A VERY valid question is circulating inside the National Assembly, thanks to the efforts of Asad Umar of the PTI: can the government tell us how much money has been sent abroad from Pakistan for the purpose of buying property in Dubai or in the rest of the United Arab Emirates in the recent past? Unfortunately, in this country, the whole scheme of sending and receiving foreign exchange is rigged in such a way as to make it impossible to find an answer. There is a good reason why this is important. For a number of years now, we have been hearing about billions of dollars worth of investment in Dubai real estate by Pakistanis. The latest release of data may show a large decline, but the amount is still just below $1bn in the year 2016, down from $2.1bn in the preceding year. In total, the data from the Dubai Land Department indicates that $7.73bn have been invested by Pakistanis in Dubai real estate since 2013.
There are grounds to be careful with this data though. First of all, it includes investments by those non-resident Pakistanis who are living and earning abroad. Second, it includes perfectly legitimate investments, not necessarily made from so-called black money or other ill-gotten proceeds. It would be a mistake to assume that the full reported amount of $7.73bn necessarily presents a problem. But in order to know the extent of the challenge these investments may pose, we need a simple reporting template that can tell us how much has been sent from here.
And that is where the problem comes in. The State Bank governor recently told a National Assembly standing committee that his institution has not granted any permission for outward remittances for investment in Dubai real estate. According to the Foreign Exchange Manual, any investment made abroad that exceeds $5m requires cabinet approval, and any investment made abroad in amounts less than that, through the interbank market, requires State Bank approval. But the way the system is set up, one can simply send an outward remittance without declaring that it is for investment purposes, and under the prevailing law no questions can be asked. The only way this could come to the attention of the state is if the person involved decides to declare the assets acquired in his or her wealth declaration at home, in order to keep the money white. For those who have no intention of ever declaring their assets, the hawala system provides an easy route to send the money with no questions asked. It is a marvel to note that our foreign exchange scheme is set up in a way that we can never even know the amount that is going from the country into real-estate investments abroad, let alone do anything to regulate or tax the enterprise.
Published in Dawn, February 26th, 2017