Sunday, February 3, 2019

Fitch: Pakistan Construction Industry to Grow 8.9% Yearly Over Next 5 Years

Fitch Solutions, a global company focused on credit, economic, and political research, says in its latest report that the China-Pakistan Economic Corridor (CPEC) will drive Pakistan's construction industry in the next decade, as the risks associated with CPEC projects recede. Fitch forecasts that the real annual growth rate of Pakistan's construction industry will average 8.9% over the next 5 years. "We will adjust our forecasts to account for possible positive ripple effects across the economy, including the construction industry, in the event an IMF bailout is secured", the report adds.





Fitch Solutions' report titled "Industry Trend Analysis - CPEC to Remain a Primary Driver of Pakistan's Construction Industry" says: "We expect debt concerns surrounding CPEC projects to ease after financial details are released. In addition, we believe political risks associated with CPEC projects have diminished since the 2018 Pakistani general election. These factors will reduce overall risk profile of CPEC projects."

The Fitch report acknowledges the completion of eleven CPEC projects termed "early harvest". It says that despite major media and political scrutiny regarding CPEC, this progress on projects highlights Beijing’s improving track record in project execution and its commitment to infrastructure development in Pakistan. As a result of CPEC progress, a total of 3,240MW of capacity has been added to the country’s national grid, constituting over 11% of total installed capacity in Pakistan. Also highlighted in the report is the 392 kilometer Multan to Sukkur section of the Peshawar-Karachi motorway, a key CPEC project which is over 80% complete and is slated to finish by August this year.

Fitch believes political risks associated with CPEC projects have diminished. "Previously, we noted that the transition in power from Pakistan Muslim League (Nawaz) to Pakistan Tehreek-e-Insaf (PTI) posed a downside risk to the Pakistani construction industry as new Prime Minister Imran Khan pledged to review Chinese-backed projects, which could potentially have led to project delays and cancellations. However, the political situation in Pakistan has since stabilized and Prime Minister Imran Khan has demonstrated willingness to cooperate with China on multiple issues including CPEC. As such, we are in the view that downside risks stemming from political uncertainty are diminishing, and bilateral projects spearheaded by CPEC, will receive a boost in terms of policy implementation and project continuity," maintained the report.

In another recent report, Fitch's competitor Moody's has acknowledged that rermittances from Pakistan diaspora rose by 10% year on year to $10.71 billion in the first half of fiscal 2019, while goods imports slowed sharply to around 3% year on year as non-energy imports contracted.

Moody's expects "the current-account deficit to narrow to 4.7% of GDP in fiscal 2019 and to 4.2% in fiscal 2020 from 6.1% in fiscal 2018, it will remain sizable and wider than in 2013-16, driving Pakistan’s external financing needs. The government has secured $12 billion in financing from Saudi Arabia and the United Arab Emirates – in each case amounting to $6 billion and divided equally between deposits and deferred oil payments – which is likely to largely cover the country’s net financing needs for fiscal 2019".

Construction industry is a major driver of economies. The sector creates new jobs, builds housing and infrastructure, drives economic growth, and provides solutions to address social, climate and energy challenges, according to the World Economic Forum. The construction industry has important linkages with other sectors such as cement, steel, energy, furniture, household appliances, etc.  The construction industry's impact on GDP and economic development goes well beyond the direct contribution of construction activities.

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26 comments:

Anonymous said...

https://www.dawn.com/news/1461907/sp-downgrades-pakistans-long-term-credit-rating

Jam D said...

Riaz Sb, How can small investors like me participate in this construction boom? Should we invest our savings in real estate or some contractor companies. In you last blog you mentioned about Chinese companies. How can we buy Chinese shares to profit from this boom.

Riaz Haq said...

Jam: "How can small investors like me participate in this construction boom?"

I believe there are several listed KSE listed companies including REITs, construction companies and supply chain companies like cement and steel which will benefit from construction boom. You should research these companies to decide how you want to participate in this boom.

Jam D said...

Thanks for the input. Cement seems a promising case. There is 1 REIT and 2 construction company listed on KSE? Neither of them seem to have any exposure to CPEC based on google search.
http://www.ksestocks.com/ListedCompanies/SortByName

They are not listed on Market Summary as the trading volume seems non-existent. Hence liquidity and small shareholder interest is suspect.
http://www.ksestocks.com/MarketSummary

Seems like CPEC is mostly rich mans game and intellectuals dream.

