Angelina Jolie Using Her Star Power to Help Pakistan Flood Victims

Beautiful Hollywood star Angelina Jolie is known for her international humanitarian work as the United Nations Goodwill Ambassador. A winner of multiple awards including one Oscar and three Golden Globes, she is among the highest paid actors in the world. Jolie is currently visiting Pakistan to bring global attention to the immense suffering caused by devastating floods in the country, particularly in its southern Sindh province.  

Angelina Jolie

Pakistan is dealing with the aftermath of the worst floods in the country's history. Over 1500 Pakistanis are dead. About 33 million people in two southern provinces are homeless. Sindh is inundated with 784% of normal rainfall so far this year. Balochistan has seen 522% of average rainfall. Both provinces suffered their worst ever heatwave prior to this unprecedented deluge. Nearly a million livestock have been lost, over two million acres of farmland is underwater and 90% of the crops in Sindh and Balochistan have been damaged. 

UN Sec Gen Antonio Guterres

The United Nations Secretary General Antonio Guterres has described the unprecedented flooding in Pakistan as “a monsoon on steroids" that has created a massive humanitarian crisis. The country can not deal with it alone. He said Pakistan "is drowning not only in floodwater, but in debt.” Mr. Guterres has called for debt relief for developing nations such as Pakistan. “The Debt Service Suspen­sion Initiative should be ex­tended – and enhanced. We also need an effective mechanism of debt relief for developing coun­tries – including middle income countries – in debt distress. Creditors should consider debt reduction mechanisms such as debt-climate adaptation swaps.

It will take hundreds of millions of dollars to provide immediate relief to 33 million people, followed by tens of billions of dollars in assistance to rebuild the lives and livelihoods and the infrastructure destroyed by this catastrophe. Pakistan's gross capital formation is only 15% of its GDP. Among the world’s top 20 economies by population, only Egypt has a lower rate of gross capital formation than Pakistan, according to Bloomberg. It is time for the rich industrialized world to help developing nations such as Pakistan to deal with the massive impact of climate change. 

Low Gross Capital Formation in Pakistan. Source: Bloomberg 

Pakistan's population is about 2.6% of the world population. The nation has contributed just 0.28% of the cumulative global carbon emissions since 1750. It lacks the resources needed to deal with the consequences of this man-made disaster. The Industrial Revolution in Europe and the United States was fueled mainly by fossil fuels such as coal and oil believed to be responsible for climate change. 

Cumulative CO2 Emissions Since 1750. Source: Our World in Data

Below is a map from Professor Jason Hickel showing that the countries in the global north are the biggest polluters while those in the global south are the most vulnerable to the effects of climate change.  

Climate Injustice: Low Emitters Global South vs Big Polluters in Industrial North. Source: Prof J. Hickel

After viewing the flood disaster in Pakistan Jolie said: "I have never seen anything like this. I have been to Pakistan many times. I came because of the generosity that Pakistani people have shown to the people of Afghanistan. Oftentimes those who have less give more than so many other countries. The climate change is not only real but it's here.  This is a wakeup call to the world about where we are. The countries that have not done as much damage to climate are the ones that are bearing the brunt. The needs in Pakistan are now so great. I appeal to the world to help. Many of the victims here will not make it without a lot of help."

Here are some more excerpts from her press conference in Pakistan: 

"I feel overwhelmed but I feel it is not fair to say that since I am not living this." 

"I've never seen anything like this and I have been to Pakistan many times"

"I came  because of  the generosity that Pakistani people have shown to the people of Afghanistan over the years...My heart is very very much with people at this time.”

"It is often seen that the countries that don't have as much give more than so many other countries"

"I am absolutely with you in pushing the international community to do more. I feel that we say that often... we speak of aid appeals, relief and support but this is something very, very different"

"Climate change is not only real and it is not only coming, it is here,"

"I've seen the lives that were saved but I've also seen... I've been speaking to people and thinking that if enough aid doesn't come they won't be here in next few weeks... they won't make it"

"Even if they make it next few months with the winter coming and the destruction of the crops and the hard reality ... I am overwhelmed but I feel it is not fair to say that because I am not living this so I simply try to speak out for help. I can't even imagine what it feels like to be there"

"I will return and continue to return and my heart is very, very much with the people at this time"

https://youtu.be/tsHpbzF_Olg

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Climate Change: Pakistan Requires Massive Assistance to Recover From Catastrophic Floods

Pakistan is dealing with the aftermath of the worst floods in the country's history.  Over a thousand Pakistanis are dead. About 33 million people in two southern provinces are homeless. Sindh is inundated with 784% of normal rainfall so far this year. Balochistan has seen 522% of average rainfall. Both provinces suffered their worst ever heatwave prior to this unprecedented deluge. Nearly a million livestock have been lost, over two million acres of farmland is underwater and 90% of the crops in Sindh and Balochistan have been damaged. This is a massive humanitarian crisis. Pakistan can not deal with it alone.

