The Prime Minister of UK, Tony Blair, visited Pakistan in the third week of November to participate in the third UK-Pakistan bilateral summit. The UK-Pak joint statement of December 6, 2004 institutionalised such bilateral meets at the highest level, to 're-energise' the 'partnership for peace and prosperity in the 21st century'. As these bilateral summits are of a strategic nature and are being pursued without interruption since 2004, it is useful to analyse the scope and extent of such bilateral engagement.

In concrete terms, the latest visit led to an increase in development assistance towards Pakistan for poverty alleviation. The UK decided to double its development assistance to Pakistan from £ 236 million (US$ 456 million) to £480 million (US$ 928 million) in the next three years with an immediate aid assistance of £20 million (US$ 38.7 million). Apart from this, it was also agreed that the UK would deliver two MI 17 helicopters to the Anti Narcotics Force (ANF) of Pakistan in 2007, to add to the Pakistani efforts to patrol the Pak-Afghan border. Both the leaders also discussed the situation in Afghanistan. After the summit meeting, Blair also touched Kabul for the first time and visited the camps of the British troops posted in the southern Afghan city of Helmand.

The joint declaration adopted at the third Pak-British summit highlights the threat of terrorism and extremism. Throughout the document terrorism is projected as the main threat facing both the countries today.

Since the inception of the UK-Pakistan strategic dialogue in 2004, terrorism and extremism have topped the agenda of bilateral talks. In fact, after the July 7 terrorist attacks in London in 2005, it was expected that in the 2005 summit meeting, Pakistan might draw the flak from UK especially in view of the reports that three of the suicide bombers were from the Pakistani diaspora and some of them had even visited Pakistan ahead of the attack. There was also a war of words between the leaderships of the two countries. President Musharraf was particularly aggressive when he asked the British leadership to put its own house in order rather than pointing fingers towards Pakistan.

Against this backdrop there was a strong possibility that the issue of 'Pakistan as the ideological source of extremism in UK' would be highly debated in the summit of 2005. However, the devastating earthquake in the northern area of Pakistan and Kashmir in October 2005 changed the agenda. The London meeting between Tony Blair and the Pakistani Prime Minister, Shaukat Aziz in November 2005 mainly discussed the effects of the disaster and ways of mitigating its impact. In the joint press conference after the 2005 summit meeting, however, both Aziz and Blair did not forget to ritualistically reiterate their resolve to fight the menace of terrorism together.

To be more specific, the UK-Pakistan strategic partnership is focussed entirely on terrorism. UK has a serious cause for concern because the empirical evidence flowing in from individual case studies and investigations done by British and other European intelligence agencies have shown that the young participants apprehended in terrorist activities in Britain and other parts of the world were primarily recruited from South Asian Muslim communities (mostly of Pakistani origin) in Britain.

The pre-9/11 terror networks had, in fact, facilitated the movement of a small number of young Muslims from UK to Afghanistan. They underwent training there and participated in the Afghan jihad. After the Soviet pull out, these elements were seen to be leaguing up with Taliban and Al Qaeda and contributing to their strategy of a global Jihad. Although the opportunity to take combat trainings in Afghanistan was lost after the fall of Taliban in 2001-2002, the Islamic extremists from Europe were quite visible in different conflict zones around the world. These radical elements had no respect for national boundaries and human values.

The July 7 suicide bombings have shown that the home-grown extremists in UK would not even spare their home country and strike there as well. More interestingly, the post-7/7 investigations and the reported Heathrow plot also revealed that Pakistan might be serving as a node for at least ideological training of these elements through jihadi organizations in Pakistan. Another cause for concern is that the Jihadi terrorist organisations like Lashkar-e-Taiba (LeT) and Jaish-e-Muhammad (JeM), though already proscribed in Pakistan and UK, do not appear to have been totally neutralised in both the countries.

Stricter surveillance at British and Pakistani airports have already been in place in order to monitor suspected terrorist activities, but given the volume of air traffic between the two countries and the close relationship between the one million strong Pakistani community in UK and its country of origin, it is indeed a formidable task for the concerned authorities to keep a constant vigil on the transit of the extremists between these two countries and isolate them effectively.

