Volume 5, Number 1 July 2007

Editor: Jeffrey Boutwell Pu gwash Research Assistants: ISSUE BRIEF Erin Blankenship Celeste LeRoux Issued by the Council of the Pugwash Conferences on Science and World Affairs Design and Layout: Nobel Peace Prize 1995 Anne Read Printing: Cardinal Press Exploring the Potential for Economic Fredericksburg, Virginia Development and Cross-LoC Collaboration in by Moeed Yusuf

Pugwash Issue Briefs Introduction holders finally seem to have realized the highlight important issues importance of viewing the ultimate solution The territorial dispute over the state of which lie at the intersection as a product of a long drawn out process is the single most con - of science, technology and that aims to create an indigenous con - tentious issue between and . public policy. stituency for peace as well as an incentive The issue has been directly or indirectly structure for Pakistan and India such that Intended for wide circulation linked to several Indo-Pak wars and crises. they allow for complete normalization of to policy makers and While persistent efforts have been made to the dispute. analysts, the media, NGOs, find a resolution to the dispute, traditional - Perhaps the most promising ‘out of the the academic and research ly, the entire debate has centered on con - box’ idea floated is the possibility of accel - communities, as well as the cerns about territoriality, sovereignty, prin - erating economic development and Pugwash community, ciple of equality, and moral legitimacy. All strengthening human interaction in both Pugwash Issue Briefs will of these are aspects that allow for little flex - parts of divided Kashmir, both independent - contain articles, commen- ibility without invoking political repercus - ly of each other as well as in a cooperative taries and conclusions that sions for authorities on both sides. framework. The hope is that over time such emanate from the broad Notwithstanding, the failure of the two an approach would integrate peoples and range of Pugwash workshops sides to resolve their differences within the economies on both sides substantially, thus and conferences held each traditional paradigm has finally pushed forming a potent constituency for perma - year. them to broaden their vision and allow nent normalization. more ‘innovative’ ideas to be debated. The The impetus to explore the economic Perspectives and recom- post-9/11 geopolitical situation in South route to enhance the likelihood of political mendations contained in the has acted as a major push factor for reconciliation is grounded in the liberal the - Issue Briefs represent those Islamabad and New to approach the ory of economic interdependence. Propo - of the individual authors, not issue with a new resolve. The positive spin- nents of the theory perceive trade to be of the Pugwash Conferences off of this welcome change is the window of inherently beneficial for countries as it or its funders. This Pugwash opportunity for relevant stakeholders to brings efficiency gains for producers, con - Issue Brief has been funded contemplate ‘out of the box’ thinking on sumers, and governments. Interdependence, in part by the Carnegie Jammu and Kashmir. The debate is now in turn, ought to bring amelioration of ten - Corporation of New York and increasingly moving away from trying to sions or conflict as a welcome political the U.S. Institute of Peace. impose a permanent solution to adopting a externality. 1 On the domestic front, trade more gradual approach to the issue. Stake - theorists contend that increased trade spurs identifies various sources to finance the suggest - domestic economic activity, thus generating ed plan. Finally, we briefly discuss some gover - employment, reducing unrest and increasing nance concerns relevant to the economic coop - cooperation within local populations. 2 The eco - eration design. nomic theory of interdependence provides the conceptual framework for our analysis. Overview of the Kashmir dispute While the debate on the potential for eco - Jammu and Kashmir are considered a single nomic integration in Jammu Kashmir has been entity but in two parts, located in the northwest initiated, it is being conducted in a broadly part of the South Asian sub-continent. It is land - defined framework. Thus far, there has been lit - locked and borders the Indian states of tle effort to focus on the particular avenues for Himachel Pradesh and to the south, collaboration and the implementation mecha - Pakistan to the west, Chinese territory of nisms that could be employed. Moreover, the Sinkiang and Tibet to the East and need for a proactive civil society role to lend per - to the northwest (see annex 1). 5 Almost 80 per - manence to such an approach is virtually absent cent of the state’s population is Muslim. Pak - from literature. This paper seeks to fill the void istani Kashmir has a population of 4.1 million, by discussing various potential aspects for eco - almost all of which is Muslim. 6 Indian Kashmir nomic cooperation and the role a vibrant civil comprises 10 million people, of whom 75 per - society could play within such a framework. cent are . 7 Within Indian Kashmir, the We focus primarily on the possibility for devel - , which is the heart of the dis - opment in Pakistani Kashmir 3 and on identify - pute, has a population of over 3 million, 93 per - ing the avenues for joint initiatives with Indian cent of which is Muslim. 8 The region of Jammu Kashmir from ’s 4 perspective. also comprises nearly 3 million people, with 57 The paper begins by providing a brief percent and 40 percent Muslims. 9 The overview of the Kashmir dispute. The socio- district of is inhabited by 1.5 million economic profile of Pakistani Kashmir is then people, 55 percent of whom are Buddhists and presented. Next, a detailed discussion about approximately 40 percent are Muslims. 10 The various avenues for economic development in latter are predominantly Shia. Pakistani Kashmir and the potential initiatives The origins of the Kashmir dispute lie in the where Pakistani and Indian Kashmir could partition of British India. Kashmir was a prince - cooperate with each other are highlighted. ly state of British India whose ruler was given This discussion is followed by a mention of the the option of joining one of the two new states, potential for civil society involvement in the Pakistan and India, based on the guiding princi - proposed framework. The penultimate section ples of religious majority and geographical conti - guity. 11 As post-partition events unfolded in Moeed Yusuf is currently a Special Guest scholar at the , USA. He is also a candi - Jammu Kashmir, the , a Hindu, was date for a Doctorate in Political Science at Boston University, USA. His permanent affiliation is with faced by a Muslim rebellion, which threatened Strategic and Economic Policy Research (Pvt. Ltd), Pakistan where he serves as a Research Fellow. He is his rule. Under serious threat of a takeover by a also visiting scholar at the Sustainable Development Policy Institute (SDPI), Pakistan. Mr. Yusuf focus - the rebels, the Maharaja requested military help es on both political economy considerations as well as concerns falling within the ambit of Pakistan’s security policy. His research interests include: Pakistan’s macro-economy, trade and sustainable devel - from the Indian government, and as a pre-condi - 12 opment issues, prospects for investment in economic ventures of strategic importance, South Asian tion acceded the state to India. Yet by the time nuclear weapons and the “stability-instability paradox,” relevance of nuclear deterrence versus nuclear military assistance from India arrived, the Mus - proliferation in , global non-proliferation regime, the Kashmir dispute, and United States lim rebellion had already managed to capture strategic interests in South Asia. Muzaffarabad (now capital of the Pakistani 13 Mr. Yusuf has taught as a member of the visiting faculty at the Department of Defence and Strategic Kashmir). The present day territorial distribu - Studies at Quaid-e-Azam University and is currently a Teaching Fellow at Boston University’s political tion of Jammu Kashmir broadly reflects the area science department. Mr. Yusuf has published widely in national/international journals, organizational each side managed to bring under its control at publications, and magazines. He writes a weekly column in The Friday Times, Pakistan. He is currently the time. The refused to also engaged in writing a book, which is a compilation of his previous writings on strategic and econom - accept Kashmir’s accession to India, which it ic issues relevant to Pakistan. The author would like to thank Gen. (ret.) Talat Masood and Jeffrey claimed violated the fundamental principle that Boutwell for helpful comments on the paper. formed the basis for partition. 14 It further

2 Pugwash Issue Brief alleged that Kashmir’s accession came about as a result of ‘fraud and violence’ that allowed India to exert pressure on the Maharaja. 15 The issue acquired international status when India took the matter to the (U.N.) Security Council in 1948. 16 Despite efforts by the U.N. and periodic discussions on Kashmir between Pakistan and India in various forums, no tangible progress has been made on the issue. To the contrary, Kashmir has been the cause of Pakistan-India armed conflict in 1948, 1965, and 1999. 17 Near-war crises relevant to the tense situation were experienced in 1987, 1990, and 2001-02. Apart from the impact on bilateral relations, the dispute has had tremendous impact on the state of Jammu and Kashmir itself. Indian Kash - mir has had a turbulent existence ever since independence. The state has witnessed a perpet - ual presence of secessionist elements which have resulted in periodic violence. Resentment in Indi - Pakistan and India have concluded a formal an Kashmir climaxed in 1989 when an active Jammu Kashmir ceasefire on the LoC, initiated a bus-service insurgency erupted in the state. Ever since, the between Muzaffarabad and , agreed to insurgency has proceeded with an intensity that do the same for the Rawalakot- route, is matched by few other conflicts in the world. opened five LoC crossing points in the after - The fall out has resulted in the killing of over math of the earthquake, and reached an agree - 60,000 people and a much higher number of ment to allow trade in raw materials across the injuries sustained by civilians, security personnel LoC. 19 These are commendable initial steps that and militants. 18 While Pakistani Kashmir has ought to be continued in a quest to accelerate not experienced active violence, the region has the process towards normalization. In this lagged behind in terms of macroeconomic devel - regard, the need to develop an institutionalized opment. Having viewed the region entirely in a framework for economic cooperation is key. strategic paradigm, Islamabad has often main - Before deliberating upon this issue however, it is tained a tight fisted control over its part of the important to highlight the existing socio-eco - state, overlooking the pressing socio-economic nomic situation in Kashmir. development concerns in the process. The ongoing violence and the overall mis - Socio-economic profile of Jammu trust between Pakistan and India have meant Kashmir and Northern areas that the two parts of Kashmir have remained completely cut-off from each other over the The urgent need for addressing economic con - years. Trade between the two sides is also non- cerns in Jammu Kashmir is obvious from an existent. Catering to their insecurities with overview of the state’s dismal socio-economic regard to Jammu Kashmir, Islamabad and New profile. Pakistani Kashmir’s per capita income 20 Delhi have treated the divided Kashmir as two stands between USD 185-200. The economy isolated entities. This has taken away the poten - is predominantly rural in its orientation. As tial to explore natural complements between the much as 88 percent of the population is depen - peoples and economies of the divided state. dant on agriculture and forestry as the principal As already mentioned, of late, the traditional source of livelihood. In the rural areas, income disconnect has been undergoing revision. Both from households’ earnings constitutes as much sides have finally begun to step down from their as 40 percent of the total income, with the rest maximalist positions. In the past four years, coming from employment, business or remit -

