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Impact of Terrorism on Economic Condition of Pakistan

Impact of Terrorism on Economic Condition of Pakistan



Terrorism can be defined as the “the premeditated use or threat of use of violence by individuals or sub-national groups to obtain a political or social objective through the intimidation of a large audience, beyond that of the immediate victim”.[1]



Although terrorism is a global phenomena, Middle East and South Asia are specifically affected today due to the War on terror initiated after the 9/11 attacks. The Taliban Government in Afghanistan was considered to be providing the base for terrorist activities of Al-Qaeda by the United States (US) and her allies. After the 9/11 incident Afghanistan was attacked by the US and NATO forces in 2001. Pakistan, a neighboring country of Afghanistan, was also affected due to the war on terror and its aftermath. Pakistan has been a victim of terrorism for the last three decades, due to her involvement in wars in Afghanistan. Besides involvement in those wars, ethnic and sectarian conflicts among different factions and separatist nationalistic movements on Pakistani soil are other sources of terrorism in Pakistan. Such a situation resulted in ultimately slowing down the economic growth. Therefore, the present study contributes to the existing literature by providing evidence on the impact of terrorism on Pakistan’s economic growth. This impact has been analyzed by using data from 1981 to present in 2017. Terrorism has not only affected the social fabric of Pakistani society but also has economic repercussions for a developing country like Pakistan. In fact, terrorism affects developing country much more severely than developed ones, as developed countries have diverse economies and terrorism results only in reallocation of resources to more secure sectors of economy, while in case of developing countries, where there is much concentration of resources in certain sectors, are more affected.[2]




Pakistan has been suffering from terrorism for the last three decades. Due to its geo-strategic position, Pakistan became a centre stage of terrorist activities. When the USSR attacked Afghanistan in 1979[3], Pakistan being a neighboring country had also to face the brunt of that invasion. It was first the Afghans who started their resistance with old weapons. Pakistan finding itself to be the next in the list of conquered countries by the USSR had to retaliate by helping Afghans to stop the Soviet invasion. Afterwards, the US and her western allies joined the bandwagon to counter the spread of communist ideology. Pakistan served as the primary logistical channel for the Afghan resistance. The military aid from Pakistan and the US and financial backing from Arab countries enabled Afghans to drive the USSR out of Afghanistan in 1989. After the USSR left, Pakistan and the Afghans were left alone by their former allies and a ruling power vacuum was created. A civil war for the power started in Afghanistan which had also repercussions for her neighboring country Pakistan. After 9/11 attack, US alleged Taliban for this attack and in retaliation attacked Afghanistan[4], overthrew Taliban’s government. Infuriated by foreign invasion on their motherland another war for independence of Afghanistan was started. The US pressure on the then Pakistani president Musharraf government led Pakistan to provide the transit route for the US military equipment to Afghanistan. Pakistan also provided air bases to the US air force.    




Terrorism is an issue more for developing countries than for developed countries. It not only affects social fabric but also economic conditions of developing countries. Whereas, for developed countries its only reallocation of funds, Growing poverty affects the whole nation to cause terrorism. Population of Pakistan is 168.23 million by 2009, out of this 35-50% of population lives below the poverty line. In rural areas people do not have to eat two times a day that encourages them to adopt illicit alternatives to meet their basic needs. Corruption and injustice started rising since 1947 and did not stop, still rising above the maturity. Pakistan stays at 42nd position in the worlds providing justice and establishing sound departments. Injustice irks the society in scores to go for alternatives. On the other hand, Organization like Tehrik-i-Taliban (TTP) and Al-Qaeda offered prompt justice by imposing their written Islamic Shariah gained popularity and become cause of supporting terrorists. Ineffective and Improper government institutes in FATA and NWFP fuel the fire to grab the nation under its lap. It is a same repeated mistake done by the government which became cause of separation of East Pakistan. Government’s lengthy procedure and acts of receiving bribe delayed justice and government benefits to deliver to the masses in NWFP and FATA. According to the National Accounting Database Regulatory Authority (NADRA) more than 0.8 millions IDP’s were not having their Computerized National Identity Cards (CNIC) during registration process in IDP’s camps. It becomes cause of lacking trust in the government and Taliban emerges as well wishers to gain the support of masses.[5] Unemployment and ineffective quota system does not meet both ends. Lack of employment encouraged Kalashinkov culture in affected areas and people divert their support from government to Taliban. The major factor behind terrorism in Pakistan is declining standard of education and its implementation. Due to improper setup in rural areas, students were not benefited with education. In Pakistan there are only 51 universities mostly erected in urban areas. In NWFP and FATA there was no proper setup of primary education to develop base of education and negate the evil thinking of act of terrorism. Teachers were not paid due to corruption in departments and further education standard deteriorated. Government proved to fail by keeping balance between Islamic teachings and state education. Due to the presence of few elements in government or authorizes motivated the madressah without evaluation that becomes road towards terrorism. Former president, Pervaiz Musharraf inked in his book “The line of fire” that,” The period of Zia and Soviet invasion in Afghanistan was the inception of Taliban in Pakistan”. Pakistan has given a birth to a threat for herself and it I left at large in past to strengthen its roots. Pakistan has to realize the factors which are motivating it and have to take prompt actions to uproot the terrorism from Pakistan.