On the other hand, even after one year of joint investigations, stricter surveillance and joint anti-terrorist operations, the British and Pakistani authorities have not been able to reduce the threat from terrorists for UK. The magnitude of the threat took the UK security system by surprise in the wake of the reported plot to attack the Heathrow airport in August 2006, which unsettled the whole global air traffic system for quite some days.

Radicalisation of younger generation of Muslims in the name of religion, and their participation in terrorist activities in Britain and elsewhere has remained the most imminent threat facing international community today. If the recent warning of Elizabeth Manningham-Buller, the director of British domestic intelligence agency (MI5) is examined carefully, two important issues come to fore. Firstly, the threat is indeed real and the agencies do not have any immediate solution except close and painstaking observation of terror cells and modules. And secondly, even if it is obligatory on the part of states to cooperate with one another to tackle the menace of terror, in the long run, the onus of defending one's own country against terrorist attacks rests primarily with every individual country. This is true of UK as well. Although the UK has been closely cooperating with other nations- be it at the European or at the international levels-, it is the UK which has to formulate its own counterterrorism policy keeping in view its own security requirements and its own understanding of the radical and restive young Muslim constituency within UK, which is amenable to indoctrination by extremist and terrorist organisations.

The strategic character of this threat became obvious when in November 2006, the British Department for Education and Skills published a guidance paper titled "Promoting Good Campus Relations: Working With Staff and Students to Build Community Cohesion and Tackle Violent Extremism in the Name of Islam". Based upon various instances and observations (some of them are however debatable) on the methods of recruitment by radical Islamist organisations in educational institutes, this document attempts to arrest the trend of further radicalisation. It remains to be seen whether some of the eight recommendations made in the document would be feasible and could be realised in the future. However it is certain that addressing the threat requires whole-hearted participation of the community leadership, lawmakers of Asian origin, media and the British political leadership to devise an antidote to such radicalism.

In an interesting development, a recent study prepared at a think-tank, close to the British Ministry of Defence, has come out with its findings that "indirectly, Pakistan (through the ISI) has been supporting terrorism and extremism, whether in London on 7/7 or in Afghanistan or Iraq". Although the British Ministry of Defence has distanced itself from the study, it was an embarrassment for the Pakistani government. Nonetheless, the study buttressed by field trips done in Pakistan in June this year, reemphasises ISI's all-too-familiar strategy of 'run with the hare and hunt with the hounds'.

In the days ahead, occasional attempts from British and Pakistani governments to put the blame for the radicalisation of a small part of the Muslim community on the other may continue. Hence the bonhomie between the two leaders may seem perfect at present, but the complex terror networks, allegedly nurtured either by the ISI or forces within Pakistan unrelated to the state agencies, would continue to make the 'strategic partnership' more complex and at times even critical, irrespective of change of political leadership in London and Islamabad.

The recently concluded three-day international seminar on Defence Finance and Economics, organised by the Indian Ministry of Defence (Finance) in New Delhi, covered a wide variety of issues concerning defence finance and economics and reflected on varied perspectives and practices from across the globe. The seminar was of particular importance because of the involvement of policy makers, academics, and other experts from think tanks and the media, in exchanging and discussing their views in the realm of the changing business and spectrum of defence worldwide. The discussion focussed on some pressing issues like defence strategies and economics, optimal resource allocation in defence, myriad dimensions in defence acquisition and offsets, defence research and development, defence manpower issues, audit and accountability in defence expenditure and procurement, and cost efficient logistics management in defence.

Focussing on the importance of economics in defence strategies, experts expressed their views on a range of issues like affordable defence, economics of force designs, trends in global defence industry and military expenditure and some core issues of defence economics. Regarding world military expenditure (US $1,118 billion in 2005, according to SIPRI), experts highlighted the fact that in recent years it has been growing at a faster rate and is approaching peak Cold War levels, motivated by the Global War on Terror (GWOT) and military operations in Afghanistan and Iraq. In the last 10-year period (1996-2005) it has shot up by 34 per cent in real terms. However, while global military expenditure has significantly grown, its distribution has been spatial. Low-income countries spend a higher share of the total on personnel and operating costs, while high-income countries spend on arms procurement and military research and development (R&D). In addition, the world arms industry is growing at a faster pace. The SIPRI top 100 arms-producing companies together accounted for $268 billion worth of armaments sales in 2004, a marked growth of 15 per cent over the previous year. With such growth, there have been structural, technological and compositional changes in the arms production industries.

