VOL 18 No 3

Local Governance, Rights and Responsibilities in Pre and Post-Islamic Northern Pakistan

I hail from Dardistan1, a region in northern Pakistan that forms part of the Hindu Kush-Karakoram area, known as the crossroads between South and Central Asia. The name Dardistan describes the area comprising the highest mountain ranges of Hindu Kush, Karakoram, western Himalaya and the Pamir mountains, and includes northern Pakistan, parts of Eastern Tibet in China, eastern Afghanistan and the Kashmir valley on both sides of the Pakistan-India border. My work, as an ethnographer and linguist, is focused on north Pakistan. North Pakistan is a spectacular mountainous land of immense linguistic, ethnic and geographic diversity. It is undoubtedly one of the most multilingual places on the planet. Over centuries, the movement and contact of people at this crossroads of Central and South Asia have left a complex pattern of languages and dialects. By north Pakistan, I mean the region of Gilgit-Baltistan, the upper parts of Pakistan’s northwest province, Khyber Pakhtunkhwa, including the districts of Chitral, Dir, Swat, Buner, Shangla, the upper Hazara division, and the part of Kashmir Vale under Pakistan’s control. In terms of area and population, north Pakistan covers more land and has more people than Austria and Switzerland put together. Traditionally, these communities lived in what the social anthropologist Fredrik Barth called “acephalous states”—societies without political leaders or hierarchies but with their own local, egalitarian system of governance. Notions of rights and responsibilities were deeply embedded in their pastoral cultures and worldviews. Before the expansion of the states into these areas, the people of Dardistan, including northern Pakistan, had their own traditional political organization. Villages and valleys were autonomous and political allegiance was mostly based on lineage and descent. In some communities, however, there existed political organizations based on villages and valleys. There is also evidence of the existence of centralized minor states in Gilgit and in Hunza since 700 CE. In the wake of the “Great Game”—the struggle for control over Central Asia between Russia and Britain—the latter applied a policy of controlling the northern borderline states, in Gilgit and in Chitral. They consolidated their power through the local rulers in these areas. By 1889 the British formed the Gilgit Agency to control the region of Hindu Kush and Karakoram by establishing good relations with the local monarchs in Gilgit-Baltistan and Chitral areas; and thus established their ‘indirect rule’ there. Prior to their indirect rule there were smaller princely states in Gilgit, Hunza, Nagar, Yasin, Baltistan and Chitral that were responsible for maintaining the political order with the support of village and valley level local influentials. The British, however, did not apply this policy to areas further south of Dardistan—in Kohistan, Diamer, Swat and Dir. These regions mostly remained independent and uncontrolled until the end of British rule in the sub-continent. The local princely states established in Swat and Dir in the beginning of the twentieth century were indirectly controlled by the British Political Agent at the Malakand top. These states were allowed to expand their rule in areas where the Dardic people, such as the Torwalis, Gawris, Mayo and Shina, were living. The Swat state extended to the Torwal area in 1921-22, leaving the Kalam territory under the direct rule of the British Political Agent. The Panjkora valley in upper Dir came under the rule of the Nawab of Dir, while the western part of Indus Kohistan up to Kandhia was annexed to the Swat State by 1939. Before the annexations these areas were mostly autonomous. The Shinkari and Indus Koshistani areas had independent political units called ‘segmentary republics’ by the German anthropologists, Karl Jettmar. On the right bank of the Indus River, according to the ethnographer Jurgen Wasim Frembegen, the main political units were Duber, Jijal, Patan, Seo and Kandhia; whereas on the left bank of the Indus River, in Shinkari Kohistan, these units were Basha, Harban, Shatial, Sazin, Sumer, Jalkot, Palas, Kolai and Batera. These are valleys in the Kohistan and each valley was a political unit. Each valley had a fortified village in which the houses had huge watch towers, known as Shikari, which were like forts for the purpose of defending their ‘republics’ against invasion by other such republics. The main conflicts were over grazing lands. There were constant armed conflicts between these village or valleybased republics; and for that reason, these areas were mostly known as Yaghistan, literally meaning ‘land of lawlessness’. Frembegen mentions in his 1999 paper, ‘Indus Kohistan: An Historical and Ethnographic Outline’, that the valleys of Tangir and Darel in the Diamer were different in as much as they seemed to be considered as a transitional zone between the northernmost centralized states of Gilgit and Yasin and the southern areas where the ‘segmentary republics’ existed. Internal conflicts were common until the British took over the ‘valley republics’. The fortified villages were abandoned, and various clans were able to easily move out of these villages to settle elsewhere. According to Keiser, in his1991 book, ‘Friend by Day; Enemy by Night’, apart from the major conflicts on grazing lands, blood feuds were also common in these areas as well as in the areas of Panjkora, upper Dir. The main cause was family honour. Crimes such as rape or adultery were resolved by local people through their traditional social norms and dispute resolution mechanism. There were male assemblies with different names in different areas. For instance, in Harban these were known as Sigas whereas in Torwal in Swat and  Panjkora in Dir these were known as Yarak and Kher respectively.  In former Kafiristan, now Nuristan, these were known as Ure. These terms have now been mostly replaced by the word Jirga. Its members used to be village influentials from the landholding class of the male population. These men are now mostly known as Maliks in Swat, Dir and Kohistan, while in Shinkari Kohistan, Gilgit and Chitral the men associated with Sigas and Mahraka were known as Jashtero (they were also known as Dharmus in Chitral).  The term Jast, meaning elder man, was also common among the Kati and

