Sunday, May 31, 2009


A report received on May 31,2009, from a source believed to be based in Zahidan, the capital of the Iranian province of Sistan-Balochistan,speaks of an exchange of fire between groups of Shias and Sunnis in different parts of Zahidan following an unsuccessful attempt by unidentified persons to kill Mulla Abdol Hamid, a senior Sunni leader. While he survived the attack, many of his body guards were reportedly injured.

2.According to the Government controlled IRNA news agency, three persons were injured on May 29,2009, when unidentified gunmen attacked the election office of President Mahmoud Ahmadinejad at Zahidan. Ahmadinejad is contesting re-election as the President. The polling is scheduled for June 12,2009.

3.Meanwhile, the Iranian authorities have blamed the US and Israel for the suicide attack in a Shia mosque on May 28,2009. They have already announced the hanging in public in Zahidan of three persons in connection with the attack. While the authorities have accused them of having been involved in the attack, independent reports claim that these persons were already in the custody of the police when the suicide attack took place in the mosque.

4.Jalal Sayah, Deputy Governor-General of Sistan-Balochistan, has been quoted by the semi-official Fars news agency as saying: “Three people involved with the terrorist incident were arrested.According to the information obtained, they were hired by America and the agents of the arrogance.” Interior Minister Sadegh Mahsooli said: “The terror agents are neither Sunni nor Shia but Americans and Israelis seeking a Shia-Sunni divide." The Agence France Presse has quoted Ian Kelly, a spokesman of the US State Department, as saying: “The US strongly condemns all forms of terrorism. We do not sponsor any form of terrorism in Iran and we continue to work with the international community to try to prevent any attacks against innocent civilians anywhere.”
( The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. E-mail: )


B. Raman

Many Sri Lankan Tamils were killed during the anti-Tamil riots in Colombo in 1983. In their anxiety to suppress details of the exact number of fatalities from being known to the international community, the Sri Lankan authorities allegedly decided to secretly burn the dead bodies of the Tamils killed in mass cremations without informing the relatives. Much before any agency of the Government of India, Indira Gandhi, the then Prime Minister, came to know about it and took action to stop it.

2. Her information came from Tamil families in Tamil Nadu with links or contacts with Tamils in Sri Lanka, I am mentioning this to underline that if there is any large-scale massacre of Tamils in Sri Lanka by State agencies, Tamil families in Tamil Nadu would generally come to know about it much before anybody else in India or in the rest of the world. The fact that there has been no such tom-toming across Tamil Nadu of independent stories----- and not stories disseminated by Western sources--- about large-scale massacre of Tamil civilians in the Northern Province by the Sri Lankan security forces would underline the need for caution in accepting stories being disseminated by Western media and human rights organisations about the alleged massacre of nearly 20,000 Tamils during the final weeks of the Sri Lankan Army's counter-insurgency operations against the LTTE.

3. Had there been really such massacres as alleged by Western sources on the basis of purported leaks from unidentified members of the junior staff of the United Nations, people in Tamil Nadu would have come to know of these alleged massacres long before anybody else. Yes, there was concern over the use of air strikes and heavy artillery by the Sri Lankan security forces. These concerns were voiced by political and non-political elements in Tamil Nadu. There was equally a feeling in Tamil Nadu that the number of casualties suffered by the civilians during the final days of the fighting must have been more than the figures given by the Sri Lankan Government. In counter-insurgency situations, it happens often that the authorities tend to underestimate civilian casualties. We saw it in Iraq and we have been seeing it in Afghanistan. The debate regarding the number of civilian fatalities in Iraq and Afghanistan goes on without anybody being to establish the exact figure. But nobody accuses the US-led forces in Iraq and Afghanistan of deliberately indulging in large-scale massacres of civilians. Nobody is asking for an international tribunal to try those in charge of operations in those two countries.

4. A campaign has been started in the West to embarrass the Sri Lankan Government and to put its senior officers, who were in charge of counter-insurgency, in the dock by disseminating unauthenticated high figures of civilian fatalities in the Northern Province. India should keep away from this campaign, which seems to be motivated not necessarily by wholly humanitarian considerations. India is uniquely placed in having a better and more objective idea of what happened in the Northern Province and should act according to its judgement without being influenced by the anti-Colombo campaign mounted in the West.

5. Now that the LTTE's insurgency is over, three issues have acquired priority. The first priority is relief and rehabilitation of the Tamil civilians affected by the counter-insurgency operations. The second is post-conflict economic reconstruction in Sri Lanka as a whole and in the Tamil areas in particular. The third is addressing the Tamil anger through an appropriate political package. The LTTE may be gone, but not the Tamil anger.

6. Since the assassination of Rajiv Gandhi in 1991 and more particularly since 2002, India has been playing second fiddle in Sri Lanka. It has left it to Western powers such as Norway and the US as well as to Japan to play an activist role in helping Sri Lanka. The time has come for India to once again play an activist role in respect of all the priorities cited above. India should assume the leadership role in helping Sri Lanka in its relief, rehabilitation and reconstruction tasks.

7. The goodwill for India in Sri Lanka has never been higher than it is after the defeat of the LTTE. It is not because India played any active role in its defeat. It is because India did not try to hamper the counter-insurgency operations of the Sri Lankan security forces. This was interpreted by them as India's moral support for their operations. Many Sri Lankans with whom I have interacted in recent weeks have frankly admitted that India's moral support was much more crucial than any material support from Pakistan or China in their counter-insurgency operations.

8. India should try to build up on this goodwill and strengthen it further by taking the leadership role in international efforts to help Sri Lanka after the conflict. If this goodwill is not frittered away and is strengthened further, that could give India a moral authority to nudge the Sri Lankan Government towards a politicasl solution which would be meaningful to the Tamils and acceptable to the Sinhalese.

9. In many articles in the past, I had expressed my fears that once the SL security forces win against the LTTE, the SL Government would try to impose a dictated peace on the Tamils. Those fears remain. All the more reason for India to play the leadership role to ensure that these fears are belied. These fears, even if valid, should not be allowed to inhibit our initiatives in Sri Lanka.

(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. E-mail:



The following is the text of an E-mail interview given by me to The Yomiuri Shimbun of Japan :
QUESTION NO.1 With Obama behaving like this, spreading impression he is a nice guy but not to be feared, are you more or less certain the United States will not be able to stop crisis in Iran's nuclear development or Af-Pak situation to be worsened?

MY REPLY: Iran has seen how North Korea has been able to defy theUS and the international community with impunity.Due to the failure ofthe US to act against North Korea before it acquired its military nuclear capability, a pre-emption is no longer an option. North Korea's conventional military capability and its missiles capable of hitting Japan and South Korea rule out the use of the military option against North Korea.. The soft policy of the Obama Administration towards Iran and its inability to take a strong line against North Korea are likely to encourage the hard-liners in Iran who want Iran to acquire a military nuclear capability. The image of Obama as a soft President who tends to avoid a confrontation will also encourage the Afghan Taliban and Al Qaeda to step up their activities against the US-led NATO forces in Afghanistan and could derail its Af-Pak policy sooner rather than later.

QUESTION NO.2 Regarding North Korea, where should Obama begin to roll back? Reports from Washington indicate he is about to put more emphasison pressuring Pyongyang rather than pursuing dialogue. Is that the right direction?

MY REPLY: As I see it, the only option left for Obama and Japan is to threaten Beijing with the danger of Japan going nuclear if China does not pressure North Korea to de-nuclearise.One does not know whether this option will work or not, but it deserves to be tried.This fear of a nuclear Japan must be constantly kept before the eyes of Beijing.

QUESTION NO.3: What do you think was North Korea's purpose in carrying out a nuclear explosion at this point? What kind of concessions are they willing to get from the U.S. as well as the international community?

MY REPLY: North Korea wants the international community to accept as a reality its present nuclear stockpile of about six A-bombs and its missile and space capability in return for its agreeing to freeze any further production of fissile material. It also wants assurances of energy supplies and economic assistance.

QUESTION NO.4: Eleven years ago this month, it was India and Pakistan that were in the position of today's North Korea, being under attack from all over the world for carrying out nuclear tests. Many people now suspect North Korea is following the examples of India and Pakistan for defying the NPT regime to win recognition as de facto nuclear powers. Those people therefore still condemn India and Pakistan for their "bad examples" that have compromised the nonproliferation regime. How do you respond to such criticism? Why India's case was different from today's North Korea?

MY REPLY: India is a democratic and open society. It is not a rogue State like North Korea. It is not a state sponsor of terrorism like North Korea. India has an adversary in China, which has a military nuclear capability since 1964. South Korea and Japan, which North Korea looks upon as adversaries, do not have a military nuclear capability.

Saturday, May 30, 2009


Years before 2006, North Korea had a tested medium-range missile capability and was developing a long-range capability which could hit targets in the US. If its objective was only to have the capability to target South Korea and Japan, it did not need a long-range capability. It wanted the long-range capability to intimidate and threaten the US. But its economy was in such a bad shape that it did not have the money to spend on its missile programme.

2. And that money came from Pakistan and Iran. They funded research and development of the North Korean missile programme as a quid pro quo for North Korea’s sharing its expertise and technology with them and selling to them some of the missiles. The Pakistan-North Korea missile development co-operation started clandestinely in 1993 when Benazir Bhutto was the Prime Minister, but it came to public notice in 1998 when Pakistan tested its so-called Ghauri missile, which was nothing but a re-baptised version of a North Korean missile. Benazir Bhutto, who was then in the opposition, publicly claimed credit for giving Pakistan a deterrent capability against India by persuading North Korea during a clandestine visit from Beijing in 1993 to co-operate with Pakistan in missile development. Around the same time, reports also started coming in of Iran’s missile procurement relationship with North Korea.

3.When Pervez Musharraf was the President of Pakistan, it had carried out a number of firings of medium and long-range missiles capable of hitting the major cities of India. These were not test firings. These were firings meant to demonstrate Pakistan’s possession of such missiles and to psychologically intimidate India. I had pointed out on many occasions that Pakistan’s action in carrying out so many demonstration firings spoke of the large stock of missiles which it has got from North Korea. Even Osama bin Laden, in one of his messages, taunted Musharraf for ordering a demonstration firing of a missile whenever he was facing difficulty at home.

