meeting of this larger group comprising several key developing countries instead of limiting consultations with the G 7 was also a manifestation of the growing relevance of developing countries in preventing a complete melt down and in turning the international economy around. Though President Nicolas Sarkozy proposed the idea of a G 20 meeting, and President Bush agreed to play host, the most sought-after country at the summit was China. With close to $2 trillion in foreign exchange reserves and an economy that is still growing, though at a slower pace than before the crisis, China is one of the few countries with the financial wherewithal to come to the aid of others in distress, either directly or by contributing to the coffers of the International Monetary Fund and thus enabling the latter to provide more emergency loans.

Given its relatively closed financial system, China’s exposure to the global financial storm has been limited. However, its reliance on exports to Western markets has meant that it has not been completely immune to the financial crisis either. The Chinese government has been watching with anxiety as its exports growth has slowed to the lowest rate in the last five years. There has also been a rise in the number of protests fuelled by the increase in the number of factory closures. It is not yet clear whether in the face of the decline in demand from the American and European markets China would be able to sustain its high growth rate and thus cushion the adverse effects of the financial crisis.

To overcome the adverse fallout from the global crisis, the Chinese government announced a US $586 billion national stimulus package in early November 2008. The primary aim of the package is to encourage growth in domestic consumption. Its focus is on encouraging growth and domestic consumption by encouraging investments in infrastructure, environmental protection and disaster rebuilding. The package targets the cement, iron and steel industries. It also aims to increase the flow the credit for major products. But the hope that such infusions of money into the economy will help increase domestic consumption can prove to be a little far-fetched. It has been seen that Chinese society is not consumption oriented but rather has a tendency to save. And this propensity towards savings might actually intensify in the face of the global financial crisis.

A worrying possibility is that a significant reduction in economic growth rate would push more Chinese people below the poverty line. Slower growth would also mean lesser availability of resources to invest in the social security needs of the poor and the needy, especially given the larger imperative of cushioning the effects of the crisis on investments and on the banking system to prevent a complete melt down.

Comparisons have been drawn between the present crisis and the 1997 Asian financial crisis to argue that just like China managed to maintain its high rate of growth in the wake of the earlier crisis it will be able to do so this time as well. But this contention ignores the fact of China’s dependence for its exports on Europe and America, which are now in recession. The Chinese currency, while rising modestly against the dollar, has strengthened sharply against the currencies of its Asian competitors and against most European currencies. This has made its exports far less competitive in these markets. The stimulus package could provide a breather but it is not clear whether China will be able to weather the storm.

Slower economic growth is also likely to have an effect on internal political stability, given that the communist party’s legitimacy is today underpinned by rapid economic growth. A slow down and the resultant adverse impact on a wide cross-section of Chinese society could lead to mass protests and the questioning of the party’s legitimacy and right to rule. The internal situation could become quite unmanageable for the communist party if the disenchantment in Tibet and Xinjiang flares up again.

Thus, contrary to expectations, China may not be able to play a crucial role in helping the world economy get back on its feet.

Evidence gathered in the aftermath of by far the most deadly terrorist attack in Mumbai indicates conclusively that the attack was planned by the Pakistan based Lashkar-e-Toiba. The attack on Mumbai was executed by a well trained and indoctrinated suicide squad comprising of ten Pakistani terrorists. This testifies to the long gestation planning and preparation that can only have been made possible by the resources of a well established terrorist organization. The recruitment was from Punjab, training was in Pakistan-occupied Kashmir, and maritime training was conducted in Karachi. A physical reconnaissance of the target area was then conducted, and after an aborted attempt to carry out the attack during Diwali, the terrorists were launched by the Lashkar operative, Zaki ur Rahman, from Karachi on November 23, 2008.

To have an organization with such capability within a country means that there has been an abdication of internal policing by the state and a loss of monopoly over force – a primary characteristic of statehood. This is an index of Pakistan’s slide to failing state status. And given the growing extent of ungoverned spaces in FATA and NWFP, Pakistan is poised on the brink of state failure. Given the Pakistan Army’s inability to tackle the neo-Taliban in these areas and the government’s approach to the IMF for a bail out make it apparent that Pakistan does not have the capacity to cope with the internal challenges confronting it. It may therefore not be prudent for India to rely on Pakistan for rolling back the Islamist threat emanating from within its borders.

