Though from a weather perspective the summer in Dubai was not as severe as previous year, even though mid day temperatures were scorching, evenings were bearable and even the odd day was pleasant. On social scene the question most asked was about the economic situation and when did one expect the down turn to reverse, even though it was reported that events were not as frequent on the social calender was a year back, there was nevertheless, amongst us long time residents a sense of relief. Relief that the glitzy and plastic side of Dubai has suffered from the economic downturn and now those who love and appreciate the city for could actually enjoy it.
Dubai and the region has been in for some bad press for while, and this is obviously the media loves to garnish its readership with, and fine with that. I am however, also of the opinion that some of the noise has come from people who themselves were the beneficiaries of boom and now having either extended themselves out too much, or not finding enough honey in the pot are the first to condemn all that went wrong with the place. Yet let us seek some balance in the argument and we will find that economic ups and downs are the feature of any economy, but never before have I seen so many rats abandon a ship so fast, assuming it was sinking. Well the way I personally see it this was a much needed clean up of the economic and social scene.
I have spent the past week speaking to bankers, tour operators, hoteliers and people who have a good lay of the land. Here is my impression. No doubt to expect the market to go back to dizzy heights of 2007 is wishful thinking if it was expected to happen in a few months. However, there is a general consensus, especially amongst property people, and I am talking of those who are truly in the know, that the bottom seems to have been established on property prices. Bankers on the other hand are seeing a welcome return of liquidity and some banks have even opened their fists enough to show that selective funding is going on. Tour operators, and especially the cruise ship boys, have indicated that their order book for the winter is filling up and there is an inherent demand that is coming back to the market.
Hoteliers are having a more torrid time as business travel seems to have shrunk and with a world wide recession the 'business travel' dollar amount has come down significantly on a global basis. While occupancies may be a struggle to achieve, I do suspect hotels are being a bit stubborn about their rates causing some of their own grief. As we know the hotel business is about putting heads on the pillows in the room and at some stage turn over versus the average room rate needs to be balanced out.
My gut reaction is that the worst seems over, and as confidence returns, the Dubai Metro soon carries its first paying passenger and indeed people come to realize the that the fundamentals for the long term are valid a better 2010 would seem on the horizon. The charm of Dubai to the sub continent and the Arab world has not diminished and on the country level all that Abu Dhabi is doing to show its capability to weather the storm abodes well for Dubai and the country as a whole. I do predict that as suddenly as someone turned of the light on exuberance it will be almost as sudden when suddenly everything will light up and I feel a scramble to buy value in a market where not long ago people were exuberantly crazy enough to pay ridiculously high price.
The summer has sizzled past us, and as the winter approaches there is more good news on the horizon than bad news. The social scene is more likely to find a mature balance and everyone will have realized that as difficult this sounds there is still alot of fun things to do.
Monday, August 24, 2009
Tuesday, August 18, 2009
Dubai: Deflation path to Recovery
Sitting on the inside, watching the economic crisis is not more a secluded exercise. This economic meltdown is a world wide episode, with ramifications that have not been quite fully understood, especially by the actors who are expected to bring about a change in this scene we stare at. As the global crisis has unfolded its own unique economic tsunami the effects of it have manifest itself in each country in a rather different way. While focus has remained on the United States in terms of the sheer size of its economy, large consumer economies like China and India has been better placed to absorb the tidal waves given that there is a basic level of consumer demand that does need fulfillment.
Dubai has received a great of attention from the world media, and understandably so; during the boom years it was the darling of the media world, and as it is learning, in the down days the same writers who showered accolades are the first ones to throw eggs. This does not mean that the entire negative press is not without foundation, but more like exaggerated to the point of sensationalist fear. For the record yes the recession has hit Dubai hard, and understandably so as it had the most grandiose of plans in the region. The debate rages over the size of its financial commitments and what it will do to revive the economy.
I would say three decades in the region, two of which were in banking, gives me more perspective than a reporter who perhaps would think of a story over a month at best. First of all Dubai has been what I have always called an 'enabling economy', whereby it has created the infrastructure for private sector to thrive. Though, understandably, over the past decade over zealous government officials donned the entrepreneurial hat and goaded the government to become in effect the biggest business conglomerate, having the disadvantage that it pushed the cautious private sector to the sidelines and yet having the advantage that government funding would ensure completion of the grand design. We must remember it was not the real estate sector that caused the problem it was a combination of financial issues within the banking sector and the effects of the global economy that started the downward spiral.
To explain this further one has to appreciate that in middle to late 2008 there was widespread speculation and debate that the UAE will delink the Dihram from the US dollar, a fixed rate that has been unchanged since 1970's. This speculation drove through most of the early part of 2008 substantial funds from Hedge Funds in Europe and elsewhere into the banking system in the UAE expecting a delinking will mean a stronger UAE Dihram. This did not happen and when in September or so last year the UAE Central Bank made its position public that there was no such delinking on the cards, billions of dollars playing this trade and sitting in the banks here too flight. Ofcourse in a sense the hedge funds had their own problems brewing with the sub prime crisis and a stock market that was not entirely comfortable.
The problem would not have been more than that it seems had some fundamental errors not taken place. So lets say $15 billion comes to the banks here, is laying in deposit waiting for the delinking, the delink does not happen the money leaves so no big deal. However, our clever bankers, and I was one of them a decade back, had lent a substantial part of these funds to domestic borrowers, so when the delink did not happen and the funds went back almost every bank was caught with their loan to deposit ratio (which is normally 80-85%) suddenly find they had more loans on their books then deposits to fund them. Well established banks with loads of liquidity were caught with a ration of close to 135% on loans to deposits. Given that international banks were stuck with their own problems even the inter bank market was struggling to fund the banks here.