4. Around the same time, Iran started emulating Pakistan by carrying out demonstration firings of missiles in order to psychologically intimidate Israel. Apart from oral warnings and threats to board North Korean ships suspected of carrying prohibited equipment to other countries, the US did nothing.Even if one can understand its inability to act against North Korea due to a fear of an irresponsible state like North Korea provoking a war in the Korean region, one failed to understand its inability to act against Pakistan and to encourage Israel to similarly act against Iran.

5.In 2003, the international community learnt with shock and surprise that Pakistan’s weapons of mass destruction capability relationship with North Korea was not confined to missiles, but also covered military nuclear capability.A.Q.Khan, the Pakistani nuclear scientist, was found to have supplied nuclear-related eqipment and technology not only to Iran and Libya, two Muslim countries, but also to North Korea. It was a nuclear-missile barter relationship. This relationship had continued at least till the Kargil conflict between India and Pakistan in 1999 when, according to Khan’s own admission to some journalists, Musharraf sent him to North Korea to procure urgently some surface-to-air missiles.

6. When all these factors came to notice one after the other since Pakistan’s firing of the Ghauri missile in April,1998, the US had three options:

Act against North Korea through a pre-emptive strike against its nuclear and missile production facilities . It did not do so due to a fear of the unpredictable behaviour of North Korea which could have led to a war in the Korean region.

Act against Pakistan in order to penalise it for its relations with North Korea and to force it to terminate its relationship. This might not have forced North Korea to stop its programme, but it might have slowed down its programme due to financial difficulties. It would have also given some indication of the US resolve to act.The US did nothing.After 9/11, co-operation ftrom Pakistan against Al Qaeda assumed greater importance for US policy-makers than options of action to stop North Korea from acquiring a military nuclear capability.

Similarly, act against Iran or encourage Israel to act. From time to time, statements were made that all options were open—-meaning even a military strike against the nuclear establishments in Iran. In the case of powers such as North Korea and Iran, empty warnings without a demonstration of the resolve to act create only contempt.

7. All eggs were put in the basket of the six-power talks, which were marked by a faith in the ability and readiness of China to make North Korea behave. North Korea skilfully adopted a strategem of “Talk, test, talk again, test again”. It will seemingly co-operate with the talks, agree to some denuclearisation measures, then break the agreement under some pretext, test, then agree to talk again, then break the talks again under some other pretext and then test again. This has been going on for some years now.

8. The result:North Korea is a demonstrated nuclear power with a delivery capability at least against South Korea and Japan, if not yet against the US. It has carried out two tests, with the second one earlier in May,2009, reportedly being more powerful and more sophisticated than the first one in 2006. It has reportedly re-started the re-processing of spent fuel rods which would add to its stockpile of fissile material.

9. Pre-emption is no longer an option. Can North Korea be pressured or cajoled through China to come back to the negotiating table and to renew its commitment to the denuclearisation path? Even if one succeeds, it is very likely that after some talks, it will break the agreement reached under some other pretext. It broke the last agreement under the pretext that the UN imposed sanctions against it for allegedly testing a communication satellite. The next time, it will find some other pretext.

10. All US administrations have fought shy of a confrontation with North Korea. The Barack Obama administration even more so than its predecessors. The North Korean leadership has concluded that not only the US, but even Japan and South Korea do not have the stomach for a policy of confrontation. It, therefore, feels it does not have to fear either pre-emption or confrontation.

11. There is one option still left—- threaten China with the danger of the international community closing its eyes to Japan acquiring a military nuclear capability if China does not force North Korea to de-nuclearise. Will it work? It may or may not, but in the absence of any other options, it is well worth giving a try.

12. Even while struggling and juggling with various options available against North Korea, it is important for the Obama Administration to remember that Teheran is closely watching how Obama handles North Korea. Any sign of further weakness and accommodation with North Korea could encourage Iran in its nuclear obstinacy. This is definitely not the time for the Obama Administration to convey a wrong message to Iran that ties between the US and Israel are weakening. The US will end up by undermining a steadfast ally for the sake of better relations with an unpredictable country. The US may have valid reasons for improving its relations with Iran, but this should not be at the expense of its relations with Israel.
(The writer, Mr B.Raman, is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. He is also associated with the Chennai Centre For China Studies. E-mail: )


B. Raman

According to the Government-controlled Iranian media, 30 persons were killed and over 180 injured on May 28, 2009, in a suspected suicide bomb blast at the Amir-al Momenin Shia mosque in Zahidan, the capital of Iranian Balochistan, called Sistan-Balochistan. It is the second largest Shia mosque in Zahidan. Mainly Shia Government servants and members of the security forces pray there.

2. The province of Sistan-Balochistan has around 3.5 million Balochs, the majority of them Sunnis. The province has been the scene of frequent incidents of violence unconnected with the liberation struggle being waged by the Balochs in Pakistan's Balochistan province for over three years now. There are close ethnic and religious links between the two Baloch communities on both sides of the Pakistan-Iran border. Iranian Balochistan also has a common border with Afghanistan.

3. Ali Mohammad Azad, the Governor-General of the province, was quoted by the Iranian Fars news agency as saying: "It was a terrorist attack. The bomb was exploded by a terrorist. Soon after the explosion, members of a terrorist group who wanted to get out of Zahidan were arrested."

4. The responsibility for the violent incidents in Iranian Balochistan in the past had been claimed by an organisation called Jondollah (Soldiers of Allah), which projects itself as the People's Resistance Movement of Iran and not as the People's Resistance Movement of Sistan-Balochistan. It has no links with any of the Baloch nationalist organisations in the Balochistan province of Pakistan. In the past, there were reports of its having links with the anti-Shia Sipah-e-Sahaba and Lashkar-e-Jhangvi of Pakistan. In the 1990s, there were reports that a major explosion in the province was organised by Ramzi Yousef, who is now undergoing imprisonment in the US for his involvement in the attempt to blow up the World Trade Centre in New York in February, 1993. The Jondollah seems to be more a Sunni extremist than a Baloch nationalist organisation.

5. The Jondollah has claimed that 130 members of the Iranian security forces were actually killed in the Zahidan attack. A statement attributed to Jondollah says: "This incident has been organised in response to one week of Omar Denunciation Ceremonies which the fanatic Shias and security forces organised to curse Omar, the second Caliph, whom they blame for killing Fatema, the daughter of Prophet Mohammad. The false and fabricated narrative has been officially recognized in Iran as a fact and therefore, Iranian authorities have initiated a large number of denunciation ceremonies in which the second Caiph is cursed by the speakers and audience; even though Ayatollah Khamenaei, the Supreme Leader of Iran, announced three weeks ago that any action that may generate divisions among Moslems is treason. The Shia leaders and followers are famous for what they call Taghiya, which means lying for the sake of Islam but now it has been turned in Iran as an official way of misleading and deceiving the public and opponents, saying something in the public and doing something else. If the supreme leader really believed in what he said, organising such incidents should have been prohibited by law and if anybody acted against the law, should have been arrested and tried for generating severe divisions among Moslems. The authorities have blamed the US for hiring terrorists who carried out the suicide bombing. Jondollah categorically rejects this claim. It does not have any kind of relationship or any kind of support from the US or any other country. This action was in response to systematic and regular insults to the beliefs of Sunni Muslims in Iran and wide discrimination against the Baloch people. We reject the Government’s claim that we are a terrorist organization. We are a defensive organization and act according to international law of self-defence by the same strategy and equipments the Iranian governments are using against us. Several religious leaders and hundreds of Baloch youth have been killed or hanged by the Islamic Republic of Iran just for their beliefs after severe and long torture. The Islamic Republic of Iran has destroyed several Sunni mosques and has hanged several top religious leaders of Sunni people in Iran."

(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. E-mail:

Thursday, May 28, 2009


International Terrorism Monitor -- Paper No.530

B. Raman

A question from a journalist working for an American newspaper asks: "Why has the Taliban attacked the ISI? Isn't that like biting the hand that feeds?"

2. This question was in pursuance of the commando-style attack at Lahore on May 27, 2009, which targeted the Lahore Police and the local office of the Inter-Services Intelligence (ISI), killing 15 police officers, one Lt. Col. of the ISI and 10 other persons.

3. While analysing the Lahore attack, one has to keep in mind certain ground realities. The first ground reality is that there are Talibans and Talibans and in each Taliban, there are mini-Talibans. As I had mentioned in one of my past articles, there are virtually as many Talibans in the Pashtun belt as there are tribal sirdars (leaders). The second ground reality is the clear distinction in behaviour and operations between the Neo Taliban of Afghanistan headed Mullah Mohammad Omar, based in Quetta, and the various Pakistani Talibans led by tribal sirdars such as Baitullah Mehsud of South Waziristan, Hakemullah Mehsud, who is responsible for operations in the Khyber, Kurrum and Orakzai areas, Maulana Fazlullah of the Tehrik-e-Nifaz-e-Shariat-e-Mohammadi (TNSM), who is a son of the Swat soil, and Sufi Mohammad, his father-in-law, who is actually from Dir and not Swat. Of these various Talibans, only the Neo Taliban of Mullah Mohammad Omar, which was created by the ISI in 1994 when Benazir Bhutoo was the Prime Minister, still owes its loyalty to the ISI and the Pakistan Government. The Neo Taliban is active against the US-led NATO forces in Afghan territory from sanctuaries in Pakistan, but it has never been involved in an act of terrorism in Pakistani territory against Pakistani targets----whether from the Army or the ISI or the Police. All the attacks in Pakistani territory on Pakistani Govt. targets were carried out by different Pakistani Taliban groups or by the Jaish-e-Mohammad (JED), which has transferred its headquarters from Bahawalpur to Swat, and the Lashkar-e-Jhangvi (LEJ), an anti-Shia terrorist organisation.

