NEAR EAST AND SOUTH ASIA REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88T00792R000300010002-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 40
• Document Creation Date: December 27, 2016
• Document Release Date: December 21, 2012
• Sequence Number: 2
• Publication Date: July 3, 1987
• Content Type: REPORT

Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
IJIrectorate tn
.-Lt? 1,;? Intelligence
1,1ASTER FILE COPY
E9 UT SIVE OUT
CR MilliX ON
Near East and
South Asia Review
3 July 1987
--SZtret,
NESA NESAR 87-016
3 July 1987
c'457
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
aecret
Near East and
South Asia Review
3 July 1987
25X1
Page
Articles Arab Politics: From Dormancy to Dynamism
Arab political maneuvering has intensified in recent months, as key
regional players share a perception of movement on an Arab-Israeli
peace process and the Iran-Iraq war. The strength and durability of
these trends are uncertain, as some of the political shifts that have
made movement possible may be only temporary and subject to
reversal.
Syria and the Peace Process: The View From Damascus
Syrian President Assad is taking a more pragmatic tactical
approach to the Arab-Israeli peace process. These signs of a less
obstructionist Syrian posture toward the peace process reflect
Assad's political isolation and the effects of an economic crisis that
is eroding Syria's ability to achieve strategic parity with Israel.
25X1
1 25X1
25X1
5
Egypt-PLO: Prospects for Reconciliation
Egypt and the PLO are quietly probing for ways to repair the recent
rupture in their relatons. An eventual resumption of formal ties is
virtually certain, as the impasse risks delaying progress on the Arab-
Israeli peace process and strengthening the hand of hardliners like
Syria, should they seek to block Egypt's participation.
25X1
25X1
25X1
25X1
9 25X1
The Egyptian Military: Complaining About Economic Hardship 13
Egyptian soldiers and officers consider themselves poorly paid and
are concerned that their standard of living is declining significantly.
The military will increase its pressure for improved compensation,
but its disgruntlement over low wages is unlikely to become a serious
threat to the Mubarak government in the short term.
i
Secret
NESA NESAR 87-016
3 July 1987
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
25X1
25X1
25X1
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
OCUI CI
Lebanon-Israel: Hizballah's Strategy and Capabilities
Recent Hizballah attacks against pro-Israeli forces in Lebanon do
not threaten Tel Aviv's policy of supporting the Army of South
Lebanon while minimizing direct Israeli intervention, but they have
bolstered perceptions of Hizballah as leading the resistance to the
Israeli presence and undermined the moderate Shia Amal militia.
25X1
17 25X1
25X1
Technological Development in the Middle East and North Africa: 21
Poor Performance, Bleak Future
The Middle Eastern and North African states remain in the early
stages of industrial development largely because of cultural and
economic constraints. As a result they will continue to rely on
assistance from the industrialized nations, but, even with such help,
progress will be slow and the technological gap with the West will
widen.
Pakistan: Landlord Clout
27
A relatively small number of landlords and large-scale commercial
farmers dominate use of Pakistan's agricultural supplies and
services and provide much of its marketed output. Because of their
influence at the village and national levels, landlords and large
farmers can exercise considerable control over Pakistan's rural
development policies.
Bangladesh: Lukewarm Response to Export Processing Zones
Investor response to Bangladesh's creation of Export Processing
Zones?duty-free areas devoted to export production?has been less
than enthusiastic. Inadequate infrastructure, corruption, and labor
strife scare off potential investors despite government incentive and
the availability of cheap labor.
Brief South Yemen: Complicity in Bombing in Djibouti
31
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
37 25X1
Some articles in the Near East and South Asia Review are preliminary views of a
subject or speculative, but the contents normally will be coordinated as
appropriate with other offices within CIA. Occasionally an article will represent
the view of a single analyst: an item like this will be designated as a
noncoordinated view.
Secret ii
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Near East and
South Asia Review
Articles
Arab Politics: From
Dormancy to Dynamism
Arab political maneuvering has intensified in recent
months, as key regional players share a perception of
movement on an Arab-Israeli peace process and the
Iran-Iraq war. Moderate Arab efforts to narrow rifts
within the Arab world, craft a joint Arab position on
arrangements for an international peace conference,
and strengthen Iraq's position vis-a-vis Iran are
gaining momentum and meeting with some success.
Some of the political shifts that have made this
possible?particularly Syrian policy adjustments?
may be only temporary, however, and are subject to
reversal. The strength and durability of these trends
are uncertain. Still, there is a good chance of the
following developments over the next six months:
? Increased cooperation among Arab states on the
Iran-Iraq war and on convening an international
conference on the Arab-Israeli conflict, with Syria
refraining from obstructionism.
? Convening of a regular Arab summit meeting, with
endorsement of a coordinated Arab position on
arrangements for a peace conference.
? Further strengthening of Iraq's political position vis-
a-vis Iran.
? Expansion of moderate Arab relations with
Moscow, allowing the moderates increasingl to
play the Soviet card to gain US cooperation.
meeting, where a unified Arab position on a formula
for an international peace conference could be
adopted.
Arab bickering has prevented the convocation of an
Arab summit meeting since the gathering in Fez in
1982. The Saudis?as designated host for the next
summit meeting and natural conciliators?have led
occasional efforts to reconcile Arab differences
sufficiently to convene a successful conclave. Now
joined by King Hussein, these efforts have gained
momentum. The urgency of these efforts derives from
the moderates' desire to maintain movement toward
an international peace conference, exploit increased
Soviet activity in the region, and avoid being caught
flatfooted in the face of unfolding developments in the
Iran-Iraq war:
? A secret Syrian-Iraqi summit meeting in late April
brokered by King Hussein has been followed by
lower level meetings and discussions on potential
areas of cooperation. The fact that the summit
meeting took place was significant in view of the
longstanding animosity between Presidents Assad of
Syria and Saddam Husayn of Iraq.
Shifting Arab Fortunes
Narrowing Rifts. As a result of a recent easing of
Arab tensions, the moderate Arabs probably sense an
opportunity to make progress toward convening an
international conference on the Arab-Israeli conflict
and increase pressure on Tehran to end the Iran-Iraq
war. According to US Embassy reporting, Jordanian
King Hussein's visits to Cairo, Baghdad, Damascus,
and Riyadh have been aimed at healing Arab
fractures, broadening Arab support for Iraq, and
laying the groundwork for an Arab League summit
1
.
US Embassy reporting indicates that King Hussein
and Egyptian President Mubarak are working on
lining up Syrian support for an Arab-Israeli
negotiating strategy. Amman and Cairo plan to seek
written Syrian commitments on conference
modalities within the next several weeks.
? Egypt's relations with the other Arab states have
steadily improved over the past year. At the Islamic
summit meeting in January?the most recent high-
level regional forum?Mubarak was widely
Secret
NESA NESAR 87-016
3 July 1987
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
CL
acknowledged as the star of the show. Assad held
discussions with Mubarak?the first meeting
between Syrian and Egyptian leaders since Cairo's
estrangement from the Arab world following the
signing of the Camp David accords in 1978.
? Moroccan and Syrian officials have initiated
exploratory talks on the possibility of restoring full
diplomatic relations.
Moderate Influence and Radical Weakness. The
success of moderate Arab efforts derives in part from
economic woes that have increased the appeal of Gulf
aid and other financial inducements. We believe
Syria's less strident positions reflect, in part, an
attempt to play all sides for economic gain.
Meanwhile, the Gulf states resumed aid to Egypt over
the past year?an important step in Cairo's gradual
reintegration into the Arab world?out of concern
that economic problems were leading to political
instability and that Iraqi military setbacks might
require closer security ties to Egypt.
Radical states in the region have also been weakened
by a variety of other developments: Syria's problems
in Lebanon and with the PLO, Libya's misadventures
in Chad, Iran's inability to effect significant change in
the Iran-Iraq war, and South Yemen's preoccupation
with internal strife. All of these states have been
condemned internationally as supporters of terrorism.
Syria, Libya, and Iran have been further weakened by
bickering among themselves, particularly over policies
in Lebanon, where there is a continuing risk of a
showdown between Syria and the Iran-backed
Hizballah.
The Islamic summit meeting last January highlighted
the relative strength of the moderates. Iran sent no
delegation because of opposition to its position on the
war. Assad showed up in return for Gulf Arab
financial aid, but he was overshadowed by Mubarak.
Libya's delegation, minus Qadhafi, faced tough
arguments from the Arabs and Africans on Chad.
Syria's Pivotal Role. Damascus has been the linchpin
of Arab relationships in recent years. Its rejectionist
positions have been largely responsible for the impasse
Secret
in Arab politics. We believe Syria's current political
isolation and economic weakness are pushing
Damascus to adopt a less strident regional stance,
with primary examples being its more flexible posture
toward Iraq and
its expulsion of Abu Nidal operatives from
Damascus. Syria could substantially reduce its
isolation and receive a Saudi payoff by returning to
the Arab fold on the Iran-Iraq war issue. Syria is not
blocking Arab League efforts to garner support for
UN sanctions against Iran. Iraq, for its part, wants to
break the Syrian-Iranian alliance and attain broader
Arab support in the war.
The trend in improved Syrian-Iraqi relations,
however, is tenuous at best. Assad probably does not
want to break relations with Iran, and he remains a
bitter enemy of Saddam Husayn. Moreover, reduced
tension between Hizballah and Syrian forces in
Lebanon would reduce Syria's willingness to break
with Iran and improve ties to Iraq. A Syrian
reconciliation with the PLO would significantly
increase Assad's overall bargaining position with the
moderates and would encourage him to resort to
obstructionism on the Iran-Iraq war as well as Arab-
Israeli issues.
Iraqi Question Mark. A wild card in the shifting
radical-moderate balance is Iraq. Formerly a staunch
member of the radical camp, Iraq's more moderate
stance in recent years has been driven by its reliance
on Saudi Arabia, Jordan, Egypt, and the small Gulf
states for support in the war. Although the Bethist
regime in Baghdad is not about to abandon either its
leftist ideology or its aspirations to assume the
leadership of the Arab world, we believe the Iraqi
position on an Arab-Israeli peace conference would be
to support Jordan over the PLO?if an
accommodation could not be reached between the
two?and to stymie Syrian efforts to dominate the
Palestinians.
The USSR: Being There
Increased Soviet activism in Middle Eastern affairs
has created the notion within the region that Moscow
should be credited for many recent developments. We
2
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
believe that over the past year the Soviets have
skillfully dovetailed their Middle Eastern policies with
regional trends ripe for exploitation, and their actions
have accelerated movement on several fronts:
? Expanded Soviet contacts with the moderate Arabs
were made possible in part by growing Arab
frustration with US Middle Eastern policies and a
general trend toward more balanced relations with
the superpowers.
? The Iranian threat has become an increased concern
for the Arabs, who have appreciated Moscow's
increased political and military support for Iraq over
the past several months. Baghdad has recently
received the Soviet MIG-29 advanced fighter
aircraft, and Moscow has stepped up its rhetorical
support for Iraq. This support came in the
immediate aftermath of strong Gulf Arab
dissatisfaction with secret US arms sales to Iran.
