Plight of Pakistan's primate city

ARTICLE: Karachi is the primate city of Pakistan. In the earlier years of Pakistan's history, it also served as the national capital. Now it is the primary and the largest economic hub of the country. The metropolis has the locational advantage of being the port for bulk of Pakistan's exports and imports. It also has a relatively educated labour force and enjoys both agglomeration economies and economies of scale.

The 2017 Population Census has reported a population of Karachi at 14.9 million. The inter-censal growth rate from 1998 to 2017 is estimated at 2.4 percent. This is significantly lower than the inter-censal growth rate of 3.4 percent between 1981 and 1998. If this growth rate had continued the population of Karachi in 2017 would have been 17.6 million. This has led to justified speculation that the population of Karachi has been significantly understated at 14.9million.

There are reasons to believe that the population of Karachi is larger and in the range of 18 to 20 million. First, the data from the Labor Force Survey of the Pakistan Bureau of Statistics reveals that the rate of migration into Sindh remained very high at least up to 2008-09. The destination of a large proportion of migrants was probably Karachi. Based on the likely number of migrants on top of the natural increase, the population of Karachi is estimated at over 18 million. Similarly, on the basis of domestic electricity connections the implied current population is close to 19 million.

Therefore, the city accommodates over 20 percent of the urban population of Pakistan and 60 percent of the urban population of the province of Sindh. It is truly a 'mini Pakistan' with people from all parts of the country living in the city.

The city of Karachi also accounts for a sizeable segment of the economic activities in the country. Based on diverse sources, it is estimated that it contributes 18 percent to the GDP of Pakistan. This implies that the size of the economy is Rs 7500 billion, equivalent to almost $45 billion. There is a concentration of industry and financial services in the city. Estimates are that over 25 percent of the national value-added in manufacturing, over 30 percent in the banking sector and 19 percent in wholesale and retail trade is generated in Karachi. The city attained the peak growth rate during the Musharraf era when the unemployment rate fell to below 4 percent. It has since risen to above 7 percent.

The city makes an extraordinary contribution to both federal and provincial tax revenues. According to the FBR Year Book of 2018-19, almost 56 percent of the revenues of FBR were collected from Karachi. This amounts to a contribution of almost Rs 2200 billion. In effect, the tax-to-GDP ratio of the city is over three times the national average. Of course, over 85 percent of taxes levied on imports are collected from Karachi port. But what is not fully appreciated is that the city yields almost 42 percent of revenues from income tax and 37 percent from the domestic sales tax on industry.

We come now to the fundamental problem. The city has historically acted as the 'goose which lays golden eggs'. Revenues generated from the city have gone into the federal divisible pool and largely distributed therefrom throughout the country. Estimates are that less than 10 percent of the revenues collected come back to the city through provincial and federal funding of projects and services. In the 2006 Interim Presidential Order on distribution of federal revenues, one sixth of the sales tax was to be allocated to the provinces on the basis of octroi and zila tax collections. The objective was to direct funds towards the local governments. But this provision was not retained in the 7thNFC award.

The city has consequently remained woefully starved of funds for maintenance and expansion of basic municipal services and for sustaining the dynamism of the growth process in the city. The budget in 2019-20 of the Karachi Metropolitan Corporation was Rs 44 billion. The corresponding budget of the Mumbai Municipal Corporation was fifteen times larger, even though the city of Mumbai has a population that is not much larger than that of the city of Karachi.

The inevitable consequence has been a, more or less, breakdown of services in the city. There is an acute shortage of drinking water of over 350 million gallons a day. The incidence of power loadshedding is relatively high, especially in the relatively low income areas of the city.

The solid waste disposal system has stopped functioning and the city drainage system is totally clogged. Air pollution has reached very high levels. There is no effective urban transport facility despite the Karachi circular railway. Given the dispersed population, the road network is inadequate. It is not surprising that Mercer has ranked Karachi as among the cities with the lowest quality of life.

The complete breakdown of the city finally took place after the recent record monsoon rains. The city was completely inundated. The roads were like rivers running downstream. Water had entered houses even in the posh areas of the city and inflicted damage on household durables like furniture, electronic goods, etc. The power system stopped providing electricity for days.

Fortunately, there has been the general realization that if the infrastructure and services were not fully rehabilitated and expanded Karachi could no longer act as the economic hub of the country. This would bring down significantly the GDP growth rate of the economy and lead to a catastrophic fall in FBR revenues.

The federal and provincial governments have prepared a joint development plan of Rs 1100 billion for the city. There is unfortunately some bickering on the size of the contribution by each government. This is unnecessary and a coordinated and effective effort has to be made for early implementation of the plan. Otherwise, there is a big risk of migration of population from Karachi putting pressure on other cities in the country. Unemployment in the city could also rise to unprecedented levels. Already, the educated segment of the labour force in the city is facing unemployment at the rate of over 15 percent.

In conclusion, there is a need to recognize the role of the people and the business community of Karachi in the growth and development of Pakistan. They must now be given an autonomous and well-funded local government supported by a substantially higher level of government transfers. Hopefully, with the implementation of the development programme of Rs 1100 billion the quality of life of the people of Karachi will be largely restored.

(The writer is former Vice Chancellor of the University of Karachi)

Copyright Business Recorder, 2020