Pakistan Economy - News & Updates

[Neo]

WB links $200m BISP loan to IMF review talks​

Wednesday, July 01, 2009

ISLAMABAD: The World Bank has delayed approval of a $200 million loan for the Benazir Income Support Programme (BISP) by linking it with a satisfactory outcome of upcoming review talks between Pakistan and the International Monetary Fund (IMF), official sources confirmed to The News.

The deliberations will be held from July 3 to 10 at Istanbul, the sources said here on Tuesday. The WB’s executive board was scheduled to approve $200 million for the BISP in its meeting held on June 18 in Washington, but did not do so. Later, the amount was linked to the review talks between the IMF and Pakistani side, the officials added.

When a high-level official in the Economic Affairs Division (EAD) was contacted on Tuesday, he confirmed that the approval of $200 million for the BISP and $100 million for the Higher Education Commission (HEC) as well as technical assistance for Thar Coal was delayed and linked to the review talks with the IMF.

The sources quoted WB officials based in Islamabad as saying that there was internal arrangement by the WB, otherwise there was no other problem linked to the much-trumpeted BISP.

However, the Asian Development Bank (ADB) had recently approved its lending facility for the BISP but the WB was showing reluctance to move ahead by approving IDA credit (soft loan) for the programme.

However, on the insistence of the WB, the government decided to conduct poverty scorecard survey of households in selected 16 districts of the country as a pilot project which would be completed by the end of July. This pilot project will be extended to other areas and completed by December.

After completing the poverty scorecard survey, the existing beneficiaries list, recommended by parliamentarians, would be replaced with the selected persons found through the survey.

The need for effective monitoring arises because the Planning Commission’s monitoring wing is not authorised to assess the performance of BISP under which Rs70 billion would be distributed among seven million beneficiaries because the PC cannot monitor funds allocated under the head of current expenditures. The PC is only authorised to monitor development projects.

According to the WB’s Programme Information Document (PID) which is at appraisal stage, total financing of $625 million is required for establishing safety nets, out of which the International Development Assistance (IDA) would be around $200 million while Pakistan would allocate $425 million from its own budgetary resources.

The development of effective institutions and strong monitoring and evaluation systems that can provide information on programme performance and gain the confidence of the public could mitigate this risk, the report states and added that the consensus across the political spectrum on the need for a safety net programme would also ensure continuity of the programme (though the name or institutional home may change). The WB estimates show that the BISP is expected to reduce poverty headcount rate by 6.4 percentage points. In addition, the basic income support to the poor is also expected to have a positive impact on human development outcomes and promote gender equity since the cash transfers supported by this operation are provided to the female head of the eligible families.

 

[Neo]

Cement exports up 47pc, local sales down 14pc​

Wednesday, July 01, 2009

KARACHI: Cement sales in fiscal year 2009 (FY09) posted an increase of two per cent year-on-year (YoY) to 30.6 million tonnes compared to a three-year Compound Annual Growth Rate (CAGR) of 23 per cent.

Local dispatches stood at 19.3 million tonnes, down 14 per cent YoY. However, exports depicted an astounding jump of 47 per cent to 11.3 million tonnes.

On month-on-month basis (MoM), local and export dispatches were up five per cent and one per cent respectively. Record Public Sector Development Programme (PSDP) allocation of Rs621 billion in the budget for FY10, reduction of Rs10 per bag in excise duty and declining interest rate set an optimistic outlook for the cement sector, JS Research reported on Tuesday.

Economic slowdown, political uncertainty and security situation along with budgetary constraints hampered infrastructure activities as well as private sector development projects in FY09. Resultantly, local cement dispatches dropped 14 per cent to 19.3 million tonnes.

However, this trend has started to reverse as local dispatches for June 2009 came in at 1.7 million tonnes, up 5 per cent MoM. It is expected that Rs219 billion PSDP allocation for infrastructure development and materialisation of dam construction activities announced in the budget remain major demand triggers, which would boost local dispatches in coming months.

On the export front, demand from the Middle East and Afghanistan drove exports upwards during FY09 as exports rose to a record 11.3 million tonnes, up 47 per cent YoY, with June sales posting one per cent MoM increase to 1.2 million tonnes.