India’s demarche has required Pakistan to act and be seen as acting against terrorist groups within its territory. India is in a strong position to press the issue since it has been at the receiving end of a proxy war for about two decades in Jammu & Kashmir. Terrorism sponsored by the ISI has been witnessed since the Mumbai bombings of March 1993. Lately these have increased in number and spatial spread to various parts of the country as well as the Indian embassy in Kabul. There is a case for all these attacks being taken cumulatively as amounting to an ‘armed attack’. India is thus in a position to legitimately undertake appropriate actions in self-defence to include military measures. In case Pakistan’s response against terrorists based in its territory is not adequately firm, India could then up the ante by unilateral military action. For additional legitimacy it could approach the UN Security Council to apprise it of the threat to international peace and security originating in Pakistan and which Pakistan is was unwilling or unable to do anything about.

India’s demarche demanding the handing over of those involved in anti-India terrorism has not been received well in Pakistan. While the civilian government appears willing, it does not have control over the country’s India and security policies and is therefore unable to deliver on its promises. In the earlier case of Operation Parakram, despite mobilization of troops India was unable to coerce Pakistan to hand over the twenty terrorists demanded. It is possible that prevarication would greet India this time around as well, with Pakistan blackmailing the United States with the threat that it would divert its attention from ongoing anti-Taliban operations towards its eastern front. India would require instead to put pressure on the US to have Pakistan deliver on its demands. The visit of Condoleezza Rice would be an opportunity to get the US onboard.

The approach should be one of convincing the US and, indeed, Pakistan also, on the long term threat posed by the Islamists to Pakistan. The awareness about this threat within Pakistan is apparently fairly high. That is why Pakistan has been avoiding a confrontation and is likely to continue to do so even in the face of Indian pressure. Its fear is that this may result in a civil war. Should this threat stay Pakistan’s hand, then India may require to determinedly convince Islamabad of Indian support in such a confrontation. Besides, Pakistan would be assured of the support of the international community in such an event. This would strengthen its hands against Islamists and hardliners in the state apparatus such as in the Army and the ISI. The outcome therefore would be along the lines as obtained in Algeria in the 1990s. Most Islamic states have successfully resorted to force of varying levels against Islamists. Since these negative forces have to be eventually confronted in any case, seizing this opportunity to do so would be in Pakistan’s interest.

Thus far Pakistan has been circumspect in its fight against Islamism both in the form of home grown Islamists or the neo-Taliban. This policy has had the rationale that Pakistan should not sacrifice its strategic interests in Afghanistan and Kashmir in what is popularly seen as someone else’s war. This position is a carry over from the Musharraf era. The democratic dispensation and the new Army leadership have since been more assertive in operations against Taliban elements. There has also been appreciable restraint in infiltrating terrorists into Kashmir to disrupt the polls there, even though there have been more violations of the ceasefire this year, testifying to attempts at infiltration being foiled by alert Indian forces on the Line of Control.

However, the Islamist threat within Pakistan, of which anti-India terrorism is an expression, has not been addressed. The logic is perhaps that opening up an internal front to tackle these elements amidst the ongoing turmoil to the North West may not be prudent. Pakistan may not be able to see the necessity of opening up this front for it has not itself been subject to attack. Instead it has managed to direct the Islamist anger outwards and may consider that it has found, in such action, a strategic instrument to cut a growing India down to its own troubled size. This could well be how the ISI, and the Army, may be tempted to interpret the outcome in Mumbai.

The alternative approach is Indian military action. The argument in this respect could be that unless forceful action is taken against anti-Indian Islamists, terrorist attacks on India in future cannot be ruled out. The perception of success in the Mumbai attacks is likely to spur these groups to greater adventurism. Future attacks are thus a probability, particularly if the reaction of India or of the Pakistani authorities proves to be weak. This would make it politically impossible for the Indian government to remain inert against the mounting public anger. Such reasoning could eventuate in a limited retributive military action on Pakistani territory, which could assume the form of attacks against known Islamist strongholds such a Muridke and/or other terrorist facilities in POK. This could well provoke Islamist reaction against the Pakistani state, thus triggering a civil war. Indian military action could be even more implacable in the form of the Limited War strategy called Cold Start. Since both military approaches have escalatory potential, it would be well if Pakistan were to be responsive to India’s concerns and forcibly restrain the Islamists through a long term policy course correction.

Military means are available but useful only in so far as they are not used. Their ready availability is a useful tool to focus the attention of the United States and Pakistan on the necessity of taking visible and tangible action in accordance with Indian demands. Indian restraint in the face of provocation has buttressed its case politically and diplomatically. It could in the interim think through the spectrum of military options available to it, which could be in line with the aims of the international community in the ongoing and overarching global war on terror. This may be in the form of air and missile attacks on select Islamist targets such as camps. These attacks should be launched after informing Pakistan and as a form of overt signalling of Indian resolve, and should seek to avoid collateral damage. This would degrade any escalatory potential and provide Pakistan the incentive to take action against the Islamists in the name of a ‘Pakistan first’ strategy.

