The Economic Genocide of Karachi
A Guest Post by Majyd Aziz
Peaceful environment is vital for economic growth and national prosperity. Citizens need an assurance of quality of life and this is possible thru income generation, social and physical infrastructure, security and safety, and political stability in their locality. At the same time, foreign and domestic investors, business and industrial community, and banking and stock exchange clients and customers want solid surety that their investment would be safe and profitable.
Karachi is the largest city of Pakistan with an estimated population of around 20 million and has the largest informal sector as well as the largest number of home-based workers. It accounts for a lion’s share in Pakistan’s revenue generation by contributing about 68% (KCCI annual report 2010-11) or 65% (as per City District Government Karachi report) to the national exchequer. All national and international surveys, reports, and analyses confirm that Karachi is the mainstay of the Pakistani economy.
Karachi contributes about 55% to Pakistan’s GDP, that is, about US$ 98 billion, projected to reach $130 billion by 2015 provided peace is restored in the city and suburbs. Of course, Karachi’s high share in GDP is due to its large industrial base. Karachi has 15,000 formal industrial units in its 5 industrial zones while there are 360 markets spread all over the city. It is estimated by this writer that the daily loss to the national GDP is Rs 2 billion for every hour that Karachi remains non-operational.
During the previous government’s tenure, the policies of Premier Shaukat Aziz encouraged substantial bullish activity at the Stock Exchanges. This led to a huge cash surplus that needed to be channelized to productive usage. At the same time Dubai witnessed a construction boom. Thus a formidable flight of capital was witnessed as billions of dollars were transferred thru Hundi and Hawala or thru couriers from Pakistan to UAE. This was done neither due to law and order nor due to political instability. The prime reason was the fabulous opportunities for short-term profits and the enchanting lure of Dubai.
Today, the flight of capital is in tandem with the pull-out of investment and the root cause has been the criminalization of Karachi, the breakdown of the security apparatus, and the juvenile efforts and actions of the political parties. Moreover, the near-collapse of the energy sector has proved to be extremely detrimental. Resultantly, foreign investment has dipped by 35% while domestic investment is on hold at this moment. The Stock Exchanges are at a downward trend and this has affected investment in real estate and other hitherto profitable ventures. Non-performing loans portfolio of banks is alarmingly high and State Bank of Pakistan has not been able to curb the menace of inflation.
It is entirely possible, although there are no credible facts and figures, that billions of dollars have been transferred to Malaysia, UAE, Bangladesh, and even Sri Lanka. Although most of the entrepreneurs do not acknowledge their foreign investment, the market gossip confirms that between 9 and 12 home textile manufacturers have set up industries in Bangladesh. The readymade garments manufacturers are taking a delegation to Bangladesh after Eid to scout joint ventures and investment possibilities. It is to be noted that since January 2011, European Union has allowed semi-finished and finished fabrics from SAARC countries if used by other SAARC countries, including Bangladesh, under the regime of SAARC Regional Cumulation in which the value-added products made from these intra-SAARC exports by Bangladesh would also be eligible for GSP+.
The industrialists of Karachi have to suffer law and order situation, power shortages, low water supply, and gas difficulties, as well as Pakistan not enjoying GSP+ for exports to EU. Furthermore, the trade and industry community is subject to extortion and arm-twisting by political and other organizations. This bhattha collection syndrome has taken huge proportions in the last couple of years. Unfortunately, the political parties, the government, and the law-enforcing agencies have not been able to stem this menacing tide. All these factors have compelled investors to set up or contemplate the setting up of units in other countries. There is news of funds being transferred to Quality Industrial Zone in Jordan. In Malaysia too, Pakistanis are investing heavily with emphasis on construction and trading. This was also revealed a couple of months ago by the outgoing Malaysian Consul General in Karachi.
Education has been seriously affected due to continued violence and strikes. Educational institutions are closed without any notice and examinations are postponed at the last minute. The education standard has deteriorated and has put the schooling careers of thousands at stake. KCCI estimated that about 35000 students from violence-affected areas are not attending classes while around 700 teachers are unable to take classes in Kati Pahari and Orangi, etc.
Weddings, funerals, and social gatherings have been negatively impacted and this has also affected the viability of service providers as well as employment. Daylight robbery is the norm and burglaries are an every day thing. Citizens have started to erect barriers that limit access to their neighborhoods and there is a substantial increase in demand for armed guards.
Karachi has over 15,000 industries in the organized sector while there are more than 50,000 units in the informal or unorganized sector that are generally not under the purview of either Labor Department or EOBI/SESSI etc. The workforce figures do not reflect real employment because employers tend to understate the number of their workers to these departments and agencies. However, conventional wisdom reckons that if each factory on an average employs 200 workers, then the 15,000 industries should be having in excess of 3 million direct employees. If the workers of the informal or unorganized sector are included, plus taking into account home-based workers, then one could state that Karachi provides direct employment to over 5 million workers. This does not take into account domestic workers or volunteers working infrequently.
