A geo-economic cocktail

Published July 5, 2021
Mixed signals on the security strategy from the powerful hierarchy in Pakistan were found to be unnerving.
Mixed signals on the security strategy from the powerful hierarchy in Pakistan were found to be unnerving.

Mixed signals on the security strategy from the powerful hierarchy in Pakistan were found to be unnerving. Business leaders perceive the next six months to be critical as they think the pressure is mounting from regional and global partners while the spillover of the evolving Afghan situation into Pakistan appears inevitable.

After publicly acknowledging the primacy of the economic prism over the security prism, the military leadership last week cautioned over the repercussions of an abrupt policy shift. “The policy of strategic depth in Afghanistan has long been a cornerstone of our foreign policy. A sudden change may entail chain reactions with the potential of spiralling out of control,” a political analyst elaborated the view.

With the future of the GSP-Plus status still uncertain, the business leaders read the inclusion of Pakistan in the US Child Soldiers Prevention Act list, inconclusive IMF talks, retention of Pakistan on the grey list of the Financial Action Task Force (FATF) and slow progress on the China-Pakistan Economic Corridor (CPEC) as expressions of the world’s antagonism towards Pakistan.

Without going into details of what might be triggering the global hostility, the tycoons expressed hope that things will somehow be managed without collateral damage to the prospects of economic ties and trade at the current juncture when the economy is just starting to come out of the pandemic’s dark shadows.

Corporate leaders fear the country may slip into yet another phase of violence and instability

As the deadline of Sept 11 for the final withdrawal of international troops draws closer and a deal on the future government in Afghanistan looks unlikely, the West and the rest manoeuvre to strike the right diplomatic balance to minimise the dangers of any disruption in the tackling of the Covid-19 crisis and recovery efforts.

Recalling the fallout of the Afghan war on Pakistan in the 1980s and the war on terror in the 2000s, the corporate leaders dread the country slipping back into yet another phase of violence and instability.

“The internal situation was never ideal but the influx of arms, drugs and militants of all ideological shades robbed Pakistan of whatever natural drive for progress we had. No, we are not frozen in history, but the progress is nowhere close to the potential,” brooded a businessman anonymously.

Saquib Shirazi, CEO of Atlas Honda and chairman of the Pakistan Business Council (PBC), believes the situation is tense but he has not given up hope. “Things will settle down in due course. The general sense is that the investments already triggered in the last 12 months will keep the momentum going for the short term and, hopefully, by the end of September, there will be clarity.”

“Geopolitical reality and multilateral support have always been vital elements in the country’s progress. While the political and economic health of the country matters, those with a long-term view, partnerships and decent local management will continue to invest through this cycle. Yes, stability helps decision-making for the larger, more capital-intensive projects with a longer gestation time.”

Nasser Hyatt Magoon, president of the Federation of Pakistan Chambers of Commerce and Industry, was worried about the accessibility of the trade route through Afghanistan post-Sept 11. “We can absorb minor setbacks as long as Pakistan’s internal security is ensured. The real challenge is to contain the spillover effect if the conflict situation in Afghanistan worsens.”

“Businesses want stability. Pakistan is currently beset with some positive factors and some challenges. After the turbulent first two years of the PTI government, we now have signs that exhibit some measure of confidence. The recent budget, one of the best, has offered added opportunity for growth for businesses recovering better than their peers.

“However, there are challenges as well like the IMF’s reluctance which we hope will be clear in the September review. The FATF upgrade from the grey list, we feel, is now dependent on politics and not merit. The real threat is the potential insecurity in Afghanistan post-US withdrawal. In view of the principled stand of the government of Pakistan, the country may face the threat of economic sanctions under any garb, including the withdrawal of concessions to exports by the European Union and selective travel restrictions. However, the business people have faced more serious challenges in the past. They will closely monitor and will have a mitigating strategy to absorb risks,” M Abdul Aleem, general secretary of the Overseas Investors Chamber of Commerce and Industry, said in his emailed response from which some extracts are reproduced.

Ehsan Malik, CEO of the PBC said: “Whilst remaining on the grey list came as a surprise (and getting off it would have been celebrated), business has got accustomed to it and the formal sector has benefited from the general tightening of the funds flow, which helped control smuggling and misuse of the Afghan Transit Treaty.

“The prime minister is rightly concerned about the developments in Afghanistan and the more organised businesses are bracing for the fallout. Focusing on geo-economics is a no-brainer but we must be conscious of the reduced interest that the United States would have in this region and the constraints that limit our regional trade.”

Majyd Aziz, another business leader from Karachi, was critical of the government for not doing proper homework to deepen trade ties and capitalise on the reconstruction drive in Afghanistan. “We should develop broader markets and focus on opportunities instead of overplaying the security scenario there. Others have their eyes and ears there to locate options.”

Published in Dawn, The Business and Finance Weekly, July 5th, 2021



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