4. The third ground reality is the distinction between the Pakistani Punjabi Taliban and the Pakistani Pashtun Taliban, All of them advocate the same Wahabised Islamic ideology based on the Sharia, but their ethnic composition differs. The term Punjabi Taliban is used to refer to the Harkat-ul-Mujahideen (HUM), the Harkat-ul-Jihad-al-Islami (HUJI), the Lashkar-Toiba (LET), the Jaish-e-Mohammad (JEM) and the LEJ. Punjabis constitute the majority of their cadres. All of them except the JEM are of the 1980s/ 1990s vintage. The JEM was born in 2000 through a split in the HUM. Of these organisations, the LET, like the Neo Taliban, is the favoured tool of the ISI, which uses the Neo Taliban in Afghanistan and the LET against India. Like the Neo Taliban, the LET too has never attacked a Pakistani target in Pakistani territory. In fact, there has never been a confirmed instance of an attack by the LET on foreign targets in Pakistani territory lest it create problems from the ISI. The JEM and the LEJ never hesitate to attack Pakistani Government targets, either on their own or at the instance of Al Qaeda. The attitude of the HUM and the HUJI is ambivalent.

5. The fourth ground reality is that while the Pakistani Punjabi Taliban and the Neo Taliban have been in existence for over a decade, the Pakistani Pashtun Talibans are a product of the commando raid into the Lal Masjid in Islamabad in July, 2007, in which a large number of Pashtun tribal children, many of them girls, were killed. It was after this that tribal sirdars such Fazlullah, Baitullah and Hakeemullah called for a jihad against the Pakistan Army and the ISI in retaliation for the raid. While the TNSM has been in existence since the early 1990s, the Tehrik-e-Taliban Pakistan (TTP) came into existence after the Lal Masjid raid.

6. The various tribal sirdars, who are supporting the TTP, repeatedly make the following points: Firstly, they did not want to fight against the Pakistan Army. It was the Army which forced them to take to arms against it by raiding the Lal Masjid and killing their children. Secondly, their real enemy is the US-led NATO forces in Afghanistan and not the Pakistan Army. They are fighting against the Pakistan Army because it prevents them from assisting the Neo Taliban against the US-led NATO forces. Thirdly, they will stop fighting against the Pakistan Army if it makes amends for the alleged massacre of tribal children in the Lal Masjid, removes restrictions on their going into Afghanistan to fight against the US-led NATO troops and stops assisting the US-led NATO troops in their war against the Neo Taliban.

7. The Pakisan Army is facing difficulties in its operations against the various Pakistani Pashtun Taliban groups because they have many Pashtun ex-servicemen assisting them----retired officers as well as other ranks. The attack by the Pakistani Taliban against the ISI at Lahore was not its first attack against the ISI. It had attacked the ISI twice before in Islamabad/ Rawalpindi, inflicting even heavier casualties than it was able to do in Lahore.

8. In this connection, I am annexing two of my previous articles---- one of November 25, 2007, titled "Jihadis Strike At Pak Army & ISI Again" and the other of December 3, 2007, titled "Well-Trained Insurgent Force in Swat."

(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. E-mail:


"Jihadis Strike at Pak Army & ISI again" (
By B. Raman
Physical security regulations in the office of Pakistan's Inter-Services Intelligence (ISI) at Rawalpindi exempt officers of the rank of Brigadier and above coming in their own vehicle from frisking at the outer gate. They undergo a frisking only after they have entered the premises, parked their car in the space allotted to them in the garage and then enter the building in which their office is located. Officers below the rank of Brigadier undergo frisking twice, whether they are in their own vehicle or in a bus ----at the outer gate and again inside before they enter the building. At the outer gate, they have to get out of their vehicle, undergo frisking and then get into their vehicle and drive in.
2. Since all officers travel in civilian clothes in unmarked vehicles, which cannot be identified with the Army or the ISI, there is a special hand signalling system for Brigadiers and above by which the security staff at the outer gate can recognise their rank and let them drive in without undergoing frisking. This hand signalling is changed frequently.
3. On the morning of November 24, 2007, a car reached the outer gate and the man inside showed a hand signal, which was in use till the previous day. It had been changed on November 23 and a new signal was in force from the morning of November 24, 2007. He was not aware of it. The security staff got suspicious and did not allow the car to drive in. They asked the man driving it to get out for questioning and frisking. He blew himself up.
4. As he did so, an unmarked chartered bus carrying over 40 civilian and junior military employees of the ISI reached the outer gate and stopped so that those inside can get out for frisking. The bus bore the brunt of the explosion, which caused the death of about 35 persons---- from among those inside the bus as well as the security staff. The Pakistani authorities have admitted the death of only 18 persons.
5. Around the same time, a man driving a vehicle towards the premises of the General Headquarters (GHQ) of the Pakistan Army in another part of Rawalpindi was stopped by the security staff at a physical security barrier. He blew himself up killing two of the security staff. The offices of Gen. Pervez Musharraf in his capacity as the Chief of the Army Staff (COAS) and of Gen. Ashfaq Pervez Kiyani, the Vice Chief of Army Staff, are located in the GHQ.
7. These two well-synchronised suicide strikes in Rawalpindi, the sanctum sanctorum of Pakistan's military-intelligence establishment, have come about six weeks after a similar attack targeting the ISI and the Army at Rawalpindi at the same time. On September 4, 2007. a suicide attacker blew himself up after boarding a bus carrying ISI employees. A roadside bomb went off near a commercial area in Rawalpindi, while a car carrying an unidentified senior Army officer to the GHQ was passing. Twenty-five persons died in the two attacks. The Army officer escaped unhurt. On October 30, 2007, a suicide bomber blew himself up at a checkpoint several hundred yards from the GHQ killing seven persons, most of the from the security staff.
8. Since the Pakistan Army's commando raid into the Lal Masjid of Islamabad from July 10 to 13, 2007, there have been two targeted attacks near the GHQ in Rawalpindi, two attacks on the ISI also at Rawalpindi, one attack on officers of the Special Services Group (SSG), the US-trained and US-assisted special forces unit to which Musharraf himself used to belong, in their mess at their headquarters in Tarbella and one attack on a bus carrying Air Force officers to the Pakistan Air Force base in Sargodha. There were many attacks targeting police officers too. These were the targeted attacks outside the tribal belt. There have been many more suicide attacks targeting security and intelligence personnel inside the tribal belt.
9. The two attacks near the GHQ were not based on any inside information. The suicide bomber took his chance hoping that he would not be frisked at the security barrier. When the security staff insisted on frisking him, he blew himself up. The two attacks directed at the ISI and the PAF were based on inside information. In the case of the explosion at the outer gate of the ISI complex on November 24, 2007, the suicide bomber was aware of the hand signalling code for Brigadiers and above. However, he was not aware that the signal code had been changed the previous day. Since these codes are communicated personally to Brigadiers and above, their existence is supposed to be known only to Brigadiers and above and the physical security staff. The suicide bomber's inside accomplice was either an ISI officer of the rank of Brigadier or above or a member of the physical security staff. According to sources, the suicide attack in the SSG mess was carried out by a Pashtun officer of the SSG while taking dinner in the mess with his colleagues. The SSG had carried out the raid into the Lal Masjid.
10. The twin bombings of November 24, 2007, came three days after the Attorney-General of Musharraf's Government had told the rubber-stamp Supreme Court bench hearing a petition agains the imposition of the Emergency that the security situation had improved after the imposition of the Emergency on November 3, 2007, and that suicide attacks in non-tribal areas had stopped. This was one of the arguments used by the court to dismiss the petition against the Emergency.
11. There are two alarming aspects of the security situation in Pakistan. The first is the upsurge in acts of suicide terrorism directed against security and intelligence personnel and their establishments. These give clear evidence of the penetration of jihadi elements inside the Armed Forces, the intelligence agencies and the Police. The second is the inability or unwillingness of the Police to vigorously investigate these incidents, including the attempt to kill Mrs. Benazir Bhutto in Karachi on October 18, 2007. Nobody knows definitively till today who are responsible for these suicide attacks---- tribal followers of Baitullah Mehsud of South Waziristan or those of Maulana Fazlullah of the Swat Valley or the Lashkar-e-Jhangvi (LEJ), the anti-Shia sectarian organisation, or Al Qaeda and its Uzbek associates or the angry students of the two madrasas run by the Lal Masjid?
12. The Rawalpindi cantonment where the headquarters of the Army and other sensitive units of the Pakistan Army and the ISI are located, and the adjoining Islamabad, the capital, where the headquarters of the federal Government and the National Assembly are located, had seen terrorist strikes even in the past. Amongst them, one could mention the 1989 explosion in the Rawalpindi office of Dr. Farooq Haider, the then President of one of the factions of the Jammu & Kashmir Liberation Front (JKLF), which was attributed to a rival faction led by Amanullah Khan; the explosion outside the Egyptian Embassy at Islamabad in the 1990s, which was attributed to some Egyptian opponents of President Hosni Mubarak; the grenade attack inside an Islamabad church frequented by the diplomatic community in March 2002 in which the wife of a US diplomat and their daughter were killed; the unsolved assassination of Maulana Azam Tariq, the Amir of the Sipah-eSahaba, Pakistan, the political wing of the Lashkar-e-Jhangvi, at Islamabad in 2003, the terrorist attack on a a group of workers of the Pakistan People's Party (PPP) of Benazir Bhutto in Islamabad earlier this year, the alleged firing of a rocket on Musharraf's plane from the terrace of a house in Islamabad again earlier this year and the alleged firing of rockets by unidentified elements from a park in Islamabad last year.
13. If one leaves aside the JKLF factional politics, the only terrorist organisations which had operated in the Islamabad-Rawalpindi area in the past (before July 2007) were the Lashkar-e-Jhangvi (LEJ), which was blamed for the church grenade attack; the Sipah Mohammad, the Shia terrorist organisation, which was suspected in the murder of Azam Tariq; and Al Qaeda. Many Pakistani and Kashmiri jihadi organisations such as the Lashkar-e-Toiba, the Hizbul Mujahideen, the Harkat-ul-Mujahideen (HUM) etc have their offices in Rawalpindi, but do not indulge in terrorist activities there.
14. There was no evidence to show that the Egyptians responsible for the explosion outside the Egyptian Embassy were then the followers of Osama bin Laden. The first indication of some local support for Al Qaeda in Rawalpindi came in March, 2003, when Khalid Sheikh Mohammad (KSM), supposedly the man who co-ordinated the 9/11 terrorist strikes in the US, was arrested from the house of a women's wing leader of the Jamaat-e-Islami (JEI) in Rawalpindi by the Pakistani authorities and handed over to the USA's Federal Bureau of Investigation (FBI).
15. KSM was living in Karachi till September, 2002, when he fled from there to Quetta in Balochistan following the arrest of Ramzi Binalshibh, another Al Qaeda operative there. From Quetta, he shifted to Rawalpindi in the beginning of 2003, fearing betrayal by the Shias of Quetta. After his arrest, no thorough enquiries would appear to have been made either by the ISI or the Police to determine why he took shelter in Rawalpindi, a highly guarded military cantonment. Did he and/or Al Qaeda have any other accomplices in Rawalpindi, in addition to the JEI leader and the members of her family, who included one junior Army officer belonging to a signals battalion, who was also detained for interrogation? Did Al Qaeda or the Pakistani organisations allied to it in the International Islamic Front (IIF) have a sleeper cell or cells in the cantonment? If they had, the sleeper cells could have functioned undetected only with the complicity of at least some in the Armed Forces.
16. After the arrest and the handing-over of KSM to the US, anti-Musharraf and pro-jihadi pamphlets typed on the official letter-head used in the army offices in the General Headquarters (GHQ) in Rawalpindi started circulating in Rawalpindi and Islamabad. The ISI and the Police were unable to determine who was circulating these pamphlets and no arrests were made in this connection. Instead, a leader of the Nawaz Sharif-led faction of the Pakistan Muslim League, who drew the attention of the National Assembly and the public to these pamphlets, was ordered to be arrested by Musharraf on a charge of treason.
17. Then followed the two serious assassination attempts on Musharraf as he was commuting between Rawalpindi and Islamabad. The first on December 14, 2003, was made immediately after he had returned by air from Karachi. The second on December 25, 2003, was made when he was doing one of his daily commutings between his residence in Rawalpindi and his office in Islamabad, a distance of about 12 miles.
18. After the April, 2003, arrest in Karachi of Waleed bin Attash of Al Qaeda, one of the suspects in the case relating to the Al Qaeda attack on the US naval ship USS Cole at Aden in October, 2000, many of the Al Qaeda members living in Karachi were reported to have shifted to the North-West Frontier Province (NWFP), Balochistan , the Federally-Administered Tribal Areas (FATA) and Rawalpindi.
19. Their shifting to Rawalpindi and taking shelter there would not have been possible without the complicity of not only the Pakistani jihadi groups, but also supporters in the Armed Forces and the police. The Pakistani security agencies have not been able to identify and dismantle Al Qaeda and IIF cells in the Rawalpindi cantonment. The fact that the perpetrators of the two attacks of December, 2003, on Musharraf, whether they belonged to Al Qaeda or to any of the Pakistani components of the IIF, chose to act on both the occasions from Rawalpindi instead of Karachi where Musharraf was before the first attack on December 14 showed their confidence in being able to operate undetected from Rawalpindi rather than from Karachi. Pakistani investigators claimed to have established that the two unsuccessful attacks on Musharraf were jointly carried out by Al Qaeda and the Jaish-e-Mohammad (JEM), with the complicity of some junior officers of the Army and the Air Force, who were identified and arrested.
20. Pakistani Police sources also say that apart from Al Qaeda and its associates, the Hizbut Tehrir (HUT) has also many followers and sympathisers in the lower and middle levels of the Armed Forces, but it has not so far indulged in any act of terrorism in Pakistani territory. Its terrorism has been confined to the Central Asian Republics.
21. It is intriguing that after the March, 2002, attack on some Americans inside an Islamabad church, there has been no terrorist strike or attempted strike targeting US nationals or interests in the Islamabad area. Attacks targeting Americans have been confined to the Karachi area. No explanation for this has been forthcoming.