Pakistan Flood 2022 Map. Source: DW

Satellite Image of Qambar, Sindh Before/After Floods 2022. Source: NASA

Satellite Image of Shikarpur, Sindh Before/After Floods 2022. Source: NASA

Balochistan and Sindh Worst Affected by Monsoon22. Source: The Economist

Pakistan's population is about 2.6% of the world population. The nation contributes less than 1% of the global carbon emissions. It lacks the resources needed to deal with the consequences of this man-made disaster. The Industrial Revolution in Europe and the United States was fueled mainly by fossil fuels such as coal and oil believed to be responsible for climate change.  The following map from Professor Jason Hickel shows that the countries in the global north are the biggest polluters while those in the global south are the most vulnerable to the effects of climate change. 

Climate Injustice: Low Emitters Global South vs Big Polluters in Industrial North. Source: Prof J. Hickel

Average Annual Cost of Floods in Vulnerable Countries. Source: Bloomberg

Comparison of 2022 and 2010 Floods in Pakistan. Source: WWF

It will take hundreds of millions of dollars to provide immediate relief to 33 million people, followed by tens of billions of dollars in assistance to rebuild the lives and livelihoods and the infrastructure destroyed by this catastrophe. Pakistan's gross capital formation is only 15% of its GDP. Among the world’s top 20 economies by population, only Egypt has a lower rate of gross capital formation than Pakistan, according to Bloomberg. It is time for the rich industrialized world to help developing nations such as Pakistan to deal with the massive impact of climate change. 

Low Gross Capital Formation in Pakistan. Source: Bloomberg 

All Pakistanis and non-Pakistanis need to pitch in with donations to help finance immediate disaster relief activities. Beyond that, Pakistan will have to be helped by international experts to build disaster preparedness capacity. The new housing and infrastructure will have to be funded and built to ensure its resilience in future climate disasters which are likely to occur more often with greater intensity. There is an urgent  need to prepare western and multilateral financial institutions to deal with such climate catastrophes in developing nations. Mechanisms also need to be put in place to provide and manage funding of these projects in a transparent manner. 

Related Links:

Haq's Musings

South Asia Investor Review

Groundwater Depletion in Pakistan

Pakistan Water Crisis: Facts and Myths

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Cycles of Drought and Floods in Pakistan

Pakistan at 75: Economic and Demographic Progress

Dust Bowl in Thar Desert Region

Dasht River in Balochistan

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Riaz Haq's Youtube Channel

PakAlumni Social Network

Naya Pakistan: Low-Cost Home Loans and Construction Subsidies to Boost Economy

Pakistani Prime Minister Imran Khan has recently announced a new housing construction incentives package that includes down payment assistance and expansion of home loans portfolios by commercial banks at discounted rates for affordable housing for the poor. Shariah compliant financing is also included in it. Pakistan’s mortgage finance to GDP ratio is just 0.25%, among the lowest in the world, according to the World Bank. The average for South Asia 3.4%.  New housing drives a large number of sectors of the economy from banking and building materials to construction and manufacturing of furniture and home appliances. These incentives are designed to stimulate the economy, boost employment and deal with the growing shortage of affordable housing in the country.

Naya Pakistan Housing:

Pakistan government's Naya Pakistan housing program offers Rs. 33 billion in direct subsidies for down payments for the first 100,000 applicants, according to media reports. In addition, the commercial banks are required to allocate 5% of their portfolio amounting to Rs330 billion for construction activities under this program. Pakistan’s mortgage finance to GDP ratio is just 0.25%, among the lowest in the world, according to the World Bank. A person earning Rs30,000 to Rs100,000 can build a house on a 5-marla lot with the mortgage financing at 5% and that of 10-marla at 7%.

Importance of Housing:

New Housing Starts are considered a reliable economic indicator in any country that collects routine economic data. Housing sector drives a large number of other sectors of the economy from banking and building materials to construction and manufacturing of furniture and home appliances.

These sectors, in turn, create jobs, improve people's living standards and widen the tax base. In the United States, for example, homes are the biggest contributors to net worth of Americans. Home equity loans allow people to take out loans for other purposes, including education, business startups and home improvements.  Hence, the governments' interest in pursuing pro-housing policies that ensure secure property rights, set aside land for housing and require banks to offer low-cost home loans.

