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Pakistan-U.S. Relations: Building a Strategic Partnership in the 21st Century [Rush Transcript; Federal News Services, Inc.]

Speaker: Shaukat Aziz, Prime Minister, Islamic Republic of Pakistan
Presider: Richard N. Haass, President, Council on Foreign Relations
January 18, 2006
Council on Foreign Relations

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Council on Foreign Relations
New York, NY

RICHARD HAASS: Well, welcome to the Council on Foreign Relations. And more important, I hope you will join me in welcoming back to the council and back to the city of New York, the prime minister of Pakistan, Shaukat Aziz.

Welcome, sir. (Applause.)

Shaukat is actually a model, even, I would say, a hope or a fantasy for many of the people in the audience here today. What he is, basically, is a successful banker who now runs his country, his government. (Laughter.) And I expect there's one or two people here who have that thought.

The prime minister did extraordinarily well as finance minister, and he's doing extraordinarily well as prime minister. And I've seen the statistics on Pakistan's economic growth, and I don't know if it's 6 or 7 or 8 percent last year, but whatever it is --

PRIME MINISTER SHAUKAT AZIZ: Eight-point-four.

HAASS: -- 8.4 -- thank you, sir. That's impressive by any measure.

Let me make clear, before I do anything else, that this event here today and the prime minister here speaking is not simply an event of the council. We are pleased and lucky to be doing it with our neighbors up the street, the Asia Society. And we have Jamie Metzl here today from the Asia Society, and we're pleased and honored to be doing this with them.

I've spoken of how well the prime minister is doing. Let me also say that he faces extraordinary challenges. And by he, I mean not just personally, but also his government and his country. As well as the economy is doing, they face the challenge of deepening and broadening economic reforms, a process not made any easier by the high cost of energy that Pakistan needs to import. They face the challenge of strengthening civil society, of governance and democracy. As if all this were not enough, they have the added burden of the earthquake, where some 73,000 people lost their lives, several million people were made homeless. They do all this in a part of the world that is many things, but it is not and is unlikely to be confused with Europe anytime soon in terms of the degree of regional integration or the degree of regional peace. And obviously, Pakistan has the challenge of relations with India.

And that gets us to the last area of challenge, which is the challenge of national security, of foreign policy. And the fact that the prime minister is here less than a week after the U.S. missile strike in Pakistan really underscores the nature of this challenge. On one hand, close ties with the United States -- and as someone who worked in the government recently, clearly the U.S.-Pakistani relationship is more intimate in many areas; cooperation is deeper than it was in some ways ever, certainly over the last few years. It's become far more intimate. We've been partners in efforts against terrorism. We've worked together in Afghanistan.

At the same time, it's no secret and it's obvious that there's strong, strong views of anti-Americanism in Pakistan that clearly place pressures, and to some extent limits the freedom of maneuver of the government. So balancing the national security imperatives against political realities is part of what makes this job of prime minister so challenging. So in case any of you were envying what the prime minister does, remember, he also holds, I believe, simply one of the most difficult jobs in the world in a country that faces one of the most demanding sets of internal and external challenges that I can think of.

The format for today is the prime minister is going to speak for some 20 minutes about the situation as he sees it. We will then turn to questions and answers. I may have one or two, but we will then open it up. We want to save the bulk of the time here for your comments, for your questions. I'll issue some ground rules on that later.

And with that, let me also simply acknowledge the presence of Pakistan's most able ambassador. We are lucky to have him here, and his country I believe is fortunate to have someone so capable representing them here. So, Ambassador Karamat, always good to see you, my friend.

With that, let me give the microphone to the prime minister.

Sir, it's a pleasure to have you back here.

AZIZ: Do you want me there?

HAASS: Yeah. Do that.

(Applause.)

AZIZ: Good afternoon, ladies and gentlemen. Mr. Richard Haass, president of the Council of Foreign Relations, Excellencies, ladies and gentlemen. Thanks, Richard, for such a gracious introduction.

It's a real pleasure to be in your midst today and talk about Pakistan to such a distinguished audience. The Council of Foreign Relations and the Asia Society are two formidable foreign policy institutions deepening awareness and understanding in the United States of the concerns, hopes and aspirations of people living across the globe. I, therefore, greatly appreciate this opportunity to share with you Pakistan's vision for building a strategic partnership with the United States.

At the outset, I would like to express my appreciation and gratitude of the government and people of Pakistan for the prompt and substantive assistance we received from the United States in the aftermath of the devastating earthquake which took place on the 8th of October last year. The substantial financial support, the Chinooks, MASH, all have made a crucial difference. The Chinooks in particular have been what President Musharraf called "angels of mercy" -- critical in saving many lives. Our thanks also go to the American people for their generosity in our hour of need.

Pakistan has had the distinction of being both the most allied ally and the most sanctioned ally of the United States. However, an enduring feature has been the friendship between the people of our two countries.

