Planning is a provincial function, and unless a provincial government knows how the economy is structured, it cannot make long-term decisions
On a recent trip to Karachi from Islamabad, some of us decided to go out on a sojourn in search of street food. In one hour, we did a round of three restaurants (taking in starters, a main meal, and dessert) on Burns Road, and emerged several pounds heavier, but satisfied that we had gotten our money’s worth — a feeling that we rarely experience on similar quests in Islamabad. Compared to other cities, Karachi is affordable, as it offers excellent quality food and more frequently features the concept of clustering wherein similar businesses tend to occupy adjacent spots. It has a big city feel that not even Lahore can boast, with truly a cosmopolitan outlook. Not to mention the city’s philanthropic tradition which truly does not have any parallels in the rest of the country.
Given that it is Pakistan’s largest city, financial hub, and a major contributor to the economy, Karachi’s derelict look and obviously poor infrastructure is an anomaly. Any discussion on its contribution to the national economy generates heat, with detractors pointing out that being the only major seaport in the country (Gwadar’s still in infancy), it is bound to generate revenue through customs receipts and transport if nothing else. The argument goes that the taxes paid in Karachi represent economic activity all over the country. This is true, but underplays the fact that Karachi’s contribution to direct taxes is also exceptional, with the city contributing over 60 percent of all direct taxes according to some estimates.
The reason ‘some estimates’ are stated here, rather than providing exact figures, is that the government is extremely wary of estimating and publishing sub-national GDP, and even information on tax collection city-wise is not easy to come by. Instead, we get press releases from the Federal Board of Revenue (FBR) with aggregated information, like the much-touted figure that 83 percent of Pakistan’s direct tax collection comes from just three major cities; Karachi, Lahore and Islamabad.
The reluctance to compute sub-national GDP, or to emphasise one region’s economic activity compared to another stem from the historic rivalry between West and East Pakistan, wherein resource generation and sharing was the key bone of contention which led to dismemberment of the country. Post-1971, the government seems to have decided to err on the side of caution and simply not say anything about how one part of the country is doing compared to another. While this may stem accusations and recrimination to some extent, it also does not leave planners and policy makers with much to chew on.
Planning is a provincial function, and unless a provincial government knows how the economy is structured, it cannot make long-term decisions. Provincial governments have in the past attempted to do GDP estimates, with assistance from agencies such as the World Bank, but these efforts are based on extrapolation from national GDP figures and are top down rather than bottom up. In any event, with little or no support from federal data collection agencies, who collect the bulk of data on industrial output and services, the effort lacked credibility.
Karachi, in particular, suffers due to this reluctance to devolve data collection. No federal government in Pakistan wants to admit that up to a fifth of the country’s GDP may very well be generated from a city whose political leadership is continuously at odds with the powerbrokers in one way or the other. In fact, the lesson to be drawn from this would be the opposite — that the city has such a growth momentum, due to sheer size if nothing else, that it manages to generate economic activity despite poor leadership, neglect, and a political atmosphere that has allowed for the proliferation of all sorts of financial, sectarian and ethnic crimes.
A detailed, quantitative study on Karachi’s economy would provide fascinating insights on resilience, entrepreneurship inadverse circumstances, and the vagaries of doing business in a hostile political atmosphere, with minimum support from the public sector. It could be an excellent opportunity to learn some lessons on what has kept the Pakistani economy chugging along at an average 4 percent annual growth for almost two decades, despite mismanagement, security crises and a series of natural disasters. Authorities should be brave enough to consider doing such work, with the aim of expanding it to other key regions.
The writer is a researcher based in Islamabad