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As the estranged allies in the war against militancy — Pakistan and the US — stepped up efforts to diffuse tensions, the West-centric corporate sector heaved a sigh of relief. Displaying nervousness initially to the US threats on Monday last, the capital, currency and commodity markets stabilised somewhat later in the week as leaders on both sides got engaged to defuse the tension and move back from the precipice.
The stock market plunged on panic selling and suffered a huge single session fall of 341.6 points on Monday last, wiping out Rs87.4 billion from the market capital after the US ‘rhetoric’ on the previous weekend. It regained lost ground partially but its sentiments remained depressed amid low volumes.
There were many factors at play but the adverse development did contribute to the sudden surge in demand for dollars in the open market. The State Bank of Pakistan had to intervene to arrest the rupee slide. Last week, it breached the psychological barrier of 90 to a dollar in the open market.
Expecting shortages, the investors’ activity in the commodity market witnessed a marked increase. No firmed up data was readily available, but informed people confirmed spurred trading in both spot and future commodity markets.
The business tycoons feared tensions to spill over to trade relations, directly impacting their business. They dreaded economic sanctions that might prove costly for the teetering economy growing at below the population growth rate, with high inflation and rising unemployment.
They cautioned that depending on their nature, the sanctions would not only repel investors but could lead to exit of American companies from Pakistan. Any extreme action would scale up risks, escalating insurance premiums. The probability of withdrawal of cover by multilateral guarantee agencies cannot be ruled out. The public discontent in wake of further economic shrinkage may drag the country towards chaos.
The current tensions mounted with the US allegations that Pakistan’s leading spy agency was supporting a militant outfit, coupled with its threat of direct operation inside Pakistani territory near Afghan border to terminate ‘ sanctuaries’ of militants.
While concern was witnessed across the board over the escalation of tensions, many expected it to fizzle out. A direct conflict was ruled out because of its cost to the regional stability. They believed the UK, China, Germany, France or even India would not want a disruption in the US-Pakistan ties for their own reasons.
The export-oriented high profile textile industry was worried but others (medium/small sector and the trading community) were not perturbed. Few were swayed by nationalistic sentiments.
Generally, there was unanimity in the business circles that growth and prosperity required restraint and peace within and without. However, there were many shades of opinion on the way forward.
They can be divided broadly into two camps: one blamed the political leadership for the current imbroglio and looked up to military leadership to show the way. The other group saw the military establishment at fault. They argued that it was military’s unrealistic ambition and missteps that pushed the country in the tight corner it finds itself.
“It is suicidal. Pakistan must stop fanning frenzy of pseudo nationalists and focus on gaining the trust of the sole super power. We cannot afford to rupture the relationship with the world’s biggest economy,” said Azad, a businessman.
“If my buyers in the US cancel orders, I will be forced to close doors on 3000 odd workers and shut down my business,” the textile exporter added.
Chairman of Pakistan-US Business Council Haroon Rashid told Dawn over phone, “We cannot afford antagonistic relationship with the US. The political government has failed to deliver and the military leadership needs to reclaim its position to set things right.”
“People tend to blow things out of proportion. Yes, there is tension between the US and Pakistan that may slow down the progress on agendas such as bilateral investment treaty (BIT) and regional opportunity zones (ROZs). However, I do not see it affecting the routine bilateral trade relations. If relationship is not salvaged, the US aid will be the first casualty”, Amin Hashwani another businessman in Karachi commented when reached for comments over telephone. He regretted that the American handling of the issue was too rough with a long time ally.
“It did not benefit me when they (the US, Pakistan) befriended and will not affect me if they ditch each other. Though remote, an armed conflict will be devastating for Pakistan,” Amir Shafi a self-employed trader who owns a small family workshop said.
It was hard to quantify the worth of bilateral economic relationship as a two-hour surfing on the internet did not yield any positive results. The US share in total export earnings has been estimated to be at around 20 per cent. According to official data, imports from the US in 2011 stood at $1.119 billion, up from $933 million last year. Exports to the US in 2011 touched $4.101 against $3.560 last year. On an average, over the past ten years the total US military and non-military support is projected at about two billion dollars per annum.
Experts see tensions persisting for a while within the manageable limits. “It is in the interest of the two countries to salvage worsening ties. Pakistan needs US support to revive economy and fight the armed insurgents. The US needs Pakistan’s support to transport NATO supplies. It understands that success in Afghanistan will be harder to achieve without Pakistan and its exit strategy can work better with its cooperation. Besides, it is a nuclear power,” a gentleman who wished anonymity said.
