Mar 31 - Apr 06, 2003



















"Democracy in the twenty-first century faces no task more pressing than to generate a nobler, more sustainable vision of the aim of life and society. Yes, it faces also the task of generating a cultural consensus, which would make non-coercive conflict resolution possible. It has urgently to devise means of massive redistribution of resources, globally and within individual societies, to prevent cataclysmic conflict between the opulent and the impoverished. Yet most fundamentally, it needs to generate a vision of being human which would make a sustainable human presence on this earth possible".

(Erasim Kohac,. "The Faces of Democracy Looking to the Twenty-first Century")


First and the foremost question that confronts the business community in Pakistan is: 'Will Pakistan be able to sustain its momentum to economic development that it achieved with much difficulty in the last few years?' Within eighteen months of the attack on twin-towers, human resource managers in labor-intensive industries like textile and leather products are once again faced with the complex situation of temporary restructure of mainly production workforce in view of dwindling exports and market demands. In my MBA class, the students request me to set aside the coursework and discuss Gulf war instead. One of them believes that a swift war will remove uncertainty, restore consumers and investors' confidence in the business, improve government and corporate sector spending and bring down the oil prices by enhancing Iraqi oil exports. Another thinks that Pakistan as an oil importing country could see prices as high as $45 a barrel and could experience a severe effect on dollar, stock and pubic confidence. My students ask me: Will peace prevail? I ask them: Will rationale prevail?

Correlation of peace and development is not a new concept. The 1992 Rio Declaration of the UN Conference on Environment and Development emphasized that: "Peace, development and environmental protection are interdependent and indivisible" (Principle 25). This is an explanation of the fact that peace is by all means an integral part and a fundamental requisite for the idea of sustainable development. Thus resolution of conflict is a global imperative in order to support development. The idea of sustainable development has been defined as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs (WCED, 1987, p.43)." Perhaps George W. Bush is missing this point when he looks at the short-termed goals while compromising on the long-termed interests of his own nation. Looking beyond the immediate control of oil resources in the guise of the elimination of weapons of mass destruction, fundamental requisite to peace in various contexts in the world is how to improve the conditions for social justice.

According to a famous proverb, you cannot choose your neighbors. Pakistan is located in a region replete with risks and opportunities. Peace in this region would permit the convalescence of stable conditions for development and unshackle resources for needed investments. Conflict in Iraq is not going to directly change only Iraq, Saudi Arabia, Jordan, Turkey and Iran, but it will also impinge on other nations as far as Japan and Hong Kong that have already started showing initial signs of distress and uncertainty in banking transactions, share markets and corporate business. In Tokyo, 20 years old record of decline in shares prices was broken on 10 March. Hong Kong market is no exception.




Pakistan is among those countries that will suffer a severe blow to their economy as a result of Iraq war. The prime concern is Pakistan's dependence on the import of Petroleum products. Pakistan meets most of its needs of fuel oil through imports from the Middle East. Outbreak of war in Iraq can destabilize Pakistani economy by disruption of oil supplies. However, official sources in Pakistan maintain that Saudi Arabia and Kuwait, two key oil suppliers, have assured of continued supplies. The concessional Saudi Oil Facility (SOF) means that there would not be any additional burden on the balance of payments. This will definitely support Pakistani economy in the event of war. There are also talks of importing oil from Singapore market if oil purchase from the Middle East is no longer an economical proposition.

In case of scarce oil supply, Pakistan can experience a shortage of electricity production (fuel unavailability). This can in turn force some big industries to reduce their production, nevertheless small industries would be able to operate because of low energy requirements.


The intricacy and enormity of changes in the aftermath of gulf war bars the development of a precise planning scenario for employers and human resource practitioners in Pakistan. An HR manager is normally expected to adorn four cloaks in an organization: Strategic partner, change agent, functional expert and people champion. In the aftermath of Iraq war, he would be required to engage more actively in the first two areas because a change in the production capacity and market demand will necessitate a strategic pro-active role of HR managers in the restructuring of staff. They may have to advise of certain lay-offs in case market demands (buyers orders in Pakistan and abroad) shrink due to logistic, security, physical or psychological reason. They may have to restructure their production strength in view of limited supply of raw material or utilities needed for production e.g. electricity, petroleum products and other imported items. They will also be required to streamline this change with the least negative repercussions for the organization. In plain words, this is a simple question of satisfying external customers (consumers and buyers) and internal customers (employees) in the best possible manner, while not compromising on surplus creation capacity. It is like walking on a tight rope by meeting the strategic requirement of the top management to lay off redundant human resources, and at the same time not losing the employees' trust and respect by educating them about the rationale and necessity of such decision, placing a merit and equity based retrenchment system in practice. This also must be born in mind that should this happen, lay off could be only for the temporary period as far as possible (e.g. from one month to six months period) and laid off staff must be restored on priority as soon as market shows favorable signs, and production back to normal.


