In Pakistan, the undocumented economy is called a “black” economy. It includes all economic activities that go unreported and, as such, hard to quantify in statistical figures. These include corruption, trade-based money laundering, trafficking of drugs and firearms, smuggling of liquor and cigarettes and other items that are not authorized to be sold by the state. It also includes smuggling of counterfeit and pirated goods of all type.
In Pakistan, the black economy appears to be growing at a faster rate than the formal economy. The year 2008–2009 was declared as the “Year of Decisiveness,” and after over five decades of debate, it was finally decided that Pakistan would go ahead with signing a free trade agreement (FTA) with India. The government expected this decision to impact positively on the formal economy and reduce the size of the black economy in Pakistan. However, that did not happen.
The black market or informal sector, is often defined as those economic activities which are either taxed, regulated or prohibited by governments but are still carried out by individuals. In Pakistan, the informal sector of the economy refers to all economic activities that are not carried out by registered companies or sole proprietorships. This term has been coined by experts to emphasize that informal economic activities, no matter if they are legal or illegal, form an important part of any economy. The most prominent form of the informal sector in Pakistan is street vending. The informal sector was estimated to be 60% of GDP in Pakistan, as of 2000. This statistic shows the importance of the informal sector, because it is larger than many other countries with a larger GDP than Pakistan. Another example of the informal sector is tailoring. In some countries, the formal sector is of great importance, but not in Pakistan. The formal sector employs 25% of the workforce in Pakistan.
The informal sector of Pakistan’s economy plays an essential role in its economic development by absorbing the majority of labour power and providing a number of economic opportunities to individuals who cannot make it into the more competitive sectors due to their lack of education or lack of personal connections. However, the informal sector is often exploited by the larger, more powerful sectors of the economy.
The informal sector has been a boon for many Pakistanis over the past decades due to its ability to employ large numbers of people who are in need of work and can be found in areas where jobs do not exist. A study conducted by The University of Karachi found that in most cases, it has become a source of employment for those in need of work. Large employers also gain an advantage over small traders who are unable to effectively compete with them because they can afford higher rent, better technology and better access to credit.
However, the informal sector is often considered as the breeding ground for corruption and criminal activities. In Pakistan, corrupt activities are sometimes carried out with the sole purpose of covering up the illegality of their activities and profits earned. Corruption has become a common practice among politicians, bureaucrats, police officials and army men. Unregulated economic activities such as the mushrooming of illegal construction along the national highways have also become major causes of corruption in Pakistan. In some cases, politicians use official positions for private gain, such as siphoning off public funds into their own pockets in order to construct palatial homes or buy up large portions of real estate at exorbitant prices for themselves.
The informal sector is virtually unregulated in Pakistan. This unregulated nature can result in vulnerable workers being exploited by unscrupulous employers and employers getting away with large amounts of money and an unfair share of the market.
In 2012, the Pakistan Electronic Media Regulatory Authority asked mobile phone companies to provide at least eight months of data protection for every subscriber so that journalists can access real-time information on a cell phone, especially during emergency situations. Despite these efforts to expand the coverage of journalists, Pakistan’s media still faces a number of problems, including low internet speed and telephone lines, short wave broadcasting channels, lack of funding and unequal distribution among ethnic groups.
The existence of the undocumented economy, its strength and acceptance within our society is an unchallenged reality. But it is also true that as long as there is a huge GAP between people of various spheres of society, this economy and its activities will expand further and penetrate deeper into society.