2017-01-27 | Business

Security successes usher in economic improvements in Pakistan

By Muhammad Shakil

Government regulations and successful security operations are resulting in economic gains and investment, officials say.


Workers load sacks of grain onto a truck in Peshawar for delivery to a local market in November. [Muhammad Shakil]
Workers load sacks of grain onto a truck in Peshawar for delivery to a local market in November. [Muhammad Shakil]
Workers load sacks of grain onto a truck in Peshawar for delivery to a local market in November. [Muhammad Shakil]

Government regulations and successful security operations are resulting in economic gains and investment, officials say.

PESHAWAR -- Improved law and order and security successes against militant groups have opened the doors for Pakistan's business sector, studies show.

Pakistan is one of ten countries highlighted in the latest World Bank Doing Business Report for making the biggest improvements to their business regulations.

Pakistani pro-business reforms facilitated trading across borders, accessing credit and registering property, the report says. These reforms improved Pakistan's ranking among 190 economies from 145th to 144th.

Cross-border trade was eased by "introducing a new electronic platform for customs clearance in Pakistan", the report said. New regulations also compel credit bureaus to provide borrowers with a copy of their credit report.

Punjab Province led the way for Pakistan's improvement in property administration with the launch of the Land Records Management and Information Programme in 2007.

"During a five-year period, the project deployed an automated land records system and improved the quality of services provided by the land agency," the report said.

Improved security, economic growth

Overall, Pakistan has seen economic growth for the third consecutive year, according to the Ministry of Finance's Pakistan Economic Survey 2015-2016.

Government-planned and -implemented policies contributed to this growth, as seen by a variety of measures -- real gross domestic product (GDP) is up by 4.71%, the highest rate in eight years, and the unemployment rate is 5.9%, down from 6.2% in 2013, the survey said.

These economic indicators and others have revived the confidence of investors, it said.

"The international rating agencies also upgraded their rating for Pakistan," the survey said. Pakistan completed 11 successful reviews with the International Monetary Fund, which "further strengthened the confidence of international investors and has placed Pakistan on their radar screen as future investment destination".

Also key to this "enabling environment" are Pakistan's on-going military Operation Zarb-e-Azb and the National Action Plan (NAP), the survey said.

Operation Zarb-e-Azb, launched in June 2014 to eliminate various militant groups from the Federally Administered Tribal Areas (FATA), "played a decisive role in maintaining peace and stability in the country", it said.

Similarly, implementation of NAP, the government's policy approach to countering terrorism, "has also played an important role", according to the survey.

Prosperity and peace

Pakistan's continued economic achievements depend significantly on the eradication of terrorist activities and on the establishment of lasting peace in the region, analysts say.

"The aim of economic growth and prosperity cannot be achieved without establishing peace," said Haji Ghulam Ali, former president of the Federation of Pakistan Chambers of Commerce and Industry.

The success of Operation Zarb-e-Azb has not only rebuilt public trust in the security forces but has given foreign investors the confidence to come and explore new opportunities for growth that were unthinkable during the period of turmoil, he said.

Pakistan's reputation among its neighbours and allies "has also improved after [it emerged] victorious in the fight against militancy", he said. "It has also elevated its position as a business-friendly country."

The growth in GDP and foreign investment -- which reached 5% last year -- is a clear indication of progress, development and peace, he said.

Victories against extremism

Residents of FATA and Khyber Pakhtunkhwa (KP) "faced the wrath of militants" and "braved unfavourable economic conditions in the aftermath of these violent terrorism attacks", said Adnan Jalil, former vice president of FPCCI.

"Uncertainty and an ambiguous future forced them to move to safer areas of Pakistan in search of better financial prospects and business opportunities," he told Pakistan Forward.

"Thanks to the efforts of security forces who achieved victories against extremism [...] people are now feeling secure and safe," he said.

"The service sector, which includes hotels, restaurants and the entertainment industry, is the first to reap benefits of improved law and order," he said.

"Citizens who were forced to remain indoors for fear of terror incidents are once again enjoying outdoor activities after military operations," he said.

Operations of small and medium enterprises (SMEs), which witnessed sluggish growth over the past three years, are now picking up steam because of mproved law and order and the business-friendly environment, Jalil said.

"The SME sector is considered the backbone of an economy [...] capable of producing numerous indirect effects [leading] to economic stability, steady growth rate and increased employment opportunities," he said.

"We are hopeful that if the law-and-order situation keeps improving, the annual growth rate of the SME sector will soon reach 15%," he said.

In comparison, India and Bangladesh recently reported SME sector annual growth rates of 25 and 40%, respectively.

Sales, exports increasing

The gemstone sector was among the industries that militancy affected directly, said Syed Shafiq Ahmad, proprietor of Arianwal Gems, a gemstone export company.

"The mining process came to a standstill," he told Pakistan Forward. "Investment in this revenue-generating sector fell to zero because of militancy."

As the gemstone industry withered during the worst years of terrorism, foreign tourists who used to travel to the mining areas to purchase gems stopped coming, he added.

Previously, gems from Afghanistan and Tajikistan, including rubies and emeralds from the Panjshir Valley, were exported via Pakistan to Dubai, he said. But turbulence in the tribal areas affected this business, diminishing trade and exports by almost 20%.

"After the cleansing operation conducted by law enforcement, the situation that was grim in the days of militancy has improved, and mining has resumed in most of the areas, including Buner and Swat," he said.

Ajeeb Ullah, who runs Hamza Stationers, a wholesale gift and stationery shop in Chowk Nasir Khan, Peshawar, suffered a significant decline in business.

"Our monthly sales were about Rs. 4 million [US $38,160], which plunged 20% in the previous three years because of terror incidents," he told Pakistan Forward.

"Terrorism had the same effect in other cities of KP, where most of the traders and businessmen were dependent on the provincial metropolis for supplies and purchases," he said.

Now, with the return of law and order and of a favourable business environment, sales have almost doubled, he said.

"Effective border management after Operation Zarb-e-Azb to prevent unwanted elements or extremists from entering the tribal belt has also created an environment [...] to promote trade with neighboring Afghanistan and the Central Asian states," he said.

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