MACRO ECONOMICS

IMPACT OF TERRORISM ON ECONOMY OF PAKISTAN

Submitted by Asad raza 13423

Submitted to Nabeel Latif

LETTER OF ACKNOWLEDGMENT
Au ust 1!" 2#13

Dear Readers" $ are t%a&'ful t( Al)i %t* Alla% f(r i+i& )e t%e stre& t% a&d ,a-abilit* t( ,()-lete t%is re-(rt (& $)-a,t (f Terr(ris) (& E,(&()* (f .a'ista& $ /(uld li'e t( t%a&' (ur ,(urse i&stru,t(r (f Ma,r( E,(&()i,s" Nabeel Latif f(r -utti& i& all t%e %ard /(r' i& t%is ,(urse t( )a'e it a )e)(rable e0-erie&,e f(r all (f us1 $ a--re,iate %is uida&,e a&d s%all a--re,iate t%e +aluable feedba,' (& t%is re-(rt1

2i&,erel*"

Asad raza

13423

LETTER OF A3T4OR$5AT$ON
Au ust 1!" 2#13

Dear Readers" As a -art (f (ur Ma,r( E,(&()i,s ,(urse" (ur i&stru,t(r Nabeel Latif aut%(rized us t( ,(&du,t stud* (& Ma,r( E,(&()i,s a&d $)-a,t (f Terr(ris) (& E,(&()* (f .a'ista&1 T%e e&,l(sed re-(rt ,(&tai&s a& (+er+ie/ (f t%e differe&t as-e,ts (f Terr(ris) t%at affe,ts (+er all e,(&()* (f .a'ista& i& Nu)ber (f Wa*s We %(-e t%at t%is re-(rt /ill ser+e its -ur-(se (f bei& a 6reif set (f i&f(r)ati(& ab(ut t%e said t(-i,

2i&,erel*"

Asad raza

13423

LETTER OF A3T4OR$5AT$ON
Au ust 1!" 2#13

Dear Readers" As a -art (f (ur Ma,r( E,(&()i,s ,(urse" (ur i&stru,t(r Nabeel Latif aut%(rized us t( ,(&du,t stud* (& Ma,r( E,(&()i,s a&d $)-a,t (f Terr(ris) (& E,(&()* (f .a'ista&1 T%e e&,l(sed re-(rt ,(&tai&s a& (+er+ie/ (f t%e differe&t as-e,ts (f Terr(ris) t%at affe,ts (+er all e,(&()* (f .a'ista& i& Nu)ber (f Wa*s We %(-e t%at t%is re-(rt /ill ser+e its -ur-(se (f bei& a 6reif set (f i&f(r)ati(& ab(ut t%e said t(-i, 2i&,erel*"

Asad raza

13423

1. Eco omy a d Te!!o!i"m

4

After 7811 terr(rist e+e&t t%e i)-a,t (f terr(ris) %as ,%a& ed t%e e(-(liti,al a&d s(,i(e,(&()i, situati(& (f t%e /(rld1 Al(& /it% (t%ers .a'ista& is fa,i& sa)e situati(&s a&d terr(ris) %as &(t (&l* affe,ted its e,(&()i, s*ste) but als( -(liti,al" la/ a&d (rder situati(&" %u)a& ri %ts +i(lati(&" basi, i&frastru,ture a&d e,(&()i, (--(rtu&ities1 T%e i))ediate ,(sts (f terr(rist a,ts are l(ss (f %u)a& li+es" destru,ti(& (f -r(-ert* a&d i&frastru,ture a&d ,urtail)e&t (f s%(rt9ter) e,(&()i, a,ti+it*1 Additi(&all*" terr(ris) ,reates u&,ertai&t*" redu,es ,(&fide&,e a&d i&,reases ris' -er,e-ti(&s: leadi& t( l(/er rates (f i&+est)e&t a&d l(/er e,(&()i, r(/t%1 .a'ista&s e,(&()i, r(/t% ,a)e t( a &ear %alt at ar(u&d 21## -er ,e&t i& fis,al *ear 2##7" &(t (&l* as a result (f t%e l(bal fi&a&,ial ,risis" but als( be,ause (f i&ter&al issues1 T%ese i&,luded a /ar (& terr(r lau&,%ed b* se,urit* f(r,es i& t%e N(rt% West Fr(&tier .r(+i&,e ;NWF.< a&d t%e Federall* Ad)i&istrated Tribal Areas ;FATA< b(rderi& (& Af %a&ista&" a&d t%e resulta&t dis-la,e)e&t (f s()e t%ree )illi(& -e(-le fr() t%eir %()es1 6(t% t%e /ar (& terr(r a&d t%e re%abilitati(& (f t%e i&ter&all* dis-la,ed -ers(&s ;$D.s< ,(&su)ed a bi ,%u&' (f t%e (+er&)e&t=s fi&a&,ial res(ur,es" t%us /ide&i& t%e fis,al defi,it a&d %alti& e,(&()i, r(/t%1 .a'ista& %as suffered )(re t%a& a&* (t%er ,(u&tr* due t( t%e /ar (& terr(r1

#. Co"t of Te!!o!i"m
La$ a d O!de! co"t %uma ita!ia Aid Fi"cal Co"t Eco omic Co"t Social Co"t Cultu!al Co"t