Major export markets Qatar and Oman are to increase their capacities by 51 per cent and 77 per cent respectively with $304 million worth of projects in the pipeline.

Capacity expansion in Oman and Qatar along with untapped markets (African countries and Sri Lanka) will provide stimulus to exports.

 

[Neo]

Pakistan’s exports to UK cross $1bn​

Wednesday, July 01, 2009

LONDON: Pakistan’s exports to the UK have crossed $1 billion this year which is for the first time in history.

With growth rate of 16.29 per cent during the period July 2008-April 2009, Pakistan has seen all-time high exports to the UK, which has been one of Pakistan’s top three export markets in the world for the last four years, from 2005-06 through 2008-09.

Exports from Pakistan to the UK were $1 billion during financial year 2007-08. The exports mainly comprised items such as textile yarn, rice and cereals, fruit and vegetables and value added goods like apparel and clothing accessories, power generating machinery and equipment.

Officials at the Pakistan High Commission explained that by diversifying a huge potential for exports could be exploited. Three new sectors are high quality replica furniture, healthcare items including pharmaceuticals, surgical and beauty care instruments, herbal medicines and hospital linen; and dairy and Halal meat products.

In this context, the Pakistan High Commission has planned sector-specific conferences. A conference for promotion of healthcare sector is being organised from July 21 to 23.

As market access remains a crucial factor in expanding trade, Pakistan has insisted time and again for concessions and preferences such as GSP plus.

The surge in exports due to effect of award of GSP plus in the past is evident from the comparison of data of FY 2003-2004 with the successive years. According to officials, in UK there is great interest for trade with Pakistan which could be translated into growth of exports through greater outreach to importers and by rectifying misperceptions about Pakistan.

 

[Neo]

Kashmir can fulfill Pakistan’s power needs: Atiq​

Wednesday, July 01, 2009

LAHORE: Azad Jammu and Kashmir has the potential to meet Pakistan’s power needs through its natural hydropower producing sites for over 17,000 megawatts besides earning huge foreign exchange by developing its tourist spots.

President Muslim Conference and former Prime Minister AJK Sardar Atiq Ahmad Khan stated this in an exclusive interview with The News. He said during his tenure as AJK PM the experts identified 22 hydro-electric projects and ground-breaking ceremony of six was performed. Work on these projects is in progress.

He said the AJK currently needs only 350MW of electricity that in mid-term after progress on tourist spots might go up to 500MW. The balance electricity, he said, could be added to the PEPCO system and might even be exported.

He said the AJK has numerous spots which could attract tourists from across the world. Governance in AJK, he added, is better than both India and Pakistan and even today foreigners roam about freely there.

He said Pir Chenasi, for instance, is a beautiful location a few kilometers away from Muzaffarabad. It is at a height of 9,300 meters and could be a hot tourist spot. He said Pir Chenasi could be connected with Muzaffarabad through cable car or chairlift.

He said when there is a simmering heat in the AJK capital during summers the temperature in Pir Chenasi ranges from 6-10 degree centigrade. He said survey for the chairlift has been completed and now the government should start its implementation.

He said many beautiful regions of AJK are near its capital city but the access roads take many hours to reach. He said feasibility study to connect attractive tourist spots through tunnels has been completed and work on two of these tunnels has started. This would reduce the travel time to these spots substantially.

Atiq said the AJK government would require a lot of funds to complete these projects. These, he added, could be arranged through the Kashmiri Diaspora living abroad. He said there are more than 1.5 million immigrants from Kashmir who are living in the developed countries having liquid assets of more than $25 billion.

He said the expats from Kashmir would willingly invest in commercially viable projects in their homeland provided they are properly briefed and motivated. He said they could even build a dry port and airport on the same pattern as done by the entrepreneurs of Sialkot. He said salvation of Kashmir and Pakistan lies in accelerated economic growth.

He said the economic progress in AJK motivates people in the occupied territory to find a just and fair solution to Kashmir issue. He said in view of widespread unemployment among doctors in occupied Kashmir the AJK government has employed them in its hospitals as it considers Kashmiris on both sides of the border as same.

