Has Pakistan lost $ 68 billion due to war on terror?

[Roybot]

Losses like uncertainty, decline in foreign investments, effects on trade, tourism, and other businesses are the result of the insecurity emanating from terrorists’ acts of violence

$ 68 billion is the figure that Pakistan often claims to have lost so far for playing the role of frontline state in the war on terror. Is it true? Maybe! Let us analyse the data that makes up this loss and see if that vouches for the authenticity of this claim.

Uncertainty, export losses, and decline in foreign investment are the key causes that are claimed to have consumed 44 percent of the total losses while compensation to affected people and infrastructure development make up only 11 percent of this loss. Does it not sound quite peculiar that these intangible losses take the lead against the tangible ones? Take uncertainty for example. How can uncertainty be assessed and on what basis are its losses quantified? The term uncertainty in itself is quite confusing and misleading. What actually is meant to convey through this term is unclear. Does it mean to convey that there is an uncertainty within the corridors of power or within the business community about the future this country holds for them? If it is used to imply that our alliance in the war on terror created uncertainty for foreign investors, then the relevant data needs to verify it.

Since 9/11, Pakistan has enjoyed an unprecedented rise in foreign investment. From a paltry amount of $ 308 million as foreign investment back in the year 2000, it started rising and reached the level of $ 4.2 billion by 2006. This upward trend in foreign investment continued till 2008 when it reached $ 5.4 billion. Thanks to the political chaos that began soon after the restoration of democracy, the foreign investors started fleeing from the country. Yet, foreign investment has not touched the bottom line. If we compare the total amount of FDI received during the last two decades of 1991-2000 and 2001-2011, the latter decade, popularly known as the war-on-terror decade, shows a significant improvement in this sector. During the whole decade from 1991-2000, we received only $ 5.07 billion as compared to $ 22.3 billion in 2001-2011, nearly $17.0 billion more than what was received in the pre war-on-terror decade.

Likewise, exports had also witnessed a constant growth after 2001 and the latest report shows that they rose by 33 percent during the July 2010-June 2011 period despite the worst security situation and energy crisis. The export trade’s growth from 2005 to 2010 was about 60 percent (from $ 14.3 billion in 2005 it went up to $ 19.2 billion in 2010) and if we include the growth of 2010-11 ($ 24.8 billion) it will be more than 120 percent growth within the last six years. This seems to be a great achievement amid the global economic meltdown of 2008 and an ongoing war on terror.

Over this economic growth during this tumultuous period, Pakistan also received $ 13 billion as funding for the war on terrorism. The US claims to have paid $ 20 billion so far. Luckily, our Pakistani community living abroad has also been a great source of relief to its war-torn country. From remittances of $ 4.2 billion in 2005, they went up to $12.0 billion in 2011, three times more than what they sent six years ago. Therefore, all these findings contradict the claim of the government about a huge loss that the war on terror has allegedly brought to this country.

To consider Pakistan as a frontline state in the war on terror, in my opinion, is in itself a wrong assumption on our part. Ours is a country that is right in the midst of the war on terror and not one that is on the borderline of a country where the war on terror is going on. If you disagree, just name one leader of the al Qaeda or the Taliban that was found or killed in our neighbouring country, Afghanistan. Unfortunately, most of them have been found or killed in Pakistan. Even the founder of al Qaeda, Osama bin Laden, was found hiding in Pakistan and was killed here. The terrorist attack on PNS Mehran and the US operation in Abbottabad have also revealed the level of penetration al Qaeda and the Taliban have gained inside the highly disciplined institution of our military. The options left with us are either to fight against terrorists or accept them as our ally and declare war against the US. We are in a situation where all roads lead to war. It is the ultimate result of the policies we pursued in the past and we cannot undo them without taking a firm stand against them. Instead of fighting this war on our own, we better be a part of the world community and make a resolve to clean the country of all sorts of extremism and terrorism that have taken root here. If the losses incurred in this war are more than what is normally accepted, we had better come up with solid and undeniable proofs. Making an unrealistic wish list as we did for the flood disaster last year is not going to work. Initially, we claimed that the flood-related losses and damages were around $ 45 billion. Later, a joint assessment by the World Bank and Asian Development Bank estimated it to be around $ 9.7 billion. The budget for 2011-2012 also carried Rs 855 billion (close to $ 10 billion) as flood-related losses.