The Pakistan-U.S. relationship is pivotal both regionally and globally. Historically, our relationship has moved in a cyclical pattern with recurrent ups and downs. Periods of intense engagement are punctuated with phases of distinct estrangement. In between, our ties have drifted in the wake of shifting priorities or differences over difficult issues, like the nuclear question. Pakistan has had the distinction of being both the most allied ally and the most sanctioned ally of the United States. However, an enduring feature has been the friendship between the people of our two countries.

Whenever Pakistan and the U.S. have acted together, we have achieved tremendous success. We have fine examples of CENTO and SEATO to contain the Communist threat through the '50s and the '60s; the decisive tilting of the East-West balance in Washington's favor following the Sino-U.S. detente, facilitated by Pakistan in the early '70s; and the successful joint struggle against Soviet aggression in Afghanistan in the '80s. This led to the triumph of the free world and a virtual end of the Cold War.

Whenever we did not maintain and sustain a deep relationship, both our countries suffered negative consequences. We don't have to look too far to find evidence in this connection. The premature U.S. disengagement from Afghanistan following the Soviet withdrawal accentuated the civil war and created conditions threatening regional and global peace. Pakistan was left alone to pick up the pieces. We experienced the worst consequences of the drug and Kalashnikov culture and witnessed the rise in extremist tendencies in the region. This also led to the immense suffering and the tragedy which happened on 9/11.

We have shown that we are capable of working patiently through our difficulties. Our relationship is on an upward trajectory today. We are putting in place elements for a robust and broad-based strategic relationship. Our two countries have joined hands to defeat the forces of extremism and terrorism. We believe we have both learned lessons from history, and are moving away from the roller coaster pattern of our past. Our engagement this time is for the long term. Indeed, our special relationship has not only revived since 9/11, but also undergone a profound transformation.

President Musharraf and President Bush, when they met in New York in November of the year 2001, articulated a new vision for Pakistan-U.S. relations when they welcomed the revival of this long-standing partnership, and expressed their conviction that it would constitute a vital element in the construction of a durable structure of peace, stability, economic growth and enhanced prosperity at the regional and global levels.

Our partnership continues to develop in line with this vision. Our ties are deepening and broadening beyond the cooperation in the war on terror. Our multifaceted cooperation is encompassing diverse fields from defense to the economy to education to science and technology. We are working together for regional peace and stability. Our cooperation on global issues is intensifying. Pakistan has worked hard over the past six years to implement difficult economic reforms and achieve national renewals. We have engaged in painstaking efforts to secure economic stability, increase political participation, involve the vulnerable segments of society, stem the rising tide of extremism and ensure better living standards for our people. This is part of our overall endeavor to realize the dream of the father of the nation, Quaid-e-Azam Mohammed Ali Jinnah, as a prosperous, moderate, democratic, Islamic state.

Another aspect of our fundamental reorientation is the move towards greater self-reliance. We do not want any dependency relationships in the future. We have said goodbye to the IMF. Instead, our emphasis is on greater trade rather than aid. We appreciate the help of the United States for economic support, for debt restructuring and assistance for social sector reforms. We believe a partnership based on shared interests and mutual benefits would provide for sustainability of our relationship over the long term. The recommendation of the 9/11 commission, that the United States make a long-term commitment to engage with and support Pakistan, was apt and timely. The convergence of our interests on bilateral, regional and global issues provides a strong foundation for establishing a strategic partnership in the 21st century.

The recommendation of the 9/11 commission, that the United States make a long-term commitment to engage with and support Pakistan, was apt and timely. The convergence of our interests on bilateral, regional and global issues provides a strong foundation for establishing a strategic partnership in the 21st century.

At the bilateral level, we are working together in four main areas, and let me dilate on each of them very briefly.

First is economic development. As you all know, there has been an impressive turnaround in Pakistan's economy as a result of the reforms based on deregulation, liberalization and privatization. Last year, we achieved a growth rate of 8.4 percent, second only to China in Asia. As Pakistan's largest trading partner, the United States has a critical role to provide access for our products in the U.S. market. This will boost our economic growth, and will give hope to millions of people living in poverty, and give them a promising future. It will also help us effectively fight extremism and terrorism. The time has therefore come for us to open more trade between the two countries and negotiate appropriate agreements in this connection.

Second is defense cooperation. In building a long-term relationship, Pakistan's legitimate security needs must be met. Peace is based on strength, not weakness. Stability comes from a sense of security. Enhancing Pakistan's defense capabilities will contribute to maintaining peace and stability in South Asia. The decision by the United States to sell F-16 aircraft to Pakistan was a recognition of our legitimate defense needs.

Third area is modernizing education. Education is crucial to Pakistan's development, as we want to build a knowledge-based economy. Our two countries also have a common objective in strengthening the education sector in Pakistan to meet the challenges of the global economy in the 21st century, as well as to neutralize the spread of extremism.

Fourth is science and technology collaboration. This is an area where the United States can extend meaningful assistance to Pakistan's plans to modernize for development. There are a number of areas in which our two countries can establish mutually beneficial cooperation. The role of science and technology will be an important component for the modernization of Pakistan.