Pugwash Issue Brief 3 40 percent of the villages have access to water. 26 For Indian Kashmir, it would suffice to say that the situation is not much different. The state has experienced much lower economic growth rates than India’s national average. The per capi - ta net state domestic product grew at 12.45 per - cent annually from 1980-2000, a rate much lower than most other Indian states. 27 Like Pak - istani Kashmir, industrial development has been slow and unemployment rates have remained substantially high. The insurgency has played a major role in disrupting the state’s economic growth. Moreover, social indicators reflect the poor quality of life for citizens. Literacy stands at 54.5 percent, well below India’s national aver - tances. 21 The latter forms a major part of age. 28 Indian Kashmir’s human development Paolo Cotta-Ramusino, resources flowing into the state for private use. index is below the national average as well. Amitabh Mattoo, Pres. Pervez The state’s economy has been adversely affected Moreover, the state’s ranking in terms of human Musharraf, and Gen. Talat in recent years due to a significant decline in development has declined over the years. 29 Masood at the Pugwash agricultural productivity. 22 Industrial develop - Conference on Kashmir, ment in the state has been sluggish. Despite an Potential for trade in goods between Islamabad, March 2006. increase in the number of industrial estates over Pakistan and Indian Kashmir the years, only marginal progress has been In this section, we look at the potential for achieved in terms of industrial production. The inter-Kashmir trade in goods. Although litera - unemployment rate is estimated between 35-50 ture on economic interdependence often meshes 23 percent. The Northern areas register a per the aspects of trade in goods with avenues for 24 capita income of approximately USD 120. joint ventures and investment opportunities, the The economy is agrarian, but productivity is policy prescriptions for the two aspects are in low due to the harsh climatic conditions. Indus - fact quite distinct. There is thus added value in trial activity is minimal. There is hardly any treating trade in goods independently from developed urban town to speak of in the entire investment/joint ventures. northern belt. Social indicators in Pakistani Kashmir are Trade in goods: A static estimation equally dismal, although the state has fared bet - Currently, there are hardly any quantitative esti - ter than Pakistan’s national average in terms of mates of trade potential between Indian and literacy. Literacy rate estimates put the figure at Pakistani Kashmir. This is largely a result of 55-60 percent. Incredibly, about 27 percent of unavailability of detailed trade data. Neverthe - the state’s recurring budget and about 10 percent less, a rudimentary estimation is possible. of the development budget is allocated to educa - Ten years ago, imports into Indian Kashmir tion. Gross enrollment rates stand at a remark - were higher than exports by approximately a able 95 percent for boys and 88 percent for girls. factor of four. While industrial production has Unfortunately, the story is quite the opposite on increased, the ratio has remained largely the health front. There are only 0.5 beds and unchanged. Although no official trade figures 0.191 doctors per 1000 people . The infant mor - for Pakistani Kashmir could be obtained, it is tality rate however has been reduced significant - known that the export potential for Azad Kash - ly to 56 deaths per 1000 live births. Almost 38 mir is lower than Indian Kashmir. percent of the rural population and 23 percent A notional estimate for export potential from of the urban population do not have access to Indian Kashmir to Pakistani Kashmir could be piped water. 25 In the Northern areas, literacy derived from the above table. The maximum rates stand at an abysmal 33 percent. Female lit - exportable value is USD 155.20 million. At the eracy is even lower at 25 percent. No more than risk of being unrealistic, even if we presume that

4 Pugwash Issue Brief Indian Kashmir’s entire exportable surplus is LoC trade is likely to end up focusing on pri - Table 1: Trade statistics traded with Pakistani Kashmir, the amount mary products, with horticulture exports going for Indian Kashmir comes to USD 155.20 million. Given the fact from Indian Kashmir and vegetable and fertiliz - in USD million 31 that Pakistani Kashmir’s potential is lower, the er exports flowing from Pakistani Kashmir. Year Import Export exportable surplus would be below USD 155.20 Trade volumes in other commodities are likely 1994-95 563.67 124.60 million. Therefore, the total trade potential to be relatively small. 1995-96 687.07 149.30 would fall below USD 310 million. Even this 1996-97 659.14 155.20 highly exaggerated figure is hardly attractive. Enhancing the potential for trade in goods Admittedly, trade potential between geo - As ought to be clear from the above, a static Source: Official statistics graphically contiguous conflict-economies is analysis paints a fairly dismal picture with regard released by the Jammu often understated if the analysis ignores informal to trade in goods. The low trade potential vali - and Kashmir Govern - ment, India. trade volumes, which usually thrive under condi - dates the abysmal economic situation on both tions similar to those in Jammu Kashmir. Indeed, sides of the LoC. Clearly, conflict in the region a number of studies on India-Pakistan trade con - has stifled economic opportunities, deterred pri - tend that official statistics understate trade vol - vate sector activity from taking off, and conse - umes substantially since the bulk of the trade is quently left the economies largely dependant on conducted through informal means. The reality primary goods production, with little exportable however, as highlighted in a recent analysis con - surpluses. There is thus an urgent need to explore ducted by the Sustainable Development Policy avenues both to optimize trade under the current Institute (SDPI), an Islamabad based think-tank, economic structures as well as to seek areas to is that informal trade amounts to a mere USD enhance economic productivity on both sides of 544 million. 30 More importantly, the study dis - the LoC, which would eventually lead to higher penses the previously held perception that the exportable surpluses. A number of avenues could LoC near the Neelam River was one of the be explored in this regard. major exchange points for informal consign - To optimize the current trade potential, the ments between Pakistan and India (this would foremost requirement is to remove all tariff and constitute inter-Kashmir informal trade). The para-tariff barriers to inter-Kashmir trade. SDPI study found informal exchanges across the There are existing proposals that call for inte - LoC to be so insignificant that the route was left gration of Jammu Kashmir, India, and Pakistan out of the final analysis. In essence, inter-Kash - through a sub-regional free trade agreement mir informal goods flows are minimal. within the South Asian Free Trade Agreement Further pessimism is shed on the potential (SAFTA) framework. 32 While this is realistic for trade in goods if one looks at the break - only in the long run, a less ambitious variant of down of the exportable commodities. For Indi - this could be a preferential trade arrangement an Kashmir, the key export items include textile which allows for cross-LoC duty free access of products, carpets, cricket bats, walnut and wal - raw materials and value added goods of Kash - nut kernels, apricot nuts, almond, coriander, miri origin. This would also necessitate having saffron, lentils, fluxes and chemicals, basic an agreement on the rules of origin. No sensi - drugs, and sewing machines. Pakistani Kash - tive lists ought to be prepared, thus allowing all mir’s major exports include marble, apricot, Kashmiri products to be traded free of duties. rice, onion, garlic, and fertilizers. The craft To maximize gains, an appropriate regulatory industry is a major production component in framework for tax breaks and simplified trade the economy on both sides as well. modalities would also have to be devised. A In order to determine trade potential, one positive beginning on this front would be to must eliminate products that are either being ensure that the recent agreement to trade raw produced indigenously across the LoC or can be materials across the LoC allows exchange free obtained at cheaper rates from either Pakistan of tariff and para-tariff barriers. or India (or any third country). The bulk of the Even before the preferential arrangement is value -added products fall in this category. A concluded, both sides must explore the option number of existing analyses confirm this by of establishing border markets at designated pointing out that in the final outcome cross- points. Three obvious locations could be the

