RECENT data from the Dubai Land Department shows that Pakistanis have purchased property worth more than Rs445bn in the years 2013 and 2014. This is a staggering number, although it is worth bearing in mind that there is no evidence yet that it is all ill-gotten gains.

Nevertheless, considering the economy has been sluggish at best during these years, with growth rates remaining below 4pc and large-scale manufacturing coming in at a dismal 2pc or lower, it is hard to understand where this large sum of money came from.

Read: Pakistanis share 8pc in Dubai property market

The same years saw spiralling inflows into other speculative trades well. Market cap in the Karachi Stock Exchange, for example, increased by 42pc in the same years and the local property market too, going by anecdotal evidence, has been booming. In fact, market cap in the KSE between January 2011 and February 2015 has increased by a staggering 161pc even as the number of listed companies has shrunk.

Also read: Pakistanis bought property worth 16bn dirhams in Dubai

Such outsize sums of money flowing into the speculative trades as the rest of the economy languishes in low growth points towards a key dysfunction. It indicates that for a certain segment of the population, incomes have continued to grow. It also indicates that these incomes find no profitable avenue for reinvestment within the country and are therefore diverted into speculative trades where returns are the result of increasing sums of money landing into the trade every year.

Questions need to be raised on both counts therefore. Where are the incomes that produce these flows being generated? And why are they opting out of acquiring productive stakes in the economy, opting for speculative returns instead?

Also read: KSE index breaches 35,000-point barrier

More specifically, it is worth asking if money that leaves Pakistan for investment in Dubai property is asked to furnish answers as to its source at any point. Source of funds questions need to be asked at some point, not only to detect ill-gotten gains, but also to curb tax evasion. The sums flowing into Dubai property will use formal channels and can, therefore, be detected. For a country known for its lack of tax compliance, tapping into this stream should be an important priority. But it stands to reason that a large number of individuals engaging in this trade have a powerful incentive to keep their funds hidden from the authorities. It equally stands to reason that these individuals would have the means to thwart the hand of the state, should it even contemplate the prospect of laying a finger on their funds. But numbers give away the reality. If the speculative trades can boom in years when the economy is going down, the most obvious conclusion suggests itself automatically. It is party time for some irrespective of what is happening to the rest of us. The tragedy writes itself from here on.

Published in Dawn February 22nd , 2015

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