The Social, Political and Economic Effects of the War on Terror:

The Social, Political and Economic Effects of the War on Terror: Pakistan 2009 To 2011

Pakistan has been fighting the war on terror, as a front line state, since September 2001. So far, the war has brought huge destruction to Pakistan by slowing down the economic growth, devastating the social structure, and harming the country politically. This paper attempts to study the social, political, and economic effects of the war on terror on Pakistan from 2009 to 2011. During this period, intensity of the war increased and it spread into the settled areas of Pakistan. Federally Administered Tribal Areas (FATA) and Khyber Pakhtunkhwa (KPK) suffered the most. This qualitative paper shows a significant negative relationship between terrorist activities and economic growth, social progress, and political advancement.

1:These are the primary sectors of Pakistan economy and any terrorist activity has a negative impact on these sectors.

 Pakistan is an agrarian economy and 45 percent of the population depends on agriculture for earning livelihood. During 2009 to 2011 the imposition of frequent curfews, shelling and firing destroyed fruits and other agriculture commodities in Swat valley. It had a negative impact on the local economy and also caused unemployment.

2:From 2009 to 2011 foreign direct investment decreased as terrorism spread fear among the people and foreigners were reluctant to invest in Pakistan. Stock market also suffered due to high profile killings like that of Benazir Bhutto, ex-premier of Pakistan. Due to large scale military operations against the militants, defense expenditures increased manifold which ultimately decreased the development budget. Annual budget for the police force also increased significantly. Similarly, terrorism also affected tourism and manufacturing sectors.

3:Pakistan lost more than fifty thousand citizens and military personnel. Terrorists destroyed a number of schools in KPK and FATA which also spread fear among the school going children. Due to terrorist attacks on the private property people lost their businesses and unemployment increased. Military operations against the militants uprooted millions of people in KPK and FATA which brought economic, social and psychological sufferings to them

Impact Analysis of the War on Terror on Pakistan The ongoing war on terror has left deep negative social, political, economic, and psychological implications for Pakistan

Sectors                                 Impact of terrorism

1:   ECONOMY:            Negative impact on earnings, consumption, tourism, foreign direct investment, security expenditures etc. 

2:Political impact:   Negative impact on the country’s image at the local, regional and international level

3: Social impact:Negative impact on employment, poverty, infrastructure and has high human cost 

4: Psychological well-being:  Negative impact on human health and causes traumas, stress and headache 

Social Impact of the War 

Incidence of Terrorism and Human Cost: 

The intensity of terrorism increased in Pakistan in 2009 as the country experienced mega terrorist’s attacks on the General Headquarters of Pakistan Army,

 Sri Lankan cricket team in Lahore and on Manawa Police Training Center, Lahore.13 PIPS data also shows that fifty four political leaders and activists were assassinated in FATA and KPK.

 In FATA, 559 terrorist attacks took place which killed 644 people and injured 1046. In KPK, in 1137 attacks 1438 people were killed. Further, in 2010, 459 attacks killed 836 people in KPK. 

In FATA, 904 people were killed and army convoys check posts and pro - government elders were frequently attacked. PIPS data shows that in 2012, 

1577 terrorist attacks killed 2050 people. In KPK, 456 attacks killed 401 people while in FATA, 388 terrorist attacks killed 631 people. Frequent terrorist attacks brought negative economic, political, social and psychological consequences for Pakistan

destruction of property, infrastructure and sluggish economic growth.