Local Governance, Rights and Responsibilities in Pre and Post-Islamic Northern Pakistan Read More »

Dimensions of Narcotic Substance Abuse and Control: A Perspective From Pakistan

Introduction Narcotic substance abuse in the form of opium has been a historical phenomenon in the Asian regions, quite often destroying nations’ capacities and resilience. However, in recent times narcotics have transformed into more sophisticated and deadly substances, affecting societies in dangerous ways. World-wide drug addiction or substance abuse, in present times, has emerged as a major threat posing serious problems for the safety and security of states and societies. Given the increased association of criminality with narcotics and the huge economic dividends from narcotics-business, the demand-supply dynamics have disrupted societal stability confronting the security and law enforcement agencies with serious challenges. To arrest the spread of narcotic substances, well targeted strategies are being strengthened at the national level to tackle both the demand and supply sides. Since the drugs related issues have wider dimensions, close coordination within the region and beyond is critical. In the context of Pakistan’s Anti-Narcotics Policy, 2019 three policy objectives have been reemphasized: i) Drug supply reduction; ii) Drug demand reduction; and iii) International cooperation.1 The paper will briefly look into some of these dynamics with a view to possibly develop understanding of the problem. Wake up Call for Pakistan As per the reported figure, the number of drug addicts in the country could be around 7.6 million (78% male and 22%female). An article on the subject indicates that “Pakistan’s drug addicts have increased exponentially from 7 million in 2015 to 9 million in 2021”.2 The number of drug addicts is reported to be increasing by 40,000 per year with 700 dying every day. Because of wide availability of and easy access to   drugs at cheaper prices, more and more of the younger population and children are becoming susceptible to falling into the trap of narcotic substance abuse. Already, drug addiction is found to be common among children as young as 14 years of age. The danger of these young children becoming targets of drug peddlers and cartels, thus getting warped in criminal activities, remains high. Since drug addiction seriously impairs individual’s behavior and capacity to lead a productive life, it poses multi-facet ted challenges for the country, more importantly, in inter-generational terms. Narcotics have the tendency to manipulate the responses of individuals in different ways. Therefore, prioritized remedial measures are imperative. The complex picture of narcotics abuse in Pakistan is hostage to the vicious cycle of rapid population growth overstretching the country’s resources and physical capacities and pushing communities into poverty. It is further compounded by rising unemployment, food insecurity and despair, changing societal norms and social status syndrome among the elite circles. The menace of injection-drug-abuse has specially emerged as a serious threat for the safety and well being of the people and state of Pakistan as it has enhanced the risks of AIDS/HIV and other blood borne diseases. Different surveys conducted reveal that the situation in schools and universities is alarming, as drug addiction seems to be growing for various reasons. Also “drug addicts (are seen) freely sitting on…road (sides), greenbelts, parapets, footpaths, bridges and inside the underpasses, injecting themselves with drugs.”3 As the police shoulders multiple responsibilities, their focus is more on dealing with drug peddlers, rings and mafias. The last survey of drug addicts in Pakistan was done in 2012-13 in collaboration with the United Nations Office of Drugs and Crime (UNODC). It “reveal(ed) that a substantial portion of the country’s population suffers from the devastating consequences of substance abuse” and estimated that “nearly 6.4 million Pakistani adults used drugs in the last 12 months (2012).”4 For a realistic appraisal of the current situation related to the prevalence of drug abuse in Pakistan the “National Drug Use Survey Pakistan 2022-2024 – A Key Milestone in Developing Effective Prevention, Treatment and Rehabilitation Programmes” initiative has been launched. Under this initiative, the Survey 2022-24, is to be conducted by the UNODC Country Office in collaboration with the Ministry of Narcotics Control of Pakistan and US State Department Bureau of International Narcotics and Law Enforcement Affairs. The deadline for the first draft is December 2023 and the report is to be finalized by 20245. This survey will be crucial in understanding: i) the extent of substance abuse in Pakistan; ii) the type of substances that are being consumed; iii) control and prevention initiatives of the government; and iv) the regional dimension of the threat. Geopolitical Landscape—Narcotic Abuse and Trade Paradigm shifts in the geopolitical landscape took place in the late 1970s, which had an overall impact on the socio-economic fabric. The Iranian revolution of 1979 together with the Soviet invasion and the intensified proxy war in Afghanistan significantly disturbed the regional equilibrium. In Pakistan the impact, inter alia, manifested in the form of proliferation of narcotic substances in the country. With the passage of time, a drug culture started taking root, especially in Pakistan’s adjacent territories to Afghanistan. Perpetual instability on the western border of Pakistan, particularly with Afghanistan, seems to have posed challenges for continued coordinated strategies to deal with the narcotics issues. The socio-economic compulsions and provision of sustained meaningful alternate livelihoods are major hurdles in weaning people away from narcotics trade and poppy cultivation in the context of Afghanistan. The current dispensation in Afghanistan is disconnected with the international community. With the Interim Afghan government’s funds frozen and very little outside support, the situation can be characterized as untenable. Underlining the social and economic causes, a Brooking study of 2016 points out that “the significance of opium poppy production for the Afghan economy and crucially for employment, will only grow as Afghanistan will continue to experience serious economic and fiscal crises.”6   Moreover, Pakistan’s and Afghanistan’s immediate neighbours’ primary concern is to ensure that the threat of terrorist groups operating against them from Afghan soil are thwarted. Since instability and disorder in the neighbourhood could have a “contagion effect”, providing space to terrorists and other criminal groups to operate with impunity, regional conversations need to focus on the challenges in an integrated manner. In a recent interview with Voice of

Dimensions of Narcotic Substance Abuse and Control: A Perspective From Pakistan Read More »

