VIEW: Reconstruction through trade —Abdul Quayyum Khan Kundi
President Obama has repeatedly stressed that a sustainable economy, and an empowered and educated middle class will be key elements of his Pakistan policy. We would request President Obama to grant Pakistan a Least Developed Beneficiary Developing Countries (LDBDC) status
The UN has declared the Pakistan floods a larger calamity than the 2004 tsunami, 2005 earthquake in Pakistan and 2010 Haiti earthquake combined. The loss of life and assets are hard to calculate but rough estimates published by Pakistani newspapers suggest over 1,800 people have lost their lives and destruction of standing crops of over $ 3.52 billion. This is a considerable loss for an economy that relies on its agricultural produce to earn foreign exchange.
The US has taken a lead in appealing to the world to come forward and support Pakistan. Secretary of State Hillary Clinton announced a flood relief fund of $ 150 million and organised a special meeting at the UN to encourage other nations to contribute. These are commendable efforts but the scale and scope of the disaster demands a new and innovative approach to rebuilding the lives of the people and reconstruction of the economy on a sustainable basis.
For a large part of this decade Pakistan’s economy has been growing at a steady pace of over 8 percent, making it one of the fast growing economies in the world. But this high growth was brought to a halt by three cataclysmic events. A major earthquake hit Pakistan in 2005, claiming over 3,500 lives and severely damaging the infrastructure in the north of Pakistan. On the other hand the continuing war on terror has cost the nation over $ 35 billion in war funding as well as a loss of over 3,000 soldiers. When the military action in South Waziristan destroyed the terrorists’ strongholds, they retaliated against the people through a series of suicide bombings in major cities. Just when the people took a sigh of relief from terrorism, the monsoon floods washed away any hope that they had of a speedy recovery.
The experience in Asia and Africa has shown that aid may provide relief in the short term but it is not the best vehicle for long-term sustainable growth, as the cost of delivery is much higher and the system is plagued with corruption. Floods have negatively impacted the disposable incomes of the people, hurting domestic demand, which could translate into high unemployment. It will be helpful to stimulate the domestic economy if aid dollars are used to procure goods and services from Pakistani producers.
Pakistan has been financing its budget deficit through loans from multilateral banks. The debt servicing cost of these loans has been hovering around 6 percent of GDP. Pakistan’s close friends, the US, China, Saudi Arabia and the European Union together have a large voting block in the multilateral organisations, the World Bank, the International Monetary Fund (IMF) and the Asian Development Bank (ADB). We hope that these countries will consider a five year moratorium on debt repayment to divert funds to reconstruction efforts. To ensure accountability, the banks can ask for a list of projects on which these funds will be spent.
A bill for Reconstruction Opportunity Zones (ROZ) is pending in the US Congress. The bill authorises duty-free import of goods produced in special zones situated in FATA and parts of Balochistan. Ironically, most of the regions suggested in the bill are now under floodwaters and their infrastructure completely damaged. It might be a good idea to amend the bill to include regions adjacent to FATA and put the bill on fast track for approval.
The government of Pakistan has been requesting increased access to US markets by granting it the status of Least Developed Beneficiary Developing Countries (LDBDC) in its Generalised System of Preferences (GSP). Pakistan adequately qualifies the criteria laid down for attaining such status. President Obama has repeatedly stressed that a sustainable economy, and an empowered and educated middle class will be key elements of his Pakistan policy. We would request President Obama to grant Pakistan a LDBDC status, which will provide greater access to US markets while on the other hand US consumers will save money through reduced prices.
Pakistan’s energy needs rely heavily on fossil fuel imports from the Middle East. Pakistan enjoys a deep and special friendship with Saudi Arabia. In the past Saudi Arabia has helped Pakistan by offering a discounted tariff on oil imports. Renewal of this fuel facility for the next three years will help Pakistan’s balance of payments and enable the government to reduce tariff on electric power. This will help export industries to be more competitive while consumers will have reduced power tariff rates, increasing their disposable incomes. The Saudi government can link the deal to the reduction of power tariff to ensure that the benefit passes on to the masses.
It is hard for a developing nation to survive one disaster let alone a series of calamities in a short period of time. It is the resilience and strength of the Pakistani nation to withstand this crisis and emerge stronger than before. Friends of Pakistan should make trade, not aid, the key to unlock the potential of the people.
The writer is the President of the Pakistan Chamber of Commerce-USA