EDITORIAL: Prime Minister Imran Khan inaugurated Ravi Riverfront Urban Development Project on Friday maintaining that the project would be "best for overseas Pakistanis as it will provide them with an opportunity for greater investment...the mega project will provide job opportunities to youth and will help in wealth creation as the Punjab government plans to develop a most modern city over an area of more than 100,000 acres near Lahore."
The prime minister's statement that the project would be best for overseas Pakistanis may be seen in the context of the hype before the launch of the five-year dollar-denominated 'Pakistan banao' certificates at an interest rate of 6.75 percent which was misplaced as it did not generate as much capital as was envisaged by the prime minister. While investment in real estate has been very high in Pakistan yet in recent years the business has stalled as the government attempts to bring it into the tax net as per its international commitments.
The prime minister's support for this mega development project is premised on his oft stated position that the construction industry can spearhead growth in the country with the capacity to jump start the 40 or so associated industries, thereby generating massive job opportunities for labour. Pakistan's economy was in a downward spiral subsequent to the 12 May 2019 staff level agreement with the International Monetary Fund (IMF), based on adherence to the agreed up-front conditions with the country's economic team leaders. However, the pandemic pushed the growth rate from the earlier projected low of 1.5 percent (against 6.2 percent in 2018-19 to 3.3 percent in 2018-19) to negative 0.4 percent in 2019-20, and therefore the need to jumpstart the economy through the construction industry achieved greater traction within the Khan administration.
However, the timing of the launch of the Ravi Riverfront Urban Development Project is extremely relevant. The amnesty granted to the construction industry, the third amnesty scheme allowed by the Pakistan Tehrik-i-Insaaf government in less than two years, was in clear violation of the time-bound pledges made to the Financial Action Task Force (FATF), as well as the IMF. The government succeeded in convincing the FATF and the IMF to its proposal for another amnesty scheme due to the devastating impact of the pandemic; however, the reprieve granted was time-bound - up to 31 December 2020 and the Prime Minister is on record as stating that the period will not be extended due to "our international commitments." The launch of the Ravi Riverfront Urban Development Project would allow investors to invest their 'no questions asked money' in schemes launched by construction and development companies and irrespective of whether the project sees the light of day the money would have been whitened.
This is yet another mega project inaugurated by prime minister Imran Khan whose PC-1 was approved during the tenure of Shahbaz Sharif as the Punjab Chief Minister who then proceeded to acquire 30,000 acres of land but then dropped the project after consultation with stakeholders for 'being economically unfeasible'. PML-N deputy secretary general Attaullah Tarar told the media that "this project will prove to be nothing but a 'paper project' and prime minister Imran Khan and his team know this. On the ground, this project cannot see the light of the day in the absence of any commercial activity. Besides, the incumbent government has no sources of funding in this respect."
True that the Khan administration is coming under increasing pressure as the inflation rate, particularly food inflation, is on the rise, oil prices cannot be contained due to heavy reliance on taxes on petroleum and products, and unemployment is rising due to the contractionary monetary and fiscal policies agreed with the IMF (exacerbated due to the pandemic); however, launching a mega project amidst much fanfare without appropriately looking at the feasibility would at best be subject to ridicule and at worst have a heavy political cost besides being contrary to the prime minister's repeated lamentations of previous governments of investing in mega projects rather than in projects of social uplift for the benefit of the people at large.
Copyright Business Recorder, 2020