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Imran Ali “Reform of Irrigaon Management in Punjab, and Implicaons for Instuonal Modernizaon” WORKING PAPER SERIES NO. 2014-05 KSBL WORKING PAPER SERIES Karachi School for Business & Leadership www.ksbl.edu.pk

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Imran Ali

“Reform of Irrigation Management in Punjab, and Implications for Institutional

Modernization”

W O R K I N G P A P E R S E R I E S N O . 2 0 1 4 - 0 5

KSBL WORKING PAPER SERIES

Karachi School for Business & Leadership www.ksbl.edu.pk

Faculty at KSBL

About KSBL

The Karachi School for Business and Leadership (KSBL) was established because a group of Pakistani business and corporate leaders recognized that Karachi, the business and commercial hub of Pakistan, needed a world-class business school. They envisioned KSBL as a graduate management school that would offer high quality leading edge programmes to the many talented young men and women in the country as well as those from abroad.

KSBL is a school with a social conscience and will promote economic and social change by developing leaders who will impact organizations through their knowledge, skills and expertise, as well as contribute to business excellence by ensuring the application of highly professional and ethical practices in the national and international marketplace.

Dr. Shaukat A. Brah PhD, University of Houston Dr. Imran Ali PhD, Australian National University Dr. Zeeshan Ahmed PhD, Mississippi State University, USA Dr. Jawaid A. Ghani PhD, University of Pennsylvania (Wharton School) Dr. Rizwan Amin Sheikh PhD, SKEMA Business School, France Dr. Faheem Ul Islam PhD, Judge Business School, University of Cambridge, UK Dr. Farzad Rafi Khan PhD, McGill University, Canada Dr. Ali Khalil Malik PhD Manchester Business School, University of Manchester UK Dr. Asma Hyder Baloch PhD, NUST, Pakistan & Sussex University, UK Dr. Muhammad Nadeem Javaid PhD, Sophia Antipolis, France Dr. Muhammad Athar Siddiqui PhD, University Strathclyde, UK

“Reform of Irrigation Management in Punjab,

and Implications for Institutional Modernization”

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Karachi School for Business & Leadership National Stadium Road, Opp. Liaquat National Hospital Karachi, Pakistan www.ksbl.edu.pk

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Imran Ali Professor Karachi School for Business and Leadership (KSBL) [email protected]

2014

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Abstract

Pakistan has the largest contiguous canal irrigation system in the world. Based on the River Indus and its western tributaries, the canal irrigated zone is critical for Pakistan’s agricultural sector and hence for its national economic sustainability. Efficiency and adaptability of irrigation management is not only crucial for sustainability, but also a barometer of the public sector’s capability to respond to rapidly evolving conditions. Focusing on the Punjab, this paper will review the attempts at reforms in irrigation management initiated in the late 1990s, with the formation of irrigation development authorities in the Punjab and Sindh. This proposed decentralization of irrigation management promised to radically alter the operational role of the provincial irrigation departments; and provide more functional, equitable and participatory mechanisms for water management than the more centralized system introduced by the British in the late nineteenth century. The latter had been retained for over half a century in Pakistan, despite endemic rent-seeking and the decline from profitable to deficit operations after 1990. Not only are they crucial for irrigation turnaround, but these reforms highlight Pakistan’s readiness for institutional modernization, for which a transformative role of public functionaries and organizations is critical. This problem assumes even greater significance with threatened water shortages from global climate change, and dam construction and water diversion by India in the upper Indus basin.

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Pakistan has the largest contiguous canal irrigation system in the world. Based on the River Indus and its western tributaries, the canal irrigated zone is critical for Pakistan’s agricultural sector and hence for its national economic sustainability. The efficiency and effectiveness of the irrigation management system is therefore of primary importance to the country, not least in its own right, but also as an indicator of the public sector’s viability and its capability to respond to rapidly evolving conditions.

Focusing on the Punjab, this paper will review the attempts at reforms in irrigation management initiated in the late 1990s, with the formation of irrigation development authorities in the Punjab and Sindh. The decentralization of irrigation management that these reforms envisaged was designed to radically alter the operational role of the provincial irrigation departments. These innovations would presumably provide more functional, equitable and participatory mechanisms for water management than the more centralized system introduced by the British in the late nineteenth century. The latter had been retained for over half a century in Pakistan, despite endemic rent-seeking and the decline from profitable to deficit operations after 1990.