Secure Property Rights:

Secure property rights are a pre-requisite for a thriving housing sector. Hernando de Soto Polar, Peruvian economist known for his work on the informal economy and on the importance of business and property rights, told Reuters back in 2016 that “(T)here is no such thing as an investment without property rights that are negotiable and transferable”.

In the United States, the world’s largest economy, the most important source of funds for new businesses is a mortgage on the entrepreneur’s house, de Soto wrote in his book “The Mystery of Capital”. He says that secure property rights for world's poor could unlock trillions in 'dead capital'.

Unfortunately, Pakistan's land title system is among the most corrupt in the country. A patwari, the title for the official keeping land records, is among the most resourceful government officials in much of Pakistan.  Patwaris have a well-deserved reputation for corruption. Legally protected and enforced property rights are the key source of the developed world’s prosperity, and the lack thereof is the reason why many nations remain mired in poverty, de Soto has argued.

Housing Finance:

Construction loans and mortgages at reasonable rates are essential for people to afford to build and own houses. Policies promoting discount loans and mortgages are the cornerstone of housing policies in the developed world.

Typical Low Cost Home. Source: Dawn 

In the United States, government-backed mortgage giants like FNMA (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corp) deploy vast resources to buy mortgages and ensure liquidity in the mortgage market. When lenders make loans for housing based on FNMA or Freddie Mac rules, they are confident they can sell in a highly liquid mortgage market.

Other developed countries also support mortgage financing in similar ways to make housing affordable.  Pakistan’s mortgage finance to Gross Domestic Product ratio is just 0.25%, among the lowest in the world.  The average for South Asia 3.4%. It's much higher in developed nations. It is over 65% in the United States, 40% in France and 20% in Italy.

Mortgage Debt to GDP Ratios in Developed Nation. Source: Urban Institute

Land at Discount Rates:

Land is a significant part of the cost of housing, particularly in or around big cities where land is highly appreciated. The government can help reduce this cost by offering land at discount for affordable housing.  There are news reports that Pakistan government has identified tracts of land to offer it to builders at discount rates for affordable housing.


Summary:

Naya Pakistan housing program offers Rs. 33 billion in direct subsidies for down payments for the first 100,000 applicants and requires the commercial banks to allocate 5% of their portfolio amounting to Rs330 billion for construction activities. Shariah compliant financing is also included in it.  It will boost Pakistan’s mortgage finance to GDP ratio which is only 0.25%, among the lowest in the world, and lower than 3.4% for South Asia. New housing drives a large number of sectors of the economy from banking and building materials to construction and manufacturing of furniture and home appliances. These incentives are designed to stimulate the economy, boost employment and deal with the growing shortage of affordable housing in the country.

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Pakistani-American to Fellow Overseas Pakistanis: Go Back and Visit

Guest Post by Rashid Ahmad

You should go back and visit. You would be surprised!

Pakistan in your mind may be frozen in time, but real Pakistan has moved on. Everything has changed.

Pakistani Capital Islamabad

You will find both familiarity and alienness there. It would appear to you like a dream. Or perhaps like being on Star Trek Holodeck, where things are familiar but there are new actors on the deck, and you are bit of a stranger.

First thing that would hit you would be the increase in population. Too many people every where, compared to the time you left Pakistan. Some areas that were farms and free spaces when you were there would now be occupied by new housing developments.

The physical appearances would have changed. There would not be any complete transformation to prosperity, but new buildings replacing the old ones, and new motorways, would change the physical reality.

You would find distances have shrunk. The places that seemed far away because you walked to them or went on bicycle, would appear to be so near because now you would travel by car.

Something would sting your heart a bit. Your home where you grew up, would now belong to someone else. When you were growing there, everybody knew it as your father's home, your home, but now if you were to ask directions to your home in your own Mohalla, they will refer to it as some strange family's home! It is your home only in your childhood memories.

You would meet someone, with white beard, bald head, missing teeth, and perhaps walking with a cane, who be introduced to you as your classmate. You would be blown away by the ravages of time, and be grateful for your own health.

A middle aged woman with young children would come to visit you. And she will turn out to be the daughter of a cousin or a friend, who was just an infant at the time you left Pakistan.

Almost anybody you meet would be younger than you!

And finally, as you relive the memories of your childhood, you may find a reason to visit again and again.

Author Rashid Ahmad is a Pakistani-American civil engineer with a Master's degree from UC Davis. Ahmad came to the United States in 1970 and has since been living in Sacramento-Davis area in California. 