From the Mumbai attack it would appear that an aim sought by the Islamists was to profit by setting off a regional crisis. The idea was perhaps that such a crisis would push Pakistan finally over the brink and make the Islamist agenda appear as the only feasible alternative for the hapless people of Pakistan. Such a plot line would require great political sagacity on the part of India to navigate through the crisis. India has in the past repeatedly demonstrated its strategic wisdom, even in the face of internal criticism. This time it has a more difficult situation on hand, with not only Pakistan requiring to be addressed but also the United States and, more importantly, the angered Indian nation. The necessary defensive measures such as a new investigation agency, additional NSG hubs, guarding of the sea front and improved policing have rightly been announced and are already underway. Of the offensive measures, the preferred option for India is to work patiently through a collaborative strategy with even a reluctant Pakistan on board. Even if the Indian response were to involve military force, this should eventuate in bold Pakistani action against its home grown Islamists. The other two options of unilateral action, and worse, of inaction, in the current regional strategic and internal political context amount to being non-options.

The number of violent incidents in Pakistan increased from 309 in September 2008 to 346 in October 2008. Yet, casualty figures decreased from 1342 to 1081.1 This shows that Pakistan’s security forces have succeeded in controlling the level of violence, even though current levels are still unacceptably high. 582 suspected militants, most of them from the North West Frontier Province (NWFP) were also arrested by the security forces during the month, in military operations as well as during searches in various areas. This relative “success” of the security forces has succeeded in frustrating the militants to some extent. However, as a result, the number of suicide attacks during October 2008 went up to nine from five in the previous month. 142 lives were lost and over 317 others were injured in these suicide attacks. The prevalence of violent incidents continues to be the highest in NWFP. At the same time, incidents of violence were lower in the Federally Administered Tribal Areas and Balochistan.

Continuing the trend that emerged in September 2008, NWFP recorded the most number of violent incidents – from 126 in September to 160 in October 2008. And unlike in the rest of Pakistan even the number of lives lost in the province registered a sharp rise to 405 from 292 in September; and some 182 persons were injured. 223 militants were killed in October 2008 as against 161 in September. At the same time, 136 civilians died in October 2008 as against 102 in September; and 46 security personnel as against 29 lost their lives in the violence within the province. Among the injured 100 were civilians, 46 security personnel and 13 militants. Given that accurate inputs about casualties among militants are generally not available, the number of militants injured could well be higher.

Large tracts of Swat valley continued to remain under militant control and the district which is the epicentre of violence in the province saw heavy exchange of fire between security forces and militants. Pakistan Air Force jets and helicopter gunships pounded alleged militant strongholds on a daily basis. In rest of the province militants targeted CD shops, police stations and educational facilities, especially those for girls and women. Low level functionaries of the Awami National Party and security forces personnel bore the brunt of the terrorist ire. In a new development, security personnel from the region and on leave were also targeted.

NWFP also witnessed four suicide attacks during October 2008. In a high-profile act, a suicide bomber attempted to kill Asfandyar Wali Khan, the president of ANP, by blowing himself up just a few feet away when Wali Khan was greeting his supporters on occasion of Eid-ul Fitr at his residence. This was the fifth suicide attack against top political leaders of the NWFP in the last one and a half years; four of these attacks took place in Charsadda district, while the fifth one was in Peshawar. The other three suicide attacks during October targeted security personnel - the targets being a military check post, a police station and the office of a police DIG. Militants also kidnapped a large number of security personnel and other government functionaries.

Security forces arrested 456 alleged militants in NWFP during the month, apart from confiscating a large cache of arms and ammunition. 200 of these militants were arrested after a major operation launched on October 16 and 17, and among them were 40 Uzbek militants arrested in Kohat. The high number of arrests of terrorists in the province shows the resolution of the provincial administration to deal with the menace of terrorism and is in sharp contrast with the performance of other administrative units in Pakistan. As a result of pressure eight militants surrendered in Peshawar on October 22 and swore on the Holy Qura’an to refrain from terrorist activities in future.

As in the past, the highest casualties in violent incidents occurred in FATA, a region that has emerged as the epicentre of global Islamic terrorism. As in September 2008, more than half of the lives lost in Pakistan as a result of violent incidents were in the region. Though the number of violent incidents declined marginally from 103 in September 2008 to 101 in October 2008, the killings reduced quite considerably and declined from 892 to 605. Among these, 455 (539 in September) were alleged militants, 149 (336 in September) were civilians, and only one was a security personnel (17 in September). 227 civilians, 3 security personnel and 60 militants are believed to have been injured during October, though the figure for militants could be higher. Only 29 alleged militants were apprehended by the security forces, clearly indicating that security forces operations were mainly confined to aerial attacks. There were three suicide attacks in different parts of FATA which claimed 96 lives and injured 205 others. Two of these attacks were directed against security forces while one targeted an anti-Taliban tribal jirga.

