Pakistan Floods: Reconstruction through Trade
By Abdul Quayyum Khan Kundi
US
United Nations has declared Pakistan floods a larger calamity than 2004 Tsunami, 2005 Earthquake in Pakistan and 2010 Haiti earthquake combined. The loss of life and assets is hard to calculate but rough estimates published by Pakistani newspapers suggest that over 1800 people lost their lives and destruction of standing crops aggregated over $3.52 billion. This marks a considerable dent in the economy that relies on its agricultural produce to earn foreign exchange.
The United States has taken the 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 organized a special meeting at the UN to encourage other nations to contribute. These are commendable efforts but the scale and scope of the disaster demand a new and innovative approach to rebuilding the lives of people and reconstruction of the economy on sustainable basis.
For large part of this decade Pakistan’s economy has been growing at a steady pace of over 8% making it one of the fast growing economies in the world. But this high growth was put to a halt by three cataclysmic events. A major earthquake hit Pakistan in 2005 claiming over 8500 lives and severely damaging the infrastructure in northern Pakistan. The continuing war on terror has cost the nation over US$35 billion in war funding and loss of over 3000 soldiers. When the military action in South Waziristan destroyed the terror strongholds, the terrorist retaliated against the people through a series of suicide bombings in major cities. Just when people were beginning to take 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% of GDP. Pakistan’s close friends USA, China , Saudi Arabia and the European Union together have a large voting bloc inn the multilateral organizations, World Bank, IMF and Asian Development Bank. 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 the list of projects on which these funds will be spent.
A bill for Reconstruction Opportunity Zones (ROZs) has been pending in the United States Congress. The bill authorizes duty free import of goods produced in special zones situated in the Federally Administered Tribal Areas (FATA) and parts of Balochistan. Ironically most of the regions suggested in the bill are now under flood waters and their infrastructure has been completely damaged. It might be a good idea to amend the bill to include regions adjacent to FATA and put it on the fast track for approval.
Government of Pakistan has been requesting increased access to US markets by granting it the status of Least Developed Beneficiary Developing Countries (LDBDCs) in its Generalized System of Preferences (GSP) system. Pakistan adequately qualifies the criteria laid down for attaining such a status. President Obama has repeatedly stressed that a sustainable economy; empowered and educated middle will be key elements of his Pakistan policy. We would request President Obama to grant Pakistan LDBDC status which will provide greater access to US markets while enabling US consumers to save money through reduced prices.
Pakistan ’s energy needs rely heavily on fossil fuel imports from Middle Eastern countries. 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 next three years will help Pakistan in the balance of payment and enable the government to reduce tariff on electric power. This will help the export industries to be more competitive while consumers will have reduced power tariff, increasing their disposable incomes. The Saudi government can link it 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 span 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.
(Abdul Quayyum Khan Kundi is President of Pakistan Chamber of Commerce-USA)
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