The cost of terrorism

Pakistan, on the 20th of September, 19th Ramazan, was, once again, subjected to a terrorist attack on a scale that sent shock waves around the world. Condemnations were quick to follow from the two countries that are perceived to be mainly responsible for the current strategy on tackling global terrorism, though their status in that war is considered to be that of a leader and a follower: the United States and the UK.
The leadership of these two countries did not take these attacks as indications of the failure of their anti-terrorism strategy eight long years down the line but as proof that the war must continue to be fought even more vigorously by Pakistan.
The economic and political costs of the war on terror are truly mind boggling though the impact on politics and economics is widely divergent in Pakistan's context. It is this particular aspect of terrorism that the US and, by extension, the UK have consistently failed to understand and, therefore, to acknowledge. In the US and the UK terror attacks to-date, far and few compared to what the Pakistani public has been subjected to, have brought the country together; and a leader who is seen dealing with such attacks effectively, and responsibly, and that's where the Bush administration loses points in terms of its war in Iraq, and public support for it. In Pakistan the situation is vastly different.
Even though the Marriott bombing was not supported by any member of the public anywhere in the country, neither is there any support for the US raids on our soil. There is also a strong perception that Pakistan is fighting the US war on terror, not its own, and that the resulting rise in suicide attacks in the country as well as insurgencies in our border areas with Afghanistan are a direct consequence of this flawed policy. This accounts for constant statements by our leadership - past and present ie Musharraf as well as the Zardari government - that the war on terror is our war. Unfortunately few in the country are convinced.
And the reason is simple: the public simply does not seem to understand that there is a tremendous amount of development assistance as well as military hardware that the Bush administration has been pumping each year into Pakistan post 9/11; assistance that was responsible to a large extent for the high growth years of the Shaukat Aziz/Musharraf era. If our leadership does not formally adopt the war on terror as its own then this source of funding may dry up leaving an economically beleaguered country all the more susceptible to deprivation.
Is there a solution to this dilemma faced by our leaders? There is a growing call for the government to defer all expenditures for one year in an effort to meet the deficit target. This will be an unpopular decision. As it is, the poor and deprived are suffering due to a slash in development expenditure. Why not slash non-development expenditure as well in an effort to balance the budget? However, a cut in expenditure must not be limited to the civilian sector alone.
Defence accounts for a significant portion of the annual budget and without the armed forces supporting the civilian government in reining in their own expenditure little will be achieved in terms of strengthening macro economic fundamentals. In addition the army's heavy reliance on US assistance also needs to be slashed. Pakistan has the nuclear deterrent in place to ensure that India will not go unpunished in case of an unprovoked attack.
That together with restarting the composite dialogue must be the way forward for the next year or two. As far as fighting the war on our border with Afghanistan as well as Waziristan is concerned the Pakistan government needs to use its 610,000 armed forces personnel (many thousand times the number of insurgents with more sophisticated weaponry and air power) to secure the entire region first and then hold parleys. We are not a foreign force, the major reason for the insurrection by the Taliban, and nor will we be then seen as taking orders from Washington - a major selling point of the Taliban against Pakistan's armed forces.
The economic cost of the suicide attacks, however, is fairly evident from the blast: the loss of life as well as property in the Marriott blast (which must run into billions of rupees) was horrendous. A little over two weeks later two more blasts in two different cities were witnessed, though the loss of life did not compare with the Marriott blast. The obvious impact of the blast on any foreign direct investment is fairly easy to assess.
The number of visitors of foreign origin who had booked rooms in hotels in Pakistan, mostly businesses one would assume as Pakistan is not quite considered a tourist destination, declined dramatically after the bomb blasts. These facts have been acknowledged by the political leadership and while Prime Minister Gilani and members of his Cabinet as well as advisors have presented a rather confused picture about the perpetrators and their target yet they have all been categorical and consistent about the possible negative impact of a blast on foreign investment.
The government's objective to generate considerable resources from privatisation proceeds in an effort to attain the challenging budget deficit target of 4.7 percent is also expected to be severely compromised as a consequence of the Marriott blast. True, the global liquidity crunch had already reduced the capacity and the inclination of capital to invest at this point in time anywhere in the world; yet even without the crunch, capital was unlikely to go to a country like Pakistan where terrorism has left a mark so recently, and in the capital too.
Thus privatisation, unless it is literally selling the family silver at throw away prices, is unlikely to attract foreign investment at this stage. The negative impact of this is going to be twofold: first the inability of the government to meet the budget deficit target, an inability that may translate into the withdrawal of assistance to Pakistan by bilaterals as well as multilaterals further, creating a need for borrowing from the State Bank which, in turn, will be highly inflationary; and, second state run organisations targeted for privatisation will continue to be a burden on the exchequer requiring support from the government.
What is perhaps unique to this part of the world is the link between terrorism and its funding source, ie proceeds from the illegal heroin trade. The Taliban in particular are almost exclusively relying on proceeds from trade in heroin and the result is the establishment of networks that feed the Western markets where profits are ridiculously high; in the wake of this illegal trade the number of addicts in both Afghanistan and Pakistan, where it is thought most of heroin is being processed, is rising to alarming levels. In other words the social costs of growing, refining to heroin, and then transporting the hallucinogenic to Western markets is significant in Pakistan and there is an urgent need to take action in this regard as well.
So does the cost of terrorism to Pakistan make it our war rather than the US war on terror? The answer is not as straightforward as one would imagine. Suicide bombers in Pakistan are a consequence of the post 9/11 period - a period that is marked by Musharraf's support for the war. At the same time suicide attacks in Pakistan are the second highest in number after Iraq which requires urgent remedial measures.
There are two options before the government: either delink policy from the US, which would require careful consideration of the economic ramifications of this action, which, in turn, would include serious political implications for the PPP. The government must then secure the troubled area and then negotiate with the Pakistani Taliban leadership and expel all foreigners from tribal areas. This would achieve the aims of the US while not alienating the locals.
Or else maintain the status quo, alienate not the US but the people of this country which, again, would have a political fallout. The PPP government appears to be leaning towards the latter option with diplomatic effort thrown in to rein in US attacks. This politically at least appears to be the PPP-led government's most feasible option. If Obama wins the elections then attacks would become the norm but if McCain wins then too attacks would continue though perhaps not as frequent as hitherto.