The security forces confronted the militants mainly in Bajaur Agency, where militant strongholds were continuously pounded by helicopter gun ships and fighter jets, as part of an operation that had begun with an attack on Lowi Sam on August 7. While security forces, supported by armour and artillery, claimed to have captured the town of Lowi Sam on October 24, fighting continued unabated in other parts of the agency. In the eleven weeks of operations in Bajaur Agency to regain control of Lowi Sam, the security forces claimed to have killed 1,500 Taliban whilst losing 73 troops and 95 civilians. They also claimed to have arrested 950 Taliban during the operation that began in August, including 300 foreign terrorists who were mainly from Uzbekistan, Tajikistan and Afghanistan.

In addition security forces raised and armed numerous tribal militias to take on the Taliban not only in Bajaur but also in neighbouring Mohmand and Orakzai Agencies. Most of the deaths in the region were on account of aerial bombings and clashes between Taliban and tribal militias. The ongoing strife between the Taliban and tribal Lashkars supported by the government might get aggravated as both sides have dealt with each other rather brutally. The Taliban have beheaded tribal leaders collaborating with the government and tribal lashkars with over 20,000 ‘volunteers’ have also dealt with Taliban sympathizers similarly. In fact over 250,000 people from Bajaur and the adjoining Mohmand Agency have been displaced from their homes. Interestingly, the Tehrik e Taliban Pakistan (TTP) on October 22 indicated its willingness to lay down arms if the government ended the ongoing military operation. Its spokesman Maulvi Omar said that the allegation that the Taliban movement was destabilising Pakistan was baseless and added that they would lay down their arms if the government ended its military operation, but refused to do so before talks. Some local Taliban and supporters of militants in the Mamoond tehsil of Bajaur Agency surrendered to a jirga (local Lashkar) on October 28 and 29. It showed that the Taliban was under some pressure in Bajaur and wanted to have a breather in the garb of talks, but the security forces refused to bite the bait and fighting continued as October came to an end.

Although fierce fighting continued in Bajaur agency and adjoining areas throughout the month, the militant citadels in North Waziristan and South Waziristan were not touched by Pakistani security forces. They were left for US drones and missiles. There was also mortar fire on militant positions from across the border. There were at least 12 such attacks from across the border. There were instances when militants fired at Army helicopters, US jets and drones. Militants also targeted with impunity personnel believed to be close to the government. In Khyber Agency, NATO supplies were targeted and there were skirmishes between the Taliban and security forces as well as between the security forces and Mangal Bagh led Lashkar-i-Islam.

In Balochistan, there was a further reduction in violence and the number of incidents declined from 32 in September to 22 in October 2008. Only 17 people were killed and 43 were injured as against 59 deaths and injuries to 61 in September. All those killed or injured during the month were civilians. Security forces claimed to have arrested 53 militants and captured huge caches of arms and ammunition within the province. The violence level in Baloch areas came down considerably and was confined to Dera Bugti district and Quetta. There were some instances of attacks on gas pipelines and railway tracks.

At the same time, activities of Islamic militants increased in Northern Balochistan especially along the province’s border with Afghanistan. Supplies to Afghanistan being sent by a National Logistics Cell trailer through Chaman were seized by militants on October 9. Four would-be suicide bombers were arrested at Zhob on October 12. The month was characterised by a significant reduction in the intensity of the Baloch insurgency, although there was some increase in the activities of pro-Taliban elements in Pakhtoon areas.

October 2008 also witnessed an expansion in the activities of militants in other parts of Pakistan, namely, Punjab, Sindh and Islamabad, where there was an increase in incidents of violence during the month to 63 as against 48 in September 2008. However, in the absence of any major incident like the attack on the Marriot, the casualty figures reduced considerably and only 54 lives were lost and 138 received injuries as against 99 killings and injuries to 265 in September. Apart from the two suicide bombers, all those who were killed and injured were civilians. Almost half the casualties were sustained in the two suicide attacks, which resulted in the loss of 25 lives and injuries to 68, the targets being the house of a parliamentarian in Bhakkar in Punjab and the building of the Anti Terrorism Squad in Islamabad. There were a number of hoax calls made reporting bombs in numerous public buildings in Islamabad and cities in Punjab and Sindh. Tribal clashes as well as ethnic and sectarian clashes were reported from rural Sindh and Punjab during the month.

