KARACHI, Sept 9: At 30 minutes past nine in the morning, five years ago, on September 11 the world changed. The terrorist attacks on Twin Towers in New York shook not just the globe’s sole super power but the whole world. The American response was to declare a “war against terror”. Cave busters and daisy cutters flattened mountains in Afghanistan. And the war zone has expanded exponentially into Iraq, at a heavy cost of men and material. But five years on, for everyone else (except perhaps President Bush) the worrying thought is not where to start the new war but how to end the old ones.

The images of crumbling buildings of Twin Towers, symbols of the economic might of the only super power, might have faded from memories of millions who gasped with horror as they watched them live on television. The chain of events initiated by the 9/11 attacks carries on and continues to impact their lives even today.

As countries made readjustments to suit their national interests, Pakistan also repositioned itself after 9/11. Shedding old friends, it joined forces with the US as a frontline allay in its war against terrorism. More than anything else, it surely was Pakistan’s location on the world map that gained it the prominence. From a country that was looked down upon for being a ‘one-tranche economy’ under a dictatorial regime excluded from the global economic mainstream as a punishment for conducting nuclear tests, Pakistan has come a long way and today it is in league with giants (China and India) leading the Asian tide.

Forgetting and forgiving sins of the Islamic republic, the world started rediscovering Pakistan. Economic sanctions were lifted. The country was embraced into advanced nations’ forums and was awarded the status of a non-Nato ally of the US. Assistance, soft loans and grants were offered by the UK and Japan. Debts were written off and rescheduled. US offered a $3 billion five-year package. The country was given greater market access for its exports to European markets. The Bretton Wood sisters, the World Bank and the IMF changed with the wind and adopted a more sympathetic and flexible approach in dealing with Pakistan. Next to countries directly involved in the conflict in terms of impact of the 9/11, Pakistan has had the most profound impact on the real economy and therefore the lives of its people.

In September 2002, a year after the tragedy, a report was published by Dawn to assess “what a difference a day made for Pakistan” based on some research and views of key stakeholders in the economy. While some stakeholders interviewed at that time expressed doubts, Abdul Razak Dawood, minister for commerce in 2002, is on record as admitting that developments after first the half of September 2001 have pulled the country out of economic mire. He saw a silver lining for the country amidst dark clouds of fear and uncertainty sweeping the globe.

The fact is that Pakistan’s economy actually did quite well from that point onwards. The growth rate climbed from three to above six per cent average. Remittances inflow increased from above $1 billion annual average in 2000-01 to $4.5 billion a year today. The reserves position was depressing back than with only something of a $700 million left in the SBP coffers in 2000-01. Today the country’s reserves are comfortably at $12.570 billion.

Pakistan’s capital market expe-

rienced an unprecedented boom and the KSE index traveled vertically from under 2,000 points to hover in the rage of 10,000 points by 2006. The level of exports and imports today are many times more than what they were five years back. The per capita income increased to promote the country from least developed to the category of developing countries. The financial sector expanded to cater to new segments making hefty profits in the process. The real estate market boomed that made ordinary middle class home owners millionaires without much effort.

The spurt in the telecommunication, automobile, cement and oil and gas sectors actually worked to lift the economy to a new level. The textile sector carried out large scale BMRs to be able to brave the competition in the post textile quota world and did not fail in its effort. The country’s textile gained though the gains are minuscule when compared to regional powers, China and India. There is no denying the fact that the economy has come a long way since 2001 in terms of both size and depth.

The question that pops up is as to how much of this gain in the economy can be attributed to 9/11? What is the perception of stakeholders on utilisation of opportunity thrown up by the changed world environment for the country?

People disagree on the degree of impact. No one including the government’s spokesperson denied that post 9/11 developments did provide lift that the economy needed to break out of the cycle of depressed economic activity level in 2001. “This is the single decisive factor that made the turnaround possible,” a senior economist in Islamabad said. Dr Ashfaque Hasan Khan, adviser to the ministry of finance, agreed that 9/11 provided a push but attributed the improvement in performance of the overall economy to the consistence and responsible economic policies of the Musharraf government.

“At best the post 9/11 support by the West to the government of Pakistan increased the pace of recovery, gave impetus and we arrived in three years where without 9/11 it would have taken the economy some five years to reach. But that is about all,” he said. “If we are doing well it is because we have the right economic policies in place,” Dr Khan said from Islamabad on telephone.

“2001 is history. Even if there were some bounties that came our way it happened five years back. For how long can we hang on to fallen Twin Towers? We need not be apologetic. The economy of the country is doing well because the government has created the right environment for the economic actors to deliver,” said a well-placed lady officer.

Some disagree. “It is hard to speculate where the economy of Pakistan would have been had there been no 9/11. It certainly would not have been where it is today,” said an independent analyst. “The economy is still essentially auto driven. The government instead of projecting future trends on the basis of economic decisions taken today spends better part of its time trying to find ways to explain whatever has happened in the past, grab credit for all that is well and shift blame to others for missing targets,” he said.

Former commerce minister Razak Dawood was not able to make himself available to reflect on the subject.

The young energetic business leader, Ameen Bandukda, favoured the view that 9/11 did impact the economy in defining proportions. The overall impact comes to be positive, he said even when weighted against negatives such as unfavourable propaganda and adverse portrayal of Pakistan by the western media. The worsening security situation within the country with increased incidents of terrorist attacks in major cities posed another challenge to business environment. Travel advisories and rise in transportation and insurance costs increased the cost of exports. But all said and done in the end the economy did expand at a very high rate over the last five years.

He appreciated the consistency in the government economic policies but saw inability of the government to use the fiscal buffer provided in periods following 9/11 to reinforce the infrastructural base as a major failure of the government. “Cheap credit and increased liquidity on account of the return of Pakistanis’ money parked abroad went to short-term high yielding speculative sector. The government failed to channelise these resources to reinforce the base of the economy that could have provided an environment for industrial and agricultural expansion on a sustained basis.”

Mr Ameen said the mismanagement at that juncture led to the overheating of the economy on one hand and created major distortions in the commodity market on the other (cement, flour and sugar crisis).

Commenting on the stellar performance by the financial sector of the country post-9/11, a seasoned banker felt that it was made possible because the banking sector had reformed and was in a position to capitalise on opportunities that came its way.

“A point worth noting is that the Pakistani banking sector had gone through substantial restructuring and therefore it developed the capability of taking advantage of this excess liquidity and channeling this into productive uses for the economy. Had the situation occurred four years earlier, it would have been very unlikely that the banks could have used this liquidity efficiently,” the banker, who wished not to be identified, told Dawn.

With effects of immediate gains of siding with the US post 9/11, tapering off the country’s economy is again confronted with infrastructural bottlenecks. The issue relates to the fact that benefits of high growth did not reach majority that is reeling under the pressures of high inflation and limited resource generation opportunities. The social discontent and high crime rate cannot be understood without keeping in view the policies that promoted the exclusion of poor people from the economic mainstream. The security situation and issues related to political mismanagement will need to be addressed for a dependable sustained development in the country with a human face.