NO nexus is stronger than the link between political power and plots (land) in this country. This has always been the case, with the rising urban property owners slowly grabbing their share of power from the landed aristocracy over time. How has this questionable alliance damaged the national economy and produced a “high-consumption, low-productivity economy” is succinctly explained by Atif Mian, a Princeton economist of Pakistani origin, in a recent commentary on the current economic situation in Pakistan. His comment comes in the wake of the arrest and court martial of the country’s former spy chief, retired Lt Gen Faiz Hameed, on charges of intimidating a developer to extort valuable land. The developer himself is alleged to have acquired that land for a housing society fraudulently. “Land is one of the favourite assets through which the powerful extract rents from the economy,” he noted. “The nexus between power and plots in Pakistan has seriously affected the economy,” the professor added, urging the government to shift its focus from non-reproducible to reproducible factors.

That real estate is widely used in Pakistan to park and launder illegal money and avoid taxes is an open secret. If you look at the balance sheets of listed companies, you notice most of them have heavily invested in property rather than in productive assets. It is because of tax exemptions enjoyed by real estate and property that land is considered the most favoured asset class that generates highest profit margins for owners and one of the lowest shares of revenue for the national exchequer, both as a share of GDP and as a share of total tax revenue. Can this entrenched nexus between power and plot be broken? Or the more pertinent question is: will those who have prospered because of this connection allow anyone to dismantle this nexus? The recent federal and provincial budgets are a clear indication that those profiting from this nexus are influential enough to prevent any effort to effectively tax real estate in spite of extreme fiscal pressures. Not only that, certain segments of society, eg civil bureaucracy and military personnel, are even protected from any taxation on property sales. That reflects the sad reality of Pakistan’s economic woes: the entire economic framework has been designed to favour the rent-seeking classes. Nothing is going to change unless this framework is dismantled.

Published in Dawn, September 3rd, 2024