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Investment and infrastructure: Sri Lanka and Bangladesh

World Cement,


Read part 1 here.

Sri Lanka

This year marks the tenth anniversary of the Indian Ocean tsunami. It followed a massive earthquake off the northwest coast of the Indonesian island of Sumatra on 26 December 2004 and caused huge loss of life and destruction in Indonesia, Thailand, India and Sri Lanka. In Sri Lanka alone, estimates of 40 000 people killed and thousands of others displaced soon filtered out through the media. Five years later, after more than 25 years of conflict, the country’s civil war finally ended with a total loss of life estimated at 80 000 – 100 000.

Grim reading, but now it is encouraging to hear that the country continues to recover from such tragedies. Asian Development Outlook 2014, published by the Asian Development Bank (ADP), reports an improved external environment, higher investments and a recovery in domestic consumption. These are predicted to sustain a rapid pace of GDP growth over the next two years. Sri Lanka’s economy recorded 7.3% growth in 2013, supported by strengthening domestic demand, a pickup in exports and tourism. Faster growth in wholesale and retail trade, hotels and restaurants, transport, banking, insurance and real estate lifted performance in the large service sector providing impetus for the rebound.

Last year there was a series of announcements by the country’s cement producers regarding new projects. In June 2014, three producers issued some more project news. Singha Cement (Italcementi) said that it is looking to invest US$10 million in the construction of a cement terminal in Colombo. The new plant will include bulk cement silos and there will be improvements in the infrastructure required for the operation of the terminal. The company has bought a Siwertell ship unloader as part of the investment and is looking to expand its business in Sri Lanka and increase its market share of the industry by the end of the year. Another company planning to penetrate the Sri Lankan cement market is My Home Industries Ltd. It is part of a major conglomerate that operates out of Hyderabad in India. The group is expanding its business across the countries that make up the South Asian Association for Regional Cooperation (SAARC), i.e., Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. My Home Industries is a joint venture with CRH. In addition to cement, the main interests of the group are power, construction, real estate, education and logistics.

Holcim has had a presence in Sri Lanka for 18 years. Its local company, Holcim Lanka, produces 2.3 million tpa at its Puttalam and Ruhunu plants. At a recent press conference, Group CEO Bernard Fontana announced that the company will invest US$22 million to increase the cement grinding capacity at the Ruhunu plant from 0.6 million tpa to 1 million tpa, and upgrade its Geocycle shredding line to enhance waste management.

Bangladesh

One does not have to travel far in South Asia before coming across China’s interests and influence in the region, especially through direct investment or through joint ventures. At a meeting in June between China’s President, Xi Jinping, and the Bangladeshi Prime Minister, Sheikh Hasima Wajed, both pledged to make joint efforts to build an economic corridor linking Bangladesh, China, India and Myanmar. This will facilitate international investment, something Bangladesh badly needs. This has been discussed before, but even though FDI inflows in 2013 reached US$1.3 billion – up 24% on the figure for 2012 – the United Nations has estimated that the country needs at least US$5 billion pa for the next 10 to 15 years to build the necessary infrastructure, such as new power stations, roads and bridges, before reaching middle-income status. At present China is involved in a number of projects in the country, including the construction of a 1320 MW coal plant at Patuakhali and a US$14 billion deep seaport at Sonadia in the south of Bangladesh. This will be developed by the China Harbour Engineering Company. The most recent deal will see a ‘garments village’ constructed south of Dhaka by the Chinese company Orion Holdings. It is hoped that this will address a number of bottlenecks, including the issue of factories located in unsafe buildings in the congested capital.

It is not only China with interests in Bangladesh; obviously India is an important neighbour and investor. Earlier this year, reporters from the Dhaka Tribune and other newspapers mentioned the press conference given by India’s High Commissioner in Dhaka, Panakaj Saran, in which he said that many Indian companies were considering setting up factories and exporting from Bangladesh back into India or China or to Myanmar. In the last fiscal year a total of US$42 million was invested by India in Bangladesh, an increase of US$28 million in the previous fiscal year.

The latest news on the cement scene is that, in a bid to increase its market share in the Dhaka region from its existing 7.5%, Lafarge Surma Cement signed a toll-grinding agreement in July, whereby clinker from its plant in Chhatak will be supplied to Metrocem Cement. Here Portland composite cement will be marketed and distributed under the brand name of ‘Duracrete’. This is similar to an agreement made last year with Madina Cement Industries that now produces the ‘Powercrete’ brand cement for Lafarge.

The annual demand for cement in the country is estimated to be about 18 million t, while the combined production capacity of the active cement producers is around 35 million t, almost double local demand.

Read part 3 here.


Written by Paul Maxwell-Cook. This is an abridged version of the full article, which appeared in the October 2014 issue of World Cement. Subscribers can view the full article by logging in.

Sources: see part 1.

Read the article online at: https://www.worldcement.com/asia-pacific-rim/29092014/investment-and-infrastructure-sri-lanka-and-bangladesh-548/


 

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