A senior British official said pithily to me some time back that "if Pakistan knew Osama bin Laden was hiding in Abbottabad (located a couple of kilometres from Pakistan's Military Academy) it is a rogue state. If Pakistan did not know Osama was living at this location for over five years, it is a failed state". Despite such no-nonsense rhetoric in private, the United States, the United Kingdom and other Western governments have not been commensurately demanding of Pakistan in public. The contrast is particularly marked when compared with the West's on-off arming of dissidents and bombing of Iraq, Libya, Syria and Afghanistan-Pakistan border areas to stop alleged covert and overt involvement with terrorism. Indian analysts are often exasperated and even apoplectic about what they perceive as wilful condoning of terrorism emanating from Pakistan. This inconsistency between the West's private acknowledgement and lack of effective action against sources of terrorism in Pakistan is because of the stakes the West has in maintaining reasonable relations with a strategically located nuclear Pakistan, and more widely with the Muslim "Ummah". As can be seen in the table, Pakistan is one of the largest countries in the Organisation of Islamic Cooperation (OIC) grouping. And Pakistan, as the only Islamic republic with nuclear weapons and a large professional army, has substantial clout within the OIC, and especially with West Asian and Gulf countries. Most developed Western countries have sizable Muslim minorities and are sensitive about pan-Islamic sentiments. For instance, a few of Britain's 2.8 million Muslim citizens have been unemployed for generations and have become radical and complicit in terrorist activities. In India, as suggested by Thomas Friedman of The New York Times, it is our flawed yet vibrant democracy that has resulted over time in the overwhelming majority of Indian Muslims thinking of themselves first and foremost as Indian. However, India has its own vulnerabilities vis-à-vis the Gulf countries, with about five million of its citizens working in that region who are a source of sizable remittances back to India. The table also shows that the 2013 defence Budgets of the six GCC countries was 221 per cent that of India with an active military which was 27 per cent that of India. India's defence imports constituted 15 per cent of global imports in 2013 and a significant proportion was sourced from Russia. Just two out of the six Gulf Cooperation Council (GCC) countries - that is, Saudi Arabia and the United Arab Emirates - accounted for eight per cent of global imports of defence equipment - which was sourced exclusively from the West. Pakistan as an influential member of the OIC gets anti-India references included in OIC documents. The following is an extract from the OIC Cairo Summit Statement of February 2013: "We reaffirm our principled support to the people of Jammu and Kashmir for the realisation of their legitimate right to self-determination, in accordance with relevant United Nations resolutions and aspirations of the Kashmiri people. We express our concern at the indiscriminate use of force and gross violations of human rights committed in Indian Occupied Kashmir (IOK) by Indian security forces." It would not be lost on Western observers that Pakistan has enough influence to engineer such OIC pronouncements. The OIC countries led by Saudi Arabia set up the Islamic Development Bank (IDB) in 1975, which follows the principles of Islamic banking.
Globally, Islamic banking assets are estimated to have reached $1.1 trillion in 2012. The sovereign wealth funds (SWFs) of Saudi Arabia and the United Arab Emirates are reported to amount to $780 billion and $800 billion respectively. Oil and gas exports of Gulf countries will continue to generate current-account surpluses, and the size and scope of Islamic banking and GCC SWFs would keep growing. Significant amounts of such funds are necessarily invested in or via the deep and liquid financial centres in New York, London and Frankfurt. Islamic banking is actively promoted by Western nations, and it follows that business and, hence, political circles in these countries step gently around perceived Muslim sensibilities. In India, as well, some mutual funds invest according to Islamic finance rules. The General Insurance Corporation, or GIC, runs an Islamic re-assurance scheme and the Kerala government-owned Kerala State Industrial Development Corporation has set up Al-Barakah Financial Services Ltd. However, as of now, the required changes in Indian banking legislation and rules have not been fully effected. To sum up, at the risk of colossal oversimplification, the selective amnesia of the United States, the United Kingdom and other Western countries about Pakistan-based elements abetting terrorism in neighbouring countries is driven logically by the West's understanding of its economic, security and strategic interests-concerns. Consequently, it is for India to convince the West that its cynical forbearance towards terrorism stemming from Pakistan is counterproductive. By downplaying the significance of centres of terrorism in Pakistan, Western countries are likely to add to the number of their dead and wounded, and incur haemorrhaging expenditures in never-ending conflicts in Iraq, Afghanistan and more widely in the region. We should complement quiet urging with some plain talk that reaches their electorates. Further, India needs to be pragmatic in its outlook towards Islamic banking to tap into the GCC funds.
The writer, a finance professional and former Indian High Commissioner to the United Kingdom, is currently RBI Chair professor at ICRIER email@example.com