The Indus River Basin Saga: The Need for Reinvigorating the Indus Waters Treaty

Abstract (Pakistan’s water-related issues have domestic and external dimensions that must be tackled simultaneously. The country’s first ever National Water Policy (April 2018) and the National Security Policy of Pakistan (2022-26) recognized the urgency of addressing both the domestic and external features of our water worries. The National Security Policy declared that unhindered access to our transboundary waters is “a national security imperative”. This essay focuses on the larger part of the external dimension, dealing with the India-Pakistan bilateral Indus Waters Treaty (IWT) which has recently come under unprecedented stress. The paper emphasizes the need for broader water-related cooperation between its signatories who are the main riparians of the Indus River Basin. It recalls wide-ranging suggestions made by a large number of experts and civil society representatives at several Track 2 dialogues. The implementation of those ideas would be possible only when India and Pakistan summon the political will to carry out a comprehensive dialogue on the water resources of the Indus Basin. The inability of the two countries to initiate action has not diminished the relevance and rationale of the recommendations. – Author) Pakistan has to contend with the twin challenges of rapidly declining per capita availability and deteriorating quality of fresh water. Our water woes have been caused by the over six-fold increase in population (from 32 million in 1947 to 241 million in 2023); unregulated urban sprawl which causes greater waste of water than planned human settlements; economic development; mounting needs of all water-user sectors, especially agriculture; and, last but not least, chronic governance and management deficits. The impacts of climate change—most of which affect water resources—have aggravated Pakistan’s water worries. With the per capita renewable availability of water having plummeted to 908 cubic meters (m/3 year) in 2022, Pakistan has become a water scarce country. It is, in fact, 14th among the 17 “extremely highwater risk countries” in the world. The water emergency warrants urgent measures to prevent worsening food and health crises and sluggish economic growth that will lead to higher and deeper levels of poverty and widespread despair and deprivation. Pakistan’s water-related issues have domestic and external dimensions that must be tackled simultaneously. The country’s first ever National Water Policy (April 2018) and the National Security Policy of Pakistan (2022-26) recognized the urgency of addressing both the domestic and external features of our water worries. The National Security Policy declared that unhindered access to our transboundary waters is “a national security imperative”. This essay focuses on the larger part of the external dimension, dealing with the India-Pakistan bilateral Indus Waters Treaty (IWT) which has recently come under unprecedented stress. The paper emphasizes the need for broader water-related cooperation between its signatories who are the main riparians of the Indus River Basin. It recalls wide-ranging suggestions made by a large number of experts and civil society representatives at several Track 2 dialogues. The implementation of those ideas would be possible only when India and Pakistan summon the political will to carry out a comprehensive dialogue on the water resources of the Indus Basin. The inability of the two countries to initiate action has not diminished the relevance and rationale of the recommendations. Pakistan’s transboundary water challenges are defined by its critical dependence for over 90 % of its surface water on the Indus River Basin (IRB) which include flows from across its frontiers accounting for 78% of the Basin’s assets. The IRB comprises seven major rivers: the three eastern rivers, namely, Beas, Ravi, and Sutlej; the three western rivers, namely the Indus, the Chenab and Jhelum; and the Kabul River originating in Afghanistan as well as dozens of smaller rivers. All the seven major tributaries of the Indus River originate in or transit through the territories of our two neighbouring countries. The Indus Waters Treaty (IWT), signed by India and Pakistan on 19 September 1960, elaborates their entitlements and obligations in respect of the eastern and western rivers. But it is silent on the Kabul River which contributes 20% of the assets of the IRB when it drains into the Indus at the end of its hundred plus kilometers long journey through Khyber Pukhtunkhwa during which it receives the rich flows of the Swat River. The Kabul River (along with the Kurram and Gomal Rivers which are indispensable for the water needs of Waziristan) has flowed from Afghanistan into Pakistan for millennia without any impediment. But the absence of an agreement regularising water sharing raises recurring fears in Pakistan that, in case Afghanistan builds more multi-purpose dams on the river to meet the growing consumption, electricity, and food needs of the three and half million residents of its capital city Kabul, its flows into Pakistan would be reduced. While the Afghan and Pakistani governments have not formally discussed matters relating to the Kabul River Basin, the two countries’ stakeholders attending Track 2 dialogues during 2018-2020, prior to the sudden withdrawal of the United States military forces which precipitated the collapse of the government headed by Ashraf Ghani and the return to power of the Taliban, were broadly supportive of mutually beneficial cooperation and collaboration in respect of the flows of the Kabul. As soon as the situation in Afghanistan allows, Pakistan should seek a dialogue with Afghanistan on cooperation in the optimum utilization of the assets of the Kabul River Basin. Implementation of the Indus Waters Treaty (IWT) The IWT had allowed India the exclusive use of the waters of the three eastern rivers. The three western rivers were to flow unhindered into Pakistan, but India was allowed to use small amounts of their waters for human consumption, agriculture, and electricity production by run-of-the-river plants with no live storage. If Pakistan raises objections against the  engineering designs of any power plant,  India is obliged to pend work on the project until the objections are settled. The IWT requires both countries to exchange data on river flows and floods (Article 6) and recognizes the possibility of mutually beneficial cooperation related to the Indus Basin (Article

