Saturday, August 8, 2009

Karachi Fourth Cheapest for Expats

Pakistan's financial capital Karachi shows up among the least expensive cities for expatriates in a survey conducted by consulting firm Mercer UK. Cost of living for employees is one of the factors considered by businesses looking to expand globally.

There are several large cities in Pakistan, but Karachi is the largest with a population exceeds 12 million, according to the United Nations. Whilst the political capital of Pakistan is Islamabad, Karachi is definitely the economic center. It is home to the largest port in Pakistan situated in a sheltered natural harbor, and it is this which originally provided the conditions for the city to grow. Whilst the port continues to play an important part in economy of Karachi, the economy has diversified. Karachi is the location for the headquarters for many of the largest Pakistani companies, as well as being the location for the Pakistani offices of many international firms. Manufacturing plays a big part in the local economy, and increasingly outsourcing of services from richer countries plays a part, particularly with call centers. Pakistan has been ranked at number 20 on the 2009 A.T. Kearney Global Services Location Index of the most attractive outsourcing destinations in the world. All of these factors combine to result in Karachi having what has been claimed to be the highest average wage of any city in south Asia. However, despite the regionally high wages, Karachi is still located in south Asia, and so many of the prices for goods and services reflect this. In addition, the excellent infrastructure links to the world further reduce the price of imported goods. These high wages, coupled with low prices of goods and services, result in Karachi being among the cheapest major cities in the world in which to live, not necessarily for the local residents, but certainly for the expatriates earning in hard currency.

Here are Mercer's picks for the least expensive cities of the world in 2009:

1. Johannesburg, South Africa
2. Monterrey, Mexico
3. Asuncion, Paraguay
4. Karachi, Pakistan
5. Wellington, New Zealand
6. Auckland, New Zealand
7. Mexico City, Mexico
8. Quito, Ecuador
9. Chennai, India
10.Tunis, Tunisia

The survey covers 143 cities across six continents but concentrates mostly on Europe, Asia, and the Middle East. The only countries in the Americas covered were Canada, Mexico, Brazil, and the U.S. Mercer looks at more than 200 factors, including the cost of housing, transport and food.

Tokyo, last year’s second most expensive city, climbed to the top spot, knocking Moscow down to number 3. Geneva and Hong Kong ranked 4th and 5th, with Asian and European cities dominating the top 10 slots.

The survey, conducted in March, uses New York as the base city for the index, with currency moves measured against the dollar. New York itself jumped to 8th from 22nd last year.

“As a direct impact of the economic downturn over the last year, we have observed significant fluctuations in most of the world’s currencies, which have had a profound impact on this year’s rankings,” Nathalie Constantin-Metral, a senior researcher at Mercer, said in a statement on the firm’s website.

“Now that cost containment and reduction is at the top of most company agendas, keeping track of the change in factors that dictate expatriate cost of living is essential,” she added.

Tel Aviv ranked as the most expensive city in the Middle East, while Caracas was top in South America, and Sydney was the priciest city for expatriates in the Pacific.

Following are the top 10 most expensive cities, according to the Mercer survey. Last year’s rankings in brackets:

1. Tokyo, Japan (2)
2. Osaka, Japan (11)
3. Moscow, Russia (1)
4. Geneva, Switzerland (8)
5. Hong Kong, China (6)
6. Zurich, Switzerland (9)
7. Copenhagen, Denmark (7)
8. New York City, USA (22)
9. Beijing, China (20)
10.Singapore, Singapore (13)

Related Links:

Eleven Days in Karachi

AT Kearney Global Services Location Index

Outsourcing to Pakistan

Power Shortages in Pakistan

Karachi: The Urban Frontier

Garbage Collection in Karachi

Pakistan's Electricity Crisis

America's Best Run Cities

Emaar Bullish on Pakistan

Infrastructure and Real Estate Development in Pakistan

Karachi Dreams Big

Cost of Power Outages in India


Anonymous said...

If karachi is the cheapest city in the world why is the expat not flocking to karachi ?

Probably you know the answer why most of the educated and well of pakistani loves to either settle in west or in middle east.

Riaz Haq said...

Until 2004, there used to be about a half million Americans and Europeans tourists a year in Pakistan. That has dropped to a trickle because of the current fears, most of which are overblown, as I saw during my visit there last month.

But there is still an expat community in Pak and I saw some of them shopping at Agha's supermarket, and others at various private clubs, including the one where I stayed. You see many East Asians, a lot more of them than whites.

The costs do matter, especially in a more competitive world. And, as soon as there is some basic sense of normalcy, you'll see many more expats, working for the many global corp with offices in Karachi, return to the city.

