Rebuilding Azad Kashmir
By Shahid Javed Burki

Islamabad’s current approach towards the devastation caused by the recent earthquake is to provide expeditiously and efficiently relief to the affected population. This is understandable given the weather in the region and the vulnerability of the survivors. As winter tightens its grip, families living without shelter will have to be provided cover or else their suffering will increase enormously.
Some aid agencies have begun to predict that the cold weather will take a heavy toll on the population that is still reeling from the blows they received on October 8.
That notwithstanding, the government will need to turn its attention to rebuilding the economy of Azad Kashmir. According to a recent news item, Dr Salman Shah has requested the large aid agencies — the World Bank, the Asian Development Bank, USAID, and Britain’s Department for International Development — to send experts to Pakistan to help the country plan the future of the areas affected by the earthquake. This is a good step but before the experts arrive, it would be useful if the government spells out the approach it would like to follow. Islamabad should think out of the box and be bold in developing a strategy that the experts should be asked to flesh out.
My suggestion is that the central element in this strategy should be to build an urban economy in the region while encouraging the development of the area’s natural resources. As a result of the earthquake, there will be a quantum jump in the number of absolute poor in Azad Kashmir, from about a third of the population to as much as three-fourths in 2005-06.
With so many schools destroyed, the proportion of enrolled students will decline precipitously. With the destruction of so many clinics and hospitals, the incidence of disease and the rate of mortality — in particular maternal and infant mortality — will increase and life expectancy will decline. These are not conjectures; all of this will happen during the course of this year. Over the short-term, no matter how much assistance is provided, the area’s economy will go through a wrenching restructuring.
It will also be seriously impoverished. The share of agriculture in the economy will be reduced by one-half, to only 20 per cent, that of industry will decline by a third to less than seven per cent. The economy, in other words, will not have the capacity to absorb the four million people that remain in the area after the earthquake. It is my estimate that the size of the economy will be reduced by one-half; that traditional agriculture will take a long time to recover; that the young will suffer a great deal in the future if urgent steps are not taken to educate and train them.
In sum, there is a danger that an economy that resembles some of the dysfunctional areas of Africa could emerge in Azad Kashmir. Steps must, therefore, be taken to revive the economy in a way that promises a better future for the people who have suffered such devastation.
That is where thinking out of the box becomes the right approach to take. The need of the hour is to develop an ambitious program for the economic and social development of Azad Kashmir, a kind of Marshall Plan implemented by the United States to help Europe recover from the ravages of the Second World War.
What should be the focus of this program? It should have three elements. It should bring new economic and social activities to the region; it should develop activities that would use the region’s natural resources; and it should integrate the region into the global economy. I will develop below each of these three ideas.
The plan should take cognizance of the fact that the only way to accommodate the large number people displaced by the economy is to urbanize the economy. The plan should focus on building the area’s human resource; it should, in particular, provide higher education to the region’s young. Upgrading the skill levels of the affected population will keep the young from being recruited by the Islamic groups that have become active providers of relief in the area. Failing to accommodate the young in the productive parts of the economy could have very serious political consequences not only for Azad Kashmir but for all of Pakistan.
In this context the highest priority should be given to rebuilding old and new cities. Muzaffarabad, the largest city in the area and also the capital of Azad Kashmir, should be the focus of attention in this context. It could become a symbol of the effort Pakistan will make to improve living conditions in the part of Kashmir it administers. It is here that the government should think big and imaginatively.
One way of doing this would be to turn the city into the center of higher education and research. The city has the right climate to attract students and researchers from other parts of Pakistan and also from outside the country if new universities and research institutions are built in and around it. The government should seek the participation of the private sector in developing these facilities. This is where the Pakistani diaspora could be mobilized to provide help. Muzaffarabad should also be developed into a health center that would provide care to those who need to be attended to immediately. Improved health services — in particular those directed at women and the very young — are urgently required. The earthquake has left many orphaned children who must be cared for or else they will fall into the hands of those who will exploit them. This has happened in other parts of the world where orphaned children were not provided adequate protection. In addition to the provision of immediate care, Muzaffarabad should be developed into a center of health education, research and advanced care. The place has the climate and a pleasant physical environment which students, researchers and those seeking assistance, would find attractive.