"Well-Trained Insurgent Force in Swat" (
By B. Raman
Despite optimistic claims put out by the Pakistan Army every day with inflated body counts of hostiles killed or captured, it is apparent its ground operations against the forces of the Tehrik-e-Nifaz-e-Shariat-e-Mohammadi (TNSM) in the Swat Valley of the North-West Frontier Province (NWFP) continue to face difficulties. The TNSM volunteers, many of whom lost their daughters during the Army's commando action in the Lal Masjid of Islamabad from July 10 to 13, 2007, have proved themselves to be not just a small group of desperate suicide terrorists, but a small, well-trained, well-motivated, well-organised insurgent army capable of fighting small-scale conventional battles on the ground.
2. The guerilla tactics----reminiscent of those of the Neo Taliban in Afghanistan--- adopted by them to harass the Army and para-military forces continue to disrupt movement of reinforcements and supplies in the area of operations. The insurgents have been able to stand and fight an army far superior in training and in the arms and ammunition in its possession. Despite their lack of anti-air capability, they have not been frightened by the frequent use of helicopter gunships by the army against the positions controlled by the insurgents. Well-informed police sources in the NWFP say that many of the volunteers of the TNSM are well-trained Pashtun ex-servicemen.
3. Embarrassed by the long time taken (three weeks) by the Army to prevail over the volunteers of the TNSM, military spokesmen are now putting out stories that even though the Army had been deployed in the Swat Valley, the ground operations are still being conducted by the para-military forces---namely the Frontier Corps and the Frontier Constabulary.
4. The Army's efforts to persuade Maulana Sufi Mohammad, the founder of the TNSM, who has been under arrest since 2002, to appeal to Maulana Fazlullah, his son-in-law, and his force to give up fighting have not succeeded. Sufi Mohammad has not said no, but he has reportedly been demanding that he should be released so that he could go back to his people and talk to them. The Army does not want to accept this demand lest he take over the leadership of the insurgent force and continue fighting against the Army.
5. Both Maulana Fazlullah, to whom informal approaches were made through pro-Government tribal intermediaries, and Maulana Sufi Mohammad, presently in a hospital in Dera Ismail Khan for a medical check-up, have reportedly been saying that they were fighting against the American forces in Afghanistan, but not against the Pakistan Army and alleging that it was the Pakistan Army that forced them to fight against it by killing a large number of tribal girls in the Lal Masjid.
6. Fazlullah and Sufi Mohammad have also reportedly told the Army that they would be prepared to call off the fighting if President Musharraf apologises for the commando action in the Lal Masjid, proclaims the Shariat law in the entire Malakand Division and allows the TNSM volunteers to go back into Afghanistan and re-join the Neo Taliban in its operations against the Americans. They have been denying any links with Al Qaeda.
7. Contrary to the claims of the Army that it has silenced the FM radio station operated by Fazlullah, he continues to boadcast to his followers from unidentified locations. The Army, which has brought in more reinforcements to the Valley, has realised that it may not be able to defeat the insurgents quickly. Its present strategy is to push them into the Federally-Administered Tribal Areas (FATA) and keep them confined there so that normalcy can be restored in the Swat Valley before the forthcoming elections. According to these police sources, the insurgents have till now been refusing to accept an Army offer of safe passage into the FATA in return for their vacating the areas controlled by them.




The Tehrik-e-Taliban Pakisan (TTP), headed by Baitullah Mehsud, is reported to have claimed responsibility for the commando-style terrorist attack involving the use of hand-held weapons and a car bomb in Lahore on May 27,2009, in which 15 police officers, an officer of the Lahore office of the Inter-Services Intelligence ( Lt-Col Mohammad Amir) and 10 others were killed. The terrorists were reported to have used a mix of RDX and TNT in the car bomb. This illustrates once again the growing menace of the proliferation of small arms and ammunition and powerful, military-grade explosives all over Pakistan which enables the terrorists to procure them easily for use anywhere in the country. No attempt has been made to stop this proliferation.

2. According to Amir Mir of the "News" (May 28), the terrorist attack was suspected to have been carried out by the Taliban and the Lashkar-e-Jhangvi (LEJ), an anti-Shia organisation . According to Amir, Qari Mohammad Zafar is currently the chief operational commander of the LEJ. However, the statement of the TTP claiming responsibility for the attack does not refer to the LEJ.

3.According to a report disseminated by the British Broadcasting Corporation on May 28,2009, a deputy to Baitullah Mehsud, who identified himself as Hakimullah Mehsud, told the BBC by telephone that the attack was in response to the army's operation in the Swat valley. He warned as follows: "We love the people of Pakistan, and because of this love we politely ask the citizens of Lahore, Islamabad,Rawalpindi and Multan to please evacuate their cities because we have marked out government targets there against whom we will carry out attacks as have never happened before."

4.While Lahore, Islamabad and Rawalpindi have been the targets of frequent attacks by the TTP, Multan has now been threatened with a major attack. It is located in the Seraiki belt of southern Punjab. The Seraikis constitute about 60 per cent of its population. The rest consist of Punjabis, Pashtuns, Sindhis, Balochs and Mohajirs. It has a large number of Sufi shrines and is known as the city of Sufis. It is a popular pilgrimage centre for Sufis, who have been the targets of the Taliban which looks upon Sufism as unislamic. The majority of the population of Multan are Barelvis known for their tolerant traditions and their opposition to the Wahabised Deobandis. It is also the home town of Prime Minister Yousef Raza Gilani and Foreign Minister Shah Mehmood Quereshi. The Jaish-e-Mohammad (JEM) headed by Maulana Masood Azhar,which operates jointly with the TTP, has an active presence in the Seraiki belt.Bahawalpur, in the Seraiki belt, is the home town of Azhar.