Anonymous said...

Proof of the pudding is eating. At the end of the day what matters is the common man all over the world comfort level to visit a country.
And purely on the basis of the number it is more than clear that people all over the world desist to visit pakistan

Further i feel the educated and well of pakistani are more in gcc and western country.

Anonymous said...

With the fundamental elements at realm of power and the government incapacity to handle internal peace i donot thinks so any guy would like to have an adventure with family to pakistan. Probably a soul searching of how many time yourself have visited pakistan after settling abroad.

I can tell you inspite of settling abroad i visit atleast twice india and 90% of my investment are in india indicate the confidence in real term rather than the lip service for the country

Riaz Haq said...

Here's a recent Rediff report on your Mumbai slum population being more than 50% of total residents:

India's financial capital which houses the maximum number of slum dwellers in the country has one in two persons residing in a slum, as per a Human Development Report compiled by Brihanmumbai Municipal Corporation (BMC) and the United Nations Development Programme (UNDP).

"Worldwide, one in three persons lives in a slum. But the figures are much higher for Mumbai where 54.1 per cent of the population are slum dwellers as per 2001 census. This means that 'one in two persons in Mumbai city is residing in a slum'," the report said.

"They occupy just six per cent of all land in Mumbai explaining the horrific levels of congestion," it added.

Delhi has 18.9 per cent, Kolkata 11.72 per cent and Chennai 25.60 per cent in slums. Some 29 per cent, between a fourth and third of Maharashtra's urban population resides in Mumbai's slums.

Riaz Haq said...

Karachi retains its title as the world's cheapest for expats in 2011, according to Businessweek:

On the shores of the Arabian Sea lies Karachi, Pakistan’s largest and most cosmopolitan city. Historically, it has been "a city of immigrants," founded by "sailor businessmen," according to author Pamela Constable’s recently published book, Playing with Fire: Pakistan at War with Itself. With a large seaport, stock exchange, and financial institutions, Karachi is home to many foreign workers and expatriates who, despite ongoing security concerns, have taken advantage of the city’s culture, business opportunities—and low cost of living.

In Mercer’s 2011 Worldwide Cost of Living Survey, released July 12, the city has maintained its position as the world’s cheapest city for expats for the second year in a row. Certain costs in Karachi have even gotten cheaper in U.S. dollars over the last year: For example, the average monthly rent for an unfurnished two-bedroom luxury apartment fell to about $293 in this year’s survey from $353 in 2010, show Mercer data.

The real reason for Luanda being the most expensive for westerners has to do with the fact that a typical western expatriate demands western-style housing and consumer products and services which are scarce in the Angolan capital.

In Karachi, there is plenty of good housing, restaurants, supermarkets, and various other products and services suitable and available at reasonable prices for western consumers.

As to the question of safety, American cities like Detroit in normal times are much more dangerous than Karachi in the worst of times.

Riaz Haq said...

Here's a Dawn report on US investment to build a modern 28-story building in Karachi:

WASHINGTON: A U.S. finance institution, Overseas Private Investment Corporation, announced on Monday to extend a $20 million loan towards completion of a 28-story office building in Karachi.

Finance Minister Abdul Hafeez Shaikh, who presided over the signing ceremony of the arrangement, hailed the transaction, saying it represents the tremendous opportunities existing between the two countries for stronger economic cooperation.

“I hope this is the beginning of a long-term association,” Dr Shaikh said. The presence of the modern building will help the country attract multinational investors by meeting an urgent need for top-quality office space.

The property will feature several green building characteristics, including a natural-gas fired cogeneration power plant which will increase its energy efficiency and mitigate negative environmental impacts.

Project sponsor TPL Properties expects to complete construction of the Centrepoint office building in central Karachi in 2012, and will then begin leasing space to large local and multinational organizations.

“This is a sign of close cooperation between Pakistan and the United States — the private sectors of the two countries have huge potential to further expand bilateral relationship,” Ali Jameel, Chief Executive Officer of TPL Holdings, said.

In the process, the project will provide new management and professional employment opportunities with benefits, including those specific to female employees. The building will be fully automated, with world-class IT and security systems.

This office building will help Karachi meet a growing need for high- quality office space, creating professional jobs in the process and becoming only the second property in the city to offer services such as world-class IT and security systems, OPIC President and CEO Elizabeth Littlefield said.

“We expect that its many green building features will encourage similarly environmentally-conscious construction in Pakistan.”

In addition to the cogeneration plant, the office space will feature an exhaust heat recovery system, air dehumidification using heating pipes, condensation collection for water usage, efficient lighting fixtures, and clean eco-friendly refrigerants used for air conditioning.

