Thursday, May 26, 2011

Pakistan's Economic Downturn - Causes and Effects

Pakistan's Economic Downturn - Causes and Effects

Pakistan is experiencing the worst economic crisis and downturn. It was worsened in the past recent years. When the country unable to sustain it's economic growth due to the major domestic reasons and also global recession implications. Poor economic conditions, planning and poverty rise more and more every year. The capital flight already happened to its much extent from the country to outside. Oil import bill continues to haunt Pakistan's balance of payments with huge amounts of worth billions of dollars imports added at one side while lesser amount of exports from Pakistan to the foreign world naturally creates unfavorable balance of payments and high trade deficit. Investors from Pakistan fled amidst of more economic fears. While the high inflation turned into stagflation contributed a lot in economic crisis in the country. Another big factor which contributed is terrorism and militancy in the country which shaken confidence of investor and businesses. These problems can be still resolved if responsible authorities and government acts responsibly now with a clear path to follow for improving the current economic conditions. The causes and effects of economic downturn are as follows.

Causes and Effects of Economic Downturn

One of the biggest worries for Pakistan economy is once again increasing oil prices. Which left the country no way but to increase oil prices domestically. Although, the government faced and is facing much resistance from the peoples and from politicians, but infact, no way is actually there which can allow the government not to increase the prices.

Increasing food prices and shortage of food products is also becoming a huge problem now because of low yields from the agricultural lands and sources of the country. Poor management of food related matters and ignored agricultural sector by the government contributing also to this. Despite of the fact that Pakistan is an agricultural country. Smuggling of food from Pakistan to Afghanistan made the food shortage in the country even worst. We can easily see anywhere longer lines for buying and taking food related ingredients are now common in the rural areas as well as cities.

Terrorism in the country especially in the big cities created fear among the peoples and common man that what will happen now, what will be their future? Contributed to already ailing Pakistan economy to more extent which also triggered most capital outflow. Investment from foreign sources in few years back was more than $700, 63 million dollars but afterwards it remained only $329 million according to last quarter of 2008 estimate.

Political instability also played its role always in decline trend of the economy because political stability is important for any economy and its activities to flourish smoothly but unfortunately Pakistan lacks this and faces most of the time political uncertainty.

Tax Culture: The tax culture in Pakistan is poorly administered and developed. The most of big and large sectors do not pay taxes to the government or pay less while most of the taxes are being paid by the salaried and middle class. They pay taxes regularly along with some business sectors but big part is still not in the tax umbrella. Also no agricultural tax is here due to no commitment in the policy makers to do this.

Uncontrolled Growth : In Pakistan, almost every government didn't paid its needed attention to production related matters and enhancing it for local market and its consumption which resulted in the need of more and more goods imports from abroad and higher dependency on other countries.

Infectivity of Poverty Reduction Programs: Pakistan tried various poverty reduction programs and schemes of different types and kinds in different decades but they do not proved significantly effective in Pakistan due to various factors involved in it such as rapidly increasing population hampers the efforts and only short term policies with less commitment. Less effective education system and also unskilled labor and population unable them to work effectively and efficiently.

Electricity and Gas Shortage: Electricity and Gas shortage in the country is also creating havoc for industries in Pakistan. Long hours of load shedding of electricity and gas throughout the country restricting the industries to work smoothly and completely and to produce the goods for catering local needs as well as foreign orders also creates other problems such as industry losing its customers and orders and ends up at last in closing of industry.

Price hike and Inflation: In last years the inflation in Pakistan had reached its record high 25% percent. Though it is not there right now but it is still at very much higher levels which is hurting the economic growth overall. Inflation increased due to the State Bank borrowing, higher food prices domestically, increasing prices of food commodities at international levels, increasing oil prices both domestically and internationally, Poor growth in manufacturing sector and non effective supply of goods and services and specially devaluation of Rupee PKR contributed to price hike and inflation a lot.

