But now, the country's most liberal city is becoming a battleground for Pakistan's spreading militant threat. Those responsible for the attacks in Mumbai, India, reportedly left from Karachi Port and phoned a coordinator here during the assault. Murmurings have risen about "Talibanization" – and its use as a fund-raising point for militants based in the northern areas and tribal belt.
Some 5,000 trained militants reside in the city, says a senior police official with the Karachi-based Crime Investigation Department (CID), speaking on the condition of anonymity. And, of course, it is known as the place where journalist Daniel Pearl was murdered.
Deputy Mayor Nasrin Jalil says Karachi has long been "vulnerable to religious extremist sentiment." And concerns are running high that militants, with the financial and logistical support of Karachi's 3,000 seminaries, might organize under the banner of the Pakistani Taliban or Al Qaeda to paralyze Pakistan's commercial capital – rocking the financial sector and destabilizing trade flows in ways that could affect the entire country.
For now, the CID official explains, these militants have not united. Instead, they maintain affiliations with militant groups that were banned after Sept. 11, 2001. Some elements emphasize anti-India sentiment. Others promote sectarian infighting, while yet others hope to establish the writ of Islamic law within Pakistan.
Despite the diffuse nature of Karachi's militants, the city government insists that "Talibanization" is under way. Last November, shopkeepers selling pirated CDs and DVDs received warnings of arson and deadlines from the Taliban to close down. Meanwhile, transporters who distribute imported goods from Karachi Port to the northern areas also feel threatened by Karachi-based Taliban.
According to the CID official, criminals with links to militants in the Federally Administered Tribal Areas (FATA) have been instructed to sabotage activities that support US efforts in Afghanistan. As a result, "goods carriers are feeling increased pressure from the Taliban, or from people connected with the Taliban," says Noor Khan Niazi, president of the Karachi Goods Carriers Association. He points to an incident in December in which trucks costing millions of rupees were burned at Karachi's New Truck Stand.
The goods carriers' fear is compounded by the recent death of Shaukat Afridi, who supplied fuel to NATO forces in Afghanistan. After being kidnapped for ransom on May 9, 2008, Mr. Afridi was murdered by his captives on Sept. 26, 2008, when police raided the house in which he was being held by activists of the banned Harkatul Mujahideen.
According to security officials, Afridi's kidnapping points to a more widespread phenomenon than the "Talibanization" of Karachi. Across the city, militants and criminals have joined hands to carry out robberies and kidnappings; the gains are then used to finance terrorism in the northern areas and FATA.
And the gains are significant: Afridi's kidnappers received more than 50 million rupees in ransom money while security guards from North Waziristan and Kurram Agency stole 160 million rupees from two banks on Jan. 6, 2006. "By some estimates," says the CID official, "over 1 billion rupees have been raised by criminals [in Karachi] over the past two years to finance jihad."
Sharfuddin Memon, the head of the Karachi-based Citizens-Police Liaison Committee (CPLC), a public and private initiative to fight urban crime, confirms this trend. "Pashto-speaking gangs have been involved in kidnappings for ransom and the money is being collected in FATA to fund the jihadi movement there," he says. In March 2008, for example, the families of three kidnapping victims were forced to pay ransoms in Peshawar and the kidnapper eventually confessed to links to the Taliban chief Baitullah Mehsud.
Many blame the increase of terror financing from Karachi on the influx of migrants from FATA. According to Deputy Mayor Jalil, between 100,000 and 300,000 people have fled military operations in FATA and settled in Karachi. The city government fears that, facing unemployment, these migrants are turning to crime.
Rooting out the true culprits behind terror financing will prove difficult owing to a longstanding ethnic conflict between Urdu-speaking migrants, known as mohajirs, who settled in Karachi at the time of Pakistan's partition, and Pashto-speaking migrants who arrive from the northern and tribal areas in search of work.
The mohajirs and Pathans have long battled over political power, control of the city's transport infrastructure, and land resources. Many thus believe that claims about the Talibanization of Karachi are a political tactic being deployed by mohajirs, whose representative political party, the Muttahida Qaumi Movement, currently makes up the city government.
"The mohajirs feel that the Pathan vote bloc will increase if too many FATA migrants settle here, so they call them Taliban on political grounds," says CPLC's Mr. Memon.
So what's in store for Karachi? The CID official says that politicizing the "Talibanization" issue is a dangerous game. "The recent hue and cry might be perceived as an invitation or a dare to cause trouble," he says.
But a moment later, he adds: "The Taliban won't cause real trouble in Karachi because it's their funding point – they get their infrastructure here, the money, the SIM chips, the mobile phones."