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Obama’s 2nd term: business response

November 11, 2012

Corporate America might not be too happy with the outcome, but the business community of Pakistan viewed Barack Obama’s victory in the US elections positively.

Besides comments, the stock market responded to the news with upbeat sentiments.

In Pakistan, the capital market index hiked on news of the re-election of President Obama in contrast to US shares that took a beating as a nervous equity market settled back to deal with problems in gridlocked Washington and Obama’s promise of more of the same.

The KSE 100-share index hit a record high on November 7, closing 1.04 per cent or 166.87 points higher at fresh peak of 16234.7 points on anticipation of uninterrupted foreign exchange inflows from the Coalition Support Fund (CSF) as Islamabad struggles to avoid a balance of payment crisis close to elections.

In New York, the shares went into free fall on fears of looming conflict over the $600 billion package of tax increases and spending cuts scheduled to take effect automatically at the end of 2012. The Dow industrial lost more then 300 points in a sell-off the same day that drove all major US stock indexes down by over two per cent with both NY Stock Exchange and Nasdaq ending in negatives. The S&P 500-share Index closed at its lowest since August 2012.

An informal interview-based dialogue by Dawn with key businessmen, corporate and service sector executives on their perception of the second term for the Democratic Party president in the White House threw up some interesting trends that suggested that the US elections were more closely monitored than generally expected.

People in key performing sectors of Pakistan, textiles, auto, pharmaceutical, fertiliser, cement, banking and hospitality, were approached the day US election results were announced. Some corporate leaders were more articulate and substantiated their view with strong argument, but in the end they were all upbeat and considered it to be a better outcome for Pakistan under the circumstances.

The support for Obama in Pakistan’s business community, despite the worst slowdown in the US in 70/80 years, was also based on the perception that blamed the recession on his Republican predecessor, President George Bush who was also disliked for his military adventures in the Middle East and Afghanistan. Besides, Obama’s Muslim African background contributed to his goodwill in this Muslim dominated country.

“How can we ignore elections that decide the next White House occupant? We are closely connected with the global economy.

Yes, the current recession has weakened America but comparatively it continues to be ahead of others by a long distance.

Therefore, the US presidential elections have direct bearing on the world affairs,” a leading industrialist from Lahore said. “It is very good. The second term always proves to be better as the President is wiser with the experience of four years in office and can deliver more. Besides the American public, Obama enjoyed support of the world,” he added.

“How the re-election plays out for Pakistan will, in the end, depend on how well we capitalise on this window of opportunity. The track record of the country in this regard is not too inspiring,” Bashir Ali Mohammad, a leading textile tycoon, said while talking to Dawn over the phone from Vietnam.

“Re-election of President Barack Obama is good news for Pakistan. In the short run, it brightens up the prospects of critically needed $600 million inflow from the US before the close of the current year as Obama retains office. If these inflows do not materialise it could worsen the balance of payment position and mount pressure on the country’s economy. In the long run we are looking at an investment treaty and favourable trade terms.

“Mitt Romeny, the defeated Republican candidate, promised to declare China a ‘currency manipulator’ if elected to power. Had that happened, it would have destabilised the world economy aggravating challenges that nations are faced with. Pakistan, being at the lower spectrum, would have been among the most adversely affected band of countries” said Sayem, Ali, the economist at Standard Chartered Bank.

“Those were primarily the elitist policies of Bush junior era that precipitated the great financial crash that shook the world economic order from its seams, aggravating problems not just for the developed world but affecting the wellbeing of masses in developing nations as well,” a businessman who owns a business empire reasoned.

“The Democratic President took major steps to boost the economy. Yes, his 2009 stimulus, his Dodd-Frank financial reforms and the auto industry bailout did not produce the results one would have wished but he did try”, he said.

Abdul Razak Thaplawala, a bigwig of cement sector in Pakistan also cheered Obama’s victory over Mitt Romney but for a different reason. He felt that Obama is more sensitised to our set of problems. He also mentioned swing of Pakistani Diaspora in the US towards Barack Obama as a reason for his satisfaction with the US election results.