A neighbour’s shrill voice Corporate Pakistan wishes for the de-escalation of tension with India, but is not particularly worried over the situation, primarily because of the weak bilateral economic ties.
The footloose investor in the country’s capital market has, however, reacted differently. Its norms of business are different. The KSE index lost a good 900 points in post Sept 17 sessions.
The company heads rule out the possibility of a full scale war but warn both nuclear-armed countries to avoid stepping on a trigger as none of them will be able to celebrate victory in case of a showdown.
They termed the blame game ‘risky politics’ and believed that India’s over reaction to a terrorist incident in Uri could not be explained without adding the Chinese coefficient to the equation. The tycoons believed India is visibly uncomfortable and that the war frenzy fanned in India was partially explained by their resentment to CPEC.
The decision of Indian PM Modi not to attend the 19th Saarc Summit in Islamabad dashed the hopes of the business class for an easier trade access in the neighbourhood markets, widening the scope of regional trade for the near future, in an increasingly challenging global trade environment.
They fear that if this phase of tension is allowed to stretch, it could divert orders expected from leading retail chains in South Asia to the Asean region, for secured/uninterrupted delivery.
“India is neither a supply source of raw material/machinery for our industry nor a market for our products so the vertical slide in the relationship graph is hurting no one directly in our ranks. None of the members has approached us for a huddle on the issue so far. They must be observing the unfortunate developments from the sidelines”, Ehsan Malik, CEO, The Pakistan Business Council, commented over phone.
OICCI Vice President Khalid Mansoor gave the following response to a query “Though the recent verbosity is quite high we feel matters will soon be controlled by saner minds. Continuation of tensions will definitely have an impact on Foreign Direct Investment in both countries. Tensions could also lead to an increase in various cost factors, like borrowing cost and Marine insurance premium”.
Munir Kamal, chairman Pakistan Stock Exchange, conceded that the current fall in the index was indeed an outcome of war fears but ruled out any deep seated panic in the capital market.
“The profit-taking is an inherent part of capital market operations so some volatility was expected. Did shrill baseless accusations by the Modi administration and the calculated reaction of Pakistan to their strong talk affect market sentiments? How can they not? Yes it did but the capital market of Pakistan has assumed depth and maturity and the loss does not signify panic”, he told Dawn in a candid discussion over the issue.
He concurred with the perception that despite differences, a war is neither affordable for India, Pakistan or the world. “The private business in India has assumed scale and commands influence over their government. Their stakes in peace are too high to let politics play games that risk their interests. Indian politicians can spit as much venom as they like but the powerful Council of Indian Industry (CII) will not allow the government to spoil the broth”, he asserted.
Another veteran business leader worried over the way the powerful cartel of Western retail chains, key importers of products from this region might be watching the friction.
“The timing is troubling”, he said, referring to the conflict. “It is a time when orders originate before Christmas spending season starts in Europe and the US. The marketing teams of business houses are out there scouting deals. I wish the phase of lunacy passes quickly, or not just Pakistan and India, but all regional suppliers, will lose business in the West”, he said, requesting anonymity while blaming Nawaz Sharif’s teams of intolerance to differences of opinion.
“Whatever little trade we have is informal or through a third country which has not been affected so far”, another CEO of a leading business house said, explaining the apathy in business circles towards the rising political temperature on the country’s eastern border.
“The regional economic integration in pursuit of common interest by countries increases the stake in peace. The motivation to form an economic union originated from fear of war in Europe which saw massive devastations caused by the two world wars”, he said, lamenting Pakistan’s near complete diplomatic isolation.
When contacted on phone for his input on the issue Dr Asad Zaman, Vice Chancellor, Pakistan Institute of Development Economics’ saw the global military industrial complex behind armed conflicts and the emerging new flashpoints. He emailed the following response:
“How was it that the British managed to conquer a huge continent, when they had very limited resources and manpower? Divide-and-rule was the key element of their strategy. The subcontinent is rich in natural resources, sufficient to provide prosperity for all. Today, imperialist strategy for extracting resources from the colonies is far more sophisticated and complex. It is, however, still founded upon the fundamental divide and rule idea.
“Trillions of dollars of tribute continue to flow from the former colonies to the imperial powers. This now comes from arms sales reflected in huge defence budgets, and interest payments on loans made to corrupt rulers who act as proxies for foreign powers. As Machiavelli noted long ago, terrifying people by magnifying threats from domestic and foreign enemies is a key to achieving compliance with autocratic policies” he commented.
The total volume of formal trade between India and Pakistan hovers around $2.5bn; that is a little less than the estimated two way traffic of informal trade that pushes the aggregate figure to little over $5bn annually. Cross border trade was suspended almost completely as diplomatic tensions between the two nations started mounting after the Pathankot incident in January.