More trade, less aid

IN a welcome move which would go a long way towards mitigating Pakistan’s chronic economic ills, the European Union has offered Pakistan wider access to its markets. In specific terms, all tariffs imposed on exports of Pakistani clothing will be removed from January next year. Secondly, the EU quota for imports of Pakistani textiles and clothing will be increased by 15 per cent on a one-off basis across the board. These trade concessions are expected to fetch Pakistan an additional one billion dollars from its exports to the EU. This is being viewed as the best possible access to the EU short of a free trade agreement. Besides, the EU is expected to sign a new and more favourably termed trade agreement with Pakistan soon. A first ever package of direct budgetary assistance for Pakistan is also said to be in the pipeline. Pakistan’s clothing industry which accounts for around 60 per cent of exports to the EU would benefit immensely by the elimination of the existing preferential seven per cent duty rate.

Pakistan has been pressing the rich countries for more liberal access to their markets for a long time. In the last twelve months, it had held a number of meetings with the Europeans and the Americans trying to make them see the logic of Pakistan’s request, but to no avail. However, in the changed post-September 11 international environment, the case seems to have acquired a compelling logic and quality of its own in the eyes of the EU. So, the speedy moves in that direction by the European Commission. One hopes the US would also offer similar access to its market, as promised by Secretary of State Colin Powell during his visit to Islamabad on Tuesday.

Pakistan today is suffering the most from the economic fallout of the new Afghan war. The emerging domestic economic indicators make one highly nervous. What we have lost in the first month of the war would require years to recoup. And if things do not take a turn for the better in the coming months, the recovery period would be lengthened further. In this situation some would even expect the government to ask for a 50-year debt moratorium if not an outright debt write-off for Pakistan. Some may even advise Islamabad to take advantage of its critical importance in the context of the present war against terrorism and dare the world by refusing to repay its past debt. No doubt Pakistan today is in dire need of concessional assistance from multilateral as well as bilateral sources. It also badly needs a third round of debt relief and would not be averse to accepting even some debt write-offs, if offered. There is also the flip side. No amount of extended concessional assistance or even a write-off of the past loans would allow Pakistan the needed space to put its economic house in order unless we make a complete break with the past pattern of aid utilization. Easy come, easy go — that is what has happened in the past. Most of the resources have either been spent on conspicuous consumption and useless projects or siphoned off by the ruling elite.

So, while welcoming in the short run anything concessional in the shape of both hard cash and write-offs, the country would very much want to see the new opportunity used for enhancing its foreign trade. Better access to rich markets would boost our exports, giving a much needed push to domestic economic activity. There would then be an all-round improvement in investment, employment and revenue situations. Budgetary deficits would come under control and the balance of payments position would improve considerably, enabling Pakistan to stand on its own feet without the crutches of aid. But market access alone would not lift the economy out of its dire straits. We would need adequate capital and the required knowhow to produce quality goods in demand in the rich markets.

The rich countries, which seem eager today to reciprocate Pakistan’s contribution in the war against international terrorism with economic concessions, could also be expected to consider encouraging their private sector to invest in our export-related sectors. The opportunity provided by the lifting of sanctions on the operations of US Exim bank and OPIC in Pakistan could be gainfully used to nudge the textile manufacturers and owners of other low-tech industries in America to relocate their units in Pakistan for mutual benefit. This was the economic assistance model which the rich countries had followed in East Asia. The result is all there for anyone to see. The relative peace in that region is also a direct outcome of the economic stability it has achieved.

The anthrax scare

THE forced closure of Capitol Hill, the building that is home to both houses of the US Congress, has confirmed perhaps the worst fears of US officials: that their country now faces a bioterrorist attack. This action was ordered after thirty-one people working in the offices of the Senate majority leader and another Democratic senator tested positive for exposure to the potentially deadly bacterial agent anthrax. In addition to this, the governor of New York has said that traces of the bacteria were also found in his office. In all, 44 cases of anthrax exposure have been detected so far, including one death. The majority of cases in the US have surfaced at institutions of influence or prominence. Apart from the mail sent to the senators, letters laced with the bacteria were sent to the offices of the ABC and NBC television networks and The New York Times. Meanwhile, police in Japan, Canada, Europe, Latin America, Africa and Australia have also been investigating suspicious substances either sent through the mail or left at public places — one case of anthrax contamination has surfaced outside the US, in Kenya.

In response to the new threat, President George Bush has said — in yet another display of flawed logic — that although his government did not have any hard evidence, it was clear that Osama bin Laden was an “evil man” and that he (Bush) “wouldn’t put it past” him (Osama) to be behind the anthrax scare. US Attorney General John Ashcroft, however, has been more circumspect in his reaction, saying that the possibility of groups other than Al Qaeda using the current tense climate to initiate their own terror campaign could not be ruled out.

Authorities in various countries, especially America, have done well to proceed with extreme caution, emphasizing that there should be little cause for panic, not least because most of the cases have turned out to be false alarms or hoaxes. The fact that the disease is not contagious and that authorities have now begun cracking down on anyone trying to play a practical joke should also help contain the scare. Several countries have begun handling mail more carefully and suspicious packages are being reported to law enforcement authorities. Medical authorities are also stocking up on antibiotics that can be used to treat anthrax. Faced with the possibility of a chemical or biological attack, governments will have to walk a very thin line between taking steps to effectively contain the threat and preventing mass panic. Care should also be taken to avoid making too many presumptions as to the motives and forces behind this new scary phenomenon.