? Soviet success in helping craft a semblance of PLO
unity was aided by the frustration of both moderate
and radical PLO factions with their respective Arab
benefactors, the preoccupation of most Arab states
with the Iran-Iraq war, and Syria's isolation.
? Renewed Soviet calls for an international peace
conference on the Arab-Israeli conflict followed the
collapse of Jordanian-PLO efforts to form a joint
negotiating team and King Hussein's decision to
internationalize the peace process.
? The small yet unprecedented Soviet security role in
transporting Kuwaiti oil comes on the heels of
increasing Iranian intimidation and a resulting
Kuwaiti decision to seek outside involvement in the
protection of Gulf oil tanker traffic.
? Soviet pressure on Assad to meet with Saddam
Husayn coincided with growing Syrian displeasure
over Iranian activities in Lebanon and intensive
Arab lobbying to mend the Syrian-Iraqi split.
The Moderate Arab Strategy on a Peace Process
We believe moderate Arab leaders, particularly King
Hussein, see Arab divisions?not Israeli or US
policies?as the immediate obstacle to movement
3
toward negotiations. Bitter rivalries among Arab
leaders?frequently on issues far removed from the
Arab-Israeli conflict?have made it impossible for
them to agree on a concerted strategy in the past, but
they now are searching for a formula for an
international conference that they believe will force
the United States to press for Israeli concessions. The
formidable barrier that the current deadlock in Israeli
politics poses to the convening of a conference will
not, in our view, deter the moderate Arabs. Indeed, it
may provide an extra incentive for Arab leaders to
come to terms on a conference formula in order to
challenge Israel and the United States to participate.
25X1
The moderate Arab leaders almost certainly realize
that there still are major difficulties to be surmounted
before a conference is convened and that the chances
of a conference leading to a peace agreement are even
more remote. The key actors continue to have sharp
differences over the modalities and role of a
conference. There is no indication that key Arab or
Israeli leaders are ready to make the concessions
necessary for a peace settlement, and it is highly
unlikely that a conference could resolve to the
satisfaction of all participants the fundamental 25X1
disagreements over the occupied territories, let alone
the status of Jerusalem and the Golan Heights.
But even the appearance of progress is important to
moderates like Hussein and Mubarak, who need
continually to demonstrate their support of
Palestinian nationalism. Since Jordan has a large
Palestinian population and Egypt is the only Arab
state to have made a separate peace with Israel,
Hussein and Mubarak probably believe they are
obliged to pursue even slim opportunities for making
progress toward restoring Arab control to part of
Palestine.
King Hussein almost certainly believes Assad's hand
has been weakened on Arab-Israeli issues, as
evidenced by Assad's inability to prevent the
convening of the Palestine National Council in
Algiers in late April and by PLO chairman Arafat's
Secret
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
ability to wean some of the radical Palestinian groups
away from Damascus. The Jordanian monarch
probably will step up his efforts over the next few
months to try to narrow differences between Syria
and the moderates on arrangements for an
international conference. He will use a combination of
personal diplomacy and Saudi money to court
Damascus.
Although the difficult question of Palestinian
participation in a conference has yet to be worked out,
moderate Arab leaders probably believe that
coordination with Syria can produce a formula
sanctioned at an Arab League summit meeting that
the PLO would have to accept or risk being left out of
negotiations. Hussein and Mubarak probably believe
that Arafat will soften his positions to avoid being
presented with a fait accompli, and that the PLO
chairman would find it extremely difficult to oppose
an agreement on Palestinian representation that was
blessed by Jordan, Syria, Saudi Arabia, and Egypt.
Prospects
We expect intense maneuvering and more tactical
shifts in the coming months, which may clarify the
strategies and objectives of individual Arab leaders.
There is a good chance for several significant trends
and developments?some favorable, others
unfavorable to US interests?over the next six
months, including:
? Increased cooperation among Arab states, and less
obstructionist Syrian policies on an international
conference and the Iran-Iraq war. There are likely
to be further high-level contacts among Arab
leaders aimed at smoothing over differences. The
combination of pressure and inducements for Syrian
pragmatism from all sides will be intense. Trouble
spots such as Libyan radicalism will remain, but
they will be peripheral to the Arab-Israeli and Iran-
Iraq arenas.
? The convening of an Arab summit meeting, where a
coordinated Arab position on arrangements for a
peace conference, a strongly worded resolution
critical of Iran, and some form of reintegration of
Secret
Egypt into the Arab world probably will be
endorsed. Any agreement reached on a peace-
seeking strategy probably would reaffirm the PLO
as the legitimate representative of the Palestinian
people while leaving open the nature of Palestinian
participation at a conference to give the PLO an
opportunity to make concessions that would allow it
to join. The moderate Arabs?and Syria and
Iraq?will expect Washington to match their
movement with a more active political role by
pressing Israel to agree to attend a conference.
? A strengthening of Iraq's political position vis-a-vis
Iran. This will develop largely as a result of
increased US and Soviet backing, Iraq's success in
courting broader Arab support at Iran's expense,
and the fraying of the Iran-Syria-Libya axis.
? A growing willingness of Arab moderates to expand
relations with Moscow and to use the Soviet card to
gain US cooperation on various regional issues.
Jordan, Egypt, and possibly even Saudi Arabia?in
exchange for Soviet moderating influence on Syria
and potential pressure on Iran and the PLO?will
sanction a Soviet role in a peace process and expand
bilateral ties. The moderates probably judge that
the United States will be more supportive of Arab
interests if Moscow is more deeply involved in
peace-seeking efforts, believing that Washington
will not want the Soviets to assume the role of
championing the moderate Arab cause. Kuwait's
success in gaining US agreement to protect its oil
exports followed its flirtations with Moscow about a
major Soviet security role in the Gulf. Other
moderate Arab states are likely to duplicate these
tactics.
4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
25X1
25X1
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Syria and the Peace
Process: The View From
Damascus
Syrian President Assad is taking a more pragmatic
tactical approach to the Arab-Israeli peace process. In
his meeting with former President Carter last April,
Assad affirmed Syria's commitment to a diplomatic
solution to the Arab-Israeli conflict, and, for the first
time, he hinted that face-to-face talks with Israel were
possible. Despite the positive noises, we believe that
Syria is not prepared to participate soon in an
international conference to end the 40-year conflict
with Israel. President Assad does not oppose in
principle a negotiated settlement, but he believes that
unconditional US support for Israel prevents the
satisfactory resolution of Arab demands at this time.
Recent tentative signs of a less obstructionist Syrian
posture toward the peace process reflect Assad's
political isolation and the effects of an economic crisis
that is eroding Syria's ability to achieve strategic
parity with Israel.
Assad probably calculates that any move toward an
international conference will founder because of
divisions within the Israeli Government on this issue
and the loss of political dynamism by a US
administration distracted with other issues.
Ultimately, Assad believes there is little danger that
Syria will be left out. Syrian participation in the peace
process is Assad's trump card, and he is unlikely to
play it unless he has guarantees that Syrian and Arab
interests will not be subverted by Israeli intransigence
backed up by a sympathetic US partner.
Assad is adamant that what he calls the "salami"
tactics of the Camp David process will not go forward.
If there is a peace process, it will not consist of a series
of bilateral agreements, in Assad's view, but will
emerge from a united Arab stand that will compel
Israel to make peace on Arab terms. In an interview
in September 1985, Assad stated that "Israel has
always rejected and continues to reject peace with the
Arabs collectively. It resorts to hunting the Arabs one
by one because this leads to the dismemberment of
the Arab nation, and this, in turn, further weakens the
Arabs and places them in a capitulatory position vis-
a-vis Israeli schemes."
5
Syria retains an almost singlehanded ability to
undermine any peace process that does not take into
account Syrian interests or attempts to circumvent
Damascus. Assad has demonstrated time and again
his willingness to intimidate Jordan and the PLO or
provoke Israel in a manner that could stalemate
progress toward a political settlement. For example in
mid-1985, when Damascus perceived that King
Hussein was about to move independently on the
peace process, the Syrians sent an unsubtle message to
the Jordanians, pointing out that, had Syria had a
common border with Egypt, there would have been no
Camp David accord
Syrian Demands: Palestine and the Golan
Syria's conditions for an end to the state of war with
Israel include full and unconditional Israeli
withdrawal from territories occupied in June 1967,
including East Jerusalem, and the recognition of the
inalienable right of the Palestinian people to self-
determination. In Syria's view, if these conditions
were met, the state of war would be replaced by an
absence of hostilities, but not normalization. Assad is
prepared to make guarantees concerning Israel's
security, but his view of peace does not include
diplomatic or commercial relations.
25X1
25X1
25X1
25X1
Playing to the more than 500,000 Palestinians living
in Syria and Lebanon?most of whom are from areas
that are part of pre-1967 Israel?Damascus has
consistently upheld the right of Palestinians to return
to their ancestral homes and thus has not endorsed the
idea of a West Bank-Gaza ministate. The regime has
carefully avoided specific formulations for Palestinian
statehood, stating that the Palestinians themselves
must determine what constitutes a satisfactory
solution. Nonetheless, Assad probably would be
flexible on the Palestinian question provided that its
resolution was accepted by other Arab states and the
configuration of a Palestinian entity established
Syria's preeminent political influence in it.
25X1
25X1
1
Secret
NESA NESAR 87-016
3 July 1987
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Assad will not compromise on his demand for the
return of the Golan Heights to Syria. The Golan issue
is intensely personal for Assad, who was Minister of
Defense when the territory was lost to Israel in 1967.
Conscious of his minority religious status, Assad is in
no position to trade away Syrian territory, nor will he
enter negotiations unless he believes the Golan issue
will be resolved in Syria's favor. Once returned to
Syria, we believe Assad would offer guarantees
regarding Israeli security, including the
demilitarization of the Golan and the assignment of
an international observer force to the area. Assad,
however, is skeptical that Israel will reverse its 1981
annexation of the Golan. He has stated publicly that,
just as Israel did not take the Golan by law, Syria will
not regain it by law.
The Military Option
Assad firmly believes that Tel Aviv will never
negotiate an equitable settlement with the Arabs as
long as Israel's military superiority is unchallenged.
In Assad's view, Israel has no incentive to make peace
with the Arabs given its military strength and
unswerving US support. Since Assad believes there
will be no change of heart in Washington, he
concludes that justice for the Arabs depends upon a
credible Arab military capability. Despite Syria's
economic crisis, Assad will pursue his goal of strategic
parity?the unilateral option to confront Israel
militarily.
Assad's goal, however, is virtually unattainable in
light of Israeli strengths and the recently stated Soviet
unwillingness to support Syrian military parity with
Israel. In a speech delivered during Assad's visit to
Moscow last April, Soviet leader Gorbachev stated
that the military option to resolve the Arab-Israeli
conflict has been completely discredited. He noted
that the Soviet Union was prepared to maintain
Syria's defensive capability at an "appropriate level"
but emphasized that the Soviets would refuse to be
drawn into a local conflict that could escalate to a
military confrontation between the superpowers.