First and foremost, terrorism destroys physical and human capital of a country. Terrorism often results in the collapse of health and educational infrastructure; leading to scarcity in the clean drinking water and facilities of sanitation, medical care, deterioration in the standard of education, low enrollment rates all of these have negative implications for economic growth. Second, it restricts the trade and business activities leading to restrain the economic growth. Third, due to increased perception of risks, terrorism may reduce the inflows of Foreign Direct Investment (FDI) and as FDI is a crucial part in the investment activities in most of the developing countries and any decrease in FDI will reduce the economic growth. Currently Pakistan needs enormous resources to enhance productive capacity of the economy by repairing damaged infrastructure and to create a favorable investment climate.[6] Terrorist acts and security threats not only the foreign investors terminate their projects and investments but also the residents of Pakistan and the national investors prefer  investing and taking their money out of the country in more safe countries like UK, USA, Middle East and Europe.  Money which is being invested outside instead of being invested in Pakistan , causes harm to the economy of the country and consequently economic growth slowdown. How Pakistan can get remedy from terrorism? Pakistan has to adopt the following remedies, such as; First, Increase in unemployment in FATA and NWFP to provide opportunity to meet their basic needs. Current Government of Pakistan has to fulfill the promise of Z.A.Bhutto of providing food, shelter and cloth to every citizen of Pakistan to swing the pendulum of hate to patriotism. Second, Sheer accountability should be adopted to nip the corruption in the bud and update aude-memoire to trace embezzlement and irregularities at the spot. Third, Justice should be equal for every citizen of Pakistan. Proper judiciary along with jirga should be developed in such regions to provide justice at every level from ever mode of selection. Fourth, Negotiations forum should be permanently established for direct negotiation between people and government unlikely rely on written documents like in Sara Rogha talks with FATA tribes in 2005. Fifth, Government should establish different departments or institutions in that regions to provide them jobs opportunities, easy access to lodge their hue and cry and prompt deliverance of aid, school standard meetings with national paradigm, hospitals with every facilities and social clubs should be developed to build goodwill and trust between people and government.




Here I will mention the laws and strategies made by Pakistan to prevent from terrorism after its independence. The Security of Pakistan Act, 1952[5] The law was enacted on 5th May, 1952 to provide special measures to deal with persons who damage the defence, peripheral interactions and security of Pakistan. The law became applicable across thhe country at once (Section 1(1)(2)). This act permitted the Federal Government to restrict the movement of any suspected person and issue his detention orders. According to this Act, the Federal Government and Provincial Governments could direct any person to submit his photograph, fingerprints, handwriting and signatures to the designated officer. The disobeyors of this Act shall be punished with an imprisonment of 6 months or with fine or with both (Section 4(2)). This law was enforced by General Ayub khan on November 26, 1958. The Defense of Pakistan Ordinance, 1955 and Defense of Pakistan Rules, 1965 were also used during his regime to target political activists.[7]