Former AJK Prime Minister said people of Kashmir are bestowed with the gift of crafts that help them earn decent livelihood. He said cashmere shawls are famous all over the world and are a major source of earning for women of Kashmir. He said cottage and small industries need government attention that could generate billions in foreign exchange.

He said Azad Kashmir ever since liberation from India has made a tremendous progress in the fields of health, education and social well being. “Today the literacy rate in AJK is 73 per cent which is much above the literacy rates in both India and Pakistan. The per capita income in AJK he added is also higher than its neighbors.

 

[Neo]

Qatar to start gas supply from Nov​

Wednesday, July 01, 2009

ISLAMABAD: Federal Minister for Investment, Waqar Ahmad Khan said here on Tuesday that Qatar would start providing Liquefied Natural Gas (LNG) and Liquefied Petroleum Gas (LPG) to Pakistan by November this year.

He was addressing a press briefing here after returning from a visit to China, Hong Kong and Qatar.

“Qatar would provide 1.5 million tons of LNG and one million tons of LPG to Pakistan,” he said, adding that the decision on necessary logistics for fuel transportation would be taken within a month.

Terming his visit to these countries successful, the federal minister said that he got a positive response from investors as Pakistan offers great investment opportunities in various fields of economy.

Waqar said that nobody in China and Hong Kong raised questions about security in Pakistan, rather, they want to have strategic investment in Pakistan to lead the country as well as the region towards economic stability.

The minister said Pakistan would attract $10 billion foreign investment this year including $6 to $7 billion from China, adding that major investments would come in telecommunications and oil and gas sectors.

He said that from China, major investment is coming from Metallurgical Corporation of China (MCC) and China Mobile, adding that MCC eyes on investing up to $4 billion, whereas the mobile company aims to reach 25 million consumers.

He said that an MCC delegation is expected to visit Pakistan on July 9 to explore various options for investment. He said China would also host a seminar which would provide Pakistan with an opportunity to attract potential Chinese investors to invest in Pakistan, adding that this would be followed by another seminar to be held in Pakistan.

He said that China would be spending $100 billion in foreign investment and it would be Pakistan’s top priority to attract a maximum portion of this investment.

He said that a Chinese-specific Special Economic Zone is being established where Chinese investors would be offered tax free import of plants and machinery to establish their industries.

He said Thar Coal reserves would also be developed on Public Private Partnership basis to produce gas, adding that once operational this project could make the country an LNG exporter. He said that UAE provided a 350 megawatt power plant to Pakistan free and would provide another 300 megawatt plant soon.

He noted that Pakistan’s environment was conducive for investment as there were no political confrontations due to the current government’s political reconciliatory policy.

 

[Neo]

Stocks experience worst performance in ten years​

KARACHI: The booming stock market, which was projected as a strong indicator of improved financial health of the country in the last few years fizzled out in 2009-10 that ended on Tuesday by recording its worst performance in the last ten years.

Though having gone through the devastating times in March 2005 resulting in a major scam, stock market consolidated itself later on and was again on track albeit the fate of inquiries made into it still hang on.

The outgoing fiscal year, ending June 2009, was the worst year for Pakistan equity market as the key benchmark KSE 100 Index lost 42 percent in local currency terms (11 percent decline in FY08

"This was the largest annual decline in percentage terms in last 10 years. The performance of share prices was bad compared to average annual Pak Rupee return of 33 percent in the last 10 years", Mohammad Sohail, Chief Executive Officer (CEO) Topline Securities said. The Index fell 52 percent in first half of FY09 but recovered 23 percent in second half.

In dollar terms, Pakistan market lost 51 percent (21 percent decline in FY08) compared to average annual US dollar gain of 30 percent in last 10-years. Market capitalization eroded by 44 percent last year from US$47.3bn to reach US$26.5bn now.

Following its record high level of 16, 576 on April last year, the painful period of the stock market started, culminating in the imposition of price floor for three and half months.