At the regional level, Pakistan is uniquely positioned to play a pivotal role. As you know, ladies and gentlemen, Pakistan is strategically located at the crossroads of South Asia, Central Asia and West Asia, or also known as the Middle East. Our partnership is therefore central to building peace, stability and development in this important region. This partnership also infringes on several significant global issues. I will focus on some of the key areas at the global and regional level on which our interests converge.

First, the joint struggle against extremism and terrorism. Pakistan has made a critical contribution to the success in the war against terror. Our resolute actions are yielding tangible results. The top al Qaeda leadership has been destructed (sic). Over 600 terrorist have been apprehended. More than 80,000 of our security personnel remain on the Pakistan-Afghanistan border to prevent the wrong people from crossing over. We continue to conduct operations, including in the sensitive tribal areas, to hunt down the remnants of these extremists. The terrorist network has been broken, and we are continuing our cooperation with the U.S. and the Afghanistan forces to eliminate them completely.

Despite attempts on my life and that of the president, we remain steadfast in our resolve to combat terrorism. We are doing this, above all, for ourselves, out of conviction that terrorism is not good for the world. This fight against extremism and terrorism is consistent with our values and principles. It is in line with our national interests. It is consequential for the kind of Pakistan we will bequeath to our coming generations.

The U.S. is spearheading the global fight against terrorism. Our alliance, thus, remains critical to this objective. Our counterterrorism strategy must have both short and long-term focus. In the short-term, stronger law enforcement, greater information and intelligence sharing and closer coordination between our intelligence agencies continue to be essential. Yet, our actions must remain within the framework of the law and fundamental freedoms. In the longer-term, terrorism cannot be defeated without addressing the root causes, political as well as economic. Action on both fronts is imperative. We need to follow a holistic approach.

As the leading global power, the U.S. must help through facilitating just solutions of disputes, like Palestine and Kashmir. The U.S. can also help through targeted interventions in the economic arena to take the oxygen of aid from the extremists. Those vulnerable to the appeal of extremism must be the special focus of our attention. For Pakistan, greater market access and special projects for the economically-depressed regions are vital for enhancing our capacity to fight extremism that spawns terrorism. This would fortify our economic reforms, help build a longer-term sustainable Pakistan-U.S. relationship and contribute immeasurably to our joint struggle against extremism.

The second area where we think we can do more is forging better understanding between Islam and the West. Our president, President Musharraf, has talked of the danger of a new iron curtain descending between the West and the Islamic world. We believe this prospect can be averted through collaborative actions aimed at removing the perception that the war on terror is a war on Islam, that Islam sanctions terrorism. We need to help by resolving situations where Muslims feel they are unjustly suppressed and extending assistance to address poverty, illiteracy, unemployment, marginalization and hopelessness.

Pakistan, as a voice of moderation and reform, has been promoting the two-pronged strategy of enlightened moderation, engaging both the Muslim and the non-Muslim world. The first part requires the Muslim world to shun militancy and extremism and adopt the part of socio-economic uplift. The second part is for the West, particularly the United States, to seek to resolve all political disputes with justice and assist in the socio-economic uplift of the deprived Muslim world.

We have mobilized the Organization of Islamic Conference -- this is a grouping of Islamic countries -- to promote this strategy within the Muslim world. The United States is also making efforts to engage people in the Islamic world. Several initiatives have been launched to foster better understanding, promote internal reform and to win the hearts and minds of the people.

President Bush himself has appreciated the concept of enlightened moderation. We believe Pakistan and the U.S. are best placed to jointly address the troubled relationship between the Muslim world and the West and to work together to forge better mutual understanding, harmony and tolerance. We are convinced that cooperation, rather than confrontation, should be the guiding principle in tackling this complicated relationship. We must fulfill our common obligation to prevent a clash of civilizations. We have to promote intercivilizational harmony by pooling our energies, resources and, above all, wisdom.

Containing the threat of proliferation of weapons of mass destruction is another area of strategic convergence between Pakistan and the United States. We too believe that proliferation of weapons of mass destruction poses the most serious threat to the peace of the world.

The third area is addressing the proliferation challenges. Containing the threat of proliferation of weapons of mass destruction is another area of strategic convergence between Pakistan and the United States. We too believe that proliferation of weapons of mass destruction poses the most serious threat to the peace of the world. We too are resolved to prevent terrorists and extremists from acquiring weapons of mass destruction and know-how of this connection.

Pakistan supported the adoption of Security Council Resolution 1540. The international nuclear black market poses a tough challenge. Our collaborative efforts led to the break up of the A.Q. Khan network. This is an important achievement in the advancement of our shared nonproliferation goals. Pakistan has strengthened physical controls over its nuclear assets. We have an effective command-and-control system in place. We have adopted comprehensive laws and regulations to prevent the export or pilferage of sensitive nuclear materials and technology.