>

&. Co "e'ue ce" of Te!!o!i"m

Terr(ris) %as reatl* affe,ted t%e f(rei & i&+est)e&t i& .a'ista&1 F(rei & i&+est)e&t is de,li&e t( ? 71#12# Milli(& fr() ?114 6illi(& i& F* #!9#71 D*e t( de,li&e i& i&+est)e&t -(+ert* a&d u&e)-l(*)e&t rises1 .(+ert* %a+e rea,%ed t( 4114@ fr() 3A1>@ i& 2##!9#71 Due t( u&st(--able terr(ris) a,ts i& .a'ista& /(rld ba&' %as bl(,'ed t/( le&di& 'e* l(a&s (f /(rt% ?!2# Milli(& till t%e ,(&diti(&s a)eli(rate t( t%e -aradi )1 2i)ilarl*" Terr(ris) i&,reases t%e e0-e&si+e (f t%e f(r,es t( )eet t%eir &eeds t( fi %t a ai&st terr(ris)1 .a'ista& %as re,ei+ed t(tal disburse)e&t (f ?11"77! Milli(& fr() 32 u&der C(aliti(& 2u--(rt Fu&d ;C2F<" (ut (f t%is a)(u&t ?3"127 Milli(& /ere e,(&()i, related aid a&d se,urit* related aid a)(u&ted t( ?!"!B7 Milli(&1 $& additi(&" ris' (f t%e i&+est(rs a&d )(re tr((-s i& Af %a&ista& de-l(*)e&t b* 32 rise t%e ris' (f i&+est(rs t( i&+est i& .a'ista& t%at ,ause seri(us d(/&fall (f de-(sits (f ba&'i& se,t(r t%at s%(/s de-(sits fell fr() Rs131AA Trilli(& t( Rs311A trilli(& (& 2e-te)ber 2##71 $& 2##2" Kara,%i st(,' e0,%a& e ;K2E< /as a/arded CT%e best -erf(r)i& st(,' )ar'et (f t%e /(rld f(r t%e *ear 2##2D1 2i)ilarl*" O& De,e)ber 2##A" K2E ,l(sed at i&de0 (f 14"12A -(i&ts /it% ,a-italizati(& (f Rs141>A trilli(&1 6ut after /ar de,lared b* (+er&)e&t /it%i& .a'ista& dr(--ed its i&de0 t( 4"BA> -(i&ts /it% a )ar'et ,a-italizati(& (f Rs111>! trilli(&" a l(ss (f (+er B>@ fr() its ,a-italizati(& i& 2##A1 Furt%er)(re" terr(ris) als( -r()(ted s)u li& i& .a'ista&" due t( -(r(us b(rder bet/ee& .a'ista& a&d Af %a&ista& s)u li& be,()es t%e s(ur,e (f ,ul-rits a&d e0-edie&ts f(r terr(rists t( /as% t%eir %a&ds fr() it t( )eet t%eir fi&a&,ial &eeds1 A,,(rdi& t( 329.a' busi&ess ,(u&,il re-(rt ;2##7<" .a'ista& is -ri)e +i,ti) (f Af %a&ista&=s i&stabilit* a&d due t( /%i,% .a'ista& e,(&()* %as s( far suffered dire,tl* (r i&dire,tl* %u e l(ss (f ?3> 6illi(&1 $t be,()es &e,essar* f(r t%e .a'ista& t( b(ttle t%e e&e" bef(re it be,()es bi er ti& size t( u&able t( fit i& it1 .a'ista& %as t( ta'e re)edies t( -ut t( e&d t%e l(ss t%at )a* %urt .a'ista& se+ere1

(. Eco omic Co"t of Te!!o!i"m)

Differe&t 2e,t(rs Affe,ted b* t%e terr(ris) is -ri)ar* se,t(rs /%i,% i&,ludes A ri,ulture" Ma&ufa,turi& " ser+i,es et,1 6el(/ ,%art s%(/s se,t(ral ,(&tributi(& t( GD. b* differe&t i&dustries1

A,,(rdi& t( t%e t%e& fi&a&,e )i&ister" 2%au'at Tari&" fi&a&,ial *ear 2##7 %as bee& t%e /(rst e,(&()i, *ear (f t%e de,ade f(r .a'ista&1 T%e real e,(&()i, r(/t% /as t%e l(/est i& last ei %t *ears" a&d fell t( 21# -er ,e&t" as a ai&st t%e a+era e (f B13 -er ,e&t i& t%e -re+i(us si0 *ears1 $t is als( a--re%e&ded t%at (&e (f t%e -ri)e ,(&tribut(rs t( t%is deraili& is .a'ista&=s -r(a,ti+e r(le i& t%e /ar (& terr(r i& NWF. a&d FATA1 4e&,e" .a'ista& %as &(t (&l* l(st -re,i(us li+es a&d i&frastru,ture" but %as als( b(r&e t%e ,(st (f ar(u&d ? 4# billi(& si&,e 2##192##21 .a'ista&=s e,(&()* is als( sufferi& ?B billi(& e0-(rt l(sses a&&uall* due t( t%e (& (i& /ar (& terr(r1

*. Secto!" t+at Affected due to Te!!o!i"m a d Im,act o Eco omy)