The closure of the market, was the main reason behind this huge dent in not only share prices but also in investors confidence. This along with weakening economy, political tension, security concerns and global financial meltdown caused foreigners to offload their shares aggressively and that further brought the equities down sharply in the outgoing year. Selling by financial institutions that provided loan against shares and failed to recover the mark to market difference also contributed to the fall.

Karachi bourse that fell by 35 percent (47 percent in US dollar) before the imposition of price floor, crashed by 36 percent in 12 trading sessions after the lifting of floor rule. However some improvement was seen later on as it posted a gain of 23 percent since Jan 2009. The charm of Pakistan market with high volume and Pakistan was amongst those markets with one of the highest volume to capitalization ratio. However, the main casualty of the last year crisis was the volume that is depth of the market.

The average daily volume dropped by 56 percent to 106 million shares a day from 241 million shares in FY08. In dollar terms the volume fell by 86 percent to $57 million a day from $409 million. The main reason of low volumes was the price floor imposition when hardly any trading occurred during that period. The closure of CFS and Deliverable Futures market by the regulators also trimmed down the volumes after the crisis.

Global financial crisis and weakening economic fundamentals generated selling by foreigners from start of the year in July. However, imposition of price floor, signaling indirect capital control, resulted in aggressive selling by foreign funds in a low volume market. Pakistan's exclusion from MSCI Emerging market index after a gap of 14-years also forced investors to trim their exposure in Pakistan.

Offshore investors were net sellers to the tune of around $450 million that is Rs 34 billion last fiscal year. Foreigners that used to hold shares worth $5.2 billion in at the stock market peak in April 2008 are currently holding $1.2 billion in Pakistan, according to SBP's numbers.

 

[Neo]

‘Pak to produce 9,700MW renewable power by 2030’​

ISLAMABAD: Federal Minister for Water and Power, Raja Pervez Ashraf on Tuesday said Pakistan had set high targets for itself including renewable energies including 5 percent (approximately 9,700 MW) of the electricity generation on grid by year 2030 and the replacement of 10 percent diesel with bio-diesel by year 2025.

He was addressing the representatives of more than 120 countries in the second session of the preparatory commission of the IRENA being held in resort city of Sharm-ul-Sheikh, says a message received from Cairo, Egypt, here.

 

[Neo]

Pakistan Stocks See Foreign Buying in June, Credit Suisse Says ​

July 1 (Bloomberg) -- Pakistan stocks lured overseas investors in June for the first time in more than a year amid an improving economic outlook and the cheapest valuations in Asia, Credit Suisse Group said.

Foreigners bought a net $42 million of Pakistan stocks last month, the first time buying exceeded selling since April 2008, Credit Suisse analyst Farid Khan said in a report today. Funds may have returned after MSCI Inc. added the nation’s equities to its frontier-market index with effect from May 29, he added.

Pakistan’s benchmark Karachi Stock Exchange 100 Index rose 4.4 percent last quarter, the smallest gain in Asia and the ninth-worst performer among 85 indexes tracked by Bloomberg globally. It lagged behind a global emerging-market rally as the army clashed with militants in an offensive that began in April.

“The return of foreign portfolio flows should help recover local market sentiment,” Khan said. “It is about time the locals start to see some bright spots that have started to appear on the horizon.”

The benchmark stock index is valued at 7.6 times current- year earnings, the lowest in Asia. The MSCI Asia-Pacific Index has a multiple of 23 times.

Credit Suisse reiterated an April forecast that the Karachi index will rise to 9,000 by year-end, citing a bailout by the International Monetary Fund and declining interest rates. The forecast is 26 percent above yesterday’s close of 7,162.18.

MSCI, whose indexes are tracked by money managers with $3 trillion of assets, removed Pakistan stocks from its emerging- market index at the end of 2008 after the South Asian nation imposed restrictions on selling stock. Those limits were lifted in December.

 

[Neo]

WB grants $50m IDA credit to Pakistan​

Thursday, July 02, 2009

ISLAMABAD: The World Bank has approved a $50 million IDA (the International Development Association) credit to Pakistan, designed to improve water resource management and enhance agricultural productivity in Sindh.

