The brazen disregard for civility and international law in the Middle East war zone has deeply saddened and incensed Pakistanis.

Beyond its social and political implications, the corporate sector was troubled by the government’s lack of preparedness in dealing with the evolving situation to mitigate potential risks for the already fragile economy.

“The vivid images depicting death, destruction, displacement and suffering in the asymmetric conflicts in the Middle East and Ukraine have shattered the presumption that wars in this century would be waged and won in classrooms and boardrooms.

This has led to the realisation that access to information technology has not been sufficient to empower the public to hold leaders accountable and restrain them from engaging in perilous war games,“ lamented an economist turned peace activist.

Pakistani business circles are eagerly anticipating an early ceasefire, yet they cannot dismiss the prospects of hostilities spilling over to engulf the energy-producing region, a crucial shipping passageway and the primary source of Pakistan’s remittances and economic support.

They, however, downplayed the potential consequences of growing anti-West sentiments in Pakistan on Euro-centric trade and the business of American and European giant companies across multiple sectors in the country.

Ehsan Malik, CEO, Pakistan Business Council (PBC), expressed concern about the already high cost of doing business potentially escalating further in the period ahead.

Unlike the Russia-Ukraine war that led to spiralling oil prices, the Israel-Palestine war may have a limited economic impact

“The main impact on a fuel import-reliant economy like Pakistan is increased cost, which, fortunately, has remained limited to around six per cent thus far. This is considerably lower than the Brent price that briefly surpassed $100 per barrel following the outset of the war in Ukraine. While the possibility of an escalation of the Middle East crisis cannot be ruled out, it appears that regional powers are taking their time to consider their next moves.

“The likelihood of an Arab oil embargo similar to that of 1973 is low. Egypt is unlikely to block traffic through the Suez Canal. Nevertheless, a country with a fragile economy should remain vigilant and formulate contingency plans for various possible scenarios.”

Sources in Islamabad claimed that certain officials in the planning ministry and the State Bank are closely monitoring developments in the Middle East and formulating strategies under different scenarios to mitigate the potential adverse impacts on the country’s economy.

When contacted for comments, Caretaker Finance Minister Dr Shamshad Akhtar did not respond till filing of the report and Caretaker Minister for Industry and Production, Gohar Eijaz, expressed his unavailability as he was attending the Belt and Road Initiative Summit in Beijing.

“Currently, we are monitoring price movement in the global markets and the potential for supply disruptions, which could impact economic activity, especially any slowdown in remittances,” a senior officer said privately.

‘The main impact on a fuel import-reliant economy like Pakistan is increased cost, which, fortunately, has remained limited to around 6pc thus far’

M Abdul Aleem, Secretary General, Overseas Chamber of Commerce and Industry, spoke against armed conflicts without taking a clear position on the bloody war in the Middle East. He was primarily worried about the impact on inflation and the flows of foreign direct investment (FDI) from the West in countries like Pakistan.

“Conflicts worldwide invariably result in disruptions. The impact of the Russia-Ukraine war, particularly on fuel and food prices, has been evident. The Middle East nations serve as global oil suppliers and play a significant role in supporting Pakistan’s economy. However, Pakistan’s economic stability relies heavily on the International Monetary Fund and World Bank, as well as China and some Middle Eastern countries.

Furthermore, Pakistan has historically received FDI from the West. Consequently, the intensifying Middle East conflict poses challenges for Pakistan. Coupled with the anticipated rise in oil prices and the currency’s relative fragility, we may face additional cost escalations in goods and services. Given Pakistan’s historical stance on the conflict, it is possible that certain Western brands could face the fallout of negative public sentiments. It is expected to be symbolic with minimal impact on the business,“ Mr Aleem noted.

Several business organisations, including the Federation of Pakistan Chamber of Commerce and Industry (FPCCI), appear to view the situation as still evolving and consider it premature to take a stance at this point, as they have not responded to queries on this matter.

Tariq Saud, former president of All Pakistan Textile Mills Association (APTMA), hammered the necessity for early elections and establishment of a stable elected government to effectively address challenges stemming from the conflict in a region with which Pakistan shares deep historical, religious, cultural, political and economic linkages.

Mariam Durrani, Director, Marketing, Pakistan Cables, does not foresee a major shift in consumer preferences in the local market, with regard to Western brands. She stated, “While there might be calls to boycott certain popular Western brands, it’s unlikely that these calls will be consistently followed through.”

Economist Ahmed Qadir highlighted that Pakistan’s economy is highly susceptible to fluctuations in oil prices and that the Gulf crisis could potentially impact remittance inflow from the region.

Published in Dawn, The Business and Finance Weekly, October 23th, 2023