Not only was it crucial for the turnaround of the irrigation sector, but the outcome of this reform process contains several implications for Pakistan’s prospects of institutional modernization and economic development, for both of which improvements in the role of public functionaries and organizations is critical. This problem assumes even greater significance in the context of threatened water shortages from global climate change and dam construction and water diversion by India in the upper Indus basin.

The provincial Irrigation Departments in the Indus region assumed singular importance with the arrival and spread of perennial canal irrigation in the late nineteenth century. Previously this area

was arid waste supporting at best a sparse semi-nomadic pastoral population, generically known in western (later Pakistani) Punjab as Janglis. This pastoral society ranged over the vast interfluves, or doabs, in the middle sections of the Indus water system. Since they were slightly elevated from the river beds, and in the absence of sufficient rainfall to conduct barani agriculture on a sizeable scale, these bar regions remained as extensive pasturages for peripatetic Jangli groups whose abodes were called rahnas. Agriculture was confined to lands contiguous to rivers, or the hithar, which had more settled communities, with cultivation carried out through inundation, wells or seasonal canals.

Many of these canals were privately owned, providing significant political influence and authority to their owners. Apart from being landowners, groups like the Nuns and Tiwanas in Shahpur District, and the Daultanas and Mamdots in southern Punjab, were private canal owners, with commensurate political leverage over irrigators. This status was evident in the politics of western Punjab during British rule. The British administration incorporated most of these canals, especially in southern Punjab, into the state owned emergent perennial canal system, with adequate compensation in the new canal commanded areas, or with the considerable increment in land values through the extension of irrigation to their propriety lands. However, the owners of the Shahpur private canals, located in the newly formed district of Sargodha, were allowed to continue in possession right through till the emergence of Pakistan. This was a clear and major concession to families that had actively supported the British in the armed struggle of 1857-58, and which later remained very prominent in securing high levels of military recruitment for the British Indian army. These recruits were used not only to suppress their own countrymen but also other colonized people in Africa and Asia, and to actively fight against their co-religionists in west Asia during the two World Wars. From these

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foundations, the linkages between imperialism, the military and irrigated land have remained a resilient influence on politics and power in the Indus region to the present day.

The construction of a network of perennial canals transformed the economy of western Punjab, and along with the canal network in Sindh, still comprises the backbone of the contemporary Pakistani economy. Since these perennial canals and their branches and distributaries were spread over barren land with a population base inadequate for large-scale cultivation, these areas had to be ‘colonized’ by outsiders. Land that was not under cultivation was deemed as Crown or State Waste Land, enabling the British to utilize or dispose of these lands as they wished. This crucial factor, along with the rejection of the pastoral rights of the Jangli population as constituting proprietary rights, gave British imperialism immense power to gratify politically significant individuals and social segments.

The patterns of land settlement and agricultural colonization as they emerged in the canal irrigated zone of Punjab have been analyzed in detail by me elsewhere, in such works as The Punjab under Imperialism, 1885-1947 (Princeton and Oxford University Presses) and “Malign Growth? Agricultural Colonization and the Roots of Backwardness in the Punjab” (in the Oxford journal Past and Present). Suffice it to say that the emergence of a hydraulic society in this region had grave and enduring impacts on its political economy, providing strong continuities between the ‘imperialist’ and ‘independent’ periods, pre- and post-1947. The beneficiaries of agricultural colonization during British rule remained the inheritors of power in the independent state. Their continued resilience into the twenty first century, even in the face of a rapidly evolving socio-economic environment, has been a significant contributor to the ongoing underdevelopment of Pakistan. The major, and now glaring, dysfunctions in institutions, the ever-growing obsession with atavistic religiousity, and the pervasive mis-

governance by entrenched, rapacious and counter-productive state functionaries, is clearly linked to the continued vassalage to global imperialism. The consequence has been to retard the prospects of modernization and progress, by methodically retaining too many features of backwardness to give a rapidly increasing population an opportunity to acquire contemporary norms.

