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Opinion Print 2020-12-10

Construction sector's massive potential - II

In order to transform cities into commercial hubs, Pakistan must
Published December 10, 2020

In order to transform cities into commercial hubs, Pakistan must:

a) relax the zoning and building regulations to allow space for mixed-use activities, energy efficiency, and vertical expansion of cities,

b) privatize unproductive state-owned land,

c) encourage foreign developers to compete in the Pakistani market, and

d) focus on research and development in low-cost energy efficient construction techniques.

In the words of Siddiqui, there is a need to fast-track the approval of drawings, ideally by introducing a computerized drawing submission mechanism. The current process is inefficient and is further hampered by numerous regulations - the file is stopped at a number of government desks and a fee is cut each time which delays the entire process unnecessarily, disheartening not only the consultants but the clients as well. To resolve this, the approval process must be shifted online where architects and consultants are able to access it easily and update their requirements.

Unfortunately, however, there is a rampant lack of professional construction project management implementation in the industry. In many cases, contractors do not have sufficient knowledge and understanding of technical standards. Some may not even have a copy of these standards. This is one of the basic and common inadequacies among contractors. This begs the question of why skilled business graduates are not contributing to the sector.

Pakistan's oldest cities remain rife with problems of poor sanitation, fire hazards and other dated problems that must be resolved and modernized. For example, the entire old Lahore area has open sewage, as does the premier institution of LUMS in Defence - supposedly a developed area. These open sewers need to be shifted underground, yet they remain open, highlighting the misallocation of development funds over the past several years. A crucial aspect of thriving cities is an effective and organized waste management system. However, it requires a sense of civic responsibility to ensure cleanliness and recycling, which is yet to be inculcated in our populace.

New government initiatives such as the Ravi Riverfront Urban Development Project and Bundal Islands Project have a potential to uplift the major cities of Karachi and Lahore from the current ills of poor sewage and sanitation, waterlogged soil and numerous others. Moving forward, a focus on dense well-connected cities and communities to promote commercial activity will be instrumental, as connectivity is a crucial component of anyeconomic growth plan. In this regard, private investors should be encouraged to participate in transport development projects as a component of promoting public-private partnership in the long-term.

Competition should also be encouraged at the domestic level by limiting regulators' role and increasing the focus on implementation and evaluation of projects. Furthermore, Pakistan must catch up with trends in international connectivity through automation. For example, the automation of customs posts can facilitate businesses considerably by reducing clearance time. Customs processes at dry ports should be computerized in order to reduce congestion at the seaports. The broader use of ICT services, if encouraged across the board in the public and private sectors can greatly reduce the costs related to transport and logistics.

Mortgage finance is a form of financial innovation that has had benefits for various economies over the past several years. It can serve as a key parameter for making housing affordable for the lower-middle, middle class and upcoming professionals.To start off, mortgage up to Rs. 10 million must be enabled for 10-year finance at a 0 percent interest rate and maximum 3 percent service charges by disbursing financial institutions, for the system to be effective.

Given that innovation and growth are generated from high-density areas, it is essential to make these areas more accessible to our youth so that they can effectively contribute to the economy while also obtaining a higher standard of living. Some banks have started to offer this option recently, which is a ray of hope for the future of housing in the country.

It is essential to note the issues with FBR's 2020 deadline for availing PM's Amnesty Scheme for the construction sector, and their having disallowed payment of fixed tax amount after expiry of the scheme on September 30, 2022.

All those who owned registered land since April 17, 2020 could avail this scheme when the Ordinance was promulgated. Now the registration with a designated FBR portal has been set at December 31, 2020 which is insufficient for effective implementation of the scheme. Therefore, the Amnesty Scheme must be extended by 1 year in order to promote much needed investment in the sector.

A focus on developing advanced, progressive cities that rise upwards will control the spreading sprawl, allowing us to preserve the sanctity of historic sites. It is crucial to freeze development in these areas to honour the history, heritage and sentimental value that these sites hold for the nation. Furthermore, the issues of waste disposal, overt pressure on water resources and oversaturated sewage systems must be alleviated with the help of modernized waste and sewage treatment plants. Public enterprise reform and privatization wherever possible, will make space for increased entrepreneurship which is the need of the hour.

The world is now in the knowledge-economy phase, as seen through changes in top companies and exporting players, while Pakistanis still industrializing. The industrial economy must be strengthened via policy support, improved efficiency and inter-city connectivity. Several markets require the government to move from producing and directly participating in markets to just regulation. For example, the current regulatory framework represses domestic commerce (retailing, warehousing, and transport) and construction and city development. Heavy government direct participation in agriculture, storage, transport, construction, to name a few, is stifling investment. Openness and city development, combined with focused public sector management would serve as crucial measures to foster innovative markets while allowing youth and new talent to make valuable contributions in the sector.

(Concluded)

Copyright Business Recorder, 2020

Author Image

Shahid Sattar

PUBLIC SECTOR EXPERIENCE: He has served as Member Energy of the Planning Commission of Pakistan & has also been an advisor at: Ministry of Finance Ministry of Petroleum Ministry of Water & Power

PRIVATE SECTOR EXPERIENCE: He has held senior management positions with various energy sector entities and has worked with the World Bank, USAID and DFID since 1988. Mr. Shahid Sattar joined All Pakistan Textile Mills Association in 2017 and holds the office of Executive Director and Secretary General of APTMA.

He has many international publications and has been regularly writing articles in Pakistani newspapers on the industry and economic issues which can be viewed in Articles & Blogs Section of this website.

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