The real losses of the war on terror are human lives and infrastructure. All other losses like uncertainty, decline in foreign investments, effects on trade, tourism, and other businesses are the result of the insecurity emanating from terrorists’ acts of violence and the weakening of the law and order situation. Even if we delink ourselves from our alliance with the US, the losses in the economic field are not going to be recovered. Therefore, the ball is in our court. Do we want to live with our extremists or the world community? Both have their own price tags along with their advantages and disadvantages. We are at a crossroads where our decisions are going to make or break this country. We have to take one or the other side. Sailing in two boats may not work anymore.

Daily Times - Leading News Resource of Pakistan

 

[rubyjackass]

Nice article. Some people just cant stop looking to blame others for their misfortunes. A similar case is the case of black money stored in Swiss banks by Indians. The amount is vastly overstated.

 

[Black Widow]

Nice article, good points made here, this is a good reply to those who make hue and cry over WoT.

 

[SMC]

The problem with this analysis is that it makes the presumption that WoT was in full swing since 2001 till today, when in fact it really only started taking off in 2008 after Bush sent 30,000 additional troops there. Before that, WoT was just lingering along.

Since 9/11, Pakistan has enjoyed an unprecedented rise in foreign investment. From a paltry amount of $ 308 million as foreign investment back in the year 2000, it started rising and reached the level of $ 4.2 billion by 2006.

The first problem with this analysis. The war on terror did not take off until 2008. Between 2001 and 2007 it was just lingering. You can't use the figures of 2001-2007 because the WoT was close to non-existant -- at least in the AfPak region. Start counting from 2008. And there you have it, because of the fact that WoT took off, we've lost at least anywhere from 5-10 billion because of lost foreign investment.

Now the global economic downturn played a role in that as well, but that was only part of it. The security situation created due to this WoT is something that played a huge role.

This upward trend in foreign investment continued till 2008 when it reached $ 5.4 billion. Thanks to the political chaos that began soon after the restoration of democracy, the foreign investors started fleeing from the country.

Or the fact that WoT started taking off at this time.. which is the key point.

Yet, foreign investment has not touched the bottom line. If we compare the total amount of FDI received during the last two decades of 1991-2000 and 2001-2011, the latter decade, popularly known as the war-on-terror decade, shows a significant improvement in this sector. During the whole decade from 1991-2000, we received only $ 5.07 billion as compared to $ 22.3 billion in 2001-2011, nearly $17.0 billion more than what was received in the pre war-on-terror decade.

"WoT decade" is not 2001-2011. Please don't selectively choose years where investment went higher. WoT years are from 2008-present. I don't need to say much about what WoT has brought in terms of investment.

Likewise, exports had also witnessed a constant growth after 2001 and the latest report shows that they rose by 33 percent during the July 2010-June 2011 period despite the worst security situation and energy crisis. The export trade’s growth from 2005 to 2010 was about 60 percent (from $ 14.3 billion in 2005 it went up to $ 19.2 billion in 2010) and if we include the growth of 2010-11 ($ 24.8 billion) it will be more than 120 percent growth within the last six years. This seems to be a great achievement amid the global economic meltdown of 2008 and an ongoing war on terror.

Exports have hardly grown during the 2008-present time, compared to their speed previously.

Over this economic growth during this tumultuous period, Pakistan also received $ 13 billion as funding for the war on terrorism. The US claims to have paid $ 20 billion so far.

Half of this is reimbursment for services provided. Only the other half is actual "aid", and that'd be around 10 billion dollars. Again, nowhere near the money we've lost due to WoT.

Luckily, our Pakistani community living abroad has also been a great source of relief to its war-torn country. From remittances of $ 4.2 billion in 2005, they went up to $12.0 billion in 2011, three times more than what they sent six years ago. Therefore, all these findings contradict the claim of the government about a huge loss that the war on terror has allegedly brought to this country.

This is a completely irrelevant and illogical point. Government is mentioning what they've lost from the WoT. If you lose money for one reason but gain money due to a different reason, you still lost money due to the first reason. I am not sure what point the author is trying to make with this fact or how this contradicts anything.