Recently, it has been seen that strikes are becoming common again. KCCI has noted that 36 announced strikes have taken place in the recent past. So much so, that even the Karachi Port has been shut off due to strike to protest the murder of a third-tier leader of an ethnic-based political party. PIA employees went on a strike against a politically appointed Managing Director, while the KESC management-workers imbroglio made Karachi hostage to loadshedding and riots for many weeks. Few days ago, the Custom people went on strike to protest the arrest of a colleague who was nabbed for committing a fraud of over Rs 1.50 billion. Pakistan’s trade was badly affected due to non-operational status at the Custom House.
The law and order situation alongwith prolonged loadshedding has affected worker‘s productivity severely. It is estimated that productivity has fallen by over 25% even when Pakistani worker’s productivity is acknowledged as less than a comparable Bangladeshi or a Sri Lankan worker. The official GDP figure of less than 2.40% is testimony to the difficult economic conditions of Pakistan; the main reason being the state of affairs in Karachi.
The situation in Karachi is primarily due to the machinations of political parties and due to their non-chalant attitude towards Karachi. This metropolis was called The City of Lights. This appellation was cherished with devout pride by the denizens of Karachi. What happened that today it is the City of Blood, the City of Darkness, and the City of Chaos?
So, can there be a U-turn by the political parties to seriously and earnestly endeavor to bring peace? Will they listen to the “signals” emanating out of the meeting of the Formation Commanders in GHQ? Will they seriously take cognizance of the daily killings and the mayhem in Karachi?
The political parties are basically fighting to maintain their turf. These parties have protectors of strong and dominant players in gun-running, land-grabbing, and drugs-marketing. The income from these activities is phenomenal and also provides power and importance. Most of the warehouses in Khadda/Moosa Lane/Kharadar/Boulton Market/Marriott Road are owned by unscrupulous importers to take advantage of the notorious Afghan Pakistan Transit Trade Agreement as well and other import “manipulations” by bringing foreign consumable goods. They pay about Rupees 100,000 per container for night-time unloading to store goods in the warehouses while “protection” of these warehouses is another big money-making racket that was partly exposed during the Ashura bomb blast and arson at the Boulton Market two years ago.
At the same time, where on the one hand, an ethno-political party has a mesmerizing control over Karachi, then on the other hand, the other parties are striving to get a foothold in the City’s political arena and to wrest seats from the control of this ethno-political party. This has naturally brought about a harsh reaction resulting in a brutal law and order situation culminating in daily deaths in double figures.
Do the politicians really want to bring about a peaceful and livable environment in this city? The task is onerous and the journey difficult. But, if there is a will there is a way. The first and foremost step to be taken is that all party flags, posters, graffiti, and slogans must be eliminated and wiped out from the city. Secondly, there would be no display of arms at political meetings nor would the politicos move around with armed escorts. Thirdly, what is of prime importance is that the political parties must keep at bay their hardcore militants and must ensure that political patronage is not accorded to militants arrested by the law-enforcing agencies.
There have been so-called De-weaponization campaigns and at the same time clarion calls for ridding this City of arms. It is easier said than done. Thousands of arms licenses are being issued on political grounds by the Home Department. The Interior Minister reveals that sophisticated Israeli arms have found their way into Karachi. The solution is however possible. Enact a Federal law making illegal arms a crime punishable by life imprisonment. Then make sure that once a culprit is arrested, that person must be sentenced if found guilty and if there is political pressure on the law enforcers, the name of the politician pulling rank must be forwarded to the Prime Minister for taking action against that politician. Meantime, an amnesty may be declared for those possessing illegal arms. This is a tall order but efforts must be continuously made in this matter.
Lack of employment opportunities is one major reason for the despondency and for the escalation in the crime rates. A massive, fast-track program must be initiated by the government to introduce projects such as low-cost housing in this country. This would directly spur up activity in 45 industries and provide jobs for millions. This is the only viable initiative for reducing unemployment and attacking extremism, terrorism, and crimes.
Therefore, it is high time all leaders of political parties must seriously, for once, have a two-day All Parties Conference to deliberate and agree on a three-point agenda:
Law and Order
Code of Conduct
This would be the Charter of Peace. This would be guaranteed and monitored by the Armed Forces, by the Judiciary, and by the Business Community.
HO CHUKI KHAK O KHOON KI HOLI
AE KARACHI AA TUJHE GULAB KARAIN
AAG JIS NE LAGAYI GULSHAN KO
AAO AB IS KA EHTESAAB KARAIN
Majyd Aziz is a Karachi based Entrepreneur and a senior leader of the business community. He is a former Chairman of SITE Association of Industry, former President of Karachi Chamber of Commerce & Industry, and has held posts on the board various public organizations and companies.
Posted on 2011/08/16, in Business & Economy, Guest Posts, Pakistan and tagged Business, Economy, Employment, Ethnic Violence, GDP, Industry, KCCI, KESC, Pakistan, Pakistan Army. Bookmark the permalink. 3 Comments.