Riaz Haq said...

Jam: "Seems like CPEC is mostly rich mans game and intellectuals dream."

I strongly disagree. CPEC has already contributed over 3000 MW of power into the national grid and more is expected. This will help Pakistan's industries employ more people and be more productive.

CPEC infrastructure construction is creating hundreds of thousands of direct jobs and employing many times more people in other industries such as cement, steel, transportation etc. supporting CPEC.

Jam D said...

I share your feeling Riaz sb regarding CPEC but have a different opinion. Our markets do not have enough depth for people to participate. Hence when the capital comes and when it disappears, it will happen in the most opaque manner. Sure we will have jobs, of the lowest variety. But what about local entrepreneurs, SMEs, small investors and the multiplier effect? With out those, I humbly agree to disagree with you.

Chinese companies will come, hire us for digging, milk us dry of dollars and vaporize in thin air. You mentioned 3000MW, where do most of the engineers needed to maintain this come from? If we look at number of visas issued, we will get a clue.

Riaz Haq said...

Jam: "what about local entrepreneurs, SMEs, small investors and the multiplier effect? With out those, I humbly agree to disagree with you. "

They all need electricity, communications and roads and other infrastructure to do business. It's very basic.

As to the number of visas, the traffic is both ways. There are lots of Pakistanis traveling to and living, studying, working in China.

Mid-1960s America saw a phenomenon called the "British Invasion". Anecdotal evidence suggests similar phenomenon, albeit on a smaller scale, is occurring in China with about 100,000 Pakistanis arriving there in recent years. While the growing presence of the Chinese in Pakistan gets a lot of press, there has been relatively little coverage of the movement of people in the other direction---from Pakistan to China. Jalil Shaikh, a Pakistani-American tech executive in Silicon Valley, has observed this phenomenon during his frequent visits to Jiangsu province in China. Jalil is often welcomed as "iron brother" by the people he meets during his stays in China.

Jalil saw anecdotal of evidence of "Pakistani invasion" of China in the city of Changzhou in Jiangsu province. Changzhou has a population of about 5 million people which makes it a medium size city by Chinese standards. Changzhou is an educational hub and is home to several universities, including Changzhou University, Hohai University (Changzhou campus), Jiangsu Teachers' University of Science and Technology, Jiangsu Teachers' University of Technology, and Changzhou Institute of Technology. It attracts a large number of foreign students mainly from countries participating in China's BRI (Belt and Road Initiative). China-Pakistan Economic Corridor (CPEC) is a flagship project of BRI. There are an estimated 22,000 Pakistani students studying in China. A significant fraction of these students receive Chinese government scholarships to study in the country.

Jalil has also travelled to the Chinese capital Beijing for business. During one such trips, he stayed at Oak Chateau hotel where he met dozens of Pakistanis working as engineers. They work as IT engineers at German automakers BMW and Mercedes whose Beijing offices are located just across the street from this hotel.

https://www.riazhaq.com/2019/01/pakistani-mini-invasion-of-china.html

Jam D said...

"They all need electricity, communications and roads and other infrastructure to do business. It's very basic. "

You nailed it. But more importantly we Pakistanis need access to contracts. Not a single CPEC tender for work or RFQ is put out in open. Chinese companies list it in Mainland in a language or method not familiar to us. What we see are RFQ for digging, cleaning, house keeping. You look at local news paper. One Chinese company is even getting their uniforms from China ! Have you seen any large civil, electrical or mechanical tender of late in news papers? PTI government must insist all contracts must be open to public in Pakistan. Else it will all end where it started.

Riaz Haq said...

Jam: "But more importantly we Pakistanis need access to contracts."


Let's divide this question in two parts: 1) power plants 2) roads/bridges/tunnels/dams

As far as power plants are concerned, Desscon tried and lost multiple bids to Chinese. Razzak Dawood bitterly complained about it but acknowledged the Chinese were lowest bidders. Chinese power contractors are big and highly competitive globally and local companies lose to them and resent them. The Chinese are very successful not only in Pakistan but also in America, Europe, Africa, Asia and even in India where they are not welcome.

On roads/bridges/tunnels/dams projects, there are several Pakistani firms developing these projects. Examples include FWO, NESPAK, DESCON etc.

Jam D said...