Pakistan equally shares the objective of avoiding a conflict in South Asia that could escalate to the nuclear level. Pakistan was not responsible for nuclear proliferation in South Asia. We were forced to respond to ensure our security by ensuring a credible nuclear deterrence. We remain committed to adopting of minimal credible deterrence. We therefore support nuclear stabilization and restraint in the region and are opposed to any arms race. Pakistan has also concluded a number of nuclear CBMs with India, including a hotline between our foreign secretaries, an agreement on prenotification of flight testing of ballistic missiles and a moratorium on nuclear testing.

We have also proposed a strategic restraint regime to endure with interlocking elements of, one, conflict resolution; second, nuclear and missile restraint; and third, conventional balance.

The potential contribution that Pakistan can make to global nonproliferation efforts is undeniable, but it can only be realized in a framework of nonselectivity and nondiscrimination. We thus expect an equal treatment of domestic laws, or international regimes are adjusted to allow civil nuclear energy cooperation with any non-NPT country. Our energy needs are no less than those of any other country. It is our conviction that Pakistan is a partner of the international community in the anti-proliferation endeavors. Working together, Pakistan and the United States can not only strengthen global efforts to curb the spread of weapons of mass destruction, but also prevent a destructive nuclear and missile arms race in South Asia.

As an immediate neighbor, Pakistan has an important stake in the peaceful settlement of the Iranian nuclear issue. We are opposed to nuclear proliferation. We have played a responsible and moderating role with regard to Iran. We will continue to do so.

We also encourage renewed efforts by Iran, as well as the EU troika, to find a solution through dialogue, engagement and discussion.

As a member of the IAEA board of governors, Pakistan voted in favor of all resolutions that called on Iran to comply with its international obligations. We hope that this matter would be settled amicably, without resort to the use of force.

Towards this end, a useful and constructive role can also be played by countries such as Russia and China.

The fourth area is promoting peace and security in South Asia. Our interests converge on the promotion of peace, security and progress in South Asia. The subcontinent is the home of one-fifth of humanity. If the countries of the region can turn away from tensions and conflict, and resolve long-standing disputes of Kashmir, South Asia can be the locus of the next Asian economic miracle.

The composite dialogue initiated by Pakistan and India encompasses all issues, including Kashmir. The CBMs have been considered as a positive step to improve the atmospherics between the two countries, but progress on substantive issues, especially Kashmir, is yet to be made.

Progress on Kashmir must be viewed in tandem with progress on all other issues. Meaningful progress towards a final settlement of the Jammu and Kashmir dispute, in accordance with the wishes of the Kashmiri people, is essential for sustainability and eventual success of the process.

We are convinced that a solution can be found with determination, vision, flexibility, courage and, above all, passion. We need passion to solved disputes, and clearly this dispute needs a lot of passion.

Accordingly, we have made several proposals to India, and we await their positive response.

This process can be facilitated by the United States encouraging the parties to resolve the issue in a just and durable manner.

South Asia has tremendous untapped human and economic potential. The promotion of trade and economic cooperation between Pakistan and India and all of South Asia will contribute to and benefit from the early progress towards peace and security. There's an inextricable link between greater economic integration and a climate of peace and stability.

Political differences in disputes so far held back prospects of real economic cooperation in the region. If we are able to change this political environment for the better, forward movement on economic and other issues will be inevitable.

Pakistan will continue to be engaged in the composite dialogue process, with a view to making it substantive, meaningful and result-oriented. This would clear a climate of trust and confidence. We have been proactive in reinvigorating the regional cooperation entity in South Asia called SAARC, and we can together utilize the immense resources of our region to make it a veritable center of economic growth.

The fifth area is building a peaceful, stable and prosperous Afghanistan. Our strategic interests converge equally in promoting peace, stability and reconstruction in Afghanistan. Pakistan and the United States worked together to help the Afghans overthrow the yoke of the Soviet occupation. We have cooperated to bring Afghanistan back into the international mainstream. Now we must work together to consolidate the gains and address the remaining challenges.

Pakistan has a vital stake in the emergence of a strong and stable Afghanistan. We are doing our best, including through unprecedented military action in the sensitive tribal areas, to prevent Taliban and other elements from moving across the border or conducting their criminal activities on either side. The tripartite mechanism comprising Pakistan, the United States and Afghanistan is functioning well.

There should be no doubt about Pakistan's commitment to the stabilization process, given our heavy deployment, the scale of our military operations and the attendant political risks. Calls from certain quarters for Pakistan to do more are unjustified and unrealistic.

Securing this long and porous border is an onerous task and a shared responsibility. One side alone cannot be solely responsible.

For the long term, all those elements causing conflict and instability should be tackled simultaneously. Increased and robust deployment of ISAF throughout Afghanistan is critical. Effective measures are necessary to stem the illicit production and trafficking of drugs, which has reached alarming proportions. The pledges for economic reconstruction of Afghanistan must be redeemed fully and urgently. Pakistan has itself made a contribution of $200 million for reconstruction in Afghanistan. We have provided unlimited access to this landlocked country. Our bilateral trade is growing and has crossed a billion dollars a year.

We've also extended full support and cooperation to Afghanistan during its recent elections.