To consider Pakistan as a frontline state in the war on terror, in my opinion, is in itself a wrong assumption on our part. Ours is a country that is right in the midst of the war on terror and not one that is on the borderline of a country where the war on terror is going on. If you disagree, just name one leader of the al Qaeda or the Taliban that was found or killed in our neighbouring country, Afghanistan. Unfortunately, most of them have been found or killed in Pakistan. Even the founder of al Qaeda, Osama bin Laden, was found hiding in Pakistan and was killed here.

Do you read the news at all? US frequently claims about killing Al Qaeda or Taliban leaders in Afghanistan. Their own statistics about how they killed 5,000 Taliban in this year, 6500 in another year, etc, etc.

The terrorist attack on PNS Mehran and the US operation in Abbottabad have also revealed the level of penetration al Qaeda and the Taliban have gained inside the highly disciplined institution of our military. The options left with us are either to fight against terrorists or accept them as our ally and declare war against the US. We are in a situation where all roads lead to war. It is the ultimate result of the policies we pursued in the past and we cannot undo them without taking a firm stand against them. Instead of fighting this war on our own, we better be a part of the world community and make a resolve to clean the country of all sorts of extremism and terrorism that have taken root here.

Any relevance to the original point of this article?

If the losses incurred in this war are more than what is normally accepted, we had better come up with solid and undeniable proofs.

We've already done assessments of the losses:

Drop in FDI
Drop in economic growth
Exports not growing as fast
Tourism lost due to WoT
Losses to the infrastructure due to terrorist attacks
Losses to the infrastructure due to NATO trucks

And this is just the start. The above combined would easily be around 40-50 billion dollars atleast.

Making an unrealistic wish list as we did for the flood disaster last year is not going to work. Initially, we claimed that the flood-related losses and damages were around $ 45 billion. Later, a joint assessment by the World Bank and Asian Development Bank estimated it to be around $ 9.7 billion. The budget for 2011-2012 also carried Rs 855 billion (close to $ 10 billion) as flood-related losses.

Sure, I can agree the flood losses may have been blown out of proportion. I don't believe that has any bearing on the fact that we've lost at least 40 billion (which is really as low as any rational estimates can get) but probably a lot more than 40 billion.

The real losses of the war on terror are human lives and infrastructure. All other losses like uncertainty, decline in foreign investments, effects on trade, tourism, and other businesses are the result of the insecurity emanating from terrorists’ acts of violence and the weakening of the law and order situation.

... Which is due to the WoT. Hello, cause and effect 101?



Btw, LOL @ the bharatis.

They read some article which they think, through their simpleton bhola minds, is some sort of the next theory of relatively just because it is against Pakistan. Really guys, grow up.

 

[Developereo]

The problem with this analysis

Thanks for the refutation (minus the b-word).

However, I agree with the OP in one aspect: the government is using the WOT as an excuse to cover up its own incompetence. Many of the economic and security problems are caused by the governments inability to provide governance. WOT cannot be blamed for not collecting taxes, ineffective police and judicial system, corruption and bureaucracy -- all these things impact the investment climate.

 

[Roybot]

The problem with this analysis is that it makes the presumption that WoT was in full swing since 2001 till today, when in fact it really only started taking off in 2008 after Bush sent 30,000 additional troops there. Before that, WoT was just lingering along.

The first problem with this analysis. The war on terror did not take off until 2008. Between 2001 and 2007 it was just lingering. You can't use the figures of 2001-2007 because the WoT was close to non-existant -- at least in the AfPak region. Start counting from 2008. And there you have it, because of the fact that WoT took off, we've lost at least anywhere from 5-10 billion because of lost foreign investment.

OK so all your rebuttal is based on the argument that the WOT didn't really have that much of an effect on Pakistan up until 2008. But mind you, the magical $68 Billion figure was cumulative, "calculated" over the years from 2001-2011 by the Government of Pakistan(GOP).

So according to you, and if people are to believe the GOP "calculation"(which no one did), at worst Pakistan incurred a loss of $40 Billion(2008-2011).

