english book (p final) · rokhan, khushal khan khattak, ... bacha khan, faqir api and samad khan...

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Pashtunkhwa — A Developmental Framework NDCP

INTRODUCTION

A framework of shared geography, language, culture and his-tory along with common interests in life, make the building blocksof a distinct community. Such a group, besides cooperation, is al-ways in competition with other human groups for the control ofresources. Therefore, to speak for one’s own community and todefend its cultural, economic and political interests is verynatural.

The history of Pakhtuns* is full of stories of valor and resil-ience. The complex mosaic of tribal structure of Pakhtun societyhas proved to be an asset as well as a liability in the history ofPakhtuns. This pattern of tribes emerged and was strengthened inview of the unique circumstances faced by our people through dif-ferent epochs of time. The difficult terrain and dictates of moun-tainous geography placed each tribe in separate compartments andobstructed increased interactions among different tribes. In politi-cal terms, this hindered the process of nation building.

The process of nation building among Pakhtuns has been mostlytriggered by external challenges. Pakhtun national movement hasseen different epochs of its existence. The rise of Shaikh Malli, PirRokhan, Khushal Khan Khattak, Mirwais Nika, Ahmad Shah Abdali,Bacha Khan, Faqir Api and Samad Khan Achakzai were not indi-vidual events, which were limited to the persons of these greatPakhtun personalities alone. Rather, each one of them represents a

*The name Pakhtun or Pashtun is used synonymously with varying dialects of the Pashtolanguage. The people of Northern Pakhtunkhwa, mainly of the Peshawar valley and theadjacent Malakand Division, use the hard variant, while the people of Southern Pashtunkhwaand Pashtuns of Balochistan use the soft variant. The same is true about Pashtunsliving in Afghanistan.

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unique historical phenomenon in the history of Pakhtuns. In fact,the national aspirations of Pakhtuns culminated in the persons ofthese leaders to give a response to the prevailing historical chal-lenges of their times.

Although the history of Pakhtun National Movement – stretch-ing over a period of more than five centuries – is full of countlessstories of sacrifices but even today, sadly enough, this Movementhas not been able to achieve the desired goals i.e. full and effectivecontrol over the natural and human resources of Pakhtuns for thewelfare of the entire people of Pashtunkhwa.

Several reasons may be counted for this failure but the fore-most is the lack of a scientific understanding of the social pro-cesses. Sentimental slogans and emotional catch-words might proveeffective tools in the over-all strategy of rallying support for a na-tional cause but, alone, it cannot actualize national goals.

Today, Pakhtun nation is faced with momentous challenges. Asever before Pakhtun land is a theater of rivalries among foreignpowers and no one seems willing to take our nation seriously be-cause we have not been able, so far, to present our national causein a scientific and convincing way.

End of the Cold War in general and the post September 11th

world in particular has confronted Pakhtuns with formidable chal-lenges. The world media and think tanks are depicting various sce-narios for our region. Unfortunately, Pakhtun leadership has notbeen able to grasp or express the vision that encompasses Pakhtunnational rights. What should be the response of Pashtun nation tothese vital aspects of geo-political changes that may sweep thisregion and how best can they articulate the complexity of the situ-ation for their national interests? These are questions of momen-tous importance, which will determine Pakhtun destiny for a verylong time.

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Pakhtuns occupy a mass of land, which has been of great geo-strategic importance in the past and will remain so in the future aswell. Pakhtuns are living at the crossroads of Chinese, Indian, Rus-sian and Persian civilizations. ‘The Great Game’* rivalry of theworld powers has not ended and has resurfaced with renewed fe-rocity. In the past, Pakhtuns have responded with ferocious ven-geance to any encroachment on their land but all such gallant en-deavors were individualistic and limited in scope and effects. Ex-cept the Khudai Khidmatgar Movement of the early 20th century,none of the opposition movements against the foreign aggressorswere organized political movements in the technical sense. Hence,they could not capitalize on the unprecedented sacrifices renderedin those movements by all segments of Pakhtun society.

The new circumstances have put our region into a fluid situa-tion that may unfold in a number of scenarios. Probably, Pakhtunland will be the center-stage of many events with radical implica-tions for its people. This has made the assessment of the presentstate of affairs, a matter of great exigency. It is, therefore, impera-tive that the probable developments must be rationally conceivedand a proactive response be formulated and presented before thePakhtun masses.

This region is in the grip of momentous changes. Pakhtuns –left unaware – will once again be the fuel for foreign rivalries.Therefore, Pakhtun National Movement must be resurrected andre-defined along scientific and modern democratic lines so thatPakhtun national interests could be actualized in the best possible way.

In order to create democratic structures and systems alongscientific lines, which will carry Pakhtun national aspirations to-wards the desired goals, it is imperative to make an analytical study

* A term used by Rudyard Kipling in his famous classic, ‘Kim’, which signified thestruggle of the Tsarist Russia and the British Empire for the control of Central Asia inthe 19th and early 20th centuries.

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of the prevailing socio-political and economic conditions of Pakhtunsociety. This analysis will help in creating a framework to build anational movement of all Pakhtuns along scientific lines. The grandaim of this Pashtun National Movement (See Annexure A for de-tails) is to bring to an end the colonial division of Pashtuns and unitethem in a single administrative unit of Pashtunkhwa. It is only byexercising their democratic rights and control over their resourcesthat Pakhtun men and women can achieve full empowerment. Thesouthern Pashtunkhwa or Pashtun belt of Balochistan is a vital partof the efforts for national unity. The National Democratic Consul-tative Process (NDCP) intends to conduct thorough research onthe problems and prospects of Southern Pashtunkhwa that will besubsequently added to this document. Before that, however, a cur-sory look at the history of Pashtun National Movement seems de-sirable.

PAKHTUN NATIONAL MOVEMENT INHISTORICAL PERSPECTIVE

Long before the efforts of Pir Roshan to unite Pakhtuns on hisrevolutionary mysticism and long before Khushal Khan Khattak’scall for defending the honour of Afghans* (Pakhtuns), Ghories andLodhies had formed vast empires. But these empires were centeredand based in foreign lands far away from the high mountain peaksand stormy rivers of Pakhtunkhwa. Rising high in their pride ofPakhtun nature, silent and magnificent, the mountain ranges ofHindu Kosh, Solayman, Toba, Khyber, Maban, Malakand, andLawaghar have been gravely pondering over the tragedy ofPakhtuns. Representing the typical Central Asian nature, thesemountains present a very poignant symbolism of the culture and

* Several names are in use for the Pashto-speaking people. The Pashtuns of Afghani-stan prefer to call themselves Afghans instead of Pashtuns so as to strengthen theconcept of ‘Afghan Millat’ within the present boundaries of Afghanistan. ThePashtuns of Pakistan, too, are Afghans but not citizens of Afghanistan. The writershave tried to be careful in the use of these words because of legal complications andfrequent use of any one name does not prove any preference for that name.

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history of Pakhtunkhwa. Their defiant looks symbolize the determi-nation of Pakhtuns to continue their struggle against all odds.

“Living beside the towering peaks of high mountains,Subjugation is simply unacceptable.”

Pakhtuns are basically a Central Asian stock. In fact they areone of the largest nation of Central Asia. Pakhtunkhwa, thanks toits peculiar geography, could absorb the ancient cultural traditionsof both Avesta and Sanskrit. Nawroz (or New Year’s day falling onMarch 21) keeps the memory of Zoroastrian times alive and thecontents of some Vedas point towards this land as origin of theircomposition. But successive invasions and immigrations broughtmany more cultural trends. Geography has played such an enor-mous role in shaping the history of Pakhtunkhwa that it is verydifficult to find any parallel to it in world history.

Pakhtunkhwa is lying on the south eastern edge of Central Asiabordering at South Asia. Practically forming a gateway to Indiansub-continent, Pakhtunkhwa had been continuously trampled bywaves of invaders and conquerors who were leading towards the“treasures” of India. For centuries this factor has proved to be ofdecisive importance in charting the course of life in Pakhtunkhwaand it has left an indelible imprint on the national character ofPakhtuns.

The birth of two very important phenomena in our society canalso be attributed to our unique geographical situation. Firstly, thedevastating and destructive wars brought about by wild hordes ofinvaders created deep ruptures and gaps between different stagesof our historical development and civilization. This peculiarity inPakhtun history deprived the people of Pakhtunkhwa of an histori-

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cal memory of their own existence, rendering them vulnerable tocolonialist manipulations. Like an individual, a nation without memoryof the past has problems of orientations in the present and future.This is how Pakhtunkhwa lost many of its rituals and books thatcould have provided her with an anchorage in the stormy seas ofhistory. This historical discontinuity has created a vacuum in knowl-edge about the origin and development of Pakhtun society that isfilled very often by concoctions prepared by colonialists. This his-torical deformation has turned Pakhtunkhwa into a society deprivedof full-fledged hinges of its own, thus opening it to foreign culturaland political dominations. The catastrophe brought about by theinvasion of Pakhtunkhwa by White Huns or Ephthalites in the 5th

century A.D. is a case in point that has resulted in the rupture of thesubsequent history of Pakhtunkhwa from the golden age of thegreat Gandhara civilization.

Secondly, as Pakhtuns were living at the fringes of differentempires for most of the times, so tribal formation among them haspersisted for a very long span of time. Long and old tribal tradi-tions have engraved particular traits on Pakhtun national cultureand psyche. Resistance against foreign invasions only reinforcedtribal and clan relations as they provided Pakhtuns with the bestform of social organizations for mustering their military strength,apart from maintaining their identity and defending their ancienttraditions.

BARRIERS TO STATE FORMATION

Difficult geographical barriers, tribal and patriarchal fragmen-tations and the persistence of a primitive type of natural economyhad made the emergence of a strong, united and centralized PakhtunState awfully difficult. The primitive type of subsistence economycoupled with very strong unruly traditions were important factorsagainst the emergence of a strong centralized state as it minimizedthe prospects for extracting the necessary amount of taxes for run-ning a strong and elaborate state machine. Apart from colonialist

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machinations and outright aggressions, these factors also providesome insight into the decline of Durrani Pakhtun State in 19th cen-tury that had emerged in the previous century on the ruins of Moghul*

and Safavid! empires. As soon as the resources from the externalconquests ended, the Afghan State became weaker and fell victimto colonialist interference and aggressions. But the most severeblow to the unity of Pakhtunkhwa in the 19th century came fromthe north-west ward expansions of the British colonialists in theIndian subcontinent. British invasion of Afghanistan in 1838 was afirst step to conquer Central Asia and to put an end to the south-ward march of Russia. The tough resistance put by Afghans, coupledwith European pressures stopped the onward British march intoCentral Asia (or the so-called Forward Policy), but the British didnot give up this ambition altogether. To get themselves entrenchedinto the borders of Central Asia, the British colonialists occupiedand divided the lands of Pakhtuns by imposing, through an unequaltreaty, “The Durand Line” on Afghanistan, a division that remainsas unnatural today as it was at the end of the 19th century when itwas first imposed.

The colonial administrative division of the lands of Afghans(Pakhtuns) and the decline of the traditional international land tradethrough Pakhtunkhwa led to socio-economic and cultural stagna-tion and decline. The clamping of Stalinist Iron Curtain over Cen-tral Asia contributed to the socio-cultural alienation of Pakhtunsfrom their Central Asian roots, pushing them towards Indiansubcontinent where they naturally faced the crisis of identity.This crisis of identity and historical roots persist to this day. Thecolonialists utilized this opportunity to perpetuate their oppressionand exploitation of Pakhtunkhwa. But the Pakhtun masses did

* An Indian ruling dynasty

! An Iranian ruling dynasty

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not put up with this situation even for a single day. The passesand valleys of Pakhtunkhwa echoed the gunfire of freedomfighters as generations after generations of Pakhtuns kept theflame of resistance alive. Pashto literature, particularly Pashtopoetry provides a very powerful depiction of the heroic struggles ofPakhtuns.

THE RISE OF MODERN PAKHTUN NATIONALMOVEMENT

The rise of modern Pakhtun national movement was also handi-capped and fragmented by the uneven socio-economic and culturaldevelopment within Pakhtunkhwa. At the beginning of the 20th cen-tury, when a separate province of North-West Frontier was estab-lished leaving out the tribal areas, princely states as well as Pakhtunareas of the then British Balochistan, it was a socio-economic mo-saic of varying colours. Mercantile relations had strengthened theirgrip over cities and towns. Stagnant and self-sufficient communallife of the rural areas was giving way to comparatively advancedagriculture on the basis of colonial land settlement. This wasparticularly in Peshawar valley where subsequently a modernirrigation system was introduced by building canals to utilizethe river Swat’s water. These developments turned the Peshawarvalley, which had been the main center of the Gandharacivilization, into a socio-cultural center of Pakhtunkhwa. TheBritish were able to create a class of collaborators in the shape ofbig landowners, Nawabs, and Khan Bahaders, whose positionsconsolidated due to colonial patronage in social and politicalareas of life.

The southern districts of Pashtunkhwa remained dormant interms of socio-economic development for most of the 20th century.In the meantime, tribal set up was fully intact in the “no man’s land”or tribal areas as well as among Pakhtuns living in British Balochistanwho were ruled through Political Agents. This division of

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Pakhtunkhwa in the spheres of influence of different Khanatesunder the umbrella of colonial administration presented yet anotherobstacle in the way of ethnic and national consolidation of Pakhtuns.

But the growth of different markets, the expansion of money-commodity relations and the steady penetration of modern eco-nomic influences from abroad created the necessary socio-economicbasis for the growth of the embryo of modern Pakhtun nationalmovement. The exposure of Pakhtun soldiers to modern influencesin British Colonial Armed Forces during the First World War; theRussian Revolution of 1917, the reforms of Amanullah Khan inAfghanistan of the early 1920s, and the rise of anti-colonial move-ment in India also provided a positive impetus to the birth of modernPakhtun national current.

This was the socio-political environment in which the reformistmovement of ‘Anjuman-e Eslah-e-Afaghina’ was born in the sec-ond decade of the 20th century that later on developed into “Khudai-Khidmatgar”, (literally meaning Servants of God), the political plat-form of the National Liberation Movement. Birth pangs of theNational Movement in Pakhtunkhwa were punctuated by armedtribal uprisings in the mountains where heroes like Faqir of Eppi,Mullah Powindah, Mullah Saheb of Hadda, and Haji Sahib ofTurangzai etc. challenged and at times even humiliated the forcesof the powerful British empire. The tiny Pakhtun intelligentsia, hail-ing mainly from religious schools as well as from the few modernschools, started formulating the cause of modern Pakhtun nation-hood and independence.

Maulana Fazl-e -Mahmud Makhfi, a very fine oracle of mod-ern Pakhtun national consciousness in the early 20th century wrotevery passionate poetry under whose influence a full new genera-tion of Pakhtun poets, writers and political activists grew up. Therequirements of the modern nationhood were very clear in the po-etry of Makhfi. For example, he puts across his views very power-fully in these lines in the very early part of the 20th century:

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“Oh God! Will there be a time when we shall have an aeroplane of our own?

Soaring high into the skies like an eagle, it will fly over oceans.

We shall have a railway of our own as well as telegraph.

I shall be following my own General to overtake the enemy.”

The reformist organization of Anjuman-e Eslah-e-Afaghina andlater the Khudai Khidmatgar Movement, both in terms ofprogramme and organization, corresponded to the embryonic na-tional consciousness of Pakhtuns that was gradually developingunder the influence of a set of internal and external factors. Themovement, representing general national aspirations, always con-sisted of conservative, reformist, and radical elements with the so-cial and political platforms of their own. These differences weredramatically highlighted during the Ghala Dher* peasant uprisingin 1937.

Islam, after its advent in this region through 8th and 9th centu-ries, had gradually integrated in the traditional tribal code ofPakhtuns—Pakhtunwali. Pakhtuns have been mainly gripped bythe externalities of the religion that became a part and parcel oftheir lives. The co-existence and interaction of ancient tribal codewith religious traits is a very interesting phenomenon that is indis-pensable for understanding the Pakhtun national culture. It also

* The uprising was named after the village Ghaladher in Nowshera district in which ittook place.

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explains the inevitable and ritualistic religiosity of a Pakhtun on theone hand, and on the other hand it explains the futility of efforts ininjecting religious fundamentalism in Pakhtun social and politicalculture as it stands in contradictions with Pakhtunwali. This am-bivalence of Pakhtun character remained as such despite thefact that the religious schools were the main source for the birth ofPakhtun intelligentsia. They were later to be joined by a handful ofintellectuals educated in modern schools and a few of independentschools run by national reformers. This small intelligentsia was verysoon radicalized and politicized as it found itself in the midst of amass upsurge that very quickly spread in all districts ofPakhtunkhwa.

Whatever social or political successes or failures the BachaKhan led Khudai Khidmatger Movement might have, the most out-standing contribution of this movement had been in the area ofconsolidation of cultural and national consciousness. Whileopposing the British colonial authority and successive dictatorialregimes of Pakistan, this national political platform was ofparamount significance for awakening Pakhtuns as a nation andalso reminding the world to take notice of the existence ofthis nation.

Khudai Khidmatgar Movement was mainly based in rural ar-eas where it built a very effective mass support base. Influencedby international trends of the 1920s and 30s, Khudai KhidmatgarMovement was organized along military lines, although it was anarmy of non-violence. Its social composition included peasantry,small landholders, artisans, petty traders, a sprinkling of intelligen-tsia, and some of the liberal landowners. It was a heterogeneousmovement in social terms and thus not without internal social con-flicts. Nevertheless, its simple but revolutionary slogans were ableto galvanize the masses, particularly in rural areas.Moreover, unlike the modernist reformist current led by SirSahebzada Abdul Qayyum Khan that stood for collaboration

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with colonial authorities, the Khudai Khidmatgar movement optedfor straight confrontation with the British Raj. The tradition of KhudaiKhidmatgar movement was continued by National Awami Party inthe 1950s and 60s, but it later dispersed in different political group-ings due to growing social tensions as well as polarization in theglobal politics.

Unfortunately, the Pakhtun National Movement could noteffectively penetrate the tribal belt that played the contra-dictory role of serving as an ethnic and physical bridge betweenWestern and Eastern Pakhtuns and also as a political “non-conduc-tor” or buffer zone separating the two Pakhtun areas. Thissituation has prevailed for quite some time, although the tribal belthas also witnessed tremendous social and cultural changes inrecent years and many urban values can be noticed in theseareas now.

Taking part in international trade via Afghanistan and utilizingthe boom of the parallel economy in Pakistan, a class of neo-richhas emerged in this area. In fact it has influenced the process ofcapital accumulation in the entire Pakhtunkhwa. The emerging newelite originally dubbed as “smugglers” by the establishment is gradu-ally gaining social recognition and is out to challenge the monopolyof traditional Maliks in social and political life. However, the Pakhtunmasses living in the seven political agencies of Federally Adminis-tered Tribal Areas (FATA) are groaning under the repression ofcolonial laws such as the Frontier Crimes Regulations (FCR) andthey have yet to get a proper constitutional system and access tojustice. Despite the “special” administrative structure in tribal ar-eas from the colonial period, around seven million Pakhtuns of FATAare joining the mainstream of Pakhtun nation by growing socio-economic, political, and cultural interaction with the Pakhtuns ofsettled areas.

The recent events in Afghanistan have been of great signifi-cance for eastern Pakhtuns. As such, they need a separate and a

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detailed study. Here we shall briefly refer to them over the risk ofover-simplification, in terms of their impact on the national develop-ment. Introducing the Cold War international polarization to Afghansociety, these events have led to great destruction and tragedies inAfghanistan. Fighting against foreign interference and against po-litical fragmentation, Afghanistan is bound to become introvert, atleast in the near future. But that is not all. The mass migration ofAfghans to the east in the wake of the induction of Soviet armedforces and the ensuing bloody conflict can prove to be the singlemost outstanding factor for the future ethnic and national develop-ment of Pakhtuns. Socio-economic, cultural, and political intercourseof the Eastern and Western Pakhtuns on such a massive scale canhave far-reaching implications. It has practically done away withthe “Durand Line”* and hundreds of thousands of Pakhtuns havebecome “Dwa Koreez”—(people having two homes). The pres-ence of such a huge body of Western Pakhtuns, despite initial com-plications and political confusion, will ultimately reinforce PakhtunNational Movement in Pakhtunkhwa.

There has been considerable development in different spheresof life in Pakhtunkhwa during the last five decades after the emer-gence of Pakistan. Policies of different oppressive regimes in Paki-stan, based on the negation of nations on cultural and geographicalbasis, have tended to hamper free and healthy national develop-ment. Pakhtunkhwa saw severe cultural repression and politico-economic deprivation particularly during the initial post partitionyears. But in recent decades, a wave of semi-urbanization, madepossible through Gulf money, and the development of a paralleleconomy has brought considerable socio-economic and culturaltransformation. There has been initial formation and accumulationof capital, but this capital is going to transport, trade, and real estatebusiness. Because of the lack of sympathetic attitude of the federalgovernment to improve conditions for industry in different parts of

* The approximately 1700 miles long official border between Afghanistan and Pakistan,which was drawn by Sir Mortimer Durand, a British Indian official, in 1893.

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Pakistan, there is very little industrialization due to the lack of nec-essary infrastructure and long distance from the seaport of Karachi.

A middle stratum is rapidly expanding in urban centers ofPakhtunkhwa, strengthening national intelligentsia. National con-solidation on modern lines is also influenced by the growing roleof markets, business centers, electronic media, press, and educa-tional institutions (including religious schools). Apart from the ra-dio stations in Afghanistan and Pakistan, there are about a dozenradio stations in different countries of the global North and Souththat are broadcasting programs in Pashto language. Those broad-casts, apart from increasing general awareness, also have an im-portant contribution in bridging the gap between the standard Pashtoof Eastern and Western Pakhtuns. Although television programs ofthe state-controlled stations of Peshawar and Quetta have yet togive Pashto programs their due place in terms of time and resources,Pashto drama has made important strides ahead. The nascent Pashtotheatre in Peshawar, notwithstanding certain limitations and restric-tions, is making good progress. There are more than eighty literaryassociations of Pakhtun poets and writers in different parts ofPakhtunkhwa inspite of the fact that Pashto is not the medium ofinstructions in the schools and is not the official language. Pashtomusic has made good use of modern electronic gadgets. Audio andvideocassettes containing the poetry of classic as well as modernpoets sung by popular singers have flooded the market. Althoughsome Pashtuns are making good use of the Internet, they lack anindependent satellite TV channel.

In recent years, Pakistani establishment has been able to bringinto its fold the major part of the Pakhtun ruling elite through aseries of adjustments and accommodations. According to someevaluations, Pakhtuns ruling elite has been partially elevated to theposition of a “junior partner” of Punjabi-Mohajir ruling classes inPakistan. In recent years Pakhtun elite has tended to adopt politicalconformism that is a reflection of expanding parallel economy as

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well as growing dependence. But the basis of these adjustments isstill narrow and contradictory. The renaming of NWFP (includingtribal belt and Pakhtun areas of Balochistan) as Pakhtunkhwa, theadoption of Pashto as official language, Afghan policy, Kalabaghdam, and provincial control over the natural resources remain to bethe areas of dissent. The failure of the federal government to payroyalty on hydel power generation to Pashtunkhwa has made eventhe most conformist elements to protest. The hostile attitude of theChambers of Commerce of Karachi and Lahore against GadoonAmazai Industrial Estate speaks volume about the fragile nature ofthe adjustments among the elites of different ethnic groups in Paki-stan. Ethnic violence in Sindh in recent past has shattered the myththat claimed Karachi to be the “biggest city of Pakhtuns”. Sendingshock waves into Pakhtunkhwa, these developments have under-lined the significance of industrial progress of Pakhtun areas forcreating job opportunities. Besides, the lack of economic opportuni-ties; urban sophistication and the absence of the rule of law havepushed work force, urban elite and investors to migrate to the ur-ban centers of Punjab and Sindh.

Although urbanization has started taking roots in Pakhtunkhwa,it has by no means created a homogeneous social scenario. Tradi-tional communal life and large family system is rapidly eroding inrural areas and chivalric traditions are disappearing in the tribalbelt. The mushrooming of entrepreneurs, growing competitions inthe market and services has given birth to new types of social inter-ests and cultural consciousness. Despite the growing disintegrationof traditional social structures and modernization, the traditional andpatriarchal value system has proved hard to die. Women rights re-main to be a contentious issue. The mass influx of rural populationinto cities and urban centers is, on the one hand, strengthening thegrip of rural Pakhtuns on these centers, on the other hand, for thetime being at least, this influx is also having “ruralising” effect onour towns. Apart from creating political fragmentations, these com-plex and contradictory features represent the complex nature of

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Pakhtun national consciousness. The said complex social develop-ment is one of the reasons for the rise of the religious right in Pashtunpolitics.

But there are some other factors behind the rise of the saidphenomenon. Pashtun society is undergoing social and political tran-sition. It was the landed gentry that mainly provided the politicalleadership to Pashtuns throughout the 20th century. But towardsthe end of the 20th century the socio-economic dominance of thelanded gentry faced formidable challenges and along with that itspolitical dominance saw a decline. The urban middle classes re-main to be under an economic squeeze. They are also marginalizedin politics.

The new political elite has yet to muster enough political strengthto gain political leadership. Religious parties filled the political vacuumcreated by this development. We should also not forget that duringthe two-decades long Afghan conflict, religious parties inPakhtunkhwa and Baloachistan received fabulous amounts of Petro-dollars. The mushrooming of madrasas provided these parties withhundred and thousands of motivated activists along with a growingnetwork of mosques used as a political platform of the religiousparties.