The sixth element where U.S. and Pakistan can see a common direction is promoting development and prosperity in Central Asia. Pakistan's strategic location holds the key for significant economic benefits for Pakistan, the United States and indeed the entire region. As the bridge between South Asia, West Asia and Central Asia, Pakistan is in a unique position to spur the movement for regional cooperation and become the hub of multidimensional trade and transportation linkages throughout the area. We have embarked on the construction of a deep-sea water port at Gwadar, along with road and rail links to Central Asia, as well as western China. This enterprise is not only mutually beneficial for Pakistan, China, Central Asia and other neighboring states, but can also be advantageous to the United States. By providing the shortest route to the sea for landlocked Central Asia, Pakistan can facilitate trade and economic links through air, road and rail, as well as for oil and gas pipelines from this energy-rich region.

This gas pipeline or the gas pipelines from Central Asia and going on to India hold major potential. Investment in these projects will not only benefit Pakistan but also Afghanistan and the Central Asian states, as well as India, and help bring prosperity to the entire region.

This would further advance our shared objective of promoting peace through development. I therefore call all this network of pipelines the peace pipeline.

The seventh and last area of cooperation is in the Middle East. As you all know, ladies and gentlemen, Pakistan has taken a major and courageous step by engaging with Israel. Our ability to move further on this track depends on the progress made in resolving the Israeli-Palestinian dispute.

In our view, a solution lies in a separate homeland for the Palestinians. A just and durable solution of Palestine will contribute substantially to the success in the war on terror, as it would remove one of the major root causes of anger, violence and extremism.

In conclusion, ladies and gentlemen, it is worth recalling the Bush administration's statement that -- and I quote -- "U.S. engagement with South Asia as a whole is a strategic imperative," unquote. It has declared Pakistan as one of its most important partners and a major non-NATO ally. Pakistan and the United States have evolved a transformed relationship. There is a strategic convergence between us and our regional and international objectives.

However, to achieve these objectives, it is imperative to ensure that consistency and continuity of policies is maintained. We must avoid fluctuations in our relations. As I mentioned earlier, any decline in our relations has been detrimental to both sides.

Moreover, we should not allow our relations to be impacted or influenced by engagement with other countries. Our partnership for peace and progress must be robust and sustainable over the long term.

By working together, we can successfully realize our vision of a strategic partnership serving the interests of our two nations in meeting the challenges of the 21st century.

I thank you, ladies and gentlemen. (Applause.)

HAASS: Thank you, sir. The fact that you were able to do that literally just hours getting off of a plane, you've been sitting a lot, so you have the right to stand. I'll just one or two questions and then we'll open it up.

One is, you talked a lot about the U.S.-Pakistani strategic partnership, and clearly it's developed over the past few years. The question I have is, what kind of roots do you think it's put down in Pakistan? How much of this is a somewhat shallow government-to-government exercise, and how much of this really enjoys the support of both elites as well as the general public in Pakistan?

AZIZ: Thank you, Richard. It's -- can you hear me, all of you?

HAASS: Yes.

AZIZ: I think it's a very good question. Clearly, Pakistan and the United States, if you go back in history, had a long relationship. And then after Afghanistan was liberated, lack of a credible exit strategy at the time led to a lot of the problems we see today. So very often I have said that getting into a theater of conflict is sometimes easier than getting out, because you need to sustain what you have achieved.

Back to your question, clearly there are different views in Pakistan. The elite, the educated people, many of them have studied here, have been here, know what the U.S. is all about and have good views. There are, however, many others who have different views.

This, incidentally, is not the exclusive preserve of Pakistan. I myself have lived in 10 countries, and I will tell you the feeling in Pakistan is very similar to the rest of the world. So let anybody not get this impression that this is a unique feeling in Pakistan. There are people who are pro-U.S., there are people who are not favoring U.S.

The reason I mention Afghanistan is that the people in the region -- you know, if you look at the genesis of al Qaeda, all these people were recruited from around the Middle East to go and fight the Soviets. I think we all know that. When the war ended, the people who recruited them disappeared. That gave rise to a feeling of being used, and bitterness. And nobody is condoning what happened later, because we're all victims of it, but the fact is that the exit strategy could have been worked differently. But hindsight is 20/20.

As far as Pakistan goes, post-earthquake, people react to what they see. People saw the Chinooks flying, the angels of mercy, MASH. There were queues outside the hospitals. And there's a tremendous feeling for the United States. At the same time, the events over the weekend raised some feelings too. But by and large, I think, people are rational. They recognize the U.S. is a global power, we have to live together, we have to look for common ground and work on any ground which is different.

So I would say that you will get similar views in Pakistan and many other countries; and not just in the Islamic world, everywhere; because depending on the issue, people will take a view. But by and large, people appreciate the role of the United States, and the United States has been good to Pakistan, as I recited or mentioned in my speech, so they appreciate that.

