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A New Era for the Indian Subcontinent? Part 2: Pakistan

World Cement,

Read part one on India here.

Can the new regime deliver?

“Pakistan grapples with rising tide of extremist violence”, reads a headline in a recent BBC News Asia report. “All over the country, in Karachi, Quetta and Peshwar there are bomb blasts, targeted killings and suicide attacks”. The underlying theme implies that successive governments have failed to implement counter-terrorism policies. The question remains, can Nawaz Sharif, elected as the Prime Minister in June of this year, answer his critics who suggest that his top priority is the economy and that he has no coherent security policy? His response is that he has been holding meetings with military and intelligence agencies and has called for the police authorities to map out a comprehensive strategy using modern technology and better policing. Sharif has said that terrorism had severely affected trade and the economy, and the country is facing an energy crisis. The new leadership in the country will also seek to alleviate the deep-seated historical fear and mistrust between Pakistan and India.

Continued investment

While terrorism remains a deadly and daily threat in Pakistan, it has so far not deterred foreign investment. Sharif recently held meetings in Beijing with China’s President Xi Jinping, during which a number of pacts were signed, including one for the construction of an ‘economic corridor’. This will be a 2000 km transport project (road and rail) connecting the city of Kashgar in northwestern China to the Pakistani port of Gwadar. China wants to see the transport project become a reality, even though as one South Asia expert predicts, “the project will not be finished within the next five to ten years due to the volatile situation in Pakistan”. China is keen to find new routes for oil imports rather than having to navigate through the Strait of Malacca near Singapore. “The new economic route will run from the Arabian Sea to the Xinjiang region and could be used to transport crude oil from West Asia to China,” said the expert. At the same time, China International Water and Electric Corporation announced an investment of US$6 billion in energy projects, including hydropower installations, over the next five years.

China is not the only country with business potential in Pakistan. Turkey has decided to invest US$1 billion in the country’s communications, textile and automotive sectors over the next three years. Britain’s Prime Minister, David Cameron, and Nawaz Sharif have pledged a new target of increasing bilateral trade to £3 billion by 2015, up from the previous commitment of £2.5 billion. There are over 100 British companies operating in Pakistan, including Mott MacDonald, a company that specialises in infrastructure development. At the end of June 2013, UK-based Orion Energy and Pakistan Petroleum Ltd agreed to work together to develop the offshore and gas potential of Pakistan. The Joint Venture Study will cover the entire Indus and Makran offshore areas.

Just after Pakistan’s general election in May, the Japanese Investment Group IT, in an interview with Pakistan’s The News, indicated the Group was preparing a large investment project, valued at US$100 million, which would create thousands of jobs generated by the construction of a large industrial zone at Dhabeji.

Rising production

As implied earlier, the new government is giving due importance to developing the country’s infrastructure as well as accelerating economic growth. It is said that Pakistan has the ability to consume the installed cement capacity of 44.7 million t. Domestic cement sales reached 25.1 million t in fiscal year 2012/13 (to the end of June). The All-Pakistan Cement Manufacturers Association claimed that this was the first time domestic sales had risen above 25 million tpa. In total the industry despatched 33.4 million t in 2012/13, including 8.3 million t in exports. The Trade Development Authority of Pakistan reported that the cement industry exported US$421 million worth of cement during the first nine months of fiscal 2013, up nearly 23% compared with the same period last year. The Express Tribune reported that profits in the 20 listed cement companies reached almost Rs.28 billion for the first nine months of the financial year that ended 30 June 2013, up 18% on the same period in 2012. Falling coal prices with declining interest rates have spurred the profitability of the cement sector.

In 2011, Pakistan’s fourth largest cement producer, Fauji Cement Company, completed a 2.3 million tpa expansion project. In a first for German cement plant equipment suppliers delivering to Pakistan, ThyssenKrupp Resource Technologies (formerly ThyssenKrupp Polysius), Loesche and Haver & Boecker, together with ABB Switzerland, were involved with the installation of the new 7200 tpd line. The company now has 8% market share compared to an average 6.6% in 2012.

Written by Paul Maxwell-Cook. This is an abridged version of the full article, which appeared in the October 2013 issue of World Cement. Subscribers can view the full article by logging in.

Read part three on Bangladesh here.

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