Riaz Haq said...

With a world cost of living index (wcol) of just 46 relative to 100 for New York City, Karachi is the cheapest city among 131 cities in the world, according to a survey reported by Economic Intelligence Unit today.

Here's a WSJ report on it:

Moving to Singapore? Start saving: The city-state is one of most expensive cities in the world – 42% more expensive than New York – topping London, Frankfurt and Hong Kong.

The Southeast Asian city joins Tokyo, Osaka and Kobe as one of the world’s top ten most expensive cities, according to the Economist Intelligence Unit’s annual cost-of-living survey, increasingly proving that Asian cities are no longer just a cheaper outpost for expats and multinationals. Though a European city – Zurich – is still the world’s most expensive, Tokyo was the runner up, with Singapore now listed as the world’s 9th most expensive city. Singapore was listed as the 6th most expensive last year, but remarkably was ranked 97th in 2001.

The survey uses prices of goods and services such as food, transportation, housing, utilities, private schools and domestic help to calculate scores for each city, using New York as its base with a score of 100. Zurich and Tokyo scored 170 and 166, respectively, indicating that they are about 70% and 66% more expensive to live in than New York.

Australian cites, too, were well-represented on the list by Sydney (No. 7) and Melbourne (No. 8, though at least it can claim it makes up for the cost in livability). While Japan has long been known as an expensive place to live — Tokyo’s gas prices are 71% higher than New York’s — the emergence of Australia and Singapore on the list is a more recent phenomenon.

Singapore’s rise is notable, since less than a decade ago it was considered a cheap city by Western standards. Just last year, a kilo of bread would have cost US$2.86, according to the Economist’s data, but now costs US$3.19 – an 11% increase from the year before.

The rise of home prices and basic goods in the city-state has for years been a sticking point for many disgruntled Singaporeans, many of whom say government policies to allow more rich expatriates to move to the city has helped push up the cost of living. In recent months, the government has put in place various cooling measures to address high property prices, which are slowly coming down.

Jon Copestake, editor of the survey, cited exchange-rate movement as “the main driver of cost-of-living growth in Singapore, relative to other cities.” The Australian cities rose for the same reason: The Australian dollar rose sharply in value last year, which helped push its two biggest cities up the charts.

Asia is also home to the world’s cheapest places to live, particularly in South Asia. Karachi, Pakistan, came in 131st out of 131 cities, with a score of 46. This makes it three times cheaper than Singapore. Also in the bottom 10: Mumbai; New Delhi; Kathmandu, Nepal; and Dhaka, Bangladesh. India and Pakistan’s cheap labor and land costs are making the area “attractive to those bargain-hungry visitors or investors willing to brave some of the security risks that accompany such low prices,” the survey said.

Riaz Haq said...

Here's a report on Karachi Hackathon:

Sabeen Mahmud has short-cropped hair and rectangular glasses; she’d fit right in hunched over a laptop at Philz or behind the counter at one of Apple’s Genius Bars. Her resume matches her style. She’s founded a small tech company, opened a hip coffee shop and organized a successful hackathon. But Mahmud doesn’t hail from the Bay – she lives in Karachi, a city more closely associated with extreme violence then entrepreneurs.

“Fear is just a line in your head,” Mahmud says. “You can choose what side of that line you want to be on.”

Mahmud represents something new in this ancient city. Mahmud “fell in passionately in love” with the first Mac she saw, teaching herself MacPaint and MacDraw in college in 1992, and devoting countless hours to Tetris. In 2006, Mahmud decided Karachi was sorely missing a space where people could gather around shared interests, an interdisciplinary space for collaboration and brainstorming. Despite the fact that in Pakistan, many women are not allowed to finish primary school, much less graduate from college and start their own company, she decided to start The Second Floor café, not letting the fact that she didn’t have any money or experience faze her. “I was living with my mother and my grandmother at the time,” she says, laughing. “I had done zero market research. I just hoped people would show up.”

People slowly have. The Second Floor now hosts four events a week, from poetry writings to live theater performances to forums on critical issues. Last month,the café hosted Pakistan’s first hackathon, a weekend-long event with nine teams focusing on solutions to civic problems in Pakistan ahead of last Saturday’s national election. “People are very disillusioned with mainstream politics right now,” Mahmud says. “We wanted to come up with a way to put that energy to use.”
Starting with 30 high-level problem areas, they whittled it down to nine specific issues that could be solved with concrete apps. “Not a single soul questioned that these problems could not be solved,” Ahmed says. “It was all a matter of selecting the right approach.”..