According to the WB’s announcement here on Wednesday, about half of Sindh’s 35 million people live in rural areas, and one-third of them live below the poverty line. Rural people, 70 per cent who are landless, derive almost 60 per cent of their income from agriculture.

The additional financing for the Sindh On-Farm Water Management Project aims to improve the efficiency, reliability, and equity of irrigation water distribution at watercourse levels and enhance agricultural productivity. Under the additional financing around 3,000 watercourses will be improved, which comprises earthen improvements, lining, installation of concrete turnouts, and culverts in watercourses.

“Irrigation and drainage are critically important to Sindh’s irrigated agriculture, which is the backbone of the economy,” said Yusupha Crookes, World Bank Country Director for Pakistan.

“The improved watercourses under the original Sindh On-Farm Water Management Project have made positive impacts in terms of enhanced and more equitable water supply. This additional financing will help extend these benefits to broader sections of the farming community in Sindh.”

The province has about 42, 000 watercourses and so far 17,000 watercourses have been improved/lined under various on-farm water management programmes, including the Sindh project.

The additional financing will also support efforts to boost agricultural productivity through demonstration on tunnel farming for high value crops, training of farmers in improved water management, agricultural practices, new technology and information dissemination.

“Participation of the farmers themselves in irrigation management is vital for the long-term sustainability of the irrigation system,” said Tumurdavaa Bayarsaihan World Bank Senior Rural Development Specialist and project task team leader. “This project supports capacity building and social mobilization of farmers in order to develop and strengthen sustainable watercourse associations which will participate in planning, designing, and implementing the rehabilitation works.”

The credit from the IDA, the World Bank’s concessionary lending arm, carries a 0.75pc service fee, a 10-year grace period, and a maturity of 35 years.

 

[Neo]

Govt to electrify 7,000 villages through solar energy​

Thursday, July 02, 2009

ISLAMABAD: Federal Minister for Water and Power Raja Pervez Ashraf has said that the government has set a target to electrify 7,000 villages in the next five years through solar energy, which cannot be electrified through grid.

He was addressing the representatives of more than 120 countries in the second session of the preparatory commission of IRENA held in the remote city of Sharm-al-Sheikh, stated a message received from Cairo here.

The minister said that Pakistan is facing the same issues in developing and utilising its renewable resources as many other countries in a similar situation. “It is, therefore, important for us to identify and address the barriers to developing renewable energy.”

“We feel that the key barriers are availability of state-of-the-art technology, skills and knowledge and the necessary financial mechanism for the promotion of technology at all levels.”

“We also need to develop a global financial mechanism that responds to the special requirements of the renewable energy sector.” Pakistan feels that if a level-playing field is provided to the renewable energy sector, they are the least expensive, environment friendly and the most sustainable resources of energy.

He said that Pakistan has also set high targets for itself including renewable energies to add five per cent (approximately 10,000 MW) of electricity generation to the grid by the year 2030 and the replacement of 5pc diesel with bio-diesel by the year 2015 and 10pc by 2025.

The minister extended full support of Pakistan to the newly perceived International Renewable Energy Agency (IRENA). He also took part in the voting proceedings for the selections of the place for the Headquarters of IRENA and the election of its Director General.

A newly conceived, carbon neutral and modern city of UAE, ‘Masdar’ is also one of the hotly contested places for IRENA headquarters.

Ashraf highlighted the commitment of Pakistan in the area of renewable energy by addressing the auditorium full of international delegates, professionals and technical experts.

He emphasised that renewable energy technologies would be an essential element in Pakistan’s energy future by making contributions to the diversity and security of the energy supply of our country and to its economic development.

 

[Neo]

Govt plans to generate Rs240bn via NSS​

Thursday, July 02, 2009

ISLAMABAD: The government plans to generate Rs240 billion through the National Savings Schemes (NSS) in the new fiscal year 2009-10 and automate 44 of the busiest centres of Central Directorate of National Savings (CDNS) by allocating Rs68 million.

The fiscal deficit target of 4.9 per cent of gross domestic product, equivalent to Rs722.5 billion, depends on resource inflow through domestic and external sources and the NSS, which is targeted to generate Rs240 billion.

