It’s going to take a while for the situation in Afghanistan to be clarified and some degree of stability and peace to return, though I have no way of guessing how long. One reason for this is that its going to take a while to put in place a political alternative to the Taliban, which means that the United Nations has to get the parties back around the table. Parties that represent the Afghans, the Uzbeks, the Tajiks, the Northern Alliance — in other words, a broad-based non-Taliban group and individual Taliban members if they wish to attend. That’s going to take a while to hammer out. Meanwhile the war will go on, but just how far the military effort can solve the problem is of considerable doubt to me.
As I look at Pakistan, the effects of this crisis in the short term have been rather positive for it, specially in terms of its balance of payments situation. I would not be surprised to see the country’s Finance Minister Shaukat Aziz getting a very good reception in Washington right now. But Pakistan hasn’t yet worked its way out of longer-term problems like declining demand for Pakistani exports, declining business confidence, and long sustained low levels of GDP growth.
What does this mean in terms of Indian businesses, especially those that rely on the U.S. for their existence?
Pretty much the same is true of India. The Indian economic situation is only partly affected by the events of Sept. 11. The trouble for India was already in place well before that — falling exports and industrial production, and declining investor confidence. Indian businesses are having a tough time — they are finding it hard to get their hands on capital, it’s getting difficult to put together offerings that customers are going to pick up, and the stock markets are in a dreadful predicament. I think it’s going to take a while for things to pick up and move ahead.
In the long term, will it rectify?
It will rectify of course, specially in India’s case. There, overcapacity will cease to be a factor. India’s huge domestic market will pick up speed again and come out of the recession. On the other hand, I still need to see some deeper structural changes to be confident about Pakistan’s prospects.
How would you advise Indian businesses that are continuing to look for businesses in the U.S. and facing a changed perception?
Be good businessmen. Think hard about your market, what you need to produce. Be well represented in the U.S. and be able to find backup packages of credit and insurance to make export an attractive proposition. Pick and choose carefully what you want to be in. IT and back office services continue to have huge export potential in the U.S., particularly in a recession when corporations are trying to cut losses. si