As far as power plants are concerned, Desscon tried and lost multiple bids to Chinese. Razzak Dawood bitterly complained about it but acknowledged the Chinese were lowest bidder"

We cannot compete with them. We have no one to blame but ourselves? We can always insist Chinese to have a 51% or 49% local partner as mandatory condition. Why dont we do it? Chinese do it all the time in their country. Once it a Chinese contractor, we can convince ourselves as much as we want but we will get nothing but housekeeping jobs. Dawood sab and those of his stature should know better.

Riaz Haq said...

Jam: "We can always insist Chinese to have a 51% or 49% local partner as mandatory condition. Why dont we do it?"

Chinese are bringing 100% of capital for most of these infrastructure projects. Besides, I'm not sure the Pakistanis have sufficient human capital to do all infrastructure development.

BTW, here's a Washington Post story of what Chinese workers have done in India:

http://www.washingtonpost.com/wp-dyn/content/article/2010/10/23/AR2010102303956.html


Clad in blue overalls, 1,600 Chinese supervisors, technicians and other laborers work at the 2,000-acre site. The $1.7 billion factory, which also relies on Chinese technology, employs 5,000 Indian workers.

Skilled Chinese workers are helping India expand its infrastructure at a frenetic pace, even as the two Asian giants compete for economic dominance.

Their presence in a nation of more than a billion people with staggering unemployment may appear incongruent. But the government says Indian workers lack the technical skilled needed to transform the country into a 21st-century economic powerhouse.

Until the gap is bridged, companies are relying on the expertise of Chinese workers to build mega infrastructure projects. Chinese workers have worked on ports, highways, power and steel plants in India. Chinese equipment and expertise have also been used in a crude oil refinery, a cable-supported bridge, the telecommunication networks and even the glass facade of the new airport terminal in New Delhi.

"India may be an IT superpower and producing thousands of doctors, lawyers and MBAs every year. But the biggest gap is in the availability of skilled electricians, carpenters, welders, mechanics and masons who can build mega infrastructure projects," said Raghav Gupta, president at Technopak, a consultancy that released a report on skill development last year. "Most of these workers have to be trained on the job. And that often delays the projects and makes it more expensive."

As the center of economic gravity shifts from the Atlantic to the Indian Ocean, analysts say, the world's two fastest growing economies will transfer even more technology and skills.

Fears of displacement

The Chinese workers in labor-surplus India prompted an outcry last year, and India clamped down by making visa rules stricter. About 25,000 workers had to leave dozens of projects midway and return to China because they were on business visas and not worker visas. Construction at 14 power plants was affected.

"We have no problems if . . . Chinese workers skilled in specialized functions come to India. We just don't want them to displace Indian workers by doing the jobs that Indians can do," said G. K. Pillai, India's home secretary, who said there are a little over 15,000 Chinese laborers in India now.

Diplomatic relations between the two nations, who have fought a war and have lingering territorial disputes, have remained testy. In recent years, Indian officials have expressed concerns about China's close ties with Pakistan, India's arch rival.

------------
The Chinese live in a row of air-conditioned pre-fab rooms and have Chinese cooks. Some say they find the Indian heat unbearable; others complain that the Internet speed is too slow for streaming Chinese movies. Sometimes, they go into the villages for an under-the-tree haircut or for the locally brewed toddy.

Riaz Haq said...

JPMorgan, CLSA vie for $2 billion #Pakistan #power sale of National Power Parks Management Co., state-owned firm that owns and runs #LNG-fired 1,230-megawatt Haveli Bahadur Shah plant and the 1,223-megawatt Balloki plant. #Privatization https://www.bloomberg.com/news/articles/2019-02-14/jpmorgan-clsa-said-to-vie-for-2-billion-pakistan-power-sale via @technology

JPMorgan Chase & Co., CLSA and Credit Suisse Group AG are among foreign banks pitching for a role on Pakistan’s biggest privatization in over a decade, which could raise around $2 billion, people with knowledge of the matter said.

The government’s sale of two LNG-fired power plants could draw interest from Chinese and Middle Eastern investors, one of the people said, asking not to be identified because the information is private. Pakistan received about 10 bids from groups seeking a financial advisory role and expects to pick banks by the end of March, another person said.




Citigroup Inc. and Standard Chartered Plc made their own separate proposals, while Lazard Ltd. is pitching with Pakistani brokerage Next Capital Ltd., the people said.

