The bottom line(s)
1. Govt. Perspective: Dire Need of USDs
With IMF's stringent conditions and the terms of Saudi/UAE loan. That loan/borrowed money, primarily is not for utilization but for reflection into reserve accounts like an individual maintains his bank statement for immigration/visa purposes by borrowing someones's money, not touchable but somehow reflects ownership in documents. Based on the available options, one of the most feasible is to borrow money from overseas residents as that money comes at some premium but no strict conditions. Magnitude of it can be small but each $ matters under current circumstances.
2. Citizen's Perspective: Only Overseas and ones holing USDs
(A) Interest Factors: Both YES and NO group. Traditionally, the overwhelming majority (as per historical trends) Interest factor is a pure NO go.
(B) Available Options: There are already many not only offered by the Govt. but also by many national banks and other financial institutes offering more or less the same.
(C) What's New: Nothing much except for re-branding as earlier Euro Bonds were floated on a same idea (10-year bonds at 6.875 %). Now appeal is to overseas to come in at this critical time, specifically with their USDs.
3. Alternative(s): Crowdfunding Sources
To avoid (A) Infrastructure Development Loans from foreign institutes, and (B) Interest Factor, Govt. can initiate crow-funding of such projects. We see frequent news on loan being obtained from whatever foreign institute to develop such Motorway, Port, Dam etc. and loan will be repaid by leasing the constructed infrastructure for some good number of years (prime example are Toll Plazas/Posts on Motorways that collect all that goes at loan payments + profits of the lending institute). In this scenario, the infrastructure projects can be funded by citizen's money and profit (more or less whatever) generated from economic zones, operational aspects etc. given back to people. Its 'by the people for the people' model. One invests in his own country to develop it and earn from it. At the moment one of the headache for Govts. is to borrow from one and repay to others for their investments in state projects.
No interest and no a rocket science! as this model has been started to be successful at many countries or at city level. It requires vision by the Govt. transparency and awareness among people.
** The Rise of Public-Sector Crowdfunding
** How Communities Are Using Crowdfunding to Finance Public Projects
4. Real Estate Factor: The Stock Market Analogy
At the very basic level, Govt. can auction state land (e.g. Commercial, Agricultural, etc.) even starting at a small level, based on shared pricing. For example, a hypothetical scenario that some commercial land/Markaz in some underdeveloped X sector costing Y money can be split up into multiple shares (y1, y2, ...yn) and floated in market to be purchased by any one who can. With money raised, and development started as soon as the worth goes up the share holder start to get their profit in a legal, regulated and taxable way. The real-estate shares can change hand as they do in the stock market. Private projects can also follow the same path that is much better regulated and shares reflect value of an immovable asset that is on ground, will not vanish and even in case of crash will retain at-least the base value. Instead of auctioning to individuals, auctioned to masses requires more administrative efforts but better circulation of money, and much less manipulation by individuals that drive the market after being sole owners or JVs.
Revenue generation in today's age need more efforts and creativity. The minds who created this mess of Pakistani economy cant get it out of the same mess. Change of attitude, people and thought process is a must. World has moved long beyond Certificates or Real Estate for revenue generation from inner sources and own citizens
5. Real Estate Industry - The Long Neglected Domain
Why Banks and Financial institutes (holding Cash Assets) are better regulated while Real Estate is not? Because policy makers are short sighted with only relying on Cash aspects and also because real estate business, by large has only been considered as a dealers' dirty game while banking (despite corrupt practices and financial scams) is considered as white color business. Each PM/Finance Minister would love to hold meeting with Bankers but rarely with Real Estate developers so one who is neglected doesn't get any fair say in the policies either.
For the majority, who has the investment power and magnitude does have concerns over the interest factor. I am sure, when better options with less margins but no interest factor becomes available by state, there can be massive investment. Just an example, Meezan Bank somehow better marketed Auto Financing (Car Ijarah) as Shariah Compliant Financing and in no time became the Market Leader when the opportunity was arise!
* Personal views, subject to personal interpretation and writing. Corrections and amendments (based on facts) are most welcome!!
135 days ago