IMPACT OF LAW AND ORDER ON PAKISTANS

ECONOMY AT OPERATIONAL LEVEL

LAW AND ORDER

The law and order situation arises when there is insecurity, threat of
violence or violence arising due to a host of factors disturbing the
ordinary conduct of life and businesses in a society.
it may be a product of one or more of the following:

factors/components:

External aggression

Internal upheavals

Religious/sectarian extremism

Labor unions strikes, boycotts, lock outs, and similar activities

Ethnic/racial/linguistic cleavages

ECONOMIC GROWTH
selective macroeconomic indicators to determine the state and growth
of economy like GDP growth rate, poverty incidence, and per capita
income growth rate over a specific period of time, and level and nature
of investment.
LAW AND ORDER SITUATION IN PAKISTAN
Organized crime and terrorism are usually viewed as two different
forms of crime, increase of which directly deteriorates law and order.
Organized crime is generally held to focus mainly on economic profit
(but not always limited to it), while terrorism is said to be motivated
chiefly by ideological aims and by a desire for political change.
Causes of Crimes
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Side by side the economic and poverty factors, crimes may be caused
by social environment motivating or encouraging crime and the
dysfunctional family conditions like parental inadequacy, parental
conflict, parental criminality, lack of communication (both in quality
and quantity), lack of respect and responsibility, abuse and neglect of
children, and family violence. Our review, however, has a limitation of
considering primarily the economic and poverty causes and precedence
of crimes with a law and order perspective.
Nature of Terrorism
Tribal belt especially the North and South Waziristan Agencies have
traditionally been a fertile land for militant activities. The area was
used for recruitment, training and as a launching pad for operations
against Russian forces during Soviet Union occupation of Afghanistan
in 1980s. After Taliban defeat in 2001, the militants shifted to this area
and started their activities against US / NATO forces. Since 2004,
Taliban terrorist attacks and LEAs counter attacks have become a
routine affair in Pakistan.
Analysis
The worst victims of law and order as well as poor economy are always
the poor. Their vulnerability to shocks is more than others. Therefore,
it is imperative that any analysis of the impact of law and order on
economic situation must start with the most vulnerable in the society.
In other words, no study of economic situation is complete without
taking account of at least three interrelated economic indicators of
poverty, unemployment, inflation, particularly food inflation.
Our study has seen positive correlations between crime and major
economic variables: when there are negative trends in the economy
(increase in inflation, poverty, unemployment, and decline in
investment) there are negative trends in law and order (increase in
crime rate). The results show that the decrease in number of all
categories of crimes during the years 1999-2001 (Annex-I) have also
witnessed decrease in inflation, poverty, and unemployment. The
subsequent years have witnessed positive growth in these sets of
variable testifying our hypothesis that law and order and economy
have positive correlations: betterment in the conditions of the former
coincide with an improvement in settings of the latter
However, not all economic indicators have similar direct correlations
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with the crimes. Law and order and economy being complex and
multidimensional may interplay with each other through their
externalities depicted in our theoretical framework (Figure-1). These
results may have some implications for the policy makers as well as
practitioners engaged in law and order and economic management.
It has been estimated by the Economic Survey that two thirds of the
countrys population lives on less than $2 a day, with at least one third
living below poverty line. During the last eight years or so the poverty
in Pakistan has increased from 30 per cent in 1998-99 to almost one
third in 2008-09, adding another 16 Million people to the absolute
poor. While incidence of poverty decreased between 2000-01 and
2005-06, the last few years witnessed an increase.
Another contributory factor to poverty is the inflation in the country.
The Economic Survey of Pakistan (2009) puts the inflationary rate at
22.3 percent; the food inflation in the country has risen from a low of
6.9 percent in 2006-07 to 17.6 in 2008-09, touching a record high of
34.1 per cent in August, 2008. As poorest spend more than 70 per
cent of their income on food, large sectors of population have been
pushed deeper into poverty.
The Human Development Index (HDI) that includes a broader
definition of well being ranks the country 136th out of 177 countries
showing that Pakistan is well below compared with other countries.
The Global Hunger Index Pakistan ranks the country 61 out of 88
countries.[1] In short all estimates and survey point towards rising
levels of poverty in the country, an outcome of slowing economy and
worsening law and order situation. Another contributory factor to
poverty as well as to crime and law and order situation is the rising
levels of unemployment in the country.
The successive governments over period have initiated a number of
policies and programs for eradication of poverty in the country but still
the poverty is on the increase. It is argued that these programs and
policies did have some beneficial impact but the population growth
rates as well as rural-urban disparities plus the weak implementation
of policies neutralized the impact.
The initiatives designed to improve rural infrastructure, cash transfers,
zakat, Bait-ul-mal, employment creation through small and medium
enterprises, micro-finance programs, Khushal Pakistan Program, Rural
Support Program, Social Action Program, and Poverty Reduction
Strategy of Pakistan (PRSP). A recent initiative to this end has been
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Benazir Income Support Program (BISP).