And naturally, there are elements in any society or any country who have different views, and sometimes these elements are more vociferous. So if you see a procession of 5,000 people -- which, incidentally, in Pakistan you can stop the traffic for 10 minutes and you'll have more than that -- and they're chanting slogans, many of them can't even read what's written on the placards, many can. But when there's a reaction, people come out, but that doesn't mean that that's something that is across the board against any particular country.

But like the other day after the attack on -- in which many civilians died, people were very angry, and if I look you in the eye and say people were not angry, I will not be reflecting the truth. But then they also realize the U.S. is a big power and we need to work together to build for peace and build for development.

But like the other day after the attack on -- in which many civilians died, people were very angry, and if I look you in the eye and say people were not angry, I will not be reflecting the truth. But then they also realize the U.S. is a big power and we need to work together to build for peace and build for development.

HAASS: Thank you. I wanted to get that out.

Let me just, by the way of housekeeping, make clear that today's event is on the record, so as we say, anything you say can and will be used against you. (Laughter.)

Let me not monopolize this. Raise your hands. We'll get you a microphone. If you can be as concise as possible with a question, that would be great. If it's a statement, still keep it concise, and just end with a lifting up of your voice. And please identify yourselves when we do it. And I don't have my glasses on, so if I can't recognize you by name, please forgive me.

The gentleman all the way in the back. We'll start with that part of the room.

QUESTIONER: Thank you. Bal Das from InsCap Partners. Prime Minister Aziz, I would like your thoughts on when do you see Pakistan having a robust and strong and stable democratic framework, an independent judiciary, effective legislature, a transparent executive? Thank you.

AZIZ: Last -- transparent what?

QUESTIONER: Executive.

AZIZ: Executive. Okay.

QUESTIONER: Thank you.

MR. AZIZ: Thank you. That's a big one. (Laughter.) Well, let me try to give you a short answer. First of all, I'll go from your last point. We are very proud and we can look anybody in the eye and say that the standards of transparency in governance in Pakistan have seen a sea change in the last five or six years. What happened before that, I will not go into, but I think anybody who knows Pakistan can tell you what was going on there.

We have the highest standards of transparency Pakistan has ever seen, in fact many countries have ever seen, in the effective functioning of the executive. And we are very proud of what we've achieved. In fact, this has been recognized all over the world, the reform agenda we have introduced, which when history is recorded will be seen as one of the most broad, deep reforms and most holistic reforms of any developing country. I'm not talking of economic reforms alone; political reforms, judicial reforms, social sector reforms, et cetera, et cetera. And if you have interest in these, e-mail me and I'll send you a lot of material.

Now, the problem in any developing country is implementation. Policy is one thing, implementation is where we have much more work to do, because like anywhere, you get roadblocks within the system which have to be fought. And the way you implement or ease -- improve governance and improve transparency is through changing your processes. That's what we have been trying to do, and the results are available to everybody.

Our judiciary is independent. They have -- the Supreme Court has a very active and very excellent reputation and is doing a very, very fine job.

As regards democracy, we are moving to -- we are in a period of transition where today I am elected. I was elected by -- in a general election. My entire Cabinet -- some of them are here -- they are elected.

Sherpao, how many times have you won a seat in the elections?

He's our minister of interior, homeland security.

MINISTER AFTAB AHMED KHAN SHERPAO (minister of Interior): I've lost count.

AZIZ: He's lost count! (Laughter.)

So it's not that we just had an election now and we never had it before. He fought an election like he did anytime else. And all the Cabinet members sitting here have done that. So this notion that we don't have an elected government is wrong.

What we do have today is an evolving democracy. And also, at the local level, for the first time, as part of our political reform, we have elected mayors in every town, village and city. We never had this before in the 57 years since Pakistan became independent. And 30 percent of the seats at the local level are reserved for women because we want to give women a stronger voice. And that is a very challenging situation because we are dealing with history, with traditions, with taboos. And we are fighting them and really promoting the cause of women. But this is a long journey. Now in Parliament, too, we have some women MPs here. Donia (ph) is here. She studied in the United States. She's elected as an MP in Parliament, and one of our youngest MPs and doing a great job. And we have many back home. So that reform is also moving.

We do have the president of Pakistan today who was elected by the assemblies. He holds a dual office of the chief of army staff. As you know, he became president when he was flying back from -- not many people -- I was surprised the other day, not many people know how he came into power. He was on a trip to Sri Lanka flying in his plane merrily back to Karachi from Colombo. And the government at the time, for reasons better known to them, decided the plane will not be allowed to land. It was left -- I'm making a long story short -- with seven minutes of fuel -- a commercial flight with lots of passengers; he was just one of them. When the army saw that the army chief is going to -- the plane is probably going to go in the Arabian Sea, they moved in, and one thing led to the other. So this is how he stepped in.

And since then, we have reformed, we have fought terrorism, we have introduced transparency, we have better governance. And we are also very proud of the fact that the press in Pakistan, which is an important ingredient of democracy -- by the way, if you open the paper, the president and I are attacked every day. I don't think that happens here. (Laughter.) And now -- let me add -- now we have just deregulated our electronic media; from one channel we have gone to 25. And everybody is competing with the other to be the fastest with news and critique. So you can imagine what we see every day. We are very proud of that, and we are not defensive or apologetic about our democratic process. We think it's right for the country, and we are evolving as time -- (inaudible).

