Matthew Fishback is pursuing a Master’s Degree in International Relations and is interested in South Asian affairs, especially the Kashmir region.
In August 2019, India’s Prime Minister Narendra Modi declared the Central Government was revoking Article 370, Jammu and Kashmir’s (J&K) special status.  Among other things, it allowed J&K to have a separate constitution, a flag, and law-making ability. This revocation was insisted on by Delhi to increase investment and boost the economy of J&K, all in order to put the territory “on par with the rest of India”. A report by the Kashmir Chamber of Commerce in August 2020, one year following the revocation, shows that J&K’s economy has undoubtedly fared worse than before.
As such, Pakistan has chosen to exploit this opportunity to assert its claim as the “legitimate owner” over all of Kashmir, as well as showcase its economic power in Pakistan Administered Kashmir (PaK). PaK includes the provinces of Azad Jammu and Kashmir (AJK) and Gilgit-Baltistan (G-B). Pakistan has worked closely with China, and to some extent Iran, to develop the economy of PaK. This has been an attempt to simultaneously better Pakistan’s economy while supplementing Pakistan’s attempts to shore up international support for her stance on the Kashmir question. This article will look at the efforts India and Pakistan have taken to develop the region, as well as what both sides could do to stabilize Kashmir long term.
1: Islamabad’s steps for Economic Recovery in PaK
PaK has been historically underdeveloped and neglected by the central government since the creation of Pakistan. This is primarily because Pakistan is a “peripheral country” in terms of the global economy where a “core country” supports and sometimes exploits the periphery. In these terms, PaK, as a semi-autonomous area, is a periphery to the central areas of Pakistan. In general, sheer distance from the heartland has discouraged investment in the mountainous province. According to the government, around 78% of AJK’s households have no tap water connection. Based on research by the University of Massachusetts, healthcare and employment are similarly lacking, with only one doctor per 4,799 people and unemployment around 13% officially. The rest of Pakistan has 1 doctor per 1127, and unemployment of around 6%.  At present, the economy of AJK relies on exploitative logging and pastoral agriculture in G-B. Many people depend on foraging in the forests, sustenance agriculture, and foreign remittances for daily survival. In this context, Pakistan seeks to develop PaK with Chinese assistance due to its shared border with China, a high literacy rate, hydroelectric potential, and plenty of land for development.
Since 2009, Pakistan and China have partnered together to develop PaK and build the multi-million dollar China-Pakistan-Economic-Corridor (CPEC). Pakistan can serve as China’s second gateway to the Persian Gulf while Pakistan gains a major partner in development projects and trade. The high literacy rates of PaK have proven to be an advantage in the region’s development. Literacy is a major indicator of a country’s economic development potential, with low rates significantly impacting GDP. Pakistan’s literacy rate sits at 45% with an education expenditure of only 2% of GDP, while Azad Kashmir sits at 78% without major investments in education.
Fig 1: The economic growth of PaK between 1970 and 2020 (Source: https://www.thehindu.com/news/international/the-land-of-peaks-streams-and-disputes/article32704400.ece)
China and Pakistan have utilized the well-educated population for skilled labor on some projects such as hydroelectric facilities, roads, and pipelines for Liquefied Natural Gas (LNG) coming from Iran. As part of CPEC, the two countries have also announced plans for Special Economic Zones, rail lines, a Trans-Himalayan oil pipeline, and industrial zones. Although COVID-19 has caused serious delays and compelled Beijing to reassess her geostrategic objectives in Pakistan, thereby jeopardizing the future of CPEC, these circumstances appear not to have impacted Pakistan’s plans for PaK. Pending a November 2020 vote, Gilgit-Baltistan, the region bordering China, will transfer from autonomous region to full state status. At the same time, Pakistan announced work on the Moqpondass Special Economic Zone would begin soon. It appears that Pakistan will push ahead with its development of the G-B and AJK regions regardless of the pandemic, economic conditions, or Chinese assistance.
2: India’s Economic Pushback
New Delhi has been significantly involved in the development of Jammu & Kashmir since its highly controversial and unilateral revocation of Article 370 in mid-2019. Delhi hopes that the revocation of Articles 370 will lead to greater economic prosperity in J&K, thereby positing India as the best option for Kashmir’s development. Simultaneously, she wants to push back on China’s ever-increasing presence in the region, an indication that India isn’t going to give up on the contested title of regional hegemon easily.
Between August 2019 and the end of the year, the Indian government invested $812 million USD in J&K. In July 2020, the Lt. Governor of J&K announced 48 development projects, some utilizing grant funds, ranging from bridges and roads to schools and water systems worth in total Rs. 151.79 crore ($20.4 million USD). This spending is highly necessary due to J&K’s low literacy rates, electricity transmission losses, and an overall lack of reliable transportation networks. On the other hand, tourism was a significant emerging sector of the economy but it has been stifled by the COVID-19 outbreak, as well as by simmering border conflicts between Pakistan and China. In particular, Chinese harassment in Ladakh, a major tourist area of J&K, has prevented tourism and development in the border region. Even then, the most damaging thing to the State’s economy has been Delhi’s punitive measures taken against ordinary Kashmiri’s. Across the state, restrictions on movement, cell service blackouts, and internet bans have cut businesses ability to export products or host tourists. There are many potential areas for growth in Kashmir’s economy, pending systemic change on Delhi’s end.
While India and Pakistan both seek to control the entirety of Greater Kashmir, the unification of Kashmir’s pre-1945 borders under one flag is incredibly unlikely. China, holding some territory and having a stake in the development of the region, is also unlikely to give up its claims now. The best bet for regional stability is through sustained development paired with diplomatic efforts to cool tensions. A soft border, similar to Northern Ireland and Ireland, would benefit Pakistan and India greatly as local commerce could pass freely. A soft border would also mitigate conflicts stemming from Kashmir being artificially split in two. India, always fearful of predatory Chinese investment practices, could try to shift Pakistan away from Chinese influence through this increased cooperation. At present, Pakistan is already building some of the infrastructure needed to facilitate an economic relationship with J&K, such as duty free special economic zones, electrical grids, and transportation networks. On the Indian side, the J&K state government is attempting to revive and strengthen the economy by spending lavishly on large projects. This will mean short term losses but long term gains if the projects pan out.
Pakistan Administered Kashmir has been rapidly developed since the start of CPEC in 2009 but if India can produce what China has yet to in 11 years, this will showcase the potential for India as a regional partner. The strongest hurdle to overcome are not the projects themselves, but the longstanding sectarian divisions between Hindus and Muslims. With China’s repositioning in the region and withdrawal from many Belt and Road initiatives due to strained finances, Pakistan will need to look elsewhere to continue most CPEC projects. Iran is one option, though US and international sanctions have killed all past projects thus far. In the short term Pakistan might be pushed to revisit old confidence building measures with India, as had taken place in the early 2000s. COVID-19 has opened some unique opportunities for everyone to reevaluate their positions in Kashmir, but only time will show what Islamabad, Delhi, and Beijing decide.
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