The week in focus

In order to progress, Pakistan can take cue from powerful economies of China, South Korea, Malaysia and Brazil.

The persistent political instability has not only diverted attention from the economy and social issues but has also downgraded the country in the eyes of investors who will think several times before coming up with a plan to invest in this resource-rich and opportunity-filled state.

Latest developments on the political front over the past few weeks, which sparked violence and shutdown in Karachi, have left deep scars, sparking fears among businessmen and investors who are considering shifting their businesses to relatively safer and peaceful countries. Already, some businesses have been shifted to Bangladesh, which provide a much safer and healthier environment.

If investment is withheld or pulled out, it will increase unemployment as well as poverty – the two main areas that the government must increasingly focus on – giving a severe jolt to the economy. According to a news report, two million people have lost their jobs because of weak economic growth. Last year, the economy grew 2.4 per cent compared to the target of 4.5 per cent mainly due to the devastating floods in the summer of 2010 and acute energy shortages.

How much the volatile political situation has impacted potential foreign investors will become apparent in coming months or years. According to figures released by the State Bank last week, foreign investment fell eight per cent to $1.92 billion in fiscal year 2010-11.

“If the government does nothing to promote investment and only the law and order situation is satisfactory, investment will come and economy will progress,” said Khurram Schehzad, Head of Research InvestCap.

Commenting on the complete shutdown in Karachi on Thursday last week, he said the repercussions of business closure in the city were felt all over the country, adding “we cannot afford strikes and shutdowns as already the investment is declining in the country.”

The government seems to be much concerned about keeping its coalition intact, which is not an undesirable effort for political stability, but it should not solely utilise its energies for achieving political gains. Equal attention should be paid to giving a boost to economy by attracting both local and foreign investment into lucrative projects as well as improving the lot of poor.

Electricity production, oil and gas exploration and financial services are the areas that should be marketed to invite investment with the support of a stable political system. Though many foreign companies and countries have vowed to make investment or are already engaged in developing different projects in the country, a safe and secure environment is a must to ensure that they keep their promises.

Short-term development projects and welfare programmes for political gains must be avoided instead long-run programmes must be focused on which will reduce the ranks of poor, create employment opportunities and discourage people from committing crime.

A positive development last week was the US assurance that despite the suspension of $800 million military aid for Pakistan, it will continue to cooperate and provide civilian assistance. Though the country should not boast of winning loans from donors, in the short-term it will help at a time when the government is facing a financial crunch due to high expenditures and low revenue collection.

In order to progress, the country can take cue from powerful economies of China, South Korea, Malaysia and Brazil who have made their mark in the world and now enjoy considerable clout in global economic affairs as their opinions are heard at every important forum.

the writer is incharge Business desk for the Express tribune and can be contacted at [e-mail]

Published in The Express Tribune, July 18^th, 2011.