President Pervez Musharraf imposed a state of emergency three weeks ago were imperilling not only the country's stability, but also its economy.
ISLAMABAD: With names like Next, McDonald's and Rolls Royce appearing in Pakistan's cities, evidence of growing foreign investment is easy to see -- but analysts warn that emergency rule could put it all at risk.
President Pervez Musharraf imposed a state of emergency three weeks ago warning that Islamic militancy and a meddling judiciary were imperilling not only the country's stability, but also its economy.
The nuclear-armed Islamic republic has experienced a boom since Musharraf seized power in a coup in 1999, with government figures recording growth last year of 7.0 percent -- one of the fastest rates in the world.
Foreign investment was around 10 billion dollars for the past year, much of it from Arab nations and the United States.
Despite continuing mass poverty, signs of that growth are widespread.
Mobile phone masts are popping up everywhere, with people benefiting from lower tariffs due to heated competition between Pakistani, Norwegian, United Arab Emirates, Chinese and Egyptian-owned companies.
In the cities, banks offer easy loans for almost anything -- houses, cars, televisions, computers, microwave ovens, refrigerators and air conditioners.
Porsche, Mercedes, Audi and Rolls Royce have all opened gleaming showrooms in the eastern city of Lahore.
But analysts and business leaders say the negative image of emergency rule, together with curbs on the media and the arrests of thousands, may have harmed the country economically.
Credit rating agencies Moody's and Standard & Poor's downgraded Pakistan's debt outlook to negative from stable after Musharraf imposed the emergency.
Mohammad Zubair Khan, an Islamabad-based economic analyst who was commerce minister in the 1996 caretaker government, said the crisis has multiplied the concerns of foreign and domestic investors.
"The possibility of a political confrontation has thrown even the existing business plans in jeopardy," said Khan, also a former International Monetary Fund official.
"Existing export orders are being cancelled because the importers who want their items to be delivered on time are not sure."
The instability also hit the stock market, which suffered its biggest ever single day fall -- 4.57 percent - on November 5 following untrue rumours that Musharraf had been toppled by his army deputy.
The impact of the emergency has started to be seen," agreed Tanvir Ahmad Sheikh, the president of the Federation of Pakistan Chambers of Commerce and Industry.
"It is bound to have a negative impact on foreign investment as developed countries do not see such measures as favourable," he told.
"Also negative travel and business advisories deter investors from putting their money in Pakistan."
Saad Bin Ahmad, head of research at Capital One Securities, said that after November 3, inflows of foreign cash dipped.
"Investors seem to be cautious as political risk has increased considerably," he said.
Even the United States -- Pakistan's biggest ally and which has effectively propped up the economy with 10 billion dollars in aid since Islamabad joined the "war on terror" in 2001 -- has expressed concern.
US ambassador Anne Patterson said emergency rule was jeopardising economic growth and upward mobility.
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