Optimal allocation in the defence sector, another area of discussion, has always been a major challenge for planners. In the 21st century, the challenge has been accentuated by the cut in the defence budget (except in the case of a few countries) in real terms, the extreme capital- and cost-intensive nature of modern war equipment, and by the concept of RMA and Net Centric Warfare. Against this backdrop, proper budgeting, planning and portfolio analysis in defence has become more relevant. As some cross-country evidence shows, the principle of sound allocation of resources for defence is based on identification and probability of risk factor; concept of force design and its costing including the full life cycle costs, and finally optimising measures. Besides, other efficiency measures like outsourcing, project management, management information, use of civilians in defence departments, management and leadership are in use.

Defence acquisition, according to many experts, is a complex and difficult business and holds critical importance because of vulnerability to fraud, waste, and mismanagement. Best practices around the world show that the modern system of acquisition should be more responsive, efficient and effective, i.e., faster, better and cheaper, while focussing on certain achievable outcomes. The effects of competition, life cycle cost considerations, legislative barriers, contract provisions - all need to be examined to get better value for money. Defence offsets, which is being increasingly used by arms buying countries, has become an instrument to leverage the outflow of foreign currencies to supplier countries. While it has placed added pressure on the supply side to oblige the offset obligations, it has also resulted in increased cost of equipment though with no significant benefits for the purchasing countries. Besides, there are many other weaknesses in implementing and over-sighting the whole procedure, which renders the whole policy of little value. Some experts opined that offsets do not promote countries' long-term military industrial goals and does not stimulate broad-based economic development. Moreover, neither substantial nor sustained job creation occurs and only little technology transfer occurs and whatever technology is transferred is quickly outpaced by continuous technology advances in the main supplying countries. However, the ingredients of a successful offset policy warrant a relatively advanced domestic industry to absorb and capitalise on benefits of offsets and with this clear oversight and audit mechanisms are necessary to systematically monitor progress and continuously revamp weaknesses.

Military defence research and development (R&D) expenditure and its interface with those of the civilian sector is a highly contested issue. Panellists demonstrated through statistics that in recent years greater weight is being assigned to more defence R&D expenditures. Statistics also reveal that in the four-year period 2000-2004 global military expenditure grew by 23 per cent to total $85 billion, representing 10 per cent of the total (civilian and military) R&D expenditure worldwide. Factors that led to increased defence R&D expenditure are: the evolution of the RMA into the concept of Network Centric Warfare; the increased need for exceptionally good intelligence capabilities and new set of weapons suitable for global warfare and urban warfare; and the need for commercialising defence technologies through new and improved versions of equipment. However, there exists a huge gulf in defence R&D expenditures between the US and European countries, which has lately resulted in some controversies over the competitiveness of European defence and commercial technologies and on the impact on the transatlantic relationship.

Regarding military manpower, analysts expressed its importance as a vital input in the overall military production function. In the present strategic military environment, its importance has gone up manifold, requiring a skilled, entrepreneurial force level, finely tailored, more accessible to joint operations and better configured to operate with other agencies and international partners. But at the same time, the cost of maintaining a large conventional force and the technology-driven substitution effect has taken centre stage in the military planning process, resulting in rebalancing between active and reserve forces, military to civilian conversions, unified command, etc.

Another crucial aspect is related to defence logistics, the cost of which is around one-fourth of the total defence budget. While no one discounts the importance of this aspect, however, defence capability and its adaptability to future needs depends much on how efficiently this is managed. An efficient management of logistics, as some international practices show, requires performance-based system, where the suppliers are paid fee-per-usage basis instead of paying individually for 'bundled' support systems. For the cost-efficient management of logistics, best practices in the private sector - centralised management and strategic sourcing - can be applied.