The law was made to suppress the acts of sabotage, subversion and terrorism in the country.[9] It applied to the entire country (Section 1(2)) and explained that after a notification in the Official Gazette, the federal government could establish special courts all over the country or in any part of it (Section 3(1)). The law further explained that the judges of these special courts would be appointed in consultation with the Chief Justice of the High Court where a special court was established and that no other judge would be consulted. The law also empowered the federal and provincial governments to appoint special judges and establish special courts anywhere in the country (Section 3(2 & 3)). It also allowed cases to be transferred from one special court to another for the convenience of the parties (Section 4)[10]. The Act gave immense powers to the special courts as they could pass any sentence authorized by law and had all powers of the High Court to punish any person who disobeyed, abused and interfered in the court’s order (Section 6). The law also defined the rights of an accused to appeal in the High Court[11] -- within 30 days of the award of sentence by a special court -- where a bench of at least two judges heard and decided the case within three months (Section 7). The law provided that if the accused appeared before the court once, the remaining trial could proceed even in his absence.[12] However, the 1975 law declared that before the trial of an absconding accused, a proclamation should be published in three national daily newspapers, two of which should be in Urdu language. In such a case, a special court was also required to appoint a lawyer for the accused and publicize his appointment through newspapers before proceeding with the trial (Section 5). After its enforcement in 1975, many amendments were made to this law until the promulgation of the 1997 Anti-Terrorism Act. Many changes were made following criticism and demands by human rights organizations. Successive governments also made changes in the law according to the circumstances to handle terrorist activities. Military ruler General Ziaul Haq (1978-1988) made two minor amendments to the law. The first was in 1984, when Zia authorized the special courts to only try such persons who had committed scheduled offences.[13] During Benazir’s tenure, a number of riots occurred in Hyderabad and Karachi. In 1989, terrorists tried to target the parliament. Amid this situation, the government made amendments to the Act and included Section 124-A of the Pakistan Penal Code in scheduled offences.[14]




“The Act was made to provide prevention from terrorism, sectarian violence and for speedy trial of heinous offences.”[16] It provided a detailed definition of a terrorist act as:  “Whoever, to strike terror in the people, or an any section of people, or to alienate any section of the people or to adversely affect harmony among different sections of the people, does any act or thing by using bombs, dynamite or other explosive or inflammable substance, or firearms, or other lethal weapons or poisons or noxious gases or chemical or other substances of a hazardous nature in such a manner as to cause the death of, or injury to, any person or persons, or damage to, or destruction of, property or disruption of any supplies or services essential to the life of the community or display firearms, or threaten with the use of force public servants in order to prevent them from discharging their lawful duties commits a terrorist act.”[17] The Act declared that if a provincial government needed military and civilian armed forces (Frontier Constabulary, Frontier Crops, Pakistan Coast Guard, Rangers and any other) to prevent terrorist acts or scheduled offences it could request the federal government, which would decide which forces were required for deployment to the affected area (Section 4). The forces deployed in any area could use the necessary amount of force against any terrorist after giving sufficient warnings. Military and civilian armed forces could use all powers of a police officer in that connection (Section 5(1)). The Act further provided all powers to law enforcement personnel to arrest any person and enter and search any house without warrants (Section 5(2) (ii & iii)). The Act permitted the military and civilian armed forces to enter any premises if they had reasonable grounds to suspect the presence there of a person involved in possession of written material, recordings or other material used for threatening people (Section 10). The Act protected actions by the military and civilian forces’ personnel by providing that no one could prosecute any act done in good faith by these personnel (Section 39).




