Sunday, October 5, 2008, Shawwal 5, 1429    

Terrorism and national economy

Fazal Hakeem

Formation of the group “Friends of Pakistan” as a permanent body is to help Pakistan and support its efforts to fight terrorism. Security scenario in the country demands scientific measures not to allow the terrorists to deepen their roots. Keep the projected GDP growth intact at least. Ensure the inflow of private investment. The making of the body is a manifestation of strong support for Pakistan ’s “democratic government”. After meeting of the group, the President Asif Ali Zardari told the journalists that the world wanted help it to deal with the economic challenges, the country faces. He further stated the “Friends of Pakistan” want to help bring stability to the young democracy. The President termed the world community economic support as a blessing.

The current situation that resulted by the waves of terrorism has become an international phenomenon and needs regional and global ownership. The blaming game will only deepen the crisis and vulnerability waves.

The permanent forum “Friends of Pakistan” that has met on the sidelines of UN General Assembly 63rd session vowed to help raise billions of dollar to avert a possible economic collapse in Pakistan . The forum meeting inaugurated by the President was attended by representatives from USA , UK , Italy , Germany , France , Japan , China , Australia , Turkey , Canada , Saudi Arabia and UAE. Recent media reports indicate that Pakistan needs as much as US$10 billion to avoid an economic meltdown. The forum jointly launched by USA/UK to help Pakistan in view of economic crisis confronting the country. President Asif Zardari told media “I do not want them to give us the fish. I want to learn how to fish and do it myself”. USA and UK have renewed their commitments to support Pakistan in its economic reforms and through international financial institutions.

The security situation has badly effected the business environment and so the economy. The bombing at Marriot Hotelhappened a day after the government announcement that massive restructuring of the finances are being undertaken. The unfortunate attack took away the impact of the development on the markets. Consequently, national resources fell down to an alarming level. If the forward liabilities are included, the real reserves may go down to 3 billion dollars which is insufficient even for one month’s import bill. The Moody’s Investors Service has lowered Pakistan ’s credit outlook to “negative” due to the risk of “missed repayments” on the nation debt. According to a media report out of total reserves of US$8.467 billion held by the Commercial banks stood at 3.461 billion dollars on September 23. From September 22, the reserves fell by US$ 180 million, due to non receipts but heavy payments were made for oil and other imports. The economic decline if did not control, could cause financial chaos which is not good for the country due to prevailing law and order situation. The bomb blast at the heavily guarded Marriot Hotel shivered the nation. The President has termed the dastardly act similar to 9/11 twin towers attack. He appropriately stated that we are in a “state of war”.

Owing to prevailing law and order situation, trading trend in the shares market remained insipid. The investors are not inclined to go beyond their predetermined limits. Trading volume in the shares market fell down to a new all time low level of 2.767 million shares on 26 September as compared to 19 September‘s 4.309 million shares. The analysts as per media reports have billed the scenario as an 11-year low as the investors are more interested to have an overview of security than in the shares business. Continued weakening of rupee against dollars (One $ =Rs.80) is termed as a double –edge weapon which is taking its toll in the shares market. A report about setting up of Rs.20-25 billion to be jointly shared by banks and financial institutions to solve liquidity problems of investors is good.

Waves of terrorism and suicide attacks proved confidence shattering for the national economy. Security problem is likely to greatly hurt the services sector as people particularly the foreigners avoid to go to public places. According to official sources since 2007, 72 suicide blasts have taken place in Pakistan . Terrorism and the state of economy are closely interlinked. Terrorism shatters the business environment as the investors do not want to risk their life and money. The world is impressed by our talent and management skill. The security environment is a hurdle to attract foreign investors. The bombing at Marriot Hotel, no doubt was aimed to inflict damage on Pakistan . Last October 2007 attack on the motorcade of Benazir Bhutto at Karachi was severe that the recent bombing, the experts believe, the economic consequences of Marriot Hotel incident will be much more severe.

Certainly, the law and order situation caused by fighting in Pakistan tribal areas. It posing a threat to national security. On 25 September, Pakistani Security Forces were forced to fire on two NATO helicopters after intrusion into Pakistan territory. The helicopters were forced to return to Afghanistan . US Secretary of State Dr. Rice has stated we need to deal with the situation. She told reporters that “there is a very strong view that this is a problem that has got to be deal with”. Pakistan ’s commitments to fight the menace of terrorism cannot be denied. Ironically, though Pakistan is being assisted in the fight but there is much to be done by the world. Asking Pakistan to do more will only complicate the scenario. The President has stated that USA and Pakistan were working together to overcome the ‘weaknesses” they confront in the war against terrorism.

He has renewed the commitments of democratic government on bringing Al-Qaeda and the Taliban leaders to justice.s are interlinked . One cannot analyze security and economic development separately. In the aftermath of devastating attack at Marriot Hotel, a new security system of “Closed Circuit TV Cameras” (CCTV) is needed at all important entry points. The bomb blasts at the Hotel has been conceded the result of a security lapse. Terrorism has caused incalculable damage to the national economy. Recovery from the crisis is a gigantic task. Terrorism causes loss of confidence in future and subsequent flight of capital. Simultaneously, pressure on the value of rupee is apparent. In addition, negative effects of electricity short supply on manufacturing and construction and widening supply-demand gap is evident.

The worrying part of terrorism and interruptions in power supply are its fall out on national economy. It increases significantly in unemployment. Weakens the purchasing powers and so a gloomy environment which does not augur well for the future.