Rate of Unemployment: 

In 2007, Greenbaum, Dugan & LaFree examined the impact of terrorism on employment and business outcomes in Italy from 1985 to 1997 and found that terrorist attacks decrease employment opportunities.15 Employment is more of a social issue than an economic one as it affects the lives of all people alike. In Pakistan unemployment increased from 3.12 million in 2009-10 to 3.40 million in 2010-11.16 Table 2 shows that due to increased terrorist activities in the urban areas of Khyber Pakhtunkhwa, unemployment increased from 0.10 million in 2009- 10 to 0.12 million 2010-2011. However, the data for FATA is not available. It can be easily predicted, from the intensity of terrorism, that thousands of people would have become jobless in FATA

Impact on Education Education is the key to progress for any nation of the world. Militants attacked and destroyed a number of boys and girls schools in FATA and KPK as a strategy to imbue the youth of the area with militant values. Militants attacked 119 schools in 2008; 188 in 2009; 129 in 2010 and 142 in 2011. In 2011, 79 attacks were witnessed in KPK and 56 in FATA. Girls’ schools suffered 62 attacks against 51 attacks on boys’ schools. Militants destroyed almost 1,000 schools, mostly girls’ schools, in FATA and KPK. Only in Swat valley, 401 schools were destroyed in 2010-11.19 According to KPK Education Department, militants destroyed a total of 758 schools in various parts of the province including 640 schools in Malakand division.20 Militants destroyed local culture, banned listening to music and recreational activities



Displacement and its Impact: Pakistan Institute of Peace Studies found that due to military operations in various parts of the KPK and FATA, 2.7 million to 3.5 million people were displaced which is considered as the largest displacement in the history of Pakistan. The displaced people left their homes for safety and security and went to the urban areas of the country to support their families. Largest displacement took place in South Waziristan Agency in FATA where approximately 4, 28,000 people were displaced. In Orakzai Agency, 4, 00,000 people and in Malakand division 3, 83,190 people were uprooted out of which 3, 82,950returned home while 20,777 are still in the camps. In Khyber Agency, between 84,000 and 100,000 people were uprooted while the number of people who fled Mohmand and Bajaur agencies is estimated as 7, 50,000.22 Due to increased militancy and subsequent military operations, the local residents, particularly women and children, of the conflict areas suffered from physical and psychological abuse and traumas. The fear of death and feelings of helplessness further traumatized their live

Political Impact of the War 

High incidents of terrorism lead to increased political instability in a country.24 Similarly, war on terror has left significant political impact on Pakistan at domestic, regional and international level. Militants destroyed the local social, political and judicial structures in FATA and Malakand division. The tribal areas of Pakistan are governed by Frontier Crime Regulation (FCR) and local disputes are settled in Jirgas that work in collaboration with political agents, appointed by the federal government. During crisis, militants killed hundreds of local elders which disturbed the political balance in FATA.25 She further found, “The presence of the military in FATA in post 9/11 scenario also undermined the authority of political agents. The power of the jirga and political agents has been assumed by Taliban commanders” (P-41). This also reduced the influence of political parties in FATA and Malakand division. Women politicians were harassed and an active women councilor from Dir district of KPK was murdered. Pakistan decision to join war on terror has weakened the federation as the fighting is getting longer. This has also created gap between the masses and the Pakistan military as the pro-Taliban section of the people opine that Pakistan army is fighting a war of US while pro-US section of people say that

Pakistan military is the biggest hurdle in eliminating terrorism and supporting militants in Afghanistan
Economic Impact of the War 

Government of Pakistan Estimates of the War on Terror: Poverty Reduction Strategy Paper (PRSP-II) of the Ministry of Finance, Government of Pakistan has identified five indirect costs of the war on terror, in addition to the direct costs. The first one is the slowing down of domestic economic activity. It means that foreign direct investment, industrial output, tax collection and exports decreased. Overall GDP growth suffered due to intensive terrorism. The second one is the increase in the credit risk of the country which means that Pakistan suffered from the financial losses by failing to repay the loans it obtained from financial organizations especially IMF. The third indirect cost is the enormous increase in unemployment in terrorism affected areas like KPK and FATA. Due to losses to agriculture sector, damage to businesses and tourist resorts thousands of people lost their jobs. The fourth one is the heavy costs of displacement of local population. Due to insurgency and counter military operations, millions of people were displaced from Malakand division and FATA. In the fifth place, due to frequent terrorist attacks implementation of development projects got delayed in KPK & FATA. This delay increased the cost of the projects manifold.28 With the increase in terrorism the benefits of participation in the war fell as in 2007-08, the United States assisted Pakistan with $1.9 billion, whereas the cost of the war was over three times higher at $ 6 billion

