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Pakistan will be second biggest sufferer in financial terms in the on going US-Afghan tussle.

Oct 08 - 14, 2001

Fearing serious jolts to country's exports as a result of US assault on Afghanistan, the Federal Commerce Minister Abdul Razzak Dawood has left for USA & Europe on a damage control mission. Taking to newsmen prior to his departure on a hurriedly arranged tour, the Minister said that his visit was in consequence of events occurring in the United States on Sept 11, 2001.

Indications are that after the United States Pakistan will be second biggest sufferer in financial terms in the on going US-Afghan, tussle. According to reports, the Western media play-up of the US war plan has wrecked six billion dollars textile exports to US, Europe, Japan etc. who now are reviewing their orders, in some cases cancelling shipments and shifting their orders for the coming fall season. A new wave of unemployment is coming as some leading textile importers from US, Europe as well as Far East are reviewing their businesses with Pakistani textile industry which can endanger over $ 6 billion exports, a worried exporter of knitwear goods told this correspondent. Leading Pakistan exporters and senior commerce ministry officials are fearful that clouds of war over this region and overt demonstration of anti-US sentiments may cause Pakistani exports to decline by up to 35 per cent.

In the last one week alone Disneyland, British Homes Store, Levis, Ikea, Gap, Adidas, Walmart, JC Penny, Nike, Wilson leathers etc either cancelled or placed on hold their orders with Pakistani companies, industry sources said. There are strict instructions to American, European and Japanese citizens from their governments to avoid any travel to Pakistan because of risk of their becoming target of any extremist religious individual or group. The US repeated its warning to its nationals against travel to Pakistan immediately after September 11, 2001.

The European Union, Japan and the United States have already termed Pakistan as a non-family station and have withdrawn non-essential diplomatic staff. Some officials at the Central Board of Revenue (CBR) have estimated that if the current level of uncertainty continued in the business circles for another six to eight weeks the revenue collection for the current year may go down by up to Rs. 50 billion.

The Minister, however, signifying the importance of the visit, divulged that President Pervez Musharraf had talked to American Secretary of State, Colin Powell about it recently. Dilating on three points likely to remain in focus during the visit, he said these included continuation of campaign to confront market access issues related to the country along with endeavour to seek a level playing field from US as well as European Union partners, including clarification of issues emanating from the post-Sept 11 events. Talking about market drive policy of the government, he said efforts in that direction were in fact not current, but had commenced some six months back when he had a discussion with European Union leadership in Brussels in April this year. "I also visited US on September 7, 2001 for discussion on vital quota issue and influx of US investments in the country," Razzak added.

He mentioned his telephonic conversation with Pascallamy, a key figure in European Union on matters pertaining to commerce. "I may hold discussion with EU while returning from US. The Minister said that he, while taking along with him a delegation of Pakistan businessmen, including Mian Mansha, Razzak Taili, Khawaja Suhail, Aziz Ahmed and others, was likely to meet 30 to 40 key US businessmen. "I am also likely to meet Robert Zoellic United States Trade Representative, and discuss with him economic matters during my stay there", he added.

Pakistan has yet to calculate the economic cost of having landed once again in the unenviable position of a front-line state in another international war the one against terrorism to be mounted by the US and its allies. Sandwiched between two wars, the one across its western border in Afghanistan which has been going on for the last 20 years and the other across the LoC in Indian occupied Kashmir since 1979, Pakistan is already paying a very heavy socio-economic price. The country, as a result, is suffering from a long bout of deep recession. The economic activity has remained very low during the last five years as a result of a serious slowdown in investment following the intensification of conflicts in Afghanistan and Indian occupied Kashmir. As a consequence, unemployment has reached an all-time high while physical and social infrastructure has almost bottomed out in recent years. Given this situation, there is hardly any economic room left in Pakistan to bear the consequences of a long drawn-out world campaign against terrorism for the present focusing on Afghanistan, the Taliban and Osama Bin Laden. The country would inevitably face an extremely difficult economic situation as the impending battle against terrorism in this region and elsewhere drags on.

Pakistan is being assured that its economic losses will be compensated but no such plan of action in concrete terms to support the verbal assurances has been put forward so far. Sanctions have been lifted and some loans are being restructured. But it is hardly enough to meet the massive economic losses Pakistan has and is likely to suffer in case this war prolongs.

Restructuring of loans will obviously yield temporary relief for a limited time, as it will only deter repayment of the loans for a certain period. The situation will be quite difficult for Pakistan at the expiry of the extended period, as the issue of repayment and debt servicing will flung into the nation's face with greater vehemence; in view of the accumulative effect of the loans' interest. This will neither augur well for the national economy, nor will it help the nation get out of the debt trap, which has been compelling the successive governments to accept harsher conditionalities of the donor agencies like the IMF and the World Bank. The restructuring will simply postpone the problem apparently in wait for the deluge. With the emerging situation in the region due to the United States' plans to carry out punitive action against Afghanistan a difficult economic scenario is obviously staring in the nation's face. The foreign investment is already extinct and domestic entrepreneurs are shy. With the shadows of war hovering overhead, exports will dwindle and production will shrink. The donor agencies and nations are only extending loans and credits, further burdening the national economy. President Bush is also mindful of the negative impact of the US action on Pakistan. With this situation at hand, the restructuring of loans is just an eye wash and falls for short of public perception and expectations in Pakistan. The situation demands that a tangible relief package with thrust on the remission of loans should be formulated for Pakistan. President Bush has rightly said that a stable Pakistan is vital for a stable world. Let words be translated into action and let Pakistan's loans be written off in the interest of world's stability. The international community will be the ultimate gainer of such a package, as Pakistan will be able to play a greater role to promote world peace and stability.

In the longer run, Pakistan would need help of the richer world to enhance its ability to trade with it. We in Pakistan understand that it was not the fault of the donors that we find ourselves in a mess despite having received generous assistance in the past. We frittered away much of it in our futile efforts to substitute imports, There is no question about repeating the mistake. But for us to enter the world export market in a big way, we do need, free access to rich markets as was provided to the East Asian countries in the 1960s. '70s, and '80s. For making quality products for these markets we would also need foreign investment and know-how. Economic stability achieved through this process would also help in bringing much needed political stability in the region and turning it into as peaceful a place as East Asian is today.