Section 11-A of the ordinance declared any organization ‘concerned with terrorism’ a terrorist organization, i.e. which:  Commits or participates in acts of terrorism, (ii) prepares for terrorism, (iii) promotes or encourages terrorism, (iv) supports and assists any organization concerned with terrorism, (v) patronizes and assists in the incitement of hatred and contempt on religious, sectarian or ethnic lines that stir up disorder, (vi) fails to expel from its ranks or ostracize those who commit acts of terrorism and presents them as heroic persons, or (vii) is otherwise concerned in terrorism (Section 11-A). The ordinance empowered the federal government to ban any organization if the federal government had reason to believe that (i) an organization was involved in terrorism, (ii) operated under the same name as an organization listed in the First Schedule or operated under a different name; or (iii) the First Schedule was amended by the federal government in any way to enforce proscription (Section 11-B). However, the ordinance provided the right of review to organizations affected by the proscription and clarified that such organizations could respond to the orders banning them within 30 days and submits a written review application to the federal government, stating the grounds on which it was made. The federal government was required to decide the matter within 90 days after hearing the applicant. If a review application was refused, the organization could file an appeal to the High Court within 30 days of the refusal (Section 11-C). The ordinance also authorized the federal government to keep any organization or person under observation for six months if the government believed that any act of an organization or person was covered by the definition of terrorism. The period could be extended even further after hearing the banned organization (Section 11-D). In case of an organization being declared proscribed, the federal government was authorized to seal its office, freeze its accounts, impound all literature, posters, banners, printed, electronic, digital or other material. The federal government could ban the publication, printing or distribution of any press statements, press conference or public utterances by or on behalf of or in support of a proscribed organization (Section 11-E).   9/11 attacks and the War on Terror The September 11, 2001 terrorist attacks in the United States at the World Trade Center towers in New York City and the Pentagon in Washington brought home to the world the increasing threat of international terrorism and its impact on global security. The launch of the subsequent ‘war on terror’ brought a great policy shift in international affairs that influenced the security policies of third world countries in South Asia. Amid the complex geo-strategic environment, Pakistan faced various internal and external security threats because of its crucial role in the war against terrorism. As a frontline state in the war against terrorism, Pakistan augmented domestic anti-terrorism measures to root out the network of extremists and militant organizations within and beyond its territory. In September and October 2001, the government established at least 11 new courts in NWFP and four in Sindh . At the end of the year 2001, at least 41 more courts were established in the country.[19] Furthermore, the Antiterrorism (Amendment) Ordinance, 2002, January 2002 was promulgated to expedite the pending trials.




The ordinance provided for the inclusion of a ‘military person’ as one of the three ATC members for a speedy trial. After the ordinance’s promulgation, all previous cases were transferred to the new courts, which were to continue working until November 30, but their term could be extended. The ordinance was aimed at targeting terrorist networks and ensuring stiff penalties, including the death sentence. The ordinance did, however, provide a right of appeal to the accused.[20]




This Ordinance increased the penalties for persons assisting terrorists in any manner, whatsoever. It enhanced the maximum punishment for those found guilty of such assistance from 14 years to life imprisonment and provided a right of appeal to the accused under Section 25(4). According to Section 4-A, a person being tried by an ACT could lodge an appeal with a High Court within 30 days of the Order passed. 




The ordinance increased the maximum punishment from five years to 10 years.




Cyber-terrorism is a new strain of terrorism through which a terrorist can assault and destroy electronic communication networks and infrastructure of states by using the relative anonymity afforded by cyberspace. It allows terrorist groups and individuals opportunities to cause massive damage to computer-dependent societies by targeting defense-related institutions. Cyber-terrorism can target considerably more people than any physical terrorist attack can and that too without the inherent threat of capture, injury, or death to the attacker that being physically present would bring.  According to the Dorothy Denning: “Cyber-Terrorism is the convergence of cyberspace and terrorism. It refers to unlawful attacks and threats of attacks against computers, networks and the information stored therein when done to intimidate or coerce a government or its people in furtherance of political or social objectives. Further, to qualify as Cyber-Terrorism, an attack should result in violence against persons or property, or at least cause enough harm to generate fear. Attacks that lead to death or bodily injury, explosions, or severe economic loss would be examples. Serious attacks against critical infrastructures could be acts of Cyber-Terrorism, depending on their impact. Attacks that disrupt nonessential services or that are mainly a costly nuisance would not.”[22]




According to the Act, “Any person, group or organization who, with terroristic intent utilizes, accesses or causes to be accessed a computer or computer network or electronic system or electronic device or by any available means, and thereby knowingly engages in or attempts to engage in a terroristic act commits the offence of cyber terrorism.” (Section 17) 




