The Central Board of Revenue has asked the Income Tax Commissioners to undertake an exercise to ascertain the investments made in real estate in the UAE by Pakistanis from their tax-paid or tax evaded income. We fail to understand the rationale.
Does the CBR not know that the bulk of the money heating up the real estate market in Pakistan itself comes from earnings outside the tax net. And, all proposals to plug the loopholes and earn a revenue windfall from real estate sector boom and the bourses were turned down by the policy makers, in the last budget, on the grounds that a drastic reduction in real estate prices could result in flight of capital.
The policy makers, instead of directing the CBR to conduct this fruitless study, should thoroughly examine the reasons behind Dubai's success in bringing investment into real estate from all over the Middle East and South Asia. Even the Arab and Asian origin citizenry in North America and Europe are investing heavily in Dubai.
It is a spectacular marketing success story. The packaging or outer wrapping is the quality of life and conducive business environment: Availability of clear land title, strict adherence to the terms of contract between the developer and the buyer, and rental laws favouring the landlord and not the tenant.
But above all the unfailing magnetic element is the ability of the Dubai government, to create a regional hub for the financial sector, shipping industry, and a crossing point between East and West for the world's top airlines. Lure the media and IT conglomerates to open offices, and entice the best human resource to man them.
Obviously these expats in Dubai have the income level to pay for premium quality residential accommodation. Unlike the labour class, they are encouraged to bring their families, too. And for this business and professional class, educational institutions, shopping centres, hotels and restaurants of high quality have sprung up. All this economic activity has made the desert (Dubai) bloom and make it the destination of choice for businesses, jobs as well as tourism.
In fact Dubai offers the best of both the worlds, ie a totally liberal westernised environment free from obscurantist do's and don'ts, with a nice blend of eastern living and close kinship in a secure environment. Just like Singapore and Kuala Lumpur in the eighties, it may end up being overbuilt. And, we may see empty apartments, shops and flats for some time before the population growth catches up.
That is, sooner or later, a desert with very little natural and human resources will have developed into a regional business centre. Pakistanis are investing in UAE for profit in the opportunities in store, and if things go wrong internally, to have an alternate base. It is a natural urge. We do, however, wonder why CBR and the SBP, for over a year, sat on the fence, ignoring all the advertisements in the media soliciting investment in properties in Dubai.
It was in November, 2004, that Prime Minister Shaukat Aziz warned the stock brokers of their involvement in the flight of capital. At that time the rupee was under pressure against the dollar and the SBP was struggling to keep the forex reserves above $10 billion. Under instructions from Islamabad, SBP was making oil payments from the flows in the inter-bank market without touching the forex reserves. CBR sleuths do not need to go to Dubai - the data is available in the building across the Mereweather Tower.
But the question is: What good will it bring? Instead of fruitless exercises, the policy makers need to recognise that the governmental system has to be efficient in its response to public needs. To put the problem in perspective, we need to compare the working of our bureaucracy with Far East nations' and the UAE's.
There the bureaucrats do their job in a professional manner and are fully trained to deal with intricate matters with diligence and commitment. That is how a modern management system works. To get a lost licence or a permit replaced takes an hour in Singapore, a day in Dubai and 30 days in the Pakistan. Today, instead of overhauling the system and reducing the size of bureaucracy and making it accountable, we have evolved a parallel system ie appoint a consultant at a astronomical cost.
There are now consultants galore. What is to be done? There are over two dozen studies on the subject on the shelf at hand. No new report is needed. We have only to find the political will and imagination to build our own Dubais.
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