Moreover, the “political engineering” of the ruling Pakistani es-tablishment is also partially responsible for the astonishing electoralvictory of MMA. After losing control over Afghanistan, extremistelements in the Pakistani State manipulated political and electoralprocesses to manage a political comeback by pro-Taliban politicalforces in Pakhtunkhwa and Baloachistan. It will serve more thanone purpose. Islamabad’s phobia of a threat from its western bor-ders can be overcomed only with the enforcement of a policy ofcontainment. It is also expected to boost the morale of the rem-nants of Taliban who are resisting the new setup in Afghanistan.An added advantage would be the use of religious right by the

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ruling establishment as a lever for putting pressure on US and otherWestern countries to have a better bargain.

Be that as it may, the religious parties in MMA are finding itvery difficult to grapple with the problem of modern governance. Inthe absence of a concrete program for socio-economic develop-ment, they have failed, so far, to deliver in terms of either providingrelief to common man or standing up for the rights of the province.Their policies will be spreading orthodoxy and would create newproblems and complications. But the Pashtun national movement isexpected to bounce back once it adopts a clear program and cred-ible leadership. Development and maturing of urbanization andmodern education will enable Pashtunkhwa in the long term to leavethis infantile disorder behind it.

ETHNIC, CULTURAL AND LINGUISTICDENOMINATIONS IN PAKHTUNKHWA

The question of ethnic, cultural, and linguistic minoritiesliving in Pakhtunkhwa is not new. But with the growing ethnic,cultural, and linguistic consciousness, unlike the past practice, thisquestion cannot be simply brushed aside by calling all peopleliving in the area as Pakhtuns. Hindkwans, Gujars, Chitralis, andKohistanis have ethnic identities of their own. The only demo-cratic and viable solution of this problem will be to accept theethnic diversity as it exits in Pakhtunkhwa. Speaking in broadpolitical terms, one can call the people of all ethnic and linguisticgroups Pakhtuns, as they are the equal inhabitants of this ancientland. But they definitely have a right to develop their owncultural and ethnic identity within the framework of Pakhtun-khwa. A democratic approach to this problem is crucial for abroader unity among the people of Pakhtunkhwa. However, onecan say with confidence that with centuries of common historyand common interests in the future prosperity, has laid a solid foun-dation for fraternal relations among the people of Pakhtunkhwa,

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who are not without justification, famous for tolerance and mutualrespect.

Politically speaking, Pakhtun National Movement is not a politi-cal sect any more confined to the belief of a certain political group-ing. On the contrary it has turned into a general political trend af-fecting all political currents in varying degrees. Modern PakhtunNational Movement requires a modern political vehicle, and a mod-ern political institution. No sectarian political group or clique can bea substitute to a modernist and democratic political organizationthat has to be very broad based to be able to represent nationalaspirations of all interest groups in Pakhtunkhwa. It is in this waythat different challenges of historical dimensions can be coped withsuccessfully. The national unity of Pakhtuns living in Pakistan andexploring the possibilities of rapid economic and social develop-ment in regional and global economy are some of the pressing chal-lenges before our people. The Pashtun intelligentsia is in touch withall these realities of the Pashtun society and the world in the 21st

century. Pakhtun diaspora has the potential for valuable cause byrendering intellectual and material assistance. A considerable por-tion of this intelligentsia, working institutionally under the NationalDemocratic Consultative Process, have gathered their intelligenceto understand the complexities of Pashtun society in the light ofemerging trends.

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PASHTUN SOCIETY INTHE 21ST CENTURY

IDENTITY

Pashtun, Pakhtun, Afghan, Pathan, Rohilas and Sulaimanis aresome of the historical and contemporary synonymous names ofsome 50 million predominantly Pashto speaking people of Afghani-stan and Pakistan’s adjacent southern, central and northernPashtunkhwa or Afghania. Unfortunately, the colonial nomencla-ture of NWFP and FATA continues to describe these areas on maps.It is important to note that the term Afghan denotes all the citizensof Afghanistan but it continues to be another name for all Pashtunsboth in Afghanistan and elsewhere.

Pashtun identity today is embedded in a common language,Pashto, a common social structure, which is mostly tribal with con-siderable regional variations. This identity is reinforced by commonhistorical memories and distinct social code, sometimes also re-ferred to as the code of life, Pashtunwali. The group’s particulargeographic location and ethnicity, which is the manifestation of manyunderlying political, economic and social factors, contribute to suchan identity.

PASHTUN SOCIETY

Before attempting any description of Pashtun society, as men-tioned ealier, one needs to understand that historically there hadbeen many breaks in the civilizational continuity of Pashtuns. Suchdisruptions were mostly caused by invasions or long periods of co-lonial occupation. As Pashtuns straddle the strategically vital cross-

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roads of South Central Asia, they had been targets of imperial de-signs with often being victims of colonial militaries.

In addition, most of the literature on Pashtuns had been shapedwith certain subjective political interests. From ManstuartElphinstone’s “An Account of the Kingdom of Kabul”, who vis-ited Afghan king Shah Shuja’s winter court at Peshawar in 1808 toOlaf Caroe’s “The Pathans” in mid-twentieth century, the image ofPashtuns changed invariably as imperial policies and boundariesaltered.

Pashtuns make the largest tribal society in the world today.Such a society has a hierarchical tree like structure known as seg-mentary lineage in anthropology and other sciences of the society.Pushtun society has an endless division of tribes, sub tribes andlineages, which makes such a hierarchical division. Pashtuns covera wide range of ecological niches, geographic zones and had de-veloped a number of social structures ranging from urban centersto semi feudal agrarian formations of Peshawar valley. There arestill semi-anarchic tribal democracies of remote regions in the TribalAreas.

The underlying system operating in Pashtun society can onlybe understood from within its unique framework. Segmentary lin-eage is a system that defines descent groups in terms of identifica-tion with successively more distant apical ancestors. The structureof such a society is thus conceived of a hierarchical or tree-like inwhich there are different levels of unity and opposition; segmentsor tribes, which are divided at the lowest level, are grouped to-gether into larger units at a higher level.

The Pashtun society is organized on the basis of patrilinealkinship or descent which is traced through the male line. Coopera-tion takes place only against external threats. Enmity focuses onclose patrilineal relations. Tarboor or a patrilineal first cousin is aliteral synonym for enemy in Pashto. The principle of the enemy

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of my enemy is my friend is invoked to develop a chequerboardpattern of alliances dividing Pashtun groups into ‘Dallas’ or‘Janbas’, which in most cases are two opposing parties.

THE PASHTUN CODE OR PASHTUNWALI

The social organization of Pashtun society as described abovehas given rise to a distinct social code, Pashtunwali, which varieswith geography and might be interpreted differently by differenttribes but its basic principles remain the same.

Pashtunwali is an adjective added to the name of Pashtuns,both as a group and an individual. Pashtunwali is the sum total ofall those ideals, meanings and qualities required from a Pashtun orbinding upon them.

The word Pashto itself designates not only the language but alsothe behavior defined by the code. Almost every Pashtun is familiarwith the proverb “you don’t speak; you do Pashto”. Pashto is equiva-lent to both honor and modesty in a complex system of morality, whichhas been formally coded in a dictionary format in Afghanistan.

Those who have written about Pashtunwali agree on several majorpoints that institute the code. One is “Melmastya” or hospitality, whichcalls for lavish entertainment, often beyond the means of its providerhaving a guest reflect one’s own status and influence as well ascreating a relationship of dependence. Hospitality must be offered toanyone who steps onto one’s property, and it can even be imposedupon those who don’t ask for it. The concept of ‘Panah’ - refugegiven to an outlaw - is an extended form of ‘Mailmastya’.

As hospitality is a crucial constituent of Pashtunwali, Pashtunpeople compete heavily for the reputation of being hospitable. Hos-pitality approaches it peak at certain rites of passage and must beperformed in massive banquets called “Kherat” open to the entirecommunity. It is because of the heavy costs of such hospitality that

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weddings, circumcisions and death are recognized as the most drain-ing pull on a family’s economy.

Along with hospitality is unusually mentioned “Nanawatey” orthe right of refuge, which, like hospitality, must be granted to any-one who asked for it. It is an institution that generally supports thefavored patron-client [Hamsaya] relationship among Pushtuns es-pecially in the Tribal Areas, where many criminals go who escapefrom non-tribal areas. They cannot simply settle, but must becomedependents on a landlord or Khan, requesting Nanawatey. For-merly, these dependents were called the landlord’s strength or evenarmy, as they owed him unconditional loyalty and support in returnfor his protection.

The third point central to Pushtunwali is “Badal”, normally re-ferred to as revenge as per street wisdom interpretation but as asublime concept ‘Badal’ means a retributive system of justice onthe pattern of Mosaic Law. The meaning of ‘Badal’ cannot be re-stricted to revenge homicide alone as is common and sometimeseven regarded us honorable. ‘Badal’ does not only means a tit-for-tat in enmity but the obligation to return goodness for goodness insocial transactions. To some observers ‘Badal’ is the major causeof violence among Pushtuns compared to other areas where crimeand violence arise out of other factors. Badal is a crucial notionbehind most action and interaction in Pashto.

PASHTUNWALI AND MODERNITY

It is interesting to note that Pushtunwali as a code of life con-sist of considerable uniformity in fundamental principles althoughthere are certain variations in details from tribe to tribe. Principlesand values such as “ Jirga”, “Nang”, “Siali”, “Teega”, Badraga”,Turburwali”, “Nanwatey” and “Mailmastya’ etc are universallyaccepted by all Pashtun tribes although some of the tribes had theirown “Narkh” (Customary Law for implementing the principles ofPashtunwali). Originally, the customary law was implemented on

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the basis of tribal affiliation irrespective of territorial location. APashto proverb sums it up very aptly when it says,

“you can get out of the village but you cannot leave the customary law”.

Pashtunwali, as a tribal code had some common features withother tribal systems such as egalitarianism, xenophobia and con-sideration for lineage although it also has some specific featuresthat were produced by the particular historical and geographicalconditions of Pashtun society.

Many factors including a transition from a subsistence eco-nomic formation of agriculture and pastoral nomadism to amonitized commercial economy and growing urbanization hasaccelerated the pace of social and cultural changes in Pashtunsociety,

It goes to the credit of reformers like Khan Abdul Ghaffar Khan,Abdul Samad Khan Achakzai and many others who worked to re-form Pashtunwali and develop it to conform to modern democraticprinciples. They tried to teach Pashtuns to overcome traditionaltribal feuds, get modern education and gain political consciousness.The problem is that Pakhtunwali remains an unwritten code basedon oral traditions and tribal practices. Although some western au-thors had tried to put it in black and white, for obvious reasons theyhad not been able to do justice to the theme. This has left Pashtunwalito be interpreted by street wisdom individually as it lacks empow-ered political structures to be enforced uniformly.

Pashto* as an ideal of behavior was an identity-maker, latersupplemented by Pashto language after the creation of modern

* There exist territorial and tribal variations in the pronunciation of Pashto words. Oneof the reasons is lack of social interaction among different Pashtun tribes due to poorroad structures. The process of standardization is at an advance stage in Afghanistanthan Pakistan. A Pashto Language Authority is needed to standardized the script anddialect of the Pashto language.

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Pashtun states in Afghanistan and Swat in the twentieth century.Pashtunwali still remains a major identity-maker, with recent politi-cal changes enhancing its role further. However, Pashtunwali re-mains a major hindrance to the assimilation of Pashtuns into otherpolitical and economic systems.

THE STATUS OF WOMEN IN PASHTUN SOCIETY

Jirgah*, which was initially representative of the whole tribe,gradually went through a process of purge with the appearance ofsocial and class differences over the centuries. Weaker sections ofthe tribe had to accept the domination of tribal elite - Maliks, Sardarsand Khans in Jirgah. Patriarchal values were strengthened by throw-ing women out of the decision making process in Jirgah. The rigidsegregation on gender basis closed the door of Hujra (CommunalGuest House) for women, which is mostly the venue for the pro-ceedings of Jirgah.

The rigid social structure was further strengthened by officialpatronage when Political Agents nominated Jirgahs as courts. Intribal areas women have greater social mobility in and around thevillage in terms of participating in economic activities, but her labourremains basically unpaid. In settled areas where private ownershipof land replaced communal ownership, women became part ofmen’s property, although they do play certain role in the affairs ofthe house within the four walls.

It is interesting to note that Loya Jirgah developed as stateinstitution in Afghanistan in the twentieth century by giving partici-pation to Afghan women. Why can’t Jirgah be democratized inlower Pashtunkhwa by including women in decision-making? It iseasier now as all the elected local bodies and assemblies have somewomen representation. But Pashtunwali definitely needs a new in-terpretation on gender issue. It is crucial for the future of democ-racy in Pashtunkhwa.

* Assembly of male elders that functions as quasi-judicial-legislative institution inmatters related to an individual, family or the community.

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THE SCIENTIFIC BASIS OFPAKHTUN NATIONAL MOVEMENT

In order to create structures and systems along scientificand democratic lines, which will carry Pakhtun national aspirationstowards the desired goals, it is imperative to make an analyticalstudy of the prevailing socio-political and economic conditions ofPakhtun society. This analysis will help in creating a framework tobuild a National Movement of all Pakhtuns along scientific and demo-cratic lines. Below is an attempt at a cursory understanding of thesocio-economic and politico-cultural landscape of Pakhtunkhwa withreference to its geo-strategic importance.

A GLIMPSE AT WORLD CURRENTS ANDPAKHTUN SOCIETY

Technology has changed the world into a global village. Geog-raphy has shrinked in the cyberspace. Twentieth century politicaljargon has changed meaning. The world is in a swift flux of changeand even modern societies are finding it hard to adjust to the post-modern paradigms.

Globalization is threatening conventional state structures.Economic activities have transcended political ideologies, state phi-losophies and geographical boundaries. Increased interactions andinter-dependence in economic activities have compelled societiesto re-align themselves in the form of new entities to respond to thechallenges of globalization.

Different countries of the world have united into regionaleconomic unions to elevate themselves to a better bargaining

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position in a world characterized by global trade, commerceand industry.

Our region, too, is witnessing the most critical phase of its his-tory. Defense imperatives, debt servicing and the poor state of thePakistani economy have resulted in the continued negligence ofthe social sector with the result that millions of Pakistanis havebeen thrown below the poverty line during the past two decades.Coupled with this poor economic performance are increased mili-tancy, sectarianism, and provincial disharmony, which are threat-ening the very existence of the social and state structures.

Pakhtuns, therefore, have great stakes in any eventualityi.e. whether globalization or anarchy sweeps the region; they haveto face the major brunt. The un-exploited markets and oil reservesof Central Asia and the Caucasian region and the booming econo-mies of China and India will significantly affect the Pakhtuninhabited region as regional and global trade in this region gets ex-panding.

Pakhtuns are once again at the crossroads of history. Theirfreedom, prosperity or subjugation would depend on their ability tomake the right choices. Before analyzing the condition of Pakhtunsociety, let us have a look at a few vital questions that cannot beignored by Pakhtuns.

These questions are:

I. What are the options available to the Pakhtun nation forsocio-economic development?

II. How to chalk out an efficient and effective strategy forrapid development of Pashtun society?

III. How much important is Pakhtun integration in regional andglobal economy and what are the mutual benefits forPakhtuns and the rest of the world from such happening?

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IV. How to curb the ever-growing poverty in Pakhtun society?

V. How best to deal with the prevailing geo-strategic condi-tions which will ensure that Pakhtun national interests reignssupreme in the ‘New World Order’?

VI. How to reconcile the interests of global powers withPakhtun national interests?

Let us then survey the socio-economic and political conditionsof Pakhtun society at present.

PRESENT CONDITIONS OF PAKHTUN SOCIETY

Political

Self-analysis is the first requisite for self-improvement. Theanalysis of the present Pakhtun national parties in Pakistan is notintended to undermine the sacrifices of its leaders or workers butsome of the shortcomings of these parties are given below for anobjective analysis.

1. Initially, the Pakhtun National Movement had the support ofeven the so-called menial classes of Pakhtun society. Until the70s, the Pakhtun National Movement attracted even the Balochsbut, unfortunately, in a process of continuous marginalizationof other nationalities and groups, the composition of Pakhtunnational parties remained restricted to smaller interest groups.In a process of historical continuity, political parties surviveonly if they represent the interests of wider groups of the soci-ety. But Pakhtun national parties have not been unable to evolvea broad base and the representation of various segments of thesociety is limited both vertically and horizontally in the partyhierarchies of the national parties.

2. There is a need of a clear agenda and a scientific methodologyfor the achievement of Pakhtun national goals, which is miss-

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ing in the Pashtun national parties. Opponents of the nationalforces allege that the general Pakhtun public has become dis-enchanted with Pashtun national parties for their inability toimprove the social, economic and cultural conditions ofPakhtuns.

3. The class composition of Pakhtun society has changed consid-erably. The emergence of an educated middle class and a com-mercial trading class is putting pressure on the old agrarian-tribal structures of Pakhtun society. A large number of Pakhtunexpatriates have accumulated wealth but lack the social legiti-macy for a high status in the social hierarchy. The existingpolitical parties have to come out of the agrarian and tribalparadigm and win these new groups into the party structures.Perhaps, one reason of the success of other political parties inPakhtunkhwa can be attributed to the inability of the Pashtunnational parties to win newly emerging middle class and thedown-trodden sections of the society.

4. The reason is that the Pashtun national parties base their iden-tity on ethnicity rather than defining it within the cultural andgeographical parameters. Ethnicity is further restricted by bloodand land-ownership than history. Thus a large segment of thePakhtun society is excluded from the Pakhtun identification.Various ethnic and linguistic denominations like Chitralis, theKohistanis etc have to be reassured of an equitable represen-tation in leadership structures because they are united withPakhtuns and Pakhtunkhwa by a common interest, history andculture. Similarly, professional groups have formed unions toprotect their interests but they act as appendages of politicalparties and lack representation in the policy-making bodies ofparties.

5. And last but not the least, the national parties of PakistaniPakhtuns have not done enough to create institutionalized tiesbetween Pakhtuns living in Afghanistan and Pakistan.

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Social

Pakhtun society can be described as one of the most backwardin the world. With its tribal reminiscences still functional, Pakhtunsociety has witnessed catastrophic blows during the last two de-cades.

Whereas the Afghan war economy marginally improved theliving standard of some people of Pakhtunkhwa, it also profoundlyaffected the social outlook of Pakhtuns in many ways.

The efforts of certain vested interest groups to strengthen reli-gious fundamentalism have significantly eroded the tolerant andsecular contours of Pakhtun society. This has resulted in increasedreligious intolerance, violence and militancy in the Pakhtun society.The easily accessible and cheap weaponry of the Afghan war hasfurther complicated the process of creating a civilized society.

Similarly, the cheap availability of drugs, increased unemploy-ment and lack of initiatives and resources of the government hasturned our towns into dens of heroin addicts.

The sponsorship and support of the orthodoxy by the vestedinterest has further checked the growth of society in areas likefemale education, women empowerment and human rights. Thecontinued marginalization of the weaker sex in socio-economic andpolitical activities has resulted in social stagnation. It has denied theopportunities of inculcating healthy attitude toward the oppositegender and has deprived them of useful participation in variouswalks of life.

The Pakhtun expatriates living abroad still rely on muscularpower to earn their livelihood because of the prolong negligence ofthe human development sector. The process of transition from physi-cal culture to thought culture has not taken place in the Pakhtunsociety and due to this reason Pakhtuns are finding it difficult totransact successfully with other nations of the world.

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Economic

Due to the narrow agricultural and industrial base of the Pakhtuneconomy, it mainly relies on the Afghan transit trade, earnings fromPakhtuns living in Karachi and the Middle East besides the blackmoney earned through the smuggling of drugs and weapons. Thelaw and order situation in Karachi has badly affected economicand commercial activities and thus Pakhtuns are the worst affecteesof the law and order situation in Karachi. Non-taxed border tradewith Afghanistan will witness further decline as soon as state struc-ture in Afghanistan is resurrected and this trade comes under ef-fective government control. The Middle Eastern countries will haveto witness further economic slump due to the volatile situation inthe region and import of workers from abroad will further slowdown.

The ongoing process of rightsizing or downsizing andprivatization of the public sector in Pakistan will also adversely af-fect the Pakhtuns employed in the public sector organizations un-like the workers of Punjab and Sindh, who will be absorbed in theprivate sector in those provinces. The thin agricultural and indus-trial base of Pakhtunkhwa would be unable to accommodate thesefired workers.

In these circumstances, various militant organizations wouldfind it least difficult to recruit the unemployed Pakhtun youth aswilling mercenaries, and drug and weapon carriers. Deprived ofevery opportunity of a decent living, the unemployed Pakhtun youthmay resort to unlawful activities for survival.

Culture

Pakhtuns have a tolerant and secular culture, which is expressedin their norms and traditions. Pakhtun national movements, duringits various phases of history, have been progressive movements innature. Starting with Pir Rokhan’s Roshnai Movement in the 15th

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century and continuing with Khushal Khan Khattak anti-Mughalresistance in seventeenth century and Ahmad Shah Abdali’s na-tion-building endeavors in the eighteenth century and the anti-impe-rialist Khudai Khidmatgars in 20th century – all these Pakhtun na-tional movements have been progressive and secular in nature. Buttime and again, the progressive march of Pakhtun society has beenblocked by foreign powers for certain strategic objectives in theland of Pakhtuns. This struggle of the indigenous secular and theexotic regressive forces in Pakhtun society has brought catastrophicconsequences for the social integration of Pakhtun society.

Afghanistan is in the process of reconstruction. Afghans aresuffering from the physical and emotional effects of a long war.So at present little can be expected of Afghanistan for the culturalrevival of Pakhtuns.

The Pakhtuns in Pakistan are facing a lot of challenges andthreats to their survival as a distinct socio-cultural group. Pashtolanguage and culture has been made a target of systematic assaultand is faced with possible extinction. Pakhtuns, as a nation, rightnow, does not have any newspaper, a radio or television channelwhich should play a leading role in preserving, promoting and trans-forming Pakhtun culture.

Despite all these odds, fortunately Pakhtuns have a strong cul-tural identity codified in Pakhtunwali, which should be rediscov-ered in the light of modernity. Every culture has its intrinsic valuebut it is not a static phenomenon. It is a dynamic process thatunfolds in a continuum of transformations to accommodate therequirements of a changing age. Cultural values are not a creedwith a celestial sanctity and a divinely binding obligation butrather the result of experiences of a people that struggle to survivethrough the twist and turn of a complex world and try to understandthe dilemma of existence. And in doing so they bring a vision of lifeinto being that embraces not only the reality of life-as it stands at anook of space and time- but also extends into its abstraction.

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Today, change has come to Pakhtunkhwa like a hurricane.Pakhtuns must be resilient enough to adopt themselves to this paceof change or else, again, there would be catastrophic consequencefor remaining stagnant. Fortunately, the interests of the indigenousprogressive and secular forces seem to be in tandem with worldcurrents and Pakhtuns must be enabled to capitalize on this oppor-tunity and realize the dreams of our forefathers for a modern andprogressive society.

It is imperative to understand the social, cultural, economic andpolitical conditions of our society for evolving a scientific and demo-cratic basis of the Pashtun national movement. The Pashtun na-tional movement can be built along scientific lines if emotions areset aside and the vital forces of societal dynamics are studied ratio-nally and objectively so as to construct necessary structures andsystems, supplemented by a programmatic concept and a scientificmethodology, for the actualization of our national goals. Apart fromefforts to work for the socio-economic development of Pashtunkhwaon non-political basis, the main focus of the ‘National DemocraticConsultative Process, remain to work for building a political organi-zation representing national interests of all Pashtuns and other peopleof Pashtunkhwa, because the question of ‘rights’ is a political one,which could only be addressed properly by taking control of thepolicy-making institutions of the government.

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POLITICAL ORGANIZATION

In a world marked by cut-throat competition, a group or com-munity must have the requisite political organization to have effec-tive control on its resources. A society, which lacks sophisticationof organizing itself, would fall prey to the ideas of another groupor community. In layman’s jargon, a society lacking in organizingitself for useful societal functions would become slave to anothergroup.

Pakhtuns have a brilliant record of social organization. Theingenuity of Pakhtuns can be gauged from the fact that despite thehindrances in its way of growth posed by international politics ofthe twentieth century, Pakhtuns have been able to establish a socialorder without the authority of a state. Even in the tribal areas whereexist a loose state machinery, Pakhtuns have been able tomaintain law and order through their customary laws encoded inPakhtunwali.

Pakhtuns have shown their political maturity and wisdom inestablishing a socio-political organization – the Khudai KhidmatgarMovement – in the early part of the 20th century, which sincerelystruggled for the achievement of the political and economicrights of Pakhtuns but the dynamics of international politics ob-structed the path of obtaining political and cultural rights ofPakhtuns.

The Khudai Khidmatgar Movement was based on principles ofnon-violence and service of the people irrespective of their faith,race or language. The Khudai Khidmatgar Movement’s chief aimwas transformation of an older social structure and a re-definitionof Pakhtunwali – the traditional code of honour of Pakhtuns. The

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Movement became part of the Indian Freedom Movement and joinedhands with the Indian National Congress to struggle against Britishimperialism. Later on, with the establishment of Pakistan, the move-ment diluted and a residue of the organization became actively in-volved in conventional power politics of Pakistan. The legacy ofthe Khudai Khidmatgar Movement to work for the socio-economicuplift, transformation of older social structures and re-definition ofthe traditional code of honour in the light of new realities becamedormant.