Terr(ris) i& .a'ista& ,(st t%e &ati(& B@ (f its Gr(ss D()esti, .r(du,t ;GD.< i& 2##79 1#" a&d %as 'illed &earl* 7"### .a'ista&is i& t%e -ast ei %t *ears1 Terr(ris) %as ta'e& a %ea+* t(ll (& .a'ista&=s e,(&()* si&,e 2##1" a,,(rdi& t( .a'ista&=s 2##792#1# e,(&()i, sur+e* re-(rt1 Milita&ts i&te&sified t%eir ,a)-ai & i& 2##7" s-e,ifi,all* tar eti& .a'ista&=s urba& ,e&tres" a,,(rdi& t( t%e i&teri(r )i&istr*=s Nati(&al Crisis Ma&a e)e&t Cell1 Offi,ials re,(rded 1"7#B terr(r atta,'s i& t%e ,(u&tr*" result& i& 1"!3> deat%s a&d >"174 i&Euries" fr() Fa&uar* 2##7 t( A-ril 2#1#1

.a'ista& %as be,()e a& e-i,e&tre (f terr(rist a,ti+it* si&,e late 2##11 At least !"141 terr(rist atta,'s %a+e 'illed !"!A> ,i+ilia&s a&d la/9e&f(r,e)e&t -ers(&&el" a&d i&Eured 2#"BA>" bet/ee& t%e e&d (f 2##2 a&d A-ril 2#1#1 Casualt* t(lls d( &(t ,a-ture t%e ,u)ulati+e effe,ts (f terr(ris) (& t%e ,(u&tr*" %(/e+er1 Li+es" %()es a&d i&,()es %a+e bee& disru-ted" a&d edu,ati(& Ee(-ardized f(r +irtuall* a /%(le e&erati(& (f s,%((l9a e ,%ildre& i& K%*ber .a'%tu&'%/a a&d t%e Federall* Ad)i&istered Tribal" a,,(rdi& t( t%e re-(rt1 Terr(ris) ,(st .a'ista& )(re t%a& 32 ?43 billi(& bet/ee& 2##1 a&d 2#1#" t%e )i&istr* re-(rted1 $ts i)-a,t (& t%e e,(&()* %as reatl* i&,reased si&,e 2##A9#!" a,,(rdi& t( t%e re-(rt" as t%e .a'ista&i ar)* %as be u& lar e9s,ale )ilitar* (-erati(&s i& t%e ,(u&tr*=s tribal areas1 A de,li&e i& GD. r(/t%" redu,ti(&s i& i&+est)e&t" l(st e0-(rts" u&e)-l(*)e&t a&d t%e de-re,iati(& a&d i&flati(& (f i&,()es a&d e0,%a& e rates are t%e )(st affe,ted areas (f .a'ista&=s e,(&()*1 T%e -ri,e (f se,urit*9related a&d ,i+il relief (-erati(&s" f(r i&sta&,e" de)(&strates t%e )a &itude (f terr(ris)=s dire,t ,(stsG .a'ista& %as s-e&t a& additi(&al 32 ?4 billi(& si&,e 2##A" t%e )i&istr* re-(rts" (r 214@ (f t%e a+era e GD.1 T%e (+er&)e&t %as als( s-e&t 32 ?B##) duri& t%is fis,al *ear t( %el- t%e )(re t%a& 3) -e(-le dis-la,ed b* terr(ris) a&d ,(u&ter9terr(ris) (-erati(&s1 .a'ista& )a* fa,e a C-er)a&e&tD de ree (f /elfare l(ss due t( t%e di+ersi(& (f de+el(-)e&t s-e&di& t(/ard t%e se,urit* bud et" ,a-ital fli %t a&d brai& drai&" a&d due t( t%e trade di+ersi(& it %as suffered si&,e 2##1" a,,(rdi& t( t%e re-(rt1 T(tal e&er * ,(&su)-ti(& de,li&ed >12@ i& 2##7 +ersus 2##!" a&d ,(&su)-ti(& i& t%e i&dustr* se,t(r fell b* 111A@" as a result (f t%e e&er * ,risis" a,,(rdi& t( t%e re-(rt1 Ele,tri,it* use i& t%e i&dustrial se,t(r fell b* B1>@ /%ile as ,(&su)-ti(& b* t%e i&dustrial se,t(r de,li&ed b* !12@1

-. Fo!ei. di!ect i /e"tme t")

