INVESTMENT FLOW ON DECLINE DUE TO HIGH COST OF DOING BUSINESS

KANWAL SALEEM, LAHORE
July 30 - Aug 05, 2007

With rapid increase in population, demand for more houses, improved health and educational facilities are emerging which provide more opportunities for investment in real estate business, setting up in educational institutions and healthcare centers apart from food and confectionery business.

Although, the government has shown commitment for increasing investment both local and foreign, but desired results are not being achieved because the investment flow is on declining trend mainly due to high cost of doing business and 'monopoly' created by some groups in particular businesses.

The real estate business, which was at its peak in Lahore and some other big cities a year ago, is facing after effects of slump these days. Only genuine buyers are now active in the real estate business in Lahore. A few foreign and Karachi based investors had jumped into the market and invested heavily in the real estate business which caused surge in real estate business.

For the population of Lahore which now exceeds over 80 million, there was need of 50,000 housing units per annum but over 20,000 units are being developed annually. Therefore, there was wide scope of investment in housing sector by the private sector. Although, small housing units of 3-Marla are being developed and sold by individual investors, the big investors can exploit this potential sector through investment at large scale level.

Lahore Builders and Developers Association, President Engineer Akber Shiekh has asked the District Government Lahore to regularize all construction projects in the city where no violation is committed on compulsory open space on ground level, structural integrity and zoning regulations on height.

It may be mentioned that the Supreme Court of Pakistan has recently directed formation of a committee to evaluate the status of all buildings in Lahore with reference to safety and other building requirements.

According to Engineer Akber Shiekh the construction work on 750 structures has been suspended pending this evaluation by the committee comprising two experts and a former judge. In the light of the orders by the Supreme Court, the Punjab government have also brought some changes in building laws. Akber Sheikh said since the new building rules apply to already completed

buildings it is essential to get each structure analyzed by the experts who could advise remedial measure if required to bring the structure in line with current building code. He said this process was adopted in Islamabad after the earth quake and necessary changes were made in all buildings to make them earth quake proof through modern technology that is available in Pakistan as well. He said careful evaluation of buildings and then making necessary changes through new technology would make the city buildings a safer place to live. He admitted that the builders have violated many building laws in the past.

Akber Shiekh said that building plan approval takes months in Lahore. He said so much so that the rules permit construction if the building plan is not approved in six months. He said there should be a period of one to two weeks during which approval is accorded or denied to the building plan. He said this measure would bring transparency in approval of buildings.

With raise in population, demands for health and education facilities also increase, providing opportunities to the investors for investment in both the sectors. In the recent years, quite a good number of private hospitals and educational institutions were established in Lahore, however, there is still a room for investment in both the sectors. The need is to exploit the potential in these sectors by providing quality health and educational facilities to people at reasonable rates.

According to Federal Minister for Health Mohammad Nasir Khan, Pakistan offers attractive incentives for investment in the country, hence, the investors should take advantage of government investors friendly policies. The Ministry of Health is fully aware of its responsibilities and is in close liaison with IPO Pakistan on the issue of patents of pharmaceutical industry.

He appreciated the efforts of the members of American Business Council to increase the exports of medicines and investment to modernize the manufacturing facilities for production of high quality medicines. On the recommendation of the Ministry of Health, pharmaceutical industry has been given relief in duties and taxes in the budget with a view to reduce the input costs of the medicines for availability at affordable prices for the common man in the country. With a view to formulate short-term and long-term policies for the development of pharmaceutical industry, a Task Force on pharmaceutical industry which will have representation from the industry and Ministry of Health is going to be formed.

Pakistan offered a level-playing field to all investors, whether domestic or foreign investors intended to exploit Pakistan's unique geo-strategic potential for the welfare of the people and use this major economic and competitive advantage as a key driver of economic growth, supported by five pillars which were water security, energy security, infrastructure development, investment in human capital and second generation reforms, analysts told PAGE.

Industrial revolution is not led by foreign companies, but by local investors, they opined. The government needs to encourage local investors for sustainable economic growth, they said, adding, ''it was necessary to create space for the private sector to invest in areas such as infrastructure development, where the public sector had encroached''. They said the private sector should be encouraged to build roads, airports, powerhouses and gas and power companies.

Talking about tourism sector, they said Pakistan has a lot to offer for international tourists who want to enjoy the natural beauty and traditional festivals. The cultural events like Shundur Polo Festival attract tourists from all parts of the world and such like events should be further promoted. The Shundur Polo Festival, they said reflects the popularity of the game of Polo in the Northern Areas as well as in other parts of the country. They said that the IFC is investing in several projects in Pakistan including tourism, power generation, telecommunications, infrastructure and manufacturing.

All these areas, they added, show potential for growth and considering the demographics of Pakistan - where around 100 million people out of a population of 160 million are below the age of 25 - this trend creates a lot of future potential for growth and expansion of the economy. The private sector is an engine of growth for the economy and the efforts of IFC in investing and financing the private sector in Pakistan will go a long way in further expansion of the private sector in the country.

They said that the government is now focusing on improving the skills of country's workforce to enable it to become more competitive and productive so as to meet the challenges of globalization. The government has launched several initiatives to enhance the skills of country's workforce, enhance the productivity in order to gain market access and increase exports. This phenomena would help maintain healthy growth in the years to come, they added.

It may be mentioned that IFC has increased its projects in Pakistan from US $120 million last year to around US $300 million this year. IFC is considering several projects of equity and debt investments in various areas including hotels, manufacturing and power generation projects. Moreover, world computer giant Microsoft is going to have a partnership with the government of Pakistan mainly in the fields of education and information technology. For this purpose they would set up region institutions and IT academies in Pakistan. Microsoft wanted to use its services and experience in Pakistan from which both could get economic benefits and it could offer excellent opportunities in building human capital in Pakistan.

Located in the heart of Asia, Pakistan is the gateway to the energy rich Central Asian States, the financially liquid Gulf States and the economically advanced Far Eastern tigers. This strategic advantage alone makes Pakistan a marketplace teeming with possibilities.