Pakistan is officially into the fourth year of the China-Pakistan Economic Corridor (CPEC) project. A lot has changed since it began. The western and local media have expressed concerns about the project, while the government calls it a “game changer.”
The Pakistan Muslim League-Nawaz (PML-N) government is out while the pro-accountability Pakistan Tehreek-e-Insaf (PTI) government is in. Four years on, the influx of Chinese people is visible in the markets of Karachi, Islamabad, and Lahore. Flights to and from China have increased tremendously, and are usually full of Chinese engineers, laborers, students and businessmen. The roads are a reality; yes, the very roads that promised economic prosperity for the common man through increased industrial development and agricultural output. The statistics and the situation on the ground, however, suggest something different.
CPEC is becoming a real estate utopia
All along the CPEC routes, one can see billboards advertising megaprojects like CPEC City, CPEC Housing, CPEC Heights and even a nice CPEC Tuck Shop, a pretty cute name for a short stopover. “Gawadar,” the crown jewel of CPEC, Pakistan’s much-hyped economic hub, is advertised with an image of a beautiful skyline surrounded by deep, shimmering waters. The reality, however, is quite different.
Gawadar still needs years of development work. Electricity shortages and a lack of water are hampering its emergence as a world-class export base. The same is the case with numerous other housing projects along the CPEC routes. The idea behind them is that, as soon as cargo trucks hit the roads, these towns will be linked with major highways, and electricity, gas and water connections will be made available, making it a cheaper commercial and housing alternative to the other big cities. Property values, it is believed, will naturally go up.
Real estate in Pakistan has become the primary source of revenue generation. Anyone having any substantial amount of capital invests it in real estate, expecting good profits in five to 10 years. This method of investment has been deemed in Pakistani society to be the safest form of investment.
The introduction of CPEC into Pakistan’s economy has given further momentum to real estate investment in the country. Though it would’ve been great news for a country with diversified industries, unfortunately for Pakistan, it is not. This investment methodology is nothing more than a bubble.
As soon as an area is declared a future route for CPEC, investors roar in and buy the surrounding land
As soon as an area is declared a future route for CPEC, investors roar in and buy the surrounding land, so by the time the road has been completed, the land surrounding it has been changing hands and by now it is unaffordable for any kind of productive venture – for example, agriculture or industrial use.
The land is now ready to be sold at a much higher price and the landowners are ready to make their lucrative sale, But wait, no one is there to buy it anymore! People know that the land has reached its highest possible value and from now on, whatever is left is very risky.
On the other hand, the investor (whose aim was only to resell it for a profit) has no other plans for the piece of land. Hence this barren or agricultural piece of land is unusable. The capital is stuck in this investment game and nothing good can come out of it in the years to come. This is how lots of average Pakistani people are making their investments, not knowing that all of this is a real estate bubble. The only thing fueling this real estate trend is an increase in our population and the myth that “Zameen kabi nuksan nahi deti,” which means “The land never gives you a loss.” Alternatively, if this capital had been spent wisely to set up a productive business, it would give a long-term profit, plus contribute to the national economy in the form of employment, taxes and foreign currency.
SEZs and real estate
In a recent CPEC meeting, Pakistani Prime Minister Imran Khan directed the relevant authorities to ensure the groundbreaking of at least three special economic zones. The proposed economic zones are Rashakai, Dhabeji, and Faisalabad. While undergoing these projects, it has to be ensured that these economic zones do not become real estate projects.
The main aim of these industrial zones should be to offer incentives to industries so that they can expand and export commodities to the world. The monetization of such land can seriously undermine efforts to achieve the goal of industrialization. I hope the relevant departments will ensure that effective policies are implemented that do not contain loopholes that can be exploited.
CPEC is indeed a game changer, but the game will change only when we have a goal and everyone strives to send the ball in the right direction. Pakistan is a free-market economy and the government should have minimal involvement in the market, but directing development is the government’s responsibility. Learning from the Chinese experience is great, but tailoring it to suit local realities is the need of the hour.