Terrorism has diverse impact on the state.  Besides, terrorizing human lives, terrorism impacts other factors as; increase poverty, unemployment, capital  flight, destruction of infrastructure, reduction in FDI and exports, low public revenues and diversion of the development expenditure to the expenditure on law and order maintenance and so forth. Terrorism deranged national GDP to 1.6 in 2016. Terrorism is a great hurdle in our economic prosperity, political stability, geo-strategic sustainability and energy security. Development activities are halt due to affected areas such as NWFP and FATA. Rise of terrorism is self-generated threat of Pakistan due to its weak policies, corruption and political instability. Pakistan has to delink every source that strengthen terrorism aim to destabilize and crippled the economy of Pakistan. Pakistan has already faced huge decline in investments, foreign exchange, trade and privatization. Terrorism has bound Pakistan to have pledges of aid from donor agencies and countries like US, UK, China etc even by having enormous resources to stand in the category of developed nations. The ongoing anti-terrorism campaign has cost thousands of human lives including both civilian and security forces. Spreading terror, attacking military convoys, destroying public properties, especially schools, and kidnapping and looting have all been regular practices. This shows that the magnitude of the problem posed by the terrorists has increased manifold and subsequently so have the costs. The question now arises as to how normalcy can be brought back to the instable regions of the country. In the first stage, the government must strive to stabilise the troubled areas with the support of the local people. In the second stage, the government should start infrastructural development and later on industrialisation in the troubled regions by utilizing their natural resources. As a result, people would not only get employment but would participate directly in the development of the country. Plus, their sense of economic deprivation would be reduced. Terrorism is the primary source of instability in Pakistan. There needs to be consensus building on the issue at the national level among the political, religious, bureaucratic and army leadership. But it should be clearly on a one-point agenda: against extremism. Moreover, it is necessary to take regional countries in confidence. Essentially, both regional and national stability are necessary if terrorism is to be tackled and if the economic cost of terrorism is to be reduced.


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  [1]Socio-Economic impact of terrorism on Pakistan . (2014, December 22). Retrieved October 14, 2017, from The Nation: http://nation.com.pk/22-Dec-2014/socio-economic-impact-of-terrorism-on-pakistan


[2] Sandler, T., & Enders, W. (2005). Economic Consequences of Terrorism in Developed and Developing countries: An Overview. Retrieved November 6th, 2010, from http://www.cba.ua.edu/~wenders Econ_Consequences_Revised.pdf.


[3] Britannica, T. E. (2015, June 03). Soviet invasion of Afghanistan 1979. Retrieved October 18, 2017, from Encyclopædia Britannica: https://www.britannica.com/event/Soviet-invasion-of-Afghanistan.


[4] Witte, G. (2017, May 02). Afghanistan War. Retrieved October 18, 2017, from Encyclopædia Britannica: https://www.britannica.com/event/Afghanistan-War.


[5] Terrorism and Its Impact on Pakistan's Economy . (2010). Retrieved October 14, 2017, from Civil Service of Pakistan: http://www.cssforum.com.pk/css-compulsory-subjects/essay/essays/30041-terrorism-its-impact-pakistans-economy-2010-a.html


[6] G.M.Chaudhry and Irafan Mahmood Warraich, The Security of Pakistan Act, 1952, ‘Pakistan Military Laws’, Federal Law House, June 2006. 


[7] Irfan Mahmood Warraich, ‘Pakistan Military Laws’, Federal Law House p. 885. 


[8] Shabana Fayyaz, ‘Responding to Terrorism: Pakistan’s Anti-Terrorism Laws: Part I’


[9] Suppression of Terrorist Activities (Special Court) Act 1975, February 1, 1975. 


[10] Mian Ghulam Hussain, Manual of Anti-Terrorism Laws in Pakistan.


[11] Suppression of Terrorist Activities (Special Courts) (Amendment) Ordinance 1984, November 11, 1984. 


[12] Mian Ghulam Hussain, Manual of Anti-Terrorism Laws in Pakistan.


[13] Shabana Fayyaz, ‘Responding to Terrorism: Pakistan’s Anti-Terrorism Laws: Part I.


[14] Section 4, Suppression of Terrorist Activities (Special Courts) (Amendment) Ordinance, 1984, April 5, 1984.


[15] Ghulam Hussain, Manual of Anti-Terrorism Laws in Pakistan, p. 541. 


[16] The Anti-Terrorism Act, 1997 (XXVII of 1997), Ministry of Law, Justice, Human Rights and Parliamentary Affairs, (Islamabad, 2003).


[17] ibid


[18] ibid


[19] Anti-Terrorism (Amendment) Ordinance, August 15, 2001. 


[20] Shabana Fayyaz, Responding to Terrorism: Pakistan’s Anti-Terrorism Laws: Part I’.


[21] Anti-Terrorism (Second Amendment) Act, 2005, January 11, 2005. 


[22]2Gabriel Weimann, ‘Cyber-Terrorism: How real is the threat’, Special Report No. 119, December 2004. http://www.usip.org/pubs/specialreports/sr119.html


[23] The Prevention of Electronic Crimes Act, 2007, August 17, 2007.   

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