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Destructive conflicts have thwarted growth and development in South Asia for more than half a century. This collection of multi-disciplinary essays examines the economic causes and consequences of military conflict in South Asia from a variety of perspectives embracing fiscal, social, strategic, environmental and several other dimensions.



1. Introduction

South Asia comprises the states of Bangladesh, India, Sri Lanka, the Maldives, Bhutan, Pakistan, Nepal and Afghanistan. It is an area of enormous opportunity, staggering diversity but also pervasive poverty and instability. Home to 1.64 billion people — roughly 24 per cent of the world’s population — South Asia is an important and emerging market that has averaged an impressive rate of real GDP growth of six per cent over the last 20 years (International Labor Organization, 2013). The region’s economic importance is heightened by its geographical position adjacent to China and South East Asia and astride trade routes between these markets and those of Africa and Europe. Consequently, it is unsurprising that the rest of the world has started to wake up and take notice of the region, particularly following the 2008 global financial crisis when emerging markets in Asia and Latin America were looked to as the engine rooms of global economic growth. While the economies of North America and Europe languished with high levels of debt, low or negative growth and spiralling unemployment, the economies of Asia and the Pacific experienced an economic renaissance with impressive rates of economic growth and investment. This led some to speculate about the relative decline of Western economic and political dominance and the advent of an ‘Asian century’ which, for many, meant a Chinese century.

Matthew J. Webb, Albert Wijeweera

2. The Economics of Conflict in the Chittagong Hill Tract Region of Bangladesh

Bangladesh emerged as an independent state in 1971 out of the separation of East/West Pakistan and the bloody war that ensued, and is largely attributable to conflicts over the division of political power and economic resources. It was expected that Bangladesh, being a relatively homogeneous state, would not confront significant internal conflict. In fact, Bangladesh is the only nation state in South Asia that is considered to be nationally homogeneous. Yet, it has not been free from conflicts. Rather, it inherited the major characteristics of Alavi’s ‘post-colonial state’ (Alavi, 1973) and consequently began to face issues and conflicts on both internal and external fronts. Today, Bangladesh is internally divided on a wide variety of internal issues including: national identity; Islamism versus secularism; an ethnic separatist movement in the Chittagong Hill Tract (CHT) region; the treatment of minorities; corruption; and a host of horizontal and vertical divisions. Consequently, any author seeking to study conflict in Bangladesh is, sadly, spoilt for choice. Moreover, if the focus of the study is narrowed to economic dimensions then the choice does not become any easier; all these conflicts have significant economic dimensions that could potentially undermine national economic growth and stability. However, among internal conflicts the demand for autonomy by the indigenous tribes of the CHT region stands out as primarily attributable to economic factors and, consequently, is the focus of this chapter.

Syed Serajul Islam

3. The ‘Political Economy’ of Sikh Separatism: Ethnic Identity, Federalism and the Distortions of Post-Independence Agrarian Development in Punjab-India

The north-western Indian state of Punjab experienced non-violent mobilization by large segments of its Sikh population for increased regional autonomy during the early 1980s, and a subsequent armed separatist insurgency for an independent state from the mid-1980s to early 1990s. This initial non-violent agitation and subsequent armed insurgency were remarkable because they occurred in one of the most prosperous states in the Indian Union that had been hailed as a model for agrarian development in the late-1960s and 1970s (Grewal, 1994). In this chapter, I argue that Sikh mobilization and violent separatism can best be explained by examining the complex and multi-faceted interactions of the economic and political dimensions of the conflict. Specifically, I identify two causal pathways linking economic discontent in Punjab to political mobilization and insurgence. First, the economic dislocation of marginal and small Sikh farmers due to the unintended so-called ‘distortions’ of the Green Revolution resulted in a deep sense of socioeconomic frustration and grievance which was utilized by the Akali Dal (the main Sikh political party) to mobilize against the central government. And, second, the economic restrictions placed by the central government on the emerging class of middle and large capitalist farmers in post-Green Revolution Punjab frustrated and alienated segments of the rural Sikh population.