The timing of all this was smack in the middle of the meltdown happening thus closing the door to the one thing that could have made this crisis less dramatic; the access to liquidity. If the banks had not been so exposed then in a nervous market more monetary moves to increase liquidity in the banking system would have given the buffer to soften the blow. This is what happened in India where huge amounts of liquidity were pumped into the banking system to make sure the consumer did not panic.
This does not mean the real estate crisis would not have happened. I am only arguing that it would not have been so serve and more importantly one has to then question was the rationale for the development model for Dubai wrong? I do not believe the model was wrong, but two things needed adjustment that just did not happen.
1. The size and scale of the development was not tuned into the sustainable demand levels.
2. The role of private sector should have been the bigger chunk of the development cake rather than end up making government owned companies the biggest competitor to the private sector.
I am often asked a question about how long this recession will last and how will Dubai come out of it?
In the first place the recession is a global event and while France, China, India and Germany have shown signs of weathering the storm better, the chances are that towards the fourth quarter of 2009 the financial elements needed for a recovery will be in better shape. This deflation we have seen globally, and in Dubai, was needed for two reasons, one to slow down an over heating economy, and secondly to bring some value back to the process of development. I believe that consumer confidence will stabilize towards the end of this year and net investments will begin to show an increase in the first quarter of next year. Yes this is totally contrary to what some leading bank researchers are saying that we have another 18 months of hardship, but trust me I know that crowd well, they are the same researchers who a year back were predicting some very exuberant predictions.
The way Dubai will come out of this is actually simpler than it looks. While the current funding of Government Bonds of $ 20 billion as a first step forward Dubai has a good collection of companies it can privatize, from airlines to hotels and property companies too. The question is the timing of such privatizations and whether this is the route to take. I believe the enabling element of Dubai's economy means in the region it is the best suited in terms of ease of business and infrastructure to be the place of first choice for regionally based companies. I believe a spending spree in Iraq on account of rebuilding the country will commence early next year, this backed up with a higher oil price will bring stability to the region and a demand led economy will emerge, but gradually. UAE and Dubai are best positioned to take advantage of the support role it will perform and this is where there base of the demand side of the equation will come to the economy.
This does not mean that the government of Dubai should not rethink their role in the economic model. I think they should go towards being more an enabler and privatize some of the business concerns, perhaps with the timing of the first offerings to be in the early part of next year. There should also be a revisit to some of the more grand projects and these should be put on the back burner and bring back the confidence that with some projects shelved the expect financial load will be substantially less. As I said to someone the other day "You can still plan to do all you wanted but just don't do them at the pace you were trying to.'
Dubai has received a great of attention from the world media, and understandably so; during the boom years it was the darling of the media world, and as it is learning, in the down days the same writers who showered accolades are the first ones to throw eggs. This does not mean that the entire negative press is not without foundation, but more like exaggerated to the point of sensationalist fear. For the record yes the recession has hit Dubai hard, and understandably so as it had the most grandiose of plans in the region. The debate rages over the size of its financial commitments and what it will do to revive the economy.
I would say three decades in the region, two of which were in banking, gives me more perspective than a reporter who perhaps would think of a story over a month at best. First of all Dubai has been what I have always called an 'enabling economy', whereby it has created the infrastructure for private sector to thrive. Though, understandably, over the past decade over zealous government officials donned the entrepreneurial hat and goaded the government to become in effect the biggest business conglomerate, having the disadvantage that it pushed the cautious private sector to the sidelines and yet having the advantage that government funding would ensure completion of the grand design. We must remember it was not the real estate sector that caused the problem it was a combination of financial issues within the banking sector and the effects of the global economy that started the downward spiral.
To explain this further one has to appreciate that in middle to late 2008 there was widespread speculation and debate that the UAE will delink the Dihram from the US dollar, a fixed rate that has been unchanged since 1970's. This speculation drove through most of the early part of 2008 substantial funds from Hedge Funds in Europe and elsewhere into the banking system in the UAE expecting a delinking will mean a stronger UAE Dihram. This did not happen and when in September or so last year the UAE Central Bank made its position public that there was no such delinking on the cards, billions of dollars playing this trade and sitting in the banks here too flight. Ofcourse in a sense the hedge funds had their own problems brewing with the sub prime crisis and a stock market that was not entirely comfortable.
The problem would not have been more than that it seems had some fundamental errors not taken place. So lets say $15 billion comes to the banks here, is laying in deposit waiting for the delinking, the delink does not happen the money leaves so no big deal. However, our clever bankers, and I was one of them a decade back, had lent a substantial part of these funds to domestic borrowers, so when the delink did not happen and the funds went back almost every bank was caught with their loan to deposit ratio (which is normally 80-85%) suddenly find they had more loans on their books then deposits to fund them. Well established banks with loads of liquidity were caught with a ration of close to 135% on loans to deposits. Given that international banks were stuck with their own problems even the inter bank market was struggling to fund the banks here.
The timing of all this was smack in the middle of the meltdown happening thus closing the door to the one thing that could have made this crisis less dramatic; the access to liquidity. If the banks had not been so exposed then in a nervous market more monetary moves to increase liquidity in the banking system would have given the buffer to soften the blow. This is what happened in India where huge amounts of liquidity were pumped into the banking system to make sure the consumer did not panic.
