March 25, 2007	Sunday	Rabi-ul-Awwal 5, 1428

KARACHI, March 24: An unprecedented rise in the prices of steel products, cement and other inputs of construction industry has shattered the dreams of millions of the middle and lower middle income group people of owning a small comfortable house. It has, however, created an unending demand for a very small elite class of ‘robber barons’ for big palatial house, expensive cars, trendy clothes and a variety of consumer items.

A glimpse of any newspaper these days brings before eyes the advertisements that offer houses at Rs10 million, Rs20 million and even at Rs25 million. “There have been quite a few transactions of Rs70 to Rs100m for purchase of houses in Karachi, Lahore, Islamabad and Rawalpindi,” a real estate dealer in Clifton disclosed on Saturday.

But sale deeds of all such transactions are obviously of much smaller amounts. In prime areas of Karachi, Lahore and Islamabad as much as Rs350 million to Rs400 million have been offered for selected sites.

“Imagine the frustrations of those who find themselves unable to pay extra Rs50,000 to Rs100,000 on their booked flats in a housing project after the developers demand in the wake of increase in cement and steel products prices,” a social scientist remarked.

“With a Defence Housing Authority virtually in every district, the business opportunities in real estate and construction are unlimited,” says a real estate dealer of Soldier Bazar, who declared that the real estate development and construction are the most lucrative business in Pakistan today showing an unprecedented growth.

The Security Exchange Commission of Pakistan (SECP) in its recent firm incorporation summary reveals the number of registered constructions going up to 1,139 in the year 2005 from 992 in the year 2004. The SECP has placed the real estate in one of 10 top sectors of incorporation. The growth in this sector is more than 77 per cent.

The pauperisation of middle income group is now more than visible in growing cases of default of personal, auto and home loans of the banks. Neither the State Bank nor the banks have informed of these defaults to the public but there are reports, which suggest that a new service of loan recovery has emerged in big cities.

The banks and leasing companies have outsourced their recoveries of loans to their retired employees and to groups of tough guys. They use all sort of tactics — from arm twisting to intimidation, harassment and threats against the defaulters.

Almost all of these defaulters are from the middle income group, who for one reason or the other are handicapped to maintain their repayment schedule and many of them suffer humiliations quietly.

The rich-poor divide is now getting more conspicuous in selection of motor cars, clothes, shopping malls, entertainment and recreation, healthcare, education and even in consumer items.

As many as 170 expensive Porsche cars are reported to have been sold out in last one year. Rolls Royce cars are now occasionally visible on roads of Lahore and there are a few people in Karachi, Lahore and Islamabad who drive Bentley cars.

More than $700 million of Pakistan’s miscellaneous import bill caters to the needs of this small elite class of robber barons who dominate stock exchanges, real estate business, banking, financial services, brokerage houses, commodities, textiles, cement, and construction. Many of them are serving and retired officials of civil and armed services.

Not to mention, many of them are legislators and are well represented in the government as well as on the opposition benches. Thanks to these legislators and ministers, the sugar, cement, auto and stock exchange cartels never enjoyed such influence and power as they did in last seven years.

For them, the neo rich class, as many as 11 posh hotel projects, including two seven star hotels, are being taken up. The Karachi sea front, islands and some other parts of the metropolitan are being given an altogether new look, which as the projects are being marketed will be “no go areas” for the majority commoners except those who would be involved in one service or the other in those areas.

Pakistan’s social and economic picture now offers same contrasting colours as were seen in late sixties when former president Ayub Khan approached the end of his decade of 1958 military takeover. Then late Dr Mahbubul Haq informed that 22 families own almost entire national resources.

As, the late doctor pointed out 80 per cent of industrial assets, 70 per cent of banking assets, 75 per cent of insurance assets were owned by these 22 families. These 22 families formed a network within itself by way of marriages and social and business relationship.

The only difference in the two scenarios, one that was in late sixties and one of now, is that the law and order situation was not as bad as it is now. “No one heard about AK 47, T.T. Pistols and also modern weapons in late sixties as these are in abundance now,” a political worker said. “Majority of the people in late sixties were then moderate and enlightened in sharp contrast to extremists and intolerants now,” he said.

No one knows exactly how many families now own how much of the national wealth. But the economic reforms set in motion after late night October 12, 1999 military coup, the banks, stock exchanges, real estate, construction and commodities operations have created a class of robber barons, who converted their thousands into millions and then millions into billions and are now working overtime to create trillions.

One of the immediate impacts of all these reforms was a sharp decline in bank interest rates to 3 and 4 per cent in 2001, 2002 and 2003 from 15 to 19 per cent during the decade of nineties. Who are the beneficiaries? A large number of those who had borrowed in billions missed no time to swap their loans on 15 per cent to 19 per cent interest rates to three and four per cent.

This decline in bank interest rates was brought about by manipulation in treasury bills trading. Billions were made and shared by the borrowers and bankers in this loan swapping business at the cost of more than 30 million account holders, who always got a negative return on hard-earned savings as declared by Dr Shamshad Akhtar in December 2006 when she launched the annual report of the central bank for 2005-06.

The State Bank has failed in its duty by concealing the information of this unholy swapping when the same class of businessmen now clamour that bank rates have gone up from three to 4 per cent in 2002 to 10 and 11 per cent in 2005. The textile barons have managed to get their Rs35 billion loans swapped to long-term export oriented loans.

In last five years or so, the banks offered more than Rs1.3 trillion loans and more than $20 billion (about Rs1.2 trillion) came as remittances. Bulk of this Rs2.5 trillion was put at the disposal of this small elite class, who used it for “badla financing” in stock exchange, commodity operations and in real estate.

The prices are on fire that has made the lives of poor, lower middle class and the middle class an unending test of endurance.