The four segments that greatly benefited from agricultural colonization were the upper landowning peasantry, the larger landowners, the military and the civil bureaucracy, of which the irrigation management structure constituted a critical element. The British understood that the lynchpin of political influence and stability in the rural economy was the landowning peasant lineages that organized agricultural production and controlled village society. Fearing the destabilizing effects of the market economy on this important constituency, they had adopted by 1901 the remarkable Punjab Alienation of Lands Act, which prohibited the passing of land from agricultural to non-agricultural castes. Only these agricultural castes were held eligible for the granting of canal irrigated land, a critical decision that completely excluded the lower, service castes from acquiring a landholding status. Despite extensive economic growth, these caste servitors remained subordinated to the upper castes, from whom the British also derived land revenue and military recruits, and who were in return accorded proprietary rights in agricultural land. The British wanted to appease this class since they realized its eventual opposition and rebellion had been instrumental in the eclipse of the Mughal empire in eighteenth century Punjab.

The larger landowners were also given substantial opportunities for obtaining canal irrigated land, through a variety of larger grants. This kept the landlord segment viable and authoritative through till Partition and beyond, enabling this intermediary class to successfully resist effective land reforms to date, over half a century after their implementation in India, which

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had enacted the Zamindari Abolition Act by 1950. British sponsored landlord parties had lost to the Indian National Congress in all Hindu majority provinces in the 1936 elections, delivering a major blow to the British hold on India. In the Punjab, however, the pro-British Punjab National Unionist Party completely excluded the Muslim League from Punjab legislative politics. The League could obtain only one seat out of 120 Muslim seats in the 1936 elections. The Unionist dominance was so great that they even came to control the provincial League, with deregistration of the Punjab Muslim League, led by Sir Muhammad Iqbal, by 1937. Thus, unlike the Indian area, the landlord hold on politics continued into the Pakistan period, with telling consequences for its political economy.

The military also gained enormous landed assets in the irrigated zone, a precursor to its dominance over political authority and economic resources in independent Pakistan. Large scale land allocations were made for the breeding of military-related animals, such as cavalry horses, mules and camels. Extensive areas were reserved for land grants to ex-soldiers: during the two World Wars this became a potent method of reward for war veterans, which no other province of British India could match. Thus, the eminence of the military was established during imperialist rule, and continued into Pakistan with added vigour. The palpable urge to capture landed resources remained a common theme between the two periods.

In a hydraulic society, civil public functionaries also enjoyed considerable scope for misdemeanour and misappropriation. There were countless transactions involved in the passage of land from state to individual, and such transactions covered an area of millions of acres. The initial choice of grantees, the granting of land, mutations, transfers, leases and sales, all were impossible without the involvement of the bureaucracy. By the 1930s, audits of district offices in the canal irrigated zone uncovered extensive corruption and malpractice by the subordinate, native bureaucracy

over a wide range of revenue and land transfer mechanisms. This entailed major losses of revenue to the state, and also inequity with the larger landholders able to bribe and connive with officials against the common good. In repeated cases, the British found they were not able to carry out changes and reforms to keep systems up to date, with the landholders conniving with officials to undermine or defeat these initiatives.

For example, the system of fluctuating assessment, comprising the harvest by harvest field assessment of revenue, was initially adopted because of unstable agrarian conditions in the newly settled lands. The British were, however, unable for years to achieve a transition to the normal and much less cumbersome revenue practice of fixed assessment, with rates held constant over a defined period of years. This transition was resisted by the land grantees, who had developed mutually beneficial relations with the native revenue and irrigation officials.

Another example was the inability of the state to achieve a fair return on water. The system of warabandi, or taking irrigation water by turn and over a defined number of hours, was universally practiced, and still remains the modus operandi. However, except for time there was no way of measuring the water consumed, which led to wasteful practices and was not particularly good for crop productivity. Malpractices were common with this method, with larger landowners in connivance with canal officials able to commit warashiknis at the cost of smaller irrigators and those at tails of distributaries. The British tried for decades to introduce a system of volumetric assessment through the installation of gauges, but they remained completely unsuccessful in doing so. Volumetric assessment has still not been institutionalizes in Pakistan’s irrigation network, which constitutes a serious shortfall in revenues. The economic value of water has yet to be realized in the Indus irrigation zone.