This does not mean the real estate crisis would not have happened. I am only arguing that it would not have been so serve and more importantly one has to then question was the rationale for the development model for Dubai wrong? I do not believe the model was wrong, but two things needed adjustment that just did not happen.
1. The size and scale of the development was not tuned into the sustainable demand levels.
2. The role of private sector should have been the bigger chunk of the development cake rather than end up making government owned companies the biggest competitor to the private sector.
I am often asked a question about how long this recession will last and how will Dubai come out of it?
In the first place the recession is a global event and while France, China, India and Germany have shown signs of weathering the storm better, the chances are that towards the fourth quarter of 2009 the financial elements needed for a recovery will be in better shape. This deflation we have seen globally, and in Dubai, was needed for two reasons, one to slow down an over heating economy, and secondly to bring some value back to the process of development. I believe that consumer confidence will stabilize towards the end of this year and net investments will begin to show an increase in the first quarter of next year. Yes this is totally contrary to what some leading bank researchers are saying that we have another 18 months of hardship, but trust me I know that crowd well, they are the same researchers who a year back were predicting some very exuberant predictions.
The way Dubai will come out of this is actually simpler than it looks. While the current funding of Government Bonds of $ 20 billion as a first step forward Dubai has a good collection of companies it can privatize, from airlines to hotels and property companies too. The question is the timing of such privatizations and whether this is the route to take. I believe the enabling element of Dubai's economy means in the region it is the best suited in terms of ease of business and infrastructure to be the place of first choice for regionally based companies. I believe a spending spree in Iraq on account of rebuilding the country will commence early next year, this backed up with a higher oil price will bring stability to the region and a demand led economy will emerge, but gradually. UAE and Dubai are best positioned to take advantage of the support role it will perform and this is where there base of the demand side of the equation will come to the economy.
This does not mean that the government of Dubai should not rethink their role in the economic model. I think they should go towards being more an enabler and privatize some of the business concerns, perhaps with the timing of the first offerings to be in the early part of next year. There should also be a revisit to some of the more grand projects and these should be put on the back burner and bring back the confidence that with some projects shelved the expect financial load will be substantially less. As I said to someone the other day "You can still plan to do all you wanted but just don't do them at the pace you were trying to.'
Wednesday, June 17, 2009
Iran Imploding?
Iranian politics is as much about what the people in the street feel and express, as it is about the bizarre behind the scene politicking and the power play that makes Iran the strange enigma that it is. To simply view the election fraud as limited to what President Ahmadinejad manipulated misses out some key aspects of undercurrent of why such a massive election fraud was done in the first place. It simply could not have been the fear of a Reformist election victory since in 1997 and 2001 Reformists did come to power. The fact that Ayatollah Ali Khameni the Spiritual Leader intervened into the election process and clearly supported Ahmadinejad before the election and was quick to endorse the fraudulent results the day after the election might hold some of the clues as to whether a internal coup is under way in Iran.
Previously Khameni has accepted Reformist governments and in both terms of office of these governments he balanced the reformist impact by appointing ultra conservatives to the Judiciary and the Media ensuring that the reformist governments were reined in and not as effective as they would like to be. At the start of this election campaign a shift started to appear as the important elements of the clergy, especially from Qom were expressing statements that they would not support any of the candidates. For these very conservative clergy from Qom, who have supported every conservative candidate in the past elections, to say they will not support anyone was simply the politically correct way of saying they do not agree with Ahmadinejad's policies.
Keeping in the that the former President being the head of the Assembly of Experts, a power group from the parliament who advise the Guardian Council was supporting the Reformist Mousavi in the election and is known not to have a great relationship with Ali Khameni could well hold the reason why this election was allowed to be rigged and why the Grand Spiritual Leader is taking sides so openly.
Unlike his predecessor, Ayatollah Khomeni, Ali Khameni has ambitions of protecting his vast business and political interests within the country. He also wants to ensure that his son Mojtaba, has a role in the political future of Iran and it is strange that for the past year conservative media close to the clergy have been portraying Ali Khameni as 'Ali of the Age', almost giving him a special place in history and perhaps making a subtle reference to Imam Ali, the First Shia Imam who passed on the reins to his son Hassan. Whether or not Mojtaba has the standing or the support to take his fathers place is moot, but one thing is clear that Ali Khameni does wish to protect his business interests and a Reformist government with Rafsanjani heading the Experts Assembly and the clergy in Qom not happy with the way Ali Khameni has blindly endorsed the reign of Ahmadinejad all indicates that this current situation in Iran is as much a battle for the survival of Ahmadinejad as it is of Ayatollah Ali Khameni.
It is thus not surprising at in some of the street demonstrations there have been calls to also reform the Iranian system to ease power, which is absolute, from the Spiritual Leader back to the elected government. Had the Ali Khameni not taken sides the issue would have been easier to resolve by asking for an impartial inquiry and dependent on the results a re-election. Now, ofcourse, the lines are being be drawn harder by the day. The arrests and the nature of the reprisal by Ahmadinejad and his supports to the demonstrators and voices of disagreement shows that the hard liners are fully aware that the stakes are high. Mousavi supporters and his political machinery are being careful not to let the demonstrations spill over into violent clashes giving the State apparatus to impose curfews and a full scale crackdown.
The worlds response has been rather muted, calling it Iran's internal affair. This is a convenient side step if I may say, because events in other countries are not seen as 'internal affairs'. If the world does want to see the rule of the ballot box then Iran's current situation does call for the condemnation of the election fraud, and the end to the repressive measures being used against opponents of Ahmadinejad. There cannot be two ways about it and this is a matter of political and human ethics and not one of diplomatic niceties.
