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September 29, 2020

Karachi and the centre

Opinion

September 29, 2020

Governments in Pakistan should not be judged on what promises they make; judge them on their actions.

Our country is a story of tall promises which were never meant to materialize. The recent hype on the Karachi package refuses to go away as many view it as ‘a dream come true’. For those of us who have witnessed trends in federal development expenditure, it won’t be long to see the dream turn sour.

Our parties in power and opposition have shown amazing capacity to not rise beyond partisan positions. Without 14 NA seats from Karachi and the MQM’s solid support, the ruling PTI in the center would not have maintained their simple majority to continue to rule in Pakistan. Ask their leadership what plans their federal budget offered to the citizens of Karachi in the past two years?

The PTI’s first budget in 2019 allocated only Rs1.4 billion for Karachi’s two projects whereas it allocated Rs25 billion for Khyber Pakhtunkhwa’s newly merged districts. The PTI reduced federal spending in its revised budget for outgoing FY2018-2019.

When the party assumed power in 2018 and faced the daunting challenge of setting priorities, it did not come with a ready plan, so one cannot blame it for focusing on Karachi’s development deficit. But then how was it able to allocate Rs25 billion for KP’s merged districts? Obviously, that was a block allocation for plans yet to be prepared and approved by the necessary layer of departments. They could not think of that for Karachi.

Many economists, experts and TV anchors have conveniently forgotten the context of the resource crunch that the city government and provincial government face. One hears of parallels being made between densely populated metropolitan cities around the world, but no one mentions that most urban metropolises do not depend on federal grants for development needs. From LA to London, Delhi to Tokyo, not a signal city suffers infrastructural gaps because of resource availability. Why? Because the single major source of income for these cities, states and provinces has been general sales tax (GST).

Counties in American states run mostly schools, police and fire departments by generating local revenue by levying six percent sales tax, business licence permits fees etc. But when it comes to our cities they are run on largely provincial fiscal transfers. The Clifton Cantonment Board generates over Rs4 billion from its residents – though there are questions over it.

In Pakistan, if the federal government needs to have a share in the sales tax, it can keep a certain percentage. For example, in India, it started with one percent and later at four percent. In Pakistan, the current sales tax at 17 percent rate is just a plunder of common citizens’ income; a low income labourer pays the same as the super-rich. Can we find a country in the world of Pakistan’s GDP size and population which collects 17 percent as GST?

The most exploitative and extractive British Empire allowed provinces to collect sales tax and carry out necessary functions under the British Raj. Soon after the creation of Pakistan, the center took over the sales tax, initially under the pretext that the newly created central government needed resources. That temporary control continues to stay. Provinces in Pakistan cannot prosper and be self-sufficient unless sales tax collection and revenue is returned to the provinces.

The MQM has failed to defend the interests of the city and the province. As I noted in my previous article on the Karachi issue, when the Water Accord of 1991 was signed, and no allocation for drinking water for Karachi was demanded, the MQM was signatory of the accord in alliance with the N-League. In fact, at the peak of their power, the MQM were indifferent and preferred to exploit tensions between Islamabad and the Sindh government (or the main ruling PPP) to capture the opportunity to ally themselves with Islamabad at the cost of the province’s interests. Unlike cities of Punjab where the ground water is sweet and drinkable, Karachi does not have ground water good enough for human consumption.

The center’s interventions create dependency and further ground for intervention. That repetitive policy framework has not helped the province in the long run, it's the same fire-fighting ad-hocism at the cost of institution-building.

Email: [email protected]

Twitter @mushrajpar