The water rates, or abiana, were initially

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sufficiently high to represent a realistic equation with market prices of crops. In the irrigated zone, abiana remained in fact a more lucrative source of income to the state than land revenue. However, over time both of these have fallen drastically in real terms, with the state’s inability to maintain any semblance of relationship between crop prices and the revenue demand. These major shortfalls have seriously eroded the fiscal viability of canal irrigation for state income, at a time when revenue generation is at endemically low levels. Not only does agricultural income continue to remain exempt from income tax, but land revenue or malikana has also been whittled down to insignificant levels, or been exempted altogether for smaller holders. These relapses constitute direct subsidies, indeed resource transfers, to agricultural owners, at the cost of the more modernized and professional sectors which have to bear the revenue burden. Most egregious is clearly the complete collapse in the real value of abiana, compounded by the ubiquitous corruption nexus between land holders and irrigation officials, who are responsible for its collection. With the ratio of resource generation to GDP remaining under 1:10, the concessions to the rural owners place a major economic burden on the entire nation.

The perennial irrigation system, as devised and developed under British rule, was clearly profitable for the state in the earlier decades. Among the larger canal networks, perhaps the most productive was the Lower Chenab Canal, which irrigated the huge Lower Chenab Colony in the Rechna Doab. In the earlier phase it returned its capital cost roughly every 2.5 years. Profitability of the Lower Jhelum Canal, in the Jech or Chaj Doab, was somewhat less as the Lower Jhelum Colony was predominantly committed to the military function of horse-breeding: yet it remained in the black throughout British rule. The Lower Bari Doab Canal was also profitable, as was the Sutlej Valley Project, though the latter’s profitability was constrained by higher interest costs and an extensively projected land auction process

disrupted by the economic depression of the 1930s. It is remarkable that the British administration was able to construct and manage an extensive hydraulic network in the Punjab and Sindh without incurring a heavy long term debt burden. The irrigation systems also remained state of the art in the earlier decades. In both these contexts there was to be dramatic decline by the late twentieth century.

In Pakistani Punjab the Irrigation Department remained profitable till around 1990, after which it suffered continuous deficits, and was unable to meet even its operations and maintenance expenditures. Again, it was remarkable that the sector that had proved the most important for state revenues was now actually incurring increasingly heavy losses. Increasing and rampant corruption among the irrigation officials, from canal patwari upwards, impacted heavily on revenue returns, apart from committing the inequity of a rent nexus between irrigation functionaries and the larger land holders, at the cost of the general public, but more immediately of smaller farmers and tail users of canal water. Efficiency levels also declined in line with the general decline of public institutions in Pakistan. The foreign assistance and loans sought for both new capital works and rehabilitation operations increased the foreign debt burden, which in aggregate now stands at unsustainable levels.

Irresponsible credit strategies of multilateral moneylenders like the World Bank and Asian Development Bank has also been responsible for the failing viability of the irrigation network. For example the SCARP, or Salinity Control and Reclamation Project, was an ill-conceived top down project of large tubewells meant to keep down groundwater levels. Aquifer levels anyway declined because of over use, and the threat now is the contrary one of significant aquifer depletion. Rather than rely on a network of farmers’ bores to maintain this balance, the multilateral agencies imposed a capital intensive alternative that also required heavy operations and maintenance costs.

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By the 1990s SCARP tubewells were consuming a sizeable proportion of total O&M expenditure of the Punjab Irrigation Department, while also incurring operating deficits. The decision was made, ironically at World Bank insistence, to ‘privatize’ these structures, with mixed results. Over the years, a large number of extremely costly projects for irrigation strengthening have been initiated by these moneylending institutions, as well as by bilateral donors like USAID, but again with outcomes remaining at high levels of inefficiency and resource diversion.