In the session on Audit and Accountability, the issue that came to the fore was obtaining the best value for money, the supreme auditing offices of many countries resorting to different forms of auditing to see the legality of expenditure, compliance to rules and their propriety. More importantly, audit institutions also carry out performance audit, or value-for-money audit, to see the efficiency and effectiveness of expenditures. The suggestions/findings of these auditors form the basis on which the respective defence planners and political executives are made accountable. However international evidence, especially those of GAO (USA), OAG (Canada), or CAG of India, shows that defence auditing is not fully followed by necessary accountability. The common shortcomings identified by all these supreme auditors could be attributed to the lack of professionalism in dealing with various aspects of defence management, leading to cost and time overruns. Besides, evidence also shows that most defence departments are manned by birds of passage, and personnel are neither properly trained nor retained for a minimum required period to see the contracts through. Moreover, the absence of legal, technical and financial experts has led to cost and time overruns. Participants voiced the need for greater dialogue among auditors, defence managers, defence personnel and executives.

In the light of above discussions, the international seminar holds special importance for India given that since the beginning of economics reforms in the early nineties, the urgency of fiscal management and better utilisation of budget was strongly felt across the spectrum of economic and non-economic activities. The staggering increase in the Indian defence expenditure (Rs. 89,000 Crore or 2.52 per cent of GDPMP in 2006-07) necessitates the need to ponder over affordability, sustainability and its impact on overall fiscal management and economic development, while not compromising the security apparatus of the country, which has been aggravated by new concerns over asymmetric and non-conventional warfare. Defence has long been left out of rigorous economic analysis because of the 'holy cow' approach as well as due to notions like strategic concerns, absolute state power, etc. These notions have led the country to mess up defence resources. Be it cost-ineffective Qualitative Requirements (QRs), or obtaining greater output/capability, economic aspects have long been sidelined. The seminar itself was a welcome step in the much-neglected field of defence finance and economics in India. The rich knowledge generated during the course of the seminar, if applied by the Ministry of Defence and other stakeholders, could better India's planning, execution and management of defence.

Efforts by the Government of India on the one hand and by non-governmental organizations on the other to bring the United Liberation Front of Asom (ULFA) to the negotiating table have not progressed very far. The rebel group continues its subversive agenda, targeting security forces personnel, bombing crowded market places, oil and gas pipelines and various state establishments and installations.

In one of the latest incidents of violence in Assam, at least 15 people were killed and close to 50 others were wounded on November 5, 2006 in two separate incidents of bomb blasts at the crowded Fancy Bazaar and Noonmati area of Guwahati city. Though there is no evidence yet to establish that the ULFA was involved in the twin blasts, however, going by its past track record, the needle of suspicion points towards it. There is wide speculation that some 'jihadi' groups might have extended support to the ULFA in carrying out the attacks.

It may not be out of context to note that since this incident the ULFA has intensified its subversive agenda. Between November 6 and 16, 2006, at least seven persons including two ULFA militants, two soldiers and three civilians were killed. At the same time there have been at least seven incidents of bomb explosions targeting mainly oil and gas pipelines that run through the eastern oil producing districts of Dibrugarh and Tinsukia. Incidents of bomb explosions in the State have been increasing in the past few years. There were just about 76 blasts in 2004, as against 121 in 2005 and as many as 100 blasts this year as of November 17.

Assam Police sources have claimed that the ULFA has switched over from "difficult and risky" military combat to the more damaging but easy-to-execute jihadi-type operations in urban areas. This change of strategy has been mainly due to stepped up counter-insurgency operations coupled with the ULFA's diminishing cadre strength. These sources have also stated that the outfit gave a crash course to new recruits in handling explosives at its transit bases in the jungles of adjoining Arunachal Pradesh, Garo Hills of Meghalaya and the border areas of Bhutan. In the words of one Assam police official, "planting explosives and lobbing grenades in public places, preferably under cover of darkness, constitute the new modus operandi of ULFA operations."