Unfortunately, no one bought this Pakistani figure and the GOP realised that just "claiming" the losses was proving counter productive and hurting the economy and investment even more, so they decided to get rid of it.

Cost of war: Chapter on war on terror losses jettisoned – The Express Tribune

Islamabad: Pakistan has formally abandoned the claim of suffering immensely from the ongoing war on terror, saying that this in fact “hurt the economy, rather than bringing about any benefit.” And therefore a section carrying details of losses the country has suffered due to the war on terror has been dropped from the latest edition of the Economic Survey of Pakistan

I think the GOP was trying to cover its failures by blaming it on WOT and the Floods. According to the GOP, loss due to floods amounted to $45 Billion, World Bank and ADB brought that figure down to $9.5 Billion! Going by that, one can only imagine how much artificially inflated these WOT loss claims really are. Given that Pakistan received over $20 Billion to support the WOT makes you wonder if Pakistan actually incurred any losses or infact made money from supporting this war!

Of course the loss of innocent life is something you can't replace with any amount of military and economic aid, and that in my opinion the biggest price Pakistan has paid and something your country should have tried to highlight more, instead of trying to scab more money off the Americans.

Btw, LOL @ the bharatis.

They read some article which they think, through their simpleton bhola minds, is some sort of the next theory of relatively just because it is against Pakistan. Really guys, grow up.

Is it ever possible for you lot to actually focus on the topic at hand rather than who has posted it? Its like the moment you see an Indian flag you automatically stop thinking logically. So its you who needs to do the growing up if any one does

 

[FaujHistorian]

Utterly useless argument by some in the Pak gov, which is based on a paltry sum of $6+ billion per year during the 11 yeas war.

If Pakistanis were working hard like Chinese, they could have made 10-100 times this by having good relations (both civilian and military) with Americans.

War is the most profitable business in the world. Any service that may cost $10 an hour for common use, suddenly jumps up to $100 if it is related to war.

S. Korean businesses became big during and right after Korean war.

You see their car manufactures like Hyundai? You know what the owner of this company used to be? A repair shop guy for the American military vehicles and later a contractor who built stuff for the American military.

Pakistan should have been the main supplier of technical labor for the American war effort. Pakistani Engineers could have earned many a times what a typical Indian engineer makes while working for Microsoft or wipro.

But our hud-h a r a m i means that our educated elite refuse to accept ghar ayee wealth and instead forced our government to go for the AID route as compensation for the support.

Americans were spending so much in Afghanistan that only one to two months expense would have paid off Pakistan's budget for the whole year.

But we instead behaved like primitive tribals. refused to use our heads and instead relied on empty barrahk bazi and pathetic excuses to support Mullahtic beardos.

Oh well.

We are poor because our minds are poor. So what's the use of these discussions.


Pakistan paindabaad.

 

[SMC]

OK so all your assessment is based on the argument that the WOT didn't really have that much of an effect on Pakistan up until 2008. But mind you, the magical $68 Billion figure was cumulative, "calculated" over the years from 2001-2011 by the Government of Pakistan.

So according to you, and if people are to believe the GOP "calculation"(which no one did), at worst Pakistan incurred a loss of $40 Billion(2008-2011).

The vast majority of the losses have been due to the period between 2008-present, yes. 40 billion is a reasonable claim.

I can actually make the very simple argument that we should be counting the losses prior to that 2008 as well, but I don't believe I need to bother with that right now as 40 billion is more than enough to make my point.

Unfortunately, no one bought this Pakistani figure and the GOP realised that just claiming the losses was proving counter productive and hurting the economy and investment even more, so they decided to get rid of it.

Cost of war: Chapter on war on terror losses jettisoned – The Express Tribune

Doesn't matter whether no one buys it. The reason why GoP abandoned it, as you say, is because it wasn't productive to economy and investment, but they're just doing it for those reasons -- to encourage investment, so that it doesn't hurt more in the long run. It doesn't cancel out the fact that we DID lose 40 billion+ due to the WoT.

