The threat of imminent American invasion in Iraq in February/March has added a new dimension to international business prospects for Pakistan. No buyers of Pakistani export goods are therefore prepared to visit this country at least over the next six months.

Many export-related events entailing visits from foreign buyers and sellers and programmed for the first half of the calender year seemed to have run in difficulty.

One such event, the IGATEX-PAKISTAN, 2003 scheduled from 9-12 April and initiated by Pakistan Expo Centre to exhibit textile machinery and allied products is on the verge of being postponed because foreign based companies have been unable to confirm their participation fearing upheaval in the region in the wake of imminent invasion of Iraq.

This is in addition to the continuing apprehension among the foreign buyers about Pakistan’s law and order situation which is being perceived by them to be deteriorating by the day. Though Pakistan has been claiming that it was dealing effectively with the so-called terrorist elements which spilled over from Afghanistan into Pakistan following the Tora Bora bombing and some of its actions in the last one year or so do prove it to be so, yet the frequent shoot-outs that are taking place in the country between the law enforcement agencies and the alleged terrorists plus the occasional attacks on the Christian religious places seem to have caused the international buyers to keep away from Pakistan. This is making the Pakistani sellers to visit Singapore, Dubai, Hong Kong, Bangkok and Colombo to meet overseas clients adding to the cost of marketing and reducing the margins that much.

Since the first issue ( invasion of Iraq) is out of our control and the second ( law and order) is likely to persist as long as the campaign against the remnants of Al-Qaeda in Pakistan does not come to a permanent end there is hardly anything the government could do to overcome the difficulties emerging from these two in the way of an accelerated expansion in exports and an upswing in the inflow of the much needed foreign direct investment. However, the elected government at the centre could enter into a dialogue with the four elected provincial governments in order to see if some of them cannot be given a degree of autonomy to solicit on their own foreign direct investment. In fact an exercise could be taken in hand at the federal and provincial levels to see if foreign investment portfolio itself could not be turned into wholly a provincial subject.

While such a development would not make any difference to the adverse impact on the investment situation due to the threats of Iraq war or/and because of the so- called worsening law and order situation in the country, it would at least enable the foreign investor and buyer to look at Pakistan from a different angle. And since the benefits of foreign direct investment would accrue immediately to the host province, if it succeeded in attracting it, then the provincial governments would perhaps take good care of the law and order situation in their respective provinces (law and order being already a provincial subject) with more dedication and more efficiently than what they are doing on this front at the moment.

Some of the provincial governments which feel that since they are not responsible for the foreign policy and international trade they could play to the gallery by saying anything against foreign citizens or even launch boycott campaigns against the products and services of multinational companies already operating in Pakistan, would perhaps behave more responsibly if they know that what they say or do would adversely impact on their chances of attracting foreign investment into their province.

Also, in view of the continuing crisis being faced by our exports first due to the increases in freight and insurance soon after 9.11 and now because of the war clouds over Iraq, the government could allow both NWFP and Balochistan to enter into free trade agreements with Afghanistan and Iran. This would not only bring down the massive smuggling that is going on through these borders but perhaps create new outlets in this zone for industrially more advanced provinces like Punjab and Sindh which are finding it difficult to expand their productions due to external factors and law and order situation in the port city.

Meanwhile, the government should accelerate the work on the construction of the Chinese-aided Gwader port so that not only the goods arriving in the free trade zone of Iran- Afghanistan-Balochistan-NWFP from the Central Asian countries could reach international markets quickly bringing prosperity to a vast region, but the new alternative sea outlet for Pakistani goods would also make Karachi administration which is now in the political hands of the MQM to tackle more responsibly and with greater attention its law and order situation which is perhaps the worst in the country and because of which the image of the entire country was tarnished even before the advent of Al-Qaeda crisis.

If the US really invades Iraq, then world oil prices are likely to shoot up sky high. Pakistan seems already to have taken steps to meet this eventuality by requesting the Saudis to extend the oil facility which we had enjoyed over the last three years for another three years. This facility not only makes available to Pakistan oil at concessional rates but also allows Islamabad to make payments when and if the resources were available. But then we must not become a permanent burden on our friends and that too on such good one.

Therefore, we could consider entering into an arrangement with Iran for supply of oil over the land route through Balochistan. Iranian oil is already being smuggled into Pakistan in good quantities which not only distorts the pricing inside Pakistan but also causes heavy losses to Iran which sells gasoline at subsidized rates to its citizens. However, if this trade is done between the two countries on regular and formal basis then perhaps both would be able to benefit from such a transaction.