Business | Markets
Revival of mass transit system likely to boost investment
The revival of Pakistan's national mass transit authority under orders from prime minister Shaukat Aziz may not be immediately seen as a development of interest to the country's financial markets.
- By Farhan Bokhari, Special to Gulf News
- Published: 00:00 August 27, 2006
Islamabad: The revival of Pakistan's national mass transit authority under orders from prime minister Shaukat Aziz may not be immediately seen as a development of interest to the country's financial markets.
But there is more than one reason to argue the close link between ultimately installing an efficiently driven mass transit system across Pakistan's large urban centres and interests of equity investors.
For one, its hard to name a large urban centre with a significant contribution to business output anywhere in the mainstream world without some attempt at creating a mass transit system.
The movement of people essentially must come with the movement of money. Hence, if urban areas indeed must become centres of thriving commerce, human beings and their contribution to that activity must hold the key for progress.
In Pakistan, take the case of Karachi which is reputedly the main business capital and central to the country's commercial activity. For years, neglect under successive governments has effectively meant that Karachi has become a run down city, notwithstanding its role as the place from where markets move and shake.
Consequently, while Karachi's under-privileged residents are forced to use its public transport system, the more affluent ones sport fancy cars on increasingly congested roads.
The other more central reason for the link between the newly proposed mass transit system and the markets is indeed one related directly to investor interests. The proposed mass transit systems which would have to be largely built on networks of commuter trains backed by bus links, must be financed with billions of dollars of new investments and not necessarily all from the public sector.
Private sector involvements would have to include a variety of sources from direct investments to possible IPOs, initially on Pakistani stock markets.
The financial viability of a mass transit system can be in little doubt given the large numbers of commuters who travel to offices in the morning in large urban cities.
Unlike the times when the Pakistani government ran its own highly-subsidised bus services under the banner of GTS which made commuters averse to commercially viable tariff, Pakistan's realities of recent years have made a significant difference. Commuters find themselves used to the idea of high and largely unsubsidised tariff, being forced to use privately run transport.
For equity markets, the idea of privately funded mass transit systems could give an impetus to a new trend of funding for public sector projects with adequate financial returns. Last but not the least, the successful financing of new mass transit projects in this way could also reverse an unfortunate legacy.
The motorway, conceived under the regime of former prime minister Nawaz Sharif, subsequently became notorious for running in recurring loss. After years of difficulty in balancing its books, the motorway project has become financially viable, thanks to the boom in Pakistan's car sales and the resultant rise in the number of relatively affluent individuals who choose to drive on the roads.
If indeed the prospects remain strong for building up new mass transport systems in Pakistan with the backing of financing through the equity and financial markets, there are indeed equally profound challenges on the country's political horizon which may well put off prospective investors.
Many such investors would indeed take the cue from the upcoming vote of no-confidence against Shaukat Aziz on Tuesday.
For prospective investors, while investing in mass transport projects in Pakistan make perfect economic sense, the politics of this undertaking only dictates in the negative. Even if Aziz survives the vote of no confidence, the political opposition would unite to agitate against the government.
- The writer is a journalist based in Pakistan.
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