December 2006, Vol. 1, No. 3

Feature 1: Hu's Visit
As the world witnesses the rise of China and India, how are the two Asian giants dealing with each other? In this issue, we look at the first visit by a Chinese President to India in a decade and gather analyses and opinions about the expectations and outcomes of the visit. Continue to read more.

Feature 2: Democracy in Nepal
On November 8, a historic agreement was reached between the Seven Party Alliance (SPA) and the Maoists (Full text of the agreement) that reiterated their commitments to competitive multiparty democracy. Through a series of articles, we present an overview of the process of the signing of the agreements and the implications for democracy in Nepal. Continue to read more.

In this Issue:
  1. Carnegie Analysis/Events: Asma Jehangir on Pakistan in transition; NATO and Afghanistan
  2. Feature: President Hu Jintao's visit to India and Pakistan; democracy in Nepal
  3. Views from South Asia:
    INDIA: Foreign Policy and Domestic Politics: Terrorism in the northeast; governance issues; India 's national security bureaucracy; Sachar report on Muslims in India;
    Economics and Energy: Tata-Corus deal; outward FDI; budget 2007; causes for higher growth rates; challenges for banking sector; NTPC's role in India's energy strategy; U.S. firms in India to scope the nuclear plants business
    PAKISTAN: Foreign Policy and Domestic Politics: Pakistan's western front; Afghanistan policy; India-Pakistan relations; democracy and elections
    Economics and Energy: Structural problems; judicial ruling on investment decisions

    BANGLADESH: Domestic political situation; election commission; economic impact of blockades
    SRI LANKA: Prabhakaran's annual Heroes' Day speech; domestic political crisis; LTTE-government relations; MoU between SFLP and UNP; Sri Lanka's trade relations with India
  4. In-Depth Analysis: U.S.-India civilian nuclear deal; U.S.-India strategic partnership; India-China relations; China's South Asia policy; way forward in Sri Lanka; China-Bangladesh relations; India's internal problems
  5. Additional Resources: Indian PM speech; India-China joint declaration; joint statement and agreements signed by Pakistan and China; comprehensive peace agreement 2006 in Nepal; arms management agreement; SPA-Maoist summit meeting; Sri Lankan President's visit to India; MoU between SFLP and UNP

Carnegie Analysis/Events

JehangirOn October 31, 2006, the Carnegie Endowment hosted Ms. Asma Jehangir, Chairperson of the Human Rights Commission of Pakistan to speak on “Pakistan in Transition.”

event photoOn November 16, 2006, Ambassador Robert Hunter, Senior Advisor at the RAND Corporation, and Carnegie visiting scholar Frederic Grare evaluated the dynamics between “NATO and Afghanistan Before the Riga Summit” while Jonah Blank moderated the event.



Editor's Note

November brought many positive developments for South Asia. India rejoiced, albeit in a cautious manner, at the Senate approval of the U.S.-India civilian nuclear deal. With the historic deal between the SPA and the Maoists, hope is in the air in Nepal, and India is jubilant that, for once, it played its cards right. Overall, India's economy continued to grow rapidly, recording record growth rates of 9.2% in the third quarter even as the stock market reached an all-time high.

The visit of Chinese President Hu Jintao to India and Pakistan was fruitful (see our feature) as India and China signed a 10-point agreement to expand their bilateral relations, while Pakistan signed an FTA with China, reaffirming their “all-weather” friendship.

Things were not positive on all fronts, however. Bangladesh continued to wrestle with political violence in the run-up to the January 2007 elections. Sri Lanka remained mired in conflict following the purported failure of peace talks in Geneva as the LTTE reverted back to the demand of an independent Tamil state and President Rajapaksa stepped up the ante against what he sees as “ruthless LTTE terrorism.” The much-hyped Justice Sachar report on the socio-economic state of Muslims in India was made public and is likely to inform future debate about potential reservations for backward Muslims in the country.

We cover all these developments and bring you the best of South Asian analysis in this issue. We thank you for the warm response and positive feedback you sent in after the last issue. Please continue to send in your comments and suggestions to us in the future.