Net f(rei & i&+est)e&t i& .a'ista& -lu))eted b* BA -er,e&t i& t%e first Huarter 2#12" a,,(rdi& t( (ffi,ial data" /it% e0-erts bla)i& t%e fall (& -((r e,(&()i, )a&a e)e&t" e&er * s%(rta es a&d -ersiste&t terr(ris)1 T%e fi ures fr() t%e 2tate 6a&' (f .a'ista& s%(/ed &et f(rei & dire,t i&+est)e&t ;FD$< fr() Ful* t( 2e-te)ber /as Eust ?!A )illi(&" ,()-ared /it% ?2B3 )illi(& i& t%e sa)e -eri(d last *ear1 .a'ista&=s fi&a&,ial *ear be i&s (& Ful* 11 T%e (+erall FD$ i&fl(/ duri& t%e Huarter /as ?2!A )illi(&" a,,(rdi& t( t%e data released (& Tuesda*" /%ile t%e (utfl(/ /as ?2## )illi(&" /it% (&l* t%e (il a&d as e0-l(rati(& se,t(r re,(rdi& a -(siti+e &et fi ure1 $& t%e sa)e Huarter last *ear" i&fl(/s /ere ?>!# )illi(& a&d (utfl(/s ?31A )illi(&1 E+e& t%e &(r)all* -(-ular tele,())u&i,ati(&s se,t(r re istered a &et (utfl(/ (f ?1##17 )illi(&1 A&al*sts said FD$ i&fl(/s %a+e bee& falli& f(r t%e last f(ur *ears1 C.((r e,(&()i, )a&a e)e&t a&d -ersiste&t )ilita&,* %as f(r,ed i&+est(rs a/a* fr() a )ar'et /%i,% %as %u e -(te&tial a&d -r(s-e,ts"D said e,(&()ist A6 2%a%id1 T%e $&ter&ati(&al M(&etar* Fu&d ;$MF< said .a'ista&=s e,(&()i, situati(& /as /(rse&i& a&d t%e ,(u&tr* fa,ed a retur& t( d(uble9di it i&flati(& as t%e (+er&)e&t -ri&ts )(&e* t( fi&a&,e its defi,it1 T%e $MF als( -redi,ted r(/t% (f Eust t%ree931> -er,e&t a&d /ar&ed t%e ,(u&tr*=s e0ter&al a,,(u&ts /ere deteri(rati& " /it% i&,()i& i&+est)e&t sl(/i& a&d t%e ,e&tral ba&'=s reser+es dr(--i& 1 C6ut t%e bi est (f t%e &e ati+es is t%e deteri(rati& la/ a&d (rder situati(& t%at see)s u&)a&a eable"D 2%a%id said1 .a'ista& %as re-aid ?113 billi(& (f $MF l(a&s i& f(ur i&stal)e&ts" i&,ludi& a ?4## )illi(& ,%u&' i& Au ust" a&d is due t( -a* a furt%er ?21> billi(& i& t%e ,urre&t fis,al *ear" /%i,% e&ds (& Fu&e 3#1 T%e ,e&tral ba&' said .a'ista& %ad f(rei & reser+es (f ?1414 billi(& d(llars as (f last /ee'1 W%ile rea,ti& t( t%e s%ar- de,li&e i& FD$" t%e busi&ess ,())u&it* %as ur ed t%e (+er&)e&t t( refra)e -(li,ies t( a+(id furt%er de,li&e a&d e&sure re,(+er* (f t%e &ati(&al l(ss1 T%e La%(re C%a)ber (f C())er,e a&d $&dustr*" All .a'ista& Te0tile Mills Ass(,iati(& a&d (t%er sta'e%(lders a--ealed t( t%e (+er&)e&t t( ta'e &(te (f t%e ,(&sta&t de,li&e i& f(rei & dire,t i&+est)e&t1 LCC$ .reside&t Far((H $fti'%ar said e&er * ,risis" la,' (f tra&s-are&,*" la/ a&d (rder situati(& /ere t%e )aE(r fa,t(rs 'ee-i& f(rei & i&+est(rs a/a*1 4e said i&,reased ris' fa,t(r ab(ut i&+esti& i& .a'ista& /as da)a i& t%e e&tire e,(&()* a&d &eeded t( be ta,'led t%r(u % a )et%(di,al a&d +isi(&ar* -(li,* b*