Jugdep S. Chima

4. The Political Economy of the Ethno-nationalist Uprising in Pakistani Balochistan, 1999–2013

In a seminal work on the ethnic history of Pakistan, the Soviet Orientalist Yuri Gankovsky (1971, p. 208) concluded his study on Balochistan by observing that:

The Baluchis [sic] are the only one of Pakistan’s major peoples who had not consolidated into a bourgeois nation by the time when the colonialists left the Indo-Pakistan subcontinent. The national consolidation of the Baluchis [sic] is still on the move in our day….

Gankovsky’s neo-Marxist analysis steeped in a historical materialist framework provides for an interesting critical assessment of how Baloch society was comparatively underdeveloped in comparison to other areas that became part of Pakistan — a characterization that unfortunately is still true and raises the question of what role issues pertaining to economic and social development have played in the growth of Baloch ethno-nationalism and secessionism. The elite class in Balochistan remains the tribal Sardars and Chieftains who are the prime movers and shakers of Balochistan’s politics. The Sardars and their power as it exists today is a consequence of the

Sandeman System

implanted by the British to keep the Baloch Sardars pliant with British interests in neighbouring Afghanistan. Through the Sandeman System, the British devised the lowest cost per unit of output method of pursuing and maintaining their imperial interests in that part of the world (Sayeed, 1980).

Farhan Hanif Siddiqi

5. Nepal’s Protracted Transition: Explaining the Continuing Political and Economic Impasse

Over the past two decades Nepal, a landlocked Himalayan nation of over 27 million people, has undergone a series of tumultuous political transformations. In 1990, a successful pro-democracy movement forced then-King Birendra to concede to a parliamentary system and a more titular role for the monarch. Subsequently, in 1996 Nepal’s fledgling democracy was challenged by a left-wing insurgency declared by a faction of Nepali communists known as Maoists. This insurgency, almost a decade long, killed over 13,000 people, and shook the foundations of Nepal’s traditional power structures led by the King and Kathmandu’s hill-based elites. In the meantime, the liberal King Birendra lost his life in a ghastly palace massacre in June 2001. His successor, King Gyanendra, proved a nightmare for Nepal’s democratic politicians as he tried by all means to recapture royal prerogatives lost in 1990. The new King’s jealous pursuit of power, however, rallied Nepal’s democratic parties and international forces against the monarchy. Consequently, in November 2005 opposition to the King took a decisive turn as Nepal’s pro-democracy Seven Party Alliance (SPA), with strong support from Nepal’s influential neighbour India, entered into an agreement with the Maoist insurgents to launch a joint movement to wrest power back from the King and restore democracy.

Pramod K. Kantha

6. India’s Indigenization of Military Aircraft Design and Manufacturing: Towards a Fifth-Generation Fighter

India has traditionally looked northward towards Pakistan as a potential aggressor. Since the creation of the separate states of Pakistan and India in 1947, there have been four wars between the two nations, one of which was undeclared, in addition to numerous border skirmishes. One might well imagine that India will continue to keep a close eye on its northern neighbour into the future. However, with the rapid emergence of China as a major geopolitical influence in the broader Asian region, it has become clear that Indian military strategists are now viewing China — a nation traditionally friendly to Pakistan — as the greater rival and threat. Despite the increasing strength in economic ties between China and India, as evidenced by China being India’s largest trading partner (Krishnan, 2011), China’s expanding military capabilities have not gone unnoticed by India. With its intention to develop a US-style carrier battle group, and the likelihood of deploying an indigenous fifth-generation air superiority fighter in the future (which could have a carrier-based application), China poses a credible future threat to Indian dominance over the Bay of Bengal and Indian airspace in the north of the country (Garver, 2002). In particular, China is seeking to develop an almost completely indigenous military equipment manufacturing capacity, which is best evidenced by an emerging view that it will soon develop its own locally designed aircraft carrier to complement the Soviet-era carrier that it has already acquired (Pasandideh, 2014).

