Economic consequences of going it alone

Published: September 24, 2011
A continuing rhetoric from the government and its reluctance to reach out to the business community with concrete steps is setting the stage for capital flight. DESIGN: ESSA MALIK

A continuing rhetoric from the government and its reluctance to reach out to the business community with concrete steps is setting the stage for capital flight. DESIGN: ESSA MALIK

After a more effective meeting between the business community of Karachi and the army chief, Prime Minister Yousaf Raza Gilani has added his own bit to shore up the sagging morale of Pakistan’s real jugular vein. He told a delegation of the city’s business and trade leaders in a meeting on September 24 that the government “is aware of its responsibilities and will not leave Karachi at the mercy of gangsters and mafias”. He also told them that he has asked an otherwise dysfunctional Sindh government to take across-the-board action against criminals, target-killers and extortionists and bring them to justice.

Strangely, the reporting on this meeting showed the two sides in the meeting talking at cross-purposes. The prime minister appeared to be replying to questions that were not posed. The questions as reported pertained to the Federal Bureau of Revenue, the law and order situation that had not improved and the ‘bhatta’ factor which continues as always. They also requested for measures to restore confidence among the business circles of Karachi, so as to enable long-term investment in the country. The crux of what they wanted was that in the aftermath of the worrisome signals from the US and Pakistan’s severing of ties with the IMF, the country could only overcome the crisis on its own, if the government provided a congenial environment to the business community and was prepared to take steps to address the situation.

The signals are indeed dire. The powers that be, above and beyond Prime Minister Gilani, had already spoken to break the heart of the business community: Pakistan was ready to take the consequences of its embrace of the Haqqani network and that it was the US that would suffer after losing Pakistan as an ally. As for the break with the IMF — after Finance Minister Abdul Hafeez Sheikh could convince neither the MQM within the government nor the PML-N in the opposition to implement the RGST (Reformed General Sales Tax) — it threatens the economy with ‘dollarisation’ and rampant inflation already standing at a level higher than any other South Asian economy. What the businessmen wanted was probably not within the grasp of Mr Gilani. They were of the opinion that if the US was to be defied and if the umbrella of the IMF was to be removed, then they could hold up their end of the bargain provided that law and order was restored. They made very concrete suggestions but did not receive concrete replies. The assurances that the prime minister held out were being belied on the ground at the very moment when he was articulating them. The pacification of Karachi is a long way off and may be overtaken by other crises triggered by the tiff Pakistan has picked with the US, to provide temporary emotional relief to the country’s intensely anti-American population. What the Gilani government is doing will not serve to bolster the confidence of the business community in Karachi. The army chief has not denied that the Haqqani Network is alive and well in Pakistan but has claimed that a lot of other countries in addition to Pakistan were maintaining contact with a militia of Taliban that controls 13 of Afghanistan’s 34 provinces. And Mr Gilani has delivered the most telling blow by saying: “America can’t do without us; it should stop sending out wrong messages.”

No prizes, therefore, for predicting that the businessmen of Karachi will soon start saving their money and assets from being devalued by fleeing to other markets in the neighbourhood. It would be fair to say that the next few months or more will be uncertain to say the least, and that the consequences of a permanent break with the Americans could be severe on Pakistan’s economy. A response needs to be formulated and in this the elected government must be allowed to take the lead role and have an actual say in whatever is drawn up. At the bare minimum, Pakistan cannot and should not allow any militant organisation to carry out attacks repeatedly on cross-border targets because that cannot be defended under any policy of national interest such as ‘strategic depth’ and so on. If the Haqqanis are truly not under our control then we should convince the Americans of it. Either way, we have to take measures to curtail the activities because the consequences of not doing that would be severe for the country’s economy.

Published in The Express Tribune, September 25th, 2011.

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Reader Comments (7)

  • Sep 24, 2011 - 9:20PM

    What can be even depressing that in Pakistan, the nations business elite, rampant tax dodgers with a history of dubious relationships with dictators now “demand” the state to act to protect their interests. Well the PM or the COAS sit down with other actors to hear their needs and address their concerns? Will they sit down with a group of families from North Waziristan and tell them that the Pakistani state will protect them from warlords? What about the rampant landgrabber in Islamabad/Rawalpindi, whose close association with politicians insures that he can do as he pleases? The nations elite, whether good times or bad have insure that their interests are served at the expense of everyone else. Are they “job creators”? Sure, but holding everyone else at ransom is simply blackmail. If they are so concerned, they should first set an example of paying their fair taxes, rather than lobbying for even more exemptions on imports, subsidies for exports, against Capital gains tax in the stock market, which Pakistan can now more than ever, not afford!Recommend

  • cautious
    Sep 24, 2011 - 10:39PM

    They were of the opinion that if the US was to be defied and if the umbrella of the IMF was to be removed, then they could hold up their end of the bargain provided that law and order was restored.
    And what exactly is their end of the bargain? The loss of the USA means the loss of your largest export market – the end of outside capital – probable sanctions – rampant inflation – diminished charitable contributions – etc. etc. What’s the business community going to do to mitigate that?


  • Sep 24, 2011 - 10:40PM

    A nation and its people who deliberately engage in the systematic conquest, subjugation, torture, imprisonment and killing of others must by the laws of physics and divine nature have the same calamities delivered upon themselves.


  • Feroz
    Sep 25, 2011 - 11:49AM

    To be financially secure and independent is the goal of every individual. The same applies to every country too. In Pakistan no one including the very rich want to pay their Taxes. This is forcing the Government to beg for Aid from all sources to make ends meet. Like a Bank that issues loans every disbursal or loan has covenants that carries obligations. An ideology driven state like Pakistan or any other will not be able to honor any of its obligations for obvious reasons. It is married to an ideology and expects the same from every citizen, peoples welfare is secondary.
    To rise and become self sufficient the country has to destroy the ideology or hold onto it and see the State destroyed. There is no alternative when any foreigner is too scared to even set foot into the country.


  • Ravi
    Sep 25, 2011 - 11:53AM

    We in India do not understand, as to what Pakistani govt is planning to do.

    Going alone means becoming another North Korea.


  • Santosh
    Sep 25, 2011 - 2:05PM

    The US has been the most liberal economic partner for Pak with over 15% of Paki exports by value going to the US. In addition, the US controls the purse strings of every multi-lateral financial and economic organization in the world. Yet, Kayani says that US needs Pak more than vice versa. Pak has seen only the generous side of US policies to date. If the US decides to put up even subtle non-tariff barriers to Paki exports or just a latent tightening of lending terms to Pak, Paki economy will keel over in under a year. Pakis think they have an energy crisis and capital flight issues now – but 2011 will seem like milk and honey days if US squeezes Pak economic lifeline just a bit more.Recommend

  • Amjad
    Sep 26, 2011 - 6:47PM

    I think that Pakistan would be better off in the long run to go it alone and forego and sort of aid. A few billion in aid is hardly adequate for the tens of billions of dollars lost due to the instability and wars in the region. When we signed up for the fight against the Soviets, we were left with all the garbage that no one in the world wanted to help us clean up. The West saved trillions when we ended Soviet rule and by extension the Cold War. All the “freedom fighters” have now become “criminals” and no one is helping us in any substantive way. They have billions to write off Greek debts but for all of Pak’s efforts, they want to give a few billion and use the nation as a scapegoat for policy failures. Why can’t the leadership of Pakistan explain our worth and how we have suffered. Yes Musharraf sold the country for next to nothing because of his own intellectual limitations, but with the current group of elected officials, little has changed.


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