i&+(l+i& )aE(r ,%a)bers (f ,())er,e (f t%e ,(u&tr*1 4e feared t%e fall i& f(rei & dire,t i&+est)e&t /as li'el* t( affe,t ad+ersel* t%e ,(u&tr*=s e,(&()i, r(/t%" t%eref(re t%e (+er&)e&t s%(uld ad(-t re)edial )easures t( re+erse t%is tre&d1 A.TMA .u&Eab C%air)a& 2%a%zad Ali K%a& als( ur ed t%e (+er&)e&t t( f(,us (& s%(rt9ter) as /ell as l(& 9ter) s(luti(&s t( t%e e&er * ,risis" /%i,% /as bri& i& t%e /%eel (f t%e i&dustr* t( a %alt" ,ausi& seri(us da)a e t( t%e &ati(&al e,(&()*1 4e said i&dustr* )ust be (& t(- -ri(rit* i& e&er * distributi(& as ,()-ared /it% d()esti," busi&ess a&d tra&s-(rtati(& a&d (t%er se,t(rs1 T%e LCC$ -reside&t said FD$ is (&e (f t%e fastest a&d )(st su,,essful /a*s f(r -((r &ati(&s t( de+el(- a&d i&,rease t%eir -er ,a-ita i&,()e1 4e said t%at FD$ als( -r(+ides f(rei & ,a-ital a&d fu&ds besides e&%a&,e)e&t i& s'ills" te,%&(l( * a&d ,reate )(re E(b (--(rtu&ities1 4e said t%e Clet%ar i,D (+er&)e&t res-(&se t( deal /it% t%e a ra+ati& e&er * ,risis /as als( affe,ti& ad+ersel* t%e l(,al i&+est)e&t s,e&ari( besides se&di& &e ati+e si &als t( -(te&tial f(rei & i&+est(rs1 $fti'%ar said a s-e,ial ,())ittee ,()-risi& )e)bers (f -arlia)e&t" -reside&ts (f ,%a)bers (f ,())er,e a&d i&dustr* a&d re-rese&tati+es (f (t%er trade a&d i&dustrial ass(,iati(&s s%(uld be f(r)ed t( ide&tif* /a*s a&d )ea&s t( attra,t f(rei & i&+est)e&t t%at /as a -rereHuisite t( e,(&()i, r(/t%1 L(,al a&d f(rei & i&+est(rs are s%*i& a/a* fr() i&+esti& i& .a'ista& a&d are (i& t( (t%er ,(u&tries su,% as $&dia 9 t%a&'s t( t%e e+er9deteri(rati& la/ a&d (rder situati(& a&d i&,(&siste&t (+er&)e&t -(li,ies1 T%e 6(ard (f $&+est)e&t ;6($< is belie+ed t( %a+e e0-ressed its i&abilit* t( %el- attra,t i&+est)e&t i& .a'ista& due t( t%e u&fa+(urable attitude (f t%e )i&istries a&d allied de-art)e&ts1 Mea&/%ile" e0-erts %a+e bee& /ar&i& t%e (+er&)e&t t( ta'e ,( &isa&,e (f t%e fast de,li&i& FD$ a&d ta'e ur e&t re)edial )easures t( deal /it% t%e issue" but s( far &(t%i& %as bee& d(&e1 F(rei & i&+est(rs ar ue t%at si&,e l(,al i&+est(rs are &( l(& er i&terested i& .a'ista&" it is u&reas(&able t( e0-e,t t%e) t( ,()e t( t%e res,ue1 Ot%er issues i&,ludi& la/ a&d (rder" a& (& (i& e&er * ,risis" ,(rru-ti(&" r(/i& +i(le&,e" -(liti,al i&stabilit*" la,' (f ((d (+er&a&,e" re ulat(r* i)-edi)e&ts a&d u&due i&fere&,e are als( ,ausi& -r(ble)s i& -r()(ti& i&+est)e&t i& t%is -art (f t%e /(rld1 T%e frustrated 6($ is said t( %a+e a--rised t%e &e/ .ri)e Mi&ister RaEa .er+ez As%raf ab(ut t(tal i&+est)e&t" /%i,% di--ed t( 13 -er,e&t (f GD. i& t%e last fis,al t%at e&ded (& Fu&e 3# t%is *ear" fr() a -ea' (f 221> -er,e&t i& 2##A /%e& FD$ st((d at ?>14 billi(&1

1#

T%e (+er&)e&t %as bee& i&f(r)ed ti)e a&d a ai& t%at i&,(&siste&t -(li,ies are ,ausi& )aE(r %urdles f(r f(rei & i&+est(rs1 Des-ite ,lai)s (f liberal i&+est)e&t -(li,ies" &e/ e&tra&ts fa,e -r(ble)s as t%e (+er&)e&t re+ises its -(li,ies e+er* &(/ a&d t%e&" -arti,ularl* b* i)-(si& differe&t slabs (f ta0es a&d tariffs (& differe&t ,ate (ries ai)ed at -r(te,ti& se,t(rs su,% as t%e aut()(bile i&dustr*1 6($ (ffi,ials )ai&tai& t%at t%e ,(st (f d(i& busi&ess is still %i % a&d is a&(t%er bi %urdle i& luri& i&+est)e&t1 T%e* ,ite t%e W(rld 6a&' 2#12 re-(rt" a,,(rdi& t( /%i,% .a'ista& ra&'ed 1#> i& ease (f d(i& busi&esses" &i&e -la,es bel(/ its ra&'i& i& 2#111 A,,(rdi& t( t%e W(rld 6a&' re-(rt" .a'ista& sli--ed furt%er d(/& t%e (rder due t( diffi,ulties i& starti& a busi&ess" deali& /it% -er)its" etti& ,redit" -a*i& ta0es a&d a dela* i& res(l+i& i&s(l+e&,*1 E+er si&,e 7811" t%e 3&ited 2tates" Eur(-ea& 3&i(& a&d Fa-a& %a+e bee& re ularl* issui& &e ati+e tra+el ad+is(ries t( t%eir i&+est(rs ur i& t%e) t( refrai& fr() (i& t( .a'ista&1 Re rettabl*" t%e issue (f tra+el ad+is(ries" /%i,% ,(&tribute t( t%e l(/eri& (f FD$" /as &(t ta'e& u- duri& t%e i&itial *ears (f Mus%arraf=s rule /%e& relati(&s /it% t%e 32 a&d t%e /est /ere said t( be +er* ((d1 6esides re ulat(r* i)-edi)e&ts" t%e ,()-(u&di& e&er * ,risis as /ell as ill9,(&,ei+ed -(li,ies based (& -atr(&isi& s-e,ifi, busi&ess r(u-s %as be,()e t%e )aE(r %urdle i& attra,ti& FD$1 T%is FD$ is )(stl* ,(&,e&trated i& t%e -(/er se,t(r" alle edl* due t( t%e t%er)al l(bb* /it% t%e result t%at &( si &ifi,a&t f(rei & i&+est)e&t ,(uld ,()e i& t%e i&frastru,ture" a ri,ulture" li+est(,' a&d s(,ial se,t(rs1 $t /as -la&&ed f(r de,ades t%at FD$ /(uld be )ade t%e basi, t((l t( eli)i&ate -(+ert* a&d u&e)-l(*)e&t a&d %el- i)-r(+e t%e bala&,e (f -a*)e&t -(siti(&1 2()e i&itial /(r' /as d(&e i& t%is re ard b* t%e first Na/az 2%arif (+er&)e&t /%e& lar e s,ale dere ulati(& t((' -la,e a&d t%e f(rei & e0,%a& e re i)e liberalised1 2ubseHue&tl* )(re ref(r)s /ere i&tr(du,ed1 T%ese /ere ai)ed at all(/i& f(rei & i&+est(rs t( %(ld 1## -er,e&t eHuit* a&d re-atriate -r(fit a&d i&+est)e&t a&* ti)e1 E0,e-t f(r f(ur se,t(rs relati& t( &ati(&al se,urit*" f(rei & i&+est(rs /ere -er)itted t( i&+est a&d d( busi&ess i& .a'ista& /it%(ut a&* fear1 O&e (f t%e )(st i)-(rta&t )easures ta'e& i& t%e 177#s /it% re ard t( FD$ /as t%e liberalisati(& (f t%e f(rei & e0,%a& e re i)e t( all(/ reside&t .a'ista&is a&d f(rei &ers t( bri& i&" -(ssess a&d ta'e (ut f(rei & ,urre&,*" )ai&tai& a,,(u&ts i& .a'ista&i ba&'s a&d %(ld f(rei & ,urre&,* ,ertifi,ates1 Als( &( (+er&)e&t sa&,ti(& /as reHuired f(r setti& u- (f a& i&dustr* i& ter)s (f field (f a,ti+it*" l(,ati(&

