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Bolstering the “Chinese Model” in South Asia

The United States should launch a Marshall Plan-like initiative to reinforce economic cooperation between India and Pakistan

Bolstering the “Chinese Model” in South AsiaPrevious posts (here and here) have highlighted how growing economic engagement is now the driver of the peace dialogue India and Pakistan launched a year ago.  The guiding principle is the so-called “Chinese model” – that is, the two countries pattern their ties along the lines of the India-China relationship, which combines broadening economic integration, frequent interactions between the national leaderships, and pragmatic diplomacy focused on incremental gains.

If enhanced trade ties were to take hold between South Asia’s largest economies, they would produce significant commercial and (eventually) security dividends for both countries and indeed the entire region.  So it’s worth considering what the United States, the most significant extra-regional actor in South Asia, can do to reinforce this effort, which if it bears fruit would have a very positive impact on U.S. security interests.

One tentative by-product already evident from the Chinese model is New Delhi’s new willingness to reopen discussions on the perennially-inflamed dispute over the Kashmir region.  The long-running territorial ructions over Sir Creek and the Siachen Glacier also seem ripe for the diplomatic agenda.

The sense of bilateral optimism was on full display at last Friday’s inauguration of a new customs facility at the Attari-Wagah border crossing that lies midway between Lahore and Amritsar.  Indian officials used the occasion to announce they would rescind the long-standing prohibition on foreign direct investment from Pakistan.  Home Minister Palaniappan Chidambaram, a senior member of Prime Minister Manmohan Singh’s Cabinet, also called for dismantling all bilateral trade barriers and hinted that a greatly liberalized visa regime for Pakistani visitors is in the works.

For his part, Shahbaz Sharif, the chief minister of Punjab province in Pakistan, effusively suggested the creation of free trade zones aimed at fostering bilateral exchange and the opening up of supply-chain links between the port city of Karachi and the Indian states of Rajasthan and Punjab.  He also proposed establishing a common market along the lines of the European Union – something that Pakistani President Asif Ali Zardari, who not too long was tarred as being soft on India, has also advocated – and declared that the two countries should now concentrate on waging “a war of economic competition.”

(By the way, Prime Minister Singh has outlined a similar vision for regional integration.)

Significantly, Sharif is the younger brother of former Prime Minister Nawaz Sharif, Zardari’s chief political rival.  His words signify that for all of their internecine squabbling, Pakistan’s main parties at least agree on the value of improved economic cooperation with India.

Of great consequence, too, is that General Ashfaq Parvez Kayani, the powerful army chief who has maintained a hard line vis-à-vis New Delhi in the past, yesterday spoke of the need for “peaceful co-existence” with India and stated that his country “can’t keep spending on defense alone and forget about the development.”  His words follow a joint plea by one of his predeccesors and a former chief of the Indian air force for new confidence-building measures between the two militaries.  Reports out of Islamabad indicate the military establishment realizes that the eastern border needs to be stabilized so resources can be focused on combating rising internal security threats.

One way the United States can strengthen these hopeful stirrings is by launching a Marshall Plan-like initiative geared toward the expansion of cross-border economic linkages between the two countries.  One of the keys to the Marshall Plan’s far-reaching success was the major financial inducement it gave European countries devastated by World War II to frame their economic futures in conjunction with their neighbors.  By putting an emphasis on reconstruction projects that crossed national frontiers, it was an important catalyst for the historic reconciliation between France and Germany and paved the way for the deep economic integration embodied in today’s EU.

A similar vision should inspire an U.S.effort to bolster cross-border economic cooperation between India and Pakistan.  This initiative would be aimed at helping the two countries, on a joint basis, upgrade and expand the meager transportation infrastructure presenting connecting them.  It would support projects that increase road and rail linkages, as well as the number and capacity of customs posts.  It would help provide resources for modernized seaport facilities that enable more two-way trade.  And with each country plagued by chronic power shortages, it would provide seed capital for cross-border energy projects that the two countries are already talking about, such as joint electrical grids or the proposed natural gas pipeline connecting Central and South Asia via Afghanistan.

The original Marshall Plan entailed a staggering sum of money – well over $100 billion in today’s terms – and an austerity-minded U.S. Congress would certainly balk at any scheme with a similar price tag.  But the initiative outlined here need only entail a modest level of expenditures – say, $50-75 million per year over a five-year period – and could be paid for by redirecting funding already authorized under the 2009 Enhanced Partnership with Pakistan Act.  Better known as the Kerry-Lugar-Berman bill, the act provides $1.5 billion annually in non-military assistance to Pakistan through 2013.  But due to a variety of factors, much of its economic development funds remain unspent.

This effort would also dovetail well with the Obama administration’s “New Silk Road” initiative that is designed to ensure Afghanistan’s economic viability by building it up as a regional trade and transit hub.  Additional countries, such as those Washington has already enlisted in the Silk Road plan, also could be invited to contribute resources.  To avoid potential concerns in New Delhi and Islamabad that Washington might try to extract diplomatic concessions from specific funding decisions, resources could be routed through the World Bank or the Asian Development Bank, where professional staff would assess the viability and impact of proposals submitted jointly by the two countries and make final judgments on which projects go forward.

Obviously, this initiative offers no magic bullet for transforming the singular intensity of the India-Pakistan strategic rivalry or the complex security dynamics in Afghanistan.  But it would be a creative investment in nurturing promising though still fragile developments already underway in South Asia, which if they take root over the long term would help lead to a game-changing situation: One in which Islamabad looks upon New Delhi more as a partner than as an inveterate enemy.  If such a development came to pass, U.S. interests throughout the entire region would be vastly easier to safeguard than they are today.

An earlier and abbreviated version of this post was published by the Christian Science Monitor.  I invite you to follow me on Twitter.



David J. Karl

David J. Karl is president of the Asia Strategy Initiative, an analysis and advisory firm that has a particular focus on South Asia. He serves on the board of counselors of Young Professionals in Foreign Policy and previously on the Executive Committee of the Southern California chapter of TiE (formerly The Indus Entrepreneurs), the world's largest not-for-profit organization dedicated to promoting entrepreneurship.

David previously served as director of studies at the Pacific Council on International Policy, in charge of the Council’s think tank focused on foreign policy issues of special resonance to the U.S West Coast, and was project director of the Bi-national Task Force on Enhancing India-U.S. Cooperation in the Global Innovation Economy that was jointly organized by the Pacific Council and the Federation of Indian Chambers & Industry. He received his doctorate in international relations at the University of Southern California, writing his dissertation on the India-Pakistan strategic rivalry, and took his masters degree in international relations from the Johns Hopkins University School of Advanced International Studies.