Soviet military assistance, nonetheless, will remain
vital to Syria, but the volume and composition of
those deliveries will be subject to fluctuations based
on Moscow's perception of Syrian efforts to service its
massive debt and cooperate on regional issues.
Secret
Syria's economic crisis is also taking a toll on its
conventional military capabilities. There has been a
decrease in the rate of acquisition of major items of
equipment, and, the armed
forces will be reduced by deactivating one of the four
brigades in most of Syria's divisions. Other cost-
cutting measures include early retirements,
cancellation of active duty extensions, and the
replacement of higher paid, more experienced
personnel with low salaried new recruits. Under these
constraints, a quick Syrian grab for the Golan?even
as a Sadat-style tactic to break the political logjam
and start negotiations?appears unlikely.
Signs of Syrian Flexibility?
Whether or not he takes a seat in a peace conference,
Assad's views on the mechanics of the process are
evolving. For example, he has consistently rejected
any formulation for direct negotiations with Israel,
but he has recently demonstrated some flexibility on
this issue. In the 20 April issue of Time magazine
former President Jimmy Carter stated that he was
authorized by President Assad to affirm Syrian
support for the concept of an international peace
conference, that Syria would be pleased to attend, and
that it was clear that many outstanding questions
would have to be negotiated in direct talks between
Israel and the particular nation involved.
The communique issued at the conclusion of Assad's
official visit to Moscow last April noted "complete
agreement" on the issue of an international peace
conference. Assad agreed to the Soviet idea of a
preparatory conference that would pair each of the
parties to the conflict with a permanent member of
the UN Security Council to articulate positions that
would be submitted to an actual conference. Assad
may view international involvement and the Soviet
"pairing" concept as a buffer in the negotiating
process and a means to finesse the issue of direct
contact with Israel.
Assad's position on the composition of the Arab
delegation also appears to be evolving. Following the
Egyptian peace treaty with Israel, Assad opposed the
6
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
ecrer
attendance of separate Arab delegations to a
conference, fearing that a Camp David-style
settlement would emerge, leading to peace between
Israel and Syria's Arab neighbors but leaving Syrian
interests unaddressed. Assad sought to maximize
Syrian influence?and veto power?by arguing for a
joint Arab delegation. His remarks to Carter indicate
a willingness for country delegations, although he
remains opposed to separate Palestinian
representation. Assad's current maneuver to assure
Syrian predominance in the negotiating process is to
advocate the establishment of functional
committees?rather than bilateral exchanges?to
examine issues such as final boundaries.
Assad's View of Israel
In our view, Assad is not capable of a dramatic move
toward peace as was Sadat. He cannot ignore the fact
that the state of Israel was created out of historical
and geographic Syria. Moreover, unlike Sadat, Assad
is genuinely committed to the Palestinian cause and
will not jettison Palestinian interests to regain lost
Syrian territory. Assad fervently believes that the
Arabs have been victimized by Israel and that the
expansion of its borders during four wars is indicative
of Israel's quest to fulfill its manifest destiny. Assad
frequently tells visitors that Israelis believe their
divinely given boundaries run "from the Nile to the
Euphrates," a phrase that Assad mistakenly claims is
inscribed on Israel's Knesset building.
Assad was profoundly affected by Israeli actions
following the Golan disengagement agreement,
reached in March 1974. The withdrawing Israeli
forces evacuated the residents of Qunaytirah, the
largest population center in southern Syria, and
systematically destroyed every building in the city,
including the mosque and the church. Assad ordered
that Qunaytirah not be rebuilt but remain as a
monument to Israel's implacable hatred for the
Arabs.
7
Outlook
As Syria's economic problems mount and its military
options decrease, it has become more vulnerable to
outside influence on a number of issues. The need for
Arab aid, for example, has led Assad to make
concessions on the margins?such as his semi-secret
meeting in Jordan last April with Iraqi President
Saddam Husayn.
Likewise, Soviet pressure has been a significant factor
shaping Assad's present tactics toward the peace
issue. New Soviet activism in the region, particularly
efforts to improve ties to moderate Arabs, appears to
have made Assad less willing to provoke his principal
benefactor. Despite strains in the relationship, Assad
is confident that the Soviets will not require him to
compromise his basic objectives, and we see Assad's
recent endorsement of Soviet peace proposals as little
more than a cost-free means to curry favor. Assad
may believe that by approving the latest Soviet peace
initiative?he endorsed previous Soviet peace
proposals in 1981 and 1984?Moscow will ease
pressure on Damascus to adjust its policy toward the
PLO or perhaps increase Soviet generosity on military
and aid issues.
Despite the growing number of factors that appear to
compel Syria toward an international conference, we
believe Assad intends to put off the day of reckoning
for as long as possible. Much of Assad's regional
influence?and traditional Arab aid?stems from
Syria's role as the principal confrontation state with
Israel. In an environment of peace, the Syrian giant
would be cut down to size. Assad is not prepared to
give up Syria's dominant role in inter-Arab politics or
Secret
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
aecret
sacrifice his significant international status?both of
which are bound up in the Arab-Israeli conflict?for
the sake of peace. Assad, nonetheless, believes he can
afford to be more flexible in his peace rhetoric.
Although he is accustomed to playing the spoiler in
the peace process, recent experience is showing him
that, for the time being at least, he can leave that role
to others, especially Israel's hardliners
Secret 8
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
aCCEeL
Egypt-PLO: Prospects
for Reconciliation
Egypt and the PLO are quietly probing for ways to
repair the recent rupture in their relations. An
eventual resumption of formal ties is virtually certain,
but prospects for a near-term rapprochement appear
dim. The impasse risks delaying progress on the Arab-
Israeli peace process and strengthening the hand of
hardliners like Syria, should they seek to block
Egypt's participation.
Relations Ruptured
Egyptian President Mubarak reacted angrily when
the Palestine National Council issued a hardline
resolution against ties to Egypt in late April. Accusing
PLO Chairman Arafat of selling out to Syrian-backed
radical Palestinian factions in order to forge a fragile
unity within the PLO, Mubarak lambasted the
Council resolution as a major insult to Egypt's
longstanding support for the Palestinian cause.
the Egyptian
leader viewed Arafat's move as a personal insult and a
betrayal of his friendship. In retaliation, Mubarak
carried out an earlier threat to act against any such
anti-Egyptian move by shutting down PLO offices in
Egypt. Press reports suggest domestic opinion has
generally supported Mubarak.
Arafat was genuinely surprised by the
vigor of the Egyptian response.
Mubarak's move against the PLO, however, has
deeper roots. Over the years he has become deeply
frustrated with Arafat's maneuvering to avoid peace
negotiations with Israel. Mubarak has long accused
the Palestinians of wasting opportunities, in particular
because of Arafat's refusal to recognize UN Security
Council Resolutions 242 and 338?the most widely
recognized basis for peace in the Middle East?and
more recently the PLO's reluctance to deal
constructively with Jordan, Egypt's leading partner in
the peace process.
Mubarak's decision also reflects his tendency to act
on advice from intelligence professionals over
recommendations from officials in the Ministry of
9
Foreign Affairs. His move against Arafat appears to
have dealt a significant, if temporary, setback to
members of the Egyptian foreign policy
establishment?in particular powerful presidential
adviser Osama al-Baz?who favor a strong pro-PLO
policy.
Whether Egypt moves decisively to repair the damage
in the months ahead will depend in part on how soon
the foreign affairs professionals can regain Mubarak's
ear and control of Egypt's PLO policy. At present,
they are being kept on a short leash,
the Foreign
Ministry has successfully blocked a General Intelli-
gence plan for Egypt to back dissident Palestinian
leader Abu Zaim against Arafat.
Peace Feelers
Since the Palestine National Council meeting, each
side has been quietly probing for signs that the other
is willing to put relations back on track, but Arafat
appears particularly eager for a rapprochement.
Arafat is
committed to good relations with Cairo because he
regards Egypt as the only effective counterbalance to
the Syrians who he believes intend to destroy him.
While publicly minimizing tensions with Egypt and
praising Mubarak for his efforts on behalf of the
Palestinians, Arafat has asked several Arab states?
including Kuwait, Algeria, and Sudan?to intercede
with Cairo on the PLO's behalf.
during the PLO Executive
Committee meeting in Tunis in mid-May, Arafat
received permission to form a new committee under
his chairmanship to study Egyptian-PLO relations
and pursue reconciliation with Cairo.
Secret
NESA NESAR 87-016
3 July 1987
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18 : CIA-RDP88T00792R000300010002-4
aecret
Arafat was considering
appointing senior political adviser Hani al-Hasan,
who is highly regarded by the Egyptians, as PLO
representative to Egypt.
Despite his eagerness, Arafat is operating under
several constraints that argue against near-term
progress. Internal differences remain the major
stumblingblock. Arafat must attempt to engage Cairo
in a dialogue without jeopardizing Fatah's new unity
with the Syrian-backed Palestinian radical groups or
allowing these factions to impose a militant agenda on
the PLO. Although the PLO Executive Committee
agreed to a communique that included praise for
Egypt,
Arafat may be able to normalize relations with Egypt
by exploiting ambiguities and escape clauses in the
Palestine National Council resolutions and by
approaching the issue quietly and informally without
appearing to openly challenge the radical factions and
undercutting PLO unity. Indeed, the radicals expect
Arafat to adovt this tactic.
at least one of the radical factions
claims that Arafat's moves toward Egypt would not
cause it to withdraw from the unified PLO. On
balance, we believe there is too much internal
opposition to reconciliation with Egypt for Arafat to
mount a hi hl visible cam i? n to court Mubarak.
More likely, Arafat will avoid testing Palestinian
unity and instead let time heal the wound. He appears
more convinced than ever that Egypt needs the PLO.
This view has been encouraged by signals from Cairo.
According to the US Embassy, PLO officials in Egypt
were assured by Egyptian officials soon after the
Palestine National Council meeting that restrictions
on PLO activity in Egypt would be quickly minimized
and gradually reduced.
Secret
Egypt's PLO Agenda
Mubarak, for his part, has no interest in broadening
the rift, but he is smarting from the PLO's insolent"
treatment of Egypt and appears in no hurry to restore
ties. He has stated publicly that, since the PLO
caused the damage, Arafat must make the first move
to repair it. Moreover, he is finding the freeze useful
as a means of conveying a tough message to Arafat:
the PLO must play a more constructive role in the
peace process by accepting UN Resolutions 242 and
338, forging a relationship with Jordan, and
demonstrating tactical flexibility on the issue of
Palestinian representation.
Despite Mubarak's irritation, Egypt has not closed
There are also signs that Mubarak is prepared to
allow positive gestures aimed at encouraging a
Palestinian response. According to Embassy
reporting, he is permitting Foreign Minister Abdel
Meguid to see Hani al-Hasan and has authorized
communications with other PLO emissaries.