I think GOP was trying to cover its failures by blaming it on WOT and the Floods. According to the GOP, loss due to floods amounted to $45 Billion, World Bank and ADB brought it down to $9.5 Billion. Going by that, one can only imagine how much artificially inflated these WOT loss claim really are. Given that Pakistan received over $20 Billion to support the WOT makes you wonder if Pakistan actually incurred any losses or infact made money from supporting this war.

The losses due to flood do seem overestimated. I don't believe WoT losses are exaggerated though, at least not to any great extent. 40 billion is a reasonable minimum estimate for the losses if you take all the things into consideration.

The aid to Pakistan is no more than 10 billion, not 20. Half of that 20 is reimbursements for services provided, as I mentioned in my previous post.

And are you seriously kidding me by claiming that Pakistan may have made money by supporting the war? I am afraid that's a martian or tinfoil-like claim. If go by the minimum loss of 40 billion and 10 billion aid, that's a minimum 30 billion loss.

 

[rubyjackass]

@SMC: If you are counting 2008-now as the WoT years for your convenience, should I also point out that these are recession years and foreign investment dried up world over? Besides, the tribune article Roybot linked clearly quotes Pakistan's finance ministry official saying the loss claim figure is inflated and instead of drastically revising it, they removed the section. Drastic revisions hurt the credibility of Pakistani government.

“We did not want to drastically revise this figure downward, as it might have raised the issue of the credibility of the country’s statistics”, official said.

Cost of war: Chapter on war on terror losses jettisoned – The Express Tribune

 

[Roybot]

Look at the breakdown of these "losses" .

How does the WOT affect Pakistan's tax collection? Pakistan's export grew from 2009-2010 to 2010-2011, still Pakistan incurred a loss of $3 Billion in tax collection due to the WOT!

How is the WOT affecting privatisation? Whats cost of uncertainty when you have already accounted the affect of WOT on exports, tax collection, industrial output, privatisation and FDI? Why is the WOT being blamed for low inustrial output and not the energy crisis in Pakistan or the global economic downturn?

Anyways Pakistan's finance minister has already rubbished the $68 Billion figure, so I guess thats the final nail in this coffin.

 

[SMC]

@SMC: If you are counting 2008-now as the WoT years for your convenience, should I also point out that these are recession years and foreign investment dried up world over?

Yes, I am taking that into account. The losses due to the global recession were great as well. But that doesn't discount the fact that we DID have losses due to WoT. The losses due to WoT and global recession combined may be around 80 billion or more. I am giving WoT a reasonable share of that loss.

Besides, the tribune article Roybot linked clearly quotes Pakistan's finance ministry official saying the loss claim figure is inflated and instead of drastically revising it, they removed the section. Drastic revisions hurt the credibility of Pakistani government.


Cost of war: Chapter on war on terror losses jettisoned – The Express Tribune

I already explained this in my above post:

The reason why GoP abandoned it, as you say, is because it wasn't productive to economy and investment, but they're just doing it for those reasons -- to encourage investment, so that it doesn't hurt more in the long run. It doesn't cancel out the fact that we DID lose 40 billion+ due to the WoT.

 

[VCheng]

................
However, I agree with the OP in one aspect: the government is using the WOT as an excuse to cover up its own incompetence. Many of the economic and security problems are caused by the governments inability to provide governance. WOT cannot be blamed for not collecting taxes, ineffective police and judicial system, corruption and bureaucracy -- all these things impact the investment climate.

You have mentioned several important reasons why Pakistan has zero credibility internationally.

 

[SMC]

Look at the breakdown of these "losses" .

How does the WOT affect Pakistan's tax collection? Pakistan's export grew from 2009-2010 to 2010-2011, still Pakistan incurred a loss of $3 Billion in tax collection due to the WOT!

Yes I agree tax collection shouldn't be effected. That'd be the government trying to overestimate the numbers.

The exports argument is a genuine one - the losses in the exports are because our exports didn't grow as fast as they would've if WoT didn't exist.

How is the WOT affecting privatisation? Whats cost of uncertainty when you have already accounted the affect of WOT on exports, tax collection, industrial output, privatisation and FDI? Why is the WOT being blamed for low inustrial output and not the energy crisis in Pakistan or the global economic downturn?

Yes, agreed privatization and uncertainty shouldn't be effected. Low industrial output is due to BOTH WoT and energy issues.

