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Will the Construction Industry Revive Pakistan Economic Sector?

06/04/2021

Will the Construction Industry Revive Pakistan Economic Sector?

In April 2020, amidst the chaos of Covid-19 induced pandemic, Prime Minister Imran Khan announced an incentive package for the construction sector. The sector was given the status of “industry” by the premier and the plan was to boost economic growth and increase the employment opportunities across the country. At the same time, the government announced to construct low-cost housing units across the country for lower income strata to fulfil the shortage of 10 million houses.

Since then, a spike in the local investment in the construction sector has been observed but foreign investors remained shy of parking their money in this industry. The government supported the sector and announced amnesty schemes that set the sector on the path of growth but it requires foreign direct investment to speed up the process in order to meet the ever-increasing demand of houses and to create profit for the investors. However, the government must make this industry conducive for foreign investors along with securing the investment to achieve the target.

What does an expert say?

Former president of Pakistan Chambers of Commerce and Industry (FPCCI) Mian Anjum Nisar said that Pakistan needs to complete homework in order to successfully attract considerable foreign direct investment (FDI) in the long-term. It is the need of the hour because Pakistan had been unable to secure significant foreign investment despite offering tax incentives and assurances of one-window facility.

“Pakistan will continue receiving FDI under the China-Pakistan Economic Corridor (CPEC) and it can also accelerate inflows by gaining wider domestic socio-political support for CPEC projects and removing procedural bottlenecks that delay their timely implementation,” Mr. Nisar added. However to make this sector go ahead, the country needs sizable amount of foreign investment as the gigantic expansion in the exports and remittances would be a short-term booster.

Construction industry has a significant share in GDP

According to an estimate the construction industry in Pakistan has a significant share between 2.3% and 2.85% in the last five fiscal years to Pakistan’s GDP, but the experts estimate that its value stands somewhere between 10 and 12% of the total GDP. It is because it supports more than 42 ancillary sectors including aluminium, brick, cables, cement, fixtures, glass, kitchen and bathroom fittings, marble, paint, steel, tiles, transportation, warehousing and wood. Therefore, it can be easily gauged that the construction industry has a far-reaching impact on the overall economy.

What is the plan?

The government of Pakistan has an extensive plan to make the most from the construction industry such as the first is to provide affordable housing through the Naya Pakistan Housing Programme (NPHP) which was initiated in 2019 and has been successfully launched across the country. The goal is to construct 5 million housing units during the tenure of PTI government.

The other fold of this plan is to set the economy on the path of growth by creating various employment opportunities. To ensure these goals are met, the government has set up the National Committee on Housing Construction and Development (NCHCD) that keeps monitoring the construction sector in order to overcome any hurdle and to make sure that construction activities continue to increase rapidly.

Incentives on offer…

One of the best incentive of this package is that investor does not have to declare their sources of income before investing in construction related projects. This is the key attraction as if a buyer is interested in buying a property, all he has to do is make the payment.

“The ‘no questions asked’ policy will encourage builders to invest their undocumented wealth in property and construction. This initiative, apart from providing legal cover for such individuals, will encourage people to invest in property. It will also encourage the expat community, who will be spared the cumbersome paperwork required to buy or build a home,” says one of the real estate agents.

Future of Pakistan Construction Industry

Despite the stellar performance of Pakistan construction industry, there are few risks that need to be addressed in order to make this sector work brilliantly. For instance, political instability, widespread corruption and poor business climate. The government must bring on reforms to regulate the entire Pakistan real estate sector, so that construction industry can perform better and contribute maximum to the GDP.

The construction industry of Pakistan is in developing stage where the government needs to take radical steps to remove bottlenecks such as eliminating the corruption factor, digitalization of the sector to improve the transparency and implement building laws that can appeal to foreign investors.

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