Mubarak
will not meet with Arafat until he publicly renounces
the Council resolutions, and we judge that an Arafat
visit is at least several months away.
Further Egyptian restrictions on the Palestinians are
unlikely, but that option remains available. Indeed,
much Palestinian activity in Egypt was not closed
down. Although six offices in Cairo and Alexandria
were shut, the 90-100 Palestinian officials who staffed
them were permitted to remain in Egypt,
Moreover, most unofficial
10
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
2bA1
25X1
25X1
25X1
LA I
25X1
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Palestinian activities and individuals, such as
students, appear to have been unaffected by the ban.
Implications for the Peace Process
The Egyptian-PLO impasse sets a significant obstacle
in the path of progress toward Arab-Israeli peace
negotiations. The split has put Egyptian-PLO
relations right where Palestinian and Syrian
hardliners want them and denied Egypt important
leverage for influencing peace developments
The Egypt-PLO rupture has also brought Cairo closer
to Jordan and appears to have strengthened King
Hussein's confidence in Mubarak as a partner in the
peace process. Together they are sending a tough
message to Arafat to get moving on peace or risk
being left out of the process. In the final analysis,
however, Egyptian policymakers recognize that
Jordan's quest for an alternative Palestinian
leadership is a nonstarter and that only the PLO
possesses the requisite support to represent Palestinian
interests at the peace table. Although Mubarak
probably recognizes that reconciliation with Arafat in
the near term would undercut his valued relationship
with Hussein, he almost certainly plans to maintain at
least some contact with the PLO.
Active involvement in the Arab-Israeli peace process
remains a basic requirement of Egyptian foreign
policy, and Egyptian officials have pledged not to
Reverse Blank
11
abandon peace efforts, according to Embassy
reporting. On the other hand, Mubarak may welcome
an opportunity to take a lower profile on peace issues 25X1
while he concentrates on pressing domestic matters,
including politically sensitive economic reforms and
his own reelection next fall. 25X1
We see little evidence that Cairo's move against the
PLO will slow Egypt's reintegration into the Arab
community. Nor do we believe that aid and
investment flows from the Gulf states will dry up as 25X1
some members of the Egyptian foreign policy
establishment have predicted. Indeed, Mubarak may
welcome offers of Arab mediation as an opportunity
to reaffirm his support for Palestinian rights and
ingratiate himself with potential donors.
25X1
Secret
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
The Egyptian Military:
Complaining About
Economic Hardship
We believe Egyptian soldiers and officers consider
themselves poorly paid and are concerned that their
standard of living is declining significantly. Many
have turned to moonlighting to make ends meet. Even
though an extensive network of perquisites and
privileges offers military personnel security and eases
their financial burdens relative to those borne by
civilians in Egypt, they are displeased that these
benefits are not keeping pace with inflation.
The military believes it should be exempt from
economic belt-tightening by virtue of its importance
to national defense. Although many military
personnel believe a general austerity program will
help reduce Egypt's economic difficulties, they are
unwilling to sacrifice military programs or benefits.
most believe
military spending is not the cause of Egypt's economic
problems, and they say reductions in the armed forces
budget will not contribute to economic recovery.
The military will increase its criticism and pressure
for improvements in compensation, but we do not
believe its disgruntlement over low wages will become
a serious threat to the Mubarak government in the
short term. Moreover, because the government wants
to guarantee the military's loyalty, it is likely to act
quickly if the economy improves to meet some of the
armed forces' demands.
Financial Squeeze
The military is particularly displeased that budget
constraints are keeping pay low,
Salaries vary considerably
depending on rank, length of service, type of duty, and
technical expertise, but the basic scale issued in 1984
has not changed significantly. Monthly base salaries
range from about six Egyptian pounds ($3) for a
conscript to some 200 pounds ($100) for a lieutenant
general, Even
though supplements and bonuses approximately
double incomes for enlisted men and officers, wages
13
tend to be low compared to those of some workers in
the private sector. For example, we estimate that a
first-year, married captain serving in the Central
Military District (Cairo area) would be eligible to
receive about 178 pounds ($89) with supplements,
while a carpenter or plumber can earn 10 times the
captain's gross wages.
The lower ranks are especially hard hit by economic
difficulties. US Embassy sources in Cairo report that
conscripts?who do not receive many of the privileges
of officers?often live in primitive conditions,
particularly outside Cairo. Embassy officers say they
have seen some conscripts living in discarded packing
crates. Volunteer soldiers and noncommissioned
officers, some with many years of experience, also are
disgruntled over their inability to make enough money
to compensate for rising prices,
25X1
25X1
25X1
25X1
25X1
25X1
Morale in the officer corps is worsening because of 25X1
low salaries and the perception among some officers
that they can earn more in the civilian sector. A major
general in the Egyptian Air Force has complained
that an Egypt Air stewardess earns six times his
salary, according to the US defense attache. A US
official who worked with the Egyptians says that
many officers come from the middle and upper classes
and do not believe they can afford to live in a style
similar to the one they had before they entered the 25X1
military. Officers also counted on promises of
"generous" promotions to increase their salaries, but
the rate of advancement has slowed. Even officers
from the Air Force, the service usually favored by
Mubarak in terms of benefits, have complained that
they no longer have enough money to buy basic
commodities because of low salaries and routine debt
payments.
Secret
NESA NESAR 87-016
3 July 1987
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
25X1
25X1
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Belly dancer
Carpenter/
plumber
Estimated Average Monthly Salaries
for Selected Egyptian Workers
IMMIIIIMMINIEMILIEBBEIMIESEEM
Engineer witha7601/2:2284E_-1$670_900
private firm
Butcher
Self-emplomactdier
craftsman
oSfrficiaV
unlv. dean
Army Lt. Gen
B-0,-?-?TeriP
? ? ? ? ? ? ;28500
=2E1
?J
?18207
$370-450
8225-310
Foreman/ ME8170-200
univ. prof.
Journeyman M$120-150
Maid/cook 08100-120
Agriculture 31...
worker 00-90
Army Captain D$89
Mid-level
government 1:35
worker
Army Soldier 18/1
(conscript)
$1550
$300 $11:1100
$1.400
$2000
Many military personnel are augmenting their
incomes by moonlighting in the civilian sector, and we
expect the number to increase as inflation reduces the
purchasing power of their low wages.
approximately 30 to 40
percent of officers between the ranks of first
lieutenant and colonel as of last summer maintained
second full-time jobs?such as sales clerks,
contracting work, telephone switchboard operators,
taxi drivers, restaurateurs, and waiters. A US official
reports that many officers make the majority of their
income from second jobs. We suspect that the
percentage of enlisted men and conscripts
moonlighting is even higher. Ministry of Defense
Secret
$20000
$25.000
$25000
policy prohibits moonlighting, but
many commanders are sympathetic to their
troops' financial difficulties and routinely turn a blind
toward such activity.
the restriction against second jobs for officers was
quietly relaxed last year and will be enforced only if
officers' military duties suffer or if their moonlighting
embarrasses the military.
Perquisites and Prestige Mitigate Strains
The prestige of a military career, in our view,
continues to make the services an attractive option for
many Egyptian men, despite low salaries. The
14
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
,.7..1 IL
military has lost much of the distinction it gained with
the 1952 revolution and the 1973 war, but it remains
the most powerful institution in Egypt. US Embassy
sources say most officers still consider themselves
members of an elite organization.
The military also offers relative security through an
extensive network of privileges and perquisites. We
believe these benefits insulate the armed forces from
many of the economic hardships affecting civilians,
help to offset low pay, and sustain the military's
loyalty to the regime.
among other advantages, regular military
personnel:
? Have the option of purchasing houses and cars on
extremely good terms. For example, military
officers and officer candidates can contract for two
bedroom or larger apartments with a downpayment
of about 4,000 to 5,000 Egyptian pounds (about
$2,000 to $2,500) and a monthly payment of 40 to
50 pounds ($20 to $25) thereafter. Even the least
desirable new apartments in Cairo cost civilians
some 20,000 to 30,000 pounds ($10,000 to $15,000).
? Receive free medical care, even after retirement.
? Can buy low-priced food and consumer goods at
special military stores.
? Are provided with recreational facilities, including
officers' clubs and seaside resorts.
? May take advantage of an inexpensive military
program sponsoring pilgrimages to Mecca.
? Have access to military education and training that
will give them saleable skills in the civilian market
after they retire from service.
Paying for Benefits
Foreign exchange constraints probably will prevent
the regime from increasing military benefits this year.
the official
military budget for 1986-87?some $1.46 billion?is
only about $10 million more than it was for 1985-86.
Inflation?currently about 30 percent annually?will
result in a real decline in government funds available
to the armed forces.
15
The Defense Ministry, however, has financial
resources that are neither part of the official budget
nor under civilian control, and we believe these could
be used to increase military pay and perquisites. We
do not know the total available to the military, but its
extensive involvement in business deals suggests that
the amount is substantial. The Ministry of Defense
has emphasized expanding its own agroindustrial
complex since the late 1970s, and the National
Services and Products Organization, an independent
agency in the armed forces that is run to make a
profit, has grown substantially. It employs at least
100,000 soldiers and civilians in various projects,
according to reporting from the US Embassy in
Cairo. Military personnel operate farms that produce
a variety of meat and vegetables, build large "cities"
designed to house and provide basic services to
military personnel and their families, and run
factories that produce items for defense and consumer
needs. For example,
the military agricultural complex as of last
ecem er was producing some 7 million tons of milk
daily and 60 million eggs, 50,000 tons of vegetables,
and 8,000 tons of meat annually as well as fodder,
edible grains, and fruit, some of which it sold on the
civilian market. The military also is involved in many
other ventures that earn revenue, including arms and
land sales.
we believe military profits
have been used to protect the military from economic
austerity by augmenting salaries and providing
benefits not covered in the official budget. For
example, Defense
Minister Abu Ghazala retains personal authority over
two aspects of military pay?"extra efforts" and
"special nature of work"?in contrast to other pay
and allowances that have to be voted by the assembly.
We estimate that allotments from these two
categories at least double military salaries for most
officers and volunteer personnel.
about two-thirds of military profits from arms deals
support military housing, maintenance, and purchases
of spare parts.
Secret
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
25X1
25X1
25X1
25X1
2bA1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Outlook
Complaints about inadequate salaries and financial
woes so far have not generated active resistance or
violence among military personnel, nor does the
loyalty of the armed forces to Mubarak appear to be
in doubt. The military generally appears to believe
that Mubarak, a former Air Force officer, will protect
its interests as much as possible against competing
demands for funds. The President also has an
important ally in Abu Ghazala, who, at least in the
short term, will probably continue to support the
administration. The Defense Minister is popular
within the armed forces as the guarantor of their
perquisites and for his attempts to expand military
benefits.