As far as the effect on the Middle East, it is clear that a 're-elected' Ahmadinejad will feel more vindicated, even if in his own eyes, about his past policies and may continue his policies of the past four years. There is a highly unlikely possibility that Ahmadinejad may try and become a reformed man and deal with the Middle East and the West differently to show his political acumen and in a way deflect attention from his crackdown on the reformists opposing him. His bet will be that the West accepts the dictates of political realities and if he can soften his position on some key issues he may find Washington and the West will be happier dealing with a devil they know, and who is trying ti change, rather than see further turmoil within Iran. I am afraid that with time this might well be the outcome of the situation as it seems the current impasse will not be resolved by a recasting of votes, unless ofcourse the powerful Guardian Council has a change of heart and signals that the clergy will not support Ahmadinejad. I would call this the Qom effect, where it has become clear that the Qom clergy, who unfortunately command more spiritual importance than political power, have abandoned Ahmadinejad.
Whether Ali Khanemi can come to realize the precarious situation the country is in with is partisan policies is another matter. Perhaps the pressure from the clergy itself may allow him to save face by leaving matters to the Guardian Council to decide and play more of the spiritual patriarch that he is supposed to be. This will be the only solution to the current problem, unless ofcourse the reformist tire of the demonstrations and the lack of progress and resign themselves to another four years of Ahmadinejad.
Previously Khameni has accepted Reformist governments and in both terms of office of these governments he balanced the reformist impact by appointing ultra conservatives to the Judiciary and the Media ensuring that the reformist governments were reined in and not as effective as they would like to be. At the start of this election campaign a shift started to appear as the important elements of the clergy, especially from Qom were expressing statements that they would not support any of the candidates. For these very conservative clergy from Qom, who have supported every conservative candidate in the past elections, to say they will not support anyone was simply the politically correct way of saying they do not agree with Ahmadinejad's policies.
Keeping in the that the former President being the head of the Assembly of Experts, a power group from the parliament who advise the Guardian Council was supporting the Reformist Mousavi in the election and is known not to have a great relationship with Ali Khameni could well hold the reason why this election was allowed to be rigged and why the Grand Spiritual Leader is taking sides so openly.
Unlike his predecessor, Ayatollah Khomeni, Ali Khameni has ambitions of protecting his vast business and political interests within the country. He also wants to ensure that his son Mojtaba, has a role in the political future of Iran and it is strange that for the past year conservative media close to the clergy have been portraying Ali Khameni as 'Ali of the Age', almost giving him a special place in history and perhaps making a subtle reference to Imam Ali, the First Shia Imam who passed on the reins to his son Hassan. Whether or not Mojtaba has the standing or the support to take his fathers place is moot, but one thing is clear that Ali Khameni does wish to protect his business interests and a Reformist government with Rafsanjani heading the Experts Assembly and the clergy in Qom not happy with the way Ali Khameni has blindly endorsed the reign of Ahmadinejad all indicates that this current situation in Iran is as much a battle for the survival of Ahmadinejad as it is of Ayatollah Ali Khameni.
It is thus not surprising at in some of the street demonstrations there have been calls to also reform the Iranian system to ease power, which is absolute, from the Spiritual Leader back to the elected government. Had the Ali Khameni not taken sides the issue would have been easier to resolve by asking for an impartial inquiry and dependent on the results a re-election. Now, ofcourse, the lines are being be drawn harder by the day. The arrests and the nature of the reprisal by Ahmadinejad and his supports to the demonstrators and voices of disagreement shows that the hard liners are fully aware that the stakes are high. Mousavi supporters and his political machinery are being careful not to let the demonstrations spill over into violent clashes giving the State apparatus to impose curfews and a full scale crackdown.
The worlds response has been rather muted, calling it Iran's internal affair. This is a convenient side step if I may say, because events in other countries are not seen as 'internal affairs'. If the world does want to see the rule of the ballot box then Iran's current situation does call for the condemnation of the election fraud, and the end to the repressive measures being used against opponents of Ahmadinejad. There cannot be two ways about it and this is a matter of political and human ethics and not one of diplomatic niceties.
As far as the effect on the Middle East, it is clear that a 're-elected' Ahmadinejad will feel more vindicated, even if in his own eyes, about his past policies and may continue his policies of the past four years. There is a highly unlikely possibility that Ahmadinejad may try and become a reformed man and deal with the Middle East and the West differently to show his political acumen and in a way deflect attention from his crackdown on the reformists opposing him. His bet will be that the West accepts the dictates of political realities and if he can soften his position on some key issues he may find Washington and the West will be happier dealing with a devil they know, and who is trying ti change, rather than see further turmoil within Iran. I am afraid that with time this might well be the outcome of the situation as it seems the current impasse will not be resolved by a recasting of votes, unless ofcourse the powerful Guardian Council has a change of heart and signals that the clergy will not support Ahmadinejad. I would call this the Qom effect, where it has become clear that the Qom clergy, who unfortunately command more spiritual importance than political power, have abandoned Ahmadinejad.
Whether Ali Khanemi can come to realize the precarious situation the country is in with is partisan policies is another matter. Perhaps the pressure from the clergy itself may allow him to save face by leaving matters to the Guardian Council to decide and play more of the spiritual patriarch that he is supposed to be. This will be the only solution to the current problem, unless ofcourse the reformist tire of the demonstrations and the lack of progress and resign themselves to another four years of Ahmadinejad.