The Khudai Khidmatgar Movement is a great heritage of allthe people inhabiting this region. Unfortunately, this heritage, likemany other historical assets of our nation, seems to bury underthe debris of power politics. Today, our nation is faced with no lesschallenging circumstances than when the Khudai Khidmatgar Move-ment was initiated by a rural Pakhtun intelligentsia.

To revive the spirit of the Khudai Khidmatgar Movement andprepare the Pakhtun people for the pressing times ahead, it is im-perative to create new organizational structures, which can bestprotect Pakhtun rights. But before elaborating these concepts, thepresent political system of Pakistan and the requisite strategy forchange is discussed.

PAKISTAN’S POLITICAL STRUCTURE ANDPAKHTUN NATIONAL INTERESTS

Pakhtunkhwa has 35 seats in the national assembly and TribalPakhtunkhwa has a representation of 12 seats in the national as-sembly of Pakistan. Besides, 6-7 seats from Balochistan also be-long to Pashtuns of Balochistan. Apart from 2-3 seats fromPakhtunkhwa, the remaining seats in the above-mentioned Pakhtuninhabited land in Pakistan makes the total strength of Pakhtuns inthe national assembly of Pakistan. There are 272 seats in the Na-tional Assembly of Pakistan out of which 19.85 per cent belong to

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Pakhtun vote. Similarly, Pakhtuns have a representation of around40 members in the senate of Pakistan, making it a sizeable group inthe senate.

From the above discussion, it is clear that even if the people ofPakhtunkhwa vote for the national parties, their representatives inthe National Assembly of Pakistan cannot form a government thusdenying them every opportunity of affecting policies of the federa-tion.

This brings into focus the federal structure of Pakistan. There-fore, the establishment of a genuine and equitable federal demo-cratic system in the country is the only way to replace the sense ofalienation with a sense of participation. The state system, whichPakistan inherited from the British in 1947, was unitary. It was verycentralized and was basically designed for colonial type of gover-nance. Even after independence this system was not changed in afundamental way to enable it for the requirements of an indepen-dent, democratic and developing country with a lot of social, cul-tural and ethnic diversity. Unfortunately, the socially narrow-basedand politically undemocratic ruling elite consisting of the big feudalsand the top echelons of the civil and military bureaucracy moved inthe wrong direction. The said elite raised the slogan of the strongcentre (instead of a strong country) and imposed One Unit Schemeon the smaller provinces, which left behind it a bitter trail of hatred,division and mistrust. The oppressive and bankrupt policies of theabove mentioned ruling elite paved the way for the disintegration ofthe country in 1971. It was after these bitter and shattering experi-ences that the 1973 constitution adopted the principal of federalismas the basis for the state system, although it has not been imple-mented in letter and spirit in the subsequent years.

The concept of federalism is not new, but in its present devel-oped form, it is one of the three most important inventions of mod-ern democratic governance, the other two being the protection ofindividual rights and the idea of a civil society. Federalism is

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something more than simple linking of the federating units into alarger whole to maintain both self-rule and shared rule. The politi-cal theory of federal democracy provides for a real alternative tosimple majoritarian, pyramid like hierarchical state with perma-nent majorities and permanent minorities. Federalism creates amatrix of institutions for power sharing on both vertical as well ashorizontal level. It is based on constitutionalism, pluralism,and power sharing. Experience in different parts of the worldhas proved it beyond any doubt that federalism is the mostsuccessful political strategy for promoting the processes ofnation-building and state building in countries having social and cul-tural diversity.

Civil Society

Civil Society stands in total contrast to authoritarianism. Ex-panding and strengthening of civil society is at the core of the pro-cess of democratization in countries like Pakistan. The idea is thatevery socio-political order has both governmental and private spheresand the government does not have the authority to intervene inevery aspect of the social order. The linkage between the twospheres is provided by a public non-governmental sphereto ensure the democratic and civilized functioning of the socio-po-litical order. One can also put it in another way. The state isto rest on three legs – private, public non-governmental andgovernmental. The first two constitute the civil society. Thestronger the civil society, the more democratic the social order andvice versa.

In our conditions the civil society can assert itself by a moresystematic, meaningful and effective role of the university cam-puses, bar associations, professional organizations, NGOs, tradeunions, and political parties. Unfortunately, the role of the above-mentioned public organizations was made extremely limited andineffective by the long spells of authoritarian regimes. Similarly, thetraditional political parties have also failed to evolve a clear and

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tangible strategy to revive, expand and strengthen civil society.Working in close contact with all the elements of civil society andmovements for ensuring human rights and for promotingparticipatory processes seems the utmost priority of any politicalstrategy.

It is interesting to note that Pakhtuns had a rudimentary formof a traditional civil society prior to the establishment of the op-pressive colonial state system. The modern idea of civil societycan be applied to Pakhtun society developing and bringing out thePakhtun traditional community based institutions up-to-date in fullconformity with modern democratic norms. Recent years have alsowitnessed the mushrooming of community based non-governmen-tal organizations for development and for achieving human rights.This is a positive development, a process of social regenerationand is intended to work together with all progressive and concernedcitizens and organizations for the cause of the under privilegedpeople.

Our society seems to burst under the burden of a protractedand ever deepening series of crises. The sever crises of gover-nance is its real epitome. The origin of these crises can be tracedback to the eleven years long arbitrary despotic dictatorship ofGeneral Zia-ul-Haq. The divisive policies of successive govern-ments in Pakistan have led to the fragmentation of the civil societyon ethnic, communal and sectarian lines. The prolonged unconstitu-tional rule of the usurpers; the rise of a powerful black economy;the trapping of the country in rivalries of international politics duringthe Cold War; the curse of an increasing foreign debt and entangle-ment in regional hostilities are some of the main factors responsiblefor depriving the country of civilized constitutional governance. Themassive erosion of state authority, kalashnikov culture, drug traf-ficking, obscurantism, extremism and large-scale corrupt practicesin state and society are the baggage of the past. The robber-bar-ons, rising mostly from amongst the collaborationists, amassed fabu-

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lous wealth while the standard of life of teeming millions took astraight nose-dive, creating a dangerous social divide. The ruthlessthrust of centralizing political and administrative power, which was,as a colonial legacy, already considerably centralized, not onlytook inefficiency to the border of complete collapse, but italso struck an almost fatal blow at the federal structure of thestate system. The old regional, political and economic imbalanceswere further intensified. The mess of Zia-ul-Haq’s legacy isso great that it does not allow the country to put back on thetrack towards socio-economic development and democraticchange. It will require structural reforms to ensure funda-mental changes in the over-all system. It is particularly impor-tant in view of the monumental and historical changes in theworld after the end of the Cold War and the new politicalsettlements.

The stubborn and hectic efforts on the part of the forces ofstatus quo to save the present over-centralized and decadent sys-tem is creating the threat of anarchy and chaos. Historical experi-ence has decisively proved that every attempt at moderating theall-around crises of state and society by using tactic of the changeof forces at governmental level, has not only miserably failed inachieving the purpose, but it has also further aggravated the prob-lem by creating serious mistrust and even cynicism in the minds ofthe people about the existing political parties and their practices.The fact of the matter is that the masses of people have lost confi-dence in the present socio-political system and they have no faithin political parties representing it. These political parties are in-creasingly viewed by the people as cliques of the corrupt rulingelite, which are hell-bent on squeezing the dying system for theirpersonal benefit instead of bringing any meaningful and positivechange.

Under these circumstances it is incumbent on all progressive,democratic, patriotic and pro-people forces to unite for building a

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new and effective political platform with the aim of finding a wayout of the present deep crises by bringing about the histori-cally necessary socio-political, economic and administrativechanges leading to the complete overhaul of the system. Theyare duty-bound to struggle for galvanizing, organizing and pre-paring the masses for shaping a society capable of maintainingits identity, religious beliefs and healthy traditions alongwith joining the mainstream socio-economic development,democratization and scientific technological revolution in the eraof globalization.

The main political challenge in Pakhtunkhwa that necessitatesthe emergence of a new political platform is to unite and strengthenall democratic political forces, particularly those in smaller federat-ing units, to struggle for the establishment of a genuine and equi-table federal democratic system to ensure complete adminis-trative, financial and judicial autonomy of the federating unitsand to achieve comprehensive decentralization of power up tothe grass-roots level. On social front, the new platform is requiredfor radically changing priorities in the area of resource allo-cation, shifting the emphasis on non-productive sectors to socialsector – particularly education, health, housing and productiveemployment.

The myth of two-party system, which was created by veryartificial and opportunistic socio-political alignment, mainly aimedat grabbing power at every cost, is shattered by the political devel-opments of the last one-decade in the country. The particular de-mographic balance among federating units, the ruthless use of the‘Punjab Card’ and the hegemonistic stance of the IJI and its suc-cessor, Pakistan Muslim League paved the way for a new politicalalignment, mainly on regional basis. Almost all the mainstream po-litical parties, despite having a token presence in different partsof the country, have come to be identified with a particular regionor province. For example, Pakistan Muslim League is for all prac-

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tical purposes a Punjab-based party. Pakistan People’s Party hasbeen pursed into the limits of Sindh. Balochistan is already domi-nated by regional parties and the same trend is being reinforced inthe NWFP (Pakhtunkhwa).

The movement for achieving a full-fledged provincial autonomyfor NWFP (Pakhtunkhwa) in the federation of Pakistan was givena negative image from day one. It was historically handicappeddue to the affiliation of the traditional Pakhtun National Move-ment with the All India National Congress before independence.After independence, the ruling establishment of the new countryperpetrated ruthless discrimination against Pakhtuns.

After the dismemberment of One Unit and the adoption of 1973constitution in Pakistan, many people expected that the provinceswill get their due constitutional rights. But such expectationswere belied by the subsequent experience. The concurrent listof powers in the constitution which was supposed to be trans-ferred to the residual powers of the provinces within 10 yearsin the original scheme, still remains as it was in 1973. Withoutpowers to debate the Annual National Budget and resourceallocation, Senate or Upper House is practically just a show-piece. The Council of Common Interests (CCI) has not func-tioned as an effective forum to redress the grievances of theprovinces. The federal government has continuously violatedits promises to pay the arrears of the royalty in the net profitsfrom the hydel generation to our province as per provision ofthe constitution.

The failure of the Federal government to equalize conditionsfor industry in different parts of the country has resulted in littleindustrial development of Pakhtunkhwa due to the lack of neces-sary infrastructure and long distance from the seaport of Karachi.The federal government has been blind to the fact that due to itsstrategic location, as a gateway to Central Asia, this area requiresspecial attention in terms of building the necessary infrastructure

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and industrial base. The Gadoon-Amazai Industrial Zone was forcedto shut down soon after policies changed and successive govern-ments withdrew all concessions. Kalabagh Dam remains to be aDamocles’ sword for the province for the last many years. Thefederal government has gone back on its promise to carry out arehabilitation work in the province for compensating the damagedone to the infrastructure as a fall out of Afghan war and the prov-ince is practically left on its own to cope with the problem of Af-ghan refugees. The province is deprived of its due share in servicesin the federal ministries, divisions, departments and corporations.The refusal of the central government to honour the resolution infavor of renaming the province as Pakhtunkhwa speak volumes ofthe attitude of the federal government about provincial auto-nomy.

Even inside Pakhtunkhwa (NWFP), the socio-economic de-velopment has not been even, leading to a sense of deprivation incertain areas. Apart from differences in the level of socio-eco-nomic development, the province has an ethnic and cultural diver-sity and the only democratic approach to this problem is to acceptthis diversity.

Struggle for establishing a genuine and equitable federal struc-ture and for overcoming regional imbalances is the only way tostrengthen the federation of Pakistan. In the changing internationalsituation, states and countries can survive only by achieving innerviability and confidence and support of the population. Voluntaryand strong support of the people is the only dependable guaranteeto the solidarity and integrity of Pakistan.

Only a strong political party, with competent political leader-ship, popular support and proper homework done by professionalsand think tanks can overcome the above-mentioned problem. The‘National Democratic Consultative Process’ is an attempt to re-define national priorities and re-create genuinely democratic politi-

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cal organization in the light of modern requirements and realitiesof the age.

Although majority of members from Pashtunkhwa in the Na-tional Assembly would not address Pashtun issues holistically, nev-ertheless, a maximum number of Pakhtun representatives in theNational Assembly can greatly increase the chances of provincialautonomy for Pakhtunkhwa. The members of the National Assem-bly would even further become effective if the FATA MNAs andthe people’s representatives from the Pakhtun belt of Balochistanalso join as representatives of the whole province. This would hap-pen only when the old colonial politico-administrative structure inFATA is replaced by a democratic and representative system ofgovernance. The following chapter deals with reforms in the Fed-erally Administered Tribal Areas.

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TRIBAL PAKHTUNKHWA

Despite its negative impacts for the people of the Tribal Areas,one must appreciate the British ingenuity for evolving an adminis-trative structure, which enabled the colonial British to rule theseareas through their proxies. The British colonialists exaggeratedthe myth of autonomy of the tribes for their own colonial interestsand made a common tribesman hostage to powerful interest groupsfor quite a long time.

The people of the Tribal Areas played a significant role in shap-ing and reshaping the history of the region. The names of legend-ary freedom fighters like Mullah Mastan, Umara Khan of Jandul,Faqir of Ippi, Mullah Pawanda, Hadday Mullah, Haji SahibTurangzai, Fazal Mahmood Makhfi etc are the symbols of tribalPashtun chivalry and spirit of independence. Unfortunately, thetribal people could not capitalize on the unprecedented sacrificesof their heroes because of lack of a grand vision.

The sacrifices of the tribal people for the independence strugglefacilitated the departure of the British from the Indian sub-conti-nent but even after the creation of Pakistan, the benefits of freedomcould not penetrate to the common strata of the tribal society.The old colonial structure in tribal areas was kept intact on onepretext or another. The people of the Tribal Areas remain deprivedof the benefits of the political developments during the pasthalf-century. Because of their exclusion from the politicalprocess, they couldn’t struggle aggressively for many of the eco-nomic and social advantages that come as a result of active politi-cal participation.

The tribesmen are being negatively portrayed by a section ofthe society in Pakistan for being involved in illegal trade like smug-

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gling and narcotics. No one cares to know about the underlyingcauses. When it comes to the defense of the motherland, the Kash-mir Jihad etc. the martial spirit of the tribal people has been usedquite excessively, but when the question of giving a genuine sharein resource distribution and socio-political rights, the tribesmenhad never been counted as equal partners with other Pakistanis.

The Cold War rivalry between the former Soviet Union andthe West also added to keep the tribesmen hostage to a colonialpolitical and administrative system because of the strategic loca-tion of the tribal areas. But now the Cold War has ended. The worldis being swept by waves of globalization and regional integration.These changes would definitely affect the prevailing status quo intribal areas. The real challenge is that the tribal people have notbeen able, as in the past, to articulate the currents of the modernchanges and formulate a systematic political response that couldend in the socio-political and economic betterment of the people ofTribal Pakhtunkhwa.

As Tribal Pakhtunkhwa was kept aloof from the mainstreampolitical current, no political party of Pakistan thought it necessaryto make the Tribal Pakhtunkhwa’s issues a part of their party mani-festoes. Although a considerable educated class aspired for a po-litical change in the tribal system, their voices remained unheard.

In the changed prevailing circumstances; the extension of thedevolution plan and representation of Tribal Pakhtunkhwa in theprovincial legislature have necessitated the urgency of a robust po-litical response.

While the efforts of the federal government to bring certainlegal and political changes in the Tribal Pakhtunkhwa are com-mendable steps, yet these efforts would be fruitless unless the voicesof the tribal people are heard in the formulation of policies that areintended for bringing changes in Tribal Pakhtunkhwa. Policies madein the cool chambers of bureaucratic mansions often meet a doomed

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fate because such policies don’t represent the aspirations of thecommon people. In order to bring genuine political, social, cultural,and economic improvements in the lives of the people of TribalPakhtunkhwa, the following policy issues are of extreme impor-tance for the success of the Tribal Pakhtunkhwa development pro-gram.

CONSTITUTIONAL REFORMS

Constitutionally, Tribal Pakhtunkhwa is a non-regulation area,which means that legislation for Tribal Pakhtunkhwa is the respon-sibility of the president of Pakistan. The governor Pakhtunkhwa,being agent of the president and representative of the federation,issues ordinances in respect of Tribal Pakhtunkhwa, if and when-ever necessary. Since, Tribal Pakhtunkhwa will be given represen-tation in the provincial legislature that would make it a regulationarea at par with other settled areas of the province, it would, there-fore, require that Tribal Pakhtunkhwa is declared a regulation areathrough a constitutional amendment. This would help in the legaland constitutional integration of Tribal Pakhtunkhwa with the restof the country. The tribal areas, while remaining within the consti-tutional and administrative framework of the federation, shall havethe right to retain its cultural identity intact.

LEGAL REFORMS

On the legal side, Tribal Pakhtunkhwa is notorious for ex-co-lonial inhuman laws in the shape of the Frontier Crimes Regula-tions. Its existence in an independent country is a great stigma onthe conscience of our policy-makers, which needs to be replacedwith civil and criminal laws that fits the socio-cultural traditions ofthe Tribal Pakhtunkhwa and the sooner this is done the better. ALaw Commission should be constituted for the formulation of alegal and judicial system that suits the genius, culture, traditions andvalues of the tribal people.

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ADMINISTRATIVE REFORMS

Administratively, Tribal Pakhtunkhwa has developed a peculiarculture of its own. Administration there is said to be cost effectivebecause of the collective and territorial responsibilities of tribes andelders to maintain law and order in their respective areas of influ-ence. This sort of administrative set-up is ‘dictatorship of the few’and cannot be justified on any ground whatsoever. In fact, this ad-ministrative arrangement only serves the financial interests of aclique of bureaucrats at the expense of the people. The un-restrainedpowers of the Political Officers in the Tribal Areas; the lack of civilsociety groups and education coupled with a lack of interest andsensitivity of the federal government to improve the existing condi-tions further fortifies an obsolete colonial structure in the TribalAreas. Public administration there, like all other public service insti-tutions in Pakistan, has undergone institutional decay worthy of beinglabeled as an ‘extortionist gang’. Constitutionally, TribalPakhtunkhwa is a ‘non-regulation area’, which is ruled by the presi-dent of Pakistan through the governor Pakhtunkhwa as his agent.Practically, however, a parallel machinery of the central and pro-vincial governments administers Tribal Pakhtunkhwa. The politicalofficers at the top have to reach the governor’s area of influencefor postings in the tribal areas. The lower tiers of administrationand the Agencies Works and other Line Departments are the do-mains of the provincial government. This administrative mayhemin the Tribal Pakhtunkhwa results in administrative deadlock be-tween the provincial and central governments at times when a fugi-tive of law from the Provincial authority takes refuge in the TribalPakhtunkhwa and the Political Officers, feeling themselves respon-sible to the governor rather than the provincial government, refuseto co-operate with the provincial home department in delivering theoutlaw. The poor law and order situation in the settled districts ofTribal Pakhtunkhwa and the resultant hesitation of investors to un-dertake economic and business activities in Pakhtunkhwa can belargely attributed to this administrative black-hole, the so called

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FATA, which makes a less secure environment for investors in ourregion.

There should be a modern security force in Tribal Pakhtunkhwasubject to the condition that Tribal Pakhtunkhwa should have itsown exclusive control over its security forces. The officer cadreshould be recruited from the graduates of the Tribal Pakhtunkhwathrough fair and transparent recruitment procedures giving due re-gard to educational backwardness and comparative disadvantageof different agencies in terms of poor human resource develop-ment. The Tribal Pakhtunkhwa administration, however, can hireofficers on deputation from the provincial or federal government ifso required by it.

The colonial legacy of recruiting soldiers from different tribesin the Frontier Corps and appointing its officer cadre from outsideshould be done away with and the tribal people must be given re-sponsibility to lead their own forces. The tribal make-up should alsobe replaced by a broader identity rather than retaining the water-tight compartments of different tribes in the semi-military forces ofthe Frontier Corps.

POLITICAL REFORMS

Any plan for the development of Tribal Pakhtunkhwa musttake into consideration, the genuine, true, fair and transparent rep-resentation of the aspirations of the common tribesmen. This ispossible only if the political process in Tribal Pakhtunkhwa isbased on adult franchise, political pluralism and the freedomof expression and association of the tribal people without fearor favor.

The egalitarian spirit and traditions of the tribal people shouldbe transformed into a modern system of democratic governance.The tribal people must be empowered to participate in the decision-making processes and structures that vitally affect their lives. The

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political rights of the people of the tribal areas of Pakistan must beconstitutionally protected, while keeping their distinct identity in-tact. In this regard, each tribal agency must have its own AgencyAssembly, which should be fully empowered to legislate on issuesaffecting the lives of people in accordance with the customs, tradi-tions and values of the tribal people except those which are viola-tive of universal human rights.

ECONOMIC REFORMS

Tribal Pakhtunkhwa is one of the most backward areas of thecountry where per capita GDP is 50% less as compared to the restof the country. During the last fifty years, very little effort has beendone to develop infrastructure and increase employment opportuni-ties in Tribal Pakhtunkhwa. The strategic location of the TribalPakhtunkhwa and the efforts of the government to address the rootcauses of terrorism make it even more important to increase devel-opmental outlays for the socio-economic development of the tribalareas. The following measures need to be taken for the economicdevelopment of the tribal areas:

a) Inclusion of Tribal Pakhtunkhwa in NFC Awards

In order to seriously consider the socio-economic developmentof Tribal Pakhtunkhwa, developmental funds must be allocated to itat par with other provinces of Pakistan.

The Federal Budget, 2002-03 allocated 193.5 billion to prov-inces. This allocation is made under the NFC Award, which is basedon the population of each province. Tribal Pakhtunkhwa is not in-cluded in the NFC award, which means leaving a population equalto the size of Balochistan’s population (according to 1971 Census)without any direct allocation from Federal Tax Revenues. TribalPakhtunkhwa’s exemption from the tax net can not be made anargument in favor of denial of its share in the Federal Tax Rev-enues as it do contribute to the tax revenues in the form of indirecttaxation.

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A comprehensive development plan of Tribal Pakhtunkhwawould require allocating funds to it on the basis of population as isdone in the case of provinces.

Presently, Tribal Pakhtunkhwa is clubbed with other SpecialAreas like AJK, Federal Capital Areas, and Northern Areas. Allthese Special Areas have been allocated Rs. 7.7 billion for develop-ment expenditure in the Federal Budget 2002-03. Besides the lowbudgetary allocation to the Special Areas, it is also not clear as tohow much of this amount would go to Tribal Pakhtunkhwa amongstthe Special Areas.

In view of the drive of the federal government to bring TribalPakhtunkhwa into the national mainstream, it is imperative that ei-ther it should be included in the NFC Awards separately or theaggregate population of Tribal Pakhtunkhwa and Pakhtunkhwashould be worked out for allocation of funds to both in the NFCAward.

b) Accounting and Financial Information System for TribalPakhtunkhwa

In order to ensure the correct utilization of the funds allocatedfor the development of Tribal Pakhtunkhwa, a transparent finan-cial and accounting management system needs to be worked out.In this regard, a separate annual budgetary statement for TribalPakhtunkhwa under the supervision of the federal or provincialgovernment has to go a long way in the right direction. This wouldalso strengthen the resolve of the present government to ensuretransparency and accountability in the utilization of public funds.As Tribal Pakhtunkhwa would be given representation in the pro-vincial assembly of Pashtunkhwa, the supervision of the recentlyestablished FATA secretariat and preparation of budget for TribalPakhtunkhwa seems more appropriate for the integration processof NWFP and FATA.

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There must be an Annual Development Program for TribalPakhtunkhwa and the correct utilization of funds must be ensuredthrough the establishment of a separate Auditor General Office.The ‘secret funds’ at the disposal of the political agents must beabolished forthwith and the ‘Moajib/Lungi System’ in tribal areasmust be finished as it encourages political bribery of the influentialelders at the cost of the common tribesmen.

c) Land Settlement

The communal land ownership in the tribal areas is a greathindrance in the way of economic growth. In order to make TribalPakhtunkhwa favorable for economic activities, it is essential thatthe communal land ownership should be replaced by modern landsettlement. Individual ownership of land would enable the peopleof Tribal Pakhtunkhwa to acquire loans for businesses givingtheir lands as collaterals. Besides, settlement of land on indivi-dual ownership basis would also lessen opportunities ofblocking improvement of physical infrastructure, which iscompromised in political and tribal disputes in Tribal Pakhtunkhwa.The tribal leaders should be taken into confidence and theyshould be made aware of the benefits of the modern landsettlement system.

d) Establishment of Free Trade Zone

The re-construction exercise in Afghanistan and the opening ofCentral Asia provides a golden opportunity for Pakistan. The es-tablishment of a Free Trade Zone in Pashtunkhwa/TribalPakhtunkhwa would greatly help in facilitating trade with the land-locked Central Asia.

The establishment of a Free Trade Zone would decrease thedependence of the tribesmen on illegal trade and would compen-sate the tribal people for the neglect of the socio-economic sectorduring the past 55 years of Pakistan’s independence.

