Karachi: The Heart of Pakistan Economy

The business community in Karachi welcomed the support of the Muttahida Qaumi Movement for the new prime minister Mr. Gillani. Good relations between Pakistan People’s Party and the MQM are considered vital for the business community in Pakistan.

According to Pakistan's Dawn newspaper, Shamim A. Shamsi, president of the Karachi Chamber of Commerce and Industry, urged the new team to revisit economic policy issues and resolve them for the good of the people.

“It was wise of the PPP to take the MQM on board as it is an integral part of the current reality of the province. The decision bodes well for Karachi and therefore the country,” Majyd Aziz, a senior leader of the business community, said.

Peace in Karachi is considered crucial for Pakistan's economic growth and prosperity. According to Wikipedia, Karachi is the financial capital of Pakistan and the biggest port city; it accounts for the lion's share of GDP and revenue. It generates over 65% of the total national revenue (federal and provincial taxes, customs and surcharges. Karachi produces about 42 percent of value added in large scale manufacturing and 25% of the GDP of Pakistan. In February 2007, the World Bank identified Karachi as the most business-friendly city in Pakistan.

Most of Pakistan's public and private banks are headquartered on Karachi's I.I. Chundrigar Road, while most major foreign multinational corporations operating in Pakistan have their headquarters in Karachi. The Karachi Stock Exchange is the largest stock exchange in Pakistan, and is considered by many economists to be one of the prime reasons for Pakistan's 8% GDP growth across 2005. During the 1960s, Karachi was seen as an economic role model around the world, and there was much praise for the way its economy was progressing. Many countries sought to emulate Pakistan's economic planning strategy and one of them, South Korea, copied the city's second "Five-Year Plan" and World Financial Center in Seoul is designed and modeled after Karachi.

In the past, the clashes between the ruling parties and the MQM, Karachi's biggest political force, have resulted in serious economic difficulties in Pakistan. The last several years, however, have seen robust economic growth and a close cooperative relationship between the MQM and the ruling coalition in Islamabad. Any progress toward maintaining a positive relationship between the MQM and the PPP would go a long way in sustaining Pakistan's economy for the benefit of the entire nation.

Comments

Riaz Haq said…
Here's an excerpt on Pakistan from a recent piece by Indian journalist Akar Patel:

Why is Pakistan such a mess? Some would blame Islam, but they’d be wrong. The problem isn’t religion at all. The problem is lack of caste balance. There aren’t enough traders to press for restraint and there are too many peasants. Too many people concerned about national honour, and not enough people concerned about national economy. Put simply: Pakistan has too many Punjabis and not enough Gujaratis. The majority of Pakistanis live in Punjab, but well over 50% of government revenue comes from just one city in Sindh: Karachi. Why? That is where the Gujarati is.

Gujaratis are less than 1% of Pakistan’s population, but they dominate its economy because they are from trading communities. Colgate-Palmolive in Pakistan is run by the Lakhani Memons, the Dawood group is run by Memons from Bantva in Saurashtra (the great Abdus Sattar Edhi is also a Memon from Bantva). The Adamjee group, advertisers on BBC, are from Gujarat’s Jetpur village and founded Muslim Commercial Bank. The Khoja businessman Sadruddin Hashwani owns hotels including Islamabad’s bombed-out Marriott. Khojas founded Habib Bank, whose boards are familiar to Indians who watched cricket on television in the 1980s. The Habibs also manufacture Toyota cars through Indus Motors. Pakistan’s only beer is made by Murree Brewery, owned by a Parsi family, the Bhandaras. Also owned by Parsis is Karachi’s Avari Hotels.

People talk of the difference between Karachi and Lahore. I find that the rational view in Pakistani newspapers is put forward by letter-writers from Karachi. Often they have names like Gheewala, a Sunni Vohra name (same caste as Deoband’s rector from Surat, Ghulam Vastanvi), or Parekh, also a Surat name.

