KARACHI: Want a daal-chawal plate for Rs15 when prices of grains are touching sky. There are catering vans serving daal chawal and other food at affordable prices to people at several places in Karachi, Lahore, Rawalpindi and other cities.

One can get a shalwar kameez suit for Rs200. Children school bags can be bought at Rs60. Perfumes and cosmetics can also be purchased at Rs150 to Rs350 a bottle.

Where are these goods coming from and who are these people offering various services at a price, which is considered to be reasonable and affordable when official price index at one time grew by 34 per cent?

These goods are coming out from factories and kitchens located in small houses in slums of Karachi, Lahore, Rawalpindi and other cities. The enterprise is mostly family-based. The value addition in product comes from efficient use of small investment and personal skills. Marketing and management is also personal and taxes are not being paid. In most of the cases electricity and gas is pilfered. No wonder, even a poor consumer gets goods of his choice at affordable and reasonable prices.

These days when factories are closing down, one after the other, and the number of unemployed is swelling every day, pushing as many as 44 per cent of Pakistan’s population below poverty, no signs of social commotion are visible. Markets belie business complaints of economy in distress.

Shops and wayside sale outlets have a lot to offer from dresses to cosmetics, winter cloths, toys, school bags and what not. What is this phenomenon?

“This is a universal phenomenon and Pakistan is no exception,’’ Zubair Motiwala, a former president of Karachi Chamber of Commerce and Industry remarked, who said informal sector is found in all countries of the world.

Zubair heads business enterprises that do not depend on bank credit at all. It is purely on religious considerations that I avoid bank credit. But he does not consider himself an informal businessman as “I maintain a corporate entity and pay all due taxes,’’ he claimed. “I maintain a current account in bank on which I do not get any return but bank earns from 16 to 17 per cent interest.

Informal sector does not depend on banks for money. For informal business there are informal sources of money. There are family funds—brothers, cousins, wife and husband etc. There are community funds and what is popularly called “committees.’’

“It is the other way of doing business,’’ Engineer Jabbar, a former vice-president of Federation of Pakistan Chambers of Commerce and Industry said. Formal business is tied down in conditions, rules and regulations. “You have to have tremendous clout and influence to carry on your business within official framework of regulations, payment of taxes and comply with laws of the administration.’’ But when conditions for normal business are inhospitable and even hostile, the informal sector takes the driving seat.

That’s why in Pakistan, under the shadow of a huge and massive but at the same time a much despised monstrous structure of Federal Bureau of Revenue (FBR), a giant informal business sector keeps growing , catering to the need of an overwhelming majority of consumers among 170 million people.

With a workforce of about 38,000, the FBR is a national tax collector. It runs a tax policy given by the government of the day, mostly military dictators in last 60 years. Without, any exception all tax policies in last 60 years were called regressive, anti-business and inflationary. Obviously, the operators of this tax policy, no matter whether it is coming from a military government or an elected popular political setup as we have one today, are said to be corrupt and bullies. Aiding and abetting these corrupt tax collectors are the minions of government administration, who are cruel and ruthless.

Informal sector is a product of corrupt tax system and a cruel administrative structure. No wonder, the informal sector is growing with every passing day. There is no accurate estimate of the size of informal business sector in Pakistan. It varies from 32 per cent of the mainstream documented economy said to be around $160 billion. A few estimate it at 80 per cent of the economy and there are people who say informal sector is twice the size of formal economy.

Whatever is the size of informal sector, the fact is that it is growing everyday and it is engaged in big and small manufacturing and delivering number of services, which just cannot be counted. Name anything under the sun, the informal sector is there to provide you with one, at affordable price but with doubtful quality. Be it ginning of cotton, spinning yarn, weaving fabrics, home textiles, stitching garments, milling a variety of products, fabrication of auto parts, home appliances, steel equipment, blacksmithing, jewelry, pharmacy, cosmetics and what not.

As for range of services in which informal sector is involved, it remains beyond comprehension. The auto repair garages are now virtually in all big and small cities and even in villages. There are plumbers, masons, electricians, mechanics for repair of electronic goods, home appliances, television sets, mobile phones and now computers. Beauty parlors are now in almost every neighborhood of big and small city. These parlors do roaring business before and after Eid when marriage season sets in. Catering business has become mobile after increase in number of cars and there are eatery vans virtually in every commercial area and business place of the city.

These auto repair shops operate as informal businessmen. Shershah in Karachi has emerged as a big cluster of informal vendors of auto parts. “Total turnover of Shershah auto part business should be around Rs4 to 4.5 billion a year,’’ confided a senior leader of the Federation of Pakistan Chambers of Commerce and Industry.

Shershah was notorious for being a bazaar of auto parts taken out from stolen and snatched vehicles. But with the course of time, the sellers of stolen vehicles developed art of fabricating parts and equipments of vehicles. The military operation in Waziristan agency and FATA has forced quite a many technicians from Adam Khel to come down to Karachi. Many of these technicians are employing their engineering skills to produce auto parts and other equipments.

A few homes in Liaquatabad in Karachi are said to have developed special skills in preparing a blend of perfumes and cosmetic products that can be matched at least in appearance with a few international brands. These were offered through a chain of outlets. But now with much better salesmanship skills, these cosmetics and perfumes are being offered through stores in “posh areas’’ also.

Informal sector employs about 70 per cent labour force in urban areas if self employed people are included in these categories. Economists believe that informal sector production is 70 per cent more efficient than formal sector where wastages are high and enterprises are top heavy. As compared to a formal business house, decision making in a small informal business is quick and adjustable according to needs. Profit margins are also high but risk is even higher.

Wages are too low for employees in an informal enterprise and there is no question of any social security net. There are instances of ex-gratia payments to employees in time of accidents, sickness or any distress, not as a matter of policy but purely as a religious obligation or personal generosity. A too big and expanded informal sector brings moral hazards, law and order problems and governance issues for the society.