Prime Minister Imran Khan is pursuing a divestment that would rank as one of the biggest-ever mergers and acquisitions in Pakistan, as he seeks to bridge a financing gap of more than $12 billion and avoid a balance-of-payments crisis. The nation has secured loans from Saudi Arabia and the United Arab Emirates and is close to a loan agreement with the International Monetary Fund.

Privatization Push
Pakistan is selling National Power Parks Management Co., the state-owned firm that owns and runs the 1,230-megawatt Haveli Bahadur Shah plant and the 1,223-megawatt Balloki plant. Both plants started operations in the past two years. The government has said it aims to complete the privatization of the power assets in the financial year ending June 30.


The sale would rank as Pakistan’s largest privatization since 2006, when Emirates Telecommunications Group Co. bought a $2.6 billion stake in Pakistan Telecommunication Co. in the country’s biggest-ever M&A transaction, data compiled by Bloomberg show. The power plant divestment is set to become Pakistan’s largest privatization in the energy sector, according to government figures dating back to 1991.

Pak Brunei Investment Co. is also pitching for a role on the power plant divestments in a group with Zeeruk International Pvt, the people said. BMA Capital Management Ltd. and CPCS Transcom Ltd. have submitted a joint proposal, according to Salman Virani, head of investment banking at BMA Capital.

Habib Bank Ltd. and China International Capital Corp. are partnering with JPMorgan, a representative for Habib Bank said in response to Bloomberg queries. CLSA submitted a joint proposal with Bank Alfalah Ltd. and their local brokerage venture, while Credit Suisse is pitching together with Pakistan’s Elixir Securities Ltd., the people said.

A representative for the Pakistan’s Privatisation Commission said the government has no comment. Representatives for CICC, Citigroup, CLSA, Credit Suisse, JPMorgan, Standard Chartered, Elixir Securities and Next Capital also declined to comment. Representatives for Lazard, Bank Alfalah, Pak Brunei and Zeeruk didn’t immediately respond to queries.

Riaz Haq said...

#China Giving #Pakistan $3.5 Billion in #Loans, #Grants. #Beijing will soon deposit $2.5 billion in the State Bank of Pakistan (SBP), raising to $4.5 billion the total amount in commercial loans China has given Pakistan this fiscal year. #CPEC https://www.voanews.com/a/china-giving-billions-to-pakistan-in-loans-grants/4788478.html

Officials say the Chinese government has also promised a grant of $1 billion for education, health, vocational training, drinking water and poverty alleviation projects over the next three years.

Minister for Planning, Development and Reform Makhdum Khusro Bakhtyar said Chinese experts are due to arrive in Islamabad later this month to coordinate socio-economic development under the promised grant.

Pakistan's foreign currency exchange remains under severe pressure, despite receiving around $2 billion from China and $4 billion from Saudi Arabia and the United Arab Emirates in commercial loan deposits.

SBP reserves stood at $8.2 billion last week, barely enough to cover two months' worth of imports.

China's CPEC

In the last six years, China has made significant financial contributions to direct investment, soft loans and commercial deposits to help its close ally, Pakistan, overcome severe economic challenges.

Under its Belt and Road Initiative, Beijing has invested $19 billion in Pakistan to build and improve road infrastructure and power plants and opened the strategic Arabian Sea port of Gwadar. Beijing has also given Islamabad concessional loans for some projects under what is known as the China-Pakistan Economic Corridor (CPEC).

The cooperation deal has created more than 70,000 jobs for Pakistanis and quickly resolved the country's chronic energy crisis. But investments from China had stopped because all major projects under CPEC will be complete by the end of this year.

Chinese and Pakistani officials say preparations are under way to launch the next phase of CPEC in coming weeks to construct nine special economic zones across Pakistan.

Beijing plans to relocate some of its industries by transferring technology to the new industrial zones to help Islamabad increase its exports to overcome its massive trade deficit and shore up cash reserves.

CPEC has "changed the image of Pakistan" and encouraged other countries to invest in the country, notes veteran opposition Senator Mushahid Hussain, who chairs the foreign affairs committee of the upper house of parliament. He praised China for being the only country to bring unprecedented, massive investments to Pakistan five years ago when other nations were reluctant to do so due to terrorism-related security concerns and political considerations.

Riaz Haq said...

