LAHORE (May 24 2009): Various government and non-governmental organisations, commercial and industrial chambers and experts have prepared reports about socio-economic costs of Pakistan's fight against terrorism during the past five years. According to the Pak-US Business Council report (2009), Pakistan is the prime victim of Afghanistan's instability, and its economy has so far suffered directly or indirectly a huge loss of 35 billion dollars.
"Moreover, due to widespread unrest and political uncertainty in Afghanistan, a large quantity of Pakistani food items/commodities is smuggled to Afghanistan, which ultimately leads to acute foodgrain scarcity within the country," said report.
According to the Finance Ministry, Pakistan suffered directly or indirectly the loss of Rs 2,080 billion in the war against terror from 2004-05 to 2008-09. It was around Rs 484 billion during the 2007-08 financial year, which badly affected the country's socio-economic development.
It is estimated that it would increase to Rs 678 billion during 2008-09 financial year. The cost includes both direct and indirect on account of loss of exports, foreign investment, privatisation, industrial output, soft image and tax collection. The report further indicates that the expected direct cost of war on terror will reach Rs 114.03 billion in 2008-09 from Rs l08.527 billion last year.
The indirect cost will increase to Rs 563.760 billion from Rs 375.840 billion. According to the report, the anti-terrorism campaign overstrained Pakistan's budget, as allocation for the law-enforcement agencies had to be increased significantly, curtailing the funding for development projects since 9/11.
In its poverty reduction strategy papers-II, the Finance Ministry revealed that Pakistan's participation in the anti-terrorism campaign had led to massive unemployment in the affected regions, which had ultimately increased rural poverty too. It had reached 37.5 percent from 23.9 percent in 2007-08, said the report.
In a well-researched report, former senior Vice-President of Lahore Chamber of Commerce and Industry (LCCI) Sohail Lashari of SOZO parks said that the Swat war had displaced two million residents, increased unemployment manifold, discontinued education of youth, badly damaged infrastructure, finished tourism - the main source of income generation of the area - sparked violence in other parts of the country, and stopped supply of essential raw materials from Swat like marble, gem and jewellery and furniture industries, besides fresh fruits, vegetables and other hilly food items to other parts of the country.
Lashari said that frequent bombings, deteriorating law and order situation and displacement of the local population, had taken a toll on the socio-economic fabric of the country, especially the embattled Northern areas. Due to deteriorating law and order situation and high political risk, the World Bank had blocked lending for two key loans, of at least 834 million dollars, market-based loans, which might increase serious economic problems for the country, he said.
Meanwhile, the experts say that since the start of the anti-terror campaign, an overall sense of uncertainty has prevailed in the country and it is at its peak in NWFP and Fata. It has contributed to capital flight and slowed down economic activities, making foreign investors jittery.
The foreign direct investment (FDI) has been adversely affected by the ongoing anti-terrorism campaign in Fata and other areas of the NWFP. Pakistan's participation in the international campaign has led to an excessive increase in the country's credit risk, due to which recently, the World Bank has lowered our credit rating, say the experts.
The former LCCI Senior President said that the business activity in NWFP was at its lowest ebbs and the Sarhad Chamber of Commerce and Industry (SCCI) had requested government to declare the province a war-affected zone. The SCCI chief said 3,500 industrial units were functioning in the province in 1995, while the number had shrunk to 600 in 2009, and that the terrorist activities had halted commercial activities.
Meanwhile, a Harvard study (December 2008) states that higher levels of terrorism risk are associated with lower levels of net FDI and Pakistan is not any exemption. In an integrated world economy, where investors are able to diversify their investments, terrorism may induce large movements of capital across countries.
According to the statistics of State Bank of Pakistan (SBP), net foreign investment has declined by 13 percent during the first seven months of the current fiscal year, mainly due to massive outflow from portfolio investment due to of poor law and order situation and political instability in the country.
Net foreign investment has registered a decline of some 324 million dollars during the first seven months (July-January) of 2009 fiscal year. Massive outflow of 25.058 million dollars of foreign portfolio investment from the country's equity market was witnessed during the week ended on January 10, 2009. According to National Clearing Company of Pakistan Limited (NCCPL) data, the cumulative outflow of this mode of investment had increased to 49.557 million dollars from January 1 to date.
The foreign portfolio investment has been witnessing a declining trend since the beginning of 2008, as a cumulative figure of this mode of investment has recorded negative 432.458 million dollars from January 1, 2008 to January 9, 2009.
It may be added that the government is engaged in a fierce war to regain the state's effective writ over thousands of kilometres area of Mingora, Buner, Charsadda, Bannu, Peshawar, Hangu, Mardan, Upper Dir, Kohat, Dera Ismail Khan and Lakki Marwat. The tribal agencies, Khyber, Mohmand, Bajaur, Orakzai, Kurram, North Waziristan and South Waziristan have also been under attacks during 2008.
