By Staff Reporter
ISLAMABAD: Pakistan’s powerful elite, including military and bureaucracy, are exploiting a corrupt system of land ownership, damaging the economy and distorting investment incentives, a prominent economist said on Thursday.
“Land is one of the favorite assets through which the powerful extract rents from the economy,” Atif Mian, a globally renowned Princeton economist said in a social media post.
Ex-spy chief General Faiz Hameed, the once powerful head of Pakistan’s intelligence agency, was recently arrested on charges of intimidating a developer to extort valuable land.
Mian said the tactics used for extracting these rents range from the legal to what General Hameed allegedly did. “However, even if the means to acquire land by the powerful are legal, it does not necessarily make them desirable, or fair. The entrenched nexus between power and plots in Pakistan is seriously damaging the economy.”
Mian said Pakistan generates one of the lowest revenues from property – both as a share of GDP and total tax revenue. “Rather than use land to raise much-needed public funds, an elaborate alliance of the powerful has developed over time to convert public land value into private property,” he said. “This is also the likely reason land value is protected from taxation. For example, despite extreme pressure due to fiscal deficit, the recent budget protected property sales of army personnel and bureaucrats from taxation.”
The economist said the macroeconomic consequences of rent-seeking via plots of land are bad. “Pakistan has high consumption and very low investment rates … When the unproductive elite grab rents via land value, they generate consumption demand in the economy, without adding to the economy’s productive capacity.”
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