#Lahore-Abdul Hakeem (near #Multan) Motorway (4-lane 230 Km M3) opens for general public . #Sukkur-Multan Motorway ( 6-lane 395 Km M5) to be operational by August 2019. #Pakistan #Motorways

https://www.pakwheels.com/blog/lahore-abdul-hakeem-motorway-opens-for-general-public/

The Government of Pakistan has finally opened Lahore-Abdul Hakeem Motorway for the general public from 1st April 2019. It was inaugurated by Governor Punjab, Chaudhry Sarwar on 31st March 2019. This new section of the motorway will reduce travel distance between Multan and Lahore making life easy for the commuters.

Note here that the total cost of this M3 section is around PKR 149 billion. It’s a six-lane motorway with eight interchanges over 40 bridges, 60 underpasses, three service stations, etc. The assigned speed at the newly opened motorway is 120 Km/h. It is also being termed as model motorway as Intelligent Transport System (ITS) has been installed on this new section.

It will ensure smooth traffic flow on the motorway, moreover, will handle all the emergencies occurring on the motorway. LED screens have been placed throughout the section, additionally, weigh system, and electronic toll collection has been introduced. Cameras have been deployed for monitoring vehicles.

Previous:

The Government of Pakistan has decided to open Abdul Hakeem-Lahore Motorway (M3) on 31-3-2019.

According to the details, the total length of the motorway is 230 kilometers which will cut down your commute time by two hours from Abdul Hakeem to Lahore and vice versa. PakWheels contacted an official of Motorway, and he confirmed that the Lahore-Abdul Hakeem motorway section would open for vehicles on 31 March 2019. Previously, it was scheduled to open in January; however, due to unknown reasons, it was delayed.

This project was started back in 2015 and was officially inaugurated by previous Prime Minister Shahid Khaqan Abbasi in 2018. According to a security analyst, this particular project is significant keeping in view the objectives of the China-Pakistan Economic Corridor (CPEC).

Read Also: 12 Driving tips to keep you safe on the motorway during fog

Moreover, an official of the National Highway Authority (NHA) while speaking to the local media said that with the completion of over 70 percent of the total work, Sukkur-Multan Motorway (M5) would get operational by August 2019. This 392 km long project started back in August 2016. When completed, this project will be a huge step towards developing a stronger Pakistani economy keeping in line with CPEC goals.

Riaz Haq said...

Second CPEC phase to boost industrial cooperation

https://tribune.com.pk/story/2022908/2-second-cpec-phase-boost-industrial-cooperation/

The second phase of China-Pakistan Economic Corridor (CPEC) is very important for Pakistan as it will give a boost to industrial cooperation and give birth to Special Economic Zones (SEZs), remarked Sichuan University Deputy Dean International Studies Professor Dr Song Zhihui.

Speaking at the ICCI, Song stressed that the setting up of SEZs would in turn create new opportunities for entrepreneurs of both countries for forming joint ventures and investing in areas of interest.

“The first phase of CPEC focused on energy and infrastructure development in Pakistan while the second phase will focus on industrial cooperation, which will yield beneficial results for the economy of Pakistan,” he said.

“Several companies of China are interested in investing and setting up factories in Pakistan because it is the best place for them.” He expressed the desire to organise a tourism promotion conference for Pakistan in a bid to highlight its tourism potential.

Song added that China was eager to enhance imports from Pakistan, which would uplift Pakistan’s exports. He urged the ICCI to cooperate in connecting right partners with Chinese counterparts in SEZs and other areas.

Speaking to the delegation, ICCI President Ahmed Hassan Moughal said the establishment of SEZs in Pakistan under CPEC would kick off a new phase of business opportunities in the country.

He asked Chinese companies to enter Pakistan with technology transfer for joint ventures and investment.

“Due to the growing population and emerging market, many sectors of Pakistan’s economy offer immense potential for investment and Chinese companies should benefit from these emerging opportunities,” he said.


Riaz Haq said...

Pakistan's Miracle Motorway - the Multan-Sukkur

http://www.chinadaily.com.cn/a/201908/14/WS5d53d0ada310cf3e35565c24.html

On the banks of the Chenab River sits Pakistan's 7th largest city, Multan. The air on July 24 was as humid as any other summer day, only this time, the residents awoke to an unprecedented level of activity. The major cultural and economic center of southern Punjab was now connected to surrounding regions by the Motorway 5.

Inaugurated on May 6, 2016, the M5 mega project was developed as part of a pilot project for the China-Pakistan Economic Corridor (CPEC), under the framework of China's Belt and Road Initiative (BRI) with a total investment of around $2.89 billion.