Today capital is fleeing Pakistan because of terrorism and poor governance. To convince investors things will get better, the Pakistani government has appointed as minister for investment a Gujarati, Saleem Mandviwalla. The Mandviwallas own Pakistan’s multiplexes, which now show Bollywood. The place where Gujaratis dominate totally, as they do also in India, is Pakistan’s capital market. Going through the list of members of the Karachi Stock Exchange (www.kse.com.pk) this becomes clear. However, few Pakistanis will understand this because as Muslims they have little knowledge of caste.

The Gujarati tries to hold up the Pakistani economy, but the peasant Punjabi (Jat) runs over his effort with his militant stupidity. Why cannot the Pakistani Punjabi also think like a trader? Simple. He’s not converted from the mercantile castes. There are some Khatris, like Najam Sethi, South Asia’s best editor, but they are frustrated because few other Pakistanis think like them. Are they an intellectual minority? Yes, but that is because they are a minority by caste. One great community of Pakistani Punjabi Khatris is called Chinioti. They are excellent at doing business but in a martial society they are the butt of jokes. I once heard Zia Mohyeddin tell a funny story about the cowardice of Chiniotis and I thought of how differently a Gujarati would look at the same story.
Riaz Haq said…
Here's a Nation newspaper report excerpt on Karachi's contribution to Pakistan's economy:

Economist A.B. Shahid said Karachi’s contribution to GDP amounted to around 16 billion rupees a day, and its daily tax revenues to two billion.

“Karachi is Pakistan’s economic engine, whenever it shuts, it affects the whole economy. Its taxes and industrial and services sectors feed the exchequer and its port being the gateway gives life to the rest of the country,” he told AFP.

“If one wants to cripple Pakistan’s economy, one should do nothing but to get Karachi paralysed.”

Market analysts say disturbances in Karachi are affecting foreign investment as well.

“Most multinationals are based in Karachi, and it has a negative impact when their bosses watch pitched battles on their TV screens in the streets of Karachi,” said Mohammad Sohail, the head of Topline Securities brokerage.

He said foreign investment in Pakistan stood at $5.4 billion four years ago, which shrank to $1.6 billion last year and is expected to further reduce to a maximum of $1 billion in the financial year ending on June 30.

Officials admit growing security concerns and targeted killings tarnish Karachi’s attraction for foreign investors and risk driving business away.

The American raid that killed Osama bin Laden in the town of Abbottabad last May was another punishing blow to Pakistan’s depleted image, raising renewed questions about whether anyone in authority had colluded with Al-Qaeda.

“Local industrialists, mainly textile businessmen, are shifting their investments to Bangladesh, Sri Lanka and Malaysia because of law and order and energy shortages,” said a government minister on condition of anonymity.

The authorities say they are doing their best to tackle the rampant unrest, but admit they have limited means at their disposal. Sharfuddin Memon, spokesman for the home department of Sindh province, of which Karachi is capital, admitted there were not enough policemen in the city but said they punch above their weight in terms of foiling crime and attacks.

The decades since independence in 1947 have seen Karachi transformed into a patchwork of Pakistan’s different ethnic groups — Mohajirs, Sindhis, Pashtuns, Punjabis and Baloch — as migrants from all over the country have come in search of a better life.

Millions in the city rely on daily piece work to make a living, and every day lost to violence or shutdowns is a day without income.

Fruit seller Mohammad Haleem, 34, said the unrest was making it hard to make ends meet.

“I could not earn livelihood for my five kids for most of the last week as it was dangerous to go outside,” said Mohammad Haleem, 34, a fruit vendor.

“It is getting too difficult for me to take a loan to feed my kids as the lenders are themselves in distress.”


http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/business/09-Apr-2012/karachi-contributes-rs-16-billion-to-gdp-a-day

Popular posts from this blog

China Sees Opportunity Where Others See Risk

Economic Comparison Between Bangladesh & Pakistan

Smartphones For Digital & Financial Inclusion in Pakistan