5.The II Corps of the Pakistan Army based at Multan is actively involved in the anti-Taliban operations. Its 14th Infantry Division was made responsible in 2007 for the operations against the followers of Baitullah Mehsud in South Waziristan. Multan is also an important base for the Air Force and the Army Aviation Corps. The helicopter gunships used against the Taliban in the Swat Valley are co-ordinated and serviced by the base in Multan.

6. The TTP's threat to attack Multan in retaliation for the military operation in the Swat Valley indicates the precise intelligence which the TTP has of the deployments of the Pakistani armed forces and the identities of different units involved in the anti-Taliban operations and the location of their rear bases, which could be attacked. (28-5-09)
(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studieas, Chennai. E-mail: )

Wednesday, May 27, 2009


International Terrorism Monitor--Paper No.. 528


At least 23 persons---many of them Lahore police officers --- are reported to have been killed and over 200 injured in a swarm attack by unidentified terrorists in a busy area on the Mall Road of Lahore. A number of important government buildings housing the offices of the Lahore Police, the Lahore office of the Inter-Services Intelligence (ISI) and the Lahore High Court are located around the area where a car suspected to be carrying explosives exploded when it was sought to be stopped by the police. There have been reports of exchange of fire between the security personnel posted in the area and an unidentified number of terrorists before the car exploded. There are no reports of any continuing exchange of fire after the explosion.

2. A building in which the emergency control room of the police, with a staff of 50, was located bore the brunt of the explosion and was totally destroyed. Other buildings in the area too suffered damages. No details are available regarding the damages, if any, sustained by the building housing the ISI office and whether there were any casualties. Sections of the Pakistani media have reported that Prof.Hafeez Mohammad Sayeed, the Amir of the Jamaat-ud-Dawa (JUD), the political arm of the Lashkar-e-Toiba (LET), who is under house arrest, was to appear in the court today in connection with the hearing on a petition in which he has challenged his house arrest.

3. A swarm attack is a commando-style attack involving multiple targets and/ or multile modus operandi----that is a mix of the use of hand-held weapons and explosives. Since the Mumbai terrorist attack of November 26 to 29,2008, which was itself a major swarm attack, there have been six more---- three in Kabul, Kandahar and Khost in Afghanistan and three in Lahore including the latest one. The two earlier swarm attacks in Lahore were directed at a Sri Lankan cricket team (March 3,2009) and a police training a school (March 30,2009). There were no multiple targets in the earlier two attacks in Lahore

4.The Tehrik-e-Taliban Pakistan (TTP) headed by Baitullah Mehsud had claimed responsibility for the attack on the police training school. Pakistani authorities had suspected that the TTP was also responsible for the attack on the Sri Lankan cricket team. They seem to suspect the hand of the TTP in the latest attack also.

5. Different cities of Pakistan---including Islamabad, Rawalpindi, Lahore and Sargoda--- have seen a never-ending succession of suicide and non-suicide attacks involving the use of car bombers and suicide bombers since the commando raid in the Lal Masjid of Islamabad in July,2007. During 2007 and 2008, the attacks were uni-targeted and mainly involved the use of explosives. They were not commando style attacks. They were often carried out by a single individual or by two persons. Commando-style attacks involving a group of persons is a phenomenon seen in India since 2001. One saw it in the attack on the Indian Parliament in New Delhi in December,2001. then in the attack on the security guards outside the US Consulate in Kolkata in January 2002, in the attack on a temple in Ahmedabad in September,2002, and in the attack on a training centre of the Centre Reserve Police Force at Rampur in Uttar Pradesh on January 1,2008. The originalty of the Mumbai attack of November 2008 was that the attackers came by sea whereas those involved in the earlier attacks came by land.

6. Similar commando-style attacks had not been seen in Pakistan before 2009. The Lashkar-e-Toiba (LET) and the Jaish-e-Mohammad (JEM) were the prime suspects in the commando style attacks in Indian territory mentioned above. The Pakistani and Afghan authorities seem to suspect the hand of the Taliban in the attacks in their territory.

7. The increasing resort to commando-style attacks by different groups in India, Pakistan and Afghanistan gives rise to the following questions: Are they merely instances of copy-cat terrorism or is there a common training centre for different organisations? If so, who runs this centre? Is there a common command and control co-ordinating these attacks?

8. It would be useful for the investigating agencies of India, Pakistan and Afghanistan to exchange notes on their respective investigations and to pick each other's brains. One should not fight shy of agreeing to a common brain-storming on the investigations.

(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. E-mail: )

Tuesday, May 26, 2009


International Terrorism Monitor -- Paper No.527

B. Raman

Nothing illustrates more starkingly the helplessness and confusion that prevails in the corridors of the Obama Administration over its Af-Pak policy than a report carried by the "Los Angeles Times" on May 25, 2009, regarding a recent visit which Richard C. Holbrooke, the Administration's special representative for Afghanistan and Pakistan, is reported to have made to China and Saudi Arabia in pursuance of his mandate.

2. To quote a news agency message based on the report carried by the "LA Times": "The Obama Administration has appealed to China to provide training and even military equipment to help Pakistan counter a growing militant threat, US officials said. .....Richard C Holbrooke, the administration’s special representative for Pakistan and Afghanistan, has visited China and Saudi Arabia, another key ally, in recent weeks as part of the effort, says Paul Richter of LAT. The American appeal to China underscores the country’s importance in security issues. The United States considers China to be the most influential country for dealing with militaristic North Korea. China also plays a crucial role in the international effort to pressure Iran over its nuclear ambitions......A senior US official, while acknowledging China’s hesitation to become more deeply involved, said, “You can see that they’re thinking about it.” He spoke on condition of anonymity because of the diplomatic sensitivity of the subject. US officials believe China is skilled at counterinsurgency, a holdover of the knowledge gained during the country’s lengthy civil war that ended with a Communist victory in 1949. And with China’s strong military ties with Pakistan, US officials hope Beijing could help craft a more sophisticated strategy than Pakistan’s current heavy-handed approach."

3. I did not know whether to laugh or cry when I read that the Obama Administration believed that "China is skilled in counter-insurgency", that it acquired its skills during its "war of liberation" against the KMT troops and that it can teach Pakistan "a more sophisticated strategy than Pakistan's current heavy-handed approach."

4. What do the Chinese regard as terrorism or insurgency? Which are the terrorist/insurgent organisations in their perception? Anyone, who has been following Chinese methods of internal security management would know that in the Chinese assessment there are two "terrorist/insurgent" organisations posing a threat to China's internal security----- the Tibetan Youth Congress (TYC), which they project as no different from Al Qaeda in its modus operandi and the Islamic Movement of East Turkestan (IMET) of the Uighurs. Since the pro-Dalai Lama uprising in the Tibetan-inhabited areas of China in March, 2008, the Chinese have been repeatedly and consistently condemning the TYC as a terrorist organisation. They have arrested a large number of Tibetan monks and youth and mass trials have been going on. If Obama and his advisers want to have details of what the Chinese have been doing in Tibet since March, 2008, under the pretext of counter-terrorism and counter-insurgency, all they have to do is to read the transcripts of the broadcasts of Radio Free Asia funded by the US State Department and to read the various statements issued by His Holiness the Dalai Lama and his followers. Does the Obama Administration consider this as skilful and sophisticated counter-insurgency techniques?

5. What the Chinese have been doing against the Uighurs in the Xinjiang Province? Indiscriminate arrests, trials and executions. To get details, Obama and his advisers should read the periodic reports of the Human Rights Watch, which is a reputed non-Governmental organisation of the US, and the annual reports of the US State Department on human rights in China. The Chinese counter-insurgency strategy against the Uighurs is based on the principle "catch and kill". That was why the George Bush Administration refused to hand over to China the Uighur jihadis arrested in Afghanistan. The entire community of the human rights organisations of the West was against their being handed over to China since they apprehended that the Chinese would execute them. That was why Albania was persuaded to give sanctuary to these Uighurs.

6. There are two components to the Chinese counter-insurgency and counter-terrorism strategy in Xinjiang---- "catch and kill" and impose restrictions on the practice of Islam. Under this policy of restrictions, construction of new mosques is not allowed, many old mosques have been forced to close down under the pretext that they were constructed illegally and the people are forced to observe their holy fast inside their houses and not to congregate in public places. This is China's "skilful and sophisticated" counter-insurgency.

7. IF Pakistan follows even some of these methods, the day will not be far off when Pakistan will become a State ruled by a combine of Al Qaeda and the Taliban. As it is, there is considerable anti-US and anti-Army anger in Pakistan. Instead of finding ways of containing and reducing this anger, the Obama Administration is coming out with shocking ideas such as "Counter-insurgency in Chinese colours", which could make an already difficult situation even more difficult to handle.

(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. He is alaso associated with the Chennai Centre For China Studies. E-mail:

Monday, May 25, 2009


B. Raman

In our preoccupation with Pakistan's Inter-Services Intelligence (ISI), we have not been paying the required attention to the goings-on in Pakistan's Intelligence Bureau (IB), which comes under the Ministry of the Interior. It is the counterpart of our IB and is of the same pedigree. Even today, the IBs of the two countries maintain some of the traditions, nomenclatures for officers and subordinate units and methods of functioning which they had inherited from the British in 1947.

2. The founding fathers of independent India made the IB the first among equals in India's internal security and counter-intelligence set-up. It has retained and even strengthened that position. It continues to be an organisation largely staffed and led by police officers taken on deputation or permanent secondment from the Indian Police Service cadres of different States of the Indian Union, but the number of direct recruits has been increasing. The IB acts as the eyes and ears of the Government of India in all matters that could have a bearing on internal security. As the leading counter-intelligence agency of India, it plays the leadership role in countering the activities of the ISI in Indian territory and against Indian interests in India and abroad.

3. As against this primacy of the Indian IB and its significant role, the Pakistani IB saw over the years its role in the internal security management and in counter-intelligence gradually eroded, with the ISI assuming the responsibility for internal security tasks. The ISI assumed the leadership in internal security matters initially in the then East Pakistan because of the Army's suspicion of the loyalty of the Bengali police officers and then in Balochistan, Sindh and the North-West Frontier Province for similar reasons. Whereas the police officers from different States in the Indian IB enjoyed the total confidence and trust of the Government of India, in the Pakistani IB, only the Punjabi police officers enjoyed some trust and confidence. The remaining police officers of non-Punjabi origin were looked upon with suspicion.

