Bad for business
Nawaz Administration needs to realise that dithering on cracking down on militancy is bad for business.
Investors in Pakistan appear to have come to an unspoken conclusion that there is no sense in making long-term investments into the country unless the government demonstrates a commitment to eradicating terrorism. PHOTO: PPI
It is rare to find occasions where foreign investors more accurately diagnose what ails the country than domestic investors, but the current decline in global portfolio investment inflows in the stock market may be just one of those few occasions where those sitting outside the country appear to have a clearer view than those inside it.
In the run-up to the election in May, and for several weeks afterwards, both foreign and domestic investors bought aggressively, buoyed by the sentiment that Pakistan finally seems to have agreed to make democracy its choice for mode of government. Yet, in recent weeks, there has been a massive pushback, with foreign investment drying up and the benchmark KSE-100 index dropping to levels close to those seen just before the election. Trading volumes have dropped sharply as foreign investors cease their buying activity. Part of this is due to global factors that have nothing to do with Pakistan. But part of it is a growing realisation among foreign investors that democracy is not meaningful unto itself unless the state takes measures to firmly establish its writ over its entire territory.
So, when all political parties get together and pretend that the Taliban are rational political actors, that has a real impact on the confidence that outsiders have on the government’s grasp of reality. Investors in Pakistan, both foreign and domestic, appear to have come to an unspoken conclusion that there is no sense in making long-term investments into the country unless the government demonstrates a commitment to eradicating terrorism.
Simply put, the Nawaz Administration needs to realise that dithering on cracking down on militancy is bad for business. For a party that bills itself as pro-business, that poses a significant political risk as well. We hope that Prime Minister Nawaz Sharif and his government find the courage required to deal with this menace and begin to build a consensus for action. The prime minister will find more support for it than he may realise.
Published in The Express Tribune, October 22nd, 2013.
In the run-up to the election in May, and for several weeks afterwards, both foreign and domestic investors bought aggressively, buoyed by the sentiment that Pakistan finally seems to have agreed to make democracy its choice for mode of government. Yet, in recent weeks, there has been a massive pushback, with foreign investment drying up and the benchmark KSE-100 index dropping to levels close to those seen just before the election. Trading volumes have dropped sharply as foreign investors cease their buying activity. Part of this is due to global factors that have nothing to do with Pakistan. But part of it is a growing realisation among foreign investors that democracy is not meaningful unto itself unless the state takes measures to firmly establish its writ over its entire territory.
So, when all political parties get together and pretend that the Taliban are rational political actors, that has a real impact on the confidence that outsiders have on the government’s grasp of reality. Investors in Pakistan, both foreign and domestic, appear to have come to an unspoken conclusion that there is no sense in making long-term investments into the country unless the government demonstrates a commitment to eradicating terrorism.
Simply put, the Nawaz Administration needs to realise that dithering on cracking down on militancy is bad for business. For a party that bills itself as pro-business, that poses a significant political risk as well. We hope that Prime Minister Nawaz Sharif and his government find the courage required to deal with this menace and begin to build a consensus for action. The prime minister will find more support for it than he may realise.
Published in The Express Tribune, October 22nd, 2013.