ECONOMIC GROWTH CURBED BY MILITANCY
FOZIA AROOJ (email@example.com)
Aug 03 - 09, 2009
A horrific and deadly wave of militancy in Pakistan has deteriorated the social, diplomatic, political and economic fabric of society. The security situation has badly affected the business environment and so the economy. Scores of incidents of bomb explosions and suicide blasts at the public places by extremist elements wrapped in religion and rigid beliefs have gravely devastated the whole society. There are numerous incidents causing massive damage to the infrastructure as well as shaking the confidence of investors and the foreign world. According to official sources since 2007, 72 suicide blasts have taken place in Pakistan. These disastrous attacks on religious institutions, five stared hotels and secret law enforcing agencies have been exorbitantly damaging for the macro economic fundamentals. The economic decline if not controlled, could cause financial chaos and further corrosion in the industry. Militancy is the greatest threat faced by Pakistan and would require a monumental effort spread over a long period to overcome this plague.
Pakistan's economy grew by only 2% in 2008-09, against the target of 4.5%, due to internal and external pressures of extreme nature coupled with poor performance of almost all sectors. The State Bank of Pakistan reported a decline of 13% in foreign direct investment in the country during the first 10 months of 2008-09. Besides FDI was 31% lower than 2007-08 reflecting the country's waning charm with foreign investors. The main sectors worst hit by the declining FDI are the financial business and telecommunications sectors. FDI in the financial business sector shrank to $707 million from $1.865 billion; a decline of 62 per cent.
The unstable law and order situation coupled with domestic elements like political turmoil and intensification of war on terror into settled areas, acute power shortages, supply shocks, augmented by intense international financial crisis and uncertainty about global recession have tested the resilience of economic fundamentals during last two years. Owing to prevailing law and order situation, trading trend in the shares market remained dull. The investors are not likely to go beyond their predetermined limits. Abrupt weakening of rupee against dollars (One $ =Rs.80) during last year, is termed as a double - edge weapon which is taking its toll in the shares market.
According to leading industrialists in NWFP and FATA around three-quarters of our industries have closed since the war in Afghanistan started but most have closed in the last two to three years. Before nine eleven incident 2,254 industries were functional in NWFP, of which just 594 operate today. More than 100,000 people were employed in those industries but now just 18,000 are there and the rest have lost their jobs Swat is today a national symbol of horror where violence last year halved receipts from tourism. The main industries in NWFP and Fata include marble, chemicals, rubber, plastic, food, tobacco, handicrafts, paper, leather and furniture which are in a state of destruction. The match industry, the only export-oriented sector in NWFP and which once employed around 5,000 people, has difficulties as a substantial quantity of the required wood comes from the conflict-torn districts.
As a consequence of this war like situation in Pakistan talented people are leaving the country because their fate is in the doldrums. Everyone is in depression due to volatile security situation, uncertainty of jobs and threat to life and property. Brain drain which was already rampant is now accelerated and depriving the country of the intellectuals that are the true assets of the country to resolve its intricate problems.
Pakistan has a lot of investment potential which could not be fully tapped because of violent incidents. Therefore, the economy of Pakistan is in the shambles. Terrorism and the state of economy are closely interlinked. Terrorism shatters the business environment as the investors do not want to risk their life and money. The world is impressed by our talent and management skill. The security environment is a hurdle to attract foreign investors. The investors have apprehension of sinking their investment due to unending terrorist incidents. Terrorism has caused loss of confidence in future and subsequent flight of capital. Simultaneously, pressure on the value of rupee is apparent. In addition, negative effects of electricity short supply on manufacturing and construction and widening supply-demand gap is evident. Business leaders want the government to offer a package of incentives such as tax and duty exemptions to revive the economy, but for now the state is focused on dispensing millions of dollars in emergency aid to the displaced.
In fact, Pakistan needs a self-sustaining economy that can only be brought about through structural reforms and removing critical political, social and economic inadequacies.
Our tourism industry is terribly affected due to militancy. Despite scenic beauty of mountainous areas, gleaming peaks, lofty hills, gushing rivers, archeological sites, and historical monuments ,the government as well as Tourism Ministry have been unsuccessful attracting the attention of the foreign tourists because no one will dare to visit a country where native's own lives are at stake.
The present government has the advantage to use the democratic dividends to bring about a turnaround and make 2009 a year of economic renewal. Security scenario in the country demands scientific measures not to allow the terrorists to deepen their roots. Government should try to keep the projected GDP growth intact at least and ensure the inflow of private investment. The domestic and the foreign investment will boom when stability is achieved. Economic indicators may pick up if innovative schemes are launched in order to channelize idle resources. However, if the current stability issues remain stumbling the way to progress and overshadow the economic growth, the situation will become even grimmer.