Anirudh Suri

Editor, South Asian Perspectives

Feature 1: Hu's Visit
Hu's visit to IndiaHu's Visit to India
While many Indian analysts continue to view China as a scheming neighbor and remain wary of its strategic posturing on key issues, there are some who have begun to push for greater Indian self-confidence in dealing with the Chinese, arguing for a more realpolitik approach in Indian foreign policy towards China. As China becomes suspicious about India's increasing proximity to the United States, India continues to remain critical of China's “all-weather friendship” with Pakistan. This bilateral relationship is likely to become even more complicated with an increasing blend of competition and cooperation in the backdrop of continued strategic maneuvers on traditional thorns in the relationship, like the border issue.

Brahma Chellaney
argues that India's relationship with an Asian-dominance-aspiring China will remain a key foreign policy challenge and suggests India should adopt a more realpolitik approach by building countervailing influence through its relationship with Taiwan and Japan (Hindustan Times, November 27, 2006).

C. Raja Mohan explains how China has managed to bring Lahore (and the plains of Punjab in Pakistan) into its economic orbit and argues that this presents both an opportunity and a challenge for India, urging the tight-fisted Commerce Ministry to lift trade barriers with neighbors so as to not give China a free economic pass in the region (Indian Express, November 25, 2006).

Amb. C. V. Ranganathan, former Indian Ambassador to China, outlines his views on various aspects of the Sino-Indian relationship including political and strategic issues, the border dispute, economic and energy issues, Tibet and the impact of China's military modernization (Institute of Peace and Conflict Studies, Article No. 2152, November 19, 2006).

Subhash Kapila, in an overall review of Hu's trip, identifies discernible changes in China's policy towards South Asia and offers future perspectives on its policy (South Asia Analysis Group, Paper No. 2040, November 27, 2006).

In the first of a series of articles, D.S. Rajan finds that unlike the PRC's international press in English that reports rather factually, the Chinese language dispatches actually provide some candid observations and detects a cautious optimism about the trip and a heavy anti-India bias (SAAG, Paper No. 2024, November 14, 2006). In another article, he attempts to explain “Beijing's Arunachal Pradesh card” (SAAG, Paper No. 2028, November 17, 2006). He also exposes a clear dissonance between the views expressed by President Hu Jintao and those expressed by the strategic experts in China, warning that the assessments of the strategic experts do in fact influence policymaking (SAAG, Paper No. 2039, November 27, 2006).

While P. Stobdan warns against trusting a scheming, deceptive China (Outlook India, November 27, 2006, free registration required), Dingli Shen argues that there's too much to be gained in cooperation for it to be lost in suspicion (Outlook India, November 27, 2006, free registration required). Bhartendu Kumar Singh provides a sober, realistic assessment of the visit, cautioning against any misconstruction of relations or their romanticisation; rather, he believes that Hu's visit has shown that both countries are willing to continue the engagement game without overtly being rivals or partners (Institute of Peace and Conflict Studies, Article No. 2058, November 28, 2006).

Hu's Visit to PakistanHu's Visit to Pakistan
Ayesha Siddiqa contends that President Hu's trip essentially defines the new parameters of Asian geo-politics under which the two giants of Asia, India and China, re-structure their relations and base it on mutual economic considerations; she also believes that if Islamabad intends to get on board the Asian bandwagon, Pakistan would need to continue to develop economically and to re-assess its policy regarding militants and militancy (Daily Times, November 27, 2006).

Ma.j Gen. (R) Jamshed Ayaz Khan argues that President Hu's visit has not only given China's relationship with Pakistan a "strategic dimension" but has also "institutionalised" each aspect of this relationship, and believes Pakistan's model friendship with Beijing will ensure that it moves hand-in-hand with China towards prosperity (Pakistan Observer, December 1, 2006).

B. Raman assesses the outcomes of Hu's trip to Pakistan in detail and concludes that it was a mixed bag for Pakistan (SAAG, Paper No. 2048, December 3, 2006).

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Feature 2: Democracy in Nepal
PrachandaOn November 8, a historic agreement was reached between the Seven Party Alliance (SPA) and the Maoists (Full text of the agreement) that reiterated their “commitments to competitive multiparty democratic system, civil liberties, fundamental rights, human rights, complete press freedom, rule of law and all other norms and values of a democratic system." This was followed by a peace accord (Full text of the Comprehensive Peace Agreement 2006, PDF) between the government of Nepal and the Maoist rebels that marked the end of the decade-long people's war. Last year, India had helped broker a 12-point agreement between the Maoists and the SPA. It is being claimed that these political developments in Nepal represent a major diplomatic victory for India. Through the following articles, we try to present you an overview of the process of the signing of the agreements and their implications for democracy in Nepal.