During October 2008 violence spread to newer areas, although the casualties reduced, as security forces mainly concentrated on taking on militants in Swat valley and Bajaur Agency, while leaving the militants in other parts to themselves. The Taliban claimed that they now have cadres in Karachi and the MQM chief seemed to agree with them on this count.

1. This commentary analyses the violence in Pakistan during October 2008 based on media reports published in the English language press.

The dust might have settled on the US Elections with Barack Obama ensuring a place in history as the first African American President to occupy the White House. The moot question now is whether the dust will begin to fly in South Asia as the new Administration begins to formulate new policies with regard to the region. It is also inevitable that existing policies would also be modified to bring them in synch with the substantially different worldview of the Democratic Party which has reclaimed the White House after eight years.

Apprehensions have been expressed in various quarters in India as to whether this would result in regression in relations with the United States after the upward momentum witnessed over the course of the Bush Presidency and which was expected to continue if John McCain had been voted into power. Both these perceptions represent extremes based on rhetoric flowing out of the two campaigns, which, it is often forgotten, is primarily for domestic consumption and tailored to the needs of respective vote banks. Even though the intended audience is domestic, such rhetoric reverberates globally almost instantaneously over the Internet, and in the process is invariably distorted, magnified or suitably misinterpreted to suit the needs of media outlet disseminating the information. Fortunately, over the years, policymakers in India have wised up to this fact, and knee jerk reactions to media reports have become the exception rather than the norm.

A case in point are the reports in the Indian media starting November 5 that made it seem as if Obama’s first thought after winning the elections was to appoint former president Bill Clinton as special envoy on Kashmir. As it turned out, Obama’s comments were made in the course of an interview with Time Magazine, which was not even carried in the print issue but posted on the Time magazine blog on October 22, 2008. The interview is unclear as to whether, while having lunch with the former President, he actually offered Clinton the position, or whether he discussed the issue generally.

The record of Special Envoys appointed by various states and multilateral organisations to deal with a particular issue is less than stellar. The mechanism of the Special Envoy has largely been used by the United Nations either to focus attention on an issue of urgency as in the case of Darfur and Kosovo, or on longer-term issues such as AIDS and climate change. Through this mechanism, the United Nations is able to draw on the services of elder statesmen, or members of the UN bureaucracy, as the case may be, to represent it and to act as a focal point. More recently, Tony Blair was appointed as Special Envoy to the Middle East by the Quartet of Middle East peacemakers. While special envoys fill a vacuum in the case of multilateral organisations, their record as appointees of states is even less than stellar. The United States has Special Envoys on issues ranging from Sudan and Somalia to Anti-Semitism and Eurasian Energy. With the possible exception of the Special Envoy on Northern Ireland, none of the others could be said to have made a substantial contribution to resolving the issues at hand. Even India had appointed Dr. Karan Singh as Special Envoy to Nepal during the height of the problems there but he could play only a limited role.

Pakistan was indeed a focal point of the campaign, with Obama taking the position that the situation in Afghanistan could be stabilised only if the safe havens provided by Pakistan in the tribal areas were made redundant. He was prepared to do this unilaterally if the Pakistanis did not provide sufficient co-operation. The Kashmir issue, as has been pointed elsewhere, has nothing to do with Afghanistan, except to provide an excuse for Pakistan for its non-cooperation with the United States and Afghanistan on clearing the Taliban from its territory. Presumably, Obama has responded to Pakistani whingeing with his proposal for appointing a special envoy on Kashmir in an effort to appear impartial.

By considering the Pakistani argument that Kashmir and Afghanistan are linked, Obama is providing a loophole for Pakistanis to continue wringing their hands when it comes to acting decisively on clamping down on the terrorist and jihadi elements in their territory. The Pakistani proclivity to link unrelated issues has been seen before, for instance, on its insistence that the Kashmir issue be settled first before discussing trade on any other issue with India. This logjam was only broken when India stood firm on its position that Kashmir could only discussed along with a whole host of other issues within a composite dialogue framework.

It is self-evident that the term “honest broker” has become an oxymoron in the current strategic environment, with a multiplicity of actors jockeying for influence and position. Furthermore, linking Kashmir with Afghanistan has the potential to undo all the good done by the Bush Administration in advancing India-US Relations. However, given that the United States is a significant actor in the region, and all three countries have common goals of eradicating the scourge of terrorism and stabilising the region, what could be encouraged is Track II engagement at the tripartite level to provide inputs at the official bilateral level.