As inflation increases over the coming months,
military personnel probably will continue to complain
about declining standards of living and will intensify
pressure on the Mubarak government to improve
salaries. Even though the regime probably will act as
quickly as possible to secure the loyalty of the military
by satisfying its demands, we doubt that the economy
will pick up enough this year to allow it to
substantially increase compensation. The Defense
Ministry also expects its personnel to have to live with
Secret
the strains of a tightened budget.
kbu Ghazala early this year told senior
commanders that funds to purchase new equipment
and to continue military modernization would have to
come from loans and US FMS grants?about $1.3
billion this year. He also said financial constraints
would preclude promised improvements in the armed
forces' salaries and perquisites during 1987.
Nonetheless, we suspect that the private Defense
Ministry budget, if not the official budget, has
sufficient resiliency to increase compensation if
morale in the military plummets and it begins
pressing for changes in leadership. Abu Ghazala
particularly would want to at least partly satisfy
military demands to secure his own power and
prestige.
16
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
LJtI t1
Lebanon-Israel: Hizballa
Strategy and Capabilities
Recent Hizballah attacks against pro-Israeli forces in
Lebanon do not threaten to overturn Tel Aviv's policy
of supporting the Army of South Lebanon while
minimizing direct Israeli intervention. If the trend
toward larger and more determined assaults by the
fundamentalist Shias continues, however, Israel will
have to take a more active role.
The widely publicized assaults on pro-Israeli forces in
South Lebanon have bolstered perceptions of
Hizballah as leading the resistance to the Israeli
presence. We believe Hizballah's activism in the south
has translated into important political advantages
against the Amal militia, the fundamentalists' rival
for influence among Lebanon's Shias.
Hizballah's Southern Strategy
Driving the Israelis out of Lebanon is not the
fundamentalists' most pressing goal. The latest
attacks seem aimed at weakening the influence of the
Amal militia and demonstrating Hizballah's improved
military capabilities.
The Israeli troop presence in Lebanon is a political
foil that Hizballah has manipulated to its advantage.
Although the Israelis were welcomed by some South
Lebanese Shias in 1982, the Israeli presence became
increasingly odious to them. After their withdrawal in
1985, Israel sought a modus vivendi in which Amal?
in effect?would police southern Lebanon. Amal's
decentralization, the preoccupation of its leadership
with the anti-Palestinian camps war in Beirut, and the
restlessness of South Lebanese Shias allowed
Hizballah to begin usurping Amal's unchallenged
position in the south.
The Israelis believe that in the last year Hizballah has
become the most important factor in operations
against the Army of South Lebanon and the security
zone. As Hizballah attacks increased, hopes for an
Israeli withdrawal faded. Retaliation by the Israelis
or their Lebanese surrogate created a cycle of violence
that has helped to radicalize the southern Shias. Amal
17
has been put in the difficult position of having to
either tacitly defend Israel's continuing presence in
Lebanon or support Hizballah in its attacks. We
believe that Amal has reluctantly followed the
fundamentalists' lead.
Hot Summer in South Lebanon?
Hizballah's attack on 31 May near Jazzin involved
considerably larger forces than it had fielded in the
past and provided dramatic evidence of the
fundamentalists' growing military strength. Estimates
of the number of attackers range from 250 to 400.
the fighting was heavy
and prolonged. Even though the assault was repulsed,
Hizballah briefly overran some Army of South
Lebanon positions. The attackers withdrew in good
order without sustaining significantly more casualties
than the defenders.
The success of the attack last May stands in sharp
contrast to the setback Hizballah received on 18 April
when a force of roughly 100 fighters attacked two
Army of South Lebanon positions. We estimate that
Hizballah suffered about 25 killed in an assault that
had little effect. Israeli portrayed the
high level of casualties inflicted by its Lebanese
surrogate on Hizballah as a clear defeat.
The May attack shows that high casualties have not
deterred Hizballah. In our view, casualties have at
best a secondary effect on Shia willingness to attack
pro-Israeli forces in Lebanon. We see little, if any,
evidence that Hizballah is having difficulty recruiting
young Lebanese Shias
Hizballah leaders regard the May attack as a
significant victory. Public statements by Hizballah
leaders claim that the attack cracked the morale of
the Army of South Lebanon and demonstrated the
Secret
NESA NESAR 87-016
3 July 1987
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
acurCL
260-
240-
220-
200-
180-
160-
140-
120-
100-
80-
60-
40-
20
0 ,
2 JAN
HIZBALLAH ATTACKS ON PRO?ISRAELI FORCES
(Since 1January 1987)
,
29 MAR
qualitative edge Hizballah holds over its opponents.
The May attack, moreover, almost certainly
strengthened Hizballah against other Lebanese Shias
who had argued that, because of the high casualties it
had suffered earlier, the attacks should stop.
Hizballah's Learning Curve
Hizballah has learned from its mistakes
In May the Shias began to coordinate
infantry and artillery, improved their capability to
attack Israeli helicopters, and demonstrated
improvements in extracting wounded from the
battlefield. Hizballah captured ammunition and other
stores when they drove off Army of South Lebanon
defenders, but, perhaps more important, Hizballah
fighters destroyed everything they could not carry off
when they were forced to retreat.
Secret
18 APR 31 MAY
Legend
? RIEMEDLEITIV
O NIZIOALLAti KIA
It was not always so. The fundamentalists' attacks
before the spring of 1986 were more undisciplined
acts of desperation than organized military action.
Shia resistance to the Israeli occupation was by and
large eclipsed by the spectacular suicide car bombings
conducted by the Syrian Social Nationalist Party.
Hizballah attacks at the time consisted mainly of
placing landmines in roadways or otherwise
concealing explosives. Although there were incidents
of armed Shias shooting at Israelis or the Army of
South Lebanon, Hizballah seems not to have been
able to organize a sniping campaign against these
forces.
18
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18 : CIA-RDP88T00792R000300010002-4
Secret
Beginning in the
began to tell of squad-size operations using
guerrilla-style hit-and-run tactics. By last fall,
Hizballah began what appeared to be carefully
planned attacks on Army of South Lebanon
strongpoints. In September, Hizballah launched
unprecedented simultaneous attacks on positions in
South Lebanon in what appeared to be the start of an
offensive to seize control of the opposition to the
Israeli presence in South Lebanon, further
undercutting support for Amal among the country's
Shias
By last spring, Hizballah had moved to platoon- and
company-size attacks involving over 100 fighters.
that the
fundamentalist attacks are better planned and
executed and more complicated, involving supportin
artillery and mortar fire.
Israel's Response
Tel Aviv believes it has little choice but to keep using
the Army of South Lebanon as a shield. The current
policy of enhancing this militia's capabilities by
increased training or providing tactical support inside
Lebanon as necessary seems unlikely to change.
Domestic political considerations make committing
Israeli forces to anything but short-term operations
inside the security 7one a remote possibility at best.
Israel's hands, however, are not completely tied. We
believe Tel Aviv will look for opportunities to attack
Hizballah concentrations whenever possible. The
increased size of Hizballah's recent attacks raises the
possibility that good tactical intelligence may enable
the Israelis to target Hizballah fighters assembling
for an attack. The supporting artillery fire noted in
the most recent attacks may present targets to Israeli
counterbattery artillery and attack helicopters.
operations and would?for the short term at least?
force the fundamentalists to divert manpower to
defending against air attack.
Outlook
Hizballah's southern strategy is working. Lebanon's
southern Shias are growing increasingly radical,
although Amal retains considerable support. Several
prominent clerics in the south are influential
Hizballah backers, and we suspect that additional
clerics sympathize with the fundamentalist camp. We
also believe that Hizballah inroads in the south are
not well documented and that more Shia villages
contain both Hizballah and Amal supporters than
previously believed. If our suspicions are correct,
Amal would still play an important role in the
political life of the southern Shias, but Hizballah?in
contrast?would be a more dynamic force.
25X11
25)(1
25X1
More attacks on the Army of South Lebanon are
likely. Considerable amounts of military supplies and
weapons destined for Hizballah shipped from Iran
had been held in Syrian warehouses, but last spring
Damascus released the materiel to the
fundamentalists,
Although this does not mean that the arms floodgates
have opened for the fundamentalists, Hizballah
should have more than ample arms for its summer
campaigns. The Syrian clampdown on Hizballah
activity in West Beirut, moreover, has helped channel
the organization's energies toward South Lebanon.
25X1
26X1'1
The Israeli air force has thus far not attacked
Hizballah's main training facility in the Bekaa
Valley, the Shaykh Abdallah barracks. Extensive
damage to Shaykh Abdallah would disrupt
Hizballah's ability to train for company-size
19
Israel cannot easily land a knockout punch. Although
the Army of South Lebanon has modified its tactics,
its orientation seems overly defensive. Hizballah has
thus far not concentrated its forces prematurely and
has apparently dispersed its rters after attacks.
Secret
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Secret
OECD MACHINERYb EXPORTS TO THE MIDDLE EAST AND NORTH AFRICAc
1972 - $2.8 BILLION
1981 - $30.1 BILLION
C Except Iceland. New Zealand. Portugal and Turkey
b We have used the category machinery as a proxy for the region's
imports of low technology goods. The category includes all types
of engines. farm equipment, heavy industrial machinery, business
machines and computers. electrical equipment. forklifts. pumps.
scientific instruments. and spare parts for machinery.
1985 - $21 BILLION
C Information was available for the following Middle East
and North Africa countries: Algeria. Bahrein. Egypt, Iran. Iraq.
Jordan, Kuwait, Lebanon, Libya. Mauritania. Morocco,
North Yemen, Oman, Oster, Saudi Arabia, South Yemen, Sudan,
Syria. Tunisia. UAE
Secret 20
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Technological Development
in the Middle East and
North Africa: Poor Performance,
Bleak Future'
The Middle Eastern and North African states remain
in the early stages of industrial development.2 They
have experienced difficulty assimilating relatively
sophisticated equipment and technologies and
generally are not noted for their skills in innovation or
invention. Cultural and economic constraints are
serious impediments to technological progress. As a
result, the countries of the Middle East and North
Africa probably will continue to rely heavily on
purchases and assistance from the industrialized
nations. Even with such help, progress will be slow
and the technological gap with the West is likely to
widen.
Modernization Goals and Trends
The countries of the Middle East and North Africa
began to reassess their development plans after the
dramatic increase in oil revenues and remittances
resulting from the region's oil and construction boom
in the 1970s. They developed policies calling for
greater use of technology to improve living standards,
promote economic growth, raise national pride, and
support military objectives. The region's imports of
machinery from the OECD countries?a rough
indicator of technology acquisition?increased more
than tenfold between 1972 and 1981. When oil
revenues and remittances began to decline in the early
1980s, the Middle Eastern and North African states
slowed the pace of modernization.
Government ministries often claim that they want
"appropriate" technology. Saudi Arabia and the
smaller Gulf states have been able to pursue capital-
intensive projects in the oil industry that are well
' For the purposes of this article, technological development largely
refers to applications that would be regarded as low technology in
most of the industrialized West but which represent attempts to
enter a new phase of industrialization in North Africa and the
Middle East. Examples include machine tools such as radial arm
drills and metal-working lathes, computer systems that keep track
of government finances or foreign workers and visitors, and new
methods to exploit mineral wealth.