11

a&d size1 6ut des-ite all t%ese i&,e&ti+es" (& t%e r(u&d f(rei & i&+est(rs /ere subEe,ted t( %arass)e&t /%e& t%e* refused t( (bli e t%e ,(&,er&ed (ffi,ers see'i& rafts1 Re rettabl* &( seri(us e0er,ise /as d(&e b* t%e (+er&)e&t /%e& FD$ fell b* ># -er,e&t t( ?!121B )illi(& i& 2#11912 ,()-ared t( ?11B billi(& i& 2#1#9111 2tate 6a&' (ffi,ials a&d t%e re-rese&tati+es (f t%e W(rld 6a&'" $MF a&d t%e Asia& De+el(-)e&t 6a&' ;AD6< based i& $sla)abad belie+e t%at )i,r(9e,(&()i, i)bala&,es a&d t%e sl(/i& d(/& (f e,(&()i, a,ti+it* t( et%er /it% i&,(&siste&t e,(&()i, -(li,ies are dis,(ura i& f(rei & i&+est(rs1 A& $ra&ia& trade dele ati(& t%at +isited .a'ista& i& Ma* t%is *ear re-(rtedl* ,()-lai&ed t%at /%ile t%ere e0isted a& u&fa+(urable i&+est)e&t ,li)ate" -e(-le i& t%e bureau,ra,* (fte& s(u %t )(&e* i& t%e &a)e (f ,())issi(& due t( /%i,% trade relati(&s bet/ee& .a'ista& a&d $ra& ,(uld &(t be stre& t%e&ed si &ifi,a&tl*1 FD$ is ,(&sidered a& effe,ti+e t((l t( ,reate e,(&()ies (f s,ale as its li&'a e effe,ts raise -r(du,ti+it* f(r /%i,% t%e ,(u&tr* &eeds t( f(,us (& i)-r(+i& its i)a e abr(ad t%at is &(/ said t( be t%e bi est i)-edi)e&t i& t%e /a* (f FD$1 $& t%e abse&,e (f a /ell9 tail(red )ar'et strate *" t%e d*&a)is) (f t%e -ri+ate se,t(r t( set .a'ista& (& a %i % r(/t% traEe,t(r* is &( l(& er e0-erie&,ed1 Iari(us re-(rts i&,ludi& Marril*&,% 6a&' -r(Ee,ted .a'ista& a)(& t%e 11 fastest r(/i& ,(u&tries (f t%e /(rld i& 2##A9#!1 2( /%at %a--e&ed i& t%e last f(ur9a&d9a9%alf *earsJ T%e de,li&i& FD$ %as started %urti& t%e ,(u&tr* a&d its -rese&t rulers refuse t( ta'e &(te (f t%e situati(&1 .a'ista& is l(,ated (& t%e ,(&flue&,e (f t%ree +ital re i(&s 9 2(ut% Asia" Ce&tral Asia a&d West Asia" (fferi& s%(rtest a,,ess t( t%e sea f(r all la&dl(,'ed ,(u&tries (f Ce&tral Asia as /ell as Wester& C%i&a1 W%* is G/adar still &(&9fu&,ti(&al des-ite i+i& a 3# *ear ,(&tra,t t( 2i& a-(re -(rt t( (-erate t%e -(rt /%i,% is ,l(se t( O)a&1 T%e -(rt ,a& be&efit e&(r)(usl* fr() t%e u&iHue (--(rtu&it* a&d e0-l(re )ulti-le ,(rrid(rs (f ,((-erati(& /it% Ce&tral Asia a&d C%i&a" -arti,ularl* i& t%e field (f e&er *" trade" tra&s-(rtati(& a&d t(uris)1 T%e de,li&e i& FD$ ,(uld &(t be arrested a&d t%e )(st dis,(ura i& &e/s /as t%at t%e tele,() se,t(r" /%i,% used t( be t%e fa+(urite area (f i&+est)e&t" attra,ted a )ere ?A3 )illi(& i& 2#11912 i& i&+est)e&t ,()-ared t( ?32A )illi(& last *ear1 $&,reasi& )ilita&,* a&d la,' (f -r( ress i& t%e -ri+atisati(& -r(,ess a&d t%e i&abilit* (f t%e (+er&)e&t i& ,(&du,ti& 3G li,e&ses als( ,(&tributed t( a /(eful de,li&e i& FD$1 L(,al i&+est(rs are ta'i& t%eir i&+est)e&t t( safer s%(res a&d t%ere are ,redible re-(rts t%at

