Shakeel Ahmad The unrest in Karachi marked by brutal target killings continues to demonstrate the withering away of the State. Karachi, a cosmopolitan city, is home to all Pakistanis, regardless of whether they belong to any part of the country. They are industrial and skilful people, who bring entrepreneurship and marketing skills for their products. It produces 70 percent of Pakistans domestic requirements of industrial and commercial goods. However, currently trade suffers a loss of over Rs5 billion in a single day due to sharp decline in sales, as buyers avoid visiting markets. If necessary measures are not taken immediately to ensure normalcy in the city, it will have far-reaching effects on trade and industry all over the country. Undoubtedly, Karachi is the countrys investment and trade gateway and its economy is the linchpin of national economic growth performance, as it contributes almost two thirds of the total revenue to the exchequer. The city produces about 42 percent of value added in large-scale manufacturing, and 25 percent of Pakistans GDP. In other words, the city itself contributes over 80 percent to the Gross Provincial Product. The economic activities in Karachi contribute more than $40 billion to the countrys total annual GDP. So if the city continues to bleed, it will affect both local and foreign investment. Moreover, Karachi is the only port and major industries and businesses are located there. In addition, the Karachi Stock Exchange is the countrys largest having an annual turnover of Rs436 million. About 70 percent of income tax and 62 percent of sales tax collected by the federal government comes from Sindh, and 94 percent of which is generated in Karachi. It has 4,500 industrial units in the formal sector. The major industries are textile, leather, paper, marble, ceramics, rubber, plastic, glass, iron, electronics, pharmaceuticals, food products, agricultural and dairy products, and stationery; many of them are export oriented. There are no estimates available for the informal sector, but 75 percent of the working population is employed in the informal sector. In recent years, a link between formal and informal sectors has been established with the formal sector subcontracting work to informal establishments. Further Karachi dominates Sindhs economy. This is evident from the fact that the industrial sector employs 71.6 percent of the total labour force in Sindh, with a value of fixed assets that is 71.4 percent of the total. Of the total number of large-scale units in Sindh, 72.7 percent are located in Karachi, and 74.8 percent of the provinces output is produced in Karachi. The citys growing importance in the national economy is reflected by the increase of cargo handled by the Karachi Port that was 2.8 million tons in 1951 and 29 million tons in 2001. Economic analysts estimate that the economy takes a hit of an additional Rs7 to Rs8 billion a day in lost production, wasted work hours, and drop in sales. The purchasing power of working class and low-income groups erodes further, as daily-wage earners and people engaged in small enterprises remain unable to earn when the wheel of business and industry halts. This is bad for Pakistans economy, which has been caught in the vortex of low growth and high inflation for the last three years due to the war on terror and rising global food and oil prices. The violence in Karachi has, indeed, become another dampening factor for the business and investment environment. The major political parties, including the ones in Sindhs ruling coalition, instead of working for the rule of law and peace, themselves have become part of the problem due to their illegal financial stakes in the city. No wonder, Karachi drifts from one bloody cycle of violence to another, weakening the States financial hub and economy, while the government looks the other way. The 2011-12 budget is intended to create macroeconomic stability in order to pave the way for microeconomic sustainability. It is aimed at growth and development, as well as welfare of the people on an equitable basis. Owing to a number of domestic factors such as violence in Karachi, chronic energy shortage and deteriorating law and order situation, the overall economic performance appears somewhat dismal as the economic growth slows down to 2 percent against the 4.1 percent growth in the last fiscal year. Unfortunately, this years target of 4.5 percent is unlikely to be achieved, if the Karachi mayhem is not arrested. A decline in GDP will have various negative repercussions for the economy. The tax efforts have yet not yielded the desired results. With the shutdown of trade and commerce, the targets fixed for tax collection are unlikely to be achieved. This is fraught with dangerous consequences for the national economy. The government will have to resort to borrowing from banks to meet the budget deficit, which will push inflation further causing seething social unrest. It would do well to place Karachi permanently on the governments radar screen. n The writer is a retired secretary of the Government of Pakistan. He is a member of the former Civil Service of Pakistan. Email: