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As Violence Hurts Business, Pakistanis Debate U.S. Help
Restrictions Make Textile-Export Bill Useless, Some Say

By Joshua Partlow and Haq Nawaz Khan
Washington Post Foreign Service
Tuesday, July 28, 2009

PESHAWAR, Pakistan -- A concrete wall already encircles Mohsin Aziz's office, but workers are making it higher brick by brick. Kalashnikov-wielding guards shadow the industrialist everywhere he goes. A chase car tracks his black sedan through thick city traffic.

Even with such precautions, Aziz said, his family considers him a "madman" for keeping his business in Peshawar, the violent capital of Pakistan's North-West Frontier Province. Military-imposed curfews keep laborers from his factories, and he sometimes has to beg his managers to come to work.

"I tell them, 'I am here with you. I will not leave you behind, dead or alive,' " said Aziz, who manufactures matches, textiles, laminates and particleboard. "We will die together."

Bombings and kidnappings by the Taliban and criminal gangs are strangling the economic life of this metropolis adjacent to the tribal territory along the Afghan border. Businessmen have fled south to safer provinces or left the country, slashed production, laid off employees, and closed down offices.

Government statistics show that large-scale manufacturing has contracted 7.6 percent across Pakistan in the past year, while a survey by the Industrialists Association of Peshawar found a 37 percent plunge in the industrial sector here. Business associations estimate that the number of industrial jobs, the main economic lifeline, has already fallen from more than 100,000 to about 25,000. Factories that ran round-the-clock now scrape by with a single shift.

"This is a recipe for disaster," said Nauman Wazir, former president of the Industrialists Association. "This is going to have a spiraling effect into more unemployment and into more radicalism."

The Obama administration has pledged to bring economic relief to these border regions dominated by Taliban and al-Qaeda fighters. In March, the president called on Congress to pass a bill that would create what are known as "reconstruction opportunity zones" to "develop the economy and bring hope to places plagued with violence."

That bill passed the House last month. It is intended to allow businesses in areas such as North-West Frontier Province, the tribal areas and a 100-mile border swath of Baluchistan in southern Pakistan to export textiles and apparel to the United States duty-free.

But Pakistani businessmen said limits on what textiles are covered -- sought by U.S. business lobbyists -- render the bill, and its pending Senate version, largely worthless.

Many products eligible for duty-free status are not items that Pakistan produces in large quantity, according to an analysis by the Citizens Voice, a Peshawar-based think tank of business and civic leaders.

"This is ridiculous, this is not going to work, this is a non-starter," said Aleema Khan, chairman of Cotton Connection, a Lahore-based firm that buys textiles for large American companies. "Everybody's rejecting it. Major industry is rejecting it. Buyers are rejecting it. This bill should not go through. The fact that they haven't done their homework is what's so scary."

Rep. Chris Van Hollen (D-Md.), one of the sponsors, said that he would support expanding the scope of products eligible for duty-free status, "so long as that does not doom the prospects of the bill."

"I always worry about making the perfect the enemy of the good. It's important to get something started," Van Hollen said. "One thing the president's been clear about is that military force alone will not resolve the conflict in Afghanistan, you need to provide greater economic opportunities in these conflict-ridden regions. This is not something that happens overnight, and this is part of a sustained strategy."

Van Hollen, citing a report by the Congressional Research Service, said the 38 textile and apparel categories included in the bill account for $1.4 billion of the $2.7 billion worth of goods that Pakistan exports each year to the United States.

Businessmen in Pakistan dispute those figures. Muhammad Atif Hanif, a manager at Dubai Islamic Bank in Peshawar and a member of the Citizens Voice, said that Pakistani textile exports tend to fall into six categories -- including cotton pants, underwear, knit shirts and hosiery -- and all are excluded from the legislation. The current legislation would benefit only about $200 million of the export industry, he said.

Said Mohsin Aziz: "We are supposed to produce swimsuits, we are supposed to produce neckties, we are supposed to produce handkerchiefs, we are supposed to produce silk gowns, which we have never produced, which we do not have the raw material for, which we do not have the expertise for. It's just a game."

Most people concede that developing significant industry in the Federally Administered Tribal Areas remains a long-term goal because the region is largely ungoverned mountain territory devoid of modern property rights or legal infrastructure and on the verge of a Pakistani military invasion. But trying to encourage textile investment in North-West Frontier Province also has generated skepticism here, as those industries' hubs reside in Karachi and Faisalbad, outside this province.

"It's not something they've ever done. I'm not going to buy from there, and I'm one of the most aggressive buyers in this country," Khan said.

On the ground in Peshawar, debates over U.S. help that is potentially years away are overshadowed by the threats businessmen face each day. As many as 300 people a month, mostly businessmen, have been kidnapped for ransom in the province, said Muhammad Ishaq, vice president of the Frontier Chamber of Commerce. Two years ago, there were 2,254 industrial companies here. Today, 594 remain, the others driven out by war and power shortages, according to the chamber.

Earlier this year, anonymous letters believed to be from the Taliban, delivered to banks, insurance companies and other businesses, demanded that employees wear traditional Islamic baggy tunics and pants, known as a salwar-kameez.

"I am wearing this because bankers have been threatened not to wear suits," one Peshawar banker, who spoke on the condition of anonymity, said of his tunic.

Ilyas Bilour, a senator and owner of a vegetable oil business in Peshawar, said he has shed 10 to 20 percent of his workforce, and the factories now operate only half the month. He moved his children and grandchildren to Islamabad to keep them safe.

"The insurance people are not covering terrorism insurance. We are ready to pay them more, much more, but they are not ready to accept our high offers," he said.

Nauman Wazir, who owns companies that produce rebar, marble and hunting weapons, has a simple strategy to weather these violent times. "I travel fully armed. AK-47s. Pistols can't save you. An AK-47 can save you. Fully loaded. I don't take chances," he said. He knows what he's up against. A decade ago, kidnappers held him for 60 days.

"Either I'm going to kill him or I'm going to get killed. I'm not having any of this kidnapping business."

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