Pugwash Issue Brief 5 Poonch-Rawala Kot route, Uri, and Chakothi. strategy. Consequently, hardly any professional All of these are current bus/truck routes. 33 The marketing entities or strategies exist on either fourth suggested point is near from side of the LoC. Much of the exports are facili - where a road link between Kargil and Skardu tated through individual contacts. Authorities would potentially pass in the future. The Kargil- on both sides of the LoC must therefore push Skardu route has been identified, as it would their respective countries to promote Kashmiri end up bringing economic interaction to an area exports, at the same time developing an internal that is essentially deprived of any commerce marketing dynamic. activity at present. 34 Intrinsically linked to the need for robust Ideally, border markets should serve as the marketing is the availability of adequate com - center of commerce activity, where people from munication networks. Telecommunication and across the LoC are allowed to visit, using offi - internet facilities are a major aspect of any mod - cially stipulated travel documents to cross the ern economy. The Pakistan military’s hold on LoC. 35 Not only could such border markets act Pakistani Kashmir’s landline telecommunication Ideally, border markets as retail hubs, but they could also provide must be loosened to allow Pakistan Telecommu - opportunities for traders on both sides, be they nication Limited (PTCL) or any private sector should serve as the center of farmers, craftsmen or producers of other value company to extend landline services. 37 The commerce activity, where added products, to meet and conclude future mobile telecommunication companies are people from across the LoC business deals. This would be a luxury that even already operational in the region, whose net - are allowed to visit, using Pakistani and Indian businessmen cannot afford work should be further expanded. As for world officially stipulated travel given the stringent visa controls exercised by wide web services, while both countries, espe - documents to cross the LoC. Islamabad and New Delhi. Arguably, enhanced cially India, have managed significant progress interaction could lead producers on both sides in access to basic internet facilities, Kashmir has to gauge consumer preferences and specialize lagged behind to a large extent. Pakistani Kash - products, especially crafts and value added mir and the Northern Areas must receive imme - goods. Moreover, trade through border markets diate attention in terms of expanding areas with would cater not only to the demand for the resi - access to the internet, at least to cover all urban dents of Jammu Kashmir but also to tourists towns. Given the necessity for swift communi - that visit either part of the state. cation modes in a modern economy, lack of ade - Apart from increased economic activity, quate telephone and internet facilities could potential positive spin-offs of establishing bor - prove to be a major hindrance. der markets include regular people-to-people A preferential trade arrangement, border contacts. Moreover, if such markets are made a markets, and marketing strategies would all daily affair, the food industry on both sides produce limited success if the productive capaci - could also gain by virtue of their presence in the ty on both sides of the LoC remains stagnant. border markets. Domestic transport require - Over the long run, the growth in inter-Kashmir ments for shipment of goods to the markets will trade volumes will primarily be a function of also increase. Moreover, were a quota for a cer - the extent to which both sides are able to tain proportion of rural producers (especially enhance production at efficient levels. In the for agricultural producers) to set up retail sta - case of Pakistani Kashmir, there is tremendous tions in the markets be established, which is scope to do so. Currently Pakistani Kashmir highly desirable, the mechanism will ensure eas - and the Northern areas use traditional agricul - ier market access for the rural poor. tural production methods, thus reducing output The trade facilitation framework suggested ratios significantly. Agricultural productivity above must be complemented by aggressive has also declined due to unsustainable marketing strategies, which seek to project trad - practices. 38 Given the agrarian nature of the able goods to as well as foreign economy, introducing sustainable modern agri - tourists. Currently, marketing of Kashmiri prod - cultural practices could boost economic growth ucts and services is virtually non-existent. 36 substantially. While statistics on efficiency of Neither India nor Pakistan have fully included industrial production do not exist, much of the Jammu Kashmir in their global trade projection crafts (which is a major part of industrial activi -

6 Pugwash Issue Brief ty) industry by definition is not automated and thus works on low efficiency. The same is true for Indian Kashmir. Enhancing productive capacity in Jammu Kashmir could be done rela - tively easily by installing new production units. There is tremendous scope for expansion in the handicrafts, wood articrafts, and handlooms industries. 39 Inviting private sector involvement and foreign investment would however be a necessary prerequisite to ensure sufficient inflow of resources to achieve expansion of productive capacity (see section on ‘financing the economic development plan’). One other long-term efficiency-enhancing enhanced trade will be lost. Theoretically, trans - development could be to move towards an En route to in increasingly urbanized economy. Boosted by port has both direct and indirect economic Kashmir increased industrial activity, urban towns could impacts. Direct impacts are related to accessibil - serve as major wholesale and retail centers to ity change where transport enables larger mar - supply exportable surpluses to the rest of Pak - kets and time and cost savings. Indirect costs on istan (and India for Indian Kashmir) as well as the other hand are linked with the economic to international destinations. 40 The recent earth - multiplier effect where increased product lines quake in Pakistani Kashmir has provided a natu - are available at lower prices .42 ral opening for this sort of urbanization drive to The road communication network in Pak - take place. The government has approved plans istani Kashmir has progressed tremendously to rebuild the city of Muzaffarabad as part of since 1947. Starting from a mere 265 kilometers the earthquake reconstruction effort. 41 of road, the majority of which was unmetalled, today the region’s roads span 9,816 kilome - Economic Development in Pakistani Kashmir ters. 43 Approximately 4,162 kilometers of these and the prospects for cross-LoC cooperation are metalled. 44 Substantial progress in road Having discussed the prospects for trade in development has also been made in the North - goods, we now turn out attention to the poten - ern areas, where metalled roads now reach some tial for investments and joint cooperation in ini - of the remote tourist attractions. Quality of tiatives relevant to economic development. In roads in Pakistani Kashmir and the Northern terms of integrating the two sides of Kashmir, areas however remain a concern. Road networks such endeavors carry much greater value. in the Northern areas need to be refurbished, Unlike commercial trade, where exchange of especially if these areas have to be positioned to goods could take place with minimal human attract global tourism (see section on tourism). A interaction and without any intense collabora - large part of the road network is also in dire tion in terms of economic activities, cooperative need of upgrades. According to one estimate, 50 frameworks necessitate integration of institu - percent of the National Highway Authority’s tions, functional processes, and in an ideal sce - current network requires major rehabilitation .45 nario, the overall economies as a whole. In the The majority of the roads in the Northern areas discussion below we identify the key sectors and Pakistani Kashmir fall in this category. with a potential for tangible gains under a coop - The air network in Jammu Kashmir remains erative economic framework. meager. There are only two small airports in Muzaffarabad and Rawalakot. 46 None have Transport infrastructure facilities that could allow it to cater to interna - For any program of economic uplift and tional trade. The Srinagar airport on the Indian increased trade activity in Kashmir, an adequate side is also not used for international traffic and transport infrastructure is essential. Without thus has limited utility in terms of international this, much of the efficiency gains possible from commerce. 47 Both sides are also missing dedi -

Pugwash Issue Brief 7 cated dry ports. 48 In essence, Jammu Kashmir receive direct inflow of Chinese goods. 51 More - has no direct link with the outside world except over, plans to extend KKH have a tremendous through Pakistan and India. bearing on Kashmir’s access to and Relevant to our discussion on inter-Kashmir on to Europe. 52 cooperation is the lack of adequate transport links across the LoC. At independence, the only Tourism transport links that existed were a road from One direct casualty of the lack of infrastructural (Pakistan) to Muzaffarabad (Pak - development in Kashmir has been the loss of istani Kashmir) and on to Baramula and Srina - tourism, which was once the mainstay of the gar (Indian Kashmir), and a rail and road link state’s economy. Kashmir’s greatest potential in between the cities of (Pakistan) and the service sector has always been its attraction Jammu (Indian Kashmir). 49 The Kashmir con - to South Asian and extra-regional tourists. The flict has kept even the existing routes unopera - Neelam Valley in Pakistani Kashmir and the tional. Lack of maintenance has meant that these entire stretch of the Northern areas in the coun - have eroded over the years. Recently however, try are prime tourist attractions. Northern areas there has been progress in reopening some of the are home to the range which traditional routes as part of the peace process. In includes K-2, the world’s second highest peak as April 2005, the Srinagar- Muzaffarabad road well as some of the longest glaciers outside the link was opened and a bus service initiated. The polar regions. 53 Despite some efforts from the recent agreement allowing trade in raw materials Pakistani government, no structured tourism between the two has also facilitated industry exists in these areas. Consequently, the commercial trucks’ movement on the route. The number of foreign tourists remains miniscule as proposal to initiate a bus service from compared to the potential. Rawalakot to Poonch has also been on the cards With the right kind of investment in infra - for some time. While such initiatives are wel - structure development, Pakistani Kashmir and come, there is a need to further enhance trans - the Northern areas could become one of the port links, especially for commercial vehicles, in most promising attractions for high-income order to facilitate commerce activities. Revital - tourists. There is tremendous scope for moun - ization of existing routes and road network taineering expeditions. A few take place even extension would also facilitate trade in goods. today. Skiing resorts could also be built in the One potential route to be developed is the region, as could facilities for water sports. In Kargil-Skardu road, which relevant authorities addition, if Kashmir’s history could be captured on both sides could do jointly (each one could through museums, it is sure to interest Chinese develop the road on territory under its control). and other East Asian nations that trace back Kashmir’s existing transport network links it their roots to this part of the world. 54 With to major cities in Pakistan, and not India. Geo - direct road links with and reports indi - graphical contours present Pakistan as a much cating that as many as 100 million Chinese more cost-effective route for inward and out - tourists may be interested in joining the global ward flow. Pakistan therefore has a natural tourist industry as clients, Kashmir could bene - advantage in utilizing its transport network to fit immensely. Of course, physical infrastructure provide feeder services for Kashmir’s trade. in terms of five star hotels, an expanded road Were the road infrastructure revitalized and the network, communication systems, banking rail link refurbished, the new airport at Lahore facilities, and health facilities would all have to could serve as the hub of movement of goods meet international standards. Moreover, the not only to and from Muzaffarabad but also to authorities would also have to ensure good law Srinagar. 50 Both parts of the state could also and order throughout the entire region, which benefit from Pakistan’s expanded road infra - given the periodic sectarian tensions in part of structure to utilize port services at Karachi. the northern belt and the physical deployment Pakistan’s link with China through the Karako - of the military is likely to prove challenging. ram Highway (KKH) is also a convoluted, yet Admittedly, infrastructure development is economically feasible route for Kashmir to only one aspect of a thriving tourism industry.