Monday, June 1, 2009
Winning the peace
The Pakistan military has been scoring some much needed military victories against the Pakistan Taliban in the region of Swat. Indeed the ferocity of the Pakistan army has been boosted by discovering bodies of Pakistani soldiers with their throats slit bringing about an attitude to yield no quarter to the Taliban. In a sense this does mean that the Taliban and the Pakistan army have now started to carry grudges and there are reports of Taliban being meted out a bit of their own medicine in terms of the harshness with which they are being dealt.
However, the Pakistan military is being asked to reverse the tide of the Taliban given that the Taliban gained control not because of the military failure but due to the spineless of the current government in Islamabad. The tricky question is that winning ground from the Taliban is one thing but winning the peace is another. I feel there are two major threats to the current series of victories of the army.
Firstly, the Taliban may well be giving up strategic towns like Mingora and others in the Swat valley, but lets not forget some of these Taliban are fading into the country side in smaller bands and mingling with the population. While this is not that easy its never the less an army of zealots who can feed of the population without necessarily having the contraptions of a standing army.
Secondly, the Internally Displaced Persons, or IDP, as they are being labeled, are more restless than before as they seek to go back but to their destroyed homes and start to rebuild their lives. A failure of the Government and the international donors to Pakistan to deal with the pressing issues of these people will result in a back lash that the country can ill afford to witness at this stage.
The military is not equipped with the mindset to seek the quick rehabilitation of the IDP's and the government is woefully inexperienced to gather the resources to rebuild the infrastructure and the homes destroyed during the fighting. Historically the government machinery is not geared up for the quick response that the situation demands.
If long lasting goodwill is not created with the displaced people of the Swat valley then clearly the battle for the hearts and minds of the people will suffer an irreparable setback. The Taliban's tactics of revenge attacks in the cities of Peshawar and Lahore have not won them any friends in the country and the government should not consider this as enough reason to be winning the war against the Pakistan Taliban. On the contrary it is a matter of urgency that the Swat Valley towns should be rebuilt and essential services restored showing that defeating the Taliban is only the first step to building the confidence of the people in the government.
However, in terms of the Taliban roll back one has to not rejoice too much considering that the Taliban tactic is that after a major defeat they lie low and regroup, usually taking two to three years before they come back into the forefront. Thus to say a military victory will have rid the country of the Taliban menace would be too optimistic. The strategy has to be clear that while the Taliban burrow down over the next couple of years, the government and all other positive segments of society should accelerate education, economic reforms aimed at the grass root level and widespread engagement of the people in the areas at risk to the next Taliban encroachment so that the Taliban cannot feed of the dissatisfaction of the people.
However, the Pakistan military is being asked to reverse the tide of the Taliban given that the Taliban gained control not because of the military failure but due to the spineless of the current government in Islamabad. The tricky question is that winning ground from the Taliban is one thing but winning the peace is another. I feel there are two major threats to the current series of victories of the army.
Firstly, the Taliban may well be giving up strategic towns like Mingora and others in the Swat valley, but lets not forget some of these Taliban are fading into the country side in smaller bands and mingling with the population. While this is not that easy its never the less an army of zealots who can feed of the population without necessarily having the contraptions of a standing army.
Secondly, the Internally Displaced Persons, or IDP, as they are being labeled, are more restless than before as they seek to go back but to their destroyed homes and start to rebuild their lives. A failure of the Government and the international donors to Pakistan to deal with the pressing issues of these people will result in a back lash that the country can ill afford to witness at this stage.
The military is not equipped with the mindset to seek the quick rehabilitation of the IDP's and the government is woefully inexperienced to gather the resources to rebuild the infrastructure and the homes destroyed during the fighting. Historically the government machinery is not geared up for the quick response that the situation demands.
If long lasting goodwill is not created with the displaced people of the Swat valley then clearly the battle for the hearts and minds of the people will suffer an irreparable setback. The Taliban's tactics of revenge attacks in the cities of Peshawar and Lahore have not won them any friends in the country and the government should not consider this as enough reason to be winning the war against the Pakistan Taliban. On the contrary it is a matter of urgency that the Swat Valley towns should be rebuilt and essential services restored showing that defeating the Taliban is only the first step to building the confidence of the people in the government.
However, in terms of the Taliban roll back one has to not rejoice too much considering that the Taliban tactic is that after a major defeat they lie low and regroup, usually taking two to three years before they come back into the forefront. Thus to say a military victory will have rid the country of the Taliban menace would be too optimistic. The strategy has to be clear that while the Taliban burrow down over the next couple of years, the government and all other positive segments of society should accelerate education, economic reforms aimed at the grass root level and widespread engagement of the people in the areas at risk to the next Taliban encroachment so that the Taliban cannot feed of the dissatisfaction of the people.
Tuesday, May 12, 2009
Obama's Open-Minded Middle East Solution
Washington Post discussion
The Current Discussion: Are Israeli Prime Minister Netanyahu and President Obama on a collision course over Iran and the Palestinian problem? What would be the consequences of a breach between the United States and Israel?
One of the assurances that Israel has always had is the unwavering support of Washington, both when Israel is harmed and when it acts to harm others in response to its own perception of threat. President Obama, it would seem, is taking a slight detour from this established principle of U.S. foreign policy; keeping Israel as the cornerstone of U.S. policy in the Middle East, but effectively seeking a dialogue with Iran and at the same time wanting to push both Israel and the Palestinians to work out peace. While on the face of it there is nothing new in this approach, look at it in the rhetorical context of how past American administrations have handled Middle East policy. President Obama's approach is more open-minded and more interesting. His call to lead the world through example and deeds rather than simply by bullying has resonated well with many countries.