2 Excluding Israel, which has been successtui in building a
technological and industrial base
21
suited to their relatively small populations. Morocco,
with its large population and rapid population growth,
has chosen some projects in agriculture that use labor
more intensively. Nevertheless, complex and capital-
intensive imported technology is favored in some
countries with large populations or high
unemployment?such as Egypt and Jordan?where it
would be wiser to focus on less sophisticated, labor-
intensive projects.
A Few Bright Spots
Countries in the region have had varying degrees of
success in economic modernization:
? All have developed or imported technology to
improve health care and municipal services, such as
sanitation, and life expectancies have increased
dramatically.
? Petroleum engineers in Saudi Arabia and some of
the smaller Gulf states have improved upon oil
extraction and refining techniques. These countries
operate complex petrochemical projects that
contribute significantly to government revenues.
25X1
25X1
25X1
? Local manpower has been trained to operate and
maintain most civilian aircraft and to manage the
air traffic control systems. Five of the region's
airlines consistently rank among the world's top 50 25X1
in terms of passengers carried, freight tons carried,
and distances flown. The aircraft and traffic control
systems are predominantly Western in origin.
? Egypt, whose research and development efforts
probably are the strongest in the Arab world, has
several relatively good laboratories devoted to
medical and agricultural research. Egypt's
dependence on the Nile has also spawned some of
the best water technicians in the world, according to
US Government officials.
Secret
NESA NESAR 87-016
3 July 1987
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
6310;1 VL
The Negative Impact of Technology
on Labor Markets
There is a downside to promoting a more efficient
infrastructure using capital-intensive and labor-
saving technology. Fewer workers are required, but
they must be more highly skilled. Most countries in
the region already have serious difficulty in trying to
lower unemployment, raise worker productivity, and
train their work forces adequately. Where capital-
intensive and labor-saving technology is successfully
introduced, unemployment problems often become
more severe. Work forces in several increasingly
capital-intensive industries such as textiles,
petrochemicals, and telecommunications probably
have been decreasing steadily over the last two to
three years.
Although much of the Jordanian population is well
educated and supports government efforts to
modernize and provide technical jobs, some lesser
educated Jordanians fear that technological advances
will eliminate their jobs,
Where positions have become
obsolete following the installation of new
technologies or updated equipment, displaced
Jordanians frequently have been kept on the payroll
and assigned other duties, such as security. Broad
government modernization plans call for retraining
displaced employees to operate new equipment, but
no programs have been established so far.
? Jordan is the principal supplier of technical
manpower to the Gulf states. Amman plans to form
consulting firms to service the technical
requirements of the region?which up to now have
largely been provided by Western expatriates.
? Industries in several countries in the region use
computers, machine tools, or other modern
equipment to streamline production processes.
Secret
Shortcomings and Failures
Most of the countries in the region have been unable
to fulfill their technological development goals, and
they remain poorly positioned to do so. Despite
government declarations encouraging the indigenous
development of technology, most governments have
failed to provide sufficient financing, especially
during periods of shrinking resources. Arab states
spend only an average of about 0.3 percent of GNP on
research and development compared with an average
of 0.4 percent in non-Arab African countries, 0.5
percent in Latin America, 1.2 percent in Asia, 2.5
percent in the United States and Japan, and 3 percent
in Israel
Little applied scientific research is performed in the
region. Industry provides almost no support for
research and development in most countries in the
Middle East and North Africa?in contrast to the
pattern in most industrialized nations. Because
universities dominate research and development in
Arab countries?Egypt's universities, for example,
sponsor between 70 and 90 percent of research and
development?there is an emphasis on esoteric
research, and short shrift is given to practical
applications of technology. When area governments
have become involved in research, they have invested
mainly in low-grade, trial-and-error types of technical
experiments that produce marginal results.
Technological "white elephants" are common
throughout the area. They result from poor planning
and a failure to adapt technology to local conditions.
According to US Embassy officials, national pride
gets in the way of eliminating these projects.
Examples include:
? A chemical fertilizer plant in Egypt that would cost
less to shut down and keep paying employees'
salaries than to keep the plant operating.
? A phosphoric acid plant in Morocco that produces
far below capacity and does not have enough
qualified foremen and middle-level managers.
? Advanced agricultural techniques in Jordan and
Saudi Arabia that produce food crops at enormous
cost.
22
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
secret
Proportion of Research & Development
Scientists and Engineers, 1987*
Non?Arab African Countries 100
Arab Countries 250
Latin America 300
Asia 350
United States
Soviet Union
3000
0
Per Million People
* Estimated, based on UNESCO statistics
Over 5000
5000
23
Secret
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
3ecrei
Several countries in the region have established
turnkey facilities?such as electricity and water
desalination plants?in which construction typically is
guided by a foreign company and few local people are
trained to run the plant once it is completed. Turnkey
plants are often hollow advances because they bypass
key intermediate technical stages and do not alleviate
surplus labor problems. The construction of turnkey
industrial plants is often more akin to conspicuous
consumption than to investment in productive
capacity.
The Middle Eastern and North African states have
become dependent on industrialized nations to provide
spare parts?for instance, printed circuit boards,
diodes, and resistors?for their technologies. Some
countries, such as Iran, Iraq, and Syria, are having
problems acquiring spare parts for newly acquired
technologies because of reduced revenues and trade
restrictions imposed by technology exporters.
even if firms
acquire all the spare parts they need, it is difficult for
some technologies, such as in telecommunications, to
be utilized successfully because of exposure of
equipment to dust, sand, and heat.
Obstacles to Successful Technology Transfer
Education. For the most part, the Middle Eastern and
North African educational systems have not
adequately prepared their populations to absorb
modern technologies:
? Literacy rates range from 15 percent in North
Yemen to 75 percent in Lebanon, compared to 75 to
94 percent in newly industrialized countries such as
Argentina and South Korea.
? Literacy among women and the poor averages less
than 15 percent, according to an expert on
education in the Middle East.
? Only half of the children in the region between the
ages of 5 and 15 attend school.
? Although school enrollment reaches about 90
percent in the cities, it often does not exceed 15
percent in rural areas.
? School curriculums are outdated, and teaching
staffs are weak throughout the region.
Educational systems in the Middle East and North
Africa are largely at odds with modernization policies.
In some cases, the educational systems are little more
Secret
than outmoded extensions of those of the former
colonial powers, and curriculums are largely
irrelevent to current social and economic demands.
Universities rely heavily on rote memorization. Many
students in Jordan complain that by graduat'
have learned only how to pass examinations.
Vocational and technical schools are both expensive
and inadequate. Per-student costs are 1.5 times
greater than in general schools. Most graduates are
prepared only for outdated technology because schools
cannot afford new equipment, according to a
contractor study. Students in computer science at
Damascus University, for example, must make do
with a purely theoretical education because they never
see a computer.
Culture. Cultural factors play a major role in
inhibiting popular acceptance of technology in the
region?particularly among the rural and lower
classes, which perceive inherent conflicts between
technology and tradition. Governments face public
resistance to policies emphasizing technical education
and, in some cases, also confront widely held class
values that encourage disdain for skilled manual
labor. Modern equipment and innovations generally
are viewed as unreliable and confusing or as attempts
by the West to gain influence. In many instances,
people have to be convinced of the usefulness of
technology before they will even experiment with it.
Fundamentalist groups opposed to the spread of
Western culture impede technological development.
According to a contractor's study, some
fundamentalists denounce what they perceive as the
moral decay caused by modernization or believe that
the economy is suffering because Muslims are
imitating un-Islamic Western models. They demand
that the government abandon Western-style
education in favor of traditional Islamic instruction,
with its emphasis on religious education. So far,
public protest against imported industrial technology
has been rare. Fundamentalists have focused more on
trying to ban other Western introductions such as
video clubs and movies
24
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
The Dismal State of Technical Education in Jordan
A recent survey of Jordanian technical school
graduates and employers?conducted for the World
Bank?reflects the low esteem with which such
graduates view themselves, the inappropriate work
attitudes they bring to the job, and the inadequacies
of the training they received:
? About 75 percent of technical school graduates
aspire to a university-level liberal arts education
and view their present circumstances as temporary.
? Only 20 percent of the graduates want to achieve a
high degree of competency in their chosen
vocational or technical education field.
? Over 60 percent of the graduates indicate that their
education did not sufficiently prepare them for their
first job.
? Some 80 percent of the graduates had only average
or below-average scholastic performance. (Trainees
can drop out of a program but are never failed
because of inadequate performance.)
? Two-thirds of the employers of technical school
graduates note that the schools are not imparting
high skill standards or responsible attitudes to
their students. Many employers choose to retrain
the graduates that they hire.
Military Siphon. The military sector?particularly in
Egypt, Iran, Iraq, Libya, Saudi Arabia, and Syria?
attracts many of the best personnel by maintaining its
own technical training facilities and by paying
salaries that surpass those available at civilian
institutions, according to a contractor's study. This
contributes to the shortage of competent technical
manpower in civilian sectors such as industry,
construction, telecommunications, and transportation.
Low Wages. Skilled workers are disenchanted because
wages do not meet expectations. Government
development policies often support salary and wage
practices that do not reflect the critical shortages in
technical manpower. Some firms in Egypt, for
example, are having trouble attracting engineers
because wages are too low, according to Embassy
reporting.
Regional Recession. The regional decline in real
economic activity of 2 percent in 1985 and 4 to 5
percent in 1986 forced countries in the area to cut
back on plans for technological development:
? Several governments in the Gulf states have
postponed or scrapped projects to construct schools
and training centers.
.
Brain Drain. The countries in the Middle East and
North Africa annually lose thousands of talented
youths. Most have gone abroad for technical
education?mainly to the United States and Western
Europe. An expert on the brain drain phenomenon
estimates that more than 250,000 Arab professionals
live in the United States, Europe, and Latin America
because of poor salaries and living conditions, political
discontent, or lack of job opportunities at home. Many
professionals in fields such as medicine, engineering,
or teaching also have emigrated mainly to the richer
Arab oil states
25
Iran has reduced the number and amount of
scholarships for study abroad because of the
recession and budget cuts.
? The Arab Republic Bank for Reconstruction and
Development in North Yemen is reluctant to
underwrite private-sector investment in technology
due to the failure of large numbers of borrowers to
repay loans,
? Other regional banks also have been reluctant to
grant credit for investment in technical areas.
Outlook
Most states in the region have little chance of entering
the ranks of the newly industrialized countries during
this century because of limited natural resources,
Secret
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
fundamentally flawed educational systems, and
deficiencies in their labor forces. Area governments
probably will seek to strengthen their technical
training programs to try to fulfill their modernization
plans, but significant shortages of indigenous
manpower in technical fields probably will persist at
least through the end of the century:
? Saudi Arabia and the smaller Gulf states are in a
good position to achieve technical advances because
of their financial and hydrocarbon resources. These
states, however, will continue to depend on
expatriate labor to achieve technological
development goals.