Pursuant to the Government of India's policy of engaging with any group that abjures the path of violence and seeks resolution of grievances within the framework of the Indian Constitution, several militant groups have come forward for talks. Presently, at least three militant groups in Assam - Dima Halim Daogah (DHD), United People's Democratic Solidarity (UPDS) and National Democratic Front of Bodoland (NDFB) - have entered into a ceasefire/suspension of operations agreements with the Union Government. When the ULFA-backed People's Consultative Group (PCG) was constituted in September 2005, there were high hopes among Assamese that the much-cherished peace may finally return to Assam. Unfortunately, the peace initiative to facilitate direct talks between the ULFA and the Union Government has remained a non-starter. The Union Government suspended army operations against the ULFA on August 13, 2006, but called it off just over a month later on September 24 following the ULFA's continued violations of the truce. The final provocation came when ULFA killed a tea estate manager, Harendranath Das, at Digboi town in Tinsukia District on September 23. A day earlier, a policeman was shot dead at Than Gaon village in Dibrugarh District.

ULFA has indeed used the brief ceasefire period to regroup itself rather than prepare for a dialogue with the government. Consequently, intelligence agencies have warned security forces of a series of possible attacks by the ULFA on oil installations, rail tracks and various government-owned institutions. Moreover, there are alarming reports of ULFA trying to re-establish its camps and hideouts in Bhutan, though Bhutanese authorities have denied outright such claims.

Meanwhile, the ULFA described the recent November 14 meeting of the People's Consultative Group (PCG) members, Indira Goswami and Rebati Phukan, with National Security Advisor M. K. Narayanan as a "fraudulent endeavour" aimed at ensuring that the forthcoming Republic Day passed off without any violent incident. The outfit stated in its publication Freedom that "Sovereignty is the only way for restoration of peace in Asom. To bring the negotiation process back on track the Government of India must send a formal proposal through the PCG, and the core issue of the talks should be restoration of sovereignty in Asom." Moreover, on November 18, the rebel group issued an "appeal" to sportspersons to stay away from the forthcoming National Games scheduled to be held in Guwahati in February 2007, saying that it was being organised by "occupational forces" that are not serious about the resolution of the "Indo-Asom conflict".

In the aftermath of the recent bomb blasts, the security forces have stepped up counter-insurgency operations against the ULFA though with a modified strategy. The effectiveness of such counter-insurgency operation, however, remains doubtful in view of the ULFA'S easy access to neighbouring countries, principally Bangladesh and Myanmar. Top ULFA leaders, including Paresh Barua and Arabinda Rajkhowa, who are widely believed to be operating out of Bangladesh, are in the grip of Pakistan's Inter Services Intelligence (ISI) and Bangladesh's Directorate General of Forces Intelligence (DGFI). These agencies would not easily let the ULFA escape their control and talk peace with New Delhi.

Refuting China's claim over Arunachal Pradesh, India's External Affairs Minister Pranab Mukherjee firmly reiterated that "The whole of Arunachal Pradesh is an integral part of India." Coming as it did days before the Chinese President's four-day visit to India from November 20, 2006, the statement made by China's Ambassador to India, Sun Yuxi, that "In our position, the whole of the state of Arunachal Pradesh is Chinese territory. And Tawang is only one of the places in it. We are claiming all of that. That is our position," is unfortunate. Though the Chinese Foreign Ministry spokeswoman, Jiang Yu, has downplayed the envoy's remarks, there is need to ponder over such statements. In fact, such statements from a high level government official raises the question as to why China chose to make such statements when President Hu Jintao is slated to visit India? Does it reflect hidden complexities in the Sino-Indian border negotiations? Does it reflect China's diplomatic tactics? What does it say about China's larger foreign policy goals? While India should firmly refute such statements and adopt a pragmatic and resolute stand on the border dispute, it should also hone up its negotiating skills to confront a rising China.

The statement reflects larger calculations in the Chinese game plan on border negotiations. It is well known that the border talks have gone on for a long time without any solution in sight. The Joint Working Group (JWG) meetings on the border resolution have been a failure. The border talks were thereafter raised to the high level Special Representative Group (SRG) meetings. So far, seven rounds of SRG meetings have taken place. However, no reports on the nature of progress made on the border talks have come out from either side. What can however be deduced from the SRG meetings is that the border negotiations have entered a crucial stage. This much was indicated by National Security Advisor, M. K. Narayanan, the Special Representative from the Indian side. The statement from the Chinese ambassador should be seen in this context. First, it reflects a hardening of China's stand on the border issue. Second, it could also mean that the People's Liberation Army (PLA) is playing a role in influencing Chinese negotiations on the border talks. Third, it indicates a Chinese strategy to understand Indian minds on the vexed border issue as well as to gauge India's diplomatic preparedness. Such a statement prior to Hu's visit, thus, indicates China's larger foreign policy strategy and negotiating skills in dealing with contentious foreign policy issues.

