Pakistan's leadership and civil society often talk about the cost borne by people in siding with USA on 'war on terror' but no one has flagged the losses that our country tolerates when any political party opts for a strike in Karachi. The Karachites witnessed three strikes just in March 2012 and overall eight strikes in 2011. Like every major cities of the world London, New York, Tokyo and Mumbai, Karachi contributes massively to the economy of Pakistan. To recall, Karachi serves as Pakistan's headquarter for the services as well as the manufacturing sector. Its contribution in national output, trade and tax receipts accounts massively at 70 percent, 100 percent and 60 percent respectively. Apart from direct economic cost, the social cost is even higher as more than 55 percent of overall labour force (majority on daily wages) is attached with the services and the manufacturing sectors. This further aggravates law & order situation and domestic violence in the city.
The economic cost
Pakistan's gross domestic product is estimated at $240 billion per year, which translate around $1 billion or Rs91 billion GDP per day. If a strike is observed in the country, and particularly in Karachi, according to most analysts, the country suffers losses in the proximity of $300-400 million. If we take into account eight strikes observed in 2011, the country lost around $3 billion (or 1.2 percent of GDP) in the shape of national output.
The tax collection and its share to GDP is lowest in the world at around 9 percent. If the country suffers losses of around $3 billion in output, tax collection losses to the national kitty are estimated at Rs25 billion, sufficient to absorb fertiliser and wheat subsidy or to reduce fiscal deficit by 0.15 percent of GDP.
Similarly, Pakistan's export to GDP is also dismal and just around 10 percent of GDP, lowest even if we compare to the regional non-exporting peers. The bulk of export cargo handles from Karachi port. Strike on any particular day cost around $77 million worth of exports. Therefore, Pakistan's lost around $616 million worth of export opportunities just in 2011.
What the country lost in the last decade?
Taking an average of 10 strikes per year, businesses in Pakistan were closed for 100 days in the last decade. In terms of national output the country has under produced $30 billion worth of goods & services. Half of the Pakistan's external debt, two-times the Pakistan's current foreign exchange reserves, and 100 percent cost of the Kalabagh and Basha dam. In terms of trade, Pakistan has missed exports opportunity of around $6 billion, again one tenth of the country's external debt and 65 percent of the loan we have received from the International Monetary Fund (IMF). The flip side of strikes is even more alarming. We have lost more what we have received from the United States for 'war against terrorism.'
If we go by figures prepared for the US congress by Alan Kronstadt, a specialist on the South Asia affairs, in total Pakistan received around $17.78 billion from the USA during FY02 to FY10. The average comes in $1.97 billion per year, which is 0.9 percent of Pakistan's GDP, 3 percent of total external trade and approximately 6.5 percent of the total government tax receipts. If we further break it up, the total US transfers to Pakistan, the highest amount of $3.05 billion was received in FY09. Imagine we lost more endogenously due to strikes and differences among political parties and then put our sovereignty at stake and beg for external assistance. Lastly, the Parliament is reviewing the Pakistan- USA relationship, they must consider how important the local economy for our survival than the external assistance.
The writer is an economist.