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This subsidy by the federal government can greatly change theeconomic conditions of the tribal people. Since the formation of thenew government in Afghanistan, the informal trade between thetwo countries has reduced but the formal trade did not pick upsignificantly. Tribal Pakhtunkhwa can play a significant role in main-taining and increasing trade ties between the two countries pro-vided that the informal trade links are replaced by formal tradebetween the two countries.

Tribal Pakhtunkhwa can play a major role in an atmosphere ofmutual trust between the governments and people of Pakistan andAfghanistan. The creation of a Free Trade Zone in Pakhtunkhwacan be of great strategic advantage to the government of Pakistanin the long run.

e) Establishment of Tribal Chamber of Commerce

The tribal people are involved in trans-border trades for centu-ries; however, their trade transactions could not be modernized andinstitutionalized due to lack of leadership, vision and information ofthe tribal traders. The establishment of a Tribal Chamber of Com-merce would enable the tribal traders to have better exposure toand transaction with national and international markets. This cham-ber can be of great help in advocating and representing the genuinetrade interests of the tribal people with government and privatesector organizations. It will also be able to protect the legal inter-ests of the tribal traders and they cannot be coerced or pressurizedfor illegal gratification by government officials and agencies. Thereis a need of a thorough spade-work to establish a Tribal Chamberof Commerce.

f) Development of Manufacturing Sector

Great potential exists for the development of the manufactur-ing sector in mining, precious stones, food processing and labor andenergy intensive units. The government must develop necessary

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infrastructure and provide electricity on subsidized rates to inves-tors for the development of the manufacturing sector in TribalPakhtunkhwa.

SOCIAL SECTOR DEVELOPMENT

1. Construction of Tribal Highway

Poor physical infrastructure in Tribal Pakhtunkhwa hasadded to the backwardness of the tribal areas. Most of thevalleys in the tribal areas remain inaccessible, which makesthe lives of the tribal people miserable in many ways. Theyhave poor access to health and education facilities and thelack of effective means of communication and transportationis responsible for retaining the backwardness of the tribalareas.

The construction of a tribal highway starting from Bajaur toMohmand, Khyber, Orakzai, Waziristan and linking it to Balochistanshould be a top priority for the socio-economic development of TribalPashtunkhwa. This will greatly help in alleviating poverty, improv-ing life standards of tribes by access to better transportation andcommunication.

2. Health

The poor health care system in Tribal Pakhtunkhwa is respon-sible for many untimely and avoidable casualties. Child and mater-nal mortality rate is higher in Tribal Pakhtunkhwa than the rest ofthe country because of poor health infrastructure. Developmentoutlays for the health sector in the national and provincial allocationfor Tribal Pakhtunkhwa must be a priority to improve health ser-vices. The central government should allocate additional funds forthis purpose.

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3. Education

Education in Tribal Pakhtunkhwa, like all other social sectors,is far behind than the rest of the country. It is mainly because thestudents from Tribal Pakhtunkhwa face a lot of difficulties in get-ting seats in professional colleges and higher educational institutes.Middle and higher standard education cannot improve unless atleast one university for both genders are established exclusivelyfor Tribal Pakhtunkhwa. There should be two sub-campuses of theseuniversities in the Tribal Areas. The establishment of a universitywould put greater demand on lower schools and colleges to pro-duce the necessary manpower for higher education. This wouldalso provide equitable educational opportunities to the students fromTribal Pakhtunkhwa at par with the students of other areas of Pa-kistan.

4. Travel Concessions

Geographical contiguity, historical, cultural and ethnic ties ofthe tribal people with Afghanistan and the imperative of frequentcross-border travel to and from Afghanistan makes it a vital ques-tion for the tribal people that they should be given visa-free cross-border travel facilities between Pakistan and Afghanistan. The rightsof the tribal people must be strongly supported to retain their his-torical links with the government and people of Afghanistan sub-ject to the condition that such contacts do not hamper goodneighborly relations between the governments of Afghanistanand Pakistan.

5. De-Weaponization

The people of Tribal Pashtunkhwa should be educated and per-suaded to give up destructive weapons acquired during recent years,which have become a tool of self-destruction. Abundance of theabove mentioned weapons in the private possessions have resultednot only in human and material losses on large scale but it has led to

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gross violations of tribal traditions in terms of killing women andchildren. As a first step Tribal Pashtunkhwa should be cleansedfrom heavy weapons with the co-operation of the people. The pro-cess of de-weaponization should gradually include smallweapons also.

As far as weapon industry and markets are concerned the gov-ernment, with the co-operation of the local people, should prepare acomprehensive plan to integrate weapon manufacturing and sellingin the national arms markets and industry. The weapon markets inthe tribal areas should be brought under proper state control.

6. Eradication of Narcotics

Drug trafficking brought a bad name to the people of TribalPakhtunkhwa and the region. In order to eliminate cultivation ofnarcotic crops, a proper plan should be devised, which should in-clude alternative employment and earning opportunities for thepeople involved in this trade.

The geo-strategic location; socio-economic under-development;the political deprivations of the people for almost a half century andthe prevailing situation in the region make increasing demands onthe government of Pakistan to give the people of Tribal Pakhtunkhwatheir due rights.

7. Constitutional Status of PATA

The Provincially Administered Tribal Areas (PATA) of Paki-stan, comprising of the former Malakand Division has been definedunder section 246 of the Constitution of Pakistan, whereas section247 deals with administration of the Tribal Areas ofPakistan.

It is interesting to note that the people of PATA elect their pub-lic representatives in the general elections like the rest of Paki-

55


stanis and their national and provincial assembly members do takepart in legislation in both legislatures but ironically any such legisla-tion is not implemented in PATA unless it is extended by an execu-tive order of the president of Pakistan or the governor NWFP(Pashtunkhwa).

This constitutional incongruity has resulted in many legal com-plications both for the general public and the government machin-ery as well. For example, the Malakand Agency prison is, legallyspeaking, a private prison as it has no ‘Jail Manual’. The youthfrom Malakand Agency cannot be selected in the Pakistan nationalsports teams because they belong to the Agency. But the agency isin name only as there are regular law courts working in MalakandAgency and the rest of PATA. But again, PATA has special lawscalled ‘The Sharia Regulations’, which co-exist with regular lawsof Pakistan. The only impression one gets of all these injustices isthat the federal government of Pakistan wants to continue the le-gal, geographic and administrative division of Pakhtuns as was pre-partition British policy in the sub-continent. It would be in the bestinterest of the country to apply uniform standards to all areas andremove the sense of frustration of the people of Pashtunkhwa.

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A GLANCE AT POVERTY INPAKHTUNKHWA

The entire Pakhtun nation, on the average, lies below the pov-erty line. If poverty line is equal to the earning of one US dollar perperson per day then the average per person GDP of Pakhtuns is farbelow this amount. Pakhtuns are too poor compared to their humanand natural resources.

The per capita GDP in Pakistan is 472 dollars while the percapita GDP of NWFP is less than half of the national average. Percapita GDP of Pakhtunkhwa (NWFP & FATA)* can range from$180 to $235 depending on the variables used in the simulation analy-sis. The effects of such a vast difference between the GDP of thisarea and the rest of the country are numerous. Over the past fewdecades millions of workers have left Pakhtunkhwa (NWFP &FATA) for others parts of the country and abroad.

In order to enhance national unity and reduce the appeal ofreligious fundamentalism (due to sense of deprivation) inPakhtunkhwa/NWFP, such a vast gap among the per capita in-come of individuals in different provinces must be reduced. In al-most all sectors including agriculture, manufacturing, services andtrade, Pakhtunkhwa needs immense investment to come up at parwith the rest of the country.

The following case study illustrates how per capita GDP ofPakhtunkhwa was calculated.

* The acronyms, NWFP and FATA, used by the government of Pakistan to designatePakhtunkhwa and Tribal Pakhtunkhwa respectively, have been retained in this part of thedocument as this section is based on reference material of the government ofPakistan.

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ESTIMATION OF THE GDP OF NWFP AND FATA

Pakistan is a low-income country, with a per capita gross do-mestic product (GDP) of around 470 dollars. The per capita in-come varies across the country and is considerably lower in NWFP,FATA and Balochistan. GDP or GNP is usually calculated for coun-tries thus ignoring the differences between the per capita incomesacross different provinces with in a country. This article will calcu-late the combined GDP of NWFP & FATA and compare it with therest of Pakistan.

GDP OR GNP

Gross Domestic Product (GDP) is the value of new goods andservices produced with in a country during the course of the year.GDP is calculated without regard to ownership of productive re-sources. Thus, the value of output of a foreign owned factory inNWFP is included in the GDP of the province. On the other hand,Gross National Product (GNP) is the value of new goods and ser-vices produced by domestic factors of production. Thus, the valueof output of a foreign owned factory in NWFP is excluded fromGNP calculation but remittances from workers of this provinceworking abroad is included in GNP. Like many developing coun-tries the GNP of NWFP & FATA is higher than the GDP of theprovince. The main reason for the higher GNP of the province isthe remittances of workers from abroad and other provinces of thecountry.

GDP can be calculated by two different approaches. These areIncome Approach and Expenditure Approach. Income Approachcalculates the wages, interest, rents, proprietors’ income, etc inNWFP & FATA in a given year. On the other hand the ExpenditureApproach is the sum of consumption, investment, government ex-penditures and net exports of NWFP & FATA. (Detail of theseapproaches is beyond the scope of this report). The economic sur-

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vey of Pakistan uses Income approach to calculate the GDP ofPakistan and the same approach is used to calculate the GDP ofNWFP & FATA in this report. Current US dollars are used in theestimation of the GDP. Purchasing power parity is not used in de-termining wages, rents etc.

POPULATION AND LABOUR FORCE

To determine the per capita GDP of the province, real popula-tion of the province needs to be estimated. Table 1 below showsthe total area and population of Pakistan, NWFP and FATA. Ac-cording to the 1998 census NWFP & FATA constitutes 16% of thepopulation of Pakistan. According to this census the population densityof NWFP is more than twice as high as FATA. Many individualsand organizations dispute these findings and argue that the popula-tion density is almost the same in NWFP & FATA. As a result theyclaim that the population of FATA is underestimated by 2-3 million.However in this report figures from 1998 Census is used to deter-mine the GDP of NWFP & FATA.

TABLE 1

Pakistan NWFP FATA NWFP &FATA

Area in Sq. Km 796,095 74,521 27,220 101,741

Area as a percen- 9.36% 3.42% 12.78%tage of total

Population 130,579,000 17,735,000 3,138,000 20,873,000

Population percentage 13.58% 2.40% 15.98%

Population Density 238 115 205

Source: Economic Survey of Pakistan

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The size of the total labor force in Pakistan is around 40.4million, which is about 31 % of the total population. Labor forceincludes those individuals who are currently employed or are search-ing for employment. Those who are unemployed and are not search-ing for employment are excluded from these calculations. Morethan 2 million people are currently unemployed in Pakistan.

TABLE 2

Pakistan

Population 130,579,000

Labor Force 40,400,000

Labor Force as Percentage of Population 30.94%

Table 2 & 3 shows the total strength of the labor force in Pakistan,and the actual and percentage breakup of individuals employed indifferent sectors of the economy.

TABLE 3

Pakistan Percentage ofDistribution Labor Forceof Labor Force in each sector

Total Labor force 40,400,000

Agriculture 19,089,000 47.25%

Mining & Manufacturing 4,100,600 10.15%

Construction 2,529,040 6.26%

Transport, Storage and Communication 2,213,920 5.48%

Trade 5,603,960 13.87%

Services and others 6,863960 16.99%

Source Table 2 & 3: Economic Survey of Pakistan

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Assuming that labor force as percentage of population isthe same for Pakistan and NWFP (almost 31%) the size oflabor force in NWFP & FATA can be estimated to be around6.5 million people. Table 4 shows the shows the total strength of thelabor force in NWFP & FATA, and the actual and percent-age breakup of individuals employed in different sectors of theeconomy according to the government figures.

TABLE 4

NWFP & Percentage ofFATA Labor ForceDistribution in each sectorof Labor Force

Total Labor force 6,457,924

Agriculture 3,117,885 48.28%

Mining & Manufacturing 415,244 6.43%

Construction 528,258 8.18%

Transport, Storage and Communication 421,057 6.52%

Trade 826,614 12.80%

Services and others 1,148,865 17.79%

Source: Economic Survey of Pakistan

GDP OF PAKISTAN

The GDP of Pakistan is estimated to be 61.7 billion dollars(Source: World Bank.). Agriculture is the biggest contributor to theGDP of Pakistan followed by manufacturing and Trade. Table 5shows the contribution of different sectors towards the GDP ofPakistan.

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TABLE 5

Contribution Contributionof different of differentsectors to GDP sectors to GDPof Pakistan in $ in percentage

Total GDP 61.7 Billion

Agriculture 15.24 Billion 24.70%

Manufacturing 10.735 Billion 17.40%

Construction 2.10 Billion 3.40%

Transport, Storage and Communication 6.41 Billion 10.40%

Trade 9.4 Billion 15.20%

Services and others 17.815 Billion 28.90%

Source: Economic Survey of Paksitan.

CALCULATING GDP OF NWFP AND FATA

NWFP & FATA constitutes around 16% of the population ofthe country and as a result roughly 16% of the GDP of the countryshould be generated in this area. Unfortunately the GDP contribu-tion from this area is much lower. Each sector of the economy ofNWFP & FATA is discussed below.

AGRICULTURE

According to the ministry of food, agriculture and livestock,around 22 million hectares are cultivated in Pakistan. Out of thisaround 1.5-1.7 million hectares are estimated to be cultivated inNWFP & FATA. Thus, 6-8 % of the total cultivated area in Paki-stan is cultivated in NWFP & FATA. Irrigation system in the prov-ince is very poor and a significant portion of the cultivable land inthe province is not cultivated due to lack of an effective irrigation

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system in the province. Furthermore, even most of the cultivatedland in the province is non-irrigated.

On the average irrigated area produces twice as much out putas the non-irrigated area. This means per acre output is consider-ably lower in NWFP& FATA compared to the better-irrigated landsin Punjab and Sindh. Based on the above-mentioned facts it is fairto estimate that the agriculture production of NWFP and FATAdoes not constitute more than 6-7% of the total agriculture outputof the country.

Table 5 shows that agriculture accounts for 15.24 billion dollarsin the total GDP of the country. 6% of 15.24 billion dollars is about914 million dollars. Thus 914 million dollars is a generous estimationof the agricultural output of the province.

The Economic Survey of Pakistan estimates that almost half ofthe population of NWFP is employed in the agriculture sector asshown in Table 4. These figures clearly show that agricultural la-bor force is over estimated. The validity of these facts needs to bequestioned for two reasons. Firstly there is not enough cultivatedand irrigated area in the province to employ such a large number ofpeople. Secondly such a large number of people cannot be gain-fully employed in this sector as the per-person income for agricul-tural workers comes to less than 100 dollars per person per year ifwe assume that half the labor force of the province is employed inagriculture sector. This situation can be termed as disguised unem-ployment.

MANUFACTURING

Manufacturing constitutes for 17.4 % of the GDP of Pakistan.Out of this figure 12.2% is large-scale manufacturing and 5.2% issmall-scale manufacturing. As shown in Table 5, manufacturingcontribute 10.735 billion dollars to the GDP of the country. Largescale manufacturing is about 7.53 billion dollars of this amountwhile small-scale manufacturing contributes around $ 3.21 billion.

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Large-scale manufacturing is very limited in NWFP and is non-existent in FATA. According to Sarhad Development Authoritythere are 2086 industrial units in the province employing 77900people. However most of these industrial units are closed. On theother hand Economic Survey of Pakistan estimates that 6.43% ofthe population of NWFP is employed in manufacturing and min-ing. If we assume the same ratio for FATA, the total number ofpeople employed in this sector is around 415,244 in NWFP & FATA.Economic Survey of Pakistan uses a broader definition of manu-facturing than SDA but again, employment in this sector is overes-timated by Economic Survey of Pakistan as there are not enoughoperational manufacturing units to employ such a large number ofpeople.

There are 12-15 units in NWFP with initial investment of 500million rupees. These can be classified as large-scale manufactur-ers and there are about 50 units with initial investment in excess of50 million rupees. A great number of these units are closed but afew cement manufacturing units, a tobacco unit in Akora andpolyester units in Hattar are notable exceptions. The contri-bution of NWFP to large scale manufacturing in Pakistan isalmost negligible. Small-scale manufacturing is also limitedbecause of lack of any competitive advantage to manufacturers inthe province.

NWFP & FATA got an insignificant share in the export of manu-factured goods from Pakistan. In all manufacturing in NWFP doesnot contribute more than 3-4 percent to the total manufacturingsector in the country. This adds around 300-350 million dollars tothe GDP of Pakistan.

CONSTRUCTION

More than 20% of the construction workers in Pakistan comefrom NWFP & FATA. The contribution of the construction indus-try of Pakistan to the GDP of Pakistan is 2.10 billion dollars. Out of

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the 528,258 construction workers in NWFP & FATA most are dailywagers. Both public sector and private sector construction work islimited in NWFP & FATA compared to Punjab and Sindh. As aresult many construction workers from NWFP & FATA work inPunjab and Sindh. Income earned by construction workers outsideNWFP & FATA cannot be technically included in the GDP calcula-tion of NWFP & FATA. Even if this amount is included the incomeearned by construction workers in NWFP & FATA can be esti-mated to be around a maximum of 12% of the total 2.10 billiondollars. This comes to about 252 million dollars.

TRANSPORT, STORAGE AND COMMUNICATION

People from NWFP and FATA have significant representationin the road transport sector of the country. Unlike construction in-dustry there is significant ownership of transport vehicles in theprovince. However income of NWFP & FATA owned vehicles op-erating exclusively in other provinces cannot be counted in the GDPof the province. The share of NWFP & FATA is very limited in airtransportation and railways. In addition communication infrastruc-ture is relatively weak in NWFP & FATA compared to Sindh andPunjab.

Transport, Storage and Communication contribute 6.41 billiondollars to the GDP of the country. A benevolent estimate will putNWFP & FATA share in this sector around 8-9% of the total. Thiscomes to 500-550 million dollars. The employment generated inthis sector is over four hundred thousands in NWFP & FATA.

TRADE

Due to weak agriculture and manufacturing sectors the pur-chasing power of the people of NWFP is limited. This is howevercompensated by remittances from other parts of the country andabroad. The presence of Bara markets also attracts buyers fromother parts of the country, as non-taxed goods in these markets

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are considerably cheaper. In addition, the presence of around 1.5million refugees also stimulates the wholesale and retail sector. Inexcess of 800,000 people are employed in this sector.

The contribution of trade to the GDP of Pakistan is around9.4 billion dollars. About 16% of the total trade (wholesaleand retail) can be attributed to NWFP & FATA. This comes toaround 1.5 billion dollars. It is possible that the actual size ofthis sector in NWFP & FATA is even bigger than this amount butit cannot be confirmed, as a big portion of this trade isundocumented.

SERVICES AND OTHERS

Services sector in NWFP & FATA is very weak. This includesFinance & Insurance, Ownership of Dwellings, Public Adminis-tration & Defense and other services. 17.185 Billion dollarsof the GDP of Pakistan is attributed to this sector. Out of theroughly seven million workers employed in this sector in thecountry about 1.1 million are employed in NWFP & FATA. Theauthor estimates that NWFP & FATA share in this sector isaround 8-9 percent of the total. This comes to about 1.3-1.5 billiondollars.

GDP OF NWFP AND FATA

Simulation analysis is used to determine an estimate of the GDPof NWFP & FATA. As the thesis of this report is that the GDP ofNWFP and FATA is considerably lower than the national average,an effort has been made to avoid underestimating NWFP & FATAcontribution to the GDP of Pakistan. (The detail methodology ofthis analysis is beyond the scope of this report). On the contraryNWFP & FATA contribution to national GDP is overestimated inthe above analysis. Table 6 estimates the GDP of NWFP and FATAusing Income Approach method.

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TABLE 6

Contribution of different Contributionsectors to GDP of of differentNWFP & FATA in $ sectors to GDP

in percentage

Agriculture 914 million-1100 million 18.97%

Manufacturing 300 million- 400 million 6.22%

Construction 252 million 5.23%

Transport, Storage and 500 Million 10.30%Communication

Trade 1500 Million 31.25%

Services and others 1350 Million 28.03%

Total GDP 4.816 Billion-5.116 Billion

Per capita GDP can be estimated from the above-mentionedtable. As Afghan refugees contribute to almost all sectors of theGDP of the province their numbers must also be included in thePer capita GDP of the province. According to 1998 Census thepopulation of NWFP & FATA is around 20.8 million. If we add the1.5-1.6 million refugees residing in the province the combined to-tal comes to 22.4 million. Dividing the total GDP of 4.816 Billionby 22.4 million people, per capita GDP for NWFP & FATA comesto $215. Even if we estimate the agriculture output for NWFP &FATA as 1.1 billion dollars, and manufacturing output as 400 mil-lion dollars the GDP per person is still less than 230 dollars perperson.

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STATE OF ECONOMY OFPAKHTUNKHWA

Successive governments in Pakhtunkhwa have failed to de-velop infrastructure necessary for industrialization in the province.Various myths have been created about the economic potential ofPakhtunkhwa such as it has no potential for economic growth; itspeople cannot survive without Punjab’s wheat etc. These mythsare totally unfounded and unfair. In fact, Pakhtunkhwa is so muchrich in natural and human resources that, if properly managed, itseconomy can be one of the most thriving in terms of per capitaincome in the whole region. But at present we will survey the presentstate of industrialization and the reasons for the poor state of indus-trialization in the province.

According to the Directory of Industrial Establishments NWFPthere were 1704 industrial units in NWFP by the end of 1996 and afurther 136 were under construction (122-155). This information ishighly misguiding, as 1704 is the total number of industrial units thatwere established from 1947 onward. Many of these units are ei-ther obsolete or bankrupt that is why the total number of runningunits are much smaller than that. Many among these so-calledindustrial units cannot be counted even as industrial units because131 ice-manufacturing units and cold storages are also consideredas industrial units. Similarly out of the 313 silk mills, more than halfare established in private homes with investment as low as Rs.93000 (Less then $1700). This is a clear sign that the industrialdepartment and the government have exaggerated the number ofindustrial units and industrial employment. It is important to dividethese industries on the basis of total amount of investment made inthem.

7

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Investment-wise Distribution of Industrial Units

Amount Invested Number of Percentageunits of Total

Less than Rs. 500,000 343 20.23

500,000 –1,000,000 283 16.70

1 Million- 5 Million 477 28.14

5-10 Million 227 13.39

10-50 Million 262 15.46

50-100 Million 39 2.30

100-500 Million 52 3.07

Above 500 Million 12 0.71

Total 1695 100

Source: (Directory of Industrial Establishment, NWFP 1996 1-122)

It is evident from this table that majority of the so-called indus-tries have a very small capital base. Taking the free market rate ofdollar at Rs. 56 to a dollar, it can be determined that 20.23% indus-trial units have investment of less than $10,000 per unit. Similarly,36.93% of the companies have investments less than $18,000 perunit and 65% of the units have less than an equivalent of $100,000invested per unit. Only 592 units have an investment that exceedsRs. 5 million. Bulk of these units is located in three industrial es-tates established by the government. These industrial estates are

1. Industrial Estate Peshawar.

2. Hatter Industrial Estate, Haripur.

3. Gadoon Industrial Estate, Swabi.

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INDUSTRIAL ESTATE PESHAWAR

Industrial estate Peshawar is spread over 868 acres, out of which181.771 acres are for infrastructural facilities and 686.229 acreshave been allocated to industrial plots (Industrial Estate Peshawar1-4). This industrial estate has 354 medium size plots under thesupervision of Sarhad Development Authority (SDA). Accordingto Sarhad Development Authority Annual Report 1996-97, 189 unitshave been established, 53 of these units are already closed and an-other 68 are under construction28. The industries in this industrialestate are dominated by match factory, vegetable oil, marble tiles,and pharmaceuticals.

HATTAR INDUSTRIAL ESTATE, HARIPUR

The industrial estate Hattar was established in 1985-86 at Hattardistrict Haripur. The total acquired area of the estate is 1032 acresout of which 861.50 acres have been allocated for 365 plots. Thetotal number of operating units is 143. Seventeen units among themare closed and 86 units are under construction (Industrial EstateHattar 1-12). The dominant industries in this estate are textiles,engineering industries, marble tiles and chemicals.

GADOON INDUSTRIAL ESTATE, SWABI

The total number of plots in Gadoon Amazai area is 623. Outof this, 219 industrial units have been developed of which only 80are operational and the rest are closed. There are 64 new unitsunder construction. The dominant forms of industries in Gadoonare textiles, vegetable oil, steel furnaces, chemicals and elec-tronic goods (Gadoon Industrial Estate 1-6). As Gadoon was abackward area the government gave special incentives to thisindustrial estate through SRO 517. The withdrawal of this incen-tive, however, caused the collapse of most of the industries in thisestate.

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Apart from these large industrial estates, small industrial es-tates are established on Kohat road (Peshawar), Jamrud road(Peshawar), Mardan, Khalbat town ship (Haripur), Abbottababd,Mansehra, Kohat, Bannu and Nowshera (Directory of IndustrialEstablishment V-XV).

