Farhan Bokhari, the FT’s Pakistan correspondent, and James Lamont, the FT’s south Asia bureau chief, interviewed Pakistan’s President Asif Ali Zardari at the presidency in Islamabad on Wednesday 9 September 2009. Below are Mr Zardari’s written responses to questions.
FT: What have you achieved after a year in office as president of Pakistan? What prospects do you see for the future of Pakistan’s democracy?
Asif Ali Zardari: The democratic government on assuming power inherited a huge portfolio of challenges that confronted the nation. The structure of democratic institutions had collapsed. The judicial crisis threatened the legal fibre of the country. The system of delivery of social services had collapsed. The macro economic instability was threatening country’s economic and financial foundations. Unemployment pushed the people below poverty line. Inflation was in the vicinity of 24 per cent. Pakistan’s international credibility was at its lowest ebb. The existence of the state was threatened by the terrorists and militants. The governance both at the federal and provincial level had collapsed.
Pakistan, thus, was facing political economic and social crisis that had to be addressed. In this backdrop, the government has achieved modest but tangible results during its first year in the office.
In these silhouettes of despair the only hope was to rise above the party politics, achieve census on national issues, cool down political tempers and restore sanity in the political conduct within the country.
Gradually, political tempers have cooled down. The national consensus on the fight against terrorism has been achieved. With the help of international community, Pakistan is fighting the menace of terrorism. Under the stewardship of the political leadership, the armed forces’ Swat operation has been a success. The militants there have been defeated. The writ of the civil government has been restored. The government moulded public opinion against terrorism.
The process of dialogue and consultation with the political parties within the parliament and outside the parliament remains a source of strength for the polity of Pakistan. This in turn, has strengthened the democratic institutions. The judiciary is independent and media is free.
FT: How fragile is the economy?
AZ: On the economic front, Pakistan has achieved a turn around. The macroeconomic indicators have improved considerably, leading to upgrades in outlook by the international credit rating agencies. The foreign exchange reserves are now around US$14bn to offset import of 5-6 months. The inflation is under check and has been brought down from 24 per cent to 11 per cent. Stock exchanges are buoyant. This has given confidence to the international corporate citizenry of Pakistan for investment in the country.
The acute problem of power shortage is being addressed. By the end of December, we hope to overcome this problem through short-term and long-term measures. The water shortage in the country is being addressed also. Massive allocations have been made in the water and power sector to overcome water shortage and to increase the productivity and achieve food self-sufficiency.
Under the Benazir Support Programme poverty issue is being addressed. The dysfunctional system of delivery of services has been checked.
To regain the confidence of our international development partners, we initiated the forum ‘Friends of democratic Pakistan’. FoDP is not a donor’s club. It is a platform for strategic support by the international community to Pakistan. It also provides a forum for continuous dialogue for identifying economic challenges that confront our nation.
On the international political landscape, there is better understanding of Pakistan’s political economic and strategic issues. We aspire to promote peace and harmony with the region. These measures are not an end itself. We cannot be complacent. We would continue to support international efforts to defeat terrorism.
FT: How serious is the challenge from your political opponents, notably the PML-N [Pakistan Muslim League-Nawaz]?
AZ: I have always advocated the process of dialogue with the political parties, including PML-N to resolve the political issues. The continuity of this dialogue has created an understanding among all the political parties of Pakistan that democracy needs to be strengthened.
Political disagreements, if any, are to be addressed and resolved through this process to strengthen the democracy and democratic institutions. PML-N is playing its role within the democratic polity. Political disagreements have the colour and fragrance that normally is seen and felt in a political bouquet, while remaining united on one issue that democracy is the future of Pakistan.
FT: What were the lessons learned in the Swat campaign? What is the level of the current threat from militants to you and your government? Has your government foiled any terrorist plots against you personally? Could you give some details?
AZ: We are following a three “Ds” policy to deal with terrorism.
First, dialogue. With tribal elders and those who lay down arms and do not challenge the state. As “political will” is must to defeat terrorism, we called the All Parties Conference and a national consensus to fight terrorism was achieved. Upon the request of provincial Government, Ilan-e-Swat (Swat declaration) was approved. But the militants mistook our offer of dialogue as our weakness and started expanding their operations to other areas. At this point the civil population was also alarmed and even those who had shown some understanding of the Taliban mindset in the past began to worry. As consensus of all political parties was with the government, so we decided to use force to establish writ of the government. After violating the peace accord, the actual face of militants was exposed and support of masses was evinced to carry out an operation against the militancy.