Bal Gopal Shrestha
analyzes the implications of the different parts of the agreement signed on November 8 in detail and argues that the deal is historic and has given hope to the Nepali people that they might live in peace again (, November 15, 2006).

Andrew Arato
posits that Nepal should create a framework to include Maoists in the democratic process through institutional design, electoral process, and civil society options so that their overwhelming interest would become self-transformation into a democratic party of the left (

Lok Nath Bhusal
analyzes the impact this historic deal is likely to have on the socio-economic agenda in Nepal and concludes that the Directive Principles of Socio-Economic Transformation (DPSET) agreed to in the historic peace accord, if properly implemented, will lead to a more participative, just and equal system (, November 29, 2006).

Sanjay Dhakal
describes how the firebrand communist leader, Prachanda, seems to have finally been tamed as far as the India-bashing is concerned—and wonders whether this move is guided by the realization of Nepal's geopolitical limits, even as the Maoists officially claim that this change in perspective springs from the positive role India played in the signing of the 12-point agreement last year (, November 24, 2006).

Providing a different perspective on the turn of events, Ajai Sahni argues that the Maoist objective in Nepal is not the sharing of power but rather the seizure of power and that this reality will crystallize over the coming months and years (Outlook India, November 13, 2006, free registration required). In a similar vein, P. V. Ramana describes how the Maoists have perfected the art of doublespeak when it comes to their views on India and criticizes India's Home Ministry for inconsistencies in its positions as well (Deccan Herald, October 24, 2006).

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Views from South Asia

~ Foreign Policy and Domestic Politics ~

Terrorism in the Northeastindia
B. Raman draws attention to the “exploding eastern front” of India, suggesting that the government needs to do more to address the scourge of terrorism than simply initiate confidence-building measures with neighbors who have a vested interest in an unstable eastern India for various reasons (Outlook India, November 23, 2006, free registration required).

Governance Issues and India's National Security Bureaucracy
Manoj Joshi argues that a lot needs to be done before India can even achieve great power status, including further empowerment of the masses, a governance revolution, Center-State relationship equilibrium, inclusive and sustainable growth, and a more effective military strategic culture (Hindustan Times, November 15, 2006). He also argues that there are disturbing signs of a dissonance introduced into the system by India's ‘national security bureaucracy' and maintains that while it serves a useful purpose, it cannot be allowed to set the direction of India's foreign policy (Hindustan Times, November 28, 2006).

Sachar Report on the Social, Economic and Educational Status of the Muslim Community in India:
full text (PDF) of the report here.

Seema Mustafa criticizes the Sachar Report for not addressing the issue of Muslim women and the sense of insecurity among the Muslim community, even as she commends the report for dispelling many of the myths about the state of Muslims in India (

Praful Bidwai, lamenting the social exclusion and political under-representation that Muslims in India face, recommends rectification of the situation through affirmative action for Muslims, a proportional representation-based system and de-communalization of the government's counter-terrorism strategy (Frontline, Vol. 23, Issue 23).

~ Economics and Energy ~

IndiaTata-Corus Deal
Sourav Majumdar points out that with the impending Tata-Corus deal, business houses from India are no longer shy of "audacious" takeover attempts but warns that “it is not going to be a cakewalk even for the most savvy Indian business house to just walk in and ensure a smooth transition” (Financial Express, November 9, 2006). T.T. Ram Mohan assesses the phenomenon of outward FDI from developing countries and places the Indian case in the larger context, arguing that outward FDI is not a reflection of a country or company's global competitiveness (Economic Times, November 2, 2006).

Budget 2007

S. Narayan
expresses concern about unbridled growth of revenue expenditure and of subsidies and recommends different measures to correct the imbalances in the economy, pointing out that the 2007 budget will be the “final opportunity to give a direction and thrust to the growth process” (Financial Express, November 22, 2006).

