Prime Minister’s Construction Package – Webinar Brief No. 12: 2020

Introduction

The    Pakistan   Institute   of  Development   Economics (PIDE) organized a  webinar on the recently announced incentive   package for  the  construction   industry   by lmran Khan, the Prime Minister of Pakistan. The representation from contractors, federal housing authorities,  LDA,  architects,  urban  planners,  and academic    researchers    made   it   a    viable   dialogue between stakeholders and  indicates the importance of the subject.

Key  Messages

■   Defining  the  construction   industry,  the  panelists agreed  on  the broader definition  of construction that recently assumed in  media and  policy circles. The   construction   industry,   as   per   participants, must  include the simultaneous  planning  of  non• constructed amenities including having public spaces.

■   Dr.   Noman  Ahmad,   an  academic  Urban   planner from   Karachi,   noted   that   the   package  clearly lacked  the  ideas  about  geographic  spread  as  a result of  construction.  He further  warned  against the  auxiliary  concentration  in  10  large cities    having   more   than   54%    of  the    urban population     of    the    country.     Abdul     Hafeez Sheikh Pasha of Bismillah Group welcomed the announcement with careful anecdote that the package is a  ‘time  bomb’,  and  most  projects  shall not be completed  in the  discounted  time by 2022. He also emphasized the need  of installing loan packages  by  financial  institutions  for daily-wage workers  of industry  through their contractors  as custodians.

■   The    Director    General    of   Federal    Government Housing  authority  Wasim   Hayat  Bajwa   clarified that,     through      its     various      initiatives,     the Naya   Pakistan    Housing    Authority    is   open    to collaborations such  as to provide land  for construction; get land  from private partners  for construction  and  building its  own  projects The   fixed  taxation   regime   shall   encourage  the  investors   to  invest   in  the construction   industry  with  per   square  feet  tax-surcharge  and   withholding taxes  only for  the  large  corporations  or   suppliers  including  that  of  steel. However,  the double tier taxation  regime  of provincial  ticketing  and  federal taxation  must be  addressed  as to bring clarity  to developers.

■    The   participants   however  dismayed   over the  timeframe   needed to  get  the necessary approvals  and  preparedness  of FBR to green-signal  the  investments.

■    With   respect   to  the  efficiency   of  the  package,   the  participants   raised  the pertinent  question  of construction  value  chain;  the extent  to which  the effects of  this  package be  rippled into  affiliate  industries.

■    ‘We’re  in  desperate  need  to deregulate  the construction  industry,  along  with reducing the number of regulatory authorities which impeded  ease-of-doing business.’  Said  Dr.  Nadeem  ul  Haque,  the Vice   Chancellor  at  PIDE.  ‘There  is obfuscation  in the commercial  usage of resident properties and  vice-versa; and needs  to develop mixed use  buildings  to address  this  undeserved dichotomy.’

■    Like  most  markets  in  Pakistan  archaic regulations  have  seldom  been  reviewed and.  The  PIDE  has  long  maintained  that we  need  to re-imagine our markets. The  construction  industry  is  a   very good  example  of  how  what  is  a   leading sector  in other countries  has been  killed by excessive regulation.  PIDE  has also argued (and  in  2011  PC  accepted this argument in  FEG)  that the path to high sustainable  growth  has to include  a  period of building  in  Pakistani  cities.  And this  building  has to be  complex construction  within  cities  not  sprawl.

■     To make  this  happen several  ideas  that we  have examined  and  proposed are:

• Make   cities   cohesive   and   defined.  The   promise   of  local   government  eludes   us .

But   even   with   local   government   we   have  to  ensure that  cities   have   coherent jurisdictions  and  even  defined areas.  Lahore  for  example  is divided  into  almost  5 overlapping jurisdictions  (CHECK) and  Karachi  into  7 (CHECK).  Moreover,  there  are no  defined  city  limits  and  mere plot  making  stretches  cities  in  strange  directions.

• Flat is the  unit of living  in  large  cities:  Whereas  in  all  large  cities,  the  unit of living is   a  flat,   in  most of our   cities  (except  perhaps   Karachi)   planners  are   holding   on to the  notion  of a  single-family  home with  a  garden to  be  the  norm.  Surprisingly these planners  remain  unaware that with  city  sizes  running  into  millions  the  poor cannot  be  accommodated  in   such  single-family  homes.  It  is for this  reason  that they developed  a  social  housing program for the  poor in  the  rural  areas  around Lahore  (Ashaina).  The  same  mistake  is now being  made in the  NPHA.

• Density gradients:   Let  city  centers  density  through  development of flat  living   in high  (10  or  more floors)  or  midrise  (less  than  10  floors)  buildings.  And   allow  for mixed use there.  Density  gradually reduces as distance  from city  centers.

• Deregulation of cities.  It  should  be emphasized that contrary  to popular belief the planner  has  not tools  to develop clarity  on  where and  what  to build.  Worldwide people are  moving away  from rigid planning of cities  that is happening  in  Pakistan. More  and  more cities  are  now developing  loose  guidelines  that allow  markets  to take decisions  on  usage,  height and  cityscape.

•         Mobile cities  with  limited  cars:  the planners  have for decades  favored cars  making poor mobility  almost  impossible.  If we want serious  development and  construction, our   paradigm   on   how   city  mobility  has  to  change.  The   current   paradigm   of excluding  the  poor is based  on  the  use  of cars  and  the  paradigm  of the  suburbia.