REASONS FOR LACK OF ECONOMICDEVELOPMENT

Some of the key reasons for the lack of industrialization ofNWFP and FATA include the following:

1. Lack of financing.

2. Lack of infrastructure.

3. Lack of managerial and entrepreneurial skills.

4. Locational advantage-turned-into-disadvantage.

5. Lack of local representation.

6. The Afghan war effects.

7. Denying hydro power royalty and fair share in water ofIndus River System

1. Lack of Financing

By June 1995, 22 Pakistani scheduled banks, operating inPakhtunkhwa, were having a total of 1147 branches in the prov-ince. In addition three foreign banks were also operating in theprovince (Bank of Khyber, Information Memorandum 5). Apartfrom Khyber Bank, none of these banks have their headquarters inPakhtunkhwa. This arrangement is especially troublesome for in-dustrialists who want to take a loan in excess of Rs. 5 million($100,000) because for medium and big size loans the banks referthe applicants to its headquarters. Most of the headquarters of thebig banks of Pakistan are located in the port city of Karachi, thus

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making it difficult for a local borrower to utilize the services ofthese major banks.

In Pakistan commercial bank borrowing is very personalizedand unless the borrower have extensive political or social contactsit is difficult to secure a loan. Most of the applicants fromPakhtunkhwa have limited or no social contacts with the bankingprofessionals in Karachi. This makes it further difficult for them toobtain a loan. Only those who are politically connected can securelarge-scale loans from these banks. As these politically connectedpeople are not always the most qualified or the most eligible forthese loans, their projects usually fail because of lack of vision orsimply because they misuse the loan amount.

Pakhtunkhwa has a share of 35% in the remittances that work-ers send from abroad. In addition, it gets 23% of inter-provincialnet flows due to large number of Pakhtun workers in other prov-inces (Zaidi 300-310). Large sum of these remittances is depositedin local banks. The percentage of money deposited by people ofPakhtunkhwa in the banking system is much higher than the rela-tive size of their population. On the other hand total borrowing bythe people of Pakhtunkhwa is very low compared to their deposits.To overcome this problem, The Bank of Khyber was established in1991 to provide a commercial bank with its headquarters inPakhtunkhwa. According to the ‘Information Memorandum’ ofBank of Khyber, “historically there has been a net outflow offunds from the province as deposits raised in Pakhtunkhwa have tobe invested outside the province due to lack of investmentavenues within the province and absence of a locally headquar-tered commercial bank. Bank of Khyber has filled this gap suc-cessfully”.3

This claim by Bank of Khyber can be rejected for several rea-sons. Firstly, the Bank of Khyber does not take rural property ascollateral thus eliminating 85% of Pakhtunkhwa population (which

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live in rural areas) from the list of eligible borrowers. Secondly,industry in Pakhtunkhwa is in embryonic stage, thus, more fundsare required for establishing new industries. On the contrary Bankof Khyber emphasizes on providing financing facilities to existingbusinesses through working capital and trade financing loans. Un-fortunately, most of these existing businesses are not even locatedin Pakhtunkhwa. Bank of Khyber has 29 branches in Pakistan outof which 23 are located in Pakhtunkhwa. Till December 1997, thetotal deposits of the bank were Rs. 6195.81 million. Out of this, Rs.4727.78 million was deposited by the people of Pakhtunkhwa thataccounts for 76.31 % of the total deposits of the bank. On theother hand the total advances (loans) given out amounted to Rs.3008.866 million. Out of this, Rs. 1670.95 million was loaned outthrough only three branches outside Pakhtunkhwa (Advances andDeposits 1997 1-2). Thus 55.53% of the total advances of thebank were loaned out in Karachi, Islamabad and Lahore. Thiscomparison can clearly tell us that the Bank of Khyber was unableto achieve its goal of making the banking system more accessiblefor the people of Pakhtunkhwa. Due to the above mentioned diffi-culties the genuine entrepreneurs and industrialists of Pakhtunkhwahave been shunned out to take advantage of the banking sector.

2. Lack of Infrastructure

Government investment in education, energy, traffic, research,health, administration, justice system, police, and communication isimportant for the development of basic infrastructure. InPakhtunkhwa lack of development in the above mentioned sectorshas hindered the progress of industrialization.

An efficient transport service is of vital importance for the de-velopment of an area. Pakhtunkhwa is land locked, therefore, isaccessible by rail, roads or by air only. The total rail road length inthe province is 686.14km which is 5.5% of the total 12593.18km inPakistan. Out of this 319.93km is broad gauge, the rest is out dated

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narrow gauge (Memorandum for National Finance Commission27).Because of this problem the reliance on railway system is verylimited. This has increased the dependence of transportation onroads.

The existing roads in Pakhtunkhwa are in very poor condition.The total roads in Pakhtunkhwa measure 9753 kilometer, which is4.9% of total road length in the country (Important District-WiseSocio-Economic Indicators NWFP 1995-1996 114). The proposedIslamabad – Peshawar Motorway will somewhat improve the ex-cessive burden on our roads but much more road construction isneeded to connect the southern districts and tribal areas with cen-tral Pakhtunkhwa and in the long run connect Pakhtunkhwa withthe port city of Gawadar, Balochistan.

The air transportation is also very limited in Pakhtunkhwa. ThePeshawar Airport is under the joint use of the Pakistan Air Forceand Civil Aviation Authority. Until recently foreign airlines werenot allowed to operate from this airport. Recently the governmenthas allowed the Qatar Airways and Emirates to operate fromPeshawar airport. The airport however, requires extensive expan-sion especially if all the travelers from Pakhtunkhwa travelingabroad take a direct flight from Peshawar. Similarly, the export offruit and other perishable items requires cargo arrangements thatneed to be constructed at Peshawar airport.

Just like transportation, the telecommunication network ofPakhtunkhwa is also very poor. Pakhtunkhwa has only 7% of thetotal telephone connections in Pakistan (Memorandum for NationalFinance Commission27). Apart from the fact that more than 30%of electricity produced in Pakistan is produced in Pakhtunkhwa andit is a net exporter of electricity to other provinces. In 1992-1993the per capita consumption by Pakhtunkhwa was 217(KWH) com-pared to 307(KWH) for Pakistan (NWFP Development Statistics95 &96 255). Till 1987 there were no 500KV transmission lines inthe province and 5% of the 220KV transmission lines of the coun-

74


try were in Pakhtunkhwa (Memorandum for National Finance Com-mission35).

Similarly the gas consumption per year in Pakhtunkhwa is 1.64%of the total gas consumed in Pakistan (NWFP Development Statis-tics 95 & 96 262). Key towns in Pakhtunkhwa are not providedwith gas that has an adverse affect on industrialization. GadoonAmazai Industrial Estate that is one of the three big industrial es-tates has not been provided gas connection.

The main reason for this poor development of infrastructurewas the lack of investment by the federal government. From 1947to 1975, 3.64% and 1975-1985, 4.18% of the total federal invest-ment was allocated to Pakhtunkhwa (Memorandum for NationalFinance Commission35).

It is evident from the above discussion that Pakhtunkhwa isnot intrinsically poor in resources but the above mentioned factorsare responsible for the backwardness of Pakhtunkhwa, which has alarge scope for industrial development.

3. Lack of Managerial and Entrepreneurial Skills

The literacy rate in Pakhtunkhwa is at 16.7% (DevelopmentStatistics 95&96 381). Out of this a very small number of peoplehave education beyond high school. Until recently there was nospecial emphasis on business education. In Peshawar Univer-sity there is an economics department plus an MBA department.There is also an economics department in Agriculture University,Peshawar and another one in Gomal University, D.I Khan.Although the MBA department of Peshawar University hasshown some improvements in the past few years but theoverall standard of education of these institutions is very low.These institutions are unable to provide the much neededmanagerial and entrepreneur skills to their students. There aresome new management schools in operation in the city of

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Peshawar but their standard is by no mean superior to institutionsmentioned above.

The expertise of business professionals is not utilized properlyin the economic structure of Pakhtunkhwa. The federal or provin-cial government owns almost all the major institutions inPakhtunkhwa. These include Pakistan Railways, Pakistan Inter-national Airlines, Pakistan Telecommunication Corporation, Oil andGas Development Corporation, Water and Power DevelopmentAuthority, Provincial Development Authority, FATA DevelopmentCorporation, Sarhad Development Authority, all the major educa-tional institutions and almost all the major banks. These organiza-tions attract most of the qualified graduates. Almost all of thesecorporations mentioned above are running in losses because of theirinefficiency, corruption and mismanagement. The newly recruitedgraduates find it difficult to contribute anything positive to theseorganizations because these organizations do not encourage anyfeed back from the newly recruited staff. Over the course of theiremployment individuals are either forced to adopt the corporateculture of these organizations, or pressurized to resign or keep apassive role. That is why generations of new managers were un-able to bring any changes in these organizations. As most of theprofessionals opt for public sector jobs, therefore, the private sec-tor is left with less of the competent individuals.

The business community of Pakhtunkhwa consists of small trad-ers instead of big business entities. It is difficult for them to hirecompetent professionals. After being unable to hire professionalguidance, most of the businessmen (who are either uneducated orless educated) rely on their own entrepreneur skills. Due to thelack of professional expertise, businessmen lack long-term vision.Most of the businesses operate on a day to day basis rather thanhaving a long-term plan. In addition, because of lack of direction,the businessmen cannot invest in an innovative project. Not manybusinessmen would invest capital unless a foreign multi-national

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invests in that sector first. And then when the local investors andbusinessmen see that the foreign multi national is making a profitthey jump into the same industry and start their own units. Thisbehavior of the local businessmen is not because they are risk aversebut because they do not have the expertise to determine the futurecourse of action for their businesses.

4. Locational Advantage turned into Disadvantage

Pakhtunkhwa lies at the junction of many countries thus prom-ising trade potential for this area. Pakhtunkhwa can serve as amanufacturing and assembling hub for Central Asian and SouthAsian markets due to its strategic location and other attributes suchas cheap hydro power and abundant human resources. Howeverdue to geo-political situation in the region this advantage turned intoa disadvantage. Locational disadvantage is one of the biggest fac-tors in the lack of industrial development of NWFP. NWFP is inthe north west of the country that makes it quite far from the portcity of Karachi. Import oriented industries have a disadvantage toestablish a unit in NWFP because of extra transportation cost.Locational disadvantage of NWFP causes a 22% increase in thecost of production over Punjab and Sindh. Even when raw mate-rial is produced in other parts of the country, it is difficult to utilize itin NWFP. For instance, the most dominant form of industry inPakistan is the textile industry. Cotton is exclusively produced inPunjab and Sindh. Thus shipping cotton to northern Pakhtunkhwafor use in textile industry and then shipping the end product to Karachifor further export makes it difficult for the local manufacturers tocompete with manufacturers from Sindh and Punjab.

There are different ways to overcome this problem. Firstly,Pakhtunkhwa can rely on those industries for which the local rawmaterial is required. Although Pakhtunkhwa is rich in mineral re-sources, production of tobacco and production of a great variety offruits, the industries based on these raw materials will be limited innumber and will still incur a big transportation expense for shipment

77


to the port city of Karachi. Secondly, special incentives can begiven to industries in Pakhtunkhwa to overcome this disadvantage.As Pakhtunkhwa has a potential of producing excess of 50,000MWof electricity – cheaper than any other form of electricity produc-tion in Pakistan – some of this advantage can be transferred to thelocal industries by charging them lower electricity price. Lowerelectricity prices will especially be beneficial for electricity inten-sive industry. For example, for mini steel mills the reduction inelectricity prices will overcome not only the locational disadvan-tage of the province but also will be the basis of competitive advan-tage in energy intensive industries. Other industries that are lesselectricity intensive will not be able to eliminate their locational dis-advantages by paying less for the electricity. These industries canbe given other incentives like exemption of excise duties and othertaxes in order to bring them at par with the rest of the country.

5. Lack of Local Representation

Pakistani political structure does not allow the provinces to havea significant say in their own economic policy formulation. GadoonAmazai Industrial Estate is a classic example of the provincialgovernment’s inability to save the industries in this province. Tocompensate for the locational disadvantage and to eradicate thepoppy cultivation, industries in Gadoon Amazai were given specialincentives like exemptions on excise duty and 50% reduction inelectricity charges. Two years after the establishment of this in-dustrial estate the federal government withdrew these incentives.This decision forced majority of the units in the estate to closedown thus leaving thousands of people unemployed.

Former FATA Development Corporation (DC) now FATA Sec-retariat carries out the development work in FATA. TribalPakhtunkhwa is not given any seats in provincial assembly, but FATADC and other development work in Tribal Pakhtunkhwa is underthe control of the governor of Pakhtunkhwa who is directly hired

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by the federal government. Thus, the federal government directlycontrols Tribal Pakhtunkhwa without any democratic representa-tion given to its people at the local or provincial level. The 12members elected from Tribal Pakhtunkhwa do not have much of asay in policy formation in the National Assembly that houses morethan three hundred members. Similarly the representation ofPakhtunkhwa is also limited to a small number of seats in the fed-eral government. With limited representation in the federal, politi-cal and bureaucratic structure, laws that are formulated by the fed-eral government are not always in favor of industrialization inPakhtunkhwa and in some cases-like Gadoon Amazai-have an ad-verse affect on the economy of Pakhtunkhwa

6. The Afghanistan War’s Effects

Tribal Pakhtunkhwa and Balochistan have a long border withAfghanistan that is accessible by the famous Khyber and BolanPasses. Trade with Afghanistan has played a significant role in thedevelopment of socio-economic structure of Pakhtunkhwa andTribal Pakhtunkhwa (FATA). For future economic development,businesses in Pakhtunkhwa will have to concentrate on links withAfghanistan. Unfortunately due to Soviet invasion of Afghanistanin 1978 and later the civil war in Afghanistan, the economic struc-ture of Afghanistan has collapsed. As Afghanistan is a land-lockcountry it was dependent on imports through Pakistan and laterthrough USSR. Industries in Pakhtunkhwa that could have devel-oped a comparative advantage by supplying to the markets in Af-ghanistan were unable to do so due to the war in Afghanistan. Thewar eroded the buying power of the Afghan people and at the sametime displaced millions of the Afghan people into the neighboringcountries. Apart from basic necessities like wheat and vegetableoil, the industrialists of Pakhtunkhwa find it difficult to get a buyerfor Pakhtunkhwa made products in Afghanistan. The war in Af-ghanistan has also stopped access to the newly liberated marketsof Uzbekistan, Tajikistan and Kazakhstan. If permanent peace can

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be achieved in Afghanistan, the industrialists in Pakhtunkhwa canplay a vital role in rebuilding of Afghanistan and establishing a mar-ket for their products in Central Asia.

7. Denying Hydro Power Royalty and Fair Share in Waterof Indus River System

According to Mr. Hassamuddin Bangash, an expert on IndusRiver System, Pakhtunkhwa and Tribal Pakhtunkhwa contributesmore than 25% of the water in the Indus River System in Pakistan.He also added that about ¼ of the river bank of Indus is inPakhtunkhwa. This entitles it to about 25% of the water in IndusRiver System. At present, not even less than ¼ of the proper shareof Pakhtunkhwa is being utilized by the province. Similarly, the is-sue of hydro power dues of Pakhtunkhwa pending against the fed-eral government is also to be addressed. The Water and PowerDevelopment Authority (WAPDA) owes billions of rupees toPakhtunkhwa in debt.

PAKHTUNKHWA’S ARREARS AGAINST WAPDA

Under article 161(2) of the constitution, NWFP should get theprofit from the hydropower projects located in NWFP (Report ofThe National Finance Commission 1996 23). It means that NWFPshould have received its due share in hydropower profits from 1974onwards. Over these years NWFP consumed less than one third ofthe total electricity produced in NWFP. Thus NWFP should havereceived payments from 1974 onwards.

According to the White Paper of the Government of NWFP(1998-1999) by the end of 1997 the government of NWFP debtliability to the federal government was 31.2 billion rupees. Alongwith paying installments on its loan, the government of NWFP onthe average pays 15% interest to the federal government on thisdebt. On the other hand the federal government (WAPDA) doesnot pay any interest on the unpaid portion of NWFP electricity roy-

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alty. In fact the situation is so bad that the federal government doesnot even recognize any arrears in the form of unpaid royalties toNWFP. The government of NWFP received hydropower royaltiesin 1991, and since then it is receiving a portion of its due share inhydropower profits. From 1974 to 1990, NWFP has not receivedany profits from WAPDA. Thus for more than 16 years, successivegovernments have not only ignored the legitimate share of NWFPin hydro power profits but have also violated the constitution bydenying NWFP its due share. WAPDA today should not only paythe government of NWFP its fair royalty on year-to-year basis butshould also make arrangements to pay unpaid arrears accumulatedfrom 1974 to 1990. As NWFP pays about 15% interest on the totalmoney borrowed from the federal government the federal govern-ment (WAPDA) should also pay 15% interest per annum on thesearrears. The following table is an estimation of how much thefederal government owes NWFP. In this table NWFP royalty isestimated to be a minimum of 1 billion rupees per annum from1974-1980, RS 3 billion per annum from 1981-1986, RS 6 billionper annum from 1987-1990, RS 8 billion per annum from 1991-1995 and RS 10 billion per annum from 1996-1998. A 15% interestper annum is charged to all the arrears. The table on the followingpage is an estimation of how much the federal government owesNWFP.

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NWFP Hydro Amount PresentProfits Received Value

Billion1974 Rs. 1 billion __ Rs. 28.631975 Rs. 1 billion __ Rs. 24.891976 Rs. 1 billion __ Rs. 21.651977 Rs. 1 billion __ Rs. 18.821978 Rs. 1 billion __ Rs. 16.3671979 Rs. 1 billion __ Rs. 14.2321980 Rs. 1 billion __ Rs. 12.3751981 Rs. 3 billion __ Rs. 32.281982 Rs. 3 billion __ Rs. 28.071983 Rs. 3 billion __ Rs. 24.411984 Rs.3 billion __ Rs. 21.231985 Rs. 3 billion __ Rs. 18.461986 Rs. 3 billion __ Rs. 16.051987 Rs. 6 billion __ Rs. 13.961988 Rs. 6 billion __ Rs. 24.281989 Rs. 6 billion __ Rs. 21.111990 Rs. 6 billion __ Rs. 18.351991 Rs. 8 billion Rs. 5.987 billion Rs. 5.351992 Rs. 8 billion Rs. 6.8 billion Rs. 2.781993 Rs. 8 billion Rs. 6.5 billion Rs. 3.021994 Rs. 8 billion Rs. 7.8 billion Rs. 0.351995 Rs. 8 billion Rs. 6 billion Rs. 3.041996 Rs. 10 billion Rs. 6 billion Rs. 5.291997 Rs. 10 billion Rs. 6 billion Rs. 4.60

1998 Rs. 10 billion Rs. 10 billion __

Total Rs. 379.57

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SCOPE OF ECONOMICDEVELOPMENT OF PAKHTUNKHWA

Pakhtunkhwa has a huge potential to develop industries in sev-eral sectors. But the first pre-requisite of developing industries inPakhtunkhwa is provincial autonomy to chalk out its own economicpolicy. Without provincial autonomy, Pakhtuns would remain amarginalized community despite having the richest economic po-tential. There is severe criticism from some quarters about finan-cial and provincial autonomy. These quarters are of the opinion thatprovincial autonomy is not feasible because Pakhtunkhwa andBalochistan provinces are economically backward and cannot af-ford to survive autonomy and economic independence. Thisargument is not true. Although provincial autonomy alone is not the solution to the economic problems of Pakhtunkhwa but it is a pre- requisite for fair and comprehensive growth of theprovincial economy. Although several aspects of provincial autonomyand its effects on the economy can be discussed in detailbut the emphasis here is given on the potential of industrializationin Pakhtunkhwa and Tribal Pakhtunkhwa and the role ofcapital markets in developing this potential. These economicpolicies can be best applied if NWFP, FATA and NorthernBalochistan are merged together to form a single province ofPakhtunkhwa.

Although a wide variety of industries can be established but intoday’s global environment it is important that investment shouldbe concentrated in those areas where the companies can developsome kind of competitive advantage and, at the same time, isable to compete globally and locally. The availability of raw mate-rial, skilled labor and the availability of proper infrastructure should

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be evaluated before setting up industries. Similarly, local andglobal demand should also be evaluated. Although many industrialset -ups are possible in Pakhtunkhwa but for the moment wewill concentrate on industries that have the potential to export andcan immediately develop competitive advantage in their respectivefields.

These industries will include the following:

AGRICULTURE-BASED INDUSTRY

In Pakhtunkhwa, total land is 7.452 million hectares (Impor-tant District-Wise Socio-Economic Indicators NWFP 1995-199610). Out of this, 5.62 million hectares is properly classified andsurveyed. This 5.62 million hectors is classified as “reported area”of which 22.23% is occupied by forest, 23.90% is cultivated area,while 22.49% area is cultivable but is not utilized mainly becauseof lack of irrigation. Out of the total cultivable area of 1,343,744hectares, 70.07% land is cultivated in Rabi (Fall) season while53.02% of the cultivated area is cultivated in Kharif (Spring) sea-son. Furthermore, 60.95% of the crops in Rabi season and 43.31%of the crop in Kharif season are cultivated in un-irrigated area. Thusonly 10.21% of the total reported area of Pakhtunkhwa is irrigatedin Kharif and only 5.49% of the total reported area of Pakhtunkhwais irrigated in Rabi (NWFP Development Statistics 95 & 9687-104).

Total area of NWFP and FATA

Area Total Area in Hectors

NWFP 7,452,100

FATA 2,722,000

N-W.F.P. & FATA 10,174,100

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1993-94 Land Use in NWFP

Land use Area in hectors % of total area

Cultivated area 1,343,744 23.90

Forest Area 1,255,817 22.33

Cultivable area not 1,264,701 22.49utilized

Not available for 1,758,865 31.28 cultivation

Total Reported Area 5,623,127

Source: (NWFP Development Statistics 86)

On the average, irrigated area produce twice as much as un-irrigated area. This means that if all the cultivated area inPakhtunkhwa is irrigated, the agriculture production of the prov-ince will double. Similarly, if the cultivable area, which is presentlynot utilized, is also irrigated, the agriculture production of the prov-ince can increase four times. Even further increase in agriculturalproduction is possible by modernizing farm equipment and farmingtechniques.

Irrigation of the above mentioned area can be made possibleby a network of canals that can be extended from many rivers thatflow in the province. Swabi SCARP and Pehur High Level Canalare two of such projects. Swabi SCARP project will make 25,500hectors waterlogged area available for cultivation (Brief on SwabiSCARP 1), while Pehur High Level Canal will irrigate 5500 hec-tors and reclaim 7,400 hectors of water logged area (Brief on PehurHigh Level Canal Project 1-4). Similarly new dams can also beconstructed like the Gomal Zam Dam that can irrigate 66,000 hec-tors in DI Khan (Gomal Zam Dam Project & Status to date 1-3)and Munda Dam that will irrigate about 26,000 hectors (Brief on

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Munda Dam 1). Thus the notion that Pakhtunkhwa cannot meet itsagricultural needs is absolutely unfounded.

Presently, wheat and maize are the dominant crops ofPakhtunkhwa. With increase in irrigation, Pakhtunkhwa will beable to grow enough wheat for its population. But it is importantthat the farmers and the government of Pakhtunkhwa concentrateon the production of those crops for which the climate and the soilis best suitable and for which they can achieve competitive advan-tage over others. These include vegetables, fruit and tobacco. Alongwith these agricultural commodities the province is suitable forlarge-scale dairy production.

Yield for irrigated and un-irrigated land in NWFP

Crop Yield per Yield per Ratio ofhectare hectare irrigatedirrigated un- and

irrigated un-irrigated

Rabi (Fall) (tons) (tons)

Wheat 1.95 0.9952 1.96

Gram 0.5077 .4305 1.18

Barley 1.23 0.97 1.27

Rape Seed and 0.62 0.53 1.17Mustard

Tobacco 2.02 0 –

Vegetables, fruits 13.07 1.49 8.77 & pulses

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Kharif (Spring) (tons) (tons)

Maize 1.08 1.77

Rice 1.99 1 1.99

Jowar .73 .66 1.11

Bajra .70 .52 1.35

Sugarcane 45.27 28.22 1.60

Vegetables, fruits 1.43 .73 1.96& pulses

Source: (NWFP Development Statistics 99-109)

Crop Acreage in NWFP 1993-1994

Crops Area in % of un- % of culti-hectors irrigated vated area

area

Rabi (Fall)

Wheat 723,700 60.20 53.86

Gram 96,400 93.26 7.17

Barley 35,200 68.47 2.62

Rape Seed and 21,400 90.91 1.59Mustard

Tobacco 35,700 0 2.66

Vegetables, fruits 29,100 4.47 2.17and pulses

Total (Rabi) 941,500 60.95 70.07

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Kharif (Spring)

Maize 491,300 56.91 36.56

Rice 51,600 0.14 3.84

Jowar 9,800 69.39 0.73

Bajra 8,900 88.76 0.66

Sugarcane 97,200 0.93 7.23

Vegetable fruit, 52,800 24.24 3.93

pulses

Others 900 57.78 0.07

Total (Kharif) 712,500 43.31 53.02

Source: (NWFP Development Statistics 99-109)

DAIRY

With increased urbanization and inflow of millions of refugeesfrom Afghanistan, the demand for milk has increased considerablyover the last two decades in Pakhtunkhwa. Unfortunately there hasbeen no expansion or modernization in the dairy industry over thisperiod. There is no organized dairy industry in Pakhtunkhwa. Farm-ers usually own 2 to 20 buffaloes/cows. They produce the milkand sell it to local shopkeepers for further sale. Due to the smallsizes of their cattle holdings these farmers are unable to employeeprofessional help. Thus the production of milk can not keepup with the demand and the gap between supply and demand isgrowing.