The Indus River Basin Saga: The Need for Reinvigorating the Indus Waters Treaty Read More »

A Re-Emergence of Transnational Terror in Pakistan

Abstract (Terror attacks proliferated in Pakistan ever since the Taliban’s takeover of Kabul, deteriorating already strained relations between Islamabad and Kabul. Actionable steps are recommended in this paper, involving both hard and soft power1, to confront terrorism’s seemingly never-ending generational menace. – Author) From crushing poverty to an attrition in the state’s institutional capability, to climate change and natural disasters, to venomous mob attacks against Christians, to abductions, assassinations, sectarian extremist outbursts; Pakistan teeters on a razor`s edge of volatile mayhem. Add to this the lack of literacy, a population explosion2, a foreign policy in disarray, a constitutional crisis, election delays and uncertainties and a fragile democracy on tenterhooks; Pakistan is being challenged in the worst of ways imaginable. As if Pakistan did not already have enough on its proverbial plate, compounding all these problems is an unsafe and unreliable Afghanistan. Since the Taliban warmed the seats of power in Kabul two years back on August 15, 2021, terrorist attacks in Pakistan amplified by an astronomical 73%. The number of victims killed in the attacks in Pakistan from August 2021 to April 2023 (21 months) alarmingly increased by 138%3. The Taliban command spurred extremists operating from (mostly Eastern Afghanistan) furnishing them with safe sanctuaries animating them to augment cross-border attacks in Pakistan. Khyber Pakhtunkhwa (KP) and Balochistan particularly experienced a troubling rise from the impact of Afghan`s fragile faltering state and terrorist violence, where the plethora of attacks during these 21 months surged by 92% and 81%, respectively. Conversely, the amount of extremist attacks in Punjab, Sindh and Islamabad Capital Territory (ICT) illustrates a relative downward slope since the Taliban takeover as compared to corresponding 21 months pre-August 20214. Counterterrorism, public welfare, peace, security and economic policies are cross-cutting and intertwined and must be viewed through a more integrated lens. Economic and political milestones will remain difficult to implement so long as internal security remains compromised, which has added negative impacts on an already volatile political climate. Pakistan’s National Security Policy (NSP) 2022-2026 revealed in January 2022 merits to be rigorously revised annually. No security policy should have a static timeframe of 4 years as security and counter-terrorism challenges evolve from month to month. The NSP, however, is a move in the right direction—focusing on citizen-centric human security that encourages geo-economics as the bastion for holistic stability. However, political disarray since March 2022 has moved Pakistan further away from materializing the NSP’s vision. Policy continuity has always been a major challenge for Islamabad. Pakistan should chart a course back to the fundamentals of the NSP and embrace human security as a central plank of its counter-terrorism policy. Achieving this, to a great degree, is contingent upon some semblance of political consensus, especially after the national elections likely to be held in early 2024. The NSP is a creative re-imagining of national security (and counterterrorism) from “state-centric” to “citizen-centric”. Since its immersion in