Michael B. Charles, Elisabeth Sinnewe

7. The Political Economy of Pakistan’s ‘War on Terror’

Studies on the impact of terrorism on an affected country’s economy tend either to be discussed from a comparative cross-country perspective in development terms, a method considered unreliable and highly speculative (Sultan, 2013), or related more to the counter-terrorist measures adopted by developed (rather than developing) countries where detailed economic data is more readily available. Typical of the former approach is the World Bank’s 2011 Development Report: Conflict, Security and Development, which broadly canvasses the ways conflict, violence and insecurity have impacted on and impeded the economic development of ‘fragile’ states. These are states that are deemed institutionally incapable of protecting their citizens from violence and oppression, and constitute, ostensibly in the World Bank’s perspective, most of the non-developed world (World Bank, 2011). While the violent situation in Pakistan and Afghanistan is alluded to as ‘consuming the attention of global policy makers’ (World Bank, 2011), the report’s focus is more on Africa than Asia. Both Pakistan and Afghanistan simply figure as a statistic in the selected World Development Indicator tables of comparative socioeconomic data for 135 economies (World Bank, 2011). In so far as terrorism is mentioned, it is undifferentiated as one of several ‘new forms of violence’ characterizing twenty-first century conflict.

Howard Brasted, Zahid Shahab Ahmed

8. Terrorist Activities and Financial Market Performance: Evidence from Sri Lanka

Terrorism is frequently indiscriminate in the methods and targets adopted to achieve its objective of sowing fear in a population. The apparently wanton ability of terrorists to strike at a range of targets is an important means of maintaining the perception of a pervasive, unpredictable and existential threat in a population. A key element in this strategy is an affront on an adversary’s economic assets and performance. By directly targeting financial and economic infrastructure, or through the knock-on effects on consumer and investor confidence, terrorists may exert significant pressure to capitulate to their demands. Recent studies (Eldor and Melnick, 2004; Farooq and Ahmed, 2008; Kollias et al., 2010; Kollias et al., 2011) on data from the USA, Israel and elsewhere have demonstrated the broad and destructive effects of terrorism on investors’ confidence with effects on the performance of stock, forex and money markets. The result is a direct affront on a government’s ability to achieve its economic targets and, by diminishing the productive and financial resources available to it, the capacity to defeat the terrorists. Accordingly, a comprehensive analysis of the consequences of terrorist acts, and the effectiveness of terrorist tactics, must include an economic dimension.

Albert Wijeweera

9. Greed, Grievance and Violent Separatism in South Asia

‘Separatism’ is the advocacy by a sub-group (usually a minority) within a state for a measure of political, social or economic autonomy. It is a matter of degree, rather than a binary (all-or-nothing) feature, consisting in a range of positions along a continuum of special benefits, privileges, entitlements and rights that bestow varying degrees of autonomy from the state’s authority (Wood, 1981; Pavkovic and Cabestan, 2013). In this chapter I shall be concerned with the position at the extreme end of this spectrum — secession — where the state’s geographical borders are re-drawn to exclude a portion of territory from its sovereignty thereby granting to the territory’s inhabitants the maximum degree of autonomy. More specifically, my concern will be to examine the foundations of some of South Asia’s more intractable and destructive secessionist wars within the framework of two types of explanatory theory that attribute the causes of secession to rational self-interest (greed) and injustice (grievance). Nonetheless, despite this focus, I shall continue to refer to these conflicts as ‘separatist’ rather than ‘secessionist’ due to the impracticality of a clear distinction between the two; not only do many secessionist groups start as separatist by pursuing lesser forms of autonomy than independent statehood (subsequently becoming secessionist as these demands are violently rebuffed), but many separatist groups employ the demand to secede as a bargaining tool to achieve lesser goals.

