The foremost challenge to Pakistan remains extremist creed and violence and concomitantly socio-economic development. Addressing these twin challenges will require clear commitment and perseverance. 2014 is a year of transition around us, bringing expected changes in India and Afghanistan, as well as in Iran-US relations. While all these trends are likely to have a profound impact on Pakistan, the situation in Afghanistan is poised to be a main source of trouble. For Pakistan, the lessons are apparent: after Afghanistan, the thirty-year conflict has hurt Pakistan more than any country. Playing favourites, however seductive or in response to regional rivalries, will only fuel the conflict, and such an activist policy can only bring harm. Pakistan should have confidence in the strength of the Islamabad-Kabul relationship that is fused with shared history, demography and geography. We should also avoid posturing ourselves as guardians of Afghan Taliban leaders, who should be free to interact with Kabul or anyone else. While the Taliban leadership enjoys our hospitality, it should not abuse it by causing disruption externally or within Pakistan. If a stable Afghanistan is in our interest, we should make a concerted effort to promote that objective.
The foremost challenge facing Pakistan in 2014 is the poor health of the economy. Signs of an ailing economy are legion: stagnant exports, rising imports, dwindling foreign exchange reserves, a depreciating rupee, severely reduced FDIs, crippling energy shortages and galloping inflation. These factors have the combined effect of further stifling the trajectory of economic growth. Unless the government makes a concerted effort to reverse these negative trends on a war footing, the country's social stability cannot be guaranteed. The IMF bailout package is only a temporary Band-Aid measure that does not adequately address the structural roots of the Pakistani state's fiscal crisis. The only silver lining to the dismal state of Pakistan's economy is overseas remittances that have crossed the USD 13 billion mark. Unfortunately, instead of using this steady pool of foreign exchange earnings wisely, the government is on a senseless spending spree, investing in dubious mega projects which neither create employment nor bring long-term benefit to the country. Pakistan's fragile economy is extremely vulnerable to exogenous shocks. A cut off in American aid, another oil shock and upheaval in the Middle East, leading to the expulsion of Pakistan workers from oil-rich countries, could just deliver a fatal blow to the economy and ignite a social implosion.
There is certainly no good news in store for Pakistan as the 2014 deadline for the withdrawal of the US-led coalition forces from Afghanistan draws closer. A nightmarish scenario is unfolding for Pakistan; the country faces an existentialist threat from rising militancy that has already claimed thousands of lives. The argument that the withdrawal of foreign forces from Afghanistan may bring an end to the militant war in Pakistan is flawed. This withdrawal, in fact, may just lead to a further intensification in terrorist violence across the country. It would not be an exaggeration to say that the post-2014 environment may bring more disaster for Pakistan's weak and politically fragmented state. Sadly, it is a disturbing reality that radical Islamic elements have as much if not more power over Pakistani society than the state. While the state has failed to develop a national narrative against militancy, an obscurantist ideology still holds sway.
The key to future stability is for the army and government to agree on a counter-terrorism strategy and implement it. The main theme of such a strategy must be zero tolerance for terrorism, while the strategy itself must include issues such as economic development, education and reconciliation programmes in the militancy's core recruitment areas – particularly FATA. Simultaneously, there must be a political solution to the FATA conundrum by bringing the tribal areas into the mainstream of the body politic instead of allowing the region to become a No-Man's land. Equally, the counter-terrorism strategy must also aim to deal with those Punjabi militant groups that have been fighting in Indian-occupied Kashmir. A significant part of a counter-terrorism strategy must also be an overhaul of foreign policy, aimed at developing good neighborly relations with India, Afghanistan and Iran.
Some of the most important developments for Pakistan in the forthcoming year will be taking place outside the country. In the 12 months between the summers of 2013 and 2014, Iran, Pakistan, Afghanistan and India will have all seen fresh new leadership teams take the helm in their respective capitals. The two new leaderships that are already in place – in Pakistan and Iran – have already made ending their isolation from their own neighbors an important priority. In 2014, we will discover what ideas the remaining two regional leaderships will bring. Once the new regional leaderships are in place, the withdrawal of US troops from Afghanistan will quicken and the war on terror is likely to draw to a close. As the superpower's regional presence shrinks, the new leaderships will be left largely to their own devices to see if they can come together and discover the road to a vision of shared prosperity and greater regional integration. Politics will invite economics into the regional driving seat in 2014, and the key to how this will work will lie in Pakistan. Will the government of Nawaz Sharif be able to overcome the challenges that lie in its way as it tries to normalise its relationship with its neighbors? If yes, then 2014 can be a game changing year for Pakistan's economy. If not, then the year will be like any other.
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