Talking to The News, Central Directorate of National Savings (CDNS) Director General Zafar Sheikh was quite confident that after corporatisation of the crucial institution the government would be able to achieve desired results.

CDNS made history by crossing the Rs250-billion mark last fiscal year 08-09, which played a crucial role in meeting the fiscal deficit target of 4.3 per cent. Its figures would be made public after a few days.

“We will ensure automation of 44 busiest centres of CDNS all over the country,” Zafar Sheikh said.

Answering a query about reduction in profit rates from July 1, he said that it would apply to new investors only and existing investors would not be affected by the reduction.

“Pensioner as well as Behbood schemes will be dealt with as a special case,” he said, adding that if the rate increased investors in pensioner and Behbood schemes would also benefit.

Sources have said the government has allocated around Rs68 million for modernising CDNS in 2009-10. Profit rates of NSS will be reviewed on quarterly basis and the next review will be done by September 1.

Despite reducing profit rates for various products offered by the NSS, the finance ministry believes that it could attract the desired amount by promoting investments among the lower middle class, especially pensioners.

“CDNS is going to offer new products in the current fiscal year, paving the way to achieve the desired target,” said the official.

The government has reduced the rates of profit on ‘National Savings Schemes’. According to CDNS, the rates of profit on Special Savings Certificates (Registered)/Accounts, Regular Income Certificates, Bahbood Savings Certificates/ Pensioner’s Benefit Accounts and Savings Accounts have been cut to 11.67pc, 12.00pc, 14.16pc, and 8.50pc per annum respectively.

The rate of profit on Defence Savings Certificates ie, 12.15 per cent pa and the value and number of prizes on prize bonds remain unchanged.

 

[Neo]

Tea import falls​

Thursday, July 02, 2009

KARACHI: Tea import has declined by 0.9 per cent to $ 187.8 million in value during year (July-2008 to June-2009), due to smuggling under Afghan Transit Trade (ATT) and high prices.

Pakistan Tea Association (PTA) Chairman Mohammad Hanif Janoo said on Wednesday, that Pakistan had imported tea worth $189.5 million during July-2007 to June-2008.

He said that another reason for low import was the high prices of tea in the international market. The average price is $2.08 per kilo during 2008-09 while it was $1.18 per kg during 2007-08.

He said the total tea import during the period under review includes 89.8 million kilograms of black tea worth $186.6 and 1.05 million kg of green tea amounting to $1.23 million. The largest exporter of tea to Pakistan was Kenya with 48.4 million kg of black tea worth $115.75m.

 

[Neo]

Model dairy farm set up in Mansehra​

Thursday, July 02, 2009

PESHAWAR: A model dairy farm and training centre has been set up in Mansehra district in an effort to acquaint local communities with scientific techniques in livestock and dairy farming.

The farm will be utilised as a demonstration spot and will serve as a training centre for the organisations working in the livestock and dairy sector. Under the Expanded Dairy Development Programme (EDDP), 300 women-headed families will be trained under the Farmer Field School (FFS) approach in livestock management and dairy development, said speakers at an inaugural ceremony of the project the other day.

Dr Muqarab Ali Khan, Director Livestock Research Station Jabba Mansehra and former provincial minister for agriculture Qari Mahmood were present at the ceremony. It was attended by the local government representatives, officials, representatives of national and international NGOs and a large number of community members. The farm has been established under the EDDP of Hashoo Foundation.

Speaking on the occasion, Hashoo Foundation Project Manager, Sajjad Ali highlighted the objectives of the programme. He emphasised on the local community to take advantage of the project to increase milk production and better manage their livestock so that their socio-economic conditions could be improved.

Dr Muqarab Ali Khan urged the NGOs working in the area to replicate the model throughout the region so that all the communities of the area could benefit. He also assured full support for the development of dairy and livestock sector in the region.

 

[Neo]

Net foreign buying seen in June​

Thursday, July 02, 2009

KARACHI: After 15 consecutive months of net selling by offshore investors, the month of June saw net buying by foreign fund managers in Pakistan’s stock markets, National Clearing Company data shows.