The second element of the strategy is to exploit the natural resources of the area. Three of these — energy, forestry and tourism potential — should have a high priority. In the sector of energy the plan should focus on the exploitation of the sites on the many rivers in the area that can be used for generating power. Surplus power could be sold to Pakistan and if possible to India. For that to happen, a transmission system will need to be built to carry surplus electricity to the grids in Pakistan and India.
Forestry is another resource of Azad Kashmir that has potential if properly developed and exploited. But it was greatly affected by the earthquake. What is required is a massive reforestation project. In this context, it might be useful to borrow from the program implemented by China in the Heilongjiang province in which the forest cover was destroyed by a massive fire. The Chinese established tree nurseries that provided saplings of the varieties that were suited for the environment and also had commercial uses for the population of the area. As a result of this effort, Heilongjiang province is now a major furniture exporter.
Once the forestry resource has been reestablished in Azad Kashmir, the government should encourage the development of industries based on forestry and animal products.
In spite of the damage caused by the earthquake, Azad Kashmir and the Northern Areas have many attractive sites that could draw a large number of tourists if proper facilities are provided. The plan should aim to bring in high-income tourists who will be attracted to the region by its mountains and rivers. Skiing and water sports could be developed to attract high-end tourism. To bring tourists to the area, the government will need to invest heavily in developing physical infrastructure such as roads and airports that can bring in a large number of people not only from Pakistan but also from Japan, East Asia, Europe and the United States. Muzaffarabad should be provided with a new international airport and also linked with Islamabad/Rawalpindi with an all weather highway.
For the type of program outlined above to succeed, Azad Kashmir will need to be linked with the outside world with the help of modern communication facilities. Once these are in place and once India and Pakistan have made progress in creating an open border between the two parts of Kashmir, the state of Kashmir will necessarily reorient itself towards Pakistan. President Pervez Musharraf has spoken about the need to soften the current hard border. This will be one way of achieving that goal.
The economic rehabilitation program spelled out above will achieve three objectives: it will help the economy to grow from the low point it would reach in 2005-06 by 12-14 per cent a year for the first five years, and by eight per cent a year in the next five years; it will have 75 per cent of the population relocated in urban areas and employed in the urban sector of the economy; and it will thoroughly modernize the economy. At these rates of growth, the economy will go back to its 2004-05 size in six years and then increase further thereafter.
The plan should come with a scheme for financing it not just from the flow of aid on which Islamabad has hitherto depended. It should seek financing through the use of new financial instruments for mobilizing required resources. The plan discussed above will cost from $10 to $12 billion over a ten-year period, beyond the rescue and relief effort that is currently underway. How can it be financed? This question should also be the focus of attention of Islamabad’s policy-makers.
Here the Pakistani diaspora in the United States can play a role. It is important for Islamabad to develop new financial instruments — they could be called “earthquake bonds” or “Muzaffarabad bonds” — for raising funds from the rich Pakistani communities in the Middle East, Britain and North America. Two types of bonds could be structured, one that would be attractive for those who wish to follow Islamic principles of finance. A market has already developed for “sakuk bonds” that could be tapped. It would target not only well-to-do Pakistanis living abroad but also Muslims all over the world. The other type of bond would target other potential investors who are also interested in not only aiding the victims of a natural disaster but would also want good returns for their investments.
The earthquake that struck on October 8, 2005 inflicted a heavy loss both in terms of the number of people killed, the number that were injured, and the number that were displaced. It is the last category of the people affected that could have very serious and potentially disastrous consequences for Pakistan if steps are not taken immediately to help them deal with the situation they face. The best way of doing this is to launch an earthquake rehabilitation program aimed at fundamentally restructuring the economy of the area. (Courtesy Dawn)



Editor: Akhtar M. Faruqui
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