The strategically-placed six-lane M5 starts from Multan and connects Jalalpur, Peerwala, Ahmed Pur East, Rahimyar Khan, Sadiqabad, Ubaro, Pano Aqil and finishes at Sukkur. The 392-kilometer M5 Sukkur-Multan Motorway is a part of the country's Peshawar-Karachi Motorway. It is designed for speeds of up to 120 km. The motorway has 12 service areas, 10 rest areas, 11 interchanges, 10 flyovers, and 426 underpasses.

The project is particularly significant since it has been constructed to resist flooding with the help of the latest technology and methods, including the Intelligent Traffic System. It is equipped with FM broadcasting, 360-degree angle monitoring, WIFI in service areas and ample night lighting.

Sukkur-Multan Motorway relied on domestically produced materials and goods such as 60 million bricks, 6 million tiles, 1 million tons of cement, 9,200 sets of machines and tools and created more than 29,000 jobs for locals during construction. The M5 also enables residents to improve their standard of living by connecting schools, small bridges, avenues, wells and water channels.

CPEC projects have largely helped Pakistan overcome economic constraints, attracting large funds as Foreign Direct Investment (FDI). The world has begun ranking Pakistan among the top potential economic powers of the future, with a recent World Bank report listing Pakistan among the top 15 emerging economies of the globe.

Federal Minister for Communications Murad Saeed said they appreciate China's contribution towards Pakistan's economic progress in the form of CPEC, which is an attractive reflection of the Pakistan-China strategic partnership.

At an opening ceremony held in Multan, National Highway Authority (NHA) M5 General Manager Muhammad Naseem Arif said the motorway is very impressive in terms of its quality and construction.

Authorities worked closely with the China State Construction Engineering Corporation (CSCEC) and overcame a number of difficulties so that they could complete the large project within three years.

Li Ganchun, chief of the M5 project from the CSCEC, appreciated the security provided by the Pakistani side, saying that the M5 will help Pakistan connect its northern and southern regions, improve the country's transportation and facilitate social economic development in the region along the motorway.

CPEC appears like a miracle for Pakistan's ailing economy. According to Chinese Ambassador to Pakistan Yao Jing, CPEC has generated around 75,000 direct and indirect jobs - but this figure is just the tip of the iceberg. A recent World Bank report has claimed that at the current pace, CPEC will create more than one million jobs in Pakistan by the year 2030.

Since Prime Minister Imran Khan has refocused on establishing vocational training institutes and Special Economic Zones across the country, millions of new high- and low-end jobs are expected to be created due to economic activities generated by the CPEC.

Riaz Haq said...

PM #ImranKhan: PROMOTING #CONSTRUCTION WILL BOOST #PAKISTAN’S #ECONOMY. INDUSTRIES LINKED TO CONSTRUCTION WILL PROSPER AND RESULT IN GREATER #JOB OPPORTUNITIES. Rs. 25 billion allocated for Pakistan #Housing Authority #cement #steel #transport #engineering https://www.newsweekpakistan.com/promoting-construction-sector-will-boost-pakistans-economy-p-m-khan/

Chairing a meeting about the construction sector in Islamabad, Khan designated its promotion yet another “topmost” priority of his government—he has already designated tourism, children’s rights, eradication of polio, and corruption, among others, ‘topmost’ priorities—adding that this would boost 40 linked industries and spur job creation. Khan said he was aware that people were experiencing financial difficulties due to rampant inflation, but said the government was making efforts to offset this by accelerating economic and business activities.

The prime minister said the government had decided, in principle, to accord the construction sector with the status of ‘industry,’ claiming this would increase the facilities available to it. He also directed the Competitive Commission of Pakistan to take measures to halt the creation of cartels that set unrealistic prices of raw materials related to the construction industry.

Adviser to the P.M. on Finance Abdul Hafeez Shaikh informed Khan during the meeting that sufficient progress had been made to address problems of the construction sector following meetings with the Association of Builders and Developers (ABAD) and other stakeholders. Shaikh said the government had also, as a first phase, allocated Rs. 25 billion for the Pakistan Housing Authority to promote the construction sector even further.

The meeting was also informed that consensus had been achieved on the future policy regarding fixed income tax for industries. In light of P.M. Khan’s desire to see a vertical growth in Pakistan’s cities, the meeting also reaffirmed that a policy on construction of high-rise buildings had been formulated and endorsed by the federal cabinet. Regarding the valuation of immovable properties, officials said the Federal Board of Revenue would appoint a regional valuation committee next week that would include the expertise of ABAD and the real estate sector.

