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The Economic Genocide of Karachi

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MA-LAUGH-1A 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:

  1. Economy
  2. Law and Order
  3. 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.



Businessmen’s Silence is Deafening

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MA-LAUGH-1A Guest Post by Majyd Aziz

PAKISTAN is fortunate to have a formidable number of experienced, visionary, and dedicated entrepreneurs who have carved out a name for themselves in trade, in industry, in social activities, and at global forums. Inspite of monumental odds and roadblocks, whether in the domestic environment or in international markets, Pakistani businessmen and industrialists have persevered and succeeded. Over the years, they also formed Chambers, Associations, Forums, and Groups to protect, promote, and project their views, their endeavors, and their organizations.

"Our lives begin to end the day we become silent about things that matter." Martin Luther King, Jr.

The trade and industry community has also boldly taken stands whenever the need arose. In 1990, under the aegis of SITE Association of Industry and APTMA, a forum SICORLO was formed to protest the deteriorating law and order situation. At that time, SICORLO issued advertisement on a daily basis making fervent appeals for the restoration of law and order. Millions of rupees were spent, and this campaign proved so effective that the government had to step in, literally pleading that this “sob-story” was giving a notorious reputation to the country and that it could turn out to be counter-productive in the long run. Things did improve for a short time thereafter and then the country was back to square one mainly due to juvenile politicians.

In 1986, under the dynamic leadership of a brave business leader, the late Ejaz Shaffi, the SITE Association of Industry led the campaign against the enforcement of a draconian system in Excise Duty that the mandarins in the erstwhile Central Board of Revenue had tried to introduce by camouflaging it as “simplification procedures”. This was a hectic nine-day protest, where five to six hundred industrialists would gather daily at SITE, keeping their factories shut, and listening to the motivational oratory of Ejaz Shaffi and other leaders. After nine days, Premier Junejo had to fly to Karachi, and at a meeting with the industrialists at the Sindh Governor House, declared that this draconian exercise planned by the egoistic CBR officers would be ended immediately. All this happened during the martial law tenure of General Zia.

The above events are narrated because I was fully involved in both. These brought me into limelight and established by bona fides as a representative of trade and industry.

In recent times, businessmen have had their protests but these have been few and ineffective. Once even FPCCI went on strike during the tenure of Benazir Bhutto but she got the better of it. Recently, a self-styled leader of small traders called a strike against extortion and law and order. Initially, the Karachi Chamber President agreed to support it but Interior Minister Rehman Malik and the Sindh Governor prevailed upon the KCCI leadership to cool down. Resultantly, the strike fizzled out and the small traders’ leader got, what Andy Warhol once said, his fifteen minutes of fame. He was a hot item for a couple of days on the media but then the party was over.

The reason I am presenting these examples is that today, when Pakistan needs to sort out its various problems, the role of the business community is zilch because it is at a crossroads. It has this feeling that policies and events in this country are working against businessmen and their very survivability is at stake. The businessmen have this feeling that they have lost whatever ground they had achieved in the last some years. A situation has developed where it seems that the businessmen are damned if they do anything and damned even if they do not do anything.

The leaders of the business community generally tend to play it safe when it comes to dealing with the ruling party, even in these days of democracy and freedom of expression. The present economic scenario and the recessionary trends in the country along with cost increases, utilities shortages and high rates, coupled with low demand, volatile business conditions, uncertainty of the rupee-dollar parity, and the deteriorating law and order situation, not to mention the upsurge in strike calls, have brought businessmen into a frenzy. Their long-term planning has gone to the dogs while in the short run the capital crunch is proving disastrous. The stock exchange is going down like a roller coaster and the media is showing the mess in vivid colors. It seems that in Islamabad the economy is on the lower strata of the government’s agenda, and the Finance Minister is spending more time in the corridors of IMF and World Bank rather than interacting with the businessmen. In his absence, the FBR fudges figures and the Finance Ministry gets pie in the face. All budgetary calculations are based on what loans and aid Pakistan will or can receive rather than endeavoring to expand the tax base at home.

Pakistan faces on-going violence in Karachi, resulting from political grievances which have been enormously magnified by extremism and lawlessness. It is a shame that the law-enforcers are so impotent that they are not able to control the city. There have been reports that they tend to become silent spectators rather than assiduously performing their obligations. Moreover, if there were no Edhi, Aman, or Chhippa ambulances, how would the injured and dead be transported to the hospitals or the morgue? And the less said about KESC, the better.