With the ongoing loss making position of the Irrigation Department, a new proposal was floated, again with the initiative coming from the World Bank, to decentralize irrigation operations. The British had tried earlier to introduce forms of cooperative irrigation but without success. Now, it was believed that the Irrigation Department could no longer efficiently and profitably manage centralized operations of the huge irrigation network. Operations should be decentralized, and run by non-state agencies closer to and representing the irrigators, with Farmers Associations at the ground level, and Area Water Boards at the apex, canal command level. Control and management of the operations and physical infrastructure would also be devolved to these bodies, with the hope that this decentralized system with its abiana collection functions would be a more viable alternative for irrigation strengthening in the current environment. The Irrigation Department would no longer be directly involved with operations, but would concentrate on a regulatory and strategic role. The wager was made on a participatory rather than authoritarian and centralized system of irrigation management.

Accordingly, legislation was passed in 1997 to create the Punjab Irrigation Development Authority (PIDA), and SIDA in Sindh. Albeit at multilateral agency initiative, these Acts were a major step towards participatory rather than centralized irrigation management. The provincial irrigation departments had been set up in the

nineteenth century, but with system expansion and pervasive rent-seeking, they had become increasingly dysfunctional, from both organizational and fiscal perspectives. It was hoped that the new measures would increase accountability, bring transparency and fairness into the water distribution system, and create a greater sense of ownership and commitment towards the irrigation infrastructure among the rural population itself. It was also hoped that revenue collections would be much more efficient and the system would return to profitability through these reforms.

The proposed transition was not without its complexities. The control of the physical infrastructure would devolve on to the Area Water Boards, for which they would need to acquire substantive technical resources. These could be obtained by employing ex-irrigation department engineers, at more attractive market based salaries. The ground level Farmers Organizations upwards would hold office through elections, a move that could create factions and internal strife, as rural society itself was divided into various castes and political alignments. The apex Area Water Boards might themselves become arenas of power conflict, which could affect their performance.

Organizational reform was a further issue. The canal patwari and kanungo segments would have to be abolished: these were functionaries at the lowest level of irrigation bureaucracy, but not without powers of coercion and manipulation. Since the law held that government servants could not be sacked, they would have to be absorbed elsewhere. In the Punjab alone, an estimated 28,000 lower officials were affected, and no other government department could take them in. They could be re-absorbed into the participative system, but would lose their lucrative perquisites.

Most importantly, the reform called for a transition in the role of the irrigation bureaucracy from control over operations to a more supervisory

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and regulatory stance. The notion was that the state was failing to deliver, and therefore should retreat from operations, which should devolve to organizations based upon participating communities. Whether public functionaries themselves bought into this philosophy was problematic, since strategic control of resources and the innumerable opportunities for misdemeanor were at stake. If the model were extended across public sector governance a paradigmatic, and for entrenched rent-seekers and incumbent stakeholders an unwelcome, change would ensue. This might well have been for the benefit of the general community, and therefore its implementation required political will and determination.

The speed of the reforms was forestalled in its initial phase with the decision that they should be tried and tested in a ‘pilot project’, centred on the canal command area of the Lower Chenab Canal. This itself was perhaps the largest canal command, so transition here could have been made to drag on for years. While PIDA was set up, almost as a project office, and some progress made with establishing Farmers Associations, the nation’s governance took a dramatic turn with General Pervez Musharraf’s military coup in October 1999. An army general was brought in as Secretary Irrigation, Punjab; and irrigation officials probably succeeded in convincing him that these ‘World Bank reforms’ would create an existential crisis for the country, by dismantling a major pillar of civil governance.

The consequence was the military dictatorship’s failure for over half a decade to extend the reforms to other canal commands, and even to upscale the changes to the LCC as a whole. While PIDA co-existed uncomfortably with the Irrigation Department, the latter continued to enjoy centre stage in decision-making and control of operations. The Managing Director of PIDA continued to be an Irrigation Department official. In the mid-2000s, with the critical need for physical rehabilitation of public works, loans from the

World Bank were sought, which came with the conditionality of opening further Farmers Associations, this time in the Lower Bari Doab canal command. However, this appeared symbolic and failed to lead to further institutionalization of the irrigation reforms.