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Gated Communities For Upwardly Mobile Pakistan

Real estate developers have so far built over 250 gated communities across Pakistan in response to rising demand from upwardly mobile Pakistanis.

Eden Housing Gated Community in Lahore, Pakistan

These communities cater to insatiable demand for world-class and well-appointed housing with modern infrastructure including well-built wide roads and reliable supply of water and electricity. Additionally, they offer various state-of-the-art amenities such as schools, hospitals, mosques, restaurants, theaters, shopping malls and parks located within secure communities, according to a report by Adrian Bishop, editor of Opp.Today.

Gated communities are being offered at multiple price points and payment plans that suit not just the rich but the middle class buyers as well. They offer condos (flats), townhouses and single-family homes on lot sizes ranging from 125 square yards to  2000 square yards. These communities are fueling a construction boom in Pakistan.

Defense Housing Authority (DHA), Bahria Town (Malik Riaz), Eden Housing (Aleem Khan), Emaar Properties (of UAE) and Ghurair-Giga (of UAE) are among the biggest developers of gated communities in Pakistan.

Bahria Town Islamabad

In addition to major Pakistani cities of Karachi, Lahore and Islamabad, new gated communities are being developed in second and third tier cities as well. Recently, Bahria Town announced its newest development of a gated community in Nawabshah, a city of just over a million residents in southern Sindh province.

Here's an excerpt of a 2013 AFP report on Bahria Town gated community in Islamabad:

Cars glide softly over the smooth tarmac carpeting the gentle hills of Pakistan’s largest gated community, past immaculate green verges dotted with statues of cattle — which, unlike their real counterparts elsewhere in the country, pose no threat to traffic. 

There’s a horse riding centre, a golf course, a posh cinema, an immaculately air-conditioned café and a mini zoo with “the only black panther in Pakistan”, whose growling excites young couples taking a walk. 

Elsewhere 20 metre models of the Eiffel Tower and Nelson’s Column — complete with lions — watch over this vision of suburbia which seems a world away from the rest of Pakistan’s seething, traffic-choked and crumbling cities.

https://youtu.be/ZvKOCZuZAiM





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Housing Construction and Economic Growth in Pakistan

Housing construction is one of the largest sectors of most major economies in the world. In the United States, for example, housing is a significant contributor to the American economy, providing millions of Americans with jobs and generating hundreds of billions of dollars of economic output each year. It is also an important source of wealth building. Beyond economic measures, homeownership and adequate rental housing also contributes to society.

The construction and sale of new homes make direct contribution to GDP, based on the value of the housing built. However, the sales of existing homes do not enter into the calculation of the nation’s domestic output, just as a used car sales do not get entered because the transaction does not represent a new production. However, purchases related to the transaction of existing home sale do get included in the GDP. For example, all payments for services rendered, such as real estate agent commissions, home inspection, attorney, and loan origination fees, are included.

Currently, Pakistan has a serious housing crisis and needs about 7 million additional housing units now, according to the data presented at the World Bank Regional Conference on Housing last year.

According to BMI research, the country’s real estate sector continues to be dominated by the two major issues of a chronic shortage of housing against a backdrop of rapid urbanization and rising population and the impact of security factors on the risk appetite of investors and developers.



The first of these factors remains as intractable as ever, with the most recent estimates identifying shortfall of 7.9mn houses. By contrast, the current government is committed to building just 1 million houses. Other estimates paint a similar picture with the Punjab province, with a population of 82 million, said to be facing a shortage of 5 million houses. By some accounts, nationally there is an incremental demand for 700,000 units a year against the annual construction of just 150,000 units.

As to the second factor, the major projects currently moving forward are being executed by risk-tolerant developers from regions such as the Gulf Cooperation Council(GCC) and government or government-linked landowners in Pakistan. This has significantly reduced the scope to provide housing at the level required to supply the backlog. Recently, however, there are reports that Malaysian developers are coming to Pakistan, according to Malaysian news agency Bernama in August 2009. The Malaysian developers are negotiating to build some 500,000 low-cost houses annually in various parts of Pakistan.

The recent Dubai debt crisis will likely hurt some Pakistani workers in the Gulf region. However, the flip side of Dubai troubles is that many of these Gulf developers will look at Pakistan where real estate investments have always been winners, regardless of the political or economic environment. The supply has continued to lag demand for housing, retail and office properties.