4. The marginalisation of the Pakistani IB by the ISI in matters relating to internal security was followed by the beginning of a process of militarisation of the IB----with the induction of serving and retired military officers into the IB. This process started under Zia-ul-Haq. When Benazir Bhutto became the Prime Minister in 1988, she sought to reverse the process. She appointed Maj-Gen. Shamshur Rehman Kallu, a retired officer who was close to her father, as the DG of the ISI much to the discomfort and unhappiness of the serving army officers. On her orders, Kallu also prepared a scheme for the re-organisation of the intelligence community. One of the key points in this scheme was the demilitarisation of the IB and restoring its police character and its role as the premier internal security agency of the country. Before the scheme could be implemented, she was dismissed by the then President Ghulam Ishaq Khan in August 1990.

5. Nawaz Sharif, who succeeded her as the Prime Minister after the ISI-rigged elections held later that year, carried out the wishes of the army and threw aside the scheme drawn up by Kallue. He once again started inducting retired and serving officers of the Army into the IB. When Benazir returned to power in 1993, she once again took up the scheme for the re-organisation of the IB and strengthening its role in internal security management. She ordered a vast expansion of the strength of the IB, emulated the Indian model of having a directly-recruited civilian cadre in addition to the police officers and ordered the direct recruitment of a large number of civilian officers.

6. When Farooq Leghari, the then President, dismissed her in 1996, he stopped the expansion ordered by her and ordered that those recruited by her should not be given appointment in the IB. Those who had already joined were sacked. Nawaz Sharif, who returned as the Prime Minister after the elections, did not reverse the orders of Leghari and went along with the wishes of the Army to let the ISI retain its primacy in internal security and counter-intelligence matters. The militarisation of the IB picked up momentum under Pervez Musharraf and reached its nadir when he appointed Brig.Ijaz Shah, a highly controversial retired officer with strongly suspected links to the jihadi terrorist organisations, as the Director-General of the IB.

7. Since the Pakistan People's Party-led coalition Government came to office in March 2008, there have been indications that Asif Ali Zardari, who succeeded Pervez Musharraf as the President in September, 2008, wants to implement once again the ideas of Benazir for the re-organisation of the IB and strengthening its role in internal security. He appointed Rehman Malik, a retired police officer, who had served under Benazir in the Federal Investigation Agency (FIA) during her second tenure as the Prime Minister, as the Adviser for Internal Security with the rank of a Cabinet Minister. He now co-ordinates all internal security matters and the IB works under him.

8. Zardari also restored the practice of a senior police officer heading the IB and reportedly wanted that all those directly-recruited to the IB during Benazir's second tenure, but kept out by Leghari and Sharif should be re-appointed. Well-informed PPP sources say that Prime Minister Yousef Raza Gilani, who does not feel comfortable with Rehman Malik and who has the backing of the ISI, has been dragging his feet in the implementation of the orders of Zardari to re-appoint all the direct recruits to the IB, who were sacked or kept out by Leghari or Sharif.

9. These sources say that the differences between Zardari and Malik on the one side and Gilani and the ISI on the other regarding the relative roles of the IB and the ISI are also coming in the way of a proper investigation into the role of the five detained activists of the Lashkar-e-Toiba (LET) in the conspiracy to carry out the terrorist attack in Mumbai from November 26 to 29, 2008. According to these sources, while Zardari and Malik are in favour of a more energetic investigation and prosecution to please the US, Gilani and the ISI have been opposing such an investigation.

10. Despite the difficulties faced by him in strengthening the IB and its role in internal security management, Zardari and Malik have been persisting with their efforts. Zardari gives a high-profile role to Malik in all matters relating to internal security. Malik and the Director-General of the IB accompany Zardari on his foreign tours. These sources say that Shoaib Suddle, the then Director-General of the IB, had accompanied Zardari on his recent visits to the US and West Europe and earlier to China. Zardari has also been encouraging the IB to set up its own network of liaison relationships with foreign intelligence agencies. Malik and the IB are being given a more active role in the counter-Taliban operations.

11. These sources say that the ISI, with the backing of Gilani, has not given up its efforts to oppose any leadership role for the IB in internal security matters. It is in this connection that one notes with interest the decision taken by Gilani on May 16, 2009, to appoint Javed Noor, the Inspector-General of Police of Pakistan-Occupied Kashmir, as the DG of the IB in replacement of Suddle, who was close to Zardari. Suddle, who belonged to the Sindh cadre of the Pakistani Police Service, was the DIG of Police of Karachi in September, 1996, when Murtaza Ali Bhutto, the younger brother of Benazir, who was challenging the role of Zardari in the PPP, was allegedly killed by the police following an altercation with them. Suddle is one of the accused in the case filed in this connection.

12. Despite this, Zardari had him appointed as the DG of the IB in June, 2008. He was given an extension of two years after he reached the age of superannuation. In April last, a judge of the Supreme Court set aside the extension given to him and other police officers facing trial in connection with the murder of Murtaza. Despite this, he was taken to the US and West Europe by Zardari along with the DG of the ISI. Shortly after his return from the tour, Gilani had him replaced as the DGIB on the ground that his continuing to hold this office had become untenable because of the Supreme Court judgement. It is not known whether Javed Noor is a nominee of Zardari or Gilani or the ISI. The removal shows that the ISI continues to be opposed to any attempt to give the IB the primacy in internal security matters.

(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. E-mail:


B. Raman

During the US Presidential primaries last year, I had expressed my misgings that Barack Obama might turn out to be another Jimmy Carter, whose confused thinking and soft image paved the way for the success of the Islamic Revolution in Iran .The subsequent Iranian defiance of the US and his inability to deal effectively with the incident in which some Iranian students raided the US Embassy in Teheran and held a number of US diplomats hostage led to the disillusionment of sections of the US electorate with him and his failure to get re-elected in 1980. The strong line taken by him against the invasion of Afghanistan by the Soviet troops towards the end of 1979 did not help him in wiping out the image of a soft and confused President.

2. The defiant action of North Korea in testing a long-range missile with military applications last month and its latest act of defiance in reportedly carrying out an underground nuclear test on May 25, 2009, can be attributed----at least partly, if not fully--- to its conviction that it will have nothing to fear from the Obama Administration for its acts of defiance. It is true that even when George Bush was the President, North Korea had carried out its first underground nuclear test in October 2006. The supposedly strong policy of the Bush Administration did not deter it from carrying out its first test.

3. After Obama assumed office on January 20, 2009, whatever hesitation was there in North Korea's policy-making circles regarding the likely response of the Obama Administration has disappeared and its leadership now feels it can defy the US and the international community with impunity.

4. A series of actions taken by the Obama Administration have created an impression in Iran, the Af-Pak region, China and North Korea that Obama does not have the political will to retaliate decisively if they act in a manner detrimental to US interests and to international peace and security. Among such actions, one could cite the soft policy towards Iran, the reluctance to articulate strongly the US determination to support the security interests of Israel, the ambivalent attitude towards Pakistan despite its continued support to anti-India terrorist groups and its ineffective action against the sanctuaries of Al Qaeda and the Taliban in Pakistani territory, its silence on the question of the violation of the human rights of the Burmese people and the continued illegal detention of Aung San Suu Kyi by the military regime in Myanmar, and its silence on the Tibetan issue. Its over-keenness to court Beijing in order to seek China's support for dealing with the economic crisis and its anxiety to ensure the continued flow of Chinese money into the US for investment in the US Treasury Bonds have also added to the soft image of the US.

5. President Obama cannot blame the problem States of the world such as Iran, Pakistan, Myanmar and North Korea if they have come to the conclusion that they can take liberties with the present Administration in Washington DC without having to fear any adverse consequences. North Korea's defiance is only the beginning. One has every reason to apprehend that Iran might be the next to follow.

6. Israel and India have been the most affected by the perceived soft policies of the Obama Administration. Israel is legitimately concerned over the likely impact of this soft policy on the behaviour of Iran. South Korea and Japan, which would have been concerned over the implications of the soft policy of the Obama Administration, had no national option because they had no independent means of acting against North Korea. Israel will not stand and watch helplessly if it concludes that Iran might follow the example of North Korea. I have said it in the past and I say it again that Israel will not hesitate to act unilaterally against Iran if it apprehends that it is on the verge of acquiring a military nuclear capability. It will prefer to act with the understanding of the US, but if there is no change in the soft policy of the Obama Administration, it will not hesitate to act even without prior consultation with the US.

7. India too has been noting with concern the total confusion which seems to prevail in the corridors of the Obama Administration over its Af-Pak policy. Some of the recent comments of Hillary Clinton, the US Secretary of State, about alleged past incoherence in the US policy towards Pakistan and about the part-responsibility of the US for the state of affairs in the Af-Pak region have given comfort to the military-intelligence establishment and the political leaders in Pakistan. Obama's new over-generosity to the Pakistani Armed forces and his reluctance to hold them accountable for their sins of commission and omission in the war against terrorism have convinced the Pakistani leaders that they have no adverse consequences to fear from the Obama Administration. India would be the first to feel the adverse consequences of this newly-found confidence in Islamabad vis-a-vis its relations with the US.

8. India also has reasons to be concerned over the definite down-grading by the Obama Administration of the importance of the USA's strategic relationship with India. This down-grading has given satisfaction to Pakistan as well as China.

9. Jimmy Carter took a little over three years to create the image of the US as a confused and soft power. Obama is bidding fair to create that image even in his first year in office. The North Korean defiance is the first result of this perceived soft image. There will be more surprises for the US and the international community to follow if Obama and his aides do not embark on corrective actions before it is too late.

