The Seen and the Unseen In Pakistan's Economy

“First winter in Islamabad?”

“I moved here a few weeks ago. Before that I was in Pakpattan, but I’ve spent some time in Multan and Khanewal as well. My mamoo taught me well; he works at an auto workshop in the main Bahawalnagar civil lines bazaar. Its the largest workshop in the entire district.”

“So you’ve been in this line of work for the last…?”

“16 years. Paid an agent 80,000 on two separate occasions for a job contact and visa in Saudia. Was refused by immigration authorities on medical grounds, both times. They said I had high blood pressure and an above average body temperature. Must’ve been because of all that time I spent playing cricket in the desert sun.”

Muhammad Shehzad now works at a small workshop in Islamabad. He gets paid, in cash, on a fortnightly basis, and rents a small room with 4 of his co-mechanics. The proprietor of his new workplace came to know of Shehzad through a local jobber (an informal employment agent), who in turn had met Shehzad a few months ago in Pakpattan.

The distance between Islamabad and Pakpattan is approximately 550 km. Shehzad had never visited Lahore, let alone Islamabad, had no relatives in the capital city, no friends, no warm clothes, and no place to stay. Yet here was, three weeks into a new job, cold and mostly hungry, but going about his business like many others across the country.

Contrary to what some of you might be thinking at this point, this column does not seek to narrate a human-interest story. In fact, this particular example has been cited precisely because of its relative tedium, its complete lack of exceptionality, and because, at any given point, it happens to be true for a very large number of individuals in Pakistan.

Let me explicate further:

These last few months, an English language daily has witnessed an intense, but mostly inconclusive debate on the nature of Pakistan’s economic crisis. In one camp are the mainstreamers; the orthodox economists who cite basic macroeconomic indicators (fiscal deficit, inflation, unemployment, growth rate, total debt) to point out the precarious position we currently find ourselves in. Crisis, they say, is an understatement. Full, unmitigated disaster captures the situation more effectively. In the other camp, there was only one man: Dr. S. Akber Zaidi. In his view, Pakistan’s economy is undoubtedly in a bad shape, but at the same time, most of this clamor and alarm about falling into an economic abyss was misplaced. The outcome, in his view, of a complete failure on part of mainstream economists to understand the nature of Pakistan’s economy.

According to Dr. Zaidi and political sociologist, Dr. Aasim Sajjad Akhtar, Pakistan’s economy exists in a seen-unseen formation, with the latter counterweighing the problems arising in the former. Most of those reading this piece, i.e. the 9 to 5, white-collar sorts with an NTN number, exist in the ‘seen’ portion. Muhammad Shehzad, the 9 to 9, paid-in-cash, auto mechanic, exists in the ‘unseen’ portion. This particular argument is premised on the fact that the unseen, or informal/undocumented portion of Pakistan’s economy is, potentially, as large as the documented portion, employs as many, if not more, people, and operates on a more nativist logic, using biraderi, zaat, tribe, and other such informal connections that produce a dynamism more capable of handling macro-economic problems. In 2003, Anwer Kemal estimated that nearly 50 percent of all employment in Pakistan happens in the informal, or semi-informal segment. Car mechanics, local shops, small-scale manufacturing units, domestic services like drivers, guards, and cleaners, all operate in the informal sector. People gain employment through intermediaries, colloquially known as jobbers, and stick around in mostly oppressive environments till they find something marginally better. This process is complemented by informal migration and subsequent remittance flows from the Gulf, which provides direct cash injection into many households in Pakistan.

The process of informalization has received several fillips since the Bhutto period: For starters, the de-regulation and de-nationalization of the economy during the 80s, and the stagnation of manufacturing in the 90s, saw a large pool of unemployed labor shift into the informal sector. Secondly, the services sector (51% of total GDP) in Punjab, and in Karachi, revolves largely around two major components: Transport & communication, and Retail & Wholesale. In the backdrop of a liberalized trade policy (as part of structural adjustment) the trading and retail, as well as transport, sector became major nodes of labor absorption. Thirdly, fueled by foreign inflows of cash (post 9/11), and a mostly artificial credit boom, the construction sector grew by nearly 48% in the last decade. Around 87.8% of all employment in this particular sector is informal and undocumented, and hence, beyond the purview of labor welfare related legislation.

Precisely because of its understudied dimension, it’s hard to pinpoint whether the visible dynamism of the informal economy is sufficient to offset Pakistan’s macro-economic crisis. The problem is further exacerbated when you consider that most people who deal with such questions (researchers, development practitioners) have failed to accord any substantive importance to the informal sector. Unlike in India, where the government has formed the National Commission for Enterprises in the Unorganized Sector (NCEUS), the academia, and the government in Pakistan continues to ignore the existence of this rapidly growing phenomenon, and consequently fails to see the very real forms of exploitation and oppression that take place within it. Safe to say, till such time that our analytical frame is broadened, all functional attempts to understand, and work with the economy will remain incomplete and hence, ineffective.

Originally published in Pakistan Today on 16/01/2011