Pakistani industry has already undergone a similar experience during October 2001-March 2002, Pakistani exports dwindled and revenue shrank. Industries like textile, leather goods, sports goods and carpet manufacturing experienced a similar blow as an outcome of 9/11 when their export volume reduced from ten to fifty percent of the normal business, and a significant part of the production workforce had to be laid off (temporarily) as a consequence. There are yet a few small units that could not absorb the shocking reduction in market demand (by cancellation of buyers orders, or augmentation of administrative and manufacturing expenses) that have not yet been able to recover to the previous level of their operations. However this is the case with the small units only, and generally Pakistani industry recovered after initial shock of few months to the normal operational level.

The export surplus also suffered during US led war against Afghanistan when Government imposed war risk surcharge on exports to and from the country thus depriving Pakistani products of the price competitiveness. The economic situation deteriorated further after lingering military stand off between India and Pakistan on the pretext of unrest in Kashmir. However after March 2002, situation started improving as IMF came for assistance and EU and US actively supported Pakistan economy by removal of economic sanctions and flow of foreign direct investment.


Today the country's reserves are in a very comfortable position and all other economic indicators including revenue, export, inflation etc are showing good omens. According to official statistics issues on March 17, 2003, foreign direct investment in the country has registered an increase of 148 per cent to $630.07 million in July-February against $254.5 million during the same period of last year. It is expected that during the current fiscal year, FDI will cross the $1 billion mark. According to country-wise break-up, $196.9 million came from UK, $162.5 million from the US and $110.3 million from the UAE. However, in case, this war looms longer than what George W. Bush expected, corporate sector of UK and US may think of switching their FDI in Pakistan to India. After all they are sensing anti-US sentiments among a sizeable part of public in Pakistan in the aftermath of two recent conflicts in the region.




In case of prolonged war, growing economic instability, shortage of utilities and growing insecurity will force many Pakistani expatriates in the Gulf to return to their homeland. Pakistan International Airlines (PIA) is reported to have made special arrangements to lift thousands of Pakistanis from Kuwait in case of emergency evacuation (that has already started).

The country gets more than half of the remittances from expatriates in the Middle East. Foreign exchange reserves have reached $10 billion, with the contribution of the remittances. The expected intake of manpower will burden the already tight employment market in the country. Expatriates from the gulf will also bring with them the money, technique and experience. Pakistani banks have in the last few years reduced the mark up rate tremendously that has set a very suitable stage for investment in small and medium businesses. However, loans are not the only instrument required to promote industry and to rescue economy from the multi-faceted severities caused by this unholy war. There is a growing need for improvement in infrastructure, business education, skill development and market improvement.


According to Shaukat Aziz (advisor on finance to the PM), the foreign reserves of Pakistanis abroad are in the range of US$60 billions. This is a huge amount for Pakistan. Recent trends indicate that Pakistanis abroad have started sending their money to Pakistani banks and there is a need that these deposits are used for the national development and economic sustainability. Interestingly, one recent trend for these deposits has been the purchase of real estate by the individuals in the posh localities of Karachi and Lahore. This has created artificial rise in the prices of the real estate. This money should be rather invested in production, industrialization and setting up of small to medium industries. Pakistan government needs to educate, invite and attract foreign investment and the deposits by expatriates to be invested in small industries, by provision of technical and managerial guidance and infrastructure.

One issue that has lately gained the attention of NGOs, State Bank of Pakistan and the Federal Government is to rely on and to promote Small and Medium Enterprise in the country. Prime Minister Jamali has recently announced Skillful Pakistani scheme for Pakistani expatriates returning home from the Gulf in case they lose their jobs due to recession in economy of these countries, and SMEDA (Small and Medium Enterprise Development Agency) have offered to help them in setting up small businesses. SMEDA will also offer easy loans to such expatriates and other skillful Pakistani youth. This will help Pakistan achieve economic sustainability and overcome unemployment menace.


Business activity in Karachi Stock Exchange was disappointing immediately after US President issued ultimatum to Saddam. Index fell down by 54 points and crossed the psychological limit of 2500. There was a decline of Rs.12 billion in the stock worth, and only 89 million shares were traded. In Lahore, index fell down by 48 points and shares of majority of the companies fell down due to sale pressure. Investors are fearful about future, and the market is in fluid condition.


Jawad S. Naqvi is a retired officer of Pakistan Air Force and a professional HR practitioner. He is a graduate of University of Engineering and Technology, Lahore and University of Western Sydney, Australia. Currently he is serving a textile factory in Lahore as Manager HRD. Jawad is also a visiting faculty member in the business institutes in Lahore. His articles have already appeared in the leading English periodicals in Pakistan and abroad. He may be contacted through thejawad@yahoo.com.