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In Karachi, economy matters most

— PHOTO: AFP

TIGHT SECURITY: Pakistani soldiers on patrol in Karachi on Wednesday, ahead of the February 18 general elections.

In the violence that swept the Sindh province after the December 27, 2007 assassination of Benazir Bhutto, among those who suffered losses was Zubair S. Tufail, a chemical manufacturer based in Karachi. A truck transporting chemicals to his factory in Lahore was burnt outside Hyderabad, on the main highway linking Sindh with Punjab. It was one of 1,500 trucks to suffer a similar fate.

“The mobs were not looking for something to steal. Chemicals are of no use to anyone. These people were not out to loot, they were just out to destroy,” said Mr. Tufail, who is also the vice-president of the Federation of Pakistan Chambers of Commerce and Industry.

According to estimates, the four days of violence caused losses of over a billion dollars as mobs targeted banks, petrol pumps, transport, and communications, paralysing economic activity and life in general throughout the country. Several people were killed.

As Pakistan prepares to go to the polls next Monday, its business community is keeping fingers crossed, and not just for the next few days to pass without any incident. The government has begun deploying the army and paramilitary rangers across the province to keep the peace.

Equally, businessmen are hoping for an end to the political uncertainty that has plagued the country from the start of 2007.

“The main expectation of the business community is that there should be peace. For the last one year, there have been so many disturbances — the judiciary crisis, agitations, bomb blasts, terrorist attacks. It has affected everyone badly. People are not stepping out of their homes. When they don’t go anywhere, they don’t spend, and when that happens, business declines,” said Mr. Tufail.

The business community is also hoping that whichever party or parties come to power, there will be continuity in the economic policies put in place by the last government.

President Pervez Musharraf’s popularity has plunged to an all time low — recent opinion polls have found that over 70 per cent want him to step down immediately. The sharp spike in the prices of essentials — just in the last year, the price of the staple roti has doubled from Rs.2 to Rs.4 — and the shock shortages of wheat flour, electricity and gas have led to large-scale discontent. In the wake of the energy crisis, the government has revised downward its initial projection of a 7.2 per cent growth for the year 2007-2008.

But in Karachi, the country’s economic nerve-centre where its big businesses are based, there is still praise for General Musharraf (retd.) and the economic policies he set in place after seizing power in 1999.

“Musharraf encouraged the government to undertake reforms, pursue a privatisation programme and a free market policy. In his time, the business community was very much pleased with the government’s economic policy,” said Arif Habib, a leading stockbroker at the Karachi Stock Exchange and the owner of a bank.

Among business leaders, even the energy shortage that has affected industry the most, especially the country’s flagship textile manufacturing sector, has not caused resentment and is seen as a result of “mismanagement” than of flawed policies.

On the back of U.S. financial assistance and a steady flow of remittances from rich non-resident Pakistanis nervous about keeping their money in Western banks after 9/11, the country’s economy has averaged a 7 per cent growth over the last five years. The main boom has been in the real estate and construction sector.

Even through the troubles of 2007, the KSE benchmark index rose by 40 per cent to register its approval of government policies. General Musharraf has often pointed to the numbers of new cars on the roads and the leap in the numbers of mobile phone users to illustrate his achievements for the country’s economy.

“We would want the new government to continue with those policies,” said Mr. Habib. According to him, the first challenge for the new government will be to erase the memory of the violence after Benazir’s killing, and restore the confidence of investors that its law and order agencies are able to protect them, while also providing long-term peace. The next challenge would be to cut the subsidies on oil prices, which the government has so far held back from doing on account of the elections.

The signals, Mr. Habib said, are so far good. “I have been listening very carefully to the statements of all the politicians, and they are all saying that the private sector is the engine of economic growth, that they want to attract more foreign and local investment, they are talking about positive economic policies.”

Overriding concerns about continuing uncertainty, particularly if General Musharraf and the new party or parties in power do not see eye to eye, and the deterioration in the security situation with the sharp rise in terrorist attacks, there is the expectation that the political noise will reduce once the elections take place and the task of government formation is over.

The market is abuzz about the Pakistan People’s Party winning the next election, or at least emerging as the single largest party. But the business community sees hope in statements by PPP leader Asif Ali Zardari that he is prepared to work with President Musharraf, despite other signals that he and Pakistan Muslim League (N) leader Nawaz Sharif, who has made no secret of his desire to have President Musharraf impeached, may join hands in a post-election scenario.

Despite fears that the political climate and terrorist attacks are driving away foreign investors, the mood at the Overseas Investors Chambers of Commerce and Industry too is upbeat. As many as 172 foreign investors are registered at the OICCI, including several multinational companies, an increase of five over the previous year.

“All plans by the market are going ahead. The industry is seeing Pakistan in a very positive way,” said secretary general Unjela Siddiqi. According to her, not a single multinational has gone back, and two of the biggest investors, Unilever and Proctor and Gamble, are going ahead with their expansion plans for Pakistan.

“The main concern is about the continuity of the economic reform agenda, and what steps the next government is going to take to develop infrastructure and human resources. What happened after December 27 has given us all a big jolt about the law and order situation, but we don’t think this is an insurmountable problem. Law and order is not an issue on the basis of which foreign investors are going to stop coming here,” said Ms. Siddiqi. “Whatever the uncertainties, people are still going to need tea and toothpaste.”

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