THE recent unabated rise in violence in Karachi marked by brutal sectarian killings and resulting in frequent forced shutdowns has further darkened the future of business in the country’s industrial hub.

It has led to a fresh wave of shifting of businesses from the city, this time, to Punjab as well as to foreign destinations.

In previous waves, the businesses from Karachi and Punjab had been moving to Bangladesh, a favourite spot, Sri Lanka, Malaysia, Dubai and Singapore. But that shifting or expansion of business which is still continuing was pursued by large industrial enterprises, textile units in particular. Those saying good-bye to Karachi now are mostly traders or owners of small industrial units.

The argument goes that as far as energy supplies are concerned the two places are almost similar, but there is at least a peaceful environment for doing business in Punjab. Although Punjab is no ideal place as far as the rule of law is concerned, one is not at least under constant threat from extortion rackets, kidnapping rings and muggers mafias.

According to All-Karachi Tajir Ittehad (AKTI) President Atiq Mir, some 30,000 businessmen, mostly traders, of Karachi have shifted to Punjab in recent months and some 5,000 to 6,000 traders have completely closed down their businesses during the last three years due to poor security situation.

Confirming the shift, Lahore Chamber of Commerce and Industry (LCCI) Vice President Mian Abu Zar Shad says that businessmen from Karachi and other parts of Sindh are settling in Lahore after packing up their businesses in their home towns. Even some industrialists have shown interest, and the LCCI has enrolled around 2,000 new members during the last few months. These migrations are reported to have resulted in 20 per cent hike in property prices in Lahore, particularly in DHA.

Haroon Agar, President, Karachi Chamber of Commerce and Industry, however, does not agree with the figure of 30,000 traders having shifted to Punjab and insists they can’t be more than 300. But, he concedes, that at least 5,000 small to large units in Karachi, mostly of textiles, have moved to foreign destinations in recent months. In fact, all categories of businessmen are moving abroad, some of them have permanently shut their businesses in the city while a few others have converted their units into warehouses or have rented them out.

According to Site Association, around 15 to 20 industrial units in its area have shifted to Nooriabad during recent months but none to Punjab. However, it says, a large number of traders and real estate agents of Karachi have definitely shifted to Punjab.

Saleem H. Mandviwalla, now federal minister of finance, holds the view that businessmen were not leaving Pakistan but instead were expanding their businesses to countries like Bangladesh which is a positive sign as their profits are going to have a far-reaching impact on the country’s economic growth.

But in 2011, he had confirmed the shifting of businesses to Dhaka saying it was happening because local production of textiles is becoming unviable and in Bangladesh a business-friendly environment was available. Investors, he observed, were like birds which have no country of their own and prefer to stay where they find profit and security of their investment. But this trend is a passing phase and would soon be over and that’s why he was not worried.

The prevailing conditions are, in a sense, similar to those in the 1990s when businesses, in large numbers, began shifting from Karachi to other parts of the country because of complete breakdown of law and order, widespread insecurity and the state’s inability to restore normality.

The city could never regain its great appeal as an industrial hub since then. Although businesses in Karachi contribute more than 50 per cent to the national exchequer but few in the government make any effort in coming to grips with the terrible menace. Shifting of businesses is a prospect Islamabad should be worried about.

Such a migration will be devastating for the country’s economy and if allowed for a long time can lead to de-industrialisation.

A 2010 report in Indian newspaper Hindustan Times titled, “Pakistan’s amazing shrinking private sector” has said that Pakistan’s private sector is shrinking, avoiding raising capital, and is fast moving out of the formal sector and entering informal sector. There is a startling trend of “de-corporatisation” in Pakistan. In other words, firms are preferring to get out of the stock market and the formal sector because of bad regulations or poor economic environment. But, the report noted, small scale sector remains marvelously active. Gross fixed capital formation in this sector between 2005 and 2009 has more than doubled.

Meanwhile, many exporters in Karachi and in Punjab cities have begun refusing most of the orders they receive for delivery of textile made-ups from foreign companies, thus drastically reducing their business. It is because of the prevailing security situation and the energy crisis in the country that they feel compelled not to accept those export orders which they believe they cannot complete and deliver in time.

The one-day strike or protest by political or religious groups sometimes extends to another day and the production in the factories comes to a halt. The strike casts a grave impact on the economy. The production activity is reduced; retail and wholesale business wanes, directly affecting sales revenues accounting for a loss of millions of rupees.

There are about 30,000 industrial units in seven zones of Karachi. Overall, the city generates economic activity of around Rs50 billion a day which in case of a strike turns into loss.