Causes for Higher Growth Rates and Challeges in the Banking Sector
T.T. Ram Mohan
contests the widely accepted view that it was the reforms process of the 1990s that led to a higher level of growth rates in the Indian economy and instead attributes it to three structural changes—rise in savings rate, enhanced export competitiveness, and financial deepening (Economic Times, November 16, 2006). He also identifies the need to garner deposits to sustain credit growth and to increase yields on loans in the face of growing disintermediation as the two key challenges for banks and recommends greater financial inclusion as a way to meet these challenges (Economic Times, November 30, 2006).

Tata-NTPC's Role in India's Energy Strategy and U.S. firms in India to Scope the Nuclear Plants Business
M.K. Venu
highlights the prominent role of the National Thermal Power Corporation (NTPC) in the addition of the much-needed power generation capacities in the coming years, and describes the government's plan to enable the NTPC to set up ultra mega power projects to meet the growing demand (Economic Times, November 28, 2006). See the news report on GE's intent to form a joint venture with firms such as NTPC and news articles (Hindustan Times and on the recent trip of U.S. firms to India to discuss potential opportunities.

Related Documents: Summary of National Energy Map for India: Technology Vision 2030 (PDF); India's Integrated Energy Strategy (PDF)

Related Upcoming Event: The Delhi Sustainable Development Summit 2007

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~ Foreign Policy and Domestic Politics ~

Pakistan's Western Front pakistan
An editorial in the Daily Times argues that President Musharraf should realize that Pakistan's situation on the western border is far more serious than the army is traditionally used to thinking, and recommends that he should focus single-mindedly on applying political solutions based on a greater national mainstream consensus rather than a diminishing parochial one (Daily Times, November 10, 2006).

Afghanistan Policy
Tanvir Ahmad Khan recommends that Pakistan should seek at least a partial restoration of both regionalism and bilateralism in addressing issues in Afghanistan, thus taking the country out of the global agenda, and emphasizes that there is no point in recommending early jirgas unless there is a clear and comprehensive vision of where they fit into the larger design for Afghanistan and the region (Dawn, December 4, 2006).

India Pakistan Relations
An editorial highlights the fact that Pakistan has few good cards to play vis-à-vis a "status quo" India that has proven that it can do without responding to Pakistani overtures, and questions why Pakistan doesn't go forward on trade and start talking seriously about a bilateral treaty liberalizing cross-border exchange of commodities, even while Kashmir remains unresolved (Daily Times, November 13, 2006).

Democracy and Elections
Irfan Husain outlines the different methods in which elections can be and have been rigged in Pakistan under the noses of foreign observers and urges more detailed and systematic scrutiny of the abuse of the incumbent advantage in Pakistan (Dawn, December 2, 2006).

~ Economics and Energy ~

Structural Problems
An editorial argues that while Pakistan's GDP growth has been commendable in the Musharraf era, significant problems exist including rising interest rates and ballooning trade deficit that might make it difficult to sustain these levels of growth (Daily Times, December 4, 2006).

Judicial Ruling on Investment Decisions
Syed Mohibullah Shah
urges political and bureaucratic functionaries to carefully study the important principles laid down by the court in that judgment provide guidance for all investment decisions involving publicly owned assets that seek to promote investment while ensuring legitimate interests have been protected by relevant state functionaries in the performance of their fiduciary and other legal obligations (Dawn, December 4, 2006).

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~ Domestic Politics ~

For a brief overview of the neutral Caretaker Government (CTG) Interregnum in Bangledesh, please click here.

In the first of two articles, Anand Kumar described the latest political developments in Bangladesh, and bangladeshexpressed the hope for a de-politicized, non-partisan caretaker government to hold free and fair elections (SAAG, Paper No. 2018, November 6, 2006). In the second article written a couple of weeks later, Kumar concludes on the basis of the President's actions that the administrative machinery meant to conduct free and fair elections in Bangladesh is definitely biased. With such little time left to introduce any major changes in the set-up, the Awami League is unlikely to participate in the elections—a move that is likely to render the elections meaningless (SAAG, Paper No. 2032, November 20, 2006).

Focusing on the negative impact the political unrest in the country is having on the economy and the political culture of Bangladesh, Sayed Kamaluddin looks at the economic loss that is likely to accompany any political blockades in the country (New Age, November 30, 2006), while Shamsher Chowdhury is reminded of the phrase “Democracy is often the tyranny of the majority” as he criticizes the mob culture of the worst form that has characterized Bangladesh's democracy in recent years (Daily Star, December 7, 2006)

Election Commission
Badiul Alam Majumdar
discusses the kind of Election Commission that Bangladesh needs and derives key lessons from India's successful experience with an independent, powerful and effective Election Commission (Daily Star, November 28, 2006).

