Pakistan's post-9/11 economic boom

While the events of 11 September 2001 created an atmosphere of fear and suspicion among Pakistani expatriates living in the US, the benefits back home are becoming increasingly noticeable.

Many wealthy Pakistanis in America have responded to increased monitoring of wealth and assets, particularly owned by Muslims, by sending a substantial part of their savings back home.

And areas like the up-market Defence Housing Authority in Lahore have benefited enormously.

A recent ballot to allocate 300 residential plots in this area received nearly 70,000 applications.

Affluent middle class

The huge interest of investors in this and other well-to-do areas is typical of the unprecedented surge in real estate businesses in big cities like Lahore and Karachi following the attack on the World Trade Centre.

Since then, the value of one plot in the Defence Housing Authority has shot up from about $65,000 before 11 September to in excess of $1.5m after it.

In the town of Johar, another affluent middle class locality, average prices have risen on an equally spectacular basis – from about $35,000 to more than $132,000.

The boom has led to a mushrooming of Pakistan’s middle class housing suburbs, often at an unprecedented speed.

The growth of Lahore’s Defence Housing Authority is so phenomenal that it has announced five new building phases since 2002.

Rags to riches

“The property boom in Lahore would not have been possible had 9/11 not occurred,” says Sahir Chaudhary, a real-estate developer in Lahore, “The price of the real estate went up by as much as 1,000% in the city in the last five years.”

Lahore is being transformed by money from the US
The rocketing real estate prices in Lahore have resulted in hundreds of rags-to-riches stories.

Poor farmers with small pieces of land in the villages close to the municipal limits could hardly make ends meet. But with the fast expansion of the city’s frontiers, they sold off their property, pocketing millions of rupees overnight.

The city’s roads are now clogged with brand new four-by-fours – the names of BMW and Lexus are becoming increasingly common on the streets.

The cars are just one sign of the ostentatious new rich, showing off money which was unheard of a few years back.

More than 30m cellular phone subscribers is another signpost of the upturn.

It is not only the property market which is booming Pakistan’s electricity company chief Tariq Hameed says there have also been record sales of refrigerators, washing machines and split air conditioners which have caused a sudden surge in electricity demand. Not surprising then that this summer there were many power cuts in peak hours.

All this is all the more amazing when one considers that just five years ago, Pakistan was on the verge of bankruptcy, with only a little more than $1bn in foreign exchange reserves and its stock market teetering at 1,000 points.

Massive remittances

Two months after 9/11, the forex reserves went up to $4bn as Pakistan joined the US coalition against the “war on terror”. The forex reserves now stand at more than $12bn.

The property boom in Lahore would not have been possible had 9/11 not occurred Sahir Chaudhary, Lahore real-estate developer

And there is little doubt that the catalyst for this growth has been the massive amount of remittances sent back by non-resident Pakistanis in the US and later from Europe.

In 2001, the remittances totalled a little more than $1bn.

But since 2002, Pakistan has received nearly $4bn in remittances every year.

That means an additional inflow of $14-15bn has been returned to the country since the 2001 attacks.

No wonder, then, that the once ever-declining rupee has been stable at around 60-61 to a dollar since then.

The wealth flowing in to Pakistan now is second only to the boom created by money sent back to the country by its blue-collar workers in the Middle East in the 1980s.

The difference is that the 1980s money created a lower middle class, whereas today the principal beneficiaries are upper middle class people in big cities.

They brandish credit cards and drive Mitsubishis. Their children go to grammar schools, eat burgers and pizzas and celebrate Halloween and Valentine’s Day.

Strange then that the vast majority still have few kind words for the US – even though it is arguably the source of their new-found prosperity.

Source: BBC