Mar 02 - 08, 2009

While Pakistan is facing pressure from the Washington to step up operations against terrorists in tribal areas, Islamabad has asked the international community to devise a 'Marshall Plan' for Pakistan to fight terrorism through a massive socio-economic uplift programme, same on the pattern of U.S. aid for Europe after World War II .

The frustration with the current socio-economic and unemployment situation is creating a breeding ground for social unrest and militancy in the country. The U.S has given about $10 billion in aid to the country since 2001, but for the last 8 months, the country has been paid nothing as compensation for the war on terror, which has cost around $1.25 billion to the country's tumbling economy. Some analysts believe that the key to stabilize or weaken the Pakistan economy is the 'war on terror" and Islamabad holding the key can secure more funds from the US and the west by using it rationally.

During his recent meeting with Baroness Pauline Neville-Jones, adviser to British minister on national security, President Asif Ali Zardari reportedly said, "The international community needs to devise a Marshall Plan for building Pakistan's capability to fight the militants through a massive programme of socio-economic development, education and employment in the under-developed Tribal Areas in particular and in the country in general".

Pakistan's northwestern tribal areas are currently serving as the terrorists' sanctuaries and nurseries for the extremists posing a threat to the world peace. The people of the most backward and least developed tribal areas are more prone to be radicalized, brainwashed and ultimately to be used as suicide bombers. Mohmand, Bajaur, Khyber, Kurram, Orakzai, North Waziristan and South Waziristan are the seven agencies, which make up the Pakistan northwest tribal area, officially known as Federally Administered Tribal Areas (FATA).

With a population of 6 million people, mostly ethnic Pashtuns, FATA covers about10,200 sq miles of mountainous territory. The tribes in FATA are blamed for harboring Al-Qaeda and Taliban insurgents. Top Al- Qaeda leaders including Osama bin Laden and Ayman al-Zawahri are believed to be hiding in FATA. Pakistan government has a nominal control over FATA. Writ of Pakistani government became less effective when Kabul fell to Taliban in 1996. Majority of the people in FATA favored the Taliban's conservative and obscurantist interpretation of Islam and supported Taliban rule in Afghanistan.

Under the new US strategy, Pakistan is considered a key regional country to the US-led war on terror for stability in Afghanistan, which has been wrecked by growing Taliban insurgency. The country has served as the major supply route for the international missions assigned in the Afghanistan since late 2001. As a key US ally, Pakistan had committed in 2001 for providing logistical support and intelligence sharing when the US-led anti-terror world coalition attacked Afghanistan to destroy Al-Qaida bases after 9/11/2001 attacks on the US. The war has now entered the south Asian country, which has already been declared by Washington a major theater for war on terror.

USA is generally a low tariff market with average duty on manufactured goods at 3.9 per cent. Although Pakistan has been a leading partner of the US in the war against terrorism, but it falls low in the list of US trade partners in terms of trade in goods and services. The share of exports from the south Asian country to the US market remained stagnant at around 0.21 per cent during the past four years. 50 percent of Pakistan's current export of $3.46 billion would be granted duty free access in United States.

The US administration is framing a new strategy to ensure greater market access to Pakistani products, reported daily Dawn citing Bryan D Hunt, the Principal Officer US Consulate. President Zardari can seek a preferred tariff status for Pakistani textile exports. The US can eliminate its current punitive tariff policies on Pakistani exports providing a level playing field to it as a way to bolster the country's exports.

Pakistan and the US have been making efforts for establishing Reconstruction Opportunity Zones (ROZs) in the tribal areas. The ROZs are aimed at creating employment in the tribal areas as a strategy for fighting terrorism. The goods produced in RoZs are to be exported to the US at zero tariff. Islamabad hopes to get at least Rs10 billion for this project from the US, which had agreed to accept duty free imports of items manufactured in backward areas to be designated as ROZs. Under the proposed legislation regarding the ROZs, the US has imposed no production cap unlike the African Growth Opportunity Act (AGOA).

Since March 2006, the US officials are working in coordination with Pakistani authorities on an arrangement setting up ROZs in the tribal areas of and other provinces of the country. The lack of infrastructure is the big hurdle to attract investment in ROZs in the tribal areas. Pakistan would extend existing incentives, regulatory structure available for Export Processing Zones to ROZs which includes full ownership rights, full repatriation of capital and profits, no minimum or maximum limit would be fixed for investment in ROZs, duty free import of machinery, equipments and materials would be allowed to units to be located at ROZs. There would be no sales tax on electricity and gas consumed in the said units and Foreign Exchange Control Regulation of Pakistan would not be applicable to investment made in ROZs.

Pakistan's economy is virtually under attack from religious extremists and militants, who are not only further tarnishing the country's image for investment in the international community but also making the lives of the country's poor more difficult. Worsening law and order situation and political instability in the country has caused a fall of 13 percent in net foreign investment during the first seven months of the current fiscal year. Net foreign investment comprising foreign direct investment (FDI) and portfolio investment registered a decline of some $324 million during the first seven months (July-January) of current fiscal year, according to the central bank. With current decline, overall net foreign investment stood at $2.2317 billion during the July-January of the current fiscal year as compared to $2.5557 billion in the same period of last fiscal year. FDI reached $2.587 billion during the first seven months of fiscal year 2009 as compared to $2.555 billion in corresponding period of last fiscal 2008, depicting an increase of 32 million dollars during July-January of current fiscal year.