A crucial component of China's foreign policy is border diplomacy. China calls this a "greater periphery strategy". It identifies the greater periphery as comprising Northeast Asia, Southeast Asia, South Asia and Central Asia. According to one Chinese scholar, China regards the greater periphery as the main battlefield for safeguarding its national security and upholding its sovereignty and territorial integrity. The greater periphery is also the zone that supports China's sustainable development and serves as a principal source of its energy resources. Finally, this four-region zone is crucially linked to China's ultimate growth as a major power. However, China views the role of the US with its alliance systems in Asia as a challenge to its greater periphery strategy. The other challenge is its existing territorial and maritime disputes with ASEAN, India and Japan. China's border dispute with India should be placed in this wider foreign policy of greater periphery strategy where the underlying aim is to acquire great power status through sustained economic growth and peaceful diplomacy. In this context, China aims at greater engagement with India under the co-operative security framework.

While India should extend the scope of engagement with China and explore new areas of co-operation, it should also firm up its own foreign policy strategy. One way to assert our own foreign policy positions would be by issuing position papers or White Papers on contentious issues. Generally, White Papers help to define foreign policy interests and goals as well as defend and uphold the nation's sovereign rights on issues of a controversial nature. So far India has no such White Paper on any of the contentious issues. It should come out with White Papers on Kashmir and Arunachal Pradesh, indicating its position on the contentious border issue. China claims around 36,000 square miles of Indian territory in Arunachal Pradesh, while it has occupied some 15,200 square miles in Kashmir.

Another significant way to firm up our foreign policy means would be by adopting aggressive economic diplomacy on the border that would boost our periphery strategy. The border economic diplomacy would include the creation of intensive infrastructural links and establishment of trans-border sub-regional mechanisms. India has lately woken up to China's aggressive road building along the Sino-Indian border. It finalised some 27 projects for construction of new roads along this border under the initiative of the Cabinet Committee on Security (CCS) in May 2006. Though India is a latecomer in infrastructural development, it has to regularly monitor and hasten infrastructural development. Among the sub-regional integration efforts, while China's Mekong Basin Project efforts have gone apace, India's Mekong-Ganga Co-operation has stalled. New Delhi should, therefore, take serious steps to augment its regional integration projects as they are not only important means to build strong economic linkages but also contribute to the country's power projection.

Besides strengthening our own foreign policy strategy, India needs to understand the Chinese mind-set. This would enable us to sharpen our negotiating skills. An important means to understand the Chinese mind is through the creation of greater channels of interaction between the two countries. The Meeting of the China-India Eminent Persons' Group that was first initiated in 2001 serves as an important advisory agency for the two governments and help in boosting mutual trust between them. Such meetings should be held regularly to hasten the process of bilateral understanding. Regular exchanges between the think tanks of the two countries would also help to firm up foreign policy directions. It may be noted that before every high level visit from China, there is a flurry of activity among Chinese research think tanks, either visiting India or organising meetings with their Indian counterparts in China. Unlike in India, in China most think tanks are either directly under a ministry or the State Council and play an important role in providing policy inputs to the government.

While these are a few steps to strengthen Indian diplomacy and negotiating strategy, at a more specific level like border negotiations, India should avoid making any unilateral concessions to China. It may be recalled that the Indian Prime Minister's 2003 visit to China resulted in India's explicit recognition of Tibet as a part of Chinese territory without any reciprocal commitment from the Chinese side on Sikkim. This showed India in a poor diplomatic light and exposed its weak negotiating skills. India should, therefore, develop its negotiating skills so as not to get caught unawares while dealing with China.

In the context of Hu Jintao's visit, India needs to be clear about its own foreign policy gaols as well as understand China's foreign policy strategy. This would help India to avoid ad-hocism in policymaking and enable the formulation of a long-term China policy. While reminding China that Yuxi's statement is detrimental to long-term Sino-Indian relations, India should resolutely point out that peaceful relations between them is imperative for their goals of emerging as major powers.