12

,l(se t( 4# -er,e&t (f t%e te0tile i&dustr*" i&,ludi& ar)e&t )a&ufa,turers" s%ifted t( 6a& lades%" alt%(u % 6($ (ffi,ials d( &(t a,,e-t t%is1 T%e* sa* t%at 6a& lades% e&E(*s a& ed e i& ter)s (f )ar'et a,,ess a&d redu,ti(& i& duties be,ause it %as bee& i+e& t%e status (f least de+el(-ed ,(u&tr* b* t%e Eur(-ea& 3&i(&" /%i,% )a'es %er a%ead (f .a'ista&1 T%e &ati(& is si,' a&d tired (f liste&i& t( t%e ,lai)s (f t%e su,,essi+e (+er&)e&ts t%at .a'ista& is a res(ur,e9ri,% ,(u&tr* %a+i& reat -(te&tial i& t%e -(/er se,t(r" i&frastru,ture a&d (t%er se,t(rs1 N(b(d* is bu*i& t%is ,lai) as it %as &(t tra&slated i&t( realit*1 T%e s(9,alled %u e s,(-e f(r i&+est)e&t i& %*del a&d ,(al9based -(/er -r(Ee,ts" alter&ati+e e&er * su,% as /i&d -(/er a&d &atural as tra&s)issi(& is als( freHue&tl* dis,ussed1 W%* /(uld a&*b(d* ,()e t( .a'ista& /%ere t%ere is &( /(rld ,lass i&frastru,ture t( i&+est" /%i,% t%e* e&erall* et i& (t%er ,(u&tries i&,ludi& t%(se (f t%e re i(&1 M(re(+er" /it%(ut t%e res(luti(& (f t%e e&er * ,risis a&d ,%a& e i& e,(&()i, -(li,ies" t%ere is %ardl* a&* %(-e (f attra,ti& FD$" /%i,% is (&e (f t%e +ital ele)e&ts (f t%e e,(&()*1 $t ta'es a )i&i)u) (f f(ur *ears f(r a&* i&+est)e&t -r(-(sal t( )ature a ai&st (&e *ear f(r t%e sa)e i& $&dia a&d less t%a& t/( *ears i& 6a& lades%1 Due t( t%e dela*ed res-(&se fr() t%e ,(&,er&ed )i&istries a&d t%e -r(+i&,es t( fa,ilitate i&+est)e&t" f(rei & i&+est(rs are &(t tur&i& t(/ards .a'ista&1 T%e* %a+e st(--ed +isiti& t%e ,(u&tr* a&d -refer t( )eet .a'ista&i (ffi,ials (utside t%e ,(u&tr*" -referabl* i& Dubai" t( dis,uss a&* i&+est)e&t deal1 Gi+e& t%e fra ile bala&,e (f -a*)e&t -(siti(& a&d ur e&t &eed t( b((st i&dustrial -r(du,ti(&" .a'ista& /ill %a+e t( )(bilise f(rei & res(ur,es1 4(/e+er" l(& 9ter) (ffi,ial assista&,e /ill be,()e i&,reasi& l* s,ar,e" /%ile -r()(ti& a lar e -(rtf(li( i&+est)e&t is &(t a -r(-er (-ti(& due t( .a'ista&=s u&derde+el(-ed a&d &arr(/ ,a-ital )ar'et1 A si &ifi,a&t i&,rease i& ,())er,ial b(rr(/i& s is als( &(t desirable1 $t is" t%eref(re" ,ru,ial t( a,,(rd %i % -ri(rit* t( FD$1 .re+i(us i&fl(/s (f FD$ i& .a'ista& /ere i&suffi,ie&t a,,(u&ti& f(r #12 -er,e&t (f t%e /(rld t(tal a&d less t%a& (&e -er,e&t (f t%e Asia& subt(tal ea,% *ear i& t%e 177#s1