The province has a high number of qualified professionals inthe field of animal husbandry. Most of these professionals who

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work in the Agricultural University Peshawar have their Mastersand Doctorate degrees from reputed universities all around the world.Besides, Pakhtunkhwa has a vast grazing area along with the ca-pacity to produce every kind of feed required by dairy animals.

According to an estimate by experts from Animal AgriculturalServices (local dairy consultants) there is a shortage of milk inexcess of hundred thousand liters a day in Pakhtunkhwa. As peopleprefer fresh milk, this demand can not be taken care of by import-ing powder milk or packaged milk from other provinces or abroad.Similarly an additional hundred thousand liters per day can be ex-ported to Afghanistan, as there are no organized dairy farms left inthat country. Along with milk, cheese, butter and other milk prod-ucts can be exported to other countries especially the Middle East.

DAIRY BASED INDUSTRY

The government of NWFP with collaboration of foreign coun-tries has established several modern dairy farms in the province, ofwhich all have failed. The reason for their failure was that none ofthese projects were started by any corporate entity instead theprojects were started by government organizations with less effi-cient structure, professionalism and high ratio of corrupt officials.

TOBACCO

Pakhtunkhwa produce 71.3% of the total tobacco in Pakistan.The total production of tobacco in Pakhtunkhwa for the year 1992-93 was 72,141 tones (NWFP Development Statistics 95 & 96 87-98-100). Tobacco produced in the province is almost entirely con-sumed in Pakistan. Almost all of the multinationals manufacturingcigarettes operate there manufacturing units in other provinces ofthe country. Their unit cost would have been cheaper if these manu-facturing units were established in Pakhtunkhwa because the rawmaterial is produced here. Most of the manufacturing units inPakhtunkhwa are locally owned. They produce cigarettes for the

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domestic market, as many of these companies do not have thefinances, technology or expertise to develop an international brand,most of these companies either produce their own low quality, lowpriced brands or they produce counterfeit cigarettes of other majorbrands.

At present the two main cigarette-manufacturing companies ofUnited States, RJR Nabisco and Philip Morris do not have a manu-facturing facility in Pakistan. These companies along withother multinationals can be invited to form joint ventures forthe manufacturing of cigarette both for domestic consumption andexport.

Pakhtunkhwa has a tremendous potential to increase its tobaccoproduction. If tobacco farming is modernized along with an in-crease in demand for tobacco, the farmers can grow at least threetimes the tobacco they are growing now. Swabi, which is the big-gest tobacco-producing district in Pakistan, has less than 18% ofits total cultivated area under tobacco cultivation. The tobacco pro-duced is of very high quality that can rival that of Turkey, Greece orCentral United states. The unit cost of production is also chea-per for tobacco in NWFP compared to the above mentionedplaces.

According to Philip Morris, the world cigarette industry unitshipment was approximately 5.6 trillion units in 1996 (Philip Mor-ris Companies Inc. 10 K report 1996 2) of which, the growing de-mand for cigarettes is in China, India, the Middle East and CentralAsia. This gives a great locational advantage to Pakhtunkhwa,which can export cigarettes by land to China, India and CentralAsia.

Apart from producing tobacco cheaper than otherareas, Pakhtunkhwa has an advantage to incur less transpor-tation expenses in shipping their tobacco products to the above-mentioned areas.

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Tobacco Production and Area under Cultivation

District Area under Total Tobacco areatobacco cultivated as a % ofcultivation area total cultivated(hectares) area

Charsadda 7749 57257 13.53

Nowshera 774 73433 1.05

Mardan 7159 112775 6.35

Swabi 15422 87032 17.72

Mansehra 2364 80747 2.93

Haripur 65 77836 .08

Malakand 484 45684 1.06

Swat 755 149604 .50

Buner 1932 55153 3.50

Dir 652 85885 .76

Total 37,356 825,406 4.53

Source: (NWFP Development Statistics 95 & 96 98 -143)

FRUIT AND VEGETABLES

There are 30,000 hectares of orchards in Pakhtunkhwa (SarhadProvincial Conservation Strategy 2). A wide variety of fruit is pro-duced in Pakhtunkhwa. These include apples, oranges, peaches,guava, apricots, plums, pears, loquats, litchi, strawberries, walnut,

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almond, etc. This fruit is of extremely high quality and canbe considered the finest in the world. Along with local production,high quality fruit from Afghanistan is mostly sold inPeshawar. Swat district is particularly famous for its wide varietyof fruits.

As fruits are highly perishable items, fast mode of transporta-tion and good storage facilities are required. Unfortunately due tolack of storing and processing facilities and lack of excess to for-eign markets the growers sell their products at very nominal pricesat the local market. Most of the time, due to lack of buyers, a bigquantity is wasted.

Individuals own almost all the farms. These farm owners havelimited access to efficient marketing and farming technologies.Introduction of corporate entities in medium size farm holdingscan be very encouraging, as these corporations can raise enoughcapital and expertise to vertically integrate the production, pro-cessing and marketing process. These companies can export freshand processed fruit to other countries especially the Middle Eastcountries.

The climate and soil of Pakhtunkhwa is also very suitable for alarge variety of vegetables. Unfortunately at present there is nosystematic plantation of vegetables in Pakhtunkhwa. Vegetablefarming is considered more labor and capital intensive by the smallfarmers. Besides, due to lack of storage facilities, there is signifi-cant variation between the prices of these commodities. With theintroduction of modern technology many vegetables can be grownyear around and also in large quantities. This will reduce the highvariation in prices of these commodities and enough vegetableswill be available for export. Vegetable plantations produce manytimes more yield than the traditional crops that the farmers grow.Thus fresh and processed fruits and vegetables can be exported toother countries and other provinces of the country in huge quanti-ties, bringing millions of dollars of foreign reserves.

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MINERAL BASED INDUSTRY

Pakhtunkhwa lies at the junction of three mountain ranges;Himalaya, Karakorum and Hindukush. This varied geology pro-vides enormous mineral wealth in the province. “All types of rockshaving sedimentary, igneous and metamorphic origin exist, whichprovide the basis for availability of various types of metallic,metalliferrous (industrial), valuable and precious minerals and min-eral deposits.” (Mineral Profile of Hazara division 1) There aremore than 55 minerals that are discovered in substantial quantity inPakhtunkhwa.

Although various agencies including Geological Survey of Pa-kistan, Pakistan Industrial Development Corporation, Pakistan Min-eral Development Corporation and Sarhad Development Author-ity are involved in the exploration and development of mineraland mineral industry but there over all performance can be ratedas extremely poor. Compared to the vast potential of mineralresources in the province, the mineral-based industry is verylimited.

List of Discovered Minerals/Rocks in NWFP

Antimony Fullers Earth Olivine

Asbestos Fire Clay Phosphate

Aquamarine Gypsum Pyrite

Amphibolite Granite Quartz

Barite Garnet Red Oxide

Bentonite Graphite Red Ocher

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Basalt Hornbi End Shale Clay

Boulengrite Iron Salt

China Clay Limestone Soap Stone

Coal Lead Serpentine

Calcita Laterite Scheelite

Copper Marble Silica Sand

Chromite Mica Slate Stone

Corrundon Magnetite Sulphur

Dolomite Manganese Topaz

Emerald Molybenite Tourmaline

Feldspar Nephyline Synite Tin

Fluorite Orpiment Vermiculite

Zinc

Sources: 1. (Sarhad Chamber of Commerce & IndustryPeshawar. Annual report 1996, 24).

2. (Sarhad Provincial Conversation Strategy 150-151)

The biggest reason for this lack of development in the miningsector is the lack of investment by private entities. Individuals inPakhtunkhwa do not have the resources to invest in big mining

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projects or mineral-based industries. Similarly, the government ofPakhtunkhwa has got limited funds and can not develop theseprojects through government funds.

The third option is the corporate sector that is almost negligiblein the province. Medium size and big mineral based industries canbe created in the corporate sector and equity funds can be raisedfor corporate sector development in the province, provided the own-ership of these corporations are limited to investors fromPakhtunkhwa. These corporations will be more successful if someequity in these corporations is also owned by the mine owners aswell.

Sarhad Development Authority has done extensive researchon the industrialization potential of mineral resources inPakhtunkhwa. They have also invited many foreign joint venturepartners to fully explore this potential. SDA have failed, how-ever, to attract any major joint venture partner. The mineralpotential of the province can be better utilized if SDA developindependent corporate entities for separate projects and thenform joint venture operation between these entities and foreigncompanies. Equity money for these independent corporateentities can be raised, provided a Stock Exchange is createdin the province and initially only the people of Pakhtunkhwaare allowed to keep ownership of all the stocks floated on thisexchange.

PRECIOUS STONES

Precious stones export holds tremendous potential for growthin Pakhtunkhwa. All Pakistan Commercial Export Association ofrough and unpolished precious and semi-precious stones (APCEA)is based in Peshawar. They have about 200 of gem stone exportersas members. According to the figures provided by APCEA, thisassociation has exported $ 4.2 million worth of gem stones in 1994,

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$ 3.6 million each in 1995 and 1996 and $ 4.2 million in 1997 fromthe province (APCEA Yearly Exports 1-2). Apart from this asso-ciation there are also other exporters in the province. The exportfigures provided by APCEA are much deflated mainly to avoidtaxes and currency restrictions. Many of the exporters have inven-tories that exceed the total amount of exports per year shown byAPCEA. The total value of gemstones exported from Pakhtunkhwais estimated to be 15-35 million dollars per year. Most of thesegemstones are exported in raw or unpolished form as the equip-ment to polish these stones according to international standards isnot available in Pakistan. This results in loss of revenue for theexporters as bulk of the profits is made by wholesalers from othercountries that buy these stones from Pakistan and polish it in Chinaor Hong Kong.

Another big problem with the gem stone industry is that thereis no coordination between the minors and the exporters. Many ofthe exporters sitting in the downtown Peshawar do not even knowwhere mining of these stones take place. Miners also do not haveaccess to modern equipment or modern mining techniques. If cor-porate entities are created that can bring modern mining and pol-ishing machinery along with technical know-how, then the exportsof gemstones can be raised substantially. According to an expertopinion, the export of gemstones can increase to $ 50 million ayear if modern technology is utilized. Corporate entities can bestutilize the gemstones potential of Pakhtunkhwa and tribal areaas they will be motivated by their own profit maximization.Previously Gemstones Corporation of Pakistan (a federalgovernment organization) was created to explore the gemstonepotential of the entire country. Until 1985 this corporation had mined222,918 carat emerald and 182,380 carat of topaz in Pakhtunkhwa(Memorandum for National Finance Commission 40). But due toexcessive corruption the corporation did not make any profit andwas unable to pay the due royalty to the government ofPakhtunkhwa.

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Precious Stones

Precious /Semi Location QualityPreciousMinerals

Emerald Swat (Mingora, Finest in the world

Alpuri, Shamozai)

Pink Topaz Mardan (Katlang) Only deposit in the world

Topaz Mardan Red and golden varieties

Kunzite Chitral Clear pink and blue crystals

Aquamarine Chitral Clear light blue

Garnet Chitral, Dir Red pyrope varieties

Quartz Chitral, Dir Clear and transparent

crystals

Peridot Kohistan Fresh green color

Tourmaline Swat, Dir Chitral Variety of colors

Selected Minerals of NWFP

Area Minerals Quantity

Kohat District Gypsum 2 billion tons

Karak District Sodium Chloride 500 million tons

D.I Khan, Silica 89 million tonsKarak,Mansehra

Abbottabad Phosphate 7.5 million tons

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Area Minerals Quantity

Chitral Scheelite 40 million tons (Tungston Ore)

Malakand Chromite 0.7 million tons District

Chitral District Gold 25,000-150,000 kg.

Swat District Lead -Zinc ore 0.5 million tons

Buner District Nephiline Syenite 6 billion tons

Chitral, Swat, Iron 1014.5 million tons Bannu, Kohat.

Sources: 1. (Sarhad Development Authority. Annual Report1996-97 47-79).

2. (Sarhad Provincial Conversation Strategy 150-151).

3. (Sarhad Chamber of Commerce & IndustryPeshawar. Annual Report, 1996, 21-22).

4. (Sarhad Provincial Conversation Strategy 149-152)

MARBLE

There are vast marble deposits in Pakhtunkhwa. These depos-its can be found in Bajaur agency, Mohmand agency, Khyber agencyand Swat. These marbles are of various shades that include grey,whitish grey, pure white, green, green zebra and pink. The totaldeposits of these marbles are in excess of 2 billion tons. Most ofextensive deposits can be found in the Mullagori, Sultan Khel,Ghundai Sar and Loe Shalman areas of the Khyber agency. Amongthese, the Mullagori marble deposits are classified as one of thebest in the world and can be ranked with Carrara in Italy and

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Makrana in India. These deposits are not only of high quality butare also extended over a large area. Just one deposit of KambelaKhwar has 282 million cubic meters (764.2 million tons) of marbledeposits (Socio Economic Profile of Khyber Agency 7-10). It isbelieved that other big deposits also exist which are not even dis-covered yet.

The mining methods used by minors are primitive due to whichup to 65% of the extracted marble is wasted. Similarly, there arenot any major marble industries in Pakhtunkhwa that can polishand cut marble according to international standards. Keeping inmind that Italy gets one third of its revenue from the export ofdecorative stones, Pakhtunkhwa can generate huge revenues if theydevelop their mines, use scientific methods of mining and modernmachinery for polishing.

An importer of marble in United States told the writer that inexcess of 100,000 tons of marble can be exported from Pakhtunkhwato North and South America, provided the marble is polished ac-cording to international standards and marble companies fromPakhtunkhwa have a network of dealers and representativesthroughout the region. Thus exports of marble to North and SouthAmerica alone can fetch in excess of 100 million dollars a year.Other decorative stones such as dolomite, jade etc are also avail-able and are of export quality.

Feasible Mineral Projects Identified by SDA and Others

Project Location Cost Output/Year

Gypsum Plaster and Kohat Rs. 240 mill. 80,000 tonsPlaster Board

Soda Ash Complex Karak Rs. 1000 mill. 40,500 tons

Ferro-Silicon D.I Khan Rs. 70.14 mill. 10,000 tonsProduction

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Project Location Cost Output/Year

Lead Zinc Concen- Swat Rs. 240 mill. 2,215 tonstration Plant

Sodium di Chromite Malakand Rs. 411.530 mill. __Products

Magnesite and Hazara Rs. 214.550 mill. 15,000 tonsChromeMagnesite Bricks

Marble Tile and Swat Rs. 1197 mill. 50,000 tonsBlock Projects

Marble Tile and Khyber Rs. 2394 mill. 100,000 tonsBlock Projects

Marble Tile and Bajaur Rs. 1197 mill. 50,000 tonsBlock Projects

Integrated Nephiline Buner Rs. 368.820 mill. 27,000 tonsSyenite Project

Koga Alkali Complex Buner $1500 mill. __

Total Rs. 91.33 billion

Source: (Investment Opportunities in Mineral and IndustrialSectors of NWFP 71-78).

GYPSUM PLASTER AND PLASTER BOARD

Huge Gypsum reserves (about 2 billion tons) are availablein district Kohat at various locations. The gypsum board thatis used for table tops, clading and partition etc. has easy

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application, good for heat insulation and has fire resistantmaterial. It has no practical deformation as well as is of lowcost. Because of these characteristics this board is regarded asone of the indispensable materials among the interior finishingsubstance. Gypsum board is commonly used for constructionof the inside walls, the ceiling and the partition. The presentdemand of gypsum board has been estimated to be 250,000 tonsper year. The total production of this unit will be 80,000 tons ayear and the cost of the project is estimated to be around Rs. 240million.

SODA ASH COMPLEX PROJECT

Soda Ash can be used in the production of Sodium Silicate,Sodium Phosphates and Sodium bicarbonate. Glass industry, pulpand paper industry, detergent industry, soap industry, and leatherIndustry utilize Soda Ash. The demand for soda is 123,041 tons ayear in Pakistan while the demand for Soda Ash is 268,369 tons peryear. The major raw material for this industry is rock salt and lime-stone. In Nari Panoos area of district Karak there are 500 milliontons of estimated deposits of Rock Salt. A Soda Ash project with aproduction capacity of 40,500 tons of Soda Ash and Caustic Sodacan be established in Karak with an estimated cost of one billionrupees.

FERRO-SILICON PRODUCTION PROJECT

Ferro-Silicon is utilized for the production of ferromanganese.The total demand of Sodium Silicate in the country is 125,000 tons/year. The basic raw material required for this project is Silica Sand.Extensive deposits of this raw material can be found in Pezu (D.IKhan), Kurd (Kohat) and Munda Kucha (Hazara). A Ferro-Siliconproduction project can be started in D.I Khan with an estimatedoutput of 10,000 tons/year. The total cost of the project is Rs.70.14 million per year.

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LEAD-ZINC CONCENTRATION PLANT

There are about half a million tons of Lead-Zinc ore reserve atPazang and Lahore (District Swat). A chemical production plantcan be established at Swat that can process 24,000 tons of Lead-Zinc ore per year. 2,000 tons of Zinc concentrate and 240 tons ofLead concentrate can be processed from the Lead-Zinc ore. Theseconcentrates will be used to produce the following:

• 280 tons per year Lead Nitrate

• 500 tons per year Zinc Carbonate

• 735 tons per year Zinc Oxide

• 700 tons per year Zinc Chloride

The total cost of this project is estimated to be Rs. 240 million.

SODIUM DICHROMITE AND BASICCHROMIUM SULPHATE CHEMICAL PRODUCTS

There are about 700,000 tons of chromite reserves in MalakandAgency. A proposed project is to be established in Malakand toprocess 20,000 tons of chromite ore per year. The processed orewill be used to manufacture basic Chromite Sulphate, SodiumDichromate and Sodium Sulphate. These products are used byleather tanning, paints, and dye manufacturers. The total cost ofthe project will be Rs. 411.53 million.

MAGNESITE AND CHROME MAGNESITE BRICKS

Chrome Magetite is used in basic refractories. It is used in thecement kilns, lining of arc furnaces, and open-hearth furnaces. Thepresent demand for Chrome Magnetite in the country is 15,000tons per year. Three million tons of Magnetite is available inKumhar area Abbottabad while extensive deposits of Chromite oreare available in Malakand Agency. These raw materials can be

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utilized in a Magnetite project in Hazara district that will produce15,000 tons of Magnesia-Chrome refractory. The total cost of theproject will be Rs. 214.550 million.

INTEGRATED NEPHELINE SYENITE MININGAND PROCESSING PROJECT FOR USE INGLASS AND CERAMIC INDUSTRIES

In Koga (Buner) there are over six billion tons of NephelineSyenite deposits. A production facility can be established at Kogathat will process 30,000 tons of lumpy Nephaline Syenite. Thisraw material can be used in the glass and the ceramic industry. Thetotal cost of the project is Rs. 368.82 million.

KOGA NEPHELINE SYENITE FOR USE INALKALI COMPLEX PROJECT

The Koga deposit can also be used in alkali complex that is, theextraction of Alumina manufacturing of Soda Ash and PortlandCement. The proposed project will be situated in Swat with thefollowing production capacity.

• 270,000 tons of Alumina.

• 200,000 tons of Soda Ash.

• Million tons of Portland Cement.

The total cost of the project is estimated to be US$1500 mil-lion that is about Rs. 84 billion.

FORESTRY BASED INDUSTRY

There are different estimates about the total area of forest inPakhtunkhwa. Some experts put it at 17% of the total area, othersput it at 16.6% and 13% of the total area (Forestry: Facts and Fal-lacies 1-18). It is true that a few decades back the total forest area

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was in excess of 23% but due to excessive cutting of trees the totalarea is not more than 13%. Similarly the total forest cover of tribalarea has also been reduced from 5% to 1%. Over all, less than 5%of the total area of Pakistan is under forest cover. According to thegovernment of NWFP, 16.9% of the area of the province isunder forest cover that accounts to 1,255,800 hectares. Mostof these forests are in Hazara, Dir, Swat, Chitral and Kohistan.It is estimated that there is a minimum of 3.5 billion cubicfeet of timber in these areas. At current market rate itaccounts for more than Rs. 250 billion (Frontier Post June 27,1996).

Pakhtunkhwa has a wide potential to double its forest areaprovided that the corporate sector is involved in the afforestationeffort. The government of NWFP has failed miserably to increasethe forest area in the province although billions of rupees werespent on it. Under scientific management corporate entities cannotonly increase the forest cover but more timber will be available forsale in the local market. Similarly, many industries can run on theraw material provided by these forests.

At present there is severe shortage of timber in Pakistan, whichis being compensated by smuggling from Afghanistan or illegalcutting in NWFP, FATA and Azad Kashmir. The FATA has specialpotential to increase its forest area. It is estimated that businessesin NWFP and FATA can generate Rs. 30-40 billion per year if thetimber trade is incorporated and mass investment by the corporatesector takes place in the afforestation in Pakhtunkhwa (NWFP andFATA).

FOREST BASED INDUSTRY

Several industries can be based on the raw material providedby the NWFP forest. One of such industry is the furniture industry.There are more than 70 furniture factories in NWFP. None of themare involved in assembly line manufacturing of furniture that’s why

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these factories can not manufacture huge quantities for export.Vast improvement can be made in furniture business if assemblyline production is introduced in NWFP. It will increase the quantityof furniture produced in a given amount of time plus the quality willbe made uniform. The process of manufacturing will also be madeless time consuming and exporters will be able to fulfill big ordersin short period of time.

Other industries that can benefit from systematic managementof NWFP forest are paper industry, chip-board industry and pack-aging industry. Two projects in this regard have been identified bySDA (Investment Opportunities in Mineral and Industrial Sectorsof NWFP 39-42).

DUPLEX PAPER BOARD

A project is identified that can be constructed in D.I. Khanwhich will use raw material of grass, pulp and other chemicals.This project will produce 35,000 tons of different packaging boards.The total cost of the project will be Rs. 415 million.

PULP PROJECT

There is a huge demand of pulp in Pakistan. It is used inpaper and chip-board industry. Two different projects can bestarted in Mansehra and Kohistan each with a capacity of 12,000tons per year while the total cost per each unit will be Rs. 632million.

Apart from marble and precious stones, Sarhad DevelopmentAuthority has identified several mineral-based projects. Theseprojects include glass and ceramic industry, Gypsum and PlasterBoard Production, Soda Ash Complex, Lead Zinc ConcentrationPlant, Ferro Silicon Production Project, Sodium Dichromite andChromium Sulphate Chemical Products, Magnesite and ChromeMagnesite Bricks and Nepheline Syenite Alkali Complex. These

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projects require a total investment of more than Rs. 85 billion andcan generate employment for thousands of people.

Apart form these projects there is huge potential for other min-eral-based industries as only a very tiny fraction of minerals re-sources of Pakhtunkhwa are properly evaluated. Other massivemineral-based industries include establishment of a large Steel Milllike the one in Karachi (that employs more than 25,000 people) toutilize more than 1 billion tons of iron ore in Pakhtunkhwa. Theiron deposits in North and South Waziristan Agencies and OrakzaiAgency are not even properly evaluated but these deposits areextensive. Based on the availability of local raw material and cheapcost of electricity, a huge Steel Mill in can be established inPakhtunkhwa. However, further studies are required to determinethe feasibility of this project. Similarly, due to availability of asignificant amount of raw material, further projects can be startedin the cement, glass, and ceramic industry.

HYDRO POWER GENERATION

Pakhtunkhwa’s biggest asset is its potential hydro power gen-eration capacity. It generates about 28-32% of total electricity inPakistan while it consumes only 10% of the total. In 1992 the totalelectricity produced in Pakistan was 48911 MKWH (Million Kilo-watt Hours). Out of this, 15141 MKWH was produced inPakhtunkhwa while the total consumption in the province was 3537(MKWH). All the electricity produced in the province is fromhydro generation. (NWFP Development Statistics 95 & 96 255-257). In the rest of Pakistan, thermal power is produced. Thusabout 30% of electricity in Pakistan is produced through hydrogeneration and 68% through thermal generation while 1% throughnuclear generation.

The thermal power projects in Pakistan rely on imported oil.This has an adverse effect on the limited foreign exchange avail-able to the country. Hydroelectric projects on the other hand have

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several advantages. Hydro-electricity is the cheapest form of elec-tricity available in Pakistan. The installation cost of hydroelectricpower station is $800,000 to $1.3 million per MW, while the instal-lation cost of thermal power stations is also the same (QazalbashDawn 30 Mar. 1998). On the other hand the operating cost ofthermal power generation is very high compared to hydroelectricpower. The cost per kwh at Tarbela (biggest earth filled dam in theworld, built in Pakhtunkhwa) is 8 paisas while the thermal powergeneration cost on the average Rs. 4 per kwh (Qazalbash Dawn 30Mar. 1998).

According to a report published by a Canadian firm, there aremore than 40,000 MW electricity generating projects inPakhtunkhwa on river Indus alone. PESC0 (Peshawar ElectricitySupply Corporation) authorities confirmed the report and added thatthese projects are very viable. According to expert opinion, there is30,000 MW electricity generating potential on river Indus’s maingorges between Tarbela and Skardu at 9 different sites. Similarly20,000 MW potential is available on river Swat. Combined to-gether the total potential is more than 50,000 MW (Dawn 30 Mar.1998). Putting the cost of installation of 1MW at 1 million dollar therequired investment will be 50 billion dollars. Although this is ahuge investment but if it is spread over a span of 20 years it doesnot seem unattainable.