The prime minister also directed the adviser on finance to request the superior judiciary to constitute a special bench for quick disposal of pending cases regarding real estate and construction sectors. He endorsed a proposal to promote a compliance regime instead of the existing No Objection Certificate system.

Discussing a proposal concerning the provision of state land for construction purposes, Khan declared it an important part of the government’s policy to utilize government property for construction projects targeting the low-income sector. He also agreed with a proposal to include the representatives of ABAD in regulatory bodies related to construction.

In addition to the prime minister and finance adviser, the meeting was also attended by Naya Pakistan Housing Authority Chairman Anwar Ali Haider; a representative of the Association of Builders and Developers, and other senior officials.

Riaz Haq said...

PM #ImranKhan announces incentives for #construction sector in #Pakistan: Rs 30 billion cash subsidies, no questions on #investment money source, lower #taxes, create jobs amid #coronavirus #lockdown. #NayaPakistan #housing #cement #steel #economy https://www.dawn.com/news/1546154/pm-imran-announces-incentives-for-construction-sector-elevates-it-to-industry

All the people investing in the construction sector this year will not be questioned about their source of income.

The tax rate will be fixed for the construction sector, and constructors will be charged tax per square foot or square yard.

People carrying out construction in the Naya Pakistan Housing Scheme for the poor will only have to pay 10 per cent of the fixed tax.

Withholding tax will be waived off for all construction sectors except the formal sectors of steel and cement.

Sales tax will be reduced in coordination with provinces.

Any family selling their house will not have to pay any capital gains tax.

A subsidy of Rs30 billion to be given for the Naya Pakistan Housing Scheme.

Construction sector to be given the status of an industry.

Construction Industry Development Board to be set up to support the sector.

Riaz Haq said...

BMA forecasts #Pakistan #cement sector revival, backed by initiation of #ImranKhan's Naya Pakistan Housing Scheme and #construction package. Sees return to prosperity with 5% growth in FY21 (last 6 months) and 7-8% growth after that as #lockdown ends. https://www.cemnet.com/News/story/168992/return-to-prosperity-forecast-for-pakistan-s-cement-sector.html

Pakistan's cement industry is likely to prosper in the coming months, due to some positive developments at the local and international level, anticipated by three of Pakistan's leading research houses.

BMA Capital Management forecasts that the cement sector is showing signs of revival, backed by initiation of the Naya Pakistan Housing Scheme and construction package announced by the government. Moreover, the easing of lockdowns has raised hopes for improved cement dispatches in the coming months.

Meanwhile, Al Habib Capital Markets states that cement dispatches are estimated to increase modestly due to the gradual easing of lockdowns and the possible announcement of relief measures in the Budget FY21, aimed at increasing construction-related activities.

In addition, Intermarket Securities adds that, despite a slow demand outlook, cement sector profitability is likely to resurge in FY21/22. This would be due to key supporting factors, such as lower international oil and coal prices (energy cost savings) and a steep decline in interest rates by the Central Bank of Pakistan.

It estimated that cement demand and prices will rebound strongly from the 2HFY21 onwards, when the COVID-19 pandemic is expected to be more manageable. Thus, the government will likely have more fiscal space to push construction activity – especially the low-cost housing scheme.

Intermarket Securities has upgraded the estimates for the cement industry, in light of the steep declines in international coal and oil prices, and the abrupt and significant cuts in interest rates in Pakistan. Lower coal prices (down 26 per cent YoY in the 4QFY20) is a boon, as coal remains the most significant input cost, along with a shift to furnace oil for power. Secondly, the decrease in interest rate by 525bps will drastically reduce finance costs and boost the bottom-line.

The analytical company, however, remains conservative on its demand growth outlook until the end-1HFY20. It foresees a five per cent YoY growth in FY21 (last six months) and 7-8 per cent YoY growth in the ensuing years. Whereas, during FY19/20 the sector saw intense price competition, where even the major players pushed sales at low prices. It believed that the government could have better fiscal space to push infrastructure from the 2HFY20 onwards. Thus, cement prices will start recovering more strongly.

It anticipated that retail prices will rise to PKR610/bag (US$3.75) in the north and PKR700/bag in