? Egypt and Jordan have moderate chances for
technical successes in selected areas because of their
relatively strong educational systems.
? The poorest countries?Mauritania, North and
South Yemen, and Sudan?have the worst
prospects for technological development
depend less on Soviet and East European equipment
and assistance, which is cheaper but less reliable and
less advanced than most Western goods and services.
Leaders in the region almost certainly will ask the
United States to disseminate more technological
information and to relax restrictions on patent
agreements. US technology exports to the region have
not grown as rapidly as those of its competitors over
the last decade because of restrictions on sales of
advanced computers and military equipment. In
addition, several countries in the region probably will
approach the United States to develop joint projects to
ensure continued access to technical expertise. Egypt,
for instance, would like to train more technicians and
production managers in the United States?
particularly as Egyptians engage in more industrial
ventures with the United States.
The Middle Eastern and North African nations
probably will continue to rely heavily on imports,
financial assistance, and trained personnel from the
United States and other industrialized nations?
particularly Japan, France, West Germany, and the
United Kingdom?to promote technological
development. As a result of its active marketing
campaigns, Japan will be a particularly stiff
competitor to the United States as a supplier of
technology to the region. Area countries probably will
Secret
26
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Secret
Pakistan: Landlord Clout 1
A relatively small number of landlords and large-scale
commercial farmers dominate use of Pakistan's
agricultural supplies and services and provide much of
its marketed output. As a group, however, they use
resources less intensively and generate lower yields
than other farmers. The government is supporting an
agrarian structure that is far from optimal from the
point of view of getting the "biggest bang for the
rupee." Because of their influence at the village and
national levels, landlords and large farmers can
exercise considerable control over Pakistan's rural
development agenda and agricultural policies. They
will not countenance land reforms and will not let
farm prices diverge from target ranges they desire.
Agrarian Structure
Since 1977, when the Zia government assumed power,
Pakistan's agricultural sector has grown at an average
annual rate of 4.2 percent. This rate is relatively
higher and more stable than those typical of the
developing world. Nevertheless, development in
Pakistan's rural sector has been uneven.
Under existing arrangements, Pakistan's large
commercial farmers, who provide the preponderance
of marketed wheat, rice, cotton, and sugarcane for
domestic and export markets, are faring well. They
already absorb the largest share of fertilizer, water,
new seeds, credit, and other inputs. They have access
to extension advice if they want it. With family and
political ties to the military and industrial elites, the
large farmer-landlords are powerful actors in the
agricultural and political sectors.
In contrast, middle and small farmers, tenants, and
agricultural laborers have only narrow avenues for
political expression in Pakistan's elite-dominated
government and party system. They are not powerless,
however, because the government needs them to meet
'This article is based on a study prepared by an outside contractor.
It has not been coordinated within the CIA. The views expressed
are those of the author.
27
its food and export targets. Their aspirations are
supported by external aid donors, who seek an
agricultural development strategy that will make
efficient use of labor, land, water, and modern inputs.
There are, therefore, counterweights to large farmer-
landlord dominance.
This agrarian structure is a disincentive to production.
The large landholders use resources much less
efficiently than would the legions of peasant farmers.
Estate owners are often content with one market crop.
Their personal incomes are high, and their
management style is loose. They may live in the cities
and act as absentee owners. In contrast, small
farmers?cultivators or tenants?concentrate on
raising yields. Their willingness to use family labor to
the point of physical and time exhaustion is the key to
getting the most food, along with cash income, from
their holdings. Agricultural census data indicate that
the smaller the farm, the more commonly is land
double- or triple-cropped.
Large farms also tend to use purchased inputs less
intensively than medium-size farms. Fertilizer
application is most common on middle-range family
farms and drops as farm size rises. Small farmers rely
more on traditional manuring. They may lack access
to credit with which to buy fertilizers. Large farmers
recruit wage labor to get the work done, but, to save
money and reduce management problems, they adopt
labor-saving mechanical equipment such as tractors.
They control irrigation flows from canals and
pumpsets, but then use water wastefully.
On the output side, large landowners have much
better access to sales channels. They can sell on the
most favorable terms to large private dealers or the
government at official procurement prices. Middle
and small farmers must dispose of their crops to small
buyers, the big landlords, moneylenders, or village
shopkeepers?all of whom extract appreciable
middlemen's profits.
Secret
NESA NESAR 87-016
3 July 1987
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
secret
-mkaaseilarm"- PAKISTAN: AGRARIAN STRUCTURE 1980
FERTILIZER USE
Percent BY FARM SIZE
50-
Percent
25
20
? AS* AO?0-
Acres
SHARE OF FARMS
BY SIZE
15
Percent
40-
35
30
25
20
15
10
5
0
CREDIT USE
BY FARM SIZE
?? 0 0 SO 0-
0.0
?0( P.
Acres
OWNER OPERATED FARMS
BY SIZE
Percent
100
90
80
70
60
50
40
30
20
10
0
Acres Acres
Secret
28
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Secret
Five-year plans and related manifestos giving priority
to agriculture have proposed policies that make sense,
but implementation has been slack. The persistent
inability of the government to move in the directions
outlined in successive plans stems from institutional
rigidities and political forces that have not changed
over at least the past 10 years.
"The Feudals"
The "big man" is a fixture of South Asian rural
society and politics. In modern Pakistan, he and his
ilk are known, with a mixture of disdain and
deference, as "feudals." In traditional and colonial
days he stood at the head of a caste, lineage, or
village. He always has had behind him an army of
kin, friends, clients, and goons to act as his muscle.
They were armed in the old days with sticks, stones,
and perhaps swords, but today they are increasingly
fitted out with domestic and imported firearms,
including an occasional Kalashnikov. The big man is
not reluctant to use his troops for pillage, rape, and
arson. He is accustomed to fawning courtesy and
rarely travels without lackeys. The magnate succeeds
in holding loyalty by doing favors for his dependents
and retainers. He is generous with gifts of money and
food to the needy, providing loans for weddings,
money to take sick children to doctors, and food to the
indigent. The large farmer employs on his lands those
who seek work, and his recommendations for jobs and
credit carry weight at least as far as the district
headquarters.
The many modern functions of the magnate account
for his survival, even prosperity, in the 1980s. He
helps his rural clients deal with the outside world?in
its marketplaces, loan offices, courts, and police
stations. At the same time, the police, agricultural
extension workers, and credit agents must work
through the magnates to reach the broader rural
constituencies. The big men are two-way "brokers"
and "fixers," serving as intermediaries between the
urban and rural, official and local, and modern and
traditional worlds.
The magnate-landlord-broker is, therefore, as
important to the external modern half of society as he
is to the internal village half. He has often taken some
of his landed wealth and moved it into commerce and
29
industry. His younger brothers and male children
have gone to the best schools and universities and then
into the Army, government, and business. At ease in
both worlds, he effectively moves people and resources
back and forth within the orbit of his influence.
So far, most rural magnates are successfully making
the transition to urban status and affluence while
retaining their rural bases. The landlords' links to
urban influence networks, via ties of birth and
marriage, plus their successful penetration of the
major modern political parties and institutions,
suggest they will remain a powerful force.
Landlords and Party Politics
Politically, the feudals constitute a potential major
building block of a party. Their retinue constitutes a
vote bank that they can deliver to the candidate of
their choice. They frequently take the local ticket
themselves. Under the restricted politics of the Zia-
Junejo period, their role has been, if anything,
magnified. In the absence of open party politics and
mass mobilization, the rural magnates offer one of the
few significant power bases. Since their means of
holding support are not restricted by official antiparty
rules, their comparative strength and their role in the
existing system are much larger than they would
otherwise be.
Landlords dominate the federal parliament, having
been elected in 1985 almost by default because the
opposition parties stayed out. They are also of
considerable significance in the opposition Pakistan
People's Party, and the Bhutto family itself belongs to
the Sindhi landed elite. A large splinter opposition
group in Sind, the National People's Party, is headed
by Ghulam Mustafa Jatoi, who has been described as
a "feudal, but a good feudal." When people are asked
how many of the incumbents in the national and
provincial assemblies are landlords, the answer is
invariably, "They all are."
Landlords and Agricultural Policy
Because of their influence at the village and national
levels, the landlords and large farmers can exercise
considerable control over Pakistan's rural
Secret
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Secret
development agenda and agricultural policies. When
they cannot shape policies to their needs at the
national or provincial level, they subvert them or
convert them to their uses in their village redoubts.
Only when national goals coincide with theirs do they
willingly cooperate with plans that are written by
technocrats with considerable advice from
international aid agencies.
The rural magnates will not countenance land reform
in any shape or size. Only a pittance of land was
redistributed to the landless during Pakistan's three
forays into land reform in 1959, 1972, and 1977.
Land reform is a dead issue because of the landlords'
opposition.
The landlords will not let farm prices diverge from the
target ranges they desire. They have permeated the
Agricultural Prices Commission, which is supposed to
set procurement prices for principal crops on a
scientific basis, and prevented output prices from
moving in directions that would threaten their
incomes and lifestyles. They will not accept taxes on
agriculture, higher water charges, or interference with
their dominance of rural resources. The big
landholders will continue to support the expansion of
acreages and yields of wheat, cotton, rice, and
sugarcane?the lucrative commercial crops?while
remaining diffident about turning to intensive garden
cropping, oilseeds, and the minor grains.
Agricultural Prospects
Pakistan's agriculture will go on expanding at about 4
percent a year so long as growth enhances the wealth
of the rural magnates and does not lead to challenges
to their authority. Global grain, cotton, and sugar
surpluses in the years ahead will continue to limit the
price incentives the government can dangle in front of
domestic farmers. Nonetheless, yields are low, so the
drift into the sector of new seeds, methods, and other
resources will raise output. The gains will come in
part from the larger estates whose magnate managers
will gradually intensify input use and, to some extent,
from the participation of middle and small farmers,
who will benefit from governmental efforts that will
gradually become more successful. These predictions
are based on normal to good weather conditions and
general economic and political stability.
Secret
The chief medium-term problem will be to maintain
and expand the nation's irrigation system, on which
all else depends. Pricing for the canal system and its
distribution channels is far below cost and does not
effectively ration water. Farmers take all they can get
when they can get it. Water- logging and salinity
affect relatively few farms and regions and do not
generate urgent calls for political remedy. Most big
landlords either secure their water from the public
system or have high-volume tubewells at their
disposal.
Although no agricultural crisis is likely in the near
term, it would be desirable to liberate land and water
use and provide middle and small farmers with better
access to the distribution of new supplies. But it is not
possible to break the power of the landlords without
courting rural and national chaos. Signals of a change
in this situation would be elections in which the
victorious parties transcended the rural vote banks the
magnates put at their disposal; meaningful land
reforms; or significant allocations of budget resources
for improved amenities and services for rural mass
constituencies.