The demand for electricity is on the increase in Pakistan. Ac-cording to a newspaper writer, a German evaluation mission esti-mated that Pakistan would require additional power generation ca-pacity of 54,000 MW in the next 25 years (Frontier Post 7 April1996). Electricity can also be exported to China, Afghanistan andIndia. China and India are two huge markets; any one of them canconsume the entire excess electricity output of Pakhtunkhwa. IfPakhtunkhwa is able to produce the additional 50,000 MW of elec-tricity then at least half of it can be exported. This amounts to 4-6billion dollars of revenue per year from the export of electricity.

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The other half can be used in energy intensive industries. The en-tire railway system of Pakistan can run on electricity thus savingmillions of dollars on import of oil.

Our cost of production for electricity in Pakhtunkhwa is thecheapest in the world, if we pass this advantage to the industrialsector, definitely they will develop a competitive advantage. To takeadvantage of these low costs many industries will shift to this re-gion. However, without provincial autonomy that will not be pos-sible. One major advantage of provincial autonomy would be thatthe provincial government would have the authority to explore itshydropower potential and to form joint venture with foreign firmsindependent of the federal government. At present the provincialgovernment can not negotiate any agreement with a foreign firm orfinancial institution with out the approval of the federal govern-ment.

TOURISM BASED INDUSTRY

Tourism is one of the fastest and largest growing industries inthe world. It provides employment to more than 240 million peoplearound the world. In 1993 the total receipts from tourism world-wide was more than 300 billion dollars (Zahir Ahmad Frontier Post14 Jan. 1995). But unfortunately in Pakistan the tourism industryis not properly developed. Tourism in Pakistan is more concen-trated on attracting tourists to the scenic sites and to Mughal archi-tecture but Pakhtunkhwa has much more to offer. Explaining thisscenario, Afrasiab Khattak well known historian of Pakhtunkhwasays that, “our biggest asset is our culture and our heritage that isthousands of years old. We have to understand that history did notstart in the 20th century. We have to explore and develop the ruinsof Buddhist, Hindu, Muslim and other civilizations as they were apart of our unique cultural heritage”. This area has witnessed therise and fall of some of the mightiest civilizations such as Bud-dhism and Hindushahi. It was also one of the destinations on the

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ancient silk route and many conquerors like Alexander the Great,Tamerlain, Mehmood of Ghazna, Babur and the Britishers crossedthe famous Khyber Pass.

Pakhtunkhwa possesses a unique cultural heritage. It has anumber of historical buildings, archeological monuments and cul-tural history that is enhanced by natural beauty of the varied land-scapes of the province. It also has a strategic location on Pakistan’smap from tourism point of view. It is in driving distance fromIran, India, China and Central Asia. The land of Pakhtunkhwais rich with archeological and cultural heritage as well as scenicbeauty. Along with its own attractions, it can provide access to theentire above mentioned tourist destinations. Thus Pakhtunkhwa canbecome a major tourist destination in Central Asia as well as atransit facility for other tourist destinations in the area.

Tourist sites in Pakhtunkhwa should cater for people from dif-ferent countries, age groups and gender. At present most of theforeign tourist coming to the province are male and middle-aged. Inorder to make the tourism industry successful, tourists should beprovided with ample opportunity to enjoy and relax. If the tourismindustry is properly developed it is estimated that Pakhtunkhwa canattract about half a million foreign tourists a year. This accounts tomore than 500 million dollars revenue per year. In addition, it canalso attract tens of thousands of tourist from southern part of thecountry especially in summer when the weather is pleasant in thenorth of the country. Again corporate entities can create hotel chains,traveling companies and entertainment resorts, as individual entre-preneurs will find it difficult to individually start projects.

ESTABLISHMENT OF A FREE TRADE ZONE INPAKHTUNKHWA

The geo-location of Pakhtunkhwa is a great fortune for itspeople, unfortunately, due to geo-politics of almost two hundredyears, Pakhtunkhwa has been on the horn of dilemma in terms of

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its destiny. As has been mentioned, Pakhtunkhwa lies at a drivingdistance from 1/3th of the world population thus making it mostsuitable for a Free Trade Zone. This Free Trade Zone inPakhtunkhwa would promote economic activities in the region andwould also eliminate the smuggling of goods in the region, whichhas hindered the growth of economic and industrial developmentin the region. The illegal Non-Taxed Border Trade between Af-ghanistan and Pakistan would also decrease by the establishmentof a Free Trade Zone in Pakhtunkhwa. This would provide greateconomic benefits for the people of Pakhtunkhwa.

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ARRANGEMENT OF CAPITAL FORECONOMIC DEVELOPMENT

Having studied the economic and industrial potential of the prov-ince in the previous chapter, it is evident that Pakhtunkhwa cannotbe termed as a poor province in terms of resources and economicpotential but the big question mark is where to get the capital neededfor setting up industries in the province. We will discuss this issue indetail in this chapter.

To professionalize and modernize the industrial setup, the busi-ness sector of Pakhtunkhwa should be dominated by corporate en-tities rather than sole proprietorships and partnerships. These cor-porations can be in the form of foreign multinationals, indigenouscompanies or a joint venture between foreign and local companies.For this reason Pakistan must understand the present globaleconomic order. Integration in the global/regional economy willmake the inflow of capital easier for many lucrative projectsin Pakhtunkhwa, which are not started because of the lack ofcapital investment. Any policy that restrain foreign trade orrestrict foreign capital will deprive Pakhtunkhwa from themuch-needed capital inflow. There are three different ways thatequity financing can be generated for corporation in the province.These are

• Foreign Direct Investments (FDI)

• Local companies floated in local stock exchange.

• Joint ventures between locally incorporated companies andmultinationals

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FOREIGN DIRECT INVESTMENTS (FDI)

In Pakhtunkhwa, the local entrepreneurs do not have the eq-uity base to start large-scale projects. The provincial governmentis looking forward for foreign multi nationals to invest in these largescale projects which include hydro power generation, developmentof different mineral based industries and tobacco industries. Atpresent, these multi nationals do not consider the socio-economicenvironment in Pakhtunkhwa to be feasible for such large-scaleinvestments.

Even if these multi nationals invested in Pakhtunkhwa, the profitgenerated by these industries will have a very limited effect on theeconomy of the province. These multi nationals will be payingmost of their taxes to the federal government and it will be thefederal government that will benefit from such an arrangement.Besides, the profits made by the multi nationals will be remittedback to the parent company, thus the people of the province willnot directly gain from the profitability of these companies. Al-though, direct foreign investment by foreign multi nationals willcreate new jobs but the local entrepreneur or investors will notdirectly get benefits from such a venture. Transfer of technologyand managerial skills will be limited in such a case because it willbe an inter-company transfer and will not have a significant effecton the over all corporate culture of the province.

LOCAL COMPANIES

There are few sectors where technology transfer is not required.In such a case, companies can be created with all its capital raisedin the local market. There are some advantages and disadvantagesof such an arrangement. The biggest advantage is that all the profitwill be kept locally. The biggest disadvantage is that the manage-ment of these firms will not be able to learn the corporate culture offoreign multinationals. At present, locally managed companies donot have the credibility established by foreign multinationals operat-

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ing in Pakistan. Pakistani companies are more prone to corruption,evasion of taxes and other irregularities. To avoid this problem it isimportant to choose management of these companies from existingmultinationals, so that they can bring more professional corporateculture with them. Some of the companies that can operate with-out foreign equity participation include dairy farms, transportationcompanies, grocery store chains, fruit processing industry, tourism(hotels and motels) and health care industry.

JOINT VENTURES

In the presence of a local stock market, local companies shouldbe created which will float shares locally. Thus, an indigenousentity will be controlling the resources of the province. In such acase, new joint ventures can be created between the new entityand the multi nationals. These joint ventures will have an advan-tage of superior technology, superior corporate culture and superiormanagement skills of the multi nationals, along with world widecredibility, reputation and access to financing all over the world.These joint ventures will be helpful in transfer of technology, trans-fer of efficient corporate culture and transfer of management skillsto the local businesses. By having partial ownership of these newjoint ventures, the people of Pakhtunkhwa can benefit directly fromthe success of these ventures. Such joint ventures will also reducethe risk to multi nationals by financing some of the investmentslocally.

Initially, the capital raised in the province can be limited but itwill show the seriousness of the government of NWFP and peopleof Pakhtunkhwa towards the growth of industrialization. Localmasses will also be less hostile towards such a corporate structurecompared to 100 % ownership by foreign multi nationals. An im-portant point is that joint ventures should be preferred in industrieswhere there is a huge potential for export. Foreign direct invest-ment or joint venture will be less fruitful in industries where there is

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limed or no scope for export. In case of no income from export,joint venture partners will be reluctant to invest huge amount be-cause they are aware of the limited buying power of Pakistani peoplein general and Pakhtunkhwa in specific. Besides, remittances bythese companies to their parent organizations will have a negativeimpact on our already adverse balance-of-payment problem. Thus,it is important that initially joint ventures should be encouraged inexport oriented industries and when our trade deficit improves wecan start joint ventures in other industries.

A local stock exchange is required to raise capital for joint ven-tures and local corporations. This local stock exchange along withlocal banks will be able to make financing available for new corpo-rate entities in the province. Before establishing a stock exchangein Pakhtunkhwa it is important to evaluate other stock exchanges inthe country and review their performance and on the basis of thatmake recommendation for the establishment of stock exchange inPakhtunkhwa.

AN OVERVIEW OF PAKISTANI STOCK MARKETS

Professor Lawrence White wrote that in the early seventies,before nationalization, 43 families or groups controlled 98% of 197non-financial companies accounting for 53% of total assets onKarachi Stock Exchange (KSC). According to Professor White,the top ten families controlled one third of the total listed assetswhile the top 30 owned over half of the listed assets on KarachiStock Exchange (KSC) in that era. Not much has changed eversince. Professor Shahid-ur-Rehman writes, “On Dec 1, 1995, thetop 43 groups owned 212 of the 552 non-financial companies listedon the Karachi Stock Exchange (KSC) accounting for 43% of thetotal manufacturing assets exclusive of multi nationals and publicsector enterprises. Out of 175 listed banking companies, modarabas,leasing and financial companies, 76 belong to these groups”. Inaddition to the assets held in there own groups, several of these

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groups own equity in multi nationals companies listed on KarachiStock Exchange (KSC). These include Hoechst Pakistan Ltd.,Siemens, Lever Brothers, Burger Paints, SmithKline and BrookeBond. These groups owned assets worth in excess of 400 billionrupees on KSC (Rehman 66-67).

Out of this, the Memons of Karachi control 82 companies onKSC while the Chinoties of Punjab control 124 companies. Apartform the multi nationals the management of the rest of the compa-nies is entirely controlled by the businessmen in Karachi and Punjab.These companies are known for corruption, avoiding taxation, brib-ing officials and many times not declaring the due dividend. Notdeclaring dividend or showing lower profits have an adverse effecton the share price.

Due to these practices, these companies and their manage-ment have not only lost their credibility in the investing communityof Pakhtunkhwa but also through out Pakistan. These companiesdo not satisfy any of their stakeholders, apart from the dominantshareholders. Thus minority shareholders neither have much to sayin running the company nor have much to gain from investing inthese companies. On Karachi Stock Exchange the heavily tradedshares belongs to either foreign multi nationals like ICI, or compa-nies whose management is foreign based like Hubco or companieswhose management is some what controlled by the government.

ESTABLISHMENT OF STOCK EXCHANGE INPAKHTUNKHWA

In economic terms, income is either spent on consumption orsaved. The money that is saved can be invested in real or financialassets. In Pakhtunkhwa, the dominant form of investment in realassets by the general public is investment in real estate. Invest-ments in financial assets are limited to government securities andbank deposits. As there is no stock exchange in Pakhtunkhwaand Balochistan, the investments in capital markets are limited

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to investment in stocks floated in other provinces as the threestock exchanges in Pakistan are located in Karachi, Lahore andIslamabad.

There is strong support for the creation of an independent StockExchange in Peshawar (Pakhtunkhwa). Such a development willopen a new avenue for the investors of the province. Generalpublic will have an opportunity to invest in assets that can easily beliquidated compared to real estate. Besides, investing in stocks canbe more rewarding than bank accounts. At the same time, estab-lishment of stock market will facilitate the development of corpo-rate sector in the province. Entrepreneurs will be able to raise eq-uity in the local market; it will also become possible to establishmedium to large-scale industries by pooling the equity of manypeople together.

By examining the dominance of a few groups in Karachi andLahore stock exchanges, certain precautions need to be taken toavoid the emergence of such groups after the formation ofPakhtunkhwa Stock Exchange. For the last few years there hasbeen attempts made by several individuals to establish a stock ex-change in Pakhtunkhwa but none have been successful so far. Cor-porate Law Authority (now known as Securities Exchange Com-mission of Pakistan) has the authority to award any company, theright to establish a stock exchange in the province. Like all othermajor government deals, if the government awards the establish-ment of the stock exchange to its political favorites then the effi-ciency and achievement of the stock exchange will be no betterthan the stock exchange already established in other three cities.The following three pre-requisites are important for the establish-ment of a successful stock exchange in Pakhtunkhwa.

Firstly, stock market in the province should be established af-ter provincial autonomy is granted to the province. If the stockexchange is established before provincial autonomy is granted thenit would be governed by Corporate Law Authority (CLA)/Securi-

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ties Exchange Commission, which means that the stock exchangewill be directly controlled by the federal government because CLA/Securities Exchange Commission is under the control of the federalgovernment. The performance of CLA/Securities Exchange Com-mission can be classified as extremely poor in Pakhtunkhwa and ifit keeps on controlling the corporate structure of the province thenthe corporate sector can not be improved. With provincial autonomythe government of NWFP must establish an independent Corpo-rate Law Authority that should be tailor-made for the needs of theprovince.

Secondly, establishment of stock exchange in Pakhtunkhwashould not be an independent event but it should be a partof a broader economic package introduced by the government.This economic package should include reduction of taxesin the province to compensate for the locational disadvantageof the province while at the same time reduction in electricityprices should provide competitive edge to industries in Pakh-tunkhwa.

The government should pass legislation to improve the bankingsystem in the province. National and international banks should berequired to make advances in the province proportionate to thetotal money deposited by the people of the province. The infra-structure of the province needs improvement. After provincial au-tonomy, the government will be at least able to locally spend theamount of taxes collected in the province. This will provide amplefunds for improvement of telecommunication and transportationnetwork, along with improvements in traffic, energy, and law andorder.

After meeting these pre-requisites, the biggest question is howthe establishment of stock exchange will bring economic prosperityand industrialization to the province? The shares of the biggestcorporations in Pakhtunkhwa, like the cement plants, are alreadyfloating in other stock exchanges of the country. As mentioned

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above the local businessmen do not have the education, entrepre-neur skills or credibility to incorporate their businesses and attractshare capital. It will be up to the government to create an atmo-sphere in the stock exchange that is fair and accessible to commoninvestor.

At present, it is important to establish local corporations withlocal equity. The common investors in the province do not have theexpertise to operate in a highly efficient stock market. To counterthe risk of speculation, investors from other provinces or other coun-tries should not be allowed to buy shares in locally listed companiesfor at least the first two years. These portfolio investors shouldinform the local Corporate Law Authority before buying more than10% share of a listed company after two years. As proxy owner-ship is legal in Pakistan, it will be extremely difficult to determinetrue ownership of the securities. New laws need to be incorpo-rated to check proxy ownership in the province after the establish-ment of stock exchange.

POTENTIAL INVESTORS

In Pakistan the domestic savings are around 8% of GDP (Raza210). This relatively low rate of saving provides limited opportunityfor investments. In Pakhtunkhwa, majority of people are poor anddo not have sufficient income to provide for savings. InPakhtunkhwa there are limited classes of people, which have extraincome to save. These groups can invest in the stock market. Theyare the following groups.

1. Shopkeepers and Small Traders.

2. Professionals (Doctors, Lawyers and Accountants).

3. Transit and Bara Market Traders.

4. Overseas Workers.

5. Landowners.

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1. Shopkeepers and Small Traders

Majority of the business community in the settled area consistsof small shopkeepers and traders. Their income depends on thesize and location of their business. These shopkeepers and tradersare comparatively better off in the cities of Peshawar and Abbottabadand to some extent in Mardan, DI Khan and Kohat. NWFP Cham-bers of Commerce has an overwhelming representation of this group.In Peshawar, capital-city of Pakhtunkhwa, local Hindus dominatedall the businesses including trading and retail businesses before thepartition of the subcontinent. After partition, when the Hindu busi-nessmen left, most of these businesses were handed over to refu-gees from India. These settlers along with other non-Pakhtun peoplehave established their own communities in Peshawar. These trad-ers dominate the famous Saddar bazaar and other bazaars in downtown Peshawar. Usually these shopkeepers and traders of Peshawarrestrict their investment to the major cities of the province. As theyhave links with other provinces in Pakistan, they do invest overthere as well. They have also invested in real estate especially inthe cantonment area. In other cities of the province, the trend ispretty much the same.

In presence of a stock market the shopkeepers and traders canplay a significant role in its operation. It is important that the shop-keepers and traders are fairly represented in the new stock exchangeas they have huge amount to invest, but it is equally important thatthe stock exchange should not be dominated like the chamber ofcommerce, by any one specific group otherwise majority of thepeople of Pakhtunkhwa will be shunned off from capital marketparticipation as well as the banking sector.

2. Professionals

There is a significant number of prospering lawyers, doctorsand to some extend accountants and other professionals. Asthese people already have a full-time profession it becomes

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difficult for them to operate their own business as well. Thisgroup does have the extra funds and education to effectivelyinvest in stocks.

3. Traders

Majority of the tribal area is dependent on transit trade withAfghanistan. Many of household items and other electronic goodsare brought to the tribal area from Afghanistan and then sold inBara Markets. Businessmen all over the country usually call thesetraders as ‘smugglers’ and due to this name these people are groupedtogether with drug smugglers. This is a very unfair stereotypeagainst the entire tribal people. The worst crime that these traderscommit is that they avoid custom tax and other forms of taxation ontheir products. This should not be considered an unusual crime asavoiding taxes is a common practice in Pakistan and is practicedmuch more in the southern provinces of Pakistan than Pakhtunkhwa.The issue of what kind of incentives should be given to the tribalarea to stop non-tax trade between Pakistan and Afghanistan willbe discussed later.

These Bara market traders have amassed significant wealth andit is very important to involve this group in the formation of capitalmarkets in Pakhtunkhwa. In general, long-term investment inindustries by these groups is very limited. One major factorfor this is the lack of infrastructure in tribal area and the otherfactor is the lack of professionally qualified people. Tribalinvestors also consider the political and social environment of thesettled areas unsafe for long term investments. A significantnumber of big businessmen from tribal areas have shifted their bankaccounts to the Middle East. Although there are no exactestimation of the wealth of this group it will be safe to say that tribalinvestors can invest in excess of 2 billion dollars in a reliable stockmarket.

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4. Overseas Workers

A large number of workers from Pakhtunkhwa are workingabroad. Most of these workers are blue-collar workers in the MiddleEast. There are also a limited amount of overseas workers in NorthAmerica and Western Europe. Unlike other communities of thesub-continent the workers of Pakhtunkhwa had not formed busi-ness communities and are just working as wage workers. Oneimportant reason for not having organized communities abroad isthat most of the workers from Pakhtunkhwa working abroad usu-ally come back to their home country after spending a few yearsabroad. When these workers come back some of them find jobswhile many others try to start their own businesses, invest in realestate, or put their money in the banks. As these workers do nothave entrepreneur skills and their individual investment is limited itbecomes difficult for them to start large-scale projects. Thereforethese workers prefer trade to investment in industries. Others whodo notstart their own businesses usually buy real estate. The real estatecan be in the form of agricultural land, residential plots in the cities,shopping plazas, or shops. These workers also have a significantamount of investment in local banks. Many of the foreign currencyaccounts in Pakistani banks are owned by Pakistani workers abroad.The government of Pakistan froze all foreign currency accounts on29th May 1998. Due to this new development these workers havelost confidence in the Pakistani banking systems. Unlike many otherPakistanis, these workers working abroad have the options to in-vest their earnings abroad and many of them are doing so. In caseof stock market development in Pakhtunkhwa, overseas workerscan invest a large sum if their confidence is restored.

5. Landowners

Unlike Sindh and Punjab there is limited feudal system in NWFP.Huge plantations are rare. There are quite a few landowners whohave comparatively larger plantation of high yielding crops like to-

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bacco in Swabi district and sugare cane in Mardan and Charsadda.Many of the large landowners lost some land in the Land ReformsAct initiated by Zulfiqaar Ali Bhutto’s government in the seventies.Other disputes also developed between landowners and tenants onmany large plantations due to land reforms initiated by the govern-ment. On some plantations the owners lost their right to replace thetenants, increase rent, or sell their land without the consent of thetenant. The negative impacts of such a development are that peoplelost confidence in the government and the security of private own-ership was shattered.

Similarly after losing control over big chunk of their lands, theland-owner’s lost the extra revenue that they could have investedin industrial projects and capital markets. By compensating for theirlosses the government can restore confidence of these landownersand at the same time solve the problems of the tenants. It istrue that many landowners do have excess income that theycan invest in the capital markets. In Pakhtunkhwa 196,250farms are bigger than 7.5 acres (Development Statistics 95 & 9692-93). Out of these at least the owners of half of these farmscan be considered to have some saving income from their farms.Thus this group can invest a large amount of money in thecapital markets.

ADVANTAGES OF LOCAL STOCK EXCHANGE

1. Portfolio investment will make available a broad spectrumof risk and return for the local investor.

2. Shift of investment towards portfolio investment will re-duce prices of other real assets.

3. Improvement in Human Resource Development and re-search.

4. Vertical Integration of industries.

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5. Reduction of Risk for the companies.

6. Diversified ownership will be a deterrent to political vic-timization.

7. Separation of ownership and management(Professionalization of business culture).

8. Economies of Scale (Modern farming).

9. Protection against inflation for the investors.

1. Portfolio Investment by Local Investors

At present, the investors in Pakhtunkhwa can invest in stocksthrough over the counter markets. Taurus Securities is one of thefew security houses that provide equity brokerage in the province.The total turn over by Taurus securities in Pakhtunkhwa is from200,000 – 500,000 shares a day. According to Tariq Mehmood,regional representative of Taurus Securities, the local investor isnot very well educated about the operations of a stock market.When stock exchange is established in the province, local investorswill have a better insight of the operations of stock exchange. Thereis also reluctance on behalf of local investor to invest in stockslisted in Karachi stock exchange on the pretext that it is too faraway and these investors find it difficult to get relevant informationabout the companies they want to invest in. There are also severalallegations of corruption against big brokers and investors of Karachiand Lahore stock exchanges, which keep the investors inPakhtunkhwa away from investing in these capital markets. Moreon this subject will be discussed later.

With a local stock market, the investors can easily access lo-cally incorporated companies. Information about these companieswill be easy to acquire. The local investors will be in a betterposition to link corporate performance with share prices. This will

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create a favorable atmosphere for investment in the stock market.Along with real estate and bank accounts stock market would pro-vide a broad spectrum of investment opportunity for individual andinstitutional investors.

2. Reduction in Real Estate Prices due to PortfolioInvestment

An executive of Islamic Investment Bank was of the opinionthat “people of Pakhtunkhwa invest in dead investments”. By deadinvestment he meant investing in real estate. Investment in realestate enhances the social status of an individual in the Pakhtunsociety. But apart from social reasons, the most important factorin real estate is the wide spread belief that real assets do not lose itsvalue. Hayatabad Town is a modern suburb of Peshawar city.Many people from all over Pakhtunkhwa have invested heavily init. Apart from buying residential plots for their own use peoplehave bought plots and houses for investment purposes.

For investors this investment is not very successful. For ex-ample one kanal plot in Phase-I used to cost Rs. 9, 00,000 in theyear 1990. The same plot costs about the same even today. Butduring this time the rupee has lost its value considerably. In theyear 1990, the rupee rate was 20 to a dollar. Now the rupee rate is58 to a dollar. Thus in dollar terms a plot that could have beenbought for $50,000 in 1990 can be bought for less than $17,000today. On the other hand if $50,000 were invested in New YorkStock Exchange Index and all the dividends re-invested the totalvalue of the portfolio investment would have been in excess of$150,000 which is about Rs. 9 million in Pakistani currency.

Thus we can see the significant amount of money lost by in-vestors in real estate in Hayatabad. The investors in houses andother building have also lost considerably. In Hayatabad, a onekanal house that costs about $80,000 to build can be rented for$200 a month because unlike other provinces of Pakistan people do

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not have the ability to pay higher rents. The return on investment insuch a case is less then 2%, keeping in mind the repair and mainte-nance expense, plus there is no increase in the real worth of theirassets. Many investors have now realized that real estate invest-ment is speculative in nature and for almost a decade the return onreal estate investment in Pakhtunkhwa is decreasing.

Capital market will provide a new avenue for investors; a sig-nificant number of real estate investors will shift their investment tocapital markets. With a shift of investment from real estate morefunds will be available for the corporate sector. The land prices willalso fall due to this shift. This fall in the price of land will be espe-cially beneficial for companies that will like to hold big land holdingsfor the plantation of tobacco, orchards and vegetables.

