Wow. Amazing Construction going on in Lahore. USA Today is reporting that Lahore will build 40 Skyscrapers… 
http://www.usatoday.com/money/world/2007-06-20-pakistan-econ-usat_N.htm
ISLAMABAD, Pakistan — To Faiz Paracha, the past few years have been astounding.
The national numbers are plain enough: Two consecutive years of 8% growth and sales of cars and electronics that are up 50% a year.
But here at Suzuki Motors, he has seen the change with his own eyes. His sales have increased sevenfold since 2002: from 400 then to an estimated 2,800 this year.
Since the Sept. 11 terror attacks, America has come calling. Throughout Pakistan’s history, its economic booms have coincided with periods of increased American attention — with Pakistan receiving huge infusions of cash for helping the United States, first against the Soviets, and now, against terrorism.
But other forces are adding to the momentum, and none of them — from investments by Pakistanis abroad to cheap consumer loans at home — bodes well for a boom that increasingly looks like a mirage, not a miracle, analysts say.
“We’re like a car that is fine when you drive it 50, but when you drive it 90, it heats up,” says Kaiser Bengali, an independent economic analyst in Karachi. “Clearly, there is something wrong with the wiring.”
Driven by American money
For much of the past 60 years, American money has hot-wired the Pakistani economy. In the 1960s, when Pakistan gave the United States permission to use a base for anti-Soviet spy planes, the economy grew at 6.5% annually. In the previous decade, it had averaged 2.7% growth.
Again in the 1980s, when Pakistan was America’s front line against the Soviet invasion of neighboring Afghanistan, the economy flourished, growing at 6.5% annually — in contrast to about 4% in preceding years.
The same has been true this time. The government is receiving some $2.5 billion a year from other countries, mostly the USA, and it had much of its debt forgiven in return for its pledge to fight terrorism after Sept. 11.
Before 2001, one-third of the budget went toward paying debts, and economic growth was at 2%. Because of the debt burden, “throughout the 1990s, Pakistan did not have the fiscal space to carry out any developmental work,” says Bengali.
Now, President Pervez Musharraf has overseen an array of free-market economic reforms, and for the first time, Pakistan’s economic growth cycle has spread well beyond America’s billions.
Since 2001, international investors have piled on in anticipation of the world’s sixth-most-populous country finally living up to its economic promise. Investment broker Merrill Lynch has called Pakistan the best market in Asia, and investors are pumping in some $10 billion each year.
The Karachi stock market closed up nearly 62 points Wednesday at 13,556.73. In 2001, it sat at 1770.
Still mainly agricultural
The problem is that Pakistan’s economic wiring hasn’t changed much in 60 years. With 65% of the population dependent on agriculture, it remains a farm economy with very little industry.
Pakistan has spent its way to prosperity with foreign cash, but has failed to build domestic capacity to maintain such growth on its own. Instead of investing in agriculture or industry, investors are going for higher-yield returns. This has infused banks, real estate developers and communications companies with billions of dollars.
Flush with cash, banks are offering low-cost consumer loans, which is why Paracha has been selling so many cars in recent years. About 80% to 85% of the cars are leased or financed by banks, he says. Elsewhere, there are plans to build 40 buildings at least 30 stories tall in Lahore alone, says Shahid Javed Burki, an economist and former World Bank vice president.
Little job growth
But little of this growth has created jobs or businesses. In 2004 and 2005, for example, only agriculture had significant job growth — and that was due to seasonal harvests. Every other sector had 0.1% or negative growth, according to a report by the Social Policy and Development Centre in Karachi.
Such spending “will tide over the country for two to three years,” says Burki. “But it is creating long-term problems.”
High personal savings rates and the breadth of the agricultural economy would prevent an economic collapse. But the pride of the Pakistan economy — a services sector that accounts for more than half the country’s growth — “is not sustainable,” says Qazi Masood Ahmed of the Institute of Business Administration in Karachi.
For example, since Pakistan is now consuming more goods — but not making more itself — its trade deficit is forecast to hit an all-time high of $9 billion this year. The cost of this consumerism has hit average Pakistanis the hardest, with inflation now routinely topping 7%.
“The improved quality of life for the upper class is being paid for by those who could not qualify for a loan,” says Bengali.
On the streets of Pakistan’s largest cities, inflation angers shopkeepers more than judicial crises or the threat of terrorism. Muhammad Dullah doesn’t know anything about the current protests to ensure an independent judiciary. Beside a Karachi thoroughfare teeming with pushcarts and cars, he just knows life is getting harder. Sitting on the sidewalk amid an avalanche of sandals and loafers, he says, “I’ve experienced a decline in my income, and a hike in the prices of essential commodities.”
In Lahore, the story is the same. Naeem Aziz Khan sits by the window of his mobile-phone shop as dust from the street outside turns his merchandise a gritty brown.
“Between now and seven years ago is like night and day— things were much easier to buy,” he says. “The government is only worried about holding onto power; they’re not thinking about the common people.”
Sappenfield is New Delhi correspondent for USA TODAY and The Christian Science Monitor ; Montero is a Monitor correspondent