KARACHI: AS things stand right now, the all-important Services sector does not quite know which way the tide may turn in post-election Pakistan. Taking happenings of the past few months as some sort of a marker, the sector is looking forward to the days ahead neither with fear nor with enthusiasm, but with blanket uncertainty. As is the nature of business activity, mind you, uncertainty is often worse than even fear for in the case of the latter one can still chart out a full-scale strategy, but the former leaves one wondering what exactly to do. Going through the phase, one runs the serious risk of getting caught like the sitting duck, but, as professional after professional points out, that is the prices one has to pay for not knowing which way to run.

Having contributed 53.3 per cent of the GDP in the 2006-07 fiscal, the Services sector has been the mainstay of the national economy, leaving far behind the more critically important areas of industry and agriculture which together put in the remaining 46.7 per cent. Pushing aside the debate surrounding the inverted pyramid that we now have due to the overall direction of the economic managers, the Services sector does account for more than half of the economy and uncertainty therein does not augur too well for anyone.

In the last financial year, the sector recorded 8.0 per cent growth, which was 0.9 per cent above the target and a full percentage point ahead of the national growth which officially stood at 7.0 per cent. However, in comparison with its own performance in the 2005-06 fiscal, the sector did have a setback worth 1.6 per cent, and, by the looks of it, the election year may only affect it negatively, say professionals in the field.

Senior consulting architect Hanif Daud, for instance, points out that two power projects have already been put on hold by Japanese investors and a couple of expansion contracts from multinational corporations have undergone downward revision because of the uncertain climate, badly hitting the allied services related to designing and construction. Besides, he says, hike in the prices of cement, steel and wood means there is going to be a lot of litigation because bids filed earlier no more stand feasible. As a result of the emerging scenario, very few people are interested in filing bids for the next few months. The impact, in his view, will go beyond the initiation of the new government in Islamabad. The uncertainty is bound to last at least till the announcement of the first budget of the new setup, says Mr Daud, implying that the whole financial year will be a low-key affair because investors and entrepreneurs will both look to play safe and keep their money readily available at all times.

Adnan Iqbal, who manages a financial consultancy, has his own fears. On top of his litany of woes is the tendency among political governments to make custom-made policies to suit individual interests. He looks back at the last few years – with or without the imposition of emergency – as a period of enviable stability, while the future sends a shrill down his spine. His major concern is that mutual funds are mostly invested in the stock market which is extremely sensitive to any uncertainty. Making reference to the obvious, he points out that if the stocks go down, they will take the mutual funds with them.

Dr Fasihullah Mir, General Secretary of the Private Hospitals and Clinics Association (PHCA), brings up another dimension of the debate – the law and order situation – when he refers to the experience of his community during periods of political dispensations during the 1990s.

There are no two opinion on this; bulletproof jackets at workplace were the norm and we got rid of them only in the last few years, he says while recalling the scores of doctors who had lost their lives in killings targeting the medical profession.

In terms of economic policy, however, Dr Mir happens to be the only one looking forward to the days ahead and that is so because PHCA President Dr M.A. Shah is contesting provincial assembly seat PS-103 on MQM’s ticket, and Dr Mir hopes that he would win, become the health minister and take care of all the problems!

Though for entirely different reasons, Bank Alfalah CEO Sirajuddin Aziz is also not pessimistic about what lies ahead. The banking sector, he says, has witnessed transformation of colossal magnitude, rather a smooth 180 degree turn in its landscape. The financial sector ownership was largely entrusted with the nationalised sector to almost more than 85 per cent and the exact opposite is prevalent today.

No matter what any political party promises in its manifestos, the economic policy would essentially remain intact largely because of global economic imperatives engulfing the local economy. The process of deregulation, privatisation, investment and trade liberalisation is an irreversible phenomenon. Therefore, the banking sector is expected to operate on an upward trajectory irrespective of electoral stances unless some maverick assumes office in Islamabad who would out of lunatic reasons derail the economy, he says, adding the banking sector on the whole, is carrying a positive outlook towards the post-election period, but nevertheless remains cautious of any unexpected reality that might emerge on the political fabric of Pakistan.

What remains unanswered though is the mere fact that, like deregularisation etc., the streamlining of the Services sector is also part of the irreversible phenomenon. The SBP Annual Report itself has talked of the United Nations International Standard Industrial Classification (ISIC) which is in the implementation phase since 2005, and calls for streamlined data in 15 categories against the six that Pakistan currently maintains mostly on the basis of estimates.

As the Report concedes, Pakistan needs to reclassify the Services sector for more disaggregated data collection and reporting. Are we ready for such documentation?

As senior taxation consultant Rafi Hyder underscores, the cushioned arrangements will soon have to go, and it will happen, as he puts it, regardless of who takes over Islamabad in the days ahead. This is the raw nerve of the Pakistani Services sector which is perhaps making it uncertain and uncomfortable more than anything else.