It is agreed at different levels that any single policy is not going to
work to eradicate poverty. Its a complex issue and requires
multidirectional approach with a mix of policies ranging from cash
payments to human resource development. It should aim at greater
growth that ensures an adequate flow of benefits to the poor and
vulnerable. Special social safety nets play an important role to meet
the current needs of the poor while micro-finance helps them
Stand on their own feet and investments in human development and
infrastructure helps enhance their productivity in terms of both quality
as well as quantity. Another important initiative required is to provide
employment by initiating labor intensive industry and programs. One
important factor for increasing rate of poverty in the country has been
slow down of the small and medium industries that are mostly labor
intensive and rural.
IDPS
One of the prime examples of impact of law and order on the economic
situation of the country on the life of common man is first
displacement, and then relocation and repatriation of over 2.5 million
people of Swat. It is perhaps the worst impact that the terrorism may
have on the people and economy. While the cost of loss of business,
government infrastructure and private property of the people is yet to
be assessed.
While the cost of loss of business, government infrastructure and
private property of the people is yet to be assessed. It would be an
understatement to say that the whole economy of NWFP in particular
and of Pakistan in general has suffered. The cost of ongoing military
operation rebuilding of the infrastructure, resettlement of the people
and their businesses is estimated to be stupendous, while the cost in
terms of human lives and sufferings is at best untold. It also offers the
reverse linkages where poverty and poor economy provides ready
recruits for crime and terrorism.
Recommendations
Our study of law and order has revealed that the policies often fail to
achieve the stated objectives and targets for lapses at operational
level. At this level either there is no identification with the policy aims
and objectives or lack of understanding that often leads to poor
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strategizing with poor results. Even normal functions of governance

receive little attention at times.
Intra-provincial and inter-provincial policy distortions like varying
compensation rates and allowances admissible in public sector etc.
may be corrected
The disparities between rural and urban areas create very strong
urban bias in the provision of services need to removed
Gender imbalances in essential services in education and health need
to be corrected
There is an urgent need for augmenting the security apparatus in
NWFP and Tribal areas that includes deployment of armed forces in
support of police, and para-military forces of to prevent deterioration
of law and order in the most vulnerable areas
The already established community police force in the tribal areas
needs to be brought into the mainstream of local administration of law
and order and other areas may also be considered for having such
force
Modern training may be imparted to police force to combat terrorism
Recommendations
The government needs to reduce its dependence on the use of military
force to address internal security issues, and should enhance the
capacity of paramilitary forces i.e. Rangers, the Frontier Corps and
other law enforcement agencies. That has emerged as a crucial issue
in view of the high number of casualties caused during operational
attacks in the NWFP and FATA
Capacity building of intelligence agencies to be enhanced. A better
coordination among various agencies and law enforcement
departments is also recommended
The government and media need to create more space for cultural and
social activities, provide healthy activities for the youth and ensure
proper utilization of funds allocated for youth and cultural
development
Recommendations

The already started reconciliation and confidence building process in

Balochistan should immediately be concluded and action plans to
remove the grievances be prepared in consultation of the important
stakeholders
The new NFC may immediately announcement by considering the
proposals of Balochistan on resource distribution and Gas Development
More development funds, especially for better health and education,
must be allocated as a priority
Temporary rehabilitation facilities for the resettled IDPs in their areas
be provided and the process of developing permanent facilities be
accelerated
Special counter-insurgency contingents of paramilitary be raised
Physical infrastructure including road, and bridges in inaccessible
affected areas be constructed
Procedures and systems for regular audit of Madrassahs and NGOs be
devised and implemented
Economy Recommendations
To control rise of inflation, the administration should take initiatives for
enabling consumers to form their effective consumer associations
supplementing already in place monitoring mechanisms
Despite very high inflation, the possibility of reducing the discount rate
by further 1-2 percentage point may be explored at operational so that
the costs of borrowing from the banks are reduced
During the period of economic problems, the government should take
the lead and start more public investments to provide a jump start to
the economic activities.
Economic Recommendations
Primarily, it is the domestic investors who have to be encouraged and
motivated to take the lead for the investment. The administration of
governmental incentives to them should be more business-friendly.
Once, domestic investors start flourishing, it will encourage foreigners
to invest in Pakistan as well
There is a need to improve business environment in the country,
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including the availability of educated and skilled manpower, ancillary

industries and utility services. Continuous rise in the prices of
petroleum products, electricity, gas and other utilities are also
adversely affecting the business environment.
We need to improve our infrastructure facilitations to make the
Business environment more conducive to foreign and local
investments.
Power shortage has already resulted in closure of many units which is
deplorable and needs to be rectified at the earliest.
The main stake of our economy is agriculture and facilitation and
incentives to develop the cottage industry need special attention. In
order to boost up investment particularly in livestock, poultry,
fisheries, and associated value added production facilities like
financing, development of services infrastructure, and manpower
development should be part of government plans and programs
So far, most of FDI has been in the services sectors which are nontradable and adversely affects the balance of payment. Taking into
account the unfavourable balance of payments problems of the
country, we need to prefer further FDI in the foreign-exchange-earning
sectors in future.
Pakistan has a record of economic growth in sixties as well as in the
recent past. However, the adhocism, and poor implementation of
policies have been distorting the system. In order to stimulate
investment and revitalize our economy, we have to ensure continuity
of economic policies coupled with political stability.
In order to boost up further investment in the home grown
manufacturing like textile industry the system of one-door operation
need to be activated and extended
INVESTMENTS
Factors instrumental to private and foreign investors:
Risks of doing business and ;
Expected returns of the investment.
Four major challenges to Pakistans socio-economic growth including:
regaining macroeconomic stability;
poverty reduction;
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fiscal retrenchment and;

Weaknesses in the external account.