The cumulative cost of the war on terror from 2001-2002 to 2010-2011 is $ 67.9 billion.30 Table 3 shows that in 2004-05 the direct cost of war on terror for Pakistan was Rs 67 billion which increased to Rs 78 billion in 2005-06 and to Rs 262 billion in 2009- 10. Similarly, the indirect cost increased from Rs 192 billion in 2004-05 to Rs 707 billion in 2009-2010

Foreign Direct Investment 

      In 2007, Abadie and Gardeazabal examined the impact of terrorism on foreign direct investment (FDI) and concluded that one standard deviation increase in terrorism leads to a decrease in the ratio of net FDI to GDP of between 4.16 and 6.54 percentage points.37 Further, Enders and Sandler studied the impact of terrorism on FDI in Greece and Spain and found a higher adverse impact of terrorism on FDI. They found a negative 13.5 percent impact on FDI in Spain from 1976 to 1991 and a negative 11.9 percentage point impact on FDI in Greece from 1975 to 1991.38 Investors always look for a safe and secure environment to invest their money. The peaceful countries of the world receive high foreign investment as compared to troubled areas. According to Economic Survey of Pakistan, foreign direct investment has emerged as a major source of private external flows for Pakistan

Agriculture 

Agriculture sector is the source of employment for 44.7 percent of labor force in Pakistan, contributes 21.8 percent to GDP and has large impact in balance of payment.41 Agriculture is the main source of revenue for the people in the terrorism affected areas like the FATA and KPK. Only Swat district has arable land of 98,100 hectares and agriculture is the primary source of livelihood for almost 80 percent of the population. From 2007- 2009, in Swat valley the loss to agriculture has been amounted to Rs.35 billion and 55 to 70 percent of the total fruit produced was wasted. This was the result of various hostilities, artillery shelling, blowing of bridges in bomb blasts and imposition of frequent curfews by the army. As a result of the precarious law and order situation of the area the local farmers, landowners and dealers had to face losses of billions of rupees

Defense Expenditures
In 2007-08, when militancy increased and terrorists started getting control of settled districts of Pakistan like Swat district, the Pakistan army conducted military operations against the terrorists to flush them out. For security and civil relief operations up to US $ 4 billion (2.4 percent of average GDP) additional expenditures incurred on the annual budget. More than 3 million people were displaced which resulted in a budgetary outlay of US $ 600 million in fiscal year 2009 alone for relief and rehabilitation process of the internally displaced persons. Cumulatively, the potential GDP loss due to terrorism for the period 2008-09 has been estimated as US $ 11.7 billion. During this period, Pakistan also suffered diversion of development funds to the security budget, capital flight and brain drain

The above discussion shows that Pakistan has suffered a great deal due to the ongoing war on terror and is still paying a heavy price in the form of low economic growth, sacrificing citizens and destruction of infrastructure. War on terror has also shattered the soft image of Pakistan in the international world. The above data show that GDP growth declined, defense expenditures increased manifold, tourism sector suffered, stock exchange experienced low performance and foreign direct investment also decreased significantly. It is important to mention that besides terrorism other related factors like energy supply shortages, global financial crisis of 2008 and heavy floods of 2010 also played significant role in negatively affecting Pakistan economy. Here the question arises is how to minimize the negative effects of war on terror on the social, political and economic sectors of Pakistan. One possible step is to develop a comprehensive strategy as how to fight this war.50 Government may review its strategy because the present strategy is not workable. Inspite of the fact that defense budget, including Police, has increased manifold in the past four years but the acts of terrorism, instead of decreasing, are increasing day by day. The political leadership, military, religious leaders and all other stake holders need to sit together and work out a possible strategy either to resolve the issue through dialogue or by eliminating the terrorists. Pakistan also needs to take the regional countries into confidence in resolving the issue of terrorism.