The economic costs of violence

Govt needs to ensure the security of investments or be ready to lose all.

KARACHI: The deteriorating law and order situation in the country is a major cause of concern for the business community countrywide. The energy crisis, coupled with day-to¬-day worsening in law and order conditions, is a major trigger behind capital flight from the economy in recent years.

Violence on the basis of ethnicity and sectarianism has had damaging effects on the investment climate in the country. Production losses have given birth to issues of unemployment and reduction in tax generation, which has led us to rely on debts to bridge the widening budget deficit. Major industrial zones in Faisalabad and Lahore have been shut down due to a shortage of gas and electricity, while in Karachi – which hosts 15,000 industrial units – industrialists are forced to close operations due to political instability and law and order problems.

Karachi is the largest city and the industrial and commercial hub of the country. It has been badly affected by poor law and order circumstances prevailing since 2009. Many industrial units have been shifted abroad or shut down, resulting in a number of employees losing their jobs on one hand, while the economy bears additional costs in the form of reduction in tax revenues and declining exports. The Federation of Pakistan Chamber of Commerce and Industry (FPCCI) has expressed their concern over lawlessness many times since 2009, but have failed to achieve an effective measure of security according to their demands so far.

In reality, it is political instability that is providing the oxygen to lawlessness in the country. When strikes and sit-ins become violent, it is the economy which faces the consequences in the form of damaged public property, burnt vehicles, shops and offices, and lost revenues. According to a press release issued by the president of the FPCCI two weeks ago, a one-day strike results in the loss of Rs10 billion to the national economy.

The government has targeted $5.5 billion in foreign direct investment for the upcoming year, which is four times more than what it has achieved this year. But the question arises here: in a country where the humanitarian aid agencies are forced to close their operation in some areas, how can we expect such dreams will ever come true? How can we achieve the target of foreign investment without first assuring the protection of foreign investors?

There is a dire need to take effective measures towards eradicating violence of all kinds, assuring the protection of local as well as foreign investors, and ensuring political stability for the sake of the economy. Otherwise, such targets will remain nothing more than the pipe dreams of deluded policymakers.

The writer hosts business talk shows on FM 101 and Radio Pakistan and is pursuing M Phil degree in Economics

Published in The Express Tribune, March 11^th, 2013.

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