30
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
secret
Bangladesh: Lukewarm Response
to Export Processing Zones
Investor response to Bangladesh's creation of Export
Processing Zones?duty-free areas devoted to export
production?has been less than enthusiastic.
Inadequate infrastructure, corruption, and labor strife
scare off potential investors despite government
incentives like tax holidays and offshore banking
facilities as well as the availability of cheap labor. So
far, textile and garment manufacturers are the
predominant industry in the initial Export Processing
Zone (EPZ) because of the abundant labor supply and
the local production of yarn and fabric. We believe
progress in attracting investors to the EPZ will be
sluggish, and low-technology and labor-intensive
industries will continue to be the ones most likely to
invest in Bangladesh.
Incentives To Invest
The EPZs are designed to broaden Bangladesh's
industrial base, which experienced a sluggish growth
rate of 1.2 percent in FY 1986,` by attracting foreign
capital and technical expertise. Government officials
hope the EPZs will provide employment opportunities
and garner needed foreign exchange because falling
oil prices in the Middle East have caused a large
number of Bangladeshi workers to return home,
adding to employment pressures and reducing needed
remittances. Dhaka also hopes that those industries
that succeed in the initial EPZ will attract other
overseas investors to areas outside the zone and
provide local businessmen and firms with a market for
components, materials, and other services. Even
though the Export Processing Zones Authority prefers
high-technology firms in the EPZs, low-technology
and labor-intensive industries continue to be the ones
most likely to invest.
In its budget for FY 1987 the Bangladeshi
Government enhanced the incentives offered to EPZ
investors by offering a 10-year tax holiday for high-
'The Bangladeshi fiscal year is from 1 July to 30 June.
31
technology firms and a five-year tax holiday for all
other firms located in the EPZs. Investors would also
be exempt from:
? Fifty percent of the tax on export sales after the tax
holiday expires.
? Dividend income taxes for nonresident shareholders
during the tax holiday. Exemption is available after
the tax holiday if the dividend income is reinvested
in the same project.
? Excise and stamp duties on land allotted in the
EPZs.
? Input export taxes.
Despite the tax benefits, we believe the most
attractive feature of the EPZs is the large,
inexpensive, and easily trained labor force. According
to the US Embassy in Dhaka, labor costs are
estimated at less than $1 per day. Bangladesh has a
sizable pool of professionals?accountants,
economists, and engineers?who have few local job
opportunities.
Infrastructure and Support Facilities
Dhaka boasts that its first EPZ?located on a 263-
hectare site at Chittagong?has nearby air and sea
transport facilities, tax incentives, and duty-free
import privileges for investing firms that should make
it attractive to foreign banks and high-technology
operations. Offshore banking?borrowing and lending
abroad and trading in 10 specified foreign
currencies?has also been approved to facilitate
financial transactions in the zone. According to press
reports, industrial plots?equipped with standard
factory buildings and warehouses?can be leased for
30 years at an annual cost of $1 per square meter.
Road and rail connections tie the EPZ to Chittagong's
main business center, seaport, and airport. The port
has the capacity to handle large container ships, and
water and power are supplied to individual plots by
the respective utility authorities. Comprehensive
Secret
NESA NESAR 87-016
3 July 1987
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
25X1
25X1
25X1
25X1
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
aecret
Fuel, Industry, and Power in Bangladesh
? Gasfield Jute mill
it Petroleum refinery -01 Textile mill
Fertilizer plant ? Leather
* Coal deposit Hydroelectric
Thermal electric
100 Kilometers
0 '100 Miles
Cos Bazar
505409 11-82
Secret 32
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Bangladesh's Export Processing
Zones Authority
The Export Processing Zones Authority?a statutory
body established in 1979?is responsible for
planning, developing, and managing the EPZs. The
board consists of a chairman and three members and
receives advice from a consultative committee that
includes a representative from the zone enterprises.
Promotional efforts currently are concentrated on the
EPZ at Chittagong. According to Embassy reporting,
the Authority believes that success of the Chittagong
EPZ depends on attracting a large US company?
particularly an electronics assembly operation?to
the zone. The Authority's reliance on the Bangladeshi
Government for approval and implementation of
projects has undermined its power and caused
considerable delays.
telecommunications, including a satellite earth
station, are located nearby. Natural gas with a low
sulphur content is also readily available, according to
public relations officials for the EPZs.
Phase one of the three-phase project at Chittagong
was completed in 1985. This phase consisted of
development of 97 plots on 50 of the zone's 263
hectares. The second phase awaits government
approval. According to press reports, the Asian
Development Bank and other international
organizations are likely to provide the $67 million
estimated by the Export Processing Zones Authority
as necessary to complete the second phase of
development. The authority projects the second
phase?development of an additional 49 hectares?
will be completed within five years of approval.
Over the last two years of operation, 19 companies?
out of the 33 approved?have gone into operation,
investing nearly $12 million, contributing about $25
million annually in export earnings, and employing
more than 3,500 Bangladeshis. According to press
reports, of the 19 companies, five are foreign owned;
nine are joint ventures with enterprises from the
United States, Japan, Hong Kong, Singapore, and
33
IITTAGONG EXPORT PROCESSING ZONEIII
SELECTED PREFERRED INDUSTRIES
Ready-made garments
and textile goods
Engineering Printing and
Products
Publishing
Electronic component
and products
Services
Pharmaceutical
Products
Pakistan; and the remaining five are locally owned.
Most of these companies are involved in textile
manufacturing because garment production costs in
Bangladesh are 15 to 25 percent less than in Sri
Lanka, Taiwan, and Hong Kong, according to press
reports. All of the products produced in the EPZ are
exported to the European Community and the United
States. According to Export Processing Zones
Authority estimates, when all 33 companies are
operational, annual exports will reach $70 million.
Moreover, these units will employ more than 8,000
workers, represent about $26 million in investment,
and generate an estimated $5 million annually in
economic benefits
The Bangladeshi Government has decided to establish
two more EPZs?one near Dhaka International
Airport and the other at Chalna, the country's second
largest port. Plans also call for investing nearly $25
million in the development of the port facilities at
Chalna to relieve some of the congestion at
Chittagong. According to Chalna port officials, the
construction of two landing wharfs should boost the
port's capacity to 3.4 million tons of cargo annually
compared with the present 2.8 million tons.
Secret
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Drawbacks
Investors have been reluctant to undertake projects in
the initial EPZ despite the long list of incentives.
Bureaucratic red tape, corruption, power shortages,
and labor unrest are the major complaints of potential
investors. Moreover, investors are concerned about
their inability to repatriate profits and guarantees of
their capital, according to press reports. To combat
this problem, the goverment passed a Foreign Private
Investment Act, which calls for full protection and
security of foreign private investment and guarantees
the transfer of capital and the returns from it.
According to the act, investors must apply to the
government for the investment protection guarantee.
Because the government has the power to impose
conditions on industrial undertakings, many investors
are skeptical that provisions of the act will be applied
evenly.
Bureaucratic delays in the project approval and
implementation process have discouraged investors
and caused some to explore similar opportunities in
neighboring countries, such as India, Hong Kong, and
Taiwan. The approval process requires at least six
months, according to the US Embassy in Dhaka. To
deal with the problem, a subcommittee of the
Ministry of Industries has recommended that the
Export Processing Zones Authority be granted
greater jurisdiction over projects and that operations
in the zone be exempted from several acts and
ordinances to speed up the process. Authority officials
claim proposals could be approved within 45 days if
they had sufficient power.
According to the US Embassy, corruption continues
to be the major obstacle for US investors. Although
some US businessmen may believe that corruption is
just a cost of doing business in a developing country,
others, according to the US Embassy, believe the
costs outweigh the benefits to be gained from
investment in a market with limited attractiveness.
Moreover, with the US recent imposition of quotas on
certain categories of Bangladeshi garment exports,
some approved garment and textile projects have
failed to be implemented
Secret
According to Embassy reporting, the zone receives
some priority in power allocation, but the supply is not
dependable. When the capacity of the nearby
hydroelectric facility drops during the dry season,
severe power shortages occur, disrupting industrial
production. One investor has installed his own
generator?a practice viewed by many businessmen
as essential?to ensure an uninterrupted power
supply. The Export Processing Zones Authority would
like to purchase a 10-megawatt gas turbine generator,
but it lacks the necessary funds.
Chittagong port, located only 3 kilometers from the
EPZ, is coming under increased pressure from the
large volume of traffic, particularly containerized
shipments. Trucks large enough to handle the 6-meter
containers are scarce in Bangladesh, and a severe
shortage has developed. According to Embassy
reporting, companies operating in the EPZ have
experienced delays of up to three weeks before
shipments can be delivered the short distance from the
port. Moreover, the 12-meter containers used by some
firms are beyond the capabilities of Bangladesh's
trucking industry
Labor strife is another problem. Recent strikes in the
EPZ calling for higher wages and increased medical
benefits have prompted the government to ban union
activity in the zone and to exempt it from
Bangladesh's labor laws. According to the technical
director of a US company operating in the EPZ, labor
unrest has diminished the attractiveness of the zone,
and the decision to ban unions will probably worsen
the problem by causing more strikes.
Outlook
The EPZs will be no panacea for Bangladesh's foreign
payments problems. Efforts to diversify Dhaka's
export base?which relies on the jute sector for half of
its export earnings?by attracting high-technology
operations such as electronic components to the EPZs
have been disappointing. Transportation,
infrastructure, and bureaucratic problems?major
34
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
necret
inhibitors for investors?are unlikely to be solved
soon. Although the introduction of offshore banking
in the zone coupled with the large, inexpensive labor
pool should help in attracting new investment,
Bangladesh will have to supply investors with more
disciplined workers to compete with similar zones in
the Middle East and other developing countries.
Reverse Blank
35
Secret
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
k7V,61vi
Near East and
South Asia Brief
South Yemen Complicity in Bombing Djibouti
Tentative evidence suggests South Yemeni complicity in the bombing of a
restaurant in Djibouti on 18 March. At the very least, Aden provided diplomatic
passports to the attackers, most likely members of either the Popular Front for the
Liberation of Palestine-Special Command or the Popular Struggle Front. South
Yemen has ties to both organizations?especially the PFLP-SC, which is
headquartered in Aden?and in the past has provided passports to various terrorist
groups.
the South Yemen
25X1
25X1
25X1
25X1
Embassy may be providing refuge for one of the suspects in the bombing. LOA-1
Although conflicting evidence precludes a definitive assessment of responsibility,
South Yemen may have been motivated to strike at Djibouti because of Djibouti's
role in a recent shipment of arms from Poland to North Yemen, allegedly intended
for use by the South Yemeni exile movement. Aden most likely was aware of the
shipment.
25X1
25X1
Reverse Blank
37
Secret
NESA NESAR 87-016
3 July 1987
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4
3ecret
Secret
Declassified in Part - Sanitized Copy Approved for Release 2013/03/18: CIA-RDP88T00792R000300010002-4