HAASS: Questions?

Yes, ma'am?

Would you wait for the microphone, please.

Again, just identify yourself. And the more succinct you are, the more chance people will get to ask -- or make questions or make comments.

QUESTIONER: Thank you. My name is Ana (sp). I have a question, which is given your knowledge working in the West -- and you have been a student of economics -- the two things that you mentioned in your speech, number one, democracy, and number two, liberalism -- liberalization, trade -- do you really believe that given the stage of literacy and maturity and the feudalistic culture that we have, democracy is the right answer in the medium term for Pakistan?

And secondly, countries like India are where they are today because of their protectionist policies, which we don't mention today. So what is your view on that?

AZIZ: Okay, the first question --

HAASS: If people would turn their cell phones off, that would be great also.

AZIZ: The first question: Is democracy the right way for Pakistan, or any developing country, for that matter? Absolutely. There are no two ways about it. And as I said, we are in a transition moving into levels of democracy.

By the way, when we had different -- you know, in the '90s, the decade of the '90s, and earlier, we had democracy, fully functioning democracy. Press freedom was never what it is today. So we have given the whole process strength, and I think this is the way to go. The voice of the people should never be suppressed. The voice of the people always speaks the truth.

Now, how you implement it, naturally you have to phase it and pace it.

On the second --

HAASS: Can I just interrupt for a second? You have a financial background. What is your view about the sequencing of economic reform and political reform?

AZIZ: Oooh. (Chuckles.)

HAASS: Of course it's different in Pakistan than it obviously has been in countries in Asia, Latin America. Countries in the Middle East are struggling with it. What's your thinking about that?

AZIZ: I mentioned briefly, Richard, that our reform agenda is not just economic, it's very holistic. It covers politics -- the mandating of women to come in, like the young MP here traveling with us; the social sector reforms, the health sector, the education sector, economic -- all have to move in tandem.

Now, I will tell you that in some areas we've done well, in others we have a lot of room for improvement, because, you know, it depends who's doing what and what is the extent of -- so I don't think you can separate the two. I think both will lead to a good solid environment for growth and development.

But back to you, ma'am. You raised an interesting question of how a country, a developing country, can or should develop. Should it be built around high tariff walls and protectionism, or should it be open? Philosophically, we are very convinced that the only way to go is openness. Globalization is upon us. We should all look at it as an opportunity, not a threat. And I think the time has come in the world that you have to be best in class in what you do, otherwise you better leave it to others and focus on what you can do better. In Pakistan, there are two things we have done -- there are many things, but two on the economic side. We have reduced tariffs, we have opened competition, we have -- causing our industry to be competitive and compete with the best in the world in their niche, in their area of influence. And there is no restriction on foreign or local private-sector investment. The three pillars of our economic growth and success are deregulation, liberalization, privatization. It is not the government's business to be in business; the private sector should do it. Government must not abdicate and be a strong policymaker and a regulator.

HAASS: Okay, Bill Drozdiak (sp).

QUESTIONER: Bill Drozdiak (sp). Mr. Prime Minister, do you support taking Iran to the U.N. Security Council and imposing economic sanctions, if necessary, to stop that country from developing nuclear weapons?

AZIZ: I thought the question might come up. So -- (laughter) -- this is the fourth time today. I thank you for raising it because it's a topical issue.

Pakistan's view on -- and I'll give you a slightly broader answer. Pakistan's view on the Iran nuclear situation is as follows. Point number one, we are against proliferation in any form whatsoever. We do not support proliferation of nuclear weapons by anybody. Second, we think every country has the right to use nuclear energy for peaceful purposes, under IAEA guidelines and safeguards. IAEA, as you all know, is the agency which monitors of this through inspections and -- et cetera.

Third, we believe rather than going to the Security Council, the IAEA may be the better forum to solve this issue dialogue and discussion. We are against the use of force to settle this issue.

And lastly, we think the EU troika, as I said in my remarks, Russia and China can play a major role in addressing this very important issue which the world faces today and find a workable solution within these parameters, but nuclear proliferation absolutely no, no.

HAASS: Do you believe -- have you concluded that Iran does seek nuclear nuclear weapons?

AZIZ: We should ask them. (Light laughter.)

HAASS: Well, we'll try to get the leadership there. (Laughter.)

AZIZ: (Laughs.)

HAASS: Yes, ma'am?

AZIZ: But Pakistan's view is very clear.

By the way, what I just said on Iran, I said that in Tehran with the Iranian leadership and to their press and wherever. So Pakistan's views are very consistent -- very clear.

QUESTIONER: Hello. Andy Nagorski (sp), Newsweek. You mentioned the incident a few days ago. Can you say were terrorists killed in this bombing as well as civilians? And also can you say what are the ground rules, implicit or explicit, between Pakistan and the United States on the handling of such strikes?

