LAW & ORDER: A SERIOUS THREAT TO ECONOMIC STABILITY

ISMAT SABIR
Jan 05 - 18, 2009

The first priority of the government is to maintain law & order, so that the life, honor and property of the people are fully protected by the state.

This was the first dictum of the founder of the country delivered during his address of August 11, 1947, to the first constituent assembly of Pakistan. However, this 'first duty' has never been fulfilled.

Good governance and law and order are prerequisite for economic development of the country. At the time of taking over oath as Prime Minister, Syed Yousuf Raza Gilani said improving the national economy and law and order situation across the country is the government's top priority. He said the issue was included in 100-day programme and would be addressed according to the government's commitment. He repeatedly said these sentences every now and then but nothing happened after lapsing more than 300 days.

He further said the government is committed to eliminate terrorism from the country as terrorist activities are main hurdle in the way of foreign investment and industrial growth.

The businessmen also show great concern about the deteriorating situation of law and order and are continuously demanding that the government should formulate long term policies for improving law and order situation, besides, overcoming energy shortage, cutting down markup rate and providing incentives to the industrial sector in order to put the economy on the right track.

Through out the last calendar year suicide attacks, kidnapping for ransom, dacoities, car snatching and theft continued, making the people life unsafe in all four provinces. In the year, first suicide attack occurred outside the Lahore High Court on January taking lives of 20 people. And the last was an attack on Marriott Hotel in Islamabad on September 20, one of the worst, killing over 40 people and grabbing attention of national an international media.

During the outgoing year in the country about 725 people, 149 law enforcing agencies officials and 576 civilians were killed in 63 terrorist attacks, averaging 61 killings per month.

On the other hand, the number of US drone attacks was 32 from January to October 2008, in which about 355 people were killed and 248 injured. The US killed 35 people per month on average in the province of NWFP destroying the tourism industry of Pakistan.

The exporters said that the government should negotiate with people of tribal areas and control the law and order situation, as exports are suffering due to disturbance in the country.

These attacks destroyed the image of Pakistan. The importers started diverting their orders to other neighbouring countries and reluctant to visit Pakistan. They are also ordering their required products on low prices.

The most tragic incident was Benazir Bhutto's assassination that had crippling effects on the economy. There was a complete shutdown of markets, offices and educational institutions for several days following impacted oil supplies further and complicated the situation and worsened law and order.

The financial losses to the country were tremendous and unbelievable. It was estimated that the country sustained around $80 million exports losses in six days as industrial production activity remained paralyzed in Karachi.

Sindh province, particularly interior Sindh, was the most affected area faced volatile situation when kidnapping for ransom and Highway dacoities drastically increased during the first half of 2008. About 20,297 policemen including officials were found involved in corruption. Sindh police thwarted only 4 terrorist groups.

Due to closer of five major industrial estates of Karachi great losses were recorded. For instance a day's closure of industrial units in Site area causes production losses of Rs2 billion and export losses of $8.2 million.

North Karachi industrial estate losses come to around Rs200 million and exports to around $1 million a day. The area suffered more than Rs53 million losses because of 6 factories damage.

Total production losses were around Rs1.5 billion in the KATI area and around Rs290 million were lost in revenue. When 50 percent of the units in Korangi industrial estate are closed the loss comes to Rs250 million daily, out of which 50 percent is exported. During the violence the area was turned into a war zone where banks, restaurants, petrol pumps and industrial units were torched; it looks like it has been bombarded.

In the state there was an accumulated loss of Rs20 billion. About 16 industrial units, 45 trailers loaded with cargo, 55 vehicles, 4 petrol pumps, 2 car showrooms and 1 restaurant were torched in the riots. The death toll in the industrial area was 9 and 16,000 workers have lost their jobs. This has been the first time in the history of country that industrial areas were targeted.

The Chairman of SITE Association of Industry Engineer MA Jabbar has urged the government to take the notice of deteriorating law and order situation in industrial estates of Karachi as its is hurting industry and investment.

Mr Jabbar disclosed that out of the total revenue 65 percent is generated by Sindh, 40 percent comes from the SITE. The 5000 acres SITE with more than 3000 industries need to be protected.

The Punjab protesters also destructed properties. All offices closed for three days while shops and petrol pumps remained closed to almost one week. Shortages of items of daily use and fuel were created and the people suffered a lot. Transporters kept their vehicles off the road for fear of increase in violence, as their vehicles were torched in all big cities and on high ways.

Due to law and order in Balochistan this year's higher share of financial resources were eaten up by additional expenditure on law and order due to reduced oil and gas production. This resulted in a loss of Rs1.7 billion in the royalty and gas development surcharge proceeds, mainly owing to much lower gas production as a result of law and order problems and supply disruptions by blowing supply lines. Besides, Sui field, Loti and Pirkoh gas fields have faced severe interruptions during the year. About Rs700 to 800 million has been spent on direct enforcement of law and order.

The 1QFY09 SBP Report also indicated that due to external and internal factors a fall in exports of leather group and jewelry was recorded. The export performance was not satisfactory due to domestic factors such as rising cost of energy and raw materials, increasing power shortages and law and order issues leading to diversion of export orders.

OICCI conducted investor perception survey to assess the overall business sentiments in the economy. As far as investment plans are concerned, more than 3/4th of the respondents were willing to invest in next two years. But, investors showed their concerns about gloomy impression of Pakistan in global market due to deteriorating situation in a number of areas including law and order, political uncertainty, energy deficiency, high cost of operations and infrastructure bottlenecks.

It said business environment is considered to be better than the other South Asian markets. However, as compared to emerging markets such as India, China, Vietnam, Hong Kong, and Middle East, the situation is poorer. The 72 percent of the respondents viewed the state of domestic economy as poor and ranked law and order as one of the major challenges. Prevailing law and order situation turned out to be the most unfavorable for investment decision as 96 percent of the respondents validated the perception that it is unsatisfactory.

It is inevitable to restore the investor confidence to resume growth on sustainable basis. Therefore, improvement in law and order, corporate governance, power supply as well as removing infrastructure bottlenecks are some important areas to be dealt immediately and seriously.

The business community said no doubt the government is facing a number of problems like energy crisis, inflation and trade deficit but all these problems can be solved by giving confidence to the business community by restoring law and order and making business friendly policies.

It is the responsibility of the government to provide security to the businesses and the people, but it has failed.

This incident sent the message to the foreign investors and already existing entrepreneurs not to enter into Pakistan because it is an unsafe and dangerous country. Image of Pakistan hit the rock bottom and it would take a very long time for its recovery.