8 Pugwash Issue Brief Equally important is the need to have trained dominated by elite, who resist efforts to remove human resources who could manage such a spe - market entry barriers in this highly lucrative With the right kind of cialized industry. This would be especially need - business. 58 The end result is continued illegal investment in infrastructure ed for an industry as large as the one being envi - extraction, and the lack of incentives to induce development, Pakistani sioned here. Moreover, the entire tourism sector efficiency in the production practices of the would need to benefit from an aggressive mar - wood industry. Kashmir and the Northern keting set-up that lures tourists from around the Literature on forest preservation details a areas could become one of world through attractive packages. India could number of varying instruments through which the most promising do the same for its side of Kashmir. conservation could be ensured. In the South attractions for high-income Possible avenues for inter-Kashmir tourism Asian context, experiences in , India, and tourists. could include joint travel packages, which provi - Pakistan have proven the worth of community sion for visits to sites across the LoC utilizing the participation through joint forest management Muzzaffarabad-Srinagar road link. This could (JFM). 59 In this light, the Muzaffarabad- be facilitated by establishing a Joint Travel Man - Udhampur forest belt could potentially be joint - agement Board. 55 Moreover, India could gain ly managed. Even if security concerns do not from its existing human capacity building track allow communities to cross over the LoC as fre - record to set up hotel management institutes in quently as is needed for JFM in the near future, Srinagar, where Kashmiris from both sides could communities from both sides could interact be trained. Other more specific vocational train - intermittently to share best practices and jointly ing institutes for personnel to be involved in var - plan future initiatives regarding protection, har - ious capacities in the industry could be set-up in vesting and regeneration. Civil society organiza - urban towns on both sides of the LoC. tions with forest sector expertise, even if they are not Kashmir based, could be involved to Environmental clean up guide communities on formulating JFM plans. Forest Resources Another option could be to involve the pri - A rather unique avenue for collaboration vate sector through public-private partnerships between Pakistani and Indian Kashmir is pro - (PPPs) in the forest sector, an avenue that state vided by the rich natural resources found in the monopolies on forests on both sides have state. Kashmir contains some of the most valu - quashed over the years. PPPs are considered able forests in South Asia. Forests on both sides valuable as they can assist in conservation efforts contribute tremendously to the construction and at the same time helping provide sustainable furniture industries, predominantly those oper - livelihoods to resource dependent communi - 60 ating in Pakistan and India. Natural forests ties . There is already some movement in vari - were once a major source of revenue for the ous provinces in Pakistan to allow private sector State. Unfortunately, massive degradation over involvement in the traditionally monopolized 61 the past few decades has led to considerable sector. Investors from the same or opposite decrease in the sectors’ economic potential. side of the LoC could either be allowed to lease Notwithstanding, some areas near Muzaf - out land with a stipulation to meet demand for farabad and Udhampur still maintain dense for - forest products within the state before exporting est cover. 56 Moreover, the forest related institu - harvests elsewhere. In addition to state forests, tions are extremely important, especially in PPPs could be extended to wastelands for plan - Pakistani Kashmir where the Forest Department tations, agro-forestry, social forestry, wildlife officially controls more than 42 percent of the breeding and conservation of biodiversity. total land area. 57 An immediate opportunity to jump start col - Moreover, on both sides, the forest industry laboration in forest management is provided by is dominated by a small number of elite – the the ongoing reconstruction in earthquake-affect - timber mafia – which is often politically con - ed areas. The forest resources, which were nected and manages to siphon away large quan - already depleted, are now under further threat tities of timber illegally. The wood based indus - due to the enormous task of physical reconstruc - tries that draw upon these forests are also tion in the region. Both sides could share best practices to ensure sustainability during the

Pugwash Issue Brief 9 reconstruction phase. For the next three to four have taken away the riverine transport potential. years, a one-off activity could be to promote pri - Restoring this potential would mean taking some vately owned nurseries on both sides of the LoC. pressure off the road network, at the same time These would produce saplings for regeneration raising efficiency levels in transporting goods nat - purposes, which could be sold under contract to urally suited to riverine transport (e.g. timber). the government of Pakistani Kashmir. 62 Since Finally, contaminated water’s health impacts, and Indian Kashmir’s earthquake related rebuilding in turn the affect on the households’ poverty , are needs are miniscule compared to Pakistani Kash - negative spin-offs, which while not quantifiable, mir’s, the former would be involved in the result in dampened economic growth. process mainly to reflect good will. Pakistani Kashmir and Pakistan have much The ultimate objective of collaboration in to gain from environmental clean-up. Reports Inter-Kashmir collaboration forest preservation would be to revitalize have indicated that there is already interest in could include a joint resources for use in indigenous wood based collaborating on environmental clean-up on industries. Granted, this would only be possible both sides of the LoC. 65 Inter-Kashmir collabo - environmental clean-up over the long run. However, once achieved, ration on this front could include a joint envi - exercise and regular wood based industries on both sides could bene - ronmental clean-up exercise and regular exchange of data on water fit the state’s economy tremendously through exchange of data on water flows and quality. 66 flows and quality. furniture exports. Much of the exports would Since a joint clean-up initiative may require be destined for extra-Kashmir sources since the buffering water flows or temporarily rechannel - forest species on both sides of the LoC, and ing outflows, a political consensus on such col - therefore their uses, are virtually identical. laboration must be reached in advance. In addi - tion to being mutually acceptable, the program Waterways would have to be situated within the confines of Kashmir’s waterways intrinsically link Pakistan the Indus Water Treaty, which is the guiding and India. All three major rivers of Pakistan, the framework for water sharing between Pakistan Indus, Jhelum and Chenab flow through Jammu and India. Failing a political consensus, either Kashmir. The fact that watersheds lie across the Pakistan or India could raise concerns about the LOC implies that Pakistan is directly affected by Indus Water Treaty being violated in the guise the state of rivers in Indian Kashmir. Therefore, of environmental sustainability. it has a stake in ensuring sustainability of water resources. Currently, all three-river tracks in Power generation Indian Kashmir are highly polluted. They are Perhaps the most potent economic use of Kash - regularly used as dumps for human, animal mir’s water resources is its electricity generation agricultural and industrial waste. 63 Moreover, potential. The total hydroelectric potential of river catchments are heavily encroached. 64 Jammu Kashmir’s water resources is estimated Water pollution has had severe implications on at 15,000 megawatts, which far surpasses the aquatic flora and fauna, as well as on human demand of Kashmir, northern India, and Pak - health. To exacerbate the situation, downstream istan. 67 Notwithstanding, it is ironic to note pollution levels in Pakistani Kashmir and Pak - that despite containing watersheds for all major istan are also high. rivers in Punjab, Jammu Kashmir remains An economic fallout caused by the water pol - severely energy deficient. Indian Kashmir is the lution is the decreased attraction of water fronts most energy-starved state in the country. as tourist spots. Traditionally, a combination of Pakistani Kashmir has made tremendous the splendor of the mountain ranges and the progress in terms of expanding its power net - waterways flowing through mountain valleys work. Six hydel stations are operational in the formed tourist hubs in the state. Moreover, the state, an avenue that must be explored further. potential for the eastern tributaries, especially A total of 17,000 kilometers of transmission Jhelum, as a trade channel is tremendous. In lines are providing electricity to over 360,000 British India, Jhelum was a major channel for households. 68 By 2009, 100 percent of the pop - downstream trade flow to Punjab and . ulation would have access to electricity. 69 Human interference and solid waste dumping Despite the quantitative gains, quality of trans -

10 Pugwash Issue Brief mission remains poor. Power outages, either of Jammu Kashmir’s marketing and information through planned load shedding or faults in the projection strategy. The entire economy ought transmission system are common. Therefore, to move towards automation in order to ensure authorities in Pakistani Kashmir must invest efficiency in trade deals as well as to promote heavily in maintaining existing infrastructure to investor friendliness. cut transmission losses. India has already transformed into the global The potential to collaborate with Indian hub of the IT service industry. While Indian Kashmir on hydroelectricity is also tremendous. Kashmir has not been a major actor in the coun - Thus far, the sensitivities surrounding the inter - try’s IT revolution, the positive spill-over has pretation of the Indus Water Treaty and the nonetheless impacted Indian Kashmir favorably. mutual insecurities between Pakistan and India According to the FICCI, as many as 10,000 have not allowed any cooperation in power gen - skilled IT professionals are present in Indian eration. Both Pakistan and India are developing Kashmir. 74 A software technology park and an hydroelectric projects in close proximity to each Electronic Industrial State have already been other across the LoC, but without any collabo - established. 75 FICCI’s recommendation to set up ration. Shahid Javed Burki, a renowned Pak - a technical university is also being contemplated. istani economist , has suggested a realistic plan To the contrary, the situation in Pakistani Kash - whereby a careful study of the power generation mir and the Northern areas is dismal. While an potential of the Indus system could be followed IT board has been set up in Pakistani Kashmir, by a joint proposal to tap the potential. 70 Burki awareness about the basic concepts of IT is low, argues for the need to have an integrated power the skilled professional pool is inadequate, soft - grid, which could be based on an extension of ware parks are absent, and there are hardly any the current distribution systems on both sides of information or learning centers to enhance the LoC. In Burki’s estimate, such a joint initia - youths’ interest in the field. 76 tive could produce as much as 7,500 megawatts Arguably, the demand for IT services on of additional power. 71 This arrangement how - both sides of the LoC could be expected to ever, would require a sub-regional agreement increase tremendously once Kashmir transforms within the framework of the Indus Water into a modern economy and banking, e-com - Treaty. The World Bank or any other interna - merce, and e-governance practices are institut - tional body could provide the overall auspices. ed. Therefore, there is a need for Pakistani The terms of the agreement would also have to Kashmir to accelerate IT development in the stipulate the revenue sharing arrangement from state. To begin with, Pakistani Kashmir could export of surplus energy. Apart from Pakistan utilize the software development capacity across and India, export surpluses could find markets the LoC by outsourcing assignments. In order to in the surrounding Central Asian republics. 72 develop human resource capacity for long term A less ambitious option could be to have a sustainability, Indian IT professionals could be joint power generating project situated on the requested to teach at small IT training centers LoC. 73 Regardless, any joint arrangement for that could be set up in Pakistani Kashmir. power generation would have to go through Moreover, IT students from Pakistani Kashmir intense negotiations to ensure that both sides could study in the proposed Indian technology are comfortable that the Indus Water Treaty institute in Indian Kashmir. The Indian side would not be undermined, and that resources could also help their Pakistani counterparts in and revenues would be shared equitably. A for - setting up software technology parks and other mal regulatory framework would also have to such IT ventures. Moreover, the establishment be put into place. of clusters of basic IT service providers – call center, transcription, etc. – even if only at a Information Technology small scale, could crowd in education and The role of the IT industry on both sides is mul - investment that provides a future to indigenous tifaceted and could underpin the very success of labor that would otherwise migrate to the South the entire economic cooperation program. For for employment. Programs that civil society one, the IT industry could become the mainstay could engage in would entail addressing the