3. Improvement in Human Resource Development andResearch

As mentioned earlier the establishment of stock markets will fa-cilitate the formation of local companies and joint ventures. Asthese companies will be based in Pakhtunkhwa where their sharecapital will also be raised, they will be extra conscious to improvethe economic and social conditions of the province for their ownbenefit as well as the benefit of the society. The formation of thesecompanies will have a significant role in human resource develop-ment and creation of employment opportunity. As there is a scar-city of skilled labor in the province, most of the industries are basedin such sectors where skilled labor is not required. Although theowners of these industries do make a profit, the laborers are com-pensated by minimum wages. The labor class is not provided withan opportunity to improve their technical skills. This is not be-cause of cupidity of the owners but because in sole proprietorshipor partnership the owners do not have the necessary funds to in-vest in human resource development. As a corporate entity canaccumulate more funds it can invest more in human resource de-

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velopment. This investment will be beneficial in two ways. Firstly,with technically skilled laborer, the efficiency, output and manufac-turing technology of the organization can be improved. Secondly,the labor class will have the opportunity to acquire more skills thatin turn will result in increasing their own output and compensationfor their work.

Similarly the present industries in Pakhtunkhwa do not havefunds available to invest in research and development thus they areconsistently dependent on foreign technology and foreign exper-tise. Again, with a bigger pool of funds available in acorporate set up, corporations will be able to invest in the develop-ment of new technologies that will make them able to competeglobally.

4. Vertical Integration of Industries

Many sole proprietorship and partnerships in Pakhtunkhwa havelimited financial resources to make long term Investments. Poorintegration between different sectors in an industry cost losses ofmillions of rupees to these businesses. One such example is thecarpet industry. In the carpet industry usually production is done onlimited scale in different households throughout the province. Middle-men buy these carpets and send them to the southern province ofPunjab for cutting and finishing. After cutting and finishing, themiddlemen sell the carpets to different exporters. The exportersfurther sell these carpets to wholesalers in different countries. Thesewholesalers then supply these carpets to different retail stores. Dueto so many intermediaries, the carpet exporters in Pakhtunkhwacan not compete with exporters in the south who have their ownmanufacturing facilities. As these exporters in Pakhtunkhwa do nothave the manufacturing facilities and have limited inventories, manytimes it becomes difficult for them to fulfill a huge order. Thusthese exporters lose their orders to exporters from other countriesand to some extent exporters from southern part of the country. In

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case of a local stock market, medium size companies can be cre-ated with a larger equity base that will be financially strong to ver-tically integrate the manufacturing facilities, the exporters of car-pets, and at the same time these companies will establish their ownretail outlets abroad. This vertical integration will reduce the costs,increase efficiency and profit margin that will ultimately increasethe export of carpets from the province. Other industries wherevertical integration can produce higher exports include; marble andprecious stones and agriculture commodities.

5. Reduction of Risk for the Companies

Floating shares on the Karachi Stock Exchange is extremelydifficult for a local businessman in Pakhtunkhwa. It is unlikely thatordinary businessmen from Pakhtunkhwa can raise capital in anyof the capital markets of the country without the right political orbureaucratic connections.

This leaves bank loans as the only source of financing avail-able to most of the industrialists and businessmen in Pakhtunkhwa.Usually a bank requires 30% percent equity participation and 70%loan. The present interest rate on different kinds of loans availablefrom the banks ranges from 10% to 15%. Due to this higher rateof interest entrepreneurs are shy to make long-term investments.Many banks also do not provide finances for new green field op-erations. Most of the loans provided by these banks are for work-ing capital need of running business. Qasim Toru, Deputy Directorof Bank of Khyber told the author that most of the account holdersdeposit their money for the short term (less than a year). This makesit extremely difficult for the bank to make long term financing avail-able for local entrepreneurs. Thus short-term working capital loansare preferred. Long-term investors usually invest in federal gov-ernment securities such as defense bond that pays up to 12% re-turn per annum. Therefore, money that could have found its way inthe banking sector and eventually could have been loaned out to the

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entrepreneur ends up in financing the fiscal deficit of the federalgovernment.

Even when money is invested in a green field operation with70% debt, the higher ratio of debt makes it a very risky proposition.Most new industries have a completion period of one and half totwo years during which the company already accumulates interestexpense of 30 to 50 percent of the loan amount even before startingtheir operations. There are a few industries that can provide such ahigher return to clear their liabilities. Two of such industries arethe pharmaceutical companies in Pakhtunkhwa and the cigarettemanufacturing companies. Such a high rate of return of these in-dustries is contributed to a fact that many of the companies in theseindustries make counterfeit products. Companies in other indus-tries that finance their operation through 70% percent bank loanusually fail. That’s why more than one-third of all the manufactur-ing units of the province are closed because of bankruptcy.

With the introduction of stock markets companies will be ableto raise equity. This will reduce their reliance on heavy debt fi-nancing. With lower debt financing the companies will also beable to reduce the fixed interest expense, which in turn will reducetheir chances of bankruptcy. Dependency of local businesses onbank financing will be reduced to a major extent and this in turnwill reduce the risk level of many businesses and increase the long-term investments by many companies.

6. Advantages of Diversified Ownership

In Pakhtunkhwa, bureaucratic and political connection is es-sential for almost any kind of business. Politicians, ex-bureaucratsand ex-armed forces officers or their relatives usually own big busi-nesses. While in power these influential people use their offices togain any kind of financial advantage. Similarly, while in oppositionmany of the industries owned by opposition members are harassedby different government agencies. This kind of political interfer-

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ence makes it extremely difficult for companies to operate freely ina competitive market. By having a local primary and secondarystock market ownership of many large corporations can be diversi-fied to such an extent that a particular individual or group cannot beaffected by the government policies.

7. Separation of Ownership and Management

Pakhtunkhwa is dominated by family based businesses. In mostof these businesses there is no distinction between ownership andmanagement. Most of the time, the owners are not educated enoughto develop any business strategy for their companies. Sometimes acompetent person starts a business and on his demise the businessis usually disintegrated; thus the concept of growth cannot mush-room in such an atmosphere. Similarly, most of the times the heirsdo not have the managerial skills to run the business. With a stockmarket in Pakhtunkhwa many big sole proprietorships and partner-ships can be incorporated. This will separate ownership from man-agers. Thus a competent management will take control of busi-nesses.

In Pakhtunkhwa, the general preference among people is towork for a government organization. One reason for developingthis psyche is the thinking that government organizations are long-term entities. Thus individuals working for these organizations canforesee a long career ahead of them. On the other hand individualsworking in private organizations do not see their organizations aslong-term entities and consider their jobs as only temporary. Cor-porate setup can change many businesses into companies that willplan for the long run. This in turn will motivate the employees topursue long-term careers in such organizations. Another problemwith private companies is that their owners have direct control overtheir employees. Professional management of such organizationusually finds it ironic to take orders from owners that are incompe-tent and in many cases illiterate. Thus there is a general trend for

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highly talented professional people to stay away from the privatesector. In case of a corporate setup, the owners do not directlycontrol the management and employees are saved from theembarrassing situation of being treated as personal servants of theowners.

8. Economies of Scale

By having a local stock market businesses can raise more fi-nances. Bigger and better organizations can be created. Apartform vertical integration of different sectors of an industry in abusiness entity; economies of scale can also be achieved. One suchfield is the agricultural sector. The climate and soil composition ofPakhtunkhwa is ideal for high quality tobacco and citrus plantation,vegetable farms and several other kinds of orchards. At presentthere is no corporate setup to effectively utilize these potentials.With land holdings getting smaller over the years, large-scale plan-tations are becoming extinct. Small plantations usually have lowyield and high unit cost, which makes the output from these planta-tions neither significantly high nor cost effective. Thus, the exportpotential of these items is limited. With the introduction of corpo-rate based culture in the agricultural industry, bigger plantations canbe created, which will reduce the unit cost and increase output.Thus economies of scale will be created in these industries produc-ing high quality and competitively priced products.

9. Protection against Inflation

In the nineties, the official inflation rate was in double digits.For the last few years the rate of inflation is on a further increase.Bank accounts pay enough interest to keep up with the inflation butsome times the interest they pay is less than the inflation rate. Thissituation has eroded the confidence of many people to invest theirmoney in Pakistani banks. Pakistani banks also provide an oppor-tunity for depositors to open foreign currency accounts. Many

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people have opened foreign currency accounts because these ac-counts provide an automatic barrier to inflation of Pakistani rupee.The rupee has continuously depreciated by more then 10% for thelast eight years excluding the last year. Over this period foreigncurrency account were not affected by this depreciation. Unfortu-nately after the freezing of foreign currency accounts even thisavenue was closed for investors to safeguard their investmentsagainst inflation. Although the government allowed the banks toopen new foreign currency accounts but the credibility of the gov-ernment is so low that very few new foreign currency accounts arebeing opened.

Even before the freezing of foreign currency accounts, manypeople who invested in Pakistani currency accounts did not con-sider the returns given by the banks adequate for their investments.These people therefore have invested their money in small busi-nesses like small-and-medium size grocery stores, auto spare partsshops etc. There are two main reasons for having such a largenumber of shops. First, there are no jobs in the government or pri-vate sector so a lot of unemployed people, having some capital,start these shops. The second reason is that in the presence of highinflation rate, a retail store is an automatic barrier against inflation.All these shops operate with as much inventory as they can.The reason for this is that if there is a sudden devaluation bythe government or price hike by the manufacturers, the shopkeep-ers will automatically increase their prices thus transferring theburden of inflation or devaluation to the consumer. Thus theinitial investments of the shopkeeper maintain its value in realterms.

Unlike bank accounts, investing in stocks can provide some in-built mechanism to counter inflation. First, dividend on stocks ispaid from net income of the company. With inflation the price ofthe products or services of the company will raise, which meanshigher return in rupee terms while in real terms the return might be

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the same or higher. This higher return in rupee term will offset theinflation rate thus the investor will be able to get a real return on hisinvestment. Therefore dependency of local investors on foreigncurrency accounts or shops to counter inflation will also be re-duced.

Apart from the above-mentioned advantages there are severalother advantages of establishing a stock exchange in Pakhtunkhwa.One major advantage for the government is that corporations areusually bigger and fewer in number. Thus it is easy to tax a fewcorporations in a town compared to hundreds of small soleproprietorships. Other advantage of stock trade is that stockhold-ers are basically owners of a business that share the profit and loss.On the other hand bank deposits pay fixed interest charges. Due toreligious sentiments many people in Pakhtunkhwa consider it wrongto receive interest on their accounts. Stock market can provide anopportunity for these investors to have an interest free income ontheir investment.

It is clear from this analysis that Pakhtunkhwa has a tremen-dous potential of fast industrial growth. The industrialization shouldstart from labor intensive and energy intensive industries as thereis plenty of unemployed labor and huge potential of hydro-powergeneration. Industrialization should be concentrated in those sec-tors where industries can compete globally as well as locally. Thisindustrialization is not possible under the present socio-economicstructure of the province. Similarly not much is possible in thepresent political setup of the country. The federal government andfederally controlled agencies have continuously misused the re-sources of Pakhtunkhwa. From 1947 onward Pakhtunkhwa has losthalf of its forests. Billions of dollars worth of timber was illegallysold with the help of federal agencies such as Pakistan Customs,and Political Administration in tribal areas. Profits from Hydro-powerin excess of Rs. 300 billion (including 15% interests) have not beengiven to the province. Gem Stone Corporation sold more than half a

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million carets of precious stones mined in Pakhtunkhwa but failedto pay a single penny to the province. Apart from the fact that thepopulation of Pakhtunkhwa is growing faster than the rest of thecountry, for the last thirty years the combined population of NWFPand FATA was shown on decline by the Population Census Organi-zation of Pakistan. In 1961 to 1981 the population of Pakhtunkhwawas reduced from 17.68% to 15.74% of the total population ofPakistan. Thus the federal government has shown consistent biasagainst the province and has failed to achieve any economic devel-opment in the province, hence, for the economic growth of theprovince it is eminent that provincial autonomy should be granted toPakhtunkhwa and FATA should be merged with NWFP. The fed-eral government should give Pakhtunkhwa the power to formulateits own economic and fiscal policy.

Once provincial autonomy is granted then new policies can beformulated for the rapid development of the province. One of thesepolicies is the creation of an independent stock exchange in theprovince. New companies should be created by SDA with govern-ment equity. Once the new entity starts operations, the governmentequity should be replaced by shareholders equity. It is importantthat initially the ownership of all the corporations listed on Peshawarstock exchange should be owned by the shareholders of the prov-ince. This will curb speculation and develop credibility of the ex-change in general public and it will also develop sense of owner-ship among the people of Pakhtunkhwa. The people of Pakhtunkhwawill consider the big corporate entities as part of their own commu-nity instead of outsiders exploiting the resources of the province.Several groups have been identified that have the potential to in-vest huge amounts in the proposed stock market in Pakhtunkhwa.In order to attract investors the companies listed on the exchangeshould have high professional management. The corporate cultureof these organizations will have to be significantly different fromthe present corporate culture in the province, which is inefficientand heavily corrupt. For bigger projects joint ventures can be for-

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mulated between the local entities and foreign firms to attract addi-tional capital.

In addition to creation of capital market the banking systemshould also be improved. Bank of Khyber and other banks inPakhtunkhwa should not be allowed to make most of its advancesoutside the province while having a majority of deposit fromPakhtunkhwa. New laws should be formulated, which will requirethe banks operating in the province to make the advances in pro-portion to the total deposits in that bank from Pakhtunkhwa. Cor-porate structure will bring efficiency to the business sector alongwith prosperity. It is also important that the provincial governmentinvests heavily to improve the overall infrastructure of the prov-ince. Special investment is required in the field of education, com-munication and transportation. It is believed that if the federal gov-ernment and federally governed organizations such as WAPDApays the amount it owes to Pakhtunkhwa, the provincial govern-ment can rapidly work on the development of the province.

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ECONOMY OF MISMANAGEMENT

It is extremely important to note that over the last two decadesthe overall culture of business in Pakhtunkhwa was based on re-source mismanagement. Evasion of taxes on border trade (TransitTrade), illegal cutting of forests, drug trafficking, embezzlement andbribery in government services became the accepted norms of re-source accumulation. Over the years a loose mafia of individualsand groups involved in this mismanaged emerged as the leadingeconomic brokers in Pakhtunkhwa.

Mismanagement of resources has a limited life span. For ex-ample timber mafia cannot continue to operate for decades (un-checked) as sooner or later they will run out of timber to cut. Thelast two decades with internal insatiability in Afghanistan providedideal environment for resource mismanagement in every shape andform. However this trend needs to be reversed, as the socio-eco-nomic environment of the region is not accommodative for suchmisadventures any more.

Some of these individuals and groups involved in big scale re-source mismanagement identify themselves with obscurantist forcesin the region. The military aspect of the ‘War on Terror’ in Af-ghanistan may be over, but how the international community woulddeprive the terrorists of financial backing by their supporters is thebiggest question before every sane person. It is, therefore, prudentto search out the sources of wealth of the forces of obscurantismand find solutions. At the same time a legal cover fis needed forborder trade between Afghanistan and Pakistan.

TRANSIT TRADE

Goods (household, electronic, crockery etc) are imported intoAfghanistan through Iran and Pakistan. Some of these goods are

10

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sold in Afghanistan but most of these goods are sent back (smuggled)in to Pakistan by avoiding appropriate duties on these goods. Dueto evasion of taxes Transit Trade goods are considerably cheaperthan goods imported through legal channel. Thus this evasion ofduties (taxes) becomes the competitive advantage of wholesaleand retail transit traders.

IMPORTANCE OF TRANSIT TRADE

Unlike Sindh or Punjab, the provinces of Pakhtunkhwa, TribalPakhtunkhwa and Balochistan do not have strong agriculture ormanufacturing sectors. Transit Trade (although technically illegal)is the biggest wealth generation sector in the above- mentionedareas. Tens of thousands of workers and entrepreneurs are employedin this sector. Wealth generated through transit trade also stimu-lates other sectors of the economy such as transportation, construc-tion, real estate, banking etc.

THREATS TO AFGHANISTAN

Due to their wealth and experience in trade between Pakistanand Afghanistan, the fundamentalists, if not checked, will control asignificant portion of trade between the two countries. For Paki-stani fundamentalists the ‘strategic depth’ of Afghanistan is notrelevant in military terms any more. But they are counting on ‘eco-nomic strategic depth’. Under this doctrine business links betweenthe two countries can be exploited by the fundamentalist groups toprovide integration of goals of fundamentalists on both sides of theborder. More importantly, it can also be used to destabilize bothAfghanistan and Pakistan economically as well as socially.

To counter this threat several steps needs to be taken. First thede-Talibanization of Pakistani economy needs to take place. Thiswill require a commitment by the Pakistani government to stop theexploitation of religion for resource accumulation. It will also re-quire commitment from Western governments and aid agencies to

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help government of Pakistan in providing business and employmentopportunities to its people especially in the backward areas ofPakhtunkhwa and Balochistan.

POLICY RECOMMENDATIONS ON TRANSITTRADE

The time is ripe to define a legal and financially feasible para-digm for transit trade in order to provide legal and gainful employ-ment opportunities to the people presently involved in this trade.Internal consultation between transit traders and policy makers andexternal consultation between the governments of Pakistan andAfghanistan is needed so that a mutually beneficial policy on thisissue is formulated. At the same time alternative business and em-ployment opportunities need to be explored by the government inorder to facilitate people of these areas to reduce their reliance ontransit trade.

EFFECTS OF STABILITY IN AFGHANISTAN

Cotton and textiles form the bulk of exports from Pakistan.However most of the exports from Pakhtunkhwa and Balochistanconstitute carpets, gemstones, fruits and vegetables. Significant por-tions of these exports from Pakhtunkhwa and Balochistan havetheir origin in Afghanistan. It is estimated that a big portion of Af-ghan carpet and gem stone trade will be relocated to Afghanistanafter the completion of initial phase of reconstruction in Afghani-stan. After the relocation of these businesses the foreign exchangeearned from these exports will also be lost. In addition foreign ex-change sent by relatives (settled abroad) of Afghan refugees livingin Pakistan will also be diverted directly to Afghanistan after thestart of Afghan refugee repatriation.

In the past Afghan exports through Pakistan, remittances fromAfghans settled abroad, aid for Afghan refugees and even the opiumtrade of Afghanistan provided liquidity to the unofficial (open) ex-

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change market in Pakistan. Transit traders and other individuals inneed of foreign exchange used these foreign exchange markets fortheir need of hard currency. In the near future, after the formationof financial institutions in Afghanistan a certain portion of openmarket currency transactions will be diverted to Afghanistan. In aworst case scenario a significant portion of open market operationsfrom Balochistan and Pakhtunkhwa could shift to Afghanistan andliquidity in the open market in Pakistan could be negatively af-fected.

At present low international oil prices, international aid & loans,and insecurity of Pakistani investors investing abroad helpedstrengthen the rupee against other currencies. However these de-velopments cannot be considered as fundamental improvements inthe economy and can be easily reversed.

Unless drastic measures are taken to increase exports fromPakhtunkhwa, the reconstruction of Afghanistan could become apotential foreign exchange outflow from Pakhtunkhwa unlike thewidely believed assumption that it would cause foreign exchangeinflows into Pakistan.

RECONSTRUCTION OF AFGHANISTAN

Afghanistan needs immense investment for infrastructuredevelopment in education, telecommunication, construction andhealth sector. These development works provide an opportunity forcement, steel, construction industries and non-government organi-zations in Pakistan to export their goods and services to Afghani-stan.

To secure maximum advantage out of the reconstruction effortin Afghanistan cohesiveness and alignment are required betweenthe objectives of Pakistani businessmen intending to operate in Af-ghanistan and the developmental polices of the Afghan govern-ment. As restructuring will be a phased process it is essential that

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goodwill is created by Pakistani businessmen in the initial phase inorder to gain future contracts.

Another important aspect of the reconstruction effort shouldbe to provide financial benefits across the cross section of societyin Pakistan (especially Pakhtunkhwa, Tribal Pakhtunkhwa &Balochistan). If reconstruction efforts are only beneficial to a fewindustrialists in Pakistan then the vast majority of people in the abovementioned areas would be extremely demoralized, as they haveattached high expectations with the reconstruction efforts in Af-ghanistan.

The financial benefits of a stable prospering Afghanistan is notlimited to the reconstruction effort in Afghanistan or the construc-tion of oil and gas pipe lines connecting oil and gas reserves ofCentral Asia with the Arabian sea. Afghanistan could provide ashortest route for up to 10 million barrel of Central Asian oil toAsian countries (where the demand is rising quickly). The revenuefrom oil and gas pipeline will be limited for both Afghan and Paki-stani government. The true wealth generation opportunity will risein trade with Central Asian republics.

With millions of barrels of oil exports every day Central Asianrepublics will gain immense wealth. The demand for durable andnon-durable goods in Central Asia will rise sharply with the in-crease of per capita income (standard of living). Leading compa-nies from the Far East, Europe and North America will competefor the new consumer markets. Pakistan can benefit from this sce-nario in three ways. In the first case, it can send its own products toCentral Asian markets. In this option success can be limited be-cause at present very few Pakistani products can compete interna-tionally. Secondly, Pakistan can act as a transit route and a dutyfree facility for regional trade especially between Central Asia andthe rest of the world. Thirdly, Pakistan in addition to being a transitroute for Central Asian trade can became a place where multina-

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tional companies can do assembling and manufacturing for CentralAsian markets.

POLICY RECOMMENDATION ONRECONSTRUCTION OF AFGHANISTAN

The emphasis on trade with Afghanistan should not be entirelyon the reconstruction efforts in Afghanistan. In fact an investmentfriendly and more importantly people (especially those who live inclose proximity to Afghan border) friendly policy regarding busi-ness with Afghanistan is required. Afghanistan and Pakistan bothneed each other to cherish their policies regarding Central Asia.However at the same time both of these countries will directly com-pete against each other in attracting multinationals to establish theirmanufacturing plants and other assets in their respective territo-ries. Pakistan got an edge over Afghanistan at present because ithas better infrastructure at the moment but Afghanistan has itsadvantages because of its better proximity to Central Asianrepublics.

It cannot be over emphasized that mutual understanding andcooperation between Pak-Afghan governments is vital for Paki-stan to take advantage of Central Asian trade. Equally important isthe informal business links between the people and business enti-ties of the two countries. Historically (for the last two decades) thetrade between the two countries was dominated by resource mis-management, corruption and illegal business transactions such astransit trade, opium smuggling, timber smuggling, historic artifactssmuggling from Afghanistan. This needs to be changed. Coopera-tion between the business communities of the two countries needsto be on resource management and business transaction betweenthe two countries needs to have a comprehensive legal procedure.

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EPILOGUE

Pakhtunkhwa remained a theater of undeclared war for globaland regional powers to gain influence in Central Asia. This war hasleft Afghanistan – a predominately Pakhtun State in shambles.Pakhtuns of Pakistan have not been able to de-colonize their land.In nutshell, Pakhtuns are not in a position of influence and powercommensurate with their size, strength and historical significancein the region. This situation cannot remain so for very long. Pakhtunshave an acute sense of asserting their power, particularly if theysee turmoil in their neighborhood.

Historically Pakhtuns have come under a single banner of aleader to press for their national rights. This characteristic of thePakhtun society was very much successful in the tribal-agrariansocial structure but societies have become too complex today. Thelevers of power have changed from muscular strength to thoughtprocesses. As Pakhtuns have historically relied on muscle powerand chivalry, therefore, they find themselves on the back seat in acompetitive world marked by sophisticated thought and the conse-quent social organization.

Social organization is the distribution of functional responsibili-ties towards the achievement of a common goal. Therefore, aPakhtun National Movement, built along scientific and democraticlines, needs to be built at the political and civil society level.

This Movement should cater to the needs of the modern dayworld. It should work like a machine towards the achievement ofits established goals. Elaborate structures and systems should bebuilt for institutionalizing the energies and efforts of Pakhtun na-tion. Such a movement must have an economic and social base inorder to succeed in its mission. In addition to the Pakhtun nation, alllikely minded communities should be made strategic allies if theirnational interests coalesce with Pakhtun national interests.

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ANNEXURE A

PROPOSED STRUCTURE OF MOVEMENT

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SALIENT FEATURES OF THEMOVEMENT

• The National Democratic Consultative Process, starting fromthe grass roots, would take the shape of a genuine democraticnational movement. Unlike other political organizations, theprofessional groups like doctors, engineers, teachers etc.would form the vanguard of the policy making body of theorganization. Presently, almost all political parties have theirsister organizations in the doctors, lawyers and teachers butthey only work as appendages of these political parties insteadof a vanguard.

• Political movements and organizations die out when they be-come un-representative of the interests they claim to promoteand protect. It happens because the parties lack a self-correct-ing mechanism to adapt themselves to new realities. To avoidstagnation, the proposed movement has a ‘Research and De-velopment Organ’, which will provide vital inputs to the policy-making body of the organization about new circumstances,national, international issues or organizational matters. Shortly,the ‘Research and Development Organ’ would work as a ‘thinktank’ of the movement.

• Small contributions from large number of people would ensurethat the party belongs to the general public rather than a fewwealthy individuals who hijack party policies due to their finan-cial contributions.

• Centralized financing for all activities of the party inclu-ding elections and an Accounts Management System willensures transparency and accountability in the utilization offunds.

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