The iron hand of the government succeeded in containing the dissenting segments of society from causing major disruption in markets, transport or industrial areas. It, however, failed to convince the West of the indispensability of such drastic measures.
The West reacted sharply by condemning the government for resorting to extra constitutional steps. The US terminated defence cooperation talks the very next day. Some Scandinavian countries threatened to withdraw their economic support. Almost all relevant trading partners issued adverse travel advisories. They demanded the reversal of steps to put the country back on the course of peaceful transition to democracy.
Taking a clue from the position taken by the industrialised nations, the international rating agencies revised Pakistan’s outlook which would depress its international business rating. Within days of the imposition of emergency, Moody and S&P gave out revised outlook on Pakistan.
Moody’s Investor Service said it had put Pakistan’s rating from stable to negative. The agency said: “Pakistan in foreign and local currency bonds was rated B1 while for bank deposits B2 and the foreign currency country selling has also impacted negatively.
Standard and Poor revised its outlook to “negative” from “stable”, citing “heightened and prolonged political uncertainty”. S&P has a B+ foreign currency rating on Pakistani debt, four levels below investment grade.
The local business community is anxious over the prolonged turmoil. An active spokesperson of the current dispensation, Dr Salman Shah was heard on a TV channel highlighting the government’s economic achievements. Dr Ashfaque was quoted by a wire service, terming the revision of outlook by rating agencies as an “over reaction”.
On the other hand, the business community is hoping against hope that active players in the current scenario would be mindful of economic dimension of their actions or reactions.
”Politics should not be narrowed down to power. It should be about meeting people’s needs through realising the development potential”, a CEO of a multinational company requesting anonymity said while commenting on the situation.
”In a phase of transition, there is a certain level of uncertainty. Yes, people have put their long-term investment decisions on hold”, Salman Burney, managing director Glaxo Smith & Kline (GSK) commented when approached by Dawn. He, however, felt that withdrawal of international support would only aggravate the situation. “If they start turning taps off or start tightening the screws it would serve anyone.
An analyst felt one week was too short a period to judge impact of a decision on macro economy of the state. “The three market indicators: capital market, currency and real estate have shown signs of pressure but the real quantifiable impact will take at least a few months to become clear”, he said.
President of the Federation of Pakistan Chamber of Commerce and Industry, Tanvir Sheikh did not make a comment, President Karachi Chamber of Commerce and Industry Shahid Ahmed Shamsi felt that by not dissolving assemblies, the government has avoided a more stern reaction of the West. He admitted that business would also bear the brunt of the negative fallouts. “The impact will surface two months from now in the form of shortages because of higher import costs or gluts and because of less than expected orders from overseas”.
Our sources in Islamabad confirmed that many investors delegation have deferred their meetings in Pakistan including a powerful Qatari delegation interested in construction sector and a European delegation that was expected to explore the possibility of the co-operation in the field of alternate energy.
People contacted in foreign missions confirmed that early next week a joint meeting of European diplomats is scheduled to decide the fate of on going projects their countries are funding.
The development partners including the World Bank, IMF, ADB, IFC have called off all their engagement in different cities of Pakistan because of travel advisories and their reservations over the current political situation that could prolong the current phase and lead to further weakening of the institutional framework.
”The World Bank continues to engage with Pakistan for the achievement of its poverty reduction objectives in accordance with bank’s operational policy guidelines dealing with situations similar to those prevailing in the country today. For now, the bank continues to supervise the portfolio and prepare operations in the lending pipeline that are scheduled for delivery in FY08 and FY09, and to watch developments closely”, said a World Bank official.
Overseas investors poured a record $8.4 billion into the nation in the year ended June 30, International investors, despite Pakistan’s political situation, invested sizeable amount since the advent of the year till now, but it has now witnessed a downslide.
’’Economic activity is weathering the political turmoil,’’ Ahsan Javed Chishty, an economist at Standard Chartered in Karachi reported to have said. ‘’However, if the emergency sparks civil unrest in the major urban areas, business confidence is likely to be more adversely impacted.’’
”The turmoil that started in March with the suspension of now deposed Chief Justice Iftekhar Chaudhry took many twists and turns but does not seem to be subsiding anytime soon. We cannot wait indefinitely and people are considering other options very actively”, a business leader from Punjab told Dawn.
”The rigmarole over the last few months is not about person X or Y. It is about military’s economic interest in the country which is not ready to step back”, said another disgruntled business leader from Islamabad on condition of anonymity.
International investors have reported to have brought a net $27.6 million of Pakistani stocks in the three months to September 30, compared with purchases of $83.6 million a year earlier, according to central bank data.
And on November 7, over 86 million dollars were withdrawn with special convertible accounts(SCRA) dropping sharply from $353.751 million to $267.622 million.