KARACHI, June 2: A working day lost by the poor law and order situation, strikes, violence and disturbance in Karachi inflicts an economic loss of over one billion rupees, including over Rs150 million in indirect tax revenue.
Karachi, being the economic nerve centre of the country, remained in the grip of various acts of terrorism and strikes during the outgoing month of May, which had restricted the actual working days of business to only 17-18. The recent wave of assassinations and killings has claimed around 61 lives, leaving 195 wounded.
The Karachi Chamber of Commerce and Industry had conducted a study of one-day economic cost as a result of strikes and disturbance in 2001. The study says the city suffers a day loss of Rs1.18 billion in terms of GDP losses, besides a Rs154 million indirect tax revenue loss to the national kitty.
"These figures of losses are relevant even today. These show rough orders of magnitude as it is difficult to calculate actual losses," research head at the KCCI economic development cell, Ishaq Subhani, told Dawn on Wednesday.
Karachi's contribution to the manufacturing sector, which was close to 60 per cent, has now come down to 30 per cent. It also comprises about 40 per cent of the total banking and insurance sector. The city contributes significantly to the service sector.
In view of this, the overall contribution of Karachi to GDP is quite significant and substantial. Being the port city of Pakistan, it handles almost the entire foreign trade.
The indirect tax losses are calculated on the assumption of 300 working days excepting excise taxes for which 250 working days are assumed. The loss at customs revenue is conservatively estimated at five per cent of daily customs revenue receipts on the assumption that the overall loss in imports due to untoward incidents is not likely to be more than five per cent and that the backlog thus caused in consignments awaiting clearance is handled on the following dates, the KCCI thinks.
The chamber says Karachi's share in federal excise duty is assumed at 18.6 per cent of total excise duty collection by the federal government. The city's sales tax contribution is assumed at 53 per cent of the federal figure (81 per cent at imports stage and 12 per cent at domestic level).
Country's revenue collection in May 2004 declined by 28 per cent to Rs37.4 billion against the target of Rs51.9 billion. Assuming that the industries suffer production losses of around 50 per cent in case of strikes, violence and killings and the share of Karachi is over 50 per cent to the entire country's revenue collection - then the 28 per cent decline in May's revenue earnings is well enough to prove Karachi's share to the national exchequer.
Federation of Pakistan Chambers of Commerce and Industry vice-president Haroon Rashid also confirmed a loss of over one billion rupees in terms of production and revenue losses in case of any shutdown in the city.
He said that foreign buyers planning to visit Karachi have altered their plans and they now opt for meeting their import requirements from China and India.
"Flight of capital from Karachi to other parts of the country has already started and may pick up further pace in case the city's situation gets aggravated, Mr Rashid said, adding that some tanneries and textiles makers have already shifted their businesses to the upcountry during the last one year.
"The government should now come forward and play its due role in restoring peace and tranquillity otherwise time is not very far when industries will start facing closure because of frequent losses and unhealthy business environment," Mr Rashid said.
KCCI acting president Mohammad Saeed Shafiq was of the view that the government had virtually failed to check the law and order situation in Karachi. He portrayed a dismal picture of business activities in case the government continue to look the other way.
Site Association of Industry chairman Mohammad Nisar Shiekhani said that the industries could only run for 17 days in May, causing an average production loss of 30 per cent, particularly in local units. In the first fortnight of May, industrial production remained out of commission for seven days.
Leading exporters have made alternate arrangements, but they had also suffered 12-15 per cent losses in May, he said. The sufferings of the daily-wagers had intensified during May.
He said foreign investors were reluctant to invest in Karachi. Local industrialists are gradually shifting their units to Punjab. He urged the local administration to take effective measures to control the law and order situation prevailing in the city.
According to the KCCI, the strength of value-added manufacturing sector was estimated at over Rs500 billion in which Karachi's contribution to the large-scale and small-scale industrial value-added is 30pc and five per cent, respectively.
The daily economic loss in value-added of the manufacturing sector thus works out to Rs460 million on the assumption of 250 working days. Karachi's share in non-agricultural sectors is estimated at 18 per cent. The daily loss in value-added on the assumption of 300 working days thus works out to Rs600 million.
The economic loss of foreign trade (imports and exports of over Rs1,158 billion annually, which almost exclusively passes through Karachi) in case of violence, strikes, terrorism, etc., is estimated at 10pc of daily exports value and 5pc for imports.