Pakistan recently decided to offer permanent residency to rich foreigners, mainly Sikhs living in the US and Canada, Afghans and Chinese, in exchange for their investment, a move the country’s Information Minister Fawad Chaudhary termed “historic.”
Pakistan recently decided to offer permanent residency to rich foreigners, mainly Sikhs living in the US and Canada, Afghans and Chinese, in exchange for their investment, a move the country’s Information Minister Fawad Chaudhary termed “historic.” The scheme that looks rosy on the surface has based on several assumptions that may not be true.
“For the first time in the history of Pakistan, foreigners are being allowed to invest in the real estate sector,” Fawad Chaudhary was quoted as saying by The Express Tribune.
Despite the 5.4 percent GDP growth rate in the Financial Year 20-21, the growth in exports remained less than satisfactory while at the same time imports continued to swell exponentially. This resulted in a huge trade deficit, around $24 billion alone in the first six months.
Through this new scheme, the government seems to be planning to bridge the gap by encouraging capital inflow in the country. However, some economists warned against this approach, citing its detrimental effects on the overall economy.
“Encouraging external capital inflow into real estate is negative for growth,” Atif Mian, a renowned economist and professor at US’ Princeton University, said in a Twitter thread. He argued the move will “make the country more expensive to live in, without providing any productivity advantage.”
Pakistan, he said, already has "an out-of-sync housing market" with a very high urban land value to income ratio.
The government, as reported in The Express Tribune, has assumed some premises based upon which it derived the scheme. It argued that rich Sikhs in the US and EU would like to buy tourism-oriented properties for development near the Kartarpur Corridor. However, the scope of religious tourism—much of which depends upon ties between India and Pakistan—remains limited so far.
Furthermore, the regional security environment and deteriorating situation within Pakistan will make any foreign direct investment in the tourism sector even harder.
“One of the purposes of opening the PR scheme was to attract rich Afghans, who were moving to Turkey, Malaysia, and some other countries following the fall of Kabul last August,” The Express Tribune reported citing an unnamed senior minister.
However, the question remains why would a rich Afghan businessman prefer Pakistan over Turkey, Malaysia, and other countries. Granting residency isn’t enough.