An Economy Shaped By Corruption

By: Wajahat Aslam Raja, CEO - Marsons Holdings

Pakistan: If you ride outside the gated community of Bahria Town or DHA into the city of Rawalpindi, you would almost instantly begin to see the absurdly real disparity of wealth within a 10 mile radius. When the roads of Bahria are sprawling with Land Cruisers and Mercs and even Porsches and the roads not ten miles away do not even have a glimpse of a decent sedan by Honda or Toyota, you begin to wonder.

 And you wonder as you wander in the streets of Saddar, the main market, who is to blame? Where did it go wrong? You almost immediately realise that this did not happen last week but that entire generations are to blame. But more on that later.

You find a shop selling computer accessories and you decide to go in to buy a new pair of headphones for that new Jay-Z album. At the first glance, the shopkeeper has made his mind judging from your appearance and his years of expertise about how much to swindle you of your cash. He quotes a price well above the dollar equivalent you can see on amazon and when adjusted for taxes and custom duties still isn’t justified. As you begin to bargain, he confidently tells you check the market and you, hoping to save a few thousand rupees decide to venture deeper into the bazaar. Within no time you realise that almost all of them are out to get you, to shave off any amount of cash as is possible. Disheartened of course and a little disappointed, you begin to wonder. Why?

A shop measuring roughly 260 square feet has a rent of roughly 50k, one or two shopkeepers add an additional 30k and with bills and miscellaneous expenses comes to roughly around 100k every month. This might make sense to you and give an understanding as to why all of them are after your money. But it begs the question, why is the rent 50k for such a small space? The answer is basic economics. It is 50k because someone is willing to pay 50k. Naturally, it is out of the landlord’s concerns as to how that rent will be generated but you have a good idea how.

Then begins the viscous circle of greed meeting with capital raised from theft, or in economics as they call it, demand and supply. Rents continue to rise and people continue to get looted and Mr Danial who wants to open a shop in the vicinity with all the virtues of a law abiding citizen must conform to this way of business or never stand a chance to even survive.

Examples are in abundance when corruption is so deeply rooted in the economy. Just a few days ago, an area measuring approximately 4500 square foot in F-6 Markaz, the heart of Islamabad, went on rent for a whopping 3 Million PKR. I can assure you with absolute certainty that a considerable percentage of this rent will come from tax fraud on the account of the tenant. The landlords, undoubtedly celebrating this auspicious moment may have condemned an entire generation of aspiring entrepreneurs to this disease. The disease called corruption.

As cancer, it has engulfed our great country and has been tearing it apart cell by cell, slowly and painfully and in the process has created generations of brilliant and hopeless business oriented people. Where that brilliance could have been used to perhaps create billion dollar companies, the toxicity of this menace subjects it to think of loopholes to how more effectively cheat the system and commit massive tax fraud. And after a while, since fraud is profitable, one begins to shift the agenda from survival to lining one’s own pockets. And there is your recipe for dooming an entire generation.

One of the many reasons which necessitates the establishment of a system to put a full stop or at least make a dent, strong enough to burst this fa├žade of real estate growth. Growth? At the expense of our future? I think not.


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