The Gulf and Malaysian investments in housing can potentially help resuscitate Pakistan's currently moribund economy by creating millions of new jobs directly and indirectly. Construction is one of the most labor intensive economic activity requiring large numbers of workers, creating hundreds of thousands of jobs. And when the buyers move in, they will demand all kinds of products and services to furnish their homes, thereby creating further employment opportunities. All of this is offers a great recipe for reigniting economic growth and renewed prosperity in Pakistan.

A new wave of housing construction offers an opportunity to the PPP leadership to live up to at least one of their election promises included in their "roti, kapda and makaan" platform. Looking back at the history of the political platforms that have succeeded, what comes to mind is the name of President Franklin Roosevelt and his "New Deal" , as well as the successive US Presidents' policies on "The American Dream" of home ownership for all. These policies helped reduce poverty and enhanced education and housing for a large number of people in the US. New housing construction can also help reduce poverty in Pakistan.

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Uncle Sam Saves Fannie and Freddie

The US Treasury Secretary Henry Paulson announced the weekend seizure of Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac). While some have criticized the US regulators' handling of the mortgage crisis, there is almost unanimous agreement that the bailout of the two mortgage giants was absolutely necessary to prevent a major, worldwide financial markets collapse. The cost of this bailout to the US taxpayers is estimated to be at least $200b.

Who are Fannie and Freddie? Both are government sponsored enterprises (GSEs) that guarantee or own more than $5 trillion of mortgages, about 50% of all the mortgages in the United States. Both have suffered heavy losses in the ongoing real estate bust in the United States. Home prices have been falling and many homeowners have lost most or all of their equity in their homes. In many cases, the outstanding mortgage balance is greater than the reduced value of the homes. There have been many mortgage defaults and rising number of foreclosures. The major banks and financial institutions in the US and Europe have had to mark down or write off hundreds of billions of dollars worth of the US mortgage-backed securities. What started as a sub-prime crisis of problem loans obtained the less credit-worthy has now spread to the entire market. Even though the interest rates are fairly low, the banks are unwilling to lend even to the individuals and institutions with good credit. Fannie's and Freddie's ability to raise funds in the bond market has been severely impacted because of concerns about their viability. The latest action by US government is to restore confidence in both organizations to help revive the housing market.

But why are they so important to the US and the world economy? To understand the answer, let us look at the role the US government has played in creating a large middle class and a highly productive economy that is still considered the engine of the world economic growth.

During the second world war, the US economy was essentially geared to mass production of military hardware to support the war effort. Consumer economy was starved of the resources and rationing of essential items was widespread. As the war ended and a large number US soldiers (GIs) started to return, the US Congress passed the GI bill which paid for their free education. At the same time, the US government used Federal Housing Administration (FHA) and Fannie Mae to offer home loans on easy terms to help the GIs purchase their first homes and start their families. With the availability of skilled labor and consumer demand from new homeowners, the US industry transformed itself from military production to consumer production to create a consumer boom.

Ever since the 1940s, the US policy makers have considered home ownership a cornerstone of US policy. Not only have the successive US governments supported the funds availability for home loans with the addition of Freddie Mac in 1970, but they have also continued tax deductibility of mortgage interest to promote home ownership. Growth in home ownership has helped Americans build equity, increased their net worth, and stimulated consumer demand to drive economic growth. Housing has become so important to the US economy that the monthly housing data is eagerly awaited by the policy makers, businesses and markets as a leading economic indicator.

In spite the recent mortgage problems and the current housing crisis, the US policy of promoting home ownership has been a great success. Along with the implementation of GI bill and various student loan programs, these policies have significantly expanded the US middle class and the US economy and created tremendous employment opportunities.

The strong US consumption has turned the US economy into the engine of worldwide growth and a major export market for countries in Europe and Asia. The recent explosive growth of emerging economies such as China and the Asian tigers would not have been possible without the insatiable consumer demand in the United States for their products.

Taking a leaf from the US housing policy to stimulate Pakistani economy, former Prime Minister Shaukat Aziz encouraged borrowing by introducing low-rate mortgages in 2003. This initiative led to a construction boom and expanded housing for the growing middle class in Pakistan, contributing significantly to new jobs creation and rapid GDP growth.

In terms of Bhutto's Pakistan People's Party's promise of roti, kapra aur makan (food, clothing and housing), Fannie and Freddie have been largely responsible for makan (housing) in the richest and most powerful economy of the world that produces more than a quarter of the world's GDP. A genuine emphasis on makan (housing) and education by US policy makers has created lots of jobs and helped produce or buy a lot of roti and kapra (food and clothing) as well as electronics, TV sets, computers, cars, and other consumer goods and services.