The failure of irrigation reforms indicates a wider malaise regarding modernization in Pakistan. Obsolete institutions, roles and practices need to be filtered out over time and replaced by more productive, efficient and equitable mechanisms. A society unable to achieve these transitions will become increasingly uncompetitive and dysfunctional for investment and growth. Existing roles will be threatened, and incumbents will be displaced. If they can manage to hold off reform and continue with their embedded systems, then progress and efficiency will suffer. In Pakistan, the public sector is especially prone to retaining atavistic norms, rent-seekers, subsidies and structures. Consequently, they have become major drains on public resources, with loss-making intensified to unsustainable levels. Previous efforts at institutional reform have by and large failed to be implemented, examples being civil service reform, railway restructuring and recently lags with follow up of the government’s own Framework for Economic Growth.

This paper suggests that the management of the Indus Basin hydraulic economy, although inputed and developed by the state, could become resilient to state measures of reform and modernization. Not only public functionaries themselves, but also beneficiaries of the land grant system, were involved with resisting reform and change. Rent-seeking relationships between public management and socio-economic stakeholders, at the cost of public revenues, pre-existed the creation of Pakistan. The entrenched roles of major institutions, like the military and civil bureaucracy, again pre-dated independence, and had a major influence on the political-economy of Pakistan.

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References

The paper is based on a number of research studies by Imran Ali:

The Punjab Canal Colonies, 1885-1940 (1980, Ph.D.Thesis, Australian National University).

Malign Growth? Agricultural Colonization and the Roots of Backwardness in the Punjab, Past and Present (Oxford), No. 114, February 1987. The Punjab uk published by Oxford University Press, New Delhi, 1989, SBN 0 19 562405 X.

The Punjab and the Retardation of Nationalism, in D.A. Low (ed.), The Political Inheritance of Pakistan (London, Macmillan, 1991).

Sikh Settlers in Western Punjab, in Pritam Singh and Shinder S. Tandli (eds), Globalisation and the Region: Explorations in Punjabi Identity (UK, Association for Punjab Studies, 1996; republished by OUP, India).

Canal Colonization and Socio-Economic Change, in Indu Banga (ed), Five Punjabi Centuries: Polity, Economy, Society and Culture, c. 1500-1990 (New Delhi, 1997).

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The Historical Lineages of Poverty and Exclusion in Pakistan, South Asia, Vol. 25, No.2, August 2002.

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Historical Impacts on Political Economy in Pakistan, Asian Journal of Management Cases, Vol. 1, No. 2 (2004).

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Re-imagining Punjab: Shackled Potential, Seminar (New Delhi, November 2006).

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Development and its Antidotes: Pakistan’s Colonial Legacies and Post-Independence Strategies, in M. Frey and R. Pruessen (eds), “Envisioning the Future: Development in Asia, 1919-1975”, Comparativ – Zeitschrift für Globalgeschichte und vergleichende Gesellschaftsforschung [Comparativ – Journal of Global History and Comparative Social Research], Vol 19, Part 4 (2009), pp. 25-43.

Elite Formation and its Impacts on Pakistan’s Development, Paper presented at Conference on The Role of Elites in Economic Development, UNU-WIDER, Helsinki, June 2009.

(with A. Malik) The Political Economy of Industrial Development in Pakistan: A Long-Term Perspective, The Lahore Journal of Economics, Vol. 14 (September 2009), pp. 29-50.

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Persistent Inequality and the Challenges to Legitimacy and Peace Building in Pakistan, Paper presented at World Conference on Recreating South Asia: Democracy, Social Justice and Sustainable Development, South Asia Centre for Policy Studies (SACEPS), New Delhi, India, February 2011.

Role of Elites in Pakistan’s Development, Paper presented at British Association of South Asian Studies (BASAS), Twenty-fifth Annual Conference, University of Southampton, Southampton, UK, April 2011.

Business Development or Business Displacement? A Longer View, Paper presented at First Conference of Economic History Society of Pakistan, Lahore, April 2011.

Elites and their Role in Pakistan’s Development, in J.C. Breman, R.S. Srivastava and M. v d Linden (eds), Festschrift for G. K. Lieten (Amsterdam, 2011).

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