the Afghan War and during the Global War on Terrorism, Pakistan has been involved in long-drawn-out regional conflicts to the intense disservice of its nation-wide development and citizens’ well-being. Such involvement led to the breeding of multiple militant outfits who are now haunting Pakistan’s quest for internal peace and security. As a “frontline state” and a “major non-NATO ally”, Pakistan decided to assume the role of a regional security guard for extra-regional powers5. The substance of the NSP articulates that Pakistan is no longer seeking to being seen only through the limiting lens of “geopolitics”. It is economic security that would, hereafter, steer the state’s strategic orientation and diplomatic engagements. A welcoming development, as militants such as TTP, AQIS, JuA, BLA, ISKP and others thrive mostly by exploiting poverty and financial vulnerabilities. Pakistan’s torment of transnational terrorism In January 2023, the Peshawar police lines mosque blast carnage claimed countless lives shaking the country’s morale to the core. Notorious TTP militants Umar Mukarram Khurasani and Sarbakaf claimed the Peshawar attack via their personal Twitter accounts6 (confirmed by TTP`s propaganda media wing Umar Media) within a couple of hours of the attack. February witnessed armed extremists target a major police office in the southern coastal city of Karachi in an attack that lasted hours and killed at least seven people7. Another large-scale attack unfolded in the Swat area of Khyber Pakhtunkhwa in April 2023 when radicals targeted a counterterrorism office, which tragically resulted in the death of 17 people. July witnessed the targeting of a political rally in Bajaur. In late August 2023, 11 labourers working on an under-construction army post were ruthlessly killed as a truck exploded with an improvised explosive device (IED) detonated in North Waziristan’s Shawal valley,8 close to the Afghan border. Attacks by the TTP soared and became ever-more unabashed after the breakdown of its ceasefire with Pakistan’s government in November 20229. The myopic ceasefire was itself a fruitless endeavour by the Pakistani government to terminate the militants fourteen-year war against Pakistan. Unmitigated terror ensued during and after the pretense of a ceasefire. In the forthcoming two years, complementing and expanding on the Afghan Taliban’s take-over, and gaining resilience and inspiration from it, the TTP’s re-emergence is amplifying. The organization seeks to mirror the successes of the Taliban in neighboring Afghanistan. With a geographical widening of its operations, added mergers, its militants relocating from Afghanistan to Pakistan10, and a highly local focus, the TTP has heightened its terror against the Pakistan state. The TTP has geographically extended its activities from its major operating theatre in Khyber Pakhtunkhwa. By broadening its insidious operations to the Pakhtun area of Balochistan, the banned entity has enlarged the security threat to a province already dealing with unhinged violence by Baloch separatists/militants. The spate of recent terrorist attacks against Pakistan, spearheaded mostly by the Tehreek-e-Taliban Pakistan (TTP) and by the so-called Islamic State of Khorasan Province (ISKP),11 illustrates that the Afghan Taliban have flagrantly violated most of their own agreed to Doha Agreement which is now nothing more than a symbolic paper tiger unilaterally shredded to pieces. Though the head

