AMBASSADOR CROCKER'S MEETINGS WITH DELHI DEFENSE

UNCLAS SECTION 01 OF 02 NEW DELHI 008035

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: PREL PTER PGOV ETRD IN PK INDO PAK
SUBJECT: AMBASSADOR CROCKER'S MEETINGS WITH DELHI DEFENSE
THINKERS AND BUSINESS COMMUNITY



1. (SBU) Summary: Ambassador Crocker's October 4 meeting
with strategists focused largely on Indian concerns that
Musharraf is continuing Pakistani polices that foster
intolerance, a hawkish stance on India, and cross-border
terrorism. With business leaders, the emphasis was on recent
incremental progress on trade liberalization, the pent up
pressure among Indian and Pakistani businesspeople to go
further, and government obstacles that impede rapid trade
growth, including both countries' restrictive visa policies.
End Summary.

Security-Wallahs Concerned Musharraf Hawkish on India
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2. (SBU) Ambassador Crocker opened the Institute for Defense
Studies and Analysis (IDSA, the Defense Ministry's
think-tank)-hosted breakfast roundtable by listing the
opposing political forces at work in Pakistan and underlining
that President Musharraf is actively engaged on combating
terrorism within Pakistan, as well as along Pakistan's border
with Afghanistan and in Kashmir. He pointed to Musharraf's
address to the cadets at the Pakistan Military Academy, which
highlighted the threat of domestic extremism and was devoid
of anti-India rhetoric, as an encouraging indicator that
Pakistan's attitudes toward India were starting to change in
a positive direction.


3. (SBU) The assemblage of retired military officers,
diplomats and senior civil servants -- most of whom have been
active in Indo-Pak and regional affairs for decades -- argued
that Pakistan still had a long way to go to improve
relations. The concerns they voiced included:

-- Islamabad's keen focus on Kashmir obstructing economic
liberalization and CBMs;

-- Musharraf's accumulation of power and international
attention eclipsing progress toward democracy;

-- Persistent hatred of India in Pakistani textbooks.


4. (SBU) Ambassador Crocker reported progress in all these
areas. Pakistani businessmen are pressing the government for
more open trade with India, and local body elections are
showing success in breaking the back of the religious
obscurantist political parties, he answered. State textbooks
and curricula are also changing, albeit incrementally.


5. (SBU) JNU Professor SD Muni asked whether the US or India
could trust Musharraf. Ambassador Crocker answered by
describing the current state of play throughout South Asia as
"a transformational period" -- for Pakistan, Afghanistan,
India, and for relations among these countries and with the
US. He continued that this trend includes Musharraf's views
on Kashmir, although it is difficult to determine if this is
a true transformation, or a change in tactics. Several
follow-up comments focused on the role of CBMs on the
Indo-Pak dialogue Kashmir: Indians view CBMs as necessary to
normalize relations so progress can be made on Kashmir,
whereas they perceive that Pakistanis view CBMs as a
distraction meant to relegate Kashmir to the back burner.

Facilitate Biz Visas so India Can Trade with Pakistan
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6. (SBU) At a lunch hosted by the DCM for business leaders
under the auspices of the Federation of Indian Chambers of
Commerce and Industry (FICCI),Ambassador Crocker explored
opportunities for increased trade and investment flows
between India and Pakistan. The consensus among Indian
participants was that the business community on both sides of
the border are enthusiastic about future prospects for trade
and investment with Pakistan but are waiting for a clear
political signal from government. The immediate stumbling
block is visas. Unless both sides liberalize visa
restriction to enable greater person-to-person contact for
potential business partners, all other efforts to catalyze
cross-border economic activity will languish.


7. (SBU) A decision to facilitate business visas would send
a strong political signal to the business community.
Subsequent necessary steps would be liberalization of
transport and telecommunications linkages and increased trade
facilitation efforts. This, combined with tariff reductions
and other restrictions on cross-border trade would have a
strong and immediate impact by enabling goods now
transshipped via third countries to cross the border
directly. The result would be dramatic price reductions and
consumer benefit, mainly on the Pakistani side of the border.
Already the Pakistan government has begun to allow import
of non-sensitive food products, sugar and some other
commodities and has managed to augment shortages and bring
down prices by doing so.


8. (SBU) Despite an initial positive economic impact of
trade liberalization, there is a strong fear on the Pakistani
side that increased imports of Indian manufactured goods
would cause economic dislocations and job losses. While
Pakistan has good potential to export basic commodities and
handicrafts to India, the expectation is that India would
benefit disproportionately from trade liberalization and that
India would need to offer non-reciprocal concessions to
facilitate market access for Pakistani goods if the benefits
are to be shared more equally. In the medium-term, good
potential also exists for cross-border investment and
increased intercompany trade and the positive impact of
investment liberalization would probably be exceed that of
trade liberalization.


9. (U) Ambassador Crocker has cleared this message.


10. (U) Visit New Delhi's Classified Website:
(http://www.state.sgov.gov/p/sa/newdelhi/)
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