The political impasse has been putting a heavy toll not only on Karachi’s economic picture, but also on the nation’s economic progress. At the same time, the effect on foreign investment in Karachi is also being felt. The head of a multi-national stated bluntly that “foreign businessmen are now becoming reluctant to invest under the prevailing circumstances and the only option left for them is to check out other countries.” Another declared in clear terms that the US investors have lost interest in funding projects due to civil strife in Karachi. His colleague added “although foreign investment is not a panacea of all ills, yet the influx of foreign investment in power generation, infra-structure development, and other sectors could help solve crucial issues.” A Japanese representative of a trading company stated that the Karachi problem has discouraged Japanese investors from coming here and that there “is a general feeling among the foreign investors that Karachi is no longer safe to invest.” Another Japanese moaned the circular debt when requested to invest in an upcoming coal-based power project. Ominous words that further erode the image of this city.

The beef against the business leadership is that matters are taken in stride and, if need arises, a press release is issued condemning this or that. That’s it. There is apathy even when rates of utilities are increased multifold. There are murmurs but no conviction in statements or actions. Extortion by vested interests is a daily occurrence but there is acquiescence within the business leadership. Market leaders collect funds on a shop-basis and then distribute them to various extortionists and political elements. Quite easily done. No hassles.

There is no better time than now for the business leadership to catch the bull by its horns. There have been no overtures made to the political parties or to the government or even to the armed forces and judiciary. There has not been a unified stance by businessmen to play a prominent and purposeful role to handle the crisis. The silence is truly deafening. Silence is not golden in this case. The FPCCI President with the support of business leaders like Tariq Sayeed, Siraj Teli, S M Muneer, Aqil Karim Dhedhi, and Asad Umar must initiate the dialog and must energize everyone towards the resolution of the crisis. Hope is there if businessmen mediate and if businessmen put some sense in the ranks of politicians. The FPCCI President is also a Senator and thus is better placed to carry on the task.

So, what it boils down to is that circumstances could look favorable for a solution to the political and economic imbroglio that Karachi is facing. The process should begin. All it needs is a pragmatic, resolute, and sincere push from the businessmen. From Asif Ali Zardari, Altaf Hussein, and the twenty million residents who want their City to become once again a peaceful, secure, and bustling city, this is the message. Peace and prosperity soon!

"There are a million ways to lose a work day, but not even a single way to get one back."

Tom De Marco and Timothy Lister

 

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.


Impact of the OBL episode on Pakistan’s economy

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MA-PP-20110505-WB-SMALLA Guest Post by Majyd Aziz

 

The Doomsday theorists and the ignorant anti-American elements in Pakistan have become over-active after the showdown in Abbottabad. Suddenly, they are back into action with their I-told-you-so rabble rousing posture and are trying to galvanize the citizens into a universal condemnation of not only Washington but also the civilian leadership and the military hierarchy of the country. President Obama is being considered as a re-incarnate of the younger Bush while all hell is being let loose on the two well-protected high rollers safely ensconced in Islamabad. The brave among this inciting crowd, all the more fortified by the drawing room analysts and pseudo-democrats, are out to get the scalps of the two Generals who had their tenures extended.

The Formation Commanders made the right noises by warning the White House, in fact, warning the world not to attempt such an adventure again inside Pakistan’s territory. There was the usual talk about ending the drone "culture", reduction in the number of Americans moving all over this nation, and threatening to "review" cooperation between Pentagon and Rawalpindi. Hallelujah. It reminds one of the classic Peter Sellers’ movie The Mouse That Roared. It may play well in maybe Gujranwala.

However, what is missing in all this wailing and blaming is that no one has seriously considered the impact this draconian adventure would have on Pakistan’s tottering economy. Come next fiscal year, there is going to be a fundamental shift in the nation’s budget planning and revenue expectations. The Finance Minister and his jolly band went to IMF with a structured begging bowl but the high priests sitting in the citadel of this institution showed them unusual courtesy by escorting them out the exit door sans any largesse. State Bank of Pakistan big boys have put their hands up in desperation that inflation is still an uncontrolled albatross around the economy. The euphoria in Trade Development Authority of Pakistan and in the minds of less knowledgeable spin-doctors of the ruling party that the export figures would be at all-time high, based on the extraordinary performance of the raw cotton and spinning sector is fizzling out sooner than expected. Half of the spinning mills are switching off their machines because all of a sudden the global demand went poof.

Copyright: Sajjad Hussain | Getty Images

The Finance Ministry officials transformed the Ministry from a being a facilitator to trade and industry by playing their own version of contract bridge by considering themselves as "us" and the businessmen as "they". When there was genuine opposition to the introduction of the macabre Reformed General Sales Tax, some hare-brained official came out with the asinine proposal to get the country’s President to issue three Ordinances as part of the Plan ‘B’ conjured up by minions in Federal Board of Revenue. Lo and behold. The trade and industry representatives got these officials on the carpet and within no time, the Ordinances became stale jokes.