Pugwash Issue Brief 11 supply chain of IT labor from education to grating training courses to primary and middle entrepreneurialism and find partners to provide school teachers, develops and distributes training seed funding to establish businesses in Kashmir. packages, provides textbook training and evalua - tion for curriculum development, and improves The Education Sector the assessment and exams for teachers. 78 Teacher As already mentioned, Pakistani Kashmir has trainer capacity building, continuous assessment fared well as far as education is concerned. The (via district assessment cells) and training with Northern areas however, are a different story. guides and materials are also part of current gov - Apart from enhancing access to education in the ernment activities. 79 Indian Kashmir could Northern areas, which is already a stated goal implement a similar program, and also interact of the Government of Pakistan, there are two with the Pakistani side to determine how best to relatively unexplored avenues for improvement. tackle implementation bottlenecks currently First, both parts of Kashmir could initiate an faced by Pakistani Kashmir. exchange program for a small quota of students The civil society NGOs could also play a between postgraduate institutions on both sides. major role in capacity building parallel to gov - The has already estab - ernment efforts, especially at the higher-level lished its mark, and could be an attractive site institutions. Such initiatives are already being for students from Pakistani Kashmir. Any one of witnessed. NGOs could come in with expertise the seven postgraduate colleges in Pakistani in assessment techniques, identify strengths, Kashmir could host Indian Kashmiris. 77 Given weaknesses, opportunities for improvement and the sensitivity about such exchanges under the threats and serve as a management tool for the current mindset, one could envision starting effective planning for each school. Distance edu - with an extremely small quota, perhaps half a cation through teacher certification, pre -service dozen students each year, and gradually build and in -service training as well as graduate and up such interaction. Student interaction at the post graduate qualifications in education could academic level carries special importance to also be instituted by NGOs. They could also ensure a holistic cooperative framework, as cen - help in training the trainers in techniques that ters of learning often end up being the hub for ensure creative learning and child centered creative ideas and innovative prescriptions to approaches. Adopting schools is another possi - approach seemingly intractable solutions. Such bility for NGOs, given the lack of state capacity interaction would also be instrumental in bring - – in order to refurbish them, increase the level ing the young population to appreciate the cul - of teachers and increase enrolment levels. 80 tural similarities on both sides. Another avenue for cooperation is for Pak - Anti-poverty programs istani and Indian Kashmir to share their experi - One of the remarkable achievements specific to ences on improving the quality of education. the Northern areas in Pakistan has been the Low quality of education, especially at the ele - high level of community mobilization, a wel - mentary level in the rural areas , is a problem come scenario not often witnessed in South that both sides continue to struggle with. In this Asia. Much of this has been made possible by regard, educational administrators (including the Rural Support Programs (RSPs), which have non-government) could build on their existing a nation wide presence in Pakistan, but main - programs for teacher training, either limiting tain most penetrability in the Northern areas. interaction to sharing best practices or exchang - RSPs are basically micro-lending programs ing master trainers that could serve short term which seek to target the poor. They are also tenures at teacher training institutes across the involved in rural infrastructure development in LoC. Admittedly, the Pakistani Kashmir model a number of villages. 81 The most important for teacher training is exemplary in its design, aspect of the RSPs is that village communities and if implemented properly, could foster posi - themselves are tasked to determine the deserv - tive change among the teaching cadre. Teachers ing ‘poor’ who ought to receive micro-credit, as are trained in public sector training institutes. I n well as identify the infrastructure development addition, the government offers curriculum inte - projects that would prove most beneficial for

12 Pugwash Issue Brief the village residents. 82 Such a structure ensures Amb. Parthasarathi, Paolo the presence of highly mobilized communities Cotta-Ramusino, Mohd whose energies could easily be utilized in any Abdullah Tari, and Imran inter-Kashmir cooperative framework. Jeelani, at the Pugwash Relevant to our discussion is the need for the RSP structure to be replicated extensively in Conference on Kashmir, Pakistani Kashmir. Not only will this serve the Kathmandu, Nepal, goal of poverty alleviation at the household December 2004 level, it will also inculcate the spirit of commu - nity mobilization in the state. Indian Kashmir, where the insurgency has stifled any opportuni - ty for developing a robust civil society, could learn from the RSP experience. One could even respond to major disasters could be overcome envision the RSP top-brass conducting orienta - by pooling capacities of the two parts of the tion and training courses for their Indian coun - state. A joint disaster management cell, with terparts and/or setting up the program in a few nominated officials from both sides should also model villages in Indian Kashmir. Given that be constituted and should meet periodically to poverty reduction is a common goal across the exchange information and discuss potential LoC, should Islamabad and New Delhi become plans and requirements on both sides of the serious about taking the economic route in LoC. Such a group would also benefit from Kashmir, both would likely welcome such inter - presence of members of the civil society. Pak - action. Indian Kashmir would also welcome an istan’s disaster management plan which is being opportunity to replicate one of the most suc - prepared under the auspices of the NDMA cessful poverty reduction programs in Pakistan. would have taken into account all lessons from the recent earthquake. It could thus be used as a Disaster Management benchmark for devising the inter-Kashmir joint Jammu Kashmir is predicted to be a site for reg - disaster management program. Best practices ular seismic activity in the coming years. More - from any existing Indian disaster management over, the state is already vulnerable to other nat - plans could also be incorporated. The plan ural disasters like land slides. Therefore the ought to allow for movement of people across potential for economic and human losses due to the LoC in addition to the exchange of all such disasters is high. The devastating earth - machinery that is not deemed to be ‘sensitive’ quake in Kashmir in 2005 highlighted the (helicopters, etc). The civil society could take potential magnitude of disaster -related losses. the lead role in instituting community based The estimated cost of bringing Pakistani Kash - training programs seeking to integrate tradition - mir’s economy to the pre-earthquake level in six al coping mechanisms with modern techniques years is USD 10-12 billion. 83 The 2005 earth - for disaster mitigations. It could even liaison quake also underscored the utility of allowing with relevant government functionaries to cross-LoC movement. Thousands of people in ensure the necessary disaster prevention infra - close proximity to the LoC on the Pakistani side structure is available to each community in the remained trapped under the rubble for days region. without anyone from the Indian side being A note on civil society cooperation allowed to assist. Subsequently, Pakistan and India did agree to open five crossing points Some potential avenues for civil society involve - across the LoC but only to assist in the recovery ment in an inter-Kashmir cooperative frame - effort in Pakistani Kashmir. 84 Even this measure work have been discussed as part of the various has been only selectively implemented on the initiatives suggested above. However, the real ground. potential of the civil society in any peace bid lies One possible buffer against future losses not in its assistance in particular projects, but in could be a joint disaster management plan. its role as the underlying driver of the entire Moreover, the current lack of capacity to framework.