13

0. Im,act of Te!!o!i"m o 12P of Pa3i"ta )

T%e E,(&()i, 2ur+e* (f .a'ista& re-(rt s%(/s t%at t%e s%are (f a ri,ulture i& t%e r(ss d()esti, -r(du,t ;GD.< %as bee& ,(&sta&tl* falli& 1 $t a,,(u&ted f(r 2>17 -er ,e&t (f GD. i& 177792###: %(/e+er" raduall* its s%are s%ra&' t( 2113 -er ,e&t i& 2##A9 2##! but i)-r(+ed sli %tl* t( 211! -er ,e&t i& 2##!92##71 T%e fi ures s%(/ t%at terr(ris) %as &(t (&l* de,reased t%e -r(du,ti+e ,a-a,it* (f a ri,ultural a,ti+it* i& t%ese re i(&s but als( i& t%e e&tire ,(u&tr*1 T%e )a&ufa,turi& se,t(r %as bee& %ard %it b* -(liti,al i&stabilit* a&d freHue&t i&,ide&ts (f terr(ris) a&d %as ,reated a& u&,ertai& e&+ir(&)e&t resulti& i&t( l(/ le+el (f e,(&()i, r(/t%1 T%e )a&ufa,turi& se,t(r is /it&essi& t%e l(/est9e+er s%are (f 1!12 -er ,e&t i& t%e GD. (+er t%e last fi+e *ears1 $& additi(&" t%e s)all a&d )ediu)9size e&ter-rises are a 'e* area (f )a&ufa,turi& a,ti+it* i& .a'ista&" -arti,ularl* i& t%e /araffe,ted areas1 .(/er l(()s" -re,i(us a&d se)i9-re,i(us st(&e )i&i& " /((d a&d )arble /(r'" a&d s)all u&its (f ,(&su)er ite)s are affe,ted a,r(ss t%e ,(u&tr* be,ause (f -(/er s%(rta es a&d freHue&t terr(rist atta,'s1 As a result" t%e )i&i& a&d Huarr* se,t(r %as s%(/& t%e l(/est9e+er r(/t% i& al)(st a de,ade a&d re/ b* (&l* 113 -er ,e&t i& 2##!92##7" as ,()-ared t( 414 -er ,e&t i& t%e *ear bef(re" a&d a tar et (f >1# -er ,e&t1 T%e ,(&tributi(& (f t%is se,t(r t( t%e GD. %as re)ai&ed l(/ at ar(u&d 21> -er ,e&t1 T%e f(ll(/i& table s%(/s t%e r(/t% -erf(r)a&,e (f real se,t(rs i& .a'ista& f(r t%is -eri(d1

14

4. Co clu"io )
T%e (& (i& i&sur e&,* %as d(&e )u,% da)a e t( t%e ,(u&tr* a&d e,(&()i, ,(&diti(&s %a+e /(rse&ed i& al)(st all +ital se,t(rs1 T%e ,(sts (f terr(ris) i&,lude l(ss (f li+eli%((d" destru,ti(& (f i&frastru,ture" ,a-ital fli %t" de,li&i& (f r(/t% rates" l(/ re+e&ues a&d %e&,e t%e deteri(rati(& (f (+erall e,(&()*1 T(uris)" (&e (f t%e )(st i)-(rta&t s(ur,es (f re+e&ue i& t%e &(rt%er& -arts (f t%e ,(u&tr*" %as als( bee& affe,ted b* t%e ,urre&t /ar (& terr(r1 C(&seHue&tl*" t%e (+erall real GD. r(/t% fell t( 21## -er ,e&t i& t%e fi&a&,ial *ear 2##!92##71 $& additi(&" t%e (& (i& a&ti9terr(ris) ,a)-ai & %as ,(st t%(usa&ds (f %u)a& li+es i&,ludi& b(t% ,i+ilia& a&d se,urit* f(r,es1 2-readi& terr(r" atta,'i& )ilitar* ,(&+(*s" destr(*i& -ubli, -r(-erties" es-e,iall* s,%((ls" a&d 'id&a--i& a&d l((ti& %a+e all bee& re ular -ra,ti,es1 T%is s%(/s t%at t%e )a &itude (f t%e -r(ble) -(sed b* t%e terr(rists %as i&,reased )a&if(ld a&d subseHue&tl* s( %a+e t%e ,(sts1 Terr(ris) is t%e -ri)ar* s(ur,e (f i&stabilit* i& .a'ista&1 T%ere &eeds t( be ,(&se&sus buildi& (& t%e issue at t%e &ati(&al le+el a)(& t%e -(liti,al" reli i(us" bureau,rati, a&d ar)* leaders%i-1 6ut it s%(uld be ,learl* (& a (&e9-(i&t a e&daG a ai&st e0tre)is)1 M(re(+er" it is &e,essar* t( ta'e re i(&al ,(u&tries i& ,(&fide&,e1 Esse&tiall*" b(t% re i(&al a&d &ati(&al stabilit* are &e,essar* if terr(ris) is t( be ta,'led a&d if t%e e,(&()i, ,(st (f terr(ris) is t( be redu,ed

1>

REFERENCES
Terr(ris) i& .a'ista&G Causes K Re)edies 6L Mu%a))ad $rs%ad CWar (& terr(r ,(st .a'ista&i e,(&()* ?4# b&G Mi&isterD" ///1s(ut%asia&e/s1,()" O,t(ber 2A" 2##71 WAR (& Terr(ris)G $)-a,t (& .a'ista&=s E,(&()* Re%a&a 2aeed 4as%)iM %tt-G88///1dail*ti)es1,()1-'8default1as-J -a eN2#12@>C1#@>C1!@>Cst(r*O1!91#92#12O- 1O1 E,(&()i, 2ur+e* 2##791# %tt-G88///1dail*ti)es1,()1-'8default1as-J -a eN2#12@>C1#@>C1!@>Cst(r*O1!91#92#12O- 1O1

1B