Effect of Law and Order Situation on Business in Pakistan

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Reasons and Cures for the Economic Situation of Pakistan

Muhammad Nawaz Khan

Central Theme
Contemporary epoch is the period of stumpy and intensified conflicts rather than conventional ones that enhance the importance of non-traditional security threats. So, the securitization of non-traditional security threats compel us to understand Pakistan’s internal dynamics, challenges and threats which are directly linked with the spill over effects of the two Afghan wars and partly linked with the issues of mismanagement. Today, Pakistan’s internal challenges are terrorism, extremism, economic woes, energy crises, unstable political situation, ethnicity, sectarianism, drug mafia and geographic vulnerabilities. This policy brief looks into the internal challenges of Pakistan with special reference to the issue of economy. It also gives some possible recommendations to put the Pakistan’s economy back on track.

Analytical Perspective:
Pakistan’s economy is currently passing through the most difficult phase of its economic history. A robust economy has been transformed into a fragile one. Pakistan is not a unique case since a number of countries have broadly encountered similar economic challenges, implemented appropriate policies, and have restored selfsustaining rapid growth with internal and external stability over the medium term. The business cycle of Pakistan’s economy has shown anomalous behaviour over the last many years. The growth rate peaked at 9% cent in 2005 before hitting the bottom in 2009. It improved a bit to 4.2% last year, which is not enough to impact the grave issues such as economic growth, unemployment and poverty. All the serious challenges Pakistan’s economy is undergoing include: the ever widening budget and trade deficits, galloping inflationary pressures, incessant increase in the level of poverty, power outages, water shortages, closure of industries, food insecurity, and relying heavily on domestic borrowing due to lower revenue collections, have all diverted our attention from addressing the national economic plight. On the one hand, war against terrorism, global recession, ethnic and sectarian strife as well as the deteriorating law and order situation in Balochistan and Karachi are contributing to the fiscal and trade deficits in Pakistan. On the other hand, lower foreign assistance disbursements are compelling the government to rely heavily on deficit financing — a tool that would further impact negatively on the country’s real productivity. Thus

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imprudent fiscal policy, as represented by large fiscal deficit, is the ‘mother’ of all 1 economic ills giving birth to stagflation in the country.

Economic Challenges of Pakistan:
Indeed, Pakistan is a country which offers huge potential and opportunities for trade and investment to both foreign investors and the local economy. No doubt, Pakistan ranked at number one in the World Bank’s ‘Ease of Doing Business Index.’ It is the world’s second largest producer of water, buffalo meat and milk, the 3rd largest producer of cottonseed and chillies, the 4th largest goat meat supplier, the 5th largest mango producer, and the 7th largest wheat grower. Pakistan possesses the 5th largest coal reserves in the world and a wide-range of other natural resources. Besides this, there are also number of other areas where attractive investment opportunities exist in Pakistan but the greatest problem lies in mismanagement and unsustainable fiscal policies. This predicament has been further heightened by the farreaching economic impact of Karachi’s descent into bloody mayhem. Likewise, more than three consecutive years of low growth have left per capita incomes stagnated, aggravated poverty and worsened unemployment rates. This has generated widespread public discontent. The slowdown in the economic growth reflects many factors including falling public and private investment and growing uncertainty pertaining to business and market growth. It also...
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