The Federal Budget is due on May 28 and the energetic but elusive Finance Minister will again attempt to teach the Parliamentarians a lesson or two in Economics 101. He has already received a bagful of help from the Presidency who outmaneuvered seasoned politicians and got them to do the tango with him. The budget would be approved but at what cost? Is the country ready to bear the ramifications of what the good Senator Doctor Sheikh has in store for the 175 million denizens? Would it be an ingenious financial vision or would it be dictated orders from IMF and other International Finance Institutions? The answer would be certain when the dust clears on the last Saturday of this month.

Should one recount what is happening on the physical infrastructure scene? Very casually and without fanfare, the nation is now short of 7000 mw of power. Very brazenly, the natural gas people unilaterally decree that gas would not be available for industries and CNG Stations. Those who decide at what cost Pakistanis would get petrol ritualistically but forcefully announce that petrol, diesel, and other petroleum products would now cost an arm and a leg.

The reason why this economic picture is being presented is to bring to the fore the very fact that the OBL episode has come at a very delicate time for Pakistan. The billions spent on the Global War on Terror by this cash-starved nation, the fabulous military victories in eliminating terrorists and extremists from the wild, wild north of the country, and the confidence reposed in the valiant forces by Pakistanis have suddenly burst like a pin pricked balloon. The general feeling was that in spite of the difficulties people faced on the economic front, it was essential and crucial that the Armed Forces were provided with everything to protect and secure the borders and the strategic assets.

This confidence in the Armed Forces must not be allowed to wane. Pakistanis must continue to support and encourage the brave forces. The entire Defense establishment must learn whatever lessons it has to learn and must carry forward. Demagogues and Fifth Columnists must be ignored and should not be given prominence by the electronic and print media.

There should not be despondency and blame-game either within the forces or among the politicians. Dejection at this stage will ruin the country by hampering its economic progress. This is the time for all decision makers to sit with the mainstream businessmen and industrialists to get the country out of this economic quagmire. The Pakistan Business Council attempted to get the politicians to sit with them at the same table and discuss the economic agenda. A noble step, but it did not create any waves because mainstream trade and industry representatives were excluded while third or fourth tier nominees from the political parties came to Serena in Islamabad to make the usual pompous statements. (Incidentally, this writer had proposed such an All-Parties Conference while taking part in a PTV program hosted by Dr Huma Baqai a couple of months back. So, credit to PBC for following it up and spending money to get politicians together).

The impact of the OBL drama would not be as damaging to the country as propagated by many analysts. This is not the time to strain relations with USA and other Western countries. Secretary of State Hillary Clinton has offered a comfort zone to Pakistan. Assurances are coming from Foggy Bottom as well as from Capitol Hill that Pakistan would be supported and that Pakistan needs maximum cooperation from Washington. This is the time for the government and even the Armed Forces to ensure that American financial assistance is not squandered away and also that Pakistan should be provided all facilities to procure smart defense technology to continue its frontline role in exterminating terrorists and extremists from this country. Emphasis should be on foreigners who have created havoc by assuming the role of so-called Jihadis. The Saudi Arabian, Sudanese, Egyptian, and the Chechen Jihadi elements must be declared persona non grata and their native countries be forced to take them back.

The recent positive outcome of the talks between the Interior Secretaries of India and Pakistan in New Delhi and the Commerce Secretaries in Islamabad and Bhurban will open new vistas of economic cooperation not only between the two countries but among all SAARC nations. This is a breath of fresh air and the expectations are positive and beneficial for Pakistan. Furthermore, there is expectation of foreign investment not only from India but also from other countries. This is the time to invite massive investment in minerals exploration, in information technology, and in livestock. These would create jobs and pump up the economy.

Pakistan cannot afford to be strangled by the OBL opera. Once lessons are learnt, once accountability has ended, and once the nation’s skies are really made impregnable, the concentration should be on the economy. The most unpatriotic thing a citizen can do at this juncture is to be persistent in carping about the capability and competency of the Armed Forces while at the same time, all those who are neglecting efforts to rejuvenate the economy are guilty of the same crime too. This is the ideal time to say "YES" to the Founder’s motto: Unity, Faith, and Discipline. By the way, what happened to Pakistan First?

 

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.


This article is taken from another source. Views expressed in this article are those of the author and may or may not be the views of From The Pulpit and DiscoMaulvi. To submit content for From The Pulpit, please email FromThePulpit [at] MuhammadAly [dot] Com.

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