Pugwash Issue Brief 13 In South Asia, where the state often acts as a any social institutions, which could help forge a closed, impermeable entity, it is the civil society common voice for peaceful coexistence. What is organizations that create the space for dialogue required is to spread the civil society movements and cooperation through a bottom-up in Pakistan and India to Jammu Kashmir. Then, approach. 88 After years of dormancy, both Pak - as civil societies in the state engage with their istan and India have recently experienced a sub - counterparts from Pakistan and India, and thus stantial growth in civil society movements. grow in stature, energies could be channeled Unfortunately, the lack of any genuine democra - such that a cross-LoC vibrant peace constituen - cy in either part of Kashmir and the insurgency cy develops. Perhaps the most important role in Indian Kashmir has not allowed these cur - for the civil society in this regard is one of advo - rents to travel to Jammu Kashmir. Currently, cacy and social mobilization. Two set of actors while informal citizens boards and community would be pivotal in attaining this objective: the organizations exist sporadically in the state, media and the academia. there are hardly any development NGOs to As far as the media is concerned, both sides speak of on either side of the LoC. The absence of Kashmir could build on the South Asia Free of civil society in Kashmir has led to a lack of Media Association (SAFMA) model, which arranges regular interaction between the media communities from across South Asia in a quest to Financing the economic development plan identify common themes and positions that could The estimated cost for any major uplift plan depends on the envisioned constituent elements. enhance cooperation among regional countries. Shahid Javed Burki’s proposal for economic uplift (mentioned above), which includes six major A SAFMA delegation in 2004 was the first group sectors— power, tourism, physical infrastructure, water resources, forest and value added agricul - of Pakistani journalists to be allowed to Jammu ture, and human resource development— is estimated to cost USD 25 billion. 85 With some addi - tional elements and inclusion of the Northern areas (Burki’s plan only focused on Pakistani and Kashmir after years of absence of any such inter - 89 Indian Kashmir) in our suggested framework, the proposed transformation may cost USD 35-40 bil - action. Media in Jammu Kashmir could coop - 90 lion. It is clear that such an exorbitant amount cannot be mobilized from public resources. Both erate under the SAFMA umbrella . Frequent parts of the state will have to tap private sector resources and foreign assistance. interaction between media personnel from both A sector-by-sector financial plan should first be developed with the help of technical experts deal - parts of Kashmir should focus on developing a ing with various facets of the program. Subsequently, the plan could be floated to seek investor joint stance on the avenues for collaboration interest. At an advanced stage, feasibilities for various identified projects could be carried out. Var - across the LoC. As for specific initiatives, the two ious multilateral donor agencies could then be lured to provide low interest loans, which are com - sides could have joint TV talk shows, even if they mon for post-conflict economies. In the case of bilateral assistance, maximum amount of grants are situated in respective studios in Muzaf - should be sought. Each agency could opt for projects that fall within its priority areas. For example, farabad and Srinagar. Joint press articles high - ADB’s focus on infrastructure and water and sanitation would lure it to such initiatives. US assis - lighting the potential for cooperation and the key tance on the other hand could go into health and education. constraints could also be written jointly by jour - The multilateral IFIs and bilateral donors would also have to play a role as underwriters of certain nalists from both sides of the state. developments that require joint collaboration between the two parts of the state. Arguably, conclud - Kashmiri academia has an equally important ing the terms and conditions of such arrangements would be extremely tricky and would have to role to play. To begin with, academics have an involve not only the Kashmir governments but also authorities from Islamabad and New Delhi. Given that IFIs have historically shied away from controversial projects on either side of the LoC, or obvious task of undertaking in-depth research ones where international stakes have been high, the only way one could realistically envision a on various possibilities for Kashmir’s future, strong commitment from these entities is if Pakistan and India, and Western powers endorse such including our proposed economic development developments. model. Currently, academic research on Kashmir Private sector investment will be an equally important pillar of the financing plan. The level of pri - has been dominated by non-Kashmiris and thus vate investment in large part will depend on the extent to which the public sector agrees to give up often tends to miss the many intricacies and sub - its monopolies, and the kind of incentives that are offered. As a first step, the World Bank’s Foreign tleties in the highly complex situation that must Investment Advisory Service could also be requested to conduct a detailed investment climate sur - be addressed to present objective analysis. In all vey of the region. 86 As for financing, the could prove to be a major resource fairness, much of the fault lies with the indige - bank. Expatriate investors could be targeted to involve themselves in sectors of their interest. nous academics for not having made any serious Admittedly, the terms of the investment would have to be fairly liberal given that Kashmir’s econo - effort to cooperate, save through a few donor my on both sides has been in disarray for a considerable number of years making most investment funded one-off research assignments. Academic avenues ‘high risk’. One other option would be to float international bonds, say the “Kashmir bonds” to raise resources. 87 research from Kashmir has not been able to pro - vide any innovative ideas on the Kashmir prob -

14 Pugwash Issue Brief lem. Kashmiri academics placed in institutions where the latter’s agenda complements, or at the and think tanks within or outside Jammu Kash - very least refrains from challenging, the official mir must come together to identify key areas for stance. The outlook is entirely reversed, howev - research and conduct joint projects. Given the er, as soon as civil society organizations step transient nature of most academic affiliations outside the traditional paradigm, which is today, it is relatively simple to engage Kashmiri exactly what a vibrant Kashmiri civil society academics through neutral affiliations thus would have to attempt to do. The point is not bypassing any potential objections from - to suggest that the civil society’s stance should What is required is to abad and New Delhi. Given the global attention be amenable to the government’s. Instead, what spread the civil society on Kashmir, funding for such initiatives is avail - is being accentuated is the need for a robust movements in Pakistan and able in abundance. institutional framework underpinning the entire India to Jammu Kashmir. Enhanced interaction between peoples from effort. Once this is achieved, generation of inno - both sides of the LoC should also extend to vative ideas and social mobilization resulting Then, as civil societies in community based organizations, institutional from civil society efforts would end up enhanc - the state engage with their actors, de-politicized community leaders, social ing inter-Kashmir people-to-people contact and counterparts from Pakistan workers and business community members. perhaps even provide new avenues for resolu - and India, and thus grow in Civil society organizations could also encourage tion of the Kashmir dispute. stature, energies could be religious, social, civic and youth leaders to con - channeled such that a duct advocacy campaigns to promote harmony The Governance of Cooperation cross-LoC vibrant peace among various adversarial viewpoints in Jammu The success of the entire economic coordination Kashmir. With regard to business interaction, the plan outlined in this paper is contingent upon a constituency develops. Chamber of Commerce and its political consensus in Islamabad and New Delhi counterpart in Indian Kashmir should arrange to allow both sides of Kashmir to transform delegations of various sub-committees relevant into an open market economy. This strikes at to inter-Kashmir trade. The business communi - the heart of a number of governance issues that ties, who have an incentive to push specific pro - would necessarily have to be tackled if our posals to enhance business transactions, are sure propositions are to be successfully implemented to take advantage of any scenario under which on the ground. For example, any initiative that such interaction is permitted. As for community requires Kashmiris to cross the LoC (border involvement in civil society movements, grass markets, IT students etc) will invoke sensitivities roots interaction through programs such as the about the travel documents requirement. More - RSP must be extended. An indigenous civil socie - over, either side could decide not to compromise ty lobby against human rights violations is also on the need to conduct thorough security much needed and could be trained by Amnesty checks, not only to inspect day passes but also International or local Pakistani and Indian to conduct physical security checks. Vehicles human rights activists. This process is already carrying commercial goods could also be underway in Indian Kashmir. 91 harassed by security forces. By the same token, While the above point to only a few of the intelligence agencies on both sides could easily endless opportunities for civil society in Jammu dampen the spirit of cooperation by tapping Kashmir, much of the future of the non-govern - people who are proactively involved in cross- ment involvement hinges on the ability of both LoC activities. Such is the current practice sides to develop vibrant civil society institutions. employed by Pakistani and Indian intelligence Without the right kind of infrastructure and agencies for respective citizens frequently travel - resources, civil society movements are likely to ing to the ‘other’ country. Another concern, have minimal impact on the ground. Given that especially on the Pakistani side, could be with civil society in Kashmir would in effect be chal - regard to the Rules of Origin even if the SAFTA lenging the traditional official stance, they are guidelines are used. The proposed free trade likely to be pitted against authorities as they zone would also have multiple governance con - seek to generate momentum. Traditionally, gov - cerns. The precise nature of regulatory frame - ernments in India and Pakistan (and Jammu works could be an especially thorny issue. Both Kashmir) have welcomed civil society presence sides could also limit gains from the economic

Pugwash Issue Brief 15 transformation by maintaining the present strin - In tandem with a change in mindsets, Islam - The success of the entire gent regulations for foreign tourists. Currently abad and New Delhi’s formal hold on function - economic coordination plan foreign tourists in Pakistani Kashmir require an ing of Kashmir’s governments must be relaxed. outlined in this paper is NOC from the Kashmir Home Department. 92 Only then can one expect a truly autonomous contingent upon a political The requirements are as dissuasive in Indian structure required to ensure economic transfor - consensus in Islamabad Kashmir. Moreover, various suggestions mation. While Pakistani Kashmir has its own and New Delhi to allow both amounting to residents from one side placing Head of state, constitution and legislature, the sides of Kashmir to themselves across the LoC for an extended peri - entire government structure remains highly od of time (student exchanges, master teacher influenced by decision makers in Islamabad. 93 transform into an open trainers, RSP teams, etc.) are sure to be received The Ministry of Kashmir Affairs and Northern market economy. cautiously in the initial stages and could only be Areas is the Central government’s principal rep - expected to materialize over the medium term. resentative body dealing with the said areas. Overly-aggressive civil society involvement is There is also the Azad Jammu and Kashmir also sure to raise a few concerns in Islamabad Council, which follows Islamabad’s lead for the and New Delhi. most part. 94 The Northern areas are managed The above are only a few examples of the under an equally intrusive regime. These Areas possible governance bottlenecks that either Pak - have no declared constitution. 95 The level of istan or India could create. The point is that intrusiveness is not much different in Indian extreme political will is necessary to allow the Kashmir despite constitutional guarantees to the process to continue beyond the initial euphoria. contrary. 96 In essence, the governance regime in For the suggestions to work, the political con - both these regions remains highly intrusive, sensus among Pakistani and Indian elite would with little real autonomy being provided to the have to be broad based, ensuring civil society local authorities. Such a governance structure is involvement while sidelining hardline views a matter of grave concern for the economic seeking to gain political mileage by attempting uplift of the state. For any possibility of the to undermine the process. Moreover, a conscious cooperation plan to go through, both sides of decision would have to be made to let loose the Kashmir have to be highly autonomous and be traditional tight fisted control maintained by allowed to develop an open market economy both sides in their respective parts of Kashmir. without any stringent checks and balances from The Pakistani military would have to accept tak - Islamabad and New Delhi. ing the back seat, notwithstanding strategic con - If such guarantees are provided by the public UN Monitoring Observer cerns that would remain despite positive move - sector, the transformed economy will inevitably Group in India-Pakistan ments on the economic front. In essence, the end up being dominated by the private sector. (UN photo # 99349) mindsets on both sides would have to change. Industrial production and services industries like tourism and IT must be driven by private sector involvement to ensure efficiency. Private sector involvement would also be key in Kash - mir’s image projection and industrial marketing around the world. There is a substantial role for the private sector in the forest sector. Civil soci - ety involvement in the services and social sec - tors would also be essential. Consequently, the public sector monopolies would have to give way, with the sector’s role being limited to one of a loose regulator. Proactive public sector involvement would only be required in sectors where the private sector is not forthcoming. These could include major physical infrastruc - ture development, cross-LoC cooperation in environmental management, and power genera - tion initiatives. The most important function for