A Re-Emergence of Transnational Terror in Pakistan Read More »

Financial Services Reform in Pakistan: Structures, Prospects, and Recommendations in the Context of the WTO Agreement

Abstract (Pakistan’s financial services sector has undergone over two decades of radical reforms and liberalization supported by diverse international financial institutions. The result is a sophisticated regulatory framework comprising a modern suite of legal instruments and well-resourced institutions for rulemaking and supervision. Remarkably, the new instruments seek to address both modern Western and Islamic concerns, thus expanding the reach not only of the framework but also of the sector itself to those wishing to closely honour religious requirements. One of the key elements of reform over the past twenty-five years has been the opening of the Pakistani financial services sector to foreign services providers. Pakistan encourages eligible foreign banks and banking services to enter the Pakistani market; there is no indication that the Ministry of Commerce or the SECP have, formally or otherwise, limited the access of insurance or other financial services providers to Pakistan. Financial services trade is about the integration of the domestic economy into the global marketplace. With new modes of financial services delivery, many distinctions between domestic service provision and financial services trade are breaking down, making the modernization of the financial services trade framework both timely and essential. Pakistan’s WTO Schedule of Specific Commitments (SoC) reflected a set of circumstances that no longer represent what appears to be a vibrant private sector-driven financial services sector in today’s Pakistan. In the light of the complex, ambitious, and wide-ranging reforms already undertaken in Pakistan, this might well be an opportune moment for Pakistan to crystallize the momentum through additional commitments. Recommendation One: inscribe the full range of financial services and service providers in the SoC. Recommendation two: reduce “unbound” commitments to those necessary for protective reasons. Recommendation three: ensure that any terms and limitations are narrowly constructed to reflect real necessary derogations essential to achieve defined objectives. Recommendation four: indicate a comprehensive review of the SoC in the course of Pakistan’s Trade Policy Review. – Author)   Introduction The financial services sector is the backbone of a modern trading economy.1 As multiple crises in the past quarter century have demonstrated, it is also the most sensitive conduit for the transmission of systemic shocks, both domestically and internationally. By some estimates, financial services comprise the most heavily regulated sector in most economies; at any rate, the sector is subject to complex and sophisticated regulation and ongoing supervision that at once protect it and its participants and render it difficult to navigate even by the most adept. Financial services trade is about the integration of the domestic economy into the global marketplace. It enables banks to diversify their portfolios.2 It helps domestic insurance companies gain added resilience by purchasing reinsurance from abroad. It allows domestic investors to hedge against wild movements in currency and the domestic economy. It helps the banking sector to reduce its risk exposure.3 It opens up new investment avenues for much needed infrastructure spending.4 It enhances the capacity of domestic industry to raise funds or credit.5 Liberalized financial services trade empowers domestic pension plans to benefit from external expert advice and management services. It helps ease international payments and transfers, for both consumers and trading enterprises; in this way, it also encourages tourism, education, health services, and other sectors of the economy that depend on international transactions and engagements. It could serve as a competitive catalyst for the flow of credit to underserved sectors, such as SMEs.6 By freeing up credit pressure elsewhere in the economy it could help ease housing finance,7 especially to lower income Pakistanis.8 Full integration with the global economy and enhancing competitive pressures could reduce both transaction costs and risks of settlement and fraud,9 and encourage more engagement by retailers and consumers alike in a cashless digital economy. With new modes of financial services delivery – as indeed recognized by the State Bank of Pakistan in its most recent communication on digital bank licensing10 – many of the distinctions between domestic service provision and financial services trade may well be breaking down, making the modernization of the financial services trade framework even more timely – and essential. For Members of the WTO, trade in services, including in financial services, is governed by the General Agreement on Trade in Services (GATS). The GATS gives considerable latitude to Members in liberalizing trade in services.11 And a Member may liberalize its services sector unilaterally, even if it has not made any commitments under the GATS.12 Making commitments serves three strategic objectives: In liberalized sectors, foreign actors will have a secure framework within which to make services offerings and investments in the domestic market. Domestic actors will have a concrete competitive framework within which to function. Political decision-makers will have an outside limit on future trade-restrictive measures, thus enhancing regulatory stability and reducing the public choice risks. In this way, treaty-based engagements in the multilateral context of the WTO have the potential to limit the frequency – or, at least, the amplitude – of what the IMF has recently described in the context of Pakistan as “a long history of stop-and-go economic policies”13 and “lackluster progress in structural reforms.”14 This paper sets out Pakistan’s financial services commitments under the World Trade Organization, examines Pakistan’s financial services regulatory framework, and analyses reform options in the context of Pakistan’s existing and potential future international trade commitments.   PAKISTAN’S SERVICES COMMITMENTS UNDER THE WTO The structure of the General Agreement on Trade in Services The General Agreement on Trade in Services (GATS) comprises the set of rights and obligations under the WTO Agreement applicable to “measures by Members affecting trade in services.”15 The GATS defines trade in services as the supply of a service in four “modes.”16 As set out on the website of the WTO. These are: “[Mode 1] Cross-border supply is defined to cover services flows from the territory of one member into the territory of another member (e.g. banking or architectural services transmitted via telecommunications or mail); [Mode 2] Consumption abroad refers to situations where a service consumer (e.g. tourist or patient) moves into

Financial Services Reform in Pakistan: Structures, Prospects, and Recommendations in the Context of the WTO Agreement Read More »

Scroll to Top