Militancy hurts economy in NW Pakistan

The match industry, the only export-oriented sector in NWFP and which once employed around 5,000 people, has hit difficulties as a substantial quantity of the required wood comes from the conflict-torn districts.

Mubarak said banks have reduced their lending to local industry because of the growing instability and element of risk.

“Only 32 billion rupees (US$395 million) out of 852 billion rupees lent by banks in Pakistan were granted to industries in NWFP last year. The lending has further reduced this year,” Mubarak said.

“Thousands of people from the tribal areas who have been rendered jobless are at the mercy of the militants,” he said.

“It makes it so easy to hire unemployed youth for their cause. The government should stop this by helping us revive the industries,” he added.

Jahan Manan, head of the independent Centre for Public Policy Research, said the root cause of decline was Afghanistan, wracked over many years by civil war and insurgency.

“NWFP's geographical position as a frontline province in international conflicts for the last 30 years has had a damaging effect on its economy. The unrest and insecurity discourage private investment,” he told AFP.

The State Bank of Pakistan reported a decline of 13 percent in foreign direct investment in the country during the first 10 months of this financial year, which runs from July 1 to June 30, compared with the same period last year.

“The security concerns in Pakistan's northwest and the global recession are both responsible,” said Mohammad Sohail, chief executive of Topline Securities brokerage house.

According to the finance ministry, Pakistan's decision to join the U.S.-led “war on terror” meant massive unemployment in affected regions and increased rural poverty, as state spending focused on law enforcement, not development.

Business leaders want the government to offer a package of incentives such as tax and duty exemptions to revive the economy, but for now the state is focused on dispensing millions of dollars in emergency aid to the displaced.

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