This is mainly in line with the funds flowing to all emerging markets for the last few months. Although net buying was only $5.6 million in June, it clearly signals that funds are slowly moving towards Pakistani markets which are now trading at a 50 per cent discount compared to regional markets on price to earnings ratio.

However, the unfortunate part is that the amount of funds that is being invested in Pakistan is far lower than regional inflows. A record net inflow has been seen in emerging markets in the second quarter of 2009 led by China, India and Brazil. But contrary to the historical trend, the money coming to the country is far less this time.

For instance, fund managers’ net buying in Indian equity market was $800 million in June and it was more than $5 billion in the last quarter. Compared to this a nominal net buying of $5.6 million was seen in Pakistan in June and for the quarter ending June 2009 there was net selling of $29 million.

 

[inayatali]

Pakistan’s economy falling prey to militancy


KARACHI: Growing extremist violence has crippled the economy in northwest Pakistan, made tens of thousands of people unemployed and exacerbated the poverty that breeds fundamentalism, business leaders say.

North West Frontier Province (NWFP), which borders Afghanistan and Pakistan’s capital Islamabad, is rich in agriculture, minerals, stunning mountain scenery once popular with tourists and multiple local industries.

But the 21st century has brought decline owing to extremist violence in the adjacent federally administered tribal areas (Fata) and the NWFP district of Swat, where the Taliban launched an uprising two years ago.

‘Around three-quarters of our industries have closed since the war in Afghanistan started but most have closed in the last two to three years,’ Sharafat Mubarak, president of the local chamber of commerce and industry, told AFP.

Before the September 11, 2001 attacks on the United States which precipitated the invasion of Afghanistan and ensuing Taliban insurgency, 2,254 industries were functional in NWFP, of which just 594 operate today, he said.

‘We had more than 100,000 people employed in those industries but now just 18,000 are there and the rest have lost their jobs,’ Mubarak said.

The decline has accelerated over the past six months, during which Pakistan battled Taliban fighters, agreed a ceasefire in part of NWFP and last month launched a renewed offensive as militants advanced further towards Islamabad.

Once known affectionately as the ‘Switzerland of Pakistan’ and frequented by Western holidaymakers, Swat is today a national symbol of horror where violence last year halved receipts from tourism, official figures show.

The main industries in NWFP and Fata include marble, chemicals, rubber, plastic, food, tobacco, handicrafts, paper, leather and furniture.

The match industry, the only export-oriented sector in NWFP and which once employed around 5,000 people, has hit difficulties as a substantial quantity of the required wood comes from the conflict-torn districts.

Mubarak said banks have reduced their lending to local industry because of the growing instability and element of risk.

‘Only 32 billion rupees out of 852 billion rupees lent by banks in Pakistan were granted to industries in NWFP last year. The lending has further reduced this year,’ Mubarak said.

‘Thousands of people from the tribal areas who have been rendered jobless are at the mercy of the militants,’ he said.

‘It makes it so easy to hire unemployed youth for their cause. The government should stop this by helping us revive the industries,’ he added.

Jahan Manan, head of the independent Centre for Public Policy Research, said the root cause of decline was Afghanistan, wracked over many years by civil war and insurgency.

‘NWFP’s geographical position as a frontline province in international conflicts for the last 30 years has had a damaging effect on its economy. The unrest and insecurity discourage private investment,’ he told AFP.

The State Bank of Pakistan reported a decline of 13 per cent in foreign direct investment in the country during the first 10 months of this financial year, which runs from July 1 to June 30, compared with the same period last year.

‘The security concerns in Pakistan’s northwest and the global recession are both responsible,’ said Mohammad Sohail, chief executive of Topline Securities brokerage house.

According to the finance ministry, Pakistan’s decision to join the US-led ‘war on terror’ meant massive unemployment in affected regions and increased rural poverty, as state spending focused on law enforcement, not development.

Business leaders want the government to offer a package of incentives such as tax and duty exemptions to revive the economy, but for now the state is focused on dispensing millions of dollars in emergency aid to the displaced.