Miscellaneous causes: The high volumes imports from the other countries actually destroyed Pakistan's own industry and manufacturing sector which resulted in unemployment. Less and illiterate peoples and human resource is less capable and productive. Conflicts, high rate of fast increasing population created more burdens for economy and as well as burden created by debts.

Security & Law & Order Issue : Terrorist activities, acts of militancy and terrorism, extremism, rising rates of crimes including street crimes, robbery, theft acts and extortion related activities and others also created sense of insecurity in peoples as well as in investors results none of them sure about anything to happen and created uncertainty.

The following is the causes and how economic crisis of Pakistan started its buildup.

Mohsin Khan of Peterson Institute advised Pakistan Government. Here are his views.

"The situation for the Pakistan economy is pretty grim. Unfortunately it is—it’s almost as if the government didn’t learn anything from that experience. What is happening is the following: You’ve got very slow growth, maybe around 2 to 3 percent for a variety of reasons, but we can go into that later. Inflation [is] rising very rapidly and the cause is exactly what was happening in 2008. You have an increase in food prices and in energy prices. The government refuses, or actually in this case, had to back down from increasing domestic gasoline prices in line with international oil prices, which meant that essentially it had to subsidize the public, which it did do.

The cost of that subsidy is rising day by day as oil prices stay high and domestic prices are kept below international prices, and the fiscal deficit rises. The expansion in the fiscal deficit is then financed primarily by the government borrowing from the central bank, which is akin to printing money. So it’s pumping liquidity into the system and that’s leading to higher inflation.

This is exactly what happened in 2008, which in fact led to the Pakistanis asking the IMF for a program of economic assistance alone. The ongoing IMF program has been suspended because Pakistan was not able to meet the conditions that the IMF had set for them, including on the size of the fiscal deficit and certain other actions like introducing a new or revised general sales tax, which is sort of like a VAT [value-added tax].

The government just recently, in fact this past week, said it tried to push this through but found such political opposition that it decided not to go through with it. So that’s off the table.

He throws up certain figures:

By my reckoning, the fiscal deficit in the budget was 4.7 percent of GDP. It’s going to be around 8 percent if this continues…… The figures coming out right now show growth of between 2 and 2.5 percent, with inflation easily above 20 percent—it could be 25 percent."

Effects of Economic Downturn - Government of Pakistan now must needs to shift its focus to economic condition of the country and need to take necessary steps now to avoid from worsening. They need to workout also on law and order situation throughout the country to improve it because this is the only way by the confidence of peoples as well as the investors can be restored. Inflation needs to be eased up in the economy and brought under control. Different business which makes cartels to increase the prices needs to be dealt strictly for curbing the inflation and price hikes. Political stability needs to be established now. Government must needs to take steps to resolve the energy and power shortage. Security situation needs much improvement overall. The economic downturn and slowdown already started its effects to be shown commonly and everyone can feel and see these effects. The power shortages throughout country are increasing public anger and everyday protests are happening everywhere against load shedding of electricity and gas. These power shortages and load shedding also affects industries to greater extents. The industrial sector is unable to conduct its production efficiently now and this is also increasing cost of production. Similarly, textile industry sector is also experiencing slowdown in the economy as well as downturn. Facing same kind of problems like other industries. Automobile sector is also hit by economic downturn and its sales are almost dropped up to 50%. Also, the unemployment is on rising and workers who were laid-off are increasingly protesting against job losses.

The thing is, Pakistan is a country with non serious rulers. Most of them are incompetent and irresponsible. The problems of the country including both threats that are originating internally and external threats can be managed by a serious administration and governments which is serious and responsible towards the country and not their own motives. Also the peoples of Pakistan needs to starts thinking and working for the country and not for only themselves if the nation building process to be successful.

(Analysis and Article is written by Ayaz Ahmed RN)

Pakistan's Economic Downturn - Causes and Effects

Psychology of Suicidal Terrorism

Psychology of Suicidal Terrorism

A New research suggests that suicide bombers just want to commit suicide.