Anyways Pakistan's finance minister has already rubbished the $68 Billion figure, so I guess thats the final nail in this coffin.

Already explained:

The reason why GoP abandoned it, as you say, is because it wasn't productive to economy and investment, but they're just doing it for those reasons -- to encourage investment, so that it doesn't hurt more in the long run. It doesn't cancel out the fact that we DID lose 40 billion+ due to the WoT.

 

[Roybot]

Yes I agree tax collection shouldn't be effected. That'd be the government trying to overestimate the numbers.

The exports argument is a genuine one - the losses in the exports are because our exports didn't grow as fast as they would've if WoT didn't exist.

Yes, agreed privatization and uncertainty shouldn't be effected. Low industrial output is due to BOTH WoT and energy issues.

On one hand you agree that cost of uncertainty, less privatisation, lower tax collection shouldn't be blamed on the WOT and then you are still hanging on to the $40 Billion figure?

Lets look at the breakdown for the year 2010-11 once again,

If you get rid of the Privatisation- $1.1 Billion, Tax collection- $2.1 Billion, Uncertainty cost- $2.9Billion, Half the loss due to lower Industrial output- $0.85 Billion(The other half blame it on energy crisis). All up thats an over estimation of at least $7 Billion for the year 2010-2011 alone. An over estimation of 40%!

So you can safely deduct 40% from the $40 Billion figure without even questioning the rest of the claimed "losses". That leaves you with a figure of around $24 Billion.

Already explained:

The reason why GoP abandoned it, as you say, is because it wasn't productive to economy and investment, but they're just doing it for those reasons -- to encourage investment, so that it doesn't hurt more in the long run. It doesn't cancel out the fact that we DID lose 40 billion+ due to the WoT.

Yes of course thats the reason they gave, what else do you expect them to say? That we were trying to scab money off the Americans by over stating our cost of the WOT and now that no one bought it we decided to get rid of it?

Read again what the Finance ministry said,

Finance ministry officials, however, said the $68 billion figure proved to be wrong during this year’s initial assessments.

“We did not want to drastically revise this figure downward, as it might have raised the issue of the credibility of the country’s statistics”, official said.

Cost of war: Chapter on war on terror losses jettisoned – The Express Tribune

 

[SMC]

On one hand you agree that cost of uncertainty, less privatisation, lower tax collection shouldn't be blamed on the WOT and then you are still hanging on to the $40 Billion figure?

Lets look at the breakdown for the year 2010-11 once again,

If you get rid of the Privatisation- $1.1 Billion, Tax collection- $2.1 Billion, Uncertainty cost- $2.9Billion, Half the loss due to lower Industrial output- $0.85 Billion(The other half blame it on energy crisis). All up thats an over estimation of at least $7 Billion for the year 2010-2011 alone. An over estimation of 40%!

So you can safely deduct 40% from the $40 Billion figure without even questioning the rest of the claimed "losses". That leaves you with a figure of around $24 Billion.

My 40 billion figure is after discounting those factors you mentioned (tax collection, privatization, etc).

Yes of course thats the reason they gave, what else do you expect them to say? That we were trying to scab money off the Americans by over stating our cost of the WOT and now that no one bought it we decided to get rid of it?

I don't care if no one bought it. Who has to "buy" it? American government only, no other country is relevant to those figures. And of course US won't buy those figures - it can easily afford to do that with the government we have. If the Americans think we haven't lost 68 billion, well how much do they think have we lost? You can't just say that we haven't lost 68 billion and not give your own reasonable estimate. My reasonable estimate is 40 billion.

Read again what the Finance ministry said,

Read carefully what he's saying. He doesn't want it to go down to, say, 40 billion, because it might raise the issue of credibility. That's why he abandoned them. He might have overestimated the losses by 28 billion and is abandoning those figures because he feels it might hurt his credibility. But that still doesn't change the fact that we DID lose 40 billion+.

Look, all this talk that you guys and the OP is doing is just technicalities of how much the figures overestimated. The fact that gets not mentioned or ignored is that we DID lose ~40 billion.

In logical terms, what I am saying is, just because the losses may have been overestimated by the government, that doesn't mean we didn't have any significant losses.