- Web Desk
- Sep 18, 2023
Pakistan’s economic crisis and its elusive, everlasting ‘fix’
- Shafiq Akbar
- Aug 27, 2023
In Pakistan, the most clichéd of all clichés is the perpetual message about the country facing its worst economic crisis, but of late, the entire governance structure is essentially functioning on foreign loans. This is the most unsustainable of economic models.
Unfortunately, the solution to such a monumental crisis is never simple. In the case of Pakistan, the predicament is not just the economic debacle but also the inability to reinforce hope at a national scale.
Given its geographic size, soaring population, and vast resources, it is staggeringly ironic that a country situated at the crossroads of the largest markets has not been able to attract a few billion dollars. A large-scale brain drain and capital flight are exacerbating its problems, making them appear much larger than they intrinsically are.
Speaking of ‘massive potential’, the immediate questions that come to mind are: do we genuinely believe that Pakistan can be a global powerhouse? And, do we truly believe in our ability to compete globally, possessing the vision, strategic planning, and dedication to harness this potential?
The answer from an overwhelming majority to that will be a clear ‘No’.
Our primary challenge isn’t the multitude of problems we face, but our will and ability to address them. It boils down to a lack of hope, self-belief, and the drive to overcome the crisis and tap into our true potential. We have prioritised individual opportunities at the pinnacle of our policies instead of promoting Pakistan as an attractive investment destination.
Isolated projects can never be more important than establishing a functioning ecosystem first.
As an overseas Pakistani who returned, believing in the potential my country offers, I can only shed light on what I have experienced while achieving something that offers a semblance of success.
We lack accurate data, a long-term vision and plan, and, above all, a clear strategy to create business-friendly environments. The responsibility for this lies squarely on the shoulders of those who exercised the authority to shape the policies that brought us here.
In an age of fierce global competition, countries like China, India, Saudi Arabia, and the UAE in our neighbourhood alone are embracing innovative ideas to attract foreign investment. Amidst all these countries, we stand out as one that doesn’t even bother to set a goal.
Do we know our business areas that are most ready for investment and are capable of attracting upwards of 15 to 20 billion dollars within a year?
The solution to Pakistan’s woes lies in the very meaning of the word ‘economy’, derived from the Greek word “oikonomia”, with oikos meaning house, and nemein meaning to manage. The remedy that Pakistan needs is proactive and sustainable management of its major economic resources – land, labour, capital, and entrepreneurship, also known as the factors of production.
Although I’ll be writing about all four in detail, this article will hopefully serve as a conversation starter for the first one – land.
It serves three primary purposes: housing natural resources, facilitating agriculture, and accommodating residential and commercial developments—collectively known as real estate.
If planned correctly, it is a resource that can attract not billions, but trillions of dollars in investment. However, with our current mismanagement, the sector is riddled with glaring failures, malpractices, dead investments stuck in unapproved and non-existent projects, and conduits for tax evasion and the black economy. It certainly is one of the most debated topics in Pakistan.
While promising to meet the critical housing needs of Pakistan’s vast population, the debate in its favour holds as much truth as that against it. Real estate, which could have been the biggest growth driver for a country like Pakistan, has been its most significant economic disaster.
Almost 70 per cent of Pakistanis invest their life savings in real estate, coupled with more than 25 per cent of all foreign remittances that the country receives. Combined, they amounted to more than 25 billion dollars in 2021.
Regrettably, more than half of these investments are now trapped as dead capital, resulting in a staggering billion-plus dollars wasted each month!
Overall, Pakistan has more than 4.5 million planned plots of land in its planned areas valued at over $410 billion. Shockingly, almost half of them, with a combined value close to US $100 billion, are vacant. But the horrors don’t end here.
Out of nearly 9,000 housing societies being developed, almost 6,000 lack government approval. Roughly 80 per cent of all vertical projects under development in Islamabad are unnecessary. Among the complaints from overseas Pakistanis, around 70 per cent relate to real estate issues. The list goes on.
But who is to be blamed? The millions of Pakistanis who invest in Pakistan’s real estate or those who are supposed to manage the sector better?