Decay of Pakistans image

The soft image Indeed is a pre-requisite for attracting high ratios of
foreign direct investments;
Brightens the possibilities of joint ventures;
Encourages FTAs and regional economic integration.
Manufacturing
Second largest sector of economy
GDP contribution 18.4 %
Negative growth of 3.3 % against target of 6.1 % and last years 4.8
%
because of acute energy outrages, security environment and political
disruption in March 2009.

Service Sector
The services sector grew by 3.6 percent as against the target of 6.1
percent and last years growth of 6.6 percent. Value added in the
wholesale and retail trade sector grew at 3.1 percent as to 5.3 percent
in last year and target for the year of 5.4 percent. Finance and
insurance sector slowed down to 12.9 percent in 2007-08 but
registered negative growth of 1.2 percent in 2008-09 because of
financial crisis plaguing international in financial markets.
Investment
total investment has declined from 22.5 percent of GDP in 2006-07 to
19.7 percent of GDP
in 2008-09. Fixed investment has decreased to 18.1percent of GDP
from 20.4 percent last year
INFLATION
The inflation rate as measured by the changes in Consumer Price

Index (CPI) showed an easing

trend beginning in November 2008, touching 17.2 percent in April
2009 after reaching a record level of 25.5 percent in August 2008 as
the food group was the major source of inflation in Pakistan during the
first ten months of 2008-09, the nonfood component of the CPI has
also been persistently high, resulting in overall stubbornness of the
inflation.
External Sector
The exports (-) 6.7 % $19.1 billion to $17.8 billion in 2008-09
compared last year;
Exports were targeted at $ 19.1 billion or 6.7 percent lower than last
year. The exports were $ 17.8 billion in 2008-09.
Imports (-) 12.9 % $40.4 billion to $34.9 billion in 2008-09
Trade Balance
The merchandise trade deficit improved by 12.3 percent and declined
from $10.7
billion in July-April 2008-09 to $ 12.3 billion in July-April 2008-09. The
substantial decrease of 9.8 percent in imports outstripped otherwise
significant decrease of 3.0 percent in export
growth, which caused the trade deficit to improve by 12.3 percent.
Conclusion
An overview of Pakistans economy 2008-09 by Ministry of Finance has
reported that the macroeconomic environment of the country is
affected by intensification of war on terror and deepening of the global
financial crisis which penetrated into domestic economy through the
route of substantial decline in Pakistans exports and a visible
slowdown in foreign direct inflows.
Pakistans participation in the international campaign has led to an
excessive increase in the countrys credit risk. Due to which recently,
the World Bank has lowered our credit rating further. Pakistans
economy continues to remain exposed to the vagaries of international
developments as well as internal security environment.
Pakistan not only lost precious lives and infrastructure but a very
conservative estimate has placed economic cost of this war for
Pakistan at around US$ 35 billion since 2001-02. Rehabilitation of IDPs
and their livelihood will require more than $ 5 billion in Malakand and
FATA alone. All this expenditure is not going favourably for Pakistan as
they are the unsustainable burden on the meagre resources of
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Pakistan.
Terrorism is a great hurdle in our socio-economic prosperity, political
stability, geo-strategic sustainability and energy security. Development
activities are halt in these areas.
Conclusion
The rule of ignorance, stagnation, fanaticism, and destruction is
spreading like a wild fire especially in NWFP and FATA. The government
should initiate three-pronged policy i.e. dialogue, development and
deterrence. Let us hope that our soil will be freed from the terrorism
and there will be no more bloodshed in the days to come.
PLAN B
Why Plan B?
Complexity
Volatility
Uncertainties
Multi dimensional
FUTURE POSSIBLE SCENARIOS
Domestic
Resurgence of ethnic conflict in Karachi?
Regional
Attack like Mumbai takes place?
International
US Iran conflict escalates?
DOMESTIC
Ethnic conflict in Karachi erupts.
Business loss
Flight of capital
Exports / imports suffer
Ripple effect on economy
Law and order deterioration
REGIONAL
Another Mumbai takes place.

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Nuclear conflict
India opts Surgical strikes
Pakistan goes into further Isolation
Economic meltdown
INTERNATIONAL
US attacks Iran.
Surge in oil prices
Use of proxies by Iran
Attack on US interests
Disruption in NATO supplies
Minorities at risk
IMPLICATIONS
Public Protests
Oil prices affect economy
Law & order aggravates
Damage to the infrastructure
Sectarian, ethnic clashes
Economic melt down.

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