Section on cost of war on terror not to be included

ZAHEER ABBASI

ISLAMABAD: The government has decided not to include section about the cost of war on terror on Pakistan’s economy in the Economic Survey for 2011-12 likely to be released tomorrow (Thursday), a day ahead of the announcement of the budget for the next fiscal year, it is learnt.

An official said it was decided that the inclusion of cost of war on terror chapter was not in the interest of the country because it was detrimental to the inflow of investment. The official also attributed decline in law and order situation as another reason for exclusion of the chapter.

Sources in the Planning Commission said investment, key for the revival of the economy has declined considerably during the outgoing fiscal year and the feeling within the economic team was that inclusion of the chapter on cost of war on terror may not be a good omen for investment.

Investment was revised downward to 12.5 per cent by the National Economic Council (NEC) for the current fiscal year from the budgetary projection of 13.8 percent and increase in investment as percentage to GDP is critical to moving toward higher and sustainable growth, he added.

Last fiscal year a chapter on war on terror and its impact on the economy was included in the Economic Survey. It noted that since 2006, the war spread like a contagion into settled areas of Pakistan that cost the country more than 35,000 citizens, 3500 security personnel, destruction of infrastructure, internal migration of millions of people from parts of northwestern Pakistan, erosion of investment climate, nose-diving of production and growing unemployment and above all brought economic activity to a virtual standstill in many part of the country.

The chapter went on to state that Pakistan continued to pay a heavy price in economic and security terms. A large portion of its resources, both men and material are being consumed by this war for the last several years. The economy was subjected to enormous direct and indirect costs which continued to rise from $ 2.669 billion in 2001-02 to $ 13.6 billion by 2009-10, projected to rise to $ 17.8 billion in the current financial year (2010-11) and moving forward, the direct and indirect costs to the economy is most likely to rise further.

The Economic Survey 2011-12 noted that during the last 10 years the direct and indirect cost of war on terror incurred by Pakistan amounted to $ 67.93 billion or Rs.5037 billion. The events that transpired after 9/11 in Afghanistan worsened the security environment in the country. As a result, the western countries including the United States continued to impose travel ban for their citizen (investor, importers, etc.) to visit Pakistan. This has affected Pakistan’s exports, prevented the inflows of foreign investment, affected the pace of privatization program, slowed the overall economic activity, reduced import demand, reduced tax collection, expenditure overrun on additional security spending and domestic tourism industry suffered badly. Hundreds and thousands of jobs could have been created had economic activity not slowed as well as thousands of jobs were lost because of the destruction of domestic/foreign tourism industry, the destruction of physical infrastructure (military and civil), massive surge in security-related spending, migration of thousands of people from war affected areas and the associated rise in expenditure to support internally displaced persons. Pakistan’s investment-to-GDP ratio has nosedived from 22.5 percent in 2006-07 to 13.4 percent in 2010-11 with serious consequences for job creating ability of the economy.