Political Analysis of Pakistan
Political: Prior to the worldwide recession, Pakistan was considered an attractive region for investment owing to a liberal investment policy. However, in present times the situation has completely changed, with the country losing its high investment value for both domestic and international investors. One of the main reasons behind this issue is political instability. A weak government, inefficient political parties and instable political culture, amalgamate to create the basis for a politically instable state.
Similarly, in Pakistan, there is deteriorating law and order situation and terrorism is on a rise since the 9/11. Terrorism is causing huge losses to the industrialized and trading sectors. The rising political obstacles in the country are having a negative impact on the economy and stock business. President Asif Ali Zardari is criticized from opposition parties after the Supreme Court struck down a reprieve that had protected the increasingly unpopular leader and several of his political allies from corruption charges.
The ambiguity regarding corruption cases against some ministers, advisors and members of parliament has created uncertainty among the businessmen. Due to the IMF demand, the government decided to increase the power tariff which has led to unstable deliveries to foreign buyers and investors by our export oriented industries. The loss of export orders has now become common and large numbers of importers have shifted to other regional countries.
The MNC’s prefer to invest in a location that is politically stable but in Pakistan due to strikes, riots, suicide bombings etc the risk of investment has increased. Therefore investors are finding their safety nets in countries such as India and China. Also due to the political structure in the country, the tax exemption provided to the elite section of the society is unfair and needs to be reduced.
Moreover, practices such as red tapism and long awaited departmental procedures are barriers in doing business.
Licenses, NICs, gas, electricity and water connections etc are not easily attainable. Hence, the investors have to face the insulting behavior of the bureaucrats. Red-Tapism, corruption and malpractices have been successful in preventing easy entry of foreign investors. In fact, retaining investors has never been observed as an area worthy of deserving attention of the concerned departments’ officials.
Investors face many hurdles ranging from purchasing of land and site development to financial and executive regulations, along with taxation related matters.
These lead to taking up about fifteen per cent of their revenues. Our country is being governed for the last 10 years by bankers with supreme authority and they take measures which are only beneficial to the banking industry. The real estate sector is also facing the same issues. The builders and developers of properties are facing difficulty in attracting investment. They are offering attractive packages to draw in the investors, but are not meeting with any significant success.
Investors are hesitant mainly because of political turbulence and security concerns.
There is nervousness in the business community. Before making any investment, a businessman mainly looks for two things, which are profitability and security of life and property. If an investor is not guaranteed sufficient security of life and property, no amount of profitability can force him to make an investment. So to sum up, political disorder in Pakistan is seriously affecting the real estate (domestic) as well as foreign investment.
The government should focus on improving the law and order situation in the country and elimination of discouraging factors.
Rapid policy changes should be avoided. These efforts can collectively serve to improve the real estate investment in the country and build the confidence of property agents, brokers, dealer and foreign investors.
Reference links: http://pu. edu. pk/images/journal/pols/pdf-files/political%20instability%20-%203.
pdf http://pakbizjournal. wordpress. com/tag/impacts-of-political-instability-in-pakistan/ http://www. gu. edu. pk/n/gujr/PDF/pdf%20june2009/J09_46_50.
pdf http://blog. merapakistan. com/political-instability-and-real-estate-investment-in-pakistan/