The future of the informal sector in Karachi is difficult to predict. However, some trends are clear. Links between the informal workshops and formal-sector industry are slowly being eroded, with the exception of those industries (such as garment manufacture) that have export potential. It is feared that even these links will cease once formal sector garment factories are set up with local and foreign investment. The process has begun and as these industries have sophisticated machinery, they will be far less labour intensive. This will result in further unemployment.
The informal sector is now moving into producing cheap consumer goods for the poorer sections of the population. This means less profit and a marginalisation from the formal sector processes and economy. At the same time, the state sector is rapidly shrinking, especially in the provision of physical development and social services. This means that politicians will not be able to hand out favours and patronage, through which informal settlements were established and informal entrepreneurs were able to function. Favours and patronage are being replaced by cash payments for the protection of activities that are in defiance of state regulations. All this means the marginalisation of those without merit or skills or access to expensive private education.
These trends are creating unemployment and this will increase until such time that formal sector private investment replaces the informal sector job market. This is nowhere in sight and as a result, the rich-poor divide is growing, leading to crime and violence. The worst affected are those sections of the new generation of consolidated lower- and lower- middle-income settlements whose aspirations to belong to this new world cannot be fulfilled. Also badly affected are those entrepreneurs and contractors who had established a working relationship with formal sector businesses and industries. It is important to note that these groups are potentially the most powerful in political terms. Their marginalisation creates a new situation.
It is therefore understandable that the present situation of inflation, recession and increasing marginalisation of these groups is being blamed on liberalisation, the World Trade Organisation (WTO), structural readjustment, and World Bank and IMF policies. The press (especially the populist newspapers), politicians of various shades, NGOs and now even transporters and solid waste recyclers’ associations, backed by academia, all participate in the debate and issue statements against globalisation. Seminars, symposia and workshops are held on the subject and endorse these views. The protests in Seattle, Melbourne, Chang Mai and Prague against the WTO, World Bank and IMF electrified the residents of lower-middle-income settlements in Karachi and various interest groups operating in the city. The informal sector and the frustrated potentially upwardly mobile sections of Karachi look forward to joining this movement against “the new world order”. How all this will resolve itself is important. So far, there has been no proper research into the long-term effects of liberalisation on the city.
Extract from the research paper ‘The changing nature of the informal sector in Karachi as a result of global restructuring and liberalisation’ by renowned architect and planner Arif Hasan