The Israeli position, as much as it professes the need for peace, takes as a starting point that peace must meet Israeli demands, which of course include the immediate cessation of all nuclear activity by Iran and a dismemberment of Hamas in Palestine. Yes, Iran must stop any activity related to the procurement of nuclear weapons and open itself up for international monitoring. But by the same logic Israel, too, must come clean on its own nuclear weapons, which it does possess, and to come to an agreement with the IAEA on how it intends to dismantle its own nuclear arsenal. If the logic is that it needs them for its defense, then clearly other countries, be they Iran or Mongolia, can make the same argument. As for Hamas, we often forget that it was elected into power. While it does resort to violence, which it too must renounce, the fact remains that its political future must be decided by the ballot box and not by pressure from abroad.
President Obama will face the wrath of many of the hawks in the U.S. State Department on his foreign policy initiatives as he tempers threats with dialogue in the Middle East. While it may not win him friends on the right of the political spectrum, it will certainly bring back fairness to the attempt for peace on the region. The chief complaint for the past three or more decades has been that the U.S. government has never really been balanced and fair in its handling of the Arab world, especially when it came to the issue of Israel. I am not suggesting that President Obama will or should abandon Israel, though the sad truth is that when he does ask for moderation in U.S. support and seek fairness and dialogue, many will assume that Israel has been abandoned.
Israel's preferred solution for Iran would be to first bomb their suspected nuclear sites, as they did with Iraq in 1981. But the world is different place than it was then. It is also well known that after Pakistan acquired nuclear weapons capabilities, Israel drew up a contingency plan to use Sri Lankan airbases for which they had operational rights, to see if they could disable Pakistan's nuclear capability. The fact that all this never happened does not mean that Israel was never planning such moves. It highlights the underlying mindset of how Tel Aviv would wish to resolve things in the Middle East. Obama has a sincerity of purpose and a resolve for showing the way without force which his predecessor grossly lacked.
While people might assume a U.S.-Israel falling out with the new Obama policy, that's highly unlikely. Strains will appear, but a complete breakdown will not happen. It would be helpful if Israelis also understood that the constraints of world policy are complex. While peace in the Middle East is of paramount importance, there is a need to consider a strategic peace effort which is good for all, not just for a few. The consequences of these changes in U.S. policy will at worst mean a sulking Israeli Prime Minister and at best a realization that the road to peace in the Middle East does not only lead through Tel Aviv. If anything, it goes through all the capitals of the Middle East.
The Current Discussion: Are Israeli Prime Minister Netanyahu and President Obama on a collision course over Iran and the Palestinian problem? What would be the consequences of a breach between the United States and Israel?
One of the assurances that Israel has always had is the unwavering support of Washington, both when Israel is harmed and when it acts to harm others in response to its own perception of threat. President Obama, it would seem, is taking a slight detour from this established principle of U.S. foreign policy; keeping Israel as the cornerstone of U.S. policy in the Middle East, but effectively seeking a dialogue with Iran and at the same time wanting to push both Israel and the Palestinians to work out peace. While on the face of it there is nothing new in this approach, look at it in the rhetorical context of how past American administrations have handled Middle East policy. President Obama's approach is more open-minded and more interesting. His call to lead the world through example and deeds rather than simply by bullying has resonated well with many countries.
The Israeli position, as much as it professes the need for peace, takes as a starting point that peace must meet Israeli demands, which of course include the immediate cessation of all nuclear activity by Iran and a dismemberment of Hamas in Palestine. Yes, Iran must stop any activity related to the procurement of nuclear weapons and open itself up for international monitoring. But by the same logic Israel, too, must come clean on its own nuclear weapons, which it does possess, and to come to an agreement with the IAEA on how it intends to dismantle its own nuclear arsenal. If the logic is that it needs them for its defense, then clearly other countries, be they Iran or Mongolia, can make the same argument. As for Hamas, we often forget that it was elected into power. While it does resort to violence, which it too must renounce, the fact remains that its political future must be decided by the ballot box and not by pressure from abroad.
President Obama will face the wrath of many of the hawks in the U.S. State Department on his foreign policy initiatives as he tempers threats with dialogue in the Middle East. While it may not win him friends on the right of the political spectrum, it will certainly bring back fairness to the attempt for peace on the region. The chief complaint for the past three or more decades has been that the U.S. government has never really been balanced and fair in its handling of the Arab world, especially when it came to the issue of Israel. I am not suggesting that President Obama will or should abandon Israel, though the sad truth is that when he does ask for moderation in U.S. support and seek fairness and dialogue, many will assume that Israel has been abandoned.
Israel's preferred solution for Iran would be to first bomb their suspected nuclear sites, as they did with Iraq in 1981. But the world is different place than it was then. It is also well known that after Pakistan acquired nuclear weapons capabilities, Israel drew up a contingency plan to use Sri Lankan airbases for which they had operational rights, to see if they could disable Pakistan's nuclear capability. The fact that all this never happened does not mean that Israel was never planning such moves. It highlights the underlying mindset of how Tel Aviv would wish to resolve things in the Middle East. Obama has a sincerity of purpose and a resolve for showing the way without force which his predecessor grossly lacked.