In its latest news article,
the Daily Star reports a major breakthrough in Bangladesh's political crisis whereby the Election Commission (EC) decided to rearrange the entire election schedule including the polling date, following a tedious negotiation among the caretaker government and the two rival political alliances (Daily Star, December 7, 2006).

~ Economics ~

Economic Impact of Blockades
Arguing that the next government would be foolhardy not to cash in on the realistic prospects of a brighter economic future for its people at the cost of political machinations, Mamun Rashid lists the economic challenges that the next government is likely to face (Daily Star, November 26, 2006).

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~ Domestic Politics ~ sri lanka

LTTE-Government Relations
LTTE leader Velupillai Pirapaharan (Prabhakaran)'s Annual Heroes' Day speech reaffirmed the demand for "an independent state for the people of Tamil Eelam" and stated that "the Rajapakse regime, while conducting genocide of the Tamils, is portraying our movement which is waging a struggle to save the Tamils from this genocide as a terrorist organization" (Outlook India, November 27, 2006).

Sathiya Moorthy analyzes the different tactics being employed by the LTTE and the Sri Lankan government and the strategic options available to them, concluding that time is running out on the peace negotiations and the two-year lifespan assigned to the MoU signed by the SLFP and the UNP should be an indicator of the deadline fixed for any successful completion of the peace process (Daily Mirror, November 6, 2006). In another article, he pushes home the point that war or peace, there are no free lunches in the lexicon of the developed world—and the earlier this is understood, better it would be for Sri Lanka and all Sri Lankans, the Tamils included (Daily Mirror, November 27, 2006).

Subash Wickramasinghe explains why Prabhakaran has welcomed the historic MoU signed between the SFLP and the UNP and provides a deeper insight into the political maneuvering occurring between the different political parties in Sri Lanka as President Rajapaksa tries to outsmart the LTTE (Daily Mirror, November 25, 2006).

MoU Between SFLP and UNP
B. Raman posits that Sri Lanka is back to 200—the period before the government and the LLTE entered into a cease-fire agreement in February 2002, and agreed to seek a political solution to the problems of the Sri Lankan Tamils on the basis of a unified state with a federal political set-up, and blames President Rajapaksa for reverting back first, only to inevitably be followed by the LTTE (SAAG, Paper No. 2041, November 28, 2006). In an earlier paper, he argued that bolstered by Pakistan's continuing military support and encouraged by U.S. diplomatic support to its military operations against the LTTE, the Sri Lankan government has been increasingly insensitive to India's concerns over the humanitarian catastrophe facing the Sri Lankan Tamil community, even as it described India as Sri Lanka's "best friend" (SAAG, Paper No. 2036, November 25, 2006).

Sri Lanka's Trade Relations with India
Even as political violence continues unabated in Sri Lanka, President Rajapaksa's visit to India also served to bolster trade ties between Sri Lanka and India as Sri Lankan Investment Promotion Minister Bogollagama highlighted his country's investment attractiveness to a group of prominent Indian business houses (Daily Mirror Financial Times, November 28, 2006).

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In-depth Analysis
sing and bushU.S.-India Civilian Nuclear Deal
In a series of articles regarding the U.S.-India nuclear deal, Arun Shourie argues that the provisions included by the Senate in the recently approved Bill would be hard for India to swallow and wonders how PM Singh will be able to stick to his earlier statements in Parliament Article I, Article II and Article III (Indian Express, November 28-30, 2006). On the other hand, R. Rajaraman reasserts the benefits of the U.S.-India civilian nuclear deal and argues that the deal is unlikely to substantially influence horizontal proliferation or negatively affect India's strategic capabilities (Hindustan Times, November 21, 2006).