16 Pugwash Issue Brief the public sector however is to guarantee an The true potential for economic integration investor friendly climate with clearly defined in Jammu Kashmir lies not in trade in goods, regulatory and legal frameworks, facilitate busi - but in the numerous possibilities for collabora - ness processes by reducing bureaucratic red- tive investments and joint ventures within each tape, enhance transparency and accountability part of Jammu Kashmir as well as across the in official mechanisms, and most importantly LoC. The most promising avenues for such col - provide clear boundaries for permissible interac - laboration include the transport, tourism, tion within which governments would refrain forestry, water, power, IT, education, poverty from invoking security concerns. All this is only and disaster management sectors. The recom - possible if Pakistan and India’s current mindset mended approaches vary from sector to sector, towards Kashmir is overhauled. with some programs like power generation and forest preservation necessitating an elaborate Conclusion cross-LoC cooperative framework, while others After years of failure to reconcile differences on could be implementable independently in both the issue of Jammu Kashmir, Pakistan and India parts of the state. While we do not recap the finally seem to have realized the need to allow specifics of each proposed project here, it is ‘out of the box’ thinking on Kashmir. Increas - important to note that all plans entail substan - ingly, the debate on Kashmir is beginning to tial private sector and civil society involvement. The true potential for economic focus on bringing normalcy in the lives of citi - The role of the civil society organizations is key integration in Jammu Kashmir zens and economic development within the state in the education and poverty uplift programs. before for a permanent solution. In this Private sector involvement would be essential in lies not in trade in goods, but in paper, we conducted a detailed analysis of the industrial production and services industries like the numerous possibilities for potential for economic development and collab - tourism and IT as well as in Kashmir’s image collaborative investments and oration across the LoC as a potent approach. projection and industrial marketing around the joint ventures within each part world. Public private partnerships have been Looking beyond the current euphoria sur - of Jammu Kashmir as well as rounding the question of economic integration, envisioned in the forest sector. across the LoC. our analysis suggests little potential for trade in The ultimate objective of taking the econom - goods across the LoC under the current struc - ic route is to ensure sufficient integration among tures of production. A highly exaggerated figure economies as well as peoples on both sides of of less than USD 310 million has been arrived at, the LoC. Grounding the analysis in the liberal which is hardly attractive. Moreover, many of theory of economic interdependence, the argu - the products in which both parts of Kashmir ment is that such integration while bringing have tradable surpluses are produced indige - normalcy to life in Jammu Kashmir would also nously by the other side. In the final outcome, end up creating a high peace dividend, thus goods trade is likely to be confined to primary increasing the likelihood of a permanent politi - products, which tend to create little economic cal resolution of the dispute. Realistically how - interdependence and fetch much lower prices. ever, the entire set of suggestions forwarded However, currently, even the existing potential in here could end up being mere ‘wish lists’ unless goods trade is not being realized. There is a need extreme political will to allow Jammu Kashmir to explore the possibility of an inter-Kashmir to transform economically is developed in preferential trade arrangement to allow duty free Islamabad and New Delhi. Failing such a exchange of primary and value added goods. change in mindsets, both sides could stall the Moreover, border markets could be set up at impetus for economic collaboration by creating designated points to act as retail and wholesale countless governance bottlenecks, as they have hubs. Communication links would also have to done to date. The role of the civil society to be enhanced. While these measures will ensure conduct an advocacy and social mobilization optimization of the existing potential, increase in campaign involving all relevant stakeholders is trade in goods over the long run is only possible essential in order to buffer against any insecuri - if production capacity is expanded and efficiency ties that may lead either Pakistan or India to of production, especially in the agriculture and thwart the initiative. crafts industries is raised.

Pugwash Issue Brief 17 Notes

1 Shaheen Rafi , et al., “Regional Trade imports and exports flowed through pres - 28 Shahid Javed Burki, “Tapping Kashmir’s Agreements in South Asia: Trade and Con - ent day Pakistan. Its only road and rail Economic Potential”, , July 29, flict Linkages”, Sustainable Development links were also through Rawalpindi and 2005. Policy Institute (for the International Sialkot respectively. Furthermore, its 29 Ibid. Development Research Center), forthcom - postal and telegraphic services were also 30 Shaheen Rafi Khan, et al., “Quantifying ing. catered through Pakistan. Therefore, Pak - Informal Trade between Pakistan and 2 Ibid. istan felt a moral right over Jammu Kash - India”, Sustainable Development Policy 3 We have used the term ‘Pakistan Kashmir’ mir. Hussain, 1998. Institute , Research paper, 2006. to refer to the part of Jammu Kashmir 15 Schofield, 2003. 31 Various studies have forecasted these items under Pakistani control (not including the 16 For details of the Indian complaint and as constituting the bulk of inter-Kashmir Pakistani Northern areas, which are men - subsequent U.N. proceedings, see Hussain, trade. tioned separately wherever appropriate), 1998. 32 See for example, Teresita C. Shaffer, ‘Indian Kashmir’ to reflect the part of the 17 Pakistan initially denied active involve - “Kashmir: The Economics of Peace Build - state under Indian control, and Jammu ment in the 1999 conflict, which took ing”, Center for Strategic and Internation - Kashmir to represent the entire area on place in the Kargil region of Kashmir. It al Studies, South Asia Program (with the both sides of the LoC, but not including the maintained that the attack on Indian posts Kashmir Study Group), December 2005. Pakistani Northern areas. in Kargil was conducted by insurgents. 33 Le Roux, 2006. 4 Muzaffarabad is the capital of Pakistani 18 Randeep Ramesh, “India Announces 34 Ibid. Kashmir. Troop Reduction in Kashmir,” Guardian 35 Ibid. 5 For an overview of the geography of Unlimited , November 12, 2004, 36 Ibid. Jammu and Kashmir, see Mushtaqur Rah - . tion network in Pakistani Kashmir is man - New Opportunities for India, Pakistan, 19 Celeste Le Roux, “Strengthening Coopera - aged by a single public entity, the Special and the Kashmiri People (Boulder: Lynne tion Across the : Assess - Communications Organization influenced Rienner Publishers, 1996 ). ment of Areas for Further Inspection”, by the Pakistan military. 6 Ibid.; Faisal Yousaf, “Kashmir: An Array of Pugwash Conferences on Science and 38 Government of Azad Jammu & Kashmir, Options” , Kashmir Institute of Internation - World Affairs , concept note, July 21, “State Profile: Introduction”. al Relations , April 30, 2004. 2006; V. Mohan Narayan, “Bus to Muzaf - 39 Federation of Indian Chamber of Com - 7 Ibid. farabad from April 7”, Rediff News , Feb - merce and Industry, “Horticulture, Handi - 8 Ibid.; Government of India, Census of ruary 16, 2005, ; Biotech: FICCI Makes Focused Sector-wise 9 Ibid. Mubarak Zeb Khan, “Pakistan and India Suggestions to Boost Investments in 10 Ibid. to Allow Trading of Raw Products Only”, J&K”, press release, May 19, 2006, < 11 This option was provided to rulers of all Dawn , May 31, 2006. http://www.ficci.com/press/86/jk.DOC>. princely states. 20 Shankar Aiyar, “The Nation: Kashmir 40 The idea of urbanization has been floated 12 The Maharaja’s decision to accede was Economy”, India Today , October 14, by renowned Pakistani economist, Shahid made reluctantly, since ideally he was 2002. Javed Burki in the context of post-earth - vying for independence for Jammu Kash - 21 Government of Azad Jammu & Kashmir, quake rehabilitation of Pakistani Kashmir. mir. “State Profile: Introduction”, official web - See Shahid Javed Burki, “Rebuilding Azad The Muslim rebellion originated in Poonch. site, . pakistanlink.com/Commentary/2005/Dec0 see Victoria Schofield, Kashmir in Conflict: 22 Ibid. 5/30/02.HTM >. India, Pakistan and the Unending War (Lon - 23 Ibid. 41 For an overview of the reconstruction don: I.B. Tauris, 2003). 24 Government of Pakistan, “Northern Areas plans, visit the website for the Earthquake 13 Ijaz Hussain, Kashmir Dispute: An Inter - of Pakistan: Profile”, Planning & Develop - Reconstruction and Rehabilitation national Law Perspective (Islambad: ment Department, Northern Areas, Gilgit, Authority (ERRA), . 14 According to the partition guidelines, ~sfpd/area_and_population.htm>. 42 Rodrigue Jean-Paul, “Transport and Eco - Muslim majority areas were to go to Pak - 25 Government of Azad Jammu & Kashmir, nomic Development” in Transport Geog - istan and Hindu majority areas were to “State Profile: Introduction”. raphy on the Web (Hofstra University, join India, provided they were geographi - 26 Government of Pakistan, “Northern Areas 1998). cally contiguous with the respective coun - of Pakistan”. 43 Government of Azad Jammu & Kashmir, tries. In 1947, the year of partition of 27 Government of India, “Jammu & Kashmir “State Profile: Introduction”. British India, 78 percent of Jammu and Development Report”; Executive Summa - 44 Ibid. Kashmir’s population was Muslim. Fur - ry, Planning Commission, undated, < 45 World Bank, Project Appraisal Document thermore, the state was geographically http://planningcommission.nic.in/plans/ for the Highways Rehabilitation Project, contiguous with present day Pakistan. Its stateplan/sdr_jandk/sdr_jkexecutive.pdf>.

