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Pak US relations: Businesses in the hot seat

Updated January 08, 2018

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THERE was anxiety in business circles over a harsher US stance towards Pakistan that evoked an angry response from the people. The government’s response, however, was muted.

Senior government officials did admit that the situation was abnormal and could aggravate external-front vulnerabilities by depressing exports and foreign direct investment prospects. They did not, however, see the shock assuming a crisis proportions as the direct US economic support has already waned over the past few years.

According to the information available online, combined civilian and military aid since 2001 totals $14.7 billion. Another $14.5bn has been disbursed on account of Coalition Support Fund (CSF) between 2002 and 2015 in return for the logistic support Pakistan provided for the ‘war on terror’, according to an independent website Citizen Security Monitor. It comes to an average $1.8bn annual inflow on the two counts.

The disbursement graph, however, has been anything but linear. According to the USAID country report, the American aid to Pakistan touched its peak at $2bn in 2011 after which it dipped but trickled till 2016. In 2017, Pakistan did not receive any aid from US. The flow of monies under the CSF was comparatively more stable at about a billion dollars a year till 2015.

Senior government officials admit that the situation is not normal but do not see the shock of US-Pakistan tension assuming crisis proportions

For some economists the US announcement was “a diplomatic failure” and for others “a blessing in disguise”. The disappointed experts blamed the delusional dominant mindset that guided the country’s foreign relations for the extreme US steps. The other set of experts equated foreign aid to opium that generates a false sense of temporary relief for rulers. They argued that the US aid perpetuated a dysfunctional economic framework in Pakistan.

The current diplomatic situation landed US companies active in Pakistan in a difficult spot. Despite many odds, Pakistan has proven to be a good destination for most US companies. Their growth trajectory has been impressive and the ease of money transfer both ways in Pakistan facilitated them to deepen their footprint in one of the fastest-growing regions.

The American Business Council, a leading single-country chamber with 69 member companies, was reached for comments. It articulated its position thus: “Pakistan is a resilient country and has seen aid being stopped numerous times. We will pull through this as well.”

Understandably, executives of some US companies approached earlier declined to come on record. They wished both their countries of origin and choice to avoid impulsive actions and reactions. They hoped politicians on both sides would set sight on the future that they argued is beyond the reach of any nation in isolation.

Ghazanfar Bilour, president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) was not accessible. Zubair Tufail, a former FPCCI president, lamented the US move that in his view was unfair.

“We can’t pretend that it will not hurt our interests. US had been the single biggest destination for our exports. The assumption that market behaves independent of politics is not true. Even if private US trade partners are not barred from dealing with Pakistani companies, hostilities if allowed to persist will eventually make business interaction difficult,” he said. He hoped for a better sense to prevail in both countries.

Majyd Aziz, president of the Employers Federation of Pakistan, was worried over the dismissive attitude towards the concerns of the sole super power. “The nation will pay the price of the incompetence of the government at commercial diplomacy. They are too busy hiding skeleton in the cupboard to pay attention to pressing national problems,” he said, mentioning inactivity of Pakistan’s caucus in the US Congress.

Miftah Ismail, a businessman turned politician who is now adviser to the prime minister on economic affairs, did not underplay the value of congenial diplomatic relations with a key trade partner. He repeated his party’s (PML-N) position for “peace within and without” for sustainable progress.

“The fact is that Pakistan is not leaning on the US. With next to nothing in aid to Pakistan has reduced the power of leverage that US enjoyed in the country in the past,” he said. Discussing the US outburst, he mentioned CPEC and the coalition’s lack of success in Afghanistan.

Dr Nadeem Javed, Chief Economist Planning Commission, expected the situation to calm down as quickly as it was erupted. “I do not foresee major interruption. Afghanistan is both a cause of the distrust and a tie that binds our two nations together.”

Dr Nadeemul Haque, planning minister under the last PPP government, hoped the shock might wake the nation from a long slumber. “What aid and FDI are we talking about? The history of aid does not invoke happy memories. According to recorded donors’ assessment, it did not serve the purpose it targeted to achieve. In most cases whatever is given by the one hand is clinched back by the other in the form of consultant fees, etc. I am firmly against raising dollar loans from the market. In my view it doesn’t suit a country with a soft currency,” he argued.

He thought it’s all about economic credentials in the end.

“Politicians are good at making noise, but the market has dynamics of its own. The US leadership can say what pleases them, but as long Pakistani suppliers beat their competitors in price and quality they will continue to find buyers in the US. As long the production in China is cheaper, US manufacturers will continue to produce there. Even under sanction US companies did business with Iran and others.”

“The right set of policies and not aid is the answer to Pakistan’s economic woes. The current US decision might force policymakers to revise decadent policies and apply innovative solutions to deal with stubborn problems,” he concluded.

Published in Dawn, The Business and Finance Weekly, January 8th,2018

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