KARACHI: Individual as well as institutional investors in the country saw a huge fall of more than Rs200 billion in their combined income in 2003 compared with what they used to get five years ago. This applies to those who keep money with banks or invest in government securities through which it raises domestic debt.

The total amount of money paid in returns on domestic debt and on bank deposits fell to Rs262 billion in 2003 from Rs468 billion in 1999 - a big decline of Rs206 billion. This happened due to frequent slashing in the rates of return on National Saving Schemes; Treasury Bills as well as bank deposits. The above- quoted figures that some local bankers have worked out for better decision-making on behalf of their bank are not final. But these show the changing trend.

Trends have changed indeed. Banks are now working with lesser number of branches and employees but they claim to have become more efficient-and even more profitable. It is separate story, however, that they have caused wide-scale joblessness in the process.

Three state-run banks (two of which now stand privatized) either fired or sent back home with a golden handshake about 37,000 employees in five years to 2003. The staff strength of National Bank, Habib Bank and United Bank combined fell to 39,600 at the end of 2002 from 76,500 at the end of 1999. The three banks shut down 1460 branches during this period bringing down their combined network of branches to 3790 in 2002 from 5250 in 1999.

The actual number of lost jobs due to restructuring of banks must be higher because two other leading banks, Muslim Commercial Bank and Allied Bank, had also shut hundreds of branches in 1997- 2002. But at the same time some local private banks expanded their branch networks.

The State Bank figures on overall number of branches of the banks operating in Pakistan makes the picture clearer: In five years to 2002 the number of all bank branches including overseas branches of Pakistani banks fell from 8671 to 7240 i.e. 1431 branches disappeared from the scene. Unfortunately, SBP does not keep a record of the numbers of the bank employees.

Top bankers have been propagating that the closure of unviable branches and rightsizing of staff has put the banks that did it to the path of progress - and has also helped the banking sector grow.

But the question is: has this led to the growth in the real sector and opened up new job opportunities?

"Yes it has - by providing the capital needed to the industry to grow which in turn creates employment," says Habib Bank President Mr Zakir Mahmood. He says that banks have been offering loans "for both working capital and for investment in new capacity."

National Bank President Syed Ali Raza says banks have given $1.3 billion loans to the textile sector alone as part of their total $3 billion investment in BMRs under textile vision 2005.

"Upsurge in industrial activities is broadly supported by higher domestic demand for consumer goods," he says referring to growth in large scale manufacturing (LSM).

Mr. Raza says that automobile and electronic sectors have benefited because of loans provided by banks and leasing companies. "Higher allocations for infrastructure development, like the construction of Gawadar Port, small dams, bridges and roads have helped construction related industries i.e. cement, steel, paints and varnishes, etc."

Both Mr Zakir Mahmood and Syed Ali Raza believe that the revival of LSM that grew by 8.7 per cent in FY03 against 4.9 per cent in FY02 would open up new jobs.

Says Mr Mahmood: "Higher demand for consumer durables and housing will create demand for the industry supporting these two sectors and therefore employment. Housing in particular is expected to create employment in more than 15 different industries."

But "also bear in mind that there is - in most cases a time lag between investment and job creation," warns Syed Ali Raza.

This indeed is the case. In four months to October 2003 LSM grew further by 14 per cent against 3.5 per cent in a year- ago period. Metal industry that is directly linked with housing industry grew by about 23 per cent and automobile sector by 55 per cent.

Top bankers say this could not have happened without liberal lending by the banks. Higher growth in LSM must have led to job creation but in the absence of official data one cannot say how many jobs have opened up.

Of late the financial sector itself has started offering new job opportunities after the restructuring of banks and revamping of the stock market.

A senior official of the United Bank said the number of UBL employees has risen from 8525 in 2002 to 8881 in 2003 as the bank after having been privatized last year started providing client- specific services.

A National Bank official said his bank also inducted a few hundred fresh bankers last year mainly at entry levels. The number of NBP employees rose from 12,195 in 2002 to 12,664 in 2003.

Karachi Stock Exchange Chairman Mr Arif Habib told Dawn that the growth in listed capital of KSE over the years has created both direct and indirect job opportunities. "The corporates whose profitability went up due to booming capital market went for capacity expansion that created more jobs," he told Dawn.

Mr. Habib said that with the development of the mutual fund industry more job openings are expected at brokerage houses as well as with investment advisory service providers. "Our own company (Arif Habib Fund Management) has lately hired 400 young sales managers for marketing our investment products," he said.

Top bankers and stock brokers take pride in the fact that the financial sector is emerging as job providers to many. But they conveniently forget that Rs206 billion fall in incomes of individuals and institutions have effectively left several thousand people jobless. This is in addition to the direct job losses due to the IMF-World Bank sponsored banking sector reforms.