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The Political Economy Of Reconstruction
Dr.Akmal Hussain
Newspaper: Daily Times
Dated: Sunday, October 30, 2005

Comprehending the scale of the earthquake disaster in Kashmir should be a humbling experience for all of us. The dead and the injured can be counted but the human suffering is immeasurable. The people and government of Pakistan as indeed the world, rallied to provide relief. Yet the sheer scale of the disaster, the inaccessibility of some of the affected areas, and the institutional weakness of the Pakistan government meant that relief, inspite of the best intentions was woefully inadequate. Now as the process of reconstruction begins it may be helpful to examine what it will take to do an adequate job.

In undertaking reconstruction, the nature of the problem must be grasped: In a single earth shaking moment the structures of government and economy in Azad Kashmir were demolished. What is required therefore is nothing less than the reconstruction of the economic and political life of the people in that region. Given this aim, financial resources are a necessary but not a sufficient condition for successful reconstruction. The crucial determinant of success will be establishing the vital institutions for translating finance into measurable outcomes: sustainable livelihoods, housing, schools, medical facilities and transportation and communications infrastructure.

Let us first indicate the resource constraint and the associated political imperatives. After the emergency donors conference organized by the UN in Geneva on 26th October, it is clear that with donor commitment of merely 580 million dollars, foreign aid can only play a supplementary role in a reconstruction effort that my own back of the envelope calculation suggests, is likely to cost at least 7 billion dollars. Consider. For an estimated population of 4.4 million people displaced in Azad Kashmir the housing cost with an average of six occupants per house (current average family size) at the minimum prevailing construction cost will be US $ 3.5 billion; the construction cost of building 400 basic health units (required for providing minimal medical services to the target population) and 3 district level general hospitals (of 180 beds each) together with modern equipment, comes to 33 million dollars; the cost of building the minimally required 14,666 schools (120 children per 3 room-school) is another 37 million dollars. Thus minimum housing, health and school facilities alone will cost US $ 4.2 billion. Add another 3 billion US dollars for reconstructing transportation and communications infrastructure and construction of small dams and water channels for irrigation. This takes the construction costs of economic and social infrastructure to roughly US $ 7.2 billion.

Even if the US $ 0.58 billion pledged by donors at Geneva is forthcoming, it still means that the government of Pakistan will have to mobilize at least US $ 6.62 billion on its own. How can this be done? Given the political constraints of the federal government with respect to the provinces, this reconstruction budget for Azad Kashmir cannot be financed by transferring the development funds normally allocated to Pakistan's provincial governments. The government may be well advised to postpone the expenditure of US $ 1.5 billion planned for the purchase of F-16s and to make sharp cuts in its own administrative expenditure. However any foreseeable expenditure cuts in defence and administration would not be enough to finance the required 6.62 billion US dollars. A possible way of mobilizing the necessary funds would be to initiate a SAARC Fund for the reconstruction of Kashmir. This however can only be done by quickly resolving the Kashmir dispute with India and based on the powerful political leverage this would give to Pakistan, invite substantial donations from SAARC countries as well as the advanced industrial countries. Kashmir and its people have been devastated. What remains except pain and suffering? In this hour of calamity, the governments of Pakistan and India should end strife and draw upon their shared humanity for a joint effort to reconstruct the lives of the very Kashmiris whom each country claims as its brethren. Such an initiative would begin a new epoch of well-being and security not only for Kashmir but also for all the peoples of India and Pakistan.

Whatever financial resources are made available for the reconstruction effort, it is important to build the institutional framework for utilizing these funds efficiently and for sustaining the economic and social life of the people. Three types of institutional structures need to be put into place: (1) An apex non-governmental organization that can bring together and coordinate the large number of development NGOs already working in local infrastructure development. The Pakistan Poverty Alleviation Fund, which works with a number of partner organizations for poverty alleviation can enlarge its scope to coordinate a broader range of small development NGOs to design local infrastructure development programmes through the participatory development methodology for each union council in Azad Kashmir. Voluntary groups of NGOs can then be allocated particular union councils for integrated action to implement these plans. (2) An apex non-governmental organization for the provision of health care and education facilities at the local level. Medium sized development NGOs such as SUNGI, which has already graduated from a local level to a district level NGO and is conducting poverty alleviation work in a number of districts in the NWFP and Azad Kashmir can provide a framework for the provision of community health and education facilities at the tehsil level. It can bring together a large number of small autonomous NGOs for reconstructing communities through social mobilization, and enabling the provision of health care and education facilities through the participatory development methodology. (3) Public-private partnerships to establish corporations for constructing large scale infrastructure projects such as roads, telecommunications, medium sized dams for hydroelectric power and irrigation channels in Azad Kashmir. These corporations, which should be run by high quality professional managers, should include amongst their shareholders the poor people of Azad Kashmir. Poor households can be given loans from the government and private sector financial institutions to acquire equity in these corporations, and the loans can then be paid back from the dividends accruing from the investments of these corporations. Thus the poor people of Azad Kashmir can be brought into the mainstream of the economy, and poverty alleviation can thereby be built into the process of economic reconstruction. Multilateral institutions and International donors who are concerned with poverty alleviation can then be asked to provide loans to the poor to enable them to become equity holders in the large public private infrastructure development corporations. If India and Pakistan were to undertake the reconstruction effort jointly a much larger volume of investment resources and loans for the poor could be forthcoming from Indian investors and financial institutions.

As Pakistan undertakes the great human endeavour of reconstructing the economic life of the people in Azad Kashmir, it faces new challenges of peace and institution building. In this article, I have argued that the required financial resources cannot be mobilized unless Pakistan takes a bold initiative of arriving at a peace settlement with India, and thereby beginning a new epoch of development and human security in South Asia. I have also indicated an institutional framework for reconstruction and human development in Kashmir, which if successfully achieved, can contribute to pro poor growth in the rest of South Asia



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