While people might assume a U.S.-Israel falling out with the new Obama policy, that's highly unlikely. Strains will appear, but a complete breakdown will not happen. It would be helpful if Israelis also understood that the constraints of world policy are complex. While peace in the Middle East is of paramount importance, there is a need to consider a strategic peace effort which is good for all, not just for a few. The consequences of these changes in U.S. policy will at worst mean a sulking Israeli Prime Minister and at best a realization that the road to peace in the Middle East does not only lead through Tel Aviv. If anything, it goes through all the capitals of the Middle East.
Monday, April 27, 2009
The Talibanization of Pakistan
When the Swat deal was done by Mr. Zardari and his rather ill informed government, I had written that this form of appeasement does not mean that the Taliban have been stopped, it only implies that they have discovered the formula of continued expansion. Thus their recent entry into Bunner district, a few rocket throws from Islamabad, comes as no surprise; indeed friends tell me more black and green turbaned youth are visible in Lahore then every before. Its almost like a Fifth column infiltrating society and given their religious accent know that opposition to them will be minimal and when needed the Taliban form of law 'Nizam-e-Addal' (System of Justice) will be meted out.
I recently saw a wonderful movie, Khuda Kay Liye (For the Sake of God) which portrays exactly the challenge we now see in Pakistan. While US statements that they would not wish to see Pakistan be held hostage by the Taliban are all fine and sweet rhetoric, the truth is that as the majority of Pakistani's do not want the Taliban in their own midst, it is they who must speak out. The People Party of Zardari and the Muslim League of Nawaz Sharif have never had an agenda of support for the Taliban and they combined hold the maximum public vote. It is therefore logical to assume, rightly, that it is these two political parties who have to speak out against what the Taliban is doing.
Well where is the solution then?
First with the Taliban spreading to Bunner, the Pakistan government should tell them the Swat deal is off, and it should establish its own effective rule over the Swat valley, and then if America really wants to help, a major program be started to rebuild roads and hospitals and schools (yes the Taliban destroyed 160 of them) which will create jobs and let people see that their future is in prosperity and not in black turbans and rocket propelled launchers. It is the lack of economic opportunities that has driven people to the hard liners who have stepped into a vacuum of ineffective government and in the process created a promise that the Taliban can guarantee security for the people better than the government.
Secondly, if the US really wants to help they must understand that missiles fired in Pakistan cannot help the eradication of the Taliban. If nothing else in the shrapnel and the dead bodies, mostly of innocent civilians, lies the very proof that the Taliban carry from village to village telling people that the 'Infidel Americans' and their 'Stooges in Islamabad' are their enemies. The hunt of foreign fighters and the issues now within Pakistan of a Pakistani Taliban are entirely different and while may be connected through some moral umbilical chord, are really a distinctly different set of circumstances. The Al Qadea want to get even with the US, the Pakistan Taliban want to take over Pakistani society through what I call 'social subversion'. While their aims may eventually be the same the battle grounds are distinctly different.
Finally, I do feel that the Pakistani ISI needs a complete overhaul, better still it needs to be disbanded and a new structure be created that is truly nationalist as opposed to religiously motivated. The damage that General Zia has done to the Pakistan Army remain deep and he must still be beaming his toothy smile that almost 15 years on and he still has his pet organization pulling the invisible strings of government.
For those who will claim that the issue of Pakistan is about Islam miss the point. Islam is not a religion about violence or coercion and its tolerance through the ages is well documented. The Taliban have no credence to claim any sanction under the name of Islam, because simply put what they advocate is not Islam, but some hybrid creed developed in the caves and villages of Afghanistan by a half blind mad man, Mullah Omar, whose understand of Islam could be put on a postage stamp and still leave room to spare.
This is indeed time for everyone in Pakistan to speak out against the tyranny of the Taliban and if we could have a million man march to restore the judges why cannot we have a 10 million man march in Pakistan to denounce the Taliban. Let them hear this message that their creed cannot be in a country which was founded on modern principles of Islam.
I recently saw a wonderful movie, Khuda Kay Liye (For the Sake of God) which portrays exactly the challenge we now see in Pakistan. While US statements that they would not wish to see Pakistan be held hostage by the Taliban are all fine and sweet rhetoric, the truth is that as the majority of Pakistani's do not want the Taliban in their own midst, it is they who must speak out. The People Party of Zardari and the Muslim League of Nawaz Sharif have never had an agenda of support for the Taliban and they combined hold the maximum public vote. It is therefore logical to assume, rightly, that it is these two political parties who have to speak out against what the Taliban is doing.
Well where is the solution then?
First with the Taliban spreading to Bunner, the Pakistan government should tell them the Swat deal is off, and it should establish its own effective rule over the Swat valley, and then if America really wants to help, a major program be started to rebuild roads and hospitals and schools (yes the Taliban destroyed 160 of them) which will create jobs and let people see that their future is in prosperity and not in black turbans and rocket propelled launchers. It is the lack of economic opportunities that has driven people to the hard liners who have stepped into a vacuum of ineffective government and in the process created a promise that the Taliban can guarantee security for the people better than the government.
Secondly, if the US really wants to help they must understand that missiles fired in Pakistan cannot help the eradication of the Taliban. If nothing else in the shrapnel and the dead bodies, mostly of innocent civilians, lies the very proof that the Taliban carry from village to village telling people that the 'Infidel Americans' and their 'Stooges in Islamabad' are their enemies. The hunt of foreign fighters and the issues now within Pakistan of a Pakistani Taliban are entirely different and while may be connected through some moral umbilical chord, are really a distinctly different set of circumstances. The Al Qadea want to get even with the US, the Pakistan Taliban want to take over Pakistani society through what I call 'social subversion'. While their aims may eventually be the same the battle grounds are distinctly different.
