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POLITICS & POLICY

MISSILE TESTS RESTORE BUSINESS CONFIDENCE

The fact remains that the tests have pricked the balloon of Indian war hysteria

By AMANULLAH BASHAR
June 03 - 09, 2002

"If you want peace, be prepared for war", the truth in this saying prevailed soon after Pakistan successfully test-fired its indigenously developed medium range ballistic missiles on May 25.

The war tension, which was earlier mounting both in India and Pakistan due to constant threats by the Indian leaders, was reflected in the crash of stock markets in the two countries.

The tense situation however greatly subsided as soon as Pakistan takes the timely decision to test a series of ballistic missiles.

Although the Indian Prime Minister Atal Behari Vajpayee tried to play down the missile test by Pakistan by saying that "we are not taking it with any greater amount of seriousness", yet the fact remains that the tests have pricked the balloon of Indian war hysteria.

The decision to go for test was taken by Pakistan amid heightened tension and fears of war between the two nuclear-armed rivals.

President Pervez Musharraf on that occasion said that Pakistan is ready for war and no one should be mistaken about it. He added that we do not want war, but we are neither scared of it. He said that the country is passing through a critical phase but Pakistan would surmount the crisis with success and honour, he said confidently.

Commenting on the Indian reaction to the missile test of Hataf (Ghauri) that they were not impressed by this missile, the President said "We do not want to impress you, we are showing our defence capabilities." The Indians were earlier talking of giving two weeks or two months time to Pakistan. President Musharraf said, "We are not impressed by such talks, either." He called for keeping the national interest supreme and foremost, above every other thing.

Haroon Bari, President of Karachi Chamber of Commerce and Industry (KCCI) while talking to PAGE appreciated the timely decision taken by the government. He said that the defence capability demonstrated by Pakistan in the form of missile tests that had greatly helped restoring the confidence of the business community in Pakistan. He said that the business community has risen to the occasion and will play its due role in the hour of the need.

Haroon Bari feels that the international community knows that people of Pakistan have always stood for the cause of humanity and have supported the efforts of the international forces against terrorism. It should be the moral obligation of the international forces to come to the help of Pakistan when some Hindu extremists are out to wage war against Pakistan.

The KCCI president said firmly that there is no panic of war among the business community in Pakistan. He however said that as a result of border tension the overall performance of the economy might hurt especially in the area of external trade.

The month of May 2002, however, proved to the most eventful month of 2002 due to the ongoing tension between India and Pakistan, which had struck the bourses of both countries. However, no major fluctuation was witnessed in the currency markets.

Although both countries remain eye to eye which may continue to have its repercussions on local equity values, no major change is expected in the local market in the near future.

RUPEE

Since January 2002 Dollar against rupee appreciated by 0.6 per cent. During May 2002 Pakistani rupee remained firm against the Greenback and no major oscillation was seen in the rupee/dollar parity. On May 1, 2002, Rupee stood at Rs60.10 and closed at Rs60.12 on May 28, 2002 showing a depreciation of only 0.03 per cent against the US Dollar.

Keeping in mind all the negatives on the political front, the only change is seen from May 20,22, 2002. Rupee appreciated by 0.23 per cent against dollar but on the very next day on May 22 it nose dived against the Dollar by 0.20 per cent and closed at Rs60.10 in the inter-bank market.

The major reason for a stable Pak Rupee/dollar parity is mainly foreign grants by the International Financial Institutions and various countries which has in turn led to a build up in the country's reserves. Furthermore no major downturn was witnessed on the country's trade account in the aftermath of 11/9 due to a turnaround in the US economy. These collectively have led to continued strength of the rupee against the Greenback. The other reason of the stability could that the currency markets are less over reactionary in nature than equities.

SITUATION

The situation remains dire as both countries remain prepared for a possible conflict. Both continue to trade heavy fire across the borders. Although both countries seem to be at the brink of war, chances that the regional crisis may be averted are high, as there remains considerable Western interest in the region. A crisis in the form of a conflict in the Indian subcontinent would serve to dampen the West ongoing fight against global terrorism.