Pakistan's troubles could be India's Gulf opportunity

01 November 2007

India and Pakistan are on divergent economic and political trajectories. The Gulf will be drawn towards the one on the right track.

While fury exploded at the start of November about the declaration of a state of emergency in Pakistan, it was business as normal for Indian Prime Minister Manmohan Singh. His visit to Moscow in the middle of the month for the annual India-Russia summit was brief and there was no warmth in his meeting with President Putin. But India is in clover compared to its tormented northern neighbour.

Events 60 years after India and Pakistan were created appear to be reaching an historic turning point. India could be one of the world’s biggest economies in little more than 25 years. Pessimists wonder whether Pakistan will then still exist in its present form. There will be implications for the GCC.

There is evidence of trade between Arabia and the subcontinent during the civilisation that flourished in the Indus valley almost 4,000 years ago. But the connection was only once formalised. British India for just over a century from 1858 effectively governed Aden, Kuwait, Bahrain, Qatar and what is now the UAE and controlled treaty relations with the Sultanate of Oman. For a period, the Indian rupee was the principal Gulf currency and much of Arabia and the entire Indian subcontinent was a single economy. The economic connection was so strong that India minted in 1959-66 the Gulf rupee for use in the region.

But the most abiding bond was in people. Before oil, the Gulf pearl trade was dominated by Indian merchants. Some of their descendants have Gulf passports. People that can trace their origins to what is now Pakistan sit in the Omani cabinet.

More than 3 million Indians and about 1.5 million Pakistanis live in the GCC. Together, they account for more than 15 per cent of the total population and represent the largest non-national share of the labour force. The number is steadily growing. Drawn by labour shortages caused by migration to the Gulf, Indian workers are arriving in Jordan and other Middle East countries where they were previously rare.

Traditionally, the GCC regarded the Indian subcontinent as a source of low-cost labour, though at least 500,000 professional and middle-class Indians and Pakistanis now live in Arabia. When it came to regional politics, Muslim Pakistan was consistently favoured. Gulf states sympathised with Islamabad in wars with India and back Pakistan’s claims in Indian-occupied Kashmir. Pakistan has supplied Gulf countries with soldiers, pilots and police.

Gulf unease with India was compounded by New Delhi’s policy of aligning itself with the Soviet Union during the Cold War. Pakistan and the GCC stood by the US and the West. Gulf relations with India chilled in 1988-2004 when the Hindu Bharatiya Janata Party (BJP) led a series of coalition governments. They hit a low point when Hindu extremists demolished the Babri Mosque in Ayodhya in 1992.

But a new opening emerged in the spring of 2004 when the Indian National Congress won a majority of seats in parliament and formed a left-of-centre coalition. Manmohan Singh, a respected technocrat and architect of many of India’s economic reforms, was made prime minister.

Singh has attempted to remake India’s international position by improving relations with the US and China, historic allies of Pakistan, in an attempt to secure permanent membership of the UN Security Council. In March, India reached a compromise nuclear co-operation agreement with the US in a deal that set a precedent for both countries, though it is still to be approved by India’s parliament.

In a sign of the changing times, King Abdullah visited New Delhi in January 2006. It was the first visit by a Saudi head of state for 51 years and evidence of a shift in attitudes in India and the GCC. New Delhi needs Arabia’s investment capital and oil. Gulf states view India as a promising emerging market. Two-way trade, estimated to have been worth more than $16,000 million in 2006, is forecast to double in less than a decade. There are plans for a GCC-India free trade agreement.

Champions of Islamic co-operation argue Pakistan, which has been enjoying unprecedented growth, should be the GCC’s top priority. But India’s economic ascent and growing pragmatism in international affairs compares favourably with the fog of uncertainty that has descended over its historic rival. There are difficult times ahead for Pakistan and its allies. But it is an ill-wind that does no one any good. Pakistan’s misfortunes represent a giant Indian opportunity in the Gulf.

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