Second, development. Development of the areas to address to the root cause of militancy and extremism. During operation in Swat millions of citizens were displaced. Our government took extra care to cater for this unpleasant outcome of militancy. With our effective management, successful Operation, support of international community and Friends of Democratic Pakistan, a major population has returned to their homes. Rehabilitation of these persons is a major challenge. We have drawn up a rehabilitation and reconstruction plan for Malakand costing nearly $2.5bn. We expect the international community to support it.
Third, deterrence. To use force against militants. After the violation of Ilan-e-Swat, the main operation was started on 7 May 09 which is now almost over. Mopping up operations in rural areas is continuing. Intelligent cooperation and support of local people is helping in preventing any untoward incident.
The threat is perpetual. We have lost our former Prime Minister Shaheed Mohtarma Benazir Bhutto, and countless of our troops and people have laid down their lives. We are not complacent. We are determined to pursue and chase the militants to the finish.
FT: How seriously do you regard President Karzai’s offer of resuming a peace dialogue with Pakistan after the elections?
AZ: We have warm and cordial relations with the people of Afghanistan and Afghan leadership. We signed the declaration of Bilateral Relations in January 2009 with Afghanistan during my visit to Kabul. The declaration has provided a framework for our multifaceted relationship. Pakistan will continue to work towards strengthening our bilateral relationship.
FT: How could peace be achieved with India during Manmohan Singh’s premiership? What steps need to be taken?
AZ: The meeting between me and Prime Minister of India in New York on 24 September 2008 led to the resumption of the fifth round of the Composite Dialogue. In the aftermath of the Mumbai incident in November 2008, India once again placed a pause on the dialogue process. Soon after re-election as prime minister in May, 2009, Manmohan Singh accused Pakistan of involvement in [the] Mumbai incident. These allegations were rejected by Pakistan.
I met prime minister Singh in Yekaterinburg, in June 2009. Later, prime minister Gilani met Mr Singh at Sharm el-Sheikh on 16 July. Both leaders have reaffirmed the desire to improve bilateral relations.
In our view, the resumption of a sustained engagement and dialogue with India could ally each others’ concerns. Both Pakistan and India need to avoid hostile propaganda and confrontation against each other.
Pakistan is ready to cooperate with India to punish the perpetrators of terror attacks in Mumbai. Pakistan has assured that it would not allow its territory to be used against India for any acts of terror. India must also reciprocate and address our concerns which are very genuine. Dialogue is the only way forward. Absence of dialogue leads to tension.
FT: How significant was the death of Baitullah Mehsud? Will it make a difference to Pakistan’s campaign against terror especially in the border areas?
AZ: The death of Baitullah is very significant. Due to his death the Taliban leadership is in disarray. On the issue of Baitullah’s succession, there is a significant division among the Taliban leadership. The major suicide bomb network and Taliban patronage has been disrupted. The acts of terror have considerably decreased in the border area.
FT: What do you consider your government’s major economic policy successes?
AZ: Over the past year, Pakistan has successfully achieved macroeconomic stability under exceptional circumstances. The key highlights are:
– The fiscal deficit has been brought down from 7.6 per cent of GDP in 2007-08, to 5.2 per cent of GDP in 2008-09, and is targeted to be lowered further to 4.9 per cent in the current fiscal. Adjusted for expenditures related to the military’s ongoing counter-terrorism operation, and for the upkeep and rehabilitation of over 2.5m Internally Displaced Persons (IDPs) – the largest IDP population in the world the underlying fiscal deficit for 2008-09 was substantially lower, indicating a significant fiscal adjustment in a space of 12 months.
– Since late 2008, foreign exchange reserves have improved, rising from US$6.7bn in October, 2008, to over US$13bn as of end august 2009. As a result, the rupee has also stabilised after recording a nearly 25 per cent decline in 2008.
– Inflation has exhibited a strong trend of improvement over the past few months, declining from a high of 25 per cent year-on-year in October 2008 to 11.2 per cent in July 2009.
– Finally, market confidence has visibly improved. Pakistan’s sovereign rating has been upgraded one notch by S&P, while Moody’s has revised the outlook to “stable”. Spreads on Pakistan’s outstanding Euro bonds have narrowed over 1,700 basis points from their peak in December 2008, while net portfolio investment has rebounded sharply in August. Pakistan’s benchmark equity index, the Karachi stock Exchange’s KSE-100 index, has risen slightly over 53 percent since January this year.