Finally, I do feel that the Pakistani ISI needs a complete overhaul, better still it needs to be disbanded and a new structure be created that is truly nationalist as opposed to religiously motivated. The damage that General Zia has done to the Pakistan Army remain deep and he must still be beaming his toothy smile that almost 15 years on and he still has his pet organization pulling the invisible strings of government.
For those who will claim that the issue of Pakistan is about Islam miss the point. Islam is not a religion about violence or coercion and its tolerance through the ages is well documented. The Taliban have no credence to claim any sanction under the name of Islam, because simply put what they advocate is not Islam, but some hybrid creed developed in the caves and villages of Afghanistan by a half blind mad man, Mullah Omar, whose understand of Islam could be put on a postage stamp and still leave room to spare.
This is indeed time for everyone in Pakistan to speak out against the tyranny of the Taliban and if we could have a million man march to restore the judges why cannot we have a 10 million man march in Pakistan to denounce the Taliban. Let them hear this message that their creed cannot be in a country which was founded on modern principles of Islam.
Saturday, January 24, 2009
Obama Must Bring Middle East to the Table
Obama's biggest mistake would be failing to bring the warring parties in the Middle East to the table. While the Arabs must also show their willingness to trust Obama, and be willing to allow him the time to settle down, they will also have to moderate their position if they want peace. On the Iraq front the conditions for a substantial U.S. withdrawal, even if incomplete, is more likely then ever before. Afghanistan will be a bigger challenge as confrontation has never worked in the long and checkered history of the country, and I am not sure that the Obama camp completely understands the complexities of that tribal land.
The Israeli government has given him the first real test of his foreign policy acumen. This adds to the Bush Blunder of Iraq and Afghanistan, where Obama has already made clear his position of disengagement, albeit with a slightly different approach. While in Iraq he would favor a quick withdrawal, in Afghanistan he would want to build up troop strength to overcome the resistance and 'bring peace' to the country. While policy action on both Iraq and Afghanistan are more within Obama's direct purview as the commander in chief of the U.S. Armed Forces, the situation in Gaza is more a test of his diplomatic determination.
Political observers in the Arab world may be banking too much on the Obama administration, hoping it will immediately seek a withdrawal of Israeli forces from Gaza and an end to the hostilities. This might be more a result of military realities. But dealing with the political carnage and the lack of trust in the U.S. as an honest broker in the Middle East are the more pressing issues for the Obama team. The expectation of the Obama administration is not to take sides, but more to be fair and even-handed in its dealing with all parties. Whether the issue is Gaza, Iraq or Afghanistan, the world expects the U.S. to restore confidence and be willing to make hard policy choices to bring peace.
On a broader canvas of foreign policy initiatives, Barack Obama will have to re-engage in serious dialogue all of the world actors whom Bush has spent eight long years alienating. Bush created a world where it was assumed, for example, that all Muslims were hell bent on destroying the United States, one in which the onus was on every Muslim to prove he or she was a 'good Muslim.' This clearly is a distorted view of the Muslim world, and it is one of Obama's most serious challenges. It will not be an easy task and there will have to be serious effort on both sides to find trust to engage in a new social set of principles. The 'War on Terror' will have to be replaced with a 'War on Intolerance', anger will have to be replaced with understanding, force will have to be replaced with empathy and most importantly, all must understand that a disjointed world is not in the interest of humanity.
Barack Obama has won the presidency. In the next six months, he has to win the right to be called a world statesman.
The Israeli government has given him the first real test of his foreign policy acumen. This adds to the Bush Blunder of Iraq and Afghanistan, where Obama has already made clear his position of disengagement, albeit with a slightly different approach. While in Iraq he would favor a quick withdrawal, in Afghanistan he would want to build up troop strength to overcome the resistance and 'bring peace' to the country. While policy action on both Iraq and Afghanistan are more within Obama's direct purview as the commander in chief of the U.S. Armed Forces, the situation in Gaza is more a test of his diplomatic determination.
Political observers in the Arab world may be banking too much on the Obama administration, hoping it will immediately seek a withdrawal of Israeli forces from Gaza and an end to the hostilities. This might be more a result of military realities. But dealing with the political carnage and the lack of trust in the U.S. as an honest broker in the Middle East are the more pressing issues for the Obama team. The expectation of the Obama administration is not to take sides, but more to be fair and even-handed in its dealing with all parties. Whether the issue is Gaza, Iraq or Afghanistan, the world expects the U.S. to restore confidence and be willing to make hard policy choices to bring peace.
On a broader canvas of foreign policy initiatives, Barack Obama will have to re-engage in serious dialogue all of the world actors whom Bush has spent eight long years alienating. Bush created a world where it was assumed, for example, that all Muslims were hell bent on destroying the United States, one in which the onus was on every Muslim to prove he or she was a 'good Muslim.' This clearly is a distorted view of the Muslim world, and it is one of Obama's most serious challenges. It will not be an easy task and there will have to be serious effort on both sides to find trust to engage in a new social set of principles. The 'War on Terror' will have to be replaced with a 'War on Intolerance', anger will have to be replaced with understanding, force will have to be replaced with empathy and most importantly, all must understand that a disjointed world is not in the interest of humanity.
Barack Obama has won the presidency. In the next six months, he has to win the right to be called a world statesman.
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