October 16, 2006	Monday	Ramazan 22, 1427

PRESIDENT General Pervez Musharraf has returned home from an 18-day long foreign trip with lots of praises for his leadership qualities and a couple of million dollars from the proceeds of his book’s sale.

However, he seemingly was not so successful in resolving issues of a bilateral free trade area (FTA) agreement, a bilateral investment treaty (BIT) and the launching date for Reconstruction Opportunity Zones (ROZs).

And nobody in the US seemed to be interested in discussing with him the matter of lifting the ban on the supply of nuclear fuel and equipment for setting up nuclear power plants in Pakistan facing looming power shortages.

The US President during his visit to Pakistan in March last had announced the establishment of ROZs along the Pakistan-Afghan border in Tribal Areas. The products made in the ROZs are to get duty-free market access in the US. However, the relevant US legislation covering the ROZs is still being awaited. And there is no hope of things getting started until the next year.

And the US continues to be non-committal on inclusion of the whole textile made-ups into the proposed ROZs. The FTA is to be signed after the finalisation of the BIT. But so far there has been no concrete movement on the BIT as the kind of conditions that are being put forward by the US seem too restrictive for Pakistan to agree.

Even the Generalized System of Preference (GSP) offered to Pakistan by the US is expiring in two months time and there is no guarantee that the US Congress would extend the agreement for another year. Not only this. It is so cumbersome for the Pakistani businessmen to get a business visa for travel to the US and on the other hand, the travel of the US businessmen to Pakistan is highly restricted because of the frequent American travel advisories.

The national economy is about to enter the choke mode as energy shortages have started slowing down the wheels. Textiles, the mainstay of our exports are finding it increasingly difficult to compete in the world market against the better quality products of China, India and even Bangladesh.

The flow of foreign investment is confined only to non-export oriented, but highly profitable domestic utilities such as telephone services, power plants, gas and oil marketing companies. All these are expected to bring in no more than another $5-6 billion. But in due course of time, the repatriation of profits would drain out more than what had come in.

So, Pakistan badly needs either civil nuclear power, say about of 1200MW to 1500MW immediately or it have to go for the costly thermal power stations of equal capacity. International assistance is required to help us build the Bhasha dam at least over the next seven years at the latest to save the economic wheels from coming to a complete halt.

Meanwhile, in order to enhance our stagnating exports, we need access to the rich market of the US for our textile and leather garments. Besides, this we also need an expedited processing of the proposal to set up ROZs.

The latest economic numbers give an indication of the oncoming crisis. The external debt and liabilities stand at $37.26 billion compared with $35.83 billion in June 2005, showing an increase of nearly $1.50 billion. Last year alone, the government borrowed more than $2 billion. In the same year it also mobilised $800 million by floating Eurobonds. The year 2005-06 ended with a trade gap of $12 billion, almost equal to our foreign exchange reserves.

The import bill has surpassed the export earnings by almost 100 per cent. The Supreme Court verdict on the sale of Pakistan Steel Mills seems to have warned off the prospective foreign buyers of our other even more lucrative public entities. The only number that has continued to remain positive is that of remittances which is approaching $5 billion annually. But once the overseas Pakistanis see the gathering clouds they would find it risky to keep their savings in the host countries.

Clearly, the macroeconomic stability the government had so painstakingly established with severe belt tightening at a time when the 9/11 related bonanza was creating massive fiscal space is seemingly under serious threat from infrastructure shortages, low productivity, low savings, decelerating investment rates, lack of markets, limited variety of exportable goods and massive technological deficit.

With the US dragging its feet on its promises, it appears that Pakistan will have to fend for itself in the coming months and years. But how does a country which has come to completely depend on outside help for its economic well being and does not know any life without the US crutches, cope with such a reality?

Unless Pakistan takes some very smart and quick steps and without losing any more time, the country would surely be left far behind in the economic race that is on at a frenzied pace in Asia itself.

And in order to get a head start in this race even at this late hour, the country very badly needs the FTA and the BIT and the ROZs. So, the government would do well to focus more on these issues rather than wasting time and resources in non-productive foreign trips.