18 Pugwash Issue Brief Energy and Infrastructure Sector Unit, The author is involved in the policy for - gramme- EC Funded: Fact At a Glance”, Report No. 27281-PAK, 2003. mulation process in this regard. May 31, 2006. 46 Government of Azad Jammu & Kashmir, 62 The Chinese example could be followed 81 Shoaib Khan, “Poverty Reduction “State Profile: Introduction”. in this regard. Heilongjiang Province, Strategy: Rural Support Programmes of 47 Government of India, undated. China invested in a major reforestation Pakistan”, Presentation made at a confer - 48 Schaffer, 2005. project after a massive fire had destroyed ence: South Africa and Pakistan: Growing 49 Burki, “Tapping Kashmir’s”, 2005. most of the forest cover in the area. Tree Trade, Building Security , South African 50 Ibid. nurseries were established and the govern - Institute for International Affairs, Novem - 51 Ibid. ment provided saplings of varieties suited ber 8, 2006. 52 The plan to extend the KKH to establish a for the environment. See Burki, “Rebuild - 82 A. Dastgeer, “Targeting the Poor: The direct link with Central Asian states has ing Azad”, 2006. RSPs Way”, Rural Support Programmes been on the table for some time. Pakistan, 63 Most major water bodies in Indian Kash - Network, undated; Mahmood Hasan China and Uzbekistan signed an agree - mir are severely polluted. , which Khan, Methods of Assessment of Rural ment as far back as 1995 to establish a benefits from water from these tributaries Poverty Projects and Program Impact: land route to connect the Central Asian was once a major tourist attraction, but Handbook for Practitioners in Rural Sup - States via Gilgit. However, the proposal presently is suffering from high levels of port Programs (Islamabad: Rural Support has not materialized thus far. “Plan water pollution. See American University, Programs Network, 2004). Shelved to Extend KKH to Central Asia”, “Kashmir Deforestation” Trade Environ - 83 Burki, “Rebuilding Azad”, 2006. Dawn , March 232, 2003. ment Database (TED) Projects, Case 84 Michael Renner, “Peacemaking in Kash - 53 “Northern Areas (Pakistan), Wikipedia Study, Case No. 365, (accessed on projects/mandala/TED/kashmir.htm>. Global Security Brief No.8, December 6, December 20, 2006). Also see, Habibullah, 2004. 2005. 54 Burki, “Tapping Kashmir’s”, 2005. 64 Habibullah, 2004. 85 Shahid Javed Burki, “Taking the Develop - 55 A similar idea has been floated in Schaf - 65 Le Roux, 2006. ment Route”, Dawn , August 2, 2006. fer, 2005. 66 Schaffer, 2005. 86 Habibullah, 2004. 56 Le Roux, 2006. 67 Habibullah, 2004. 87 Shahid Javed Burki initially suggested a 57 Government of Azad Jammu & Kashmir, 68 Government of Azad Jammu & Kashmir, similar idea in the context of reconstruc - “State Profile: Introduction”. “State Profile: Introduction”. tion of Pakistan Kashmir. See Burki, 58 A number of capacity constraints and 69 Ibid. “Rebuilding Azad”, 2006. management issues have also not allowed 70 Shahid Javed Burki, “Kashmir: The Eco - 88 Praful Bidwai, “No Peace Without Civil the wood based industry to grow. See nomic Option”, Dawn, July 19, 2005. Society”, Frontline , Voume 21, Issue 18, Wajahat Habibullah, “The Political Econ - 71 Ibid. August 28-September 10, 2004. omy of the Kashmir Conflict: Opportuni - 72 Ibid. 89 A number of renowned Pakistani journal - ties for Economic Peacebuilding and for 73 Le Roux, 2006. ists were included in the delegation to U.S. Policy”, United States Institute of 74 Federation of Indian Chamber of Com - Indian Kashmir. Kashmir: 18 Journalists Peace , Special Report 121, June 2004. merce and Industry, 2006. to Visit Held Kashmir, New Delhi”, 59 Moeed Yusuf, “Forest Management in 75 Ibid. Dawn , September 29, 2004. Pakistan: A Legal and Institutional Analy - 76 Government of Azad Jammu & Kashmir, 90 SAFMA already hosts Kashmiri journal - sis”, South Asian Network for Develop - “Departments: Business Rules”, official ists as parts of South Asian delegations. ment and Environmental Economics , website, . mir”, undated, . Paper 2003-8, selected for presentation at 78 World Bank, Staff Appraisal Report Pak - 92 Government of Azad Jammu & Kashmir, the Northeastern Agricultural Resource istan Northern Education Project, South “History of Azad Jammu and Kashmir Economics Association, Portsmouth, New Asia Region, Report No. 15830-PAK, and Other Information”, official website, Hampshire, June 8-10, 2003. 1997. < http://www.ajk.gov.pk/tourism/ 60 Shaheen Rafi Khan, et al., The Quest for 79 World Bank, Implementation Completion facts.html>. Sustainable Forest Management: Explor - Report on a Credit to the Islamic Repub - 93 International Crisis Group, “India/Pak - ing Public-Private Partnerships in the lic of Pakistan for a Northern Education istan Relations and Kashmir: Steps Forestry Sector in Pakistan”. Sustainable Project, Report No. 28241-PK, 2004. Towards Peace”, Report No.79, Islam - Development Policy Institute for Sungi 80 This is already widely practiced in Pak - abad, New Delhi, , June 24, 2004. Foundation, forthcoming. istan. Even in the Northern areas and 94 Ibid. 61 Sungi Development Foundation has taken Pakistani Kashmir, a number of NGOs 95 Ibid. the lead on introducing public-private have taken initiatives related to Teacher 96 The Indian constitution’s article 370 guar - partnerships in Pakistan. Consultative Professional Development. See for exam - antees ‘special status’ and high degree of workshops have been held in all four ple, Aga Khan Education Service, Pak - autonomy to Indian Kashmir, which has provinces of Pakistan and a national istan, “Northern Pakistan Education Pro - not been forthcoming in reality. workshop is planned for March 2007.

Pugwash Issue Brief 19 Rome Office PUGWASH CONFERENCES ON SCIENCE AND WORLD AFFAIRS Accademia Nazionale Nobel Peace Prize 1995 dei Lincei via della Lungara, 10 I-00165 ROME, Italy n 1995, the Pugwash Conferences and President of Pugwash is Prof. M.S. Phone: **39-06-6872606 one of its co-founders, the physicist Swaminathan of India; the Secretary Sir Joseph Rotblat, shared the Nobel Fax: **39-06-6878376 I General is Prof. Paolo Cotta-Ramusino of E-mail: [email protected] Peace Prize in recognition of their Italy; the Executive Director is Dr. Jeffrey decades-long work to reduce the threat of Boutwell of the US; and the Chair of the London Office nuclear war and ultimately abolish Pugwash Council is Prof. Marie Muller of Flat A Museum Mansions nuclear and other weapons of mass South Africa. 63A Great Russell Street destruction. Beginning with its first inter - Inspired by the Russell-Einstein LONDON WC1B 3BJ, England national conference in Pugwash, Nova Manifesto of 1955, and founded on the Phone: **44-20-7405-6661 Scotia in 1957, the Pugwash Conferences principle of the individual responsibility Fax: **44-20-7831-5651 have brought together influential scien - of scientists for their work, the Pugwash E-mail: [email protected] tists, scholars and public figures con - Conferences have worked for the past 50 cerned with reducing the danger of armed years toward the twin goals of abolishing Geneva Office conflict and seeking cooperative solutions nuclear weapons and the peaceful settle - 16 rue de la Voie-Creuse for global problems. ment of international disputes. The 1211 GENEVA, Switzerland Today, there are more than 50 nation - emerging challenges in science, technolo - Phone: **41-22-919-7920 al Pugwash groups around the world, and gy and international politics of the 21 st Fax: **41-22-919-7925 four offices in Rome, London, Geneva, century make those principles and goals E-mail: [email protected] and Washington, DC. The current more relevant than ever.

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