FT: Do you share your finance minister Shaukat Tarin’s concern about the high costs associated with larger US aid flows? Is this an issue you will raise with US president Barack Obama when you meet him next month in the US?
AZ: The concern regarding high intermediate costs is a general one, and does not pertain to US aid flows alone. The fact that up to 45 percent of the aid disbursement is not spent on the recipient country but is instead utilised on goods and services sourced from a donor country is a matter of concern regarding the effectiveness of international aid.
Given the severity of the international security challenge, and the associated spillover effects that Pakistan faces, the country needs maximum support from the international community. This should translate into not just a higher quantum of assistance but also higher quality of aid - ie, Pakistan needs more grant assistance than loans; soft terms for assistance in the form of loans, and less “tied” aid.
FT: Are you disappointed by the failure of the Friends of Pakistan Group to begin delivering the money they had promised in Tokyo earlier this year? If the pledges do not come in full, what would be the implications for Pakistan’s economy?
AZ: We are indebted to the international community/Friends of Democratic Pakistan for the generous pledges made in Tokyo amounting to $5.27bn. We also recognise that converting those pledges into actual disbursements of aid can be a cumbersome process.
However, Pakistan does not have the luxury of time. Given the severity of internal security challenge the country is facing, it is critical that the economy is provided a strong stimulus as quickly as possible so that the maximum number of jobs are created in the shortest time.
Pakistan does not have the fiscal resources to provide for the stimulus; hence, the importance of international aid flows. If these are delayed beyond the next few months, the country will be forced to cut development spending as well as the provision of critical social services. You can then imagine how big a setback that could be for the global war on terror.
FT: Are you still worried about the proliferation network operated by AQ Khan? Do you share US concerns about the safety of the nuclear arsenal?
AZ: Dr AQ Khan now lives a private life and has nothing to do with the country’s nuclear programme. We have strengthened our export controls and Command and Control Systems. So, concerns, if any, regarding the safety of our nuclear arsenals are unfounded.
FT: What was the substance of your talks with Gordon Brown during your recent visit to the UK?
AZ: Apart from bilateral ties we discussed a whole range of issues including Afghanistan and Pak-India relations. Pakistan-UK have substantive ongoing cooperation in many fields. We have a 1m Pakistani diaspora in UK. We are exploring ways and means towards engaging them in Pakistan’s long term socio-economic development. This is one area where Britain can be of great help to Pakistan.
FT: How do you see China’s involvement in Pakistan during your tenure as president and going in to the future?
AZ: China is our longstanding friend and a traditional partner. There is complete understanding between us on regional and international issues. The depth of our political understanding has, however, not been fully translated in to our economic ties.
It has been my endeavour to translate our relations in the economic sphere. I have visited China four times since assuming office last year. The purpose of my visit to the major provincial hubs of China is to learn from their growth model and to identify areas of commonality where we can cooperate. The emphasis of my government is to take advantage from the Chinese experience in the fields of agriculture, fisheries, energy, infrastructure, development, health and high efficiency irrigation. We have made progress in these areas. Chinese investment and expertise would be forthcoming in these areas. We are committed to further strengthen our ties to truly make it a model relationship through strong institutional linkages.
FT: Do you see a difference in US engagement especially with Richard Holbrooke’s appointment as Washington’s envoy for the AfPak region? How much difference has been made by Richard Holbrooke personally?
AZ: Afghanistan and Pakistan are distinctly different countries and should not be lumped together in the generic label of AfPak.
Pakistan and US share a strategic relationship which is based on mutual interest. The democratic government of Pakistan is committed to building a long-term, broad-based relationship with the US which benefits the people of both the countries. Anybody who pursues this agenda is welcome from our side. We had earlier welcomed the appointment of Mr Holbrooke as President Obama’s special representative for Afghanistan and Pakistan and we continue to work with him to promote the mutual interest of our two countries.
Our interaction with the US side has increased with the appointment of Mr Holbrooke who brings with him a unique focus on relations with Pakistan. We also appreciate the emphasis of the Obama administration on our economic and energy issues and look forward to working with them to resolve some of the chronic issues facing our economy.
ISLAMABAD : Prime Minister Syed Yousuf Raza Gilani has approved the appointment of Saba Gul Khattak as member of the Planning Commission.