(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. He is also associated with the Chennai Centre For China Studies. E-mail:

Saturday, May 23, 2009



(What will be the impact of the global financial and economic melt-down on the Chinese economy? This question should be of interest to the other countries of the South and the South-East Asian region. If the Chinese economy is badly affected, they too are likely to feel the negative consequences of the down-turn in the Chinese economy. Keeping this in view, we have been bringing out a periodic "Chinese Economy Monitor" based on open information. This is the seventh in the series)


Driven by an increase in domestic demand, the Chinese economy has started showing signs of a recovery. The signs are stronger in the interior provinces in Central and Western China where the industries are not dependent on exports than in the coastal provinces where the manufacturing sector is dependent on exports. While domestic demand, encouraged by the Government's stimulus package of last November, is increasing, exports continue to decline, but the rate of decline is slower. Chinese analysts expect that the decline in exports, at a slower rate, will continue till the end of the year. The exports may start picking up again next year if the US economy improves, but not otherwise. While the Asian Development Bank has been upbeat on the signs of a recovery in China, the World Bank has been more cautious and warned against premature optimism. One of the factors for the caution is that most of the recovery has been due to an increase in Government spending and not to an increase in private investment .Another factor is that some of the data tend to be confusing and contradictory. This has been pointed out even by Chinese analysts. An analysis of the recovery by the official Xinhua news agency points out that while industrial production, driven by an increase in domestic demand, is reported to be going up again, power consumption by the industries continues to go down. It points out that no explanation for this contradiction has been forthcoming. There are definite signs of a recovery driven by an increase in domestic demand, but are these signs ephemeral or will they be sustained? The Chinese analysts are keeping their fingers crossed. As one studies the way the Chinese leadership has been dealing with the economic down-turn, one is impressed by the refreshing transparency exhibited by the Chinese leadership in dealing with the economic distress.Instead of covering up their economic difficulties, they have been taking their people into confidence, explaining to them the reasons for the difficulties and the action being taken by the Government in dealing with the difficulties and appealing for the understanding and co-operation of the people. President Hu Jintao, Prime Minister Wen Jiabo and other leaders have been touring inside the country extensively and repeatedly for this purpose. Their efforts are showing results as could be seen from the fact that warnings by foreign analysts of extensive social unrest due to large-scale job losses have been belied so far.


2.In a report dated May 4,2009, the Credit Lyonnais Securities Asia (CLSA) based in Hong Kong, which monitors the Chinese economy, reported as follows: "The CLSA China Manufacturing PMI (Purchasing Managers' Index) rose sharply to 50.1 in April, from 44.8 in the previous month, to signal an expansion of the Chinese manufacturing sector for the first time in nine months. The upward trend observed in the index since posting a survey low last November, suggests that the sector is showing signs of stabilisation. April data pointed to the first rise in production levels at Chinese manufacturers since last July. Where firms signalled an increase in output at their plants, this was commonly attributed to modest gains in new business. Growth of new orders was signalled by April’s survey, following eight consecutive months in which order books have deteriorated. Chinese manufacturers widely reported that improved domestic demand had led sales higher in April. Despite an overall gain in new business, Chinese manufacturers pointed to a modest decline in export sales in April. That said, the latest drop in foreign orders was the least marked for eight months, with panellists commenting that improved demand from some external sources had acted to limit the rate of decline. A modest increase in staff numbers at Chinese manufacturers was recorded in April, which was the first in nine months. Employment growth largely reflected an improvement in order books and higher output requirements. Prices charged by Chinese manufacturers for their finished goods fell further in April, extending the current period of decline to eight successive months. Anecdotal evidence frequently linked the marked drop in output charges to competitive pressures and falling input costs. Average cost burdens faced by Chinese manufacturers declined for the seventh month running in April. The latest reduction was still sharp but much weaker than the rapid declines recorded towards the end of 2008. "

3.Commenting on the survey, Eric Fishwick, Head of Economic Research at CLSA, said: "China's Government has been extremely successful in stimulating investment and, combined with a sharp improvement in export orders, this has pushed the PMI back into positive territory in April. The Export Orders Index should soften again in the coming months as, inventories having been brought under control, orders track final demand overseas. However, we hope that firmer domestic demand, as Government spending gains traction, will keep the PMI above 50 in months to come."
---- CLSA survey dated May 4,2009, available at


4.Addressing a press conference at the end of the annual meeting of the Asian Development Bank (ADB) at Bali in Indonesia on May 5,2009,Haruhiko Kuroda, President of Asian Development Bank, said:"China's economy is on recovery course and it could recover much earlier than other economies, but of course, at the same time, we have to be very cautious. The South Korean economy had showed signs of recovery, and Japan's industrial production showed some signs of bottoming out.On the whole, I'm cautiously optimistic that Asia will recover by the end of next year."
------ Xinhua report dated May 5,2009.


5. China's domestic demand has started to become more of a driving force for the country's economic growth than in the past. Signs of a domestic consumption boost are apparent as people are spending more on domestic commodities and the Government plans for more consumption stimulus. Data from the National Bureau of Statistics (NBS) released on May 20,2009, showed that China's domestic consumption had maintained an upward trend since the beginning of the year. China's retail sales rose 14.8 per cent in April year on year. It was 0.1 percentage points higher than in March. Rural spending, driven by a Government rebate policy on home-appliance purchases and other commodities, grew by 16.7 per cent in April, which was 2.8 percentage points higher than urban growth. The property and auto market also showed the same trend as China became the world's largest vehicle market again with more than 1.15 million cars sold in April, up 25 per cent from a year earlier. In the housing sector, China's real-estate climate index was finally back to growth after ten months of decline. Property sales rose by 17.5 per cent in acreage from a year earlier in the first four months of 2009. "China's economic structure has started to enter a transforming period to a consumption-driven growth model," said Li Daokui, Director of the Department of Finance at Tsinghua University. According to Li, economic growth of China's inland western and central regions, which relied less on export, had exceeded that of the coastal areas in the first quarter, reflecting a strong pull from domestic consumption and investment. Data from regional statistics bureaus had shown that Western and Central China accounted for nine of the 11 provincial areas that had seen double-digit economic growth year on year in the first quarter. Such growth was contrasted by coastal regions whose economy has been mainly driven by export, such as Shanghai, Zhejiang and Guangdong. Gross domestic production (GDP) growth there dropped to three- to- six per cent. "Domestic consumption, together with fixed assets investment, had become the main forces of China's economic recovery as export continues to weaken," Li told Xinhua.
--- Xinhua dated May 21,2009

6."With stronger domestic demand, China is very likely to see its economy facing better conditions this year and the Government's goal of 8 per cent growth will be more than achievable," said Wang Yuanhong, senior economist and head of the Economic Forecasting Department of the State Information Center at a seminar organized by the All-China Journalists Association. Wang, however, expressed concerns on whether the current economic recovery is sustainable. Xu Lin, Director-General of the fiscal and financial affairs department at the National Development and Reform Commission, said China can achieve its goal of 8 per cent growth this year as it has enough resources to add to Government spending if needed. Many observers suspect this may be an overestimate. The World Bank estimates that a 6.5 per cent growth is more realistic and said the enthusiasm about an economic recovery in China may be "premature" as private investment lags behind Government spending. Most China watchers, however, feel that an 8 per cent growth is required to boost employment.China will also have to identify new growth sectors apart from the saturated automobile and real estate markets, Wang said.
------" China Daily " dated May 21,2009


