April 11, 2002	Thursday	Muharram 27, 1423

KARACHI, April 10: The risk that President Gen Pervez Musharraf has taken in seeking a vote of confidence from the people through a referendum has also created uncertainty for business.

According to western diplomats, foreign investment would not pick up before the October elections even if security concerns are pacified.

Significant capital spending and business decisions by locals are expected to be put on hold as the month of April begins with sluggish trading in yarn and textiles after some buoyancy witnessed in local markets last month, says a former president of the chamber of commerce and industry.

What is at stake in the politically controversial referendum scheduled for April 30 is legitimacy and stability of the regime. A negative vote for General Musharraf is unlikely but voters’ low turn-out may deprive him of a convincing victory.

Whether the referendum will help tighten his grip over power or will prove to be an exit route is still an open question, says a confused businessman.

Business says its main business concern is continuity in policies that is often disturbed somewhat by change in governments. However, by and large, with some adjustment, the policy directions have been maintained by the successive governments.

The problem arises with speed and sequence. Political governments have their own agenda/manifesto that is dovetailed with policies and programmes evolved by the IFIs or the establishment. Domestic social and economic compulsions dictate the conduct of politicians.

Being more receptive to public demands, political governments do not succumb as much to the outside agenda. The technocrats are not in command in political governments as in case of military or interim regimes.

Whereas major policies issues may be mandated by the National Security Council and the president, the authority of day to day administration would rest with the prime minister. A weak prime minister would not help resolve the national problems and the strong one would have his own say.

On business risks, Zubyr Soomro, president of the American Business Council, who hails from a well-known family of politicians recently observed: “The risks of politics and politicians cannot be eliminated or deferred indefinitely but have to be managed.”

He told a monthly journal recently, “the less the power you are willing to share, the poorer the quality of people you would attract in the process. All this has to be factored into the proposed structure, but again, once it is opened up, the structure will be put to test.”

Often projects and private investment proposals approved by one government have been cancelled by the following one. It has raised the issue of the rule of law. Foreigners often claim that it is not the commercial contracts but the feudal pattern of relationship that governs business.

Similarly, the supremacy of constitution and rule of law has yet to be established to woo foreign investment. While recounting the support his country has given to Islamabad after September 11, the Canadian high commissioner said here at a local function, “we are not losing sight of the need to encourage Pakistan to restore democracy.”

As the referendum would end six months before the October polls, the intervening period may be used to win over those sitting on the political fence. Yet, the president’s scathing criticism on Nawaz Sharif and Benazir shows that the two major political parties still form formidable opposition. Both have strong feudal and business constituencies.

The Musharraf government may have won the confidence of international creditors but business confidence has not been restored. The government has been soft on agriculture income tax. The distribution of land among peasants has not been a priority area. It has yet to come to grips with the poverty problem.

The possibility of the referendum, kicking off a prolonged political campaign ending in October, may have unforeseen consequences. It appears certain that it is politics and not economics that would be in command in the rest of the current calender year.