Tight-fisted Urban Development!

We are looking for ways to accelerate growth so that poverty can be reduced and living standards improved. We go borrowing and begging to do this! Yet not many of us question the myriads of opportunities for investment that careless regulation stifles. The most glaring example of this is urban regulation which through Pakistan’s history has stifled huge investment opportunities.

Construction leads growth. That is why analysts in the US always watch it. But construction is not just building kothis and outside city centers which is what our paradigm of urban development appears to be.

I am glad to see that the momentum for an overhaul of our urban regulatory regime is now building up. Most recently, Faisal Bari, in a column in the Nation on Monday February 23 joined a list of economists and opinion makers who are asking for the non-developmental urban regulations to be changed.

This is a subject on which some of us have been writing for a while. Most recently, Khalid Hassan in the Friday times quoted extensively from the articles by Nadeem Ul Haque on the subject. For those interested, these articles can be found on chowk.com at http://www.chowk.com/show_article.cgi?aid=0000312 5&channel=market%20street.

Taking their cue from Khalid’s articles, recently the Daily Times wrote an editorial asking for the government to let down its hair on the development of Lahore.

Let me recap and build on some questions that Nadeem has asked that I think should be made the subject of extensive research. Hopefully researchers like Bari will engage in this research.

1. Why are there no tall buildings in Lahore? The tallest building probably remains WAPDA house made in 1966! Why? If you go to chowk.com and see the responses to Nadeem’s articles, you will see that may people equate development with environmental degradation and other social evils. Indeed this surprises me. I wonder do our regulators hold on to this anti-development feudal attitude because our people subscribe to it.

Contrary to what people think, tall buildings and less regulated development does not lead to social and environmental ills. Research shows, that despite propaganda, US cities continue to develop at a rapid pace while their environment is getting cleaner and social evils like crime are declining (references upon request).

I am also surprised that these people would rather see the green fields of Punjab replaced by kothis rather than allow high rises. These people also do not see the cost of the urban sprawl in terms of pollution and developing highway and public transport infrastructure.

2. Why are their only 2 hotels in Lahore and they were also built in the sixties and seventies? Despite Lahore being rich in history and culture, why is their no tourism in Lahore? No conventions? Indeed none anywhere in Pakistan. Dubai has large conventions and boasts hundreds of thousands of hotel rooms. Lahore barely makes a few hundred 5-star rooms. Is this to protect a certain hotel monopoly? One should ask the related question, why has there been no entry into the hotel industry in the last 40 years? Why are multinational hotels not visible in Lahore and everywhere in the country? They will say that there is no demand. Of course there is not when they have to build out of the city. Why not a city center location?

3. Indeed why do we not exploit our history and our mountains, beaches for tourism? Why no hotels near Moenjo Daro and Harrapa? No hotels in the mountains? Why? Tourist industry is huge and growing in the world with countries like Turkey getting $20 billion a year from it yet we have virtually willed it away.

Nathia Gali and Murree still have a Governor’s house which is hardly used and which could be a lovely high priced hotel? The hills still have rest houses being preserved for the VIPs at government expense. Rest houses were made in areas where there were no hotels for the touring judges or civil servants. Why not replace them with hotels? How many of these rest houses are properly used for government business? Is there any study of this?

4. Where is the commercial center of Lahore? I was told by one regulator that the heart of Lahore should now move to Bedian. By fiat even though the connection to the rest of the country is over the Ravi, yet the city center should be by the Indian Border. People have to be moved from the old city and their current locations in Gulberg further out into the boonies to preserve government real estate in the center of town? We have no highway infrastructure, pollution is already a problem. But no matter spread the city out more and destroy the green fields of Punjab.

5. Why is the heart of the city government owned? Almost all the land from the Charing Cross to the Airport along the Mall is owned by the government. Some of it is not even fully utilized. Some examples of this are the Staff College (which can easily be moved to join up with the civil service academy near DHA), Civil service academy (now State Guest House and there is an academy near the DHA) (note US has a 5 bedroom townhouse for a state guest house) NIPA, Government house, Navy War College (where is the sea?) the never used Chief justice house (preserved only for weddings of the well connected).The US government owns only the White house (smaller than our Governor’s mansion and the Vice President’s House. All of us know the famous town house 10 Downing Street? The UK government maintains no housing for its permanent secretaries or judges! Why do we, a poor country maintain expensive housing for officials?

6. Why is the urban regulation paradigm still friendly to an urban sprawl based on kothis? Why do kothi wallahs determine the pace of development by having the right of refusal to commercial development? Apartment blocks because of height and other restrictions are made economically infeasible. Where can you get readymade serviced office space in Lahore? Where is good warehouse space? Retail space is on now 3 marla plots? What can you build on that?

7. Why do we have nothing else in our cities but parks and clubs for the rich? The latter are subsidized heavily through cheap land gifts. (The Lahore’s Race course park that provided some entertainment to the middle classes was moved out of the city but not so the rich man’s polo club which is the bulk of the park. Who owns the polo club? How did they get the title? What taxes do they pay?) Other social and commercial institutions –schools, theaters, community centers, social clubs for the poor, commercial sports, shopping malls, amusement parks—are not possible inside Lahore because of zoning laws or direct government ownership of land.

8. Why do we maintain rent control? Every major city in the world has eliminated rent control. All rent control does is reduce the supply of rental real estate and destroys the incentive to maintain quality real estate. Our regulators, however, are of the view that they know the value of rental real estate better than the market. Not surprisingly, Mall road has shabby property that tenants have been renting for years at a rent that has not kept pace with inflation or real estate values. People who have had leases for decades continue to hold them and sometime even sublet. Rent control must go as an urgent priority if the construction sector is to be revitalized.

Urban construction is one of the most growth and poor-friendly activity in a country. Financial markets, pension funds can be based on it. It is sad that we are holding it back. Developing urban centers rather than urban sprawls are also intellectually and culturally invigorating. After all, most of mankind’s major achievements—philosophy, democracy, industry, drama, art-- have taken place in congested city centers. Let us embrace commercial development not fear it.