Another research by Swedish Scientists shows young men with low intelligence scores were more likely to commit suicide.

These both two results and suggestion of studies and researches are actually giving the answers why a person commits suicide or become involved in suicidal terrorism. Well, for finding this, we have to look deep in the reasons known till now. That first a person who do not want to live his life anymore likely to commit suicide. This can be due to various reasons such as unbearable ignorance, humiliation, mental state or due to some of his personal fears of that kind. Whereas, A suicide bomber commit suicide and killing himself with others by bombing due to brainwashing, revenge, political reasons or due blackmailing including money, helplessness and religious reasons as well. Suicides also occur due to intelligence factor in peoples. Have a look at some stats below:

"Few previous studies have assessed the association of measures of intelligence with suicide. The 1946 British birth cohort study found that suicide was associated with delayed physical development but not with age at first speech, alertness (age 7 years), or measures of intelligence at age 15 years. There were only 11 suicides in that study and so it lacked power to detect potentially important effects. A study of 43 suicides in Israeli conscripts aged 18-21 years suggested that they were of above average intelligence,4 although patterns of suicide in the context of military service may differ from those in the general population. A study of university students in the United States, however, also found an increased risk of suicide among the offspring of better educated or professional parents. Suicide rates among Australian army conscripts were strongly associated with a measure of general intelligence, even after adjustment for several other risk markers, but this study was based on only 76 suicides. In a previous study of Swedish conscripts, associations with suicide were attenuated after adjustment for measures of conduct and personality. Several studies have examined the association of childhood IQ with overall mortality. In two Scottish studies low IQ at age 10-11 years and poor mental ability at age 11 years were strongly associated with all cause mortality."
(These are various researches held)

All these are worth considering, first for intelligence issues, we have to work on it from early places such as schools, colleges and other places like academic levels. We will also need to use radio and television as medium here for educating the minds of peoples. Let the peoples love their life by influencing them through various ways from media, newspapers and other ways.
Promote practical kind of activities in this mechanic life where everyone works for himself only to earn money somehow such as sports etc. Promoting positive things in peoples which are human friendly basically and stress buster such as vacations.
And also preventing the terrorist organization to recruit more men and have them brainwashed. Stopping the ways of funding terror and cracking down at terrorist and their organizations and safe heavens. By doing all this, we can significantly reduced suicidal terrorist activities and their recruitment also.

(Written by A.A RickyNastan)

Psychology of Suicidal Terrorism

Bin Laden was a US prisoner before being killed

TEHRAN: Al Qaeda founder Osama bin Laden was a prisoner in US custody for “sometime” before he was killed by the American military, Iranian President Mahmoud Ahmadinejad said on Sunday.
“I have exact information that Bin Laden was held by the American military for sometime… until the day they killed him he was a prisoner held by them,” the hardline president said in a live interview on Iranian state television.
“Please pay attention. This is important. He was held by them for sometime. They made him sick and while he was sick they killed him,” Ahmadinejad added.
He accused US President Barack Obama for announcing the al Qaeda leader’s death for “political gain.”
“What the US president has done is for domestic political gain. In other words, they killed him for Mr Obama’s election and now they are seeking to replace him with someone else,” Ahmadinejad said without elaborating.
Bin Laden was shot dead on May 2 in a US commando raid on a heavily fortified compound near Islamabad, Pakistan.
On May 4, Iranian Defence Minister Ahmad Vahidi too had cast doubt on Bin Laden’s death, saying there were “ambiguities” over the way he was killed.
The Americans “said they threw his body in the sea. Why did they not allowed an independent expert to examine the body to say if it was Bin Laden or not?” Vahidi said.
Iran has always considered al Qaeda as a threat to its security. But the Islamic republic has regularly criticised the presence of US-led Western forces in Afghanistan, saying it prevented any negotiated settlement of the Afghan conflict.
Tehran also regularly denounces the presence of US forces in Arab states of the Gulf, calling it a source of regional tension.