Economics of Agitation and Assassinations

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Complicated Subject

Economics is a complicated subject, which always has multiplier effects. And politics of agitations always discourages the inflows of funds (FDI & FPI), decreases the chances of joint venture activities and the last not the least chances of brighter economic prosperity may also be endanger. The continued politics of agitations on the issue of Blasphemous caricatures of the Holy Prophet (Peace Be Upon Him) in Jyllands Posten has rocked the socio-economic life of the country.

General Prediction

It is predicted that the country will have to pay a higher price for entrepreneurial risks to attract foreign investment despite greater liberalization than India because of latter’s political instability, politics of agitations, deteriorating law & order situation, increasing sentiments of alienation & isolation, harder to foreigners and the last not the least with having larger market size if ongoing protests are not dealt with iron hands. Such incidents neither serve Islam nor the country. Instead these enhance negative perception of the country in the eyes of our importers. Manpower export has already on the decline and persistent policy of “Foreigner” hatred may further decrease the ratios. 25000 Pakistanis are living in the Denmark and millions in other EU-25 may face difficult times in the future.

Estimated Losses

It is hard to estimate the quantum of losses caused to the businesses and property but it is predicated that series of the incident will frighten foreign investors for the short-term. Some foreign buyers had already begun thinking of canceling their scheduled visits to Pakistan as a result of continued violence in the country. Services sector, retail, transport, restaurants, distribution, etc are the prime victims of the furry of the protestors. Millions of rupees must have been lost due to strike and violence. The uncertain national and regional political situation has kept FDI inflow low into Pakistan the average annual Global foreign direct investment [FDI] is $600 million India gets $2 billion a year while China gets $40. Pakistan is expecting $2-3 billon FDI in the country in the recent fiscal year, which is at stake due to continued deteriorating law & order situation in the country. Handiwork of al-Qaeda and other militant Islamic groups exposing the security risks to the foreigners and are supposed to be one of the main hurdles in attracting new inflows of FDI & FPI in the country and new series of protests and violence may add difficulty to achieve desired levels of GDP.

Details of commercial, industrial and collaterals damages

According to independent estimation Karachi the industrial hub of the country has to bear Rs.2-3.5 billion losses if the business activities are closed for only a single day. The mayhem has left two people dead and over 100 buildings and 250 vehicles torched in Lahore. Structural damage has been caused to a part of the Punjab Assembly building, some banks (Askari, Metropolitan, NIB, NBP, Citi, Union, Alfalh, NBP) many western fast food (KFC, McDonald) and phone outlets of Norwegian phone company (Telenor), Scandinavian and US businesses outlets and the last not the least a hospital etc. Protesters run amok in Peshawar Three killed, 124 hurt tens of thousands of protesters torched 26 vehicles and scores of offices of local and multinational companies along with departmental stores in different parts of the city. Protests are being held in other cities, including Multan, Hyderabad and Bahawalpur.

Assassination of Chinese engineers

Three Chinese engineers were shot dead by assailants while driving home after work in the Balochistan town of Hub. It was the third attack in two years on Chinese technicians working in the country. The Pakistan government has strongly condemned killing that comes on the eve of President Musharraf’s state visit to China. Continuing attacks of the kind might force the Chinese, or indeed other foreign workers, to decide against staying on and working in Pakistan. Balochistan and especially Gwadar has become strategically important business hub. The level of Chinese investment in Balochisatn and especially in Gwadar $3 to 4 billion is very high and valuable and these kind of negative activities and assassinations may badly hurt the overall economic growth and prospective of the region.

Strategic Importance of Gwadar

Pakistan is eyeing huge economic and strategic gains, with Gwadar poised to become a key-shipping hub at the mouth of a strategic waterway. A port at Gwadar provides Pakistan with strategic depth vis-a-vis India. Gwadar is 725km to the west of Karachi port, making it that much less vulnerable than Karachi to an Indian naval blockade. China’s "string of pearls" strategy rests on the success of Gwadar seaport. Pakistan could earn up to $60 billion per annum out of transit trade alone if she can create all the required facilities. But these kind of activities and incidents are jeopardizing the economic development.

Bilateral trade between Pakistan and China

Bilateral trade between China and Pakistan has been on the upward trend since the year 2000 and it is expected to lead to the signing of the free trade agreement between two countries. Now Pakistan has turned out into China’s second largest trade partner in South Asia, following India. The two countries had a record trade volume of 3.06 billion US dollars, an increase of 26 per cent compare to year 2003. China’s exports to Pakistan reached 2.47 billion US dollars, up by 33 per cent from the year 2003. China’s imports from Pakistan reached 5.95 billion US dollars and up by 3.5 per cent compared to the year 2003. China mainly exports machinery equipment and components, mechanical and electrical equipment, audiovisual products, and vehicles, accounting for over 40 per cent of the China’s total exports to Pakistan. Presently bilateral trade between them stands at $ 2.5 billion out of which Chinese exports to Pakistan are $ 1.5 billion and Pakistan’s exports to China stand at $ 1billion dollars.

Importance of Chinese Economic Ties

The deepening of Gwadar sea port, Chashma nuclear power project (II), Neelum-Jhelum hydro power project, raising of the Mangla dam, Thar coal, Lowari tunnel and a free trade agreement are some of the significant areas where we can feel the heavy involvement of China which are important for our own economic growth and development.

Boycotts of Danish Goods

Danish companies are now feeling the heat and in hot waters. Consumer boycotts of Danish goods in Muslim countries are seriously hurting Denmark’s companies millions. It has raised fears of permanent damage to trade ties. From Havarti cheese to Lego, Danish products have been pulled off the shelves of stores in Saudi Arabia, Kuwait, Syria, Iran, Pakistan and other countries around the Middle East. Recently, Indonesia’s importers association started boycotting Danish goods, which it said made up US$74 million or 62 million euros in 2005 about one per cent of the nation’s annual imports. International market policy for the Confederation of Danish Industries, and EU Trade Commissioner Peter Mandelson has already stressed the need to resolve the issue as soon as possible.

Denmark’s Danske Bank estimation

Denmark’s Danske Bank estimates Danish goods worth 10 billion kroner or euro1.3 billion; US$1.6 billion annually are endangered in 20-25 Muslim countries by the boycott. That compares with worldwide exports in 2004 of 452 billion kroner, or about US$73 billion. Arla Foods, one of Europe’s largest dairy companies, is thought to be the worst hit, losing an estimated 10 million kroner (euro1.3 million; US$1.6 million) each day.

Conclusion

Decency and tolerance is the key of any problem. Religious matters should be handled separately with zeal and dignity and not trying to match the levels of mental ineluctability of other people and countries. Flaws in security system should be removed immediately and assurance of life and capital should also be given to foreign investors and companies to attract FDI & FPI in telecom, oil & gas and other sectors.

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