Thank you.

AZIZ: Yes. At the moment, all we know is that some civilians, women and children were killed, but our investigators are through the necessary analysis, through the debris, et cetera, to find out how many people were there and who they were, et cetera. And tonight they will again brief me on where they've reached today, but as of now, we have -- that's all we know.

The rules of engagement through our dialogue process is that we work closely with the security agencies of the three countries: the United States, Pakistan and Afghanistan. Any action taken within Pakistan is taken by the Pakistan security forces. That's the understanding.

Secondly, the rules of engagement through our dialogue process is that we work closely with the security agencies of the three countries: the United States, Pakistan and Afghanistan. Any action taken within Pakistan is taken by the Pakistan security forces. That's the understanding.

HAASS: George Schwab.

Let's just decide. One of the microphones.

QUESTIONER: Thank you. George Schwab, National Committee on American Foreign Policy. I wonder whether you would care to comment about the relevance of American military presence in the Middle East, Iraq and elsewhere. What is your government's attitude toward this?

AZIZ: Okay. I think the relevance and need for U.S. troops in Iraq is a bit academic now because they are there, and all I would say is what I said earlier vis a vis Afghanistan, that whenever and however U.S. and other friends, allies who are there decide to exit Iraq, that exit strategy should be well thought-out and very choreographed. The same is true with Afghanistan. In Afghanistan, since we are immediate neighbors, Pakistan can play a major role in crafting that policy and making sure it succeeds.

But as the world has learned in history -- in recent history, that if we pack our bags and leave overnight, it can result in bigger problems in the future. So the crafting of the exit strategy is more important than the entry strategy. So now that the U.S. troops in Iraq are a reality, I think we have always felt that as -- whenever the time comes for them to -- we are against foreign troops going in -- into countries, but now that this has happened, I think the exit strategy needs to be carefully crafted.

HAASS: Could imagine a scenario where -- as Brent Scowcroft called for the other day -- there was some sort of an international force in Iraq that was invited by the government. Could you ever see Pakistan participating in something like that if it were invited?

AZIZ: Pakistan, if it's blue helmet situation, U.N. troops, we are the largest contributor of troops to the United Nations -- I think many people are not aware -- for peacekeeping operations. And I think if we are requested, then we'd look at it favorably.

HAASS: Mr. Kotecha?

QUESTIONER: Thank you very much. Mahesh Kotecha, Structured Credit International. Mr. Prime Minister, you -- first of all, we are very proud that you're the next city banker. (Laughter, laughs.) May all city bankers have futures like yours. (Laughter.)

More seriously, you mentioned Kashmir several times, and you indicated that you needed passion to move that forward. I agree with you entirely, and I hope that there's passion on the Indian side. Could you speak about how you see that discussion evolving, and what the U.S., in particular, could do there?

AZIZ: Yes. The Kashmir issue is -- I mentioned it at least five times in my speech. The reason is that this is the linchpin of stability and peace in South Asia. If we can come to a solution, a credible solution acceptable to all stakeholders -- and there are three stakeholders in this dispute -- Pakistan, India and the Kashmiri people, and whatever solution we come up with must be in line with the wishes and aspirations of the Kashmiri people because they are the affectees (sp) -- they are amongst the three stakeholders.

Having said that, I -- as I said, I believe passion is needed on both sides, leadership, magnanimity, flexibility to solve this issue, and Pakistan has proposed many different ideas which may not be final, final, but they are a basis for discussion. This includes demilitarization, this includes measures of self-governance. This could go even further in terms of how the place is managed, et cetera. So we are open, and I think the suggestions we have made have struck a good cord in Kashmir also. So now, we need to show passion and a real desire to move on, and that can't be done without all three stakeholders agreeing and sitting together.

So we are hopeful that India will look at this peaceful -- these initiatives in a constructive manner. Our foreign secretary is in Delhi today. He's flying to New York to join me on this trip. He should be here tomorrow -- tomorrow evening, and this is part of our CBM -- you know, confidence building measures -- to get the dialogue going. But you know, in any region, there are issues which impact the entire relationship in the area, and Kashmir -- Jammu Kashmir is the one between India and Pakistan.

If we can solve this, the fallout will be tremendous, but issues are always solved with passion.

HAASS: That's the first time I've ever heard anyone argue for more passion vis a vis Kashmir. (Laughter.) As a former diplomat, I thought there was sometimes too much, but that was my own particular narrow perspective.

I apologize. There's a lot of people who want to talk. One of the very few principles I like to keep is the idea that we roughly start our meetings on time and end them, and I know the prime minister has an extraordinary schedule.

Let me just say, I want to just publicly commend him for his personal courage, for his commitment to what he's done, and I think what you've just heard, we've -- is just one of the most thoughtful people anywhere who occupies a position of real responsibility.

So again, on behalf of ourselves and the Asia Society, Sir, let me just again thank you for taking the time, and again, we look forward to welcoming you back whenever your travels take you here.

AZIZ: Thank you very much. (Applause.)

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