U.S.-India Strategic Partnership
Addressing the question of whether the U.S.-India strategic partnership has finally matured, Ambassador Lalit Mansingh argues that the destinies of the two countries are interlinked and the strategic partnership between them will be one of the defining features of the 21st century, and is convinced that closer bilateral cooperation will be insulated from partisan politics in both countries (IPCS Issue Brief 39, October 2006, PDF).

singh and huIndia-China Relations
Subhash Kapila argues that President Hu's visit to India and Pakistan would make evident the marked strategic contrasts in China's policies in South Asia—specifically, how China is intent on reinforcing its strategic nexus with Pakistan and upgrading its military capabilities, and how it has no intention of respecting India's strategic sensitivities in South Asia (SAAG, Paper No. 2017, November 6, 2006).

China-Bangladesh Relations
Urvashi Aneja outlines the contours of the emerging strategic partnership between China and Bangladesh and argues that rather than feeling threatened by Bangladesh's tilt towards China, India should resolve some of the outstanding disputes with Bangladesh and actively seek greater economic and diplomatic engagement, where this becomes especially important given India's growing energy demands (IPCS Special Report 33, November 2006, PDF).

Way Forward in Sri Lanka
G.H. Peiris
considers the feasibility of the federal option for Sri Lanka, drawing upon Sri Lanka's domestic situation and other countries' experiences as well (Faultlines, Vol. 17). In a different document entitled “Way Ahead in Sri Lanka (PDF),” various Sri Lanka experts analyze the existing ground situation in Sri Lanka, the various domestic and international actors involved and their respective positions and stakes and suggest a way to move beyond the current political stalemate (ORF Discourse, Vol. 1, No. 2, November 2006, PDF).

mumbai train bombingIndia's Internal Problems
Partha S. Ghosh posits that the biggest challenge to India is the unprecedented incidence of terrorism and insurgency (with significant domestic roots) and emphasizes that while it is important to deal with their international connections, it is equally important not to do anything at home that could enlarge their appeal within their respective communities (Faultlines, Vol. 1).

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Additional Resources

In a speech on terrorism, law and development, Indian Prime Minister Manmohan Singh ruled out any new law against terrorism as demanded by security agencies, explaining that his government is committed to fight it 'within the framework of our existing legal system.' Click here (free registration required) for the speech.

For the official briefing by India's Ministry of External Affairs on the Foreign Secretary Level Talks between India and Pakistan on November 14-15, 2006, click here (free registration required). For the Joint Statement issued after the talks, click here.

Joint Declaration by India and China on November 21, 2006, including the ten-point strategy for the development of the strategic and cooperative partnership; for other documents relating to the visit, including a synopsis of the thirteen agreements signed, please click here.

President Hu Jintao's Speech at China-India Economic, Trade and Investment Cooperation Summit in Mumbai, India on November 23, 2006.

President Hu Jintao's talks with Prime Minister Singh.

Full text of Sachar Report on the Social, Economic and Educational Status of the Muslim Community in India, (PDF).

Text of the Joint Statement between the Islamic Republic of Pakistan and People's Republic of China.

Agreements/MOUs signed between China and Pakistan.

President Hu Jintao's talks with President Musharraf.

Agreement on Monitoring of the Management of Arms and Armies (PDF), November 28, 2006.

Full text of the Comprehensive Peace Agreement 2006 (PDF), November 22, 2006 (Unofficial translation).

Full text of the decisions of the SPA-Maoist summit meeting, November 8, 2006.

12-Point understanding between Seven Party Alliance and Maoists, November 22, 2005.

The Missing Piece of the Puzzle: Caste Discrimination and the Conflict in Nepal (PDF), Report by Center for Human Rights and Global Justice, NYU School of Law, 2005

RajapaksaSRI LANKA
Address by His Excellency Mahinda Rajapaksa President of the Democratic Socialist Republic of Sri Lanka at the Asia Society in New York.

Media Release by the Sri Lankan Ministry of Foreign Affairs on the visit of H.E Mahinda Rajapaksa, President of Sri Lanka to India, November 25 -29, 2006.

Full text of the Memorandum of Understanding (MoU) between The Sri Lanka Freedom Party and The United National Party to cooperate on key issues vital for the nation's well being.

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  Editorial Staff

Anirudh Suri, junior fellow, South Asia Program, Carnegie Endowment

Gretchen Smith, program assistant, South Asia Program, Carnegie Endowment

Carnegie Endowment for International Peace
1779 Massachusetts Avenue, NW
Washington, DC 20005
Ph: 202-939-2306

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