7."With the world keeping a close watch on the Chinese economy for signs of revival, the latest data are sending mixed signals and fueling concern that a recovery, if there really is one, is not on solid footing. When gross domestic product (GDP) and exports were soaring, indicators like electricity use didn't get much attention. Now, analysts are closely examining every scrap of data. But the problem is, many statistics don't seem to be giving much insight into economic trends. Old patterns are breaking down and long-standing relationships are breaking apart. Also, many figures for the first two months of 2009 are especially confusing, because the long Lunar New Year holiday fell in January this year, two weeks earlier than in 2008. Many statistics were only released as an aggregate figure for January and February, making it almost impossible to derive accurate year-on-year data. The National Bureau of Statistics (NBS) reported this week that China's industrial output rose 7.3 per cent year on year in April, at the higher end of analysts' expectations. But power generation fell 3.55 per cent last month from a year earlier, to 274.76 billion kilowatt hours, according to the State Grid Corp. of China. Since industry consumes about 70 per cent of China's power, how do economists account for a rise in industrial production accompanied by a decline in power consumption?
A breakdown of electricity use sheds a little light on the situation. Electricity consumption started declining on a year-on-year basis last October, when it fell 3.7 per cent, the first drop since 1999.That was also before the Government announced a 4-trillion-yuan($586 billion) stimulus package in November. Power consumption fell 4 per cent to 781 billion kw/hrs in the first quarter from a year earlier. But in March, it fell 2.02 per cent, a little more than half the rate of decline in October. And not all sectors reported a power consumption drop. Consumption of agriculture and tertiary industry rose 5.12 per cent and 7.41 per cent year on year in the first quarter, respectively, according to the China Electricity Council (CEC). Residential use rose 9.88 per cent.But industrial use declined 8.21 per cent, and with exports falling, use in the manufacturing and export hubs of Guangdong and Zhejiang provinces, was "below the national average," the CEC said. Indeed, the latest industrial output figures for exporters also show a sharp decline last month, down 14.3 per cent to 566.21 billion yuan. An export revival is evidently way off, and that's bound to delay an overall economic recovery.
Zhang Liqun, a researcher with the Development Research Center of the State Council, a government think-tank, told Xinhua that exports would continue declining in the second half but at a slower pace. Zhang said the likelihood of further deterioration in the global economy was "slim" and Chinese exporters were trying to change their product mix. Exports fell 22.6 per cent last month, the sixth monthly drop in a row. Zhang predicted that for the whole year, exports might fall about 10 per cent to 15 per cent. He noted that when looking at the decline in industrial power use, it was important to remember that industrial upgrading was still in progress. The decline of electricity consumption by heavy industry, which accounts for 82 per cent of total industrial power consumption, was the leading cause for the overall decline. China has spent years working to scale back its smokestack industries so it can cut energy intensity by 20 per cent and major emissions by 10 per cent between 2006 and 2010. China plans to eliminate 15 million kw/hrs of power provided by small coal-powered plants, as well as obsolete capacity of 10 million tonnes in the iron industry and 6 million tonnes in the steel industry this year. The first-quarter output growth rate of the six most energy-intensive sectors (iron and steel, nonferrous metals, building materials, petrochemicals, coking and chemicals) fell 12.5 percentage points on average from a year earlier, to 2.3 percent, NBS figures showed. Power use by those sectors also showed large declines: iron and steel (10.24 per cent), chemicals (13.14 per cent) and nonferrous metals (16.78 per cent) in the first quarter, according to the CEC. Meanwhile, efforts to upgrade and rebalance industry showed progress in the first quarter, with tertiary industry's weight in the economy up 1.6 percentage points and secondary industry's weight down 1.9 points. Despite discouraging data on the industrial front, policy makers have taken heart from consumer behavior in recent months, which seems to show that the effort to get more economic growth out of domestic demand and less from external factors is succeeding. GDP expanded 6.1 per cent in the first quarter, and the domestic consumption provided the largest share at 4.3 percentage points, accounting for 70.5 percent of the total growth. Investment generated another 2 points, accounting for 32.8 per cent of the total growth, while the decline in exports shaved 0.2 point of the total, according to NBS figures. The economy expanded by 10.6 per cent year on year in the first quarter of 2008. Consumption accounted for 44.4 per cent of total GDP growth, with investment generating another 46.7 per cent and exports providing the remaining 8.9 per cent of the total, according to Zhu Baoliang, an expert with the NBS.
China has become the world's largest vehicle market, with more than 2.67 million cars sold in the first quarter, up 3.88 per cent year on year. Car sales were buoyed by government stimulus policies, said Zhang Yunpeng, an analyst with Beijing-based Huarong Securities. In January, China halved the purchase tax on passenger cars to 5 per cent for models with engine displacements of less than 1.6 liters. More than 1.15 million vehicles were sold last month in China, up 25 per cent in terms of units, while sales in the United States fell 34.4 per cent year on year to 819,540 units, according to the China Association of Automobile Manufacturers. Other NBS figures this week showed that retail sales rose 14.8 per cent in April year on year to 934.32 billion yuan, and the 18.5 per cent monthly vehicle sales growth in terms of sales revenue dwarfed other items by 3.7 percentage points. Private-sector housing sales rose 8.2 per cent year on year in 70 mid-sized and large cities in the first quarter, including Beijing, Shanghai, Guangzhou and other metropolises. Auto and home sales were the most important consumption sectors and their revival showed a trend of consumption recovery in China. This would stimulate the growth of related industries. Boosted by the surge in housing transactions, sales of construction and interior decoration materials rose 10.8 per cent in April from a year earlier, according to the NBS. Zhuang Jian, a senior economist with the Asian Development Bank office in Beijing, told Xinhua that although sales of cars and homes had picked up in recent months, Chinese consumers needed to have more confidence before they would spend and invest more. The Government needed to take new, responsive measures as new situations emerged. Zhuang also noted that contradictory data had been seen from time to time in earlier years in China, when the country's economy was maturing, and there still might be some difficulties ahead. He added that it had only been half a year since the major stimulus plan was announced and it would be wise to wait for another quarter to see the effects of the stimulus package. "The stimulus has already paid off, with rising investment in government-supported projects. As the weather in the second quarter is more suitable for construction work, we can expect this type of investment would continue to grow," Zhang said. China's fixed-asset investment jumped 28.8 per cent to 2.81 trillion yuan in the first quarter. The growth pace accelerated further to 34 per cent in April. Analysts said they expected further gains in shares, car sales and housing transactions in the coming months, but they warned that economic data could still be confusing and disappointing.The ADB forecast in a March report that China's economy might grow 7 per cent this year. "Judging from current conditions, economic growth might even exceed that forecast," Zhang said.
------ Xinhua analysis dated May 14,2009


8. Chinese experts have welcomed the remarks made by Timothy Geithner, US Treasury Secretary, on May 20,2009, before the US Senate Banking Committee that China did not manipulate the renminbi for export advantage and had taken steps to enhance exchange rate flexibility. Commenting on his statement, Zhai Peng, economist, Guotai Jun'an Securities, said: "China's yuan has appreciated by 20 per cent between July 2005 and February 2009. The currency even appreciated slightly against the dollar when most other emerging markets and other currencies fell sharply against the greenback during the financial crisis.Unlike the Asian financial crisis in 1997 when the Chinese Government intervened to hold the renminbi's value against depreciation, it has become much more market oriented ever since China launched the reform of its foreign exchange mechanism in July 2005."Li Jianfeng, economist, Shanghai Securities, said: "The fact that Shanghai is to be built into a global financial center by 2020 would greatly drive the yuan to play a bigger international role. This will consequently enable the Government to promote the reform of the foreign exchange mechanism and thus result in a steady appreciation of the currency." Du Peng, the head of the current account department at the State Administration of Foreign Exchange (SAFE), said that China would give the nation's banks more price-setting capacity in the exchange of foreign currencies with customers as part of Government efforts to create a more market-oriented yuan. "The foreign exchange regulator will relax limits on exchange rates commercial banks offer customers to meet demand for two-way fluctuations of the yuan," he said and added that China would also push forward the opening of the capital account and improve the management of current account."After several years of reform, China's foreign exchange market has developed quickly and has made great strides,"he said. Zhang Guangping, deputy head of the Shanghai branch of the China Banking Regulatory Commission, said that a series of conditions would have to be met for the yuan globalization trend to gather momentum."China would have to gradually make the yuan convertible on the capital account; it needs a more liquid foreign exchange market; its bond markets and banking system needs to be more developed; and there has to be proper monitoring of cross-border capital flows," Zhang said.
------ "China Daily " dated May 22,2009


9.Addressing a press conference on March 23,2009,Hu Xiaolian, a Vice- Governor of the People's Bank of China, made the following points: (i).China will continue to buy US Treasury Bonds, viewing the credit risk as low overall."Investing in American Treasuries, as an important part of our foreign exchange reserve management, will continue." (ii). China would pay close attention to changes in the value of its Treasury holdings. "US Treasuries are an important part of our foreign exchange reserves. So we naturally care about the security and investment return on US Treasuries." (iii). She disputed the argument heard in some circles that the US economy and markets were in such deep trouble that the dollar's global supremacy was under threat. She said China's view was that studies could begin of a multi-polar global currency system but that the dollar remained the key currency in terms of trade, settlement, payments and pricing. The dollar also dominated financial investment. That was why China, though favoring research into a new multi-currency system, believed the current priority is to step up supervision of the US economy and its financial markets. (iv).The Central Government took long-term factors into account such as the structure of China's payments and trade; the risks and returns on various currencies; and the liquidity of different currencies. China would not be swayed in determining the make-up of its portfolio by short-term volatility in currency markets.
---"CHINA DAILY" dated March 23,2009.


10.China's consumer goods industry kept stable development in the first four months this year, thanks to rising domestic demand that offsets falling export, said the Ministry of Industry and Information Technology (MIIT) on May 22,2009. In the past four months, the industrial output of consumer goods grew by 8 per cent. The figures were higher for March and April at 9.8 per cent and 9.2 per cent each. Among its major sectors, textiles, tobacco and pharmaceutical, and light industry grew by 8.1 per cent, 6.6 per cent, 6.1 per cent and 13.8 per cent in industrial output respectively.Industrial output of the four sectors accounted for 30.4 per cent of the national total, statistics from MIIT showed.The light and textile industries, which had been among the ten industries supported by the Government's stimulus plans, reported shrinking decline in exports.Exports in the light industry fell by 10.9 per cent and exports in the textile industry dropped 8.4 per cent from January to April. However, the decline rates were 4.8 and 7.4 percentage points lower compared to that of the whole industrial export in the same period.
----- Xinhua dated May 22,2009


11.In a statement issued on May 20,2009, the National Development and Reform Commission gave for the first time a break-up of how the stimulus package of US $ 586 million announced by the Government in November last year would be utilised. At the time the stimulus package was announced, some analysts had pointed out that the Government had included in the package the amounts which it intended spending for the relief, rehabilitation and reconstruction of the quake-hit areas of the Sichuan Province.Confirming this, the statement indicated that one-fourth of the stimulus package was going towards the reconstruction in quake-devastated Sichuan province.Another 37.5 per cent of the package is going towards the construction of roads, railways, airports, irrigation and other basic infrastructure across the country. The balance is being utilised for construction of new houses and the improvement of existing houses, village improvement schemes and the improvement of public health services and education. The Central Government is providing 29.5 per cent of the funding for the overall stimulus program, with the balance coming from local governments and other sources.
---- "China Daily" dated May 22,2009


12.China will unveil its first iron ore trade platform called the Rizhao International Iron Ore Trade Center in the Shandong province on May 25, 2009. It will signal that the establishment of the country's iron ore price index is under way, according to Bai Wenhui, executive of Shandong Huaxin Trade Co Ltd, a major shareholder of the trade center. Jointly started by five local private companies pursuing bulk commodity transaction in Shandong, the center mainly provides electronic commerce services for iron ore suppliers and steelmakers. Its registered capital totals 20 million yuan ($2.93 million). The trade center will offer services including electronic transaction, information exchange, quality inspection, storage, transportation, insurance, and settlement for the two parties in iron ore trading, according to Wang Lei, head of the preparation team for this program."As the biggest iron ore importer, China has not set an iron ore price index to date. The iron ore trade center will promote orderly iron ore imports and standardize activities of trading parties, and gradually facilitate China to launch its own iron ore price index in the future," said Bai.Data from China Customs shows that the country imported 443.7 million tons of iron ore in 2008, half of the world's overall iron ore exports volume over the year, and the imports in January-April period in 2009 hit 188 million tons.
----Xinhua dated May 22,2009.

( The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. He is also associated with the Chennai Centre For China Studies. E-mail: )