Matthew J. Webb

10. The Himalayan Ranges, Glaciers, Lakes and Rivers: An International Ecological, Economic and Military Outlook

The Himalayas contain the world’s third largest mass of ice which is a source for more than ten major rivers in Asia that support immense agricultural and industrial economies. Major Himalayan rivers such as the Ganga and Yamuna water almost half of India and support a vast industrial base, while the Indus, Sutlej and its tributaries serve a similar function in Pakistan and northwest India. Similarly, the Mekong, Padma and Brahmaputra rivers are vitally important to the populace and economies of Nepal, Myanmar, Thailand, Vietnam, Cambodia and Bangladesh while major Chinese rivers such as the Yangtze and Yellow rivers also originate in the Himalayas. Consequently, almost half of the world’s population depend on the natural resources of the Himalayas. However, the region remains socially disturbed, politically unstable and militarily sensitive. Moreover, the absence of coordinated and sustainable management has resulted in (or exacerbated) severe crises including the 2011 floods that devastated the economies of Pakistan, Bangladesh and parts of Southeast Asia. Of particular concern is the Aksai Chin region — located at the convergence of the three regional powers of China, India and Pakistan — where Chinese projects since the 1970s to develop electro-power facilities and an economic corridor to West and Central Asia, combined with increased military activity, has inflamed tensions and heightened geo-strategic rivalries.

Lavanya Vemsani

11. Defence, Security and the Economy in South Asian Countries

Conflict and development are invariably considered as incompatible and even mutually exclusive as contemporaneously occurring phenomena. The former, through a cohort of mechanisms and channels, siphons valuable and scarce resources to less productive and in fact, destructive uses with a very high welfare cost to societies. Hence it adversely affects and impedes development efforts and hinders socio-economic progress (Collier, 1999; Barros, 2002; Blomberg and Hess, 2002; Murdoch and Sandler, 2002; Gupta et al., 2004; Murdoch and Sandler, 2004; Koubi, 2005; Gaibulloev and Sandler, 2009; Glick and Taylor, 2010; Braddon and Hartley, 2011; Blomberg and Hess, 2012). Although this probably has a universal application, it is even truer when it comes to poorer countries that, in comparative terms, are resource constrained compared to their richer, more developed counterparts. As a result of conflict and violence — be it inter- or intra-state — developing countries are starved from valuable and scarce assets and human capital that could alternatively contribute to their developmental efforts, propping-up growth, propelling human welfare and improving standards of living (Abadie and Gardeazabal, 2003; Blomberg et al., 2006; Brauer and Dunne, 2002; Garfinkel and Skaperdas, 2012; Skaperdas, 2011). Some of the most protracted and violent conflicts in the world can be found in the South Asia region.

Christos Kollias, Stephanos Papadamou

12. A Survival Analysis of the Onset of Peace in South Asia

It is a sad fact that Asian states have experienced disproportionately longer wars and are more likely to endure multiple, repeated spells of conflict where a war ceases and then starts again (e.g., the multiple Indo-Pakistan conflicts). In this chapter we explore why wars in Asia, and especially in South Asia, are so prolonged and cost so many lives through an examination of the determinants of Asian wars. Specifically, we use econometric modelling (survival analysis) to analyse the probability of the termination of war in Asia according to three distinct outcomes: victory, ceasefire and peace. To clarify, survival analysis is used to explain events that have a certain end; for example, it is often used in health studies to estimate the probability of patients’ survival so many years after initial diagnosis of certain conditions. In the context of this paper, ‘survival’ means the continuation of war and the probability of survival (or the existence of war). This goes down when peace is achieved or the war has ended for a country. It approaches zero when war for the last fighting states terminates. Our study uses data from Uppsala Conflict Data Program (UCDP) and Peace Research Institute of Oslo (PRIO) for the period 1946–2011. We merge this data set with Angus Maddison’s economic data series and, after a descriptive analysis, estimate the model using competing risk proportional-hazard models with reference to specific causes.

Ali C. Tasiran, Zainab Kazim Ali

13. Conclusion

The central message to emerge from the collection of essays that constitute this volume is that ethnic, political, strategic, environmental, economic and other factors — each vital to understanding the causes and trajectories of the myriad forms of conflict that exist in South Asia — cannot on their own provide a compelling descriptive or explanatory account. Rather, at individual, district, national and regional levels of analysis, economic factors intersect with other determinants of conflict to form a multifaceted, seamless mosaic. Rational self-interest — the pillar of economic theory — is, therefore, a necessary, but not sufficient, factor in the analysis of these conflicts. Rather, there exists a dynamic interplay between economic and other factors to foment and sustain conflict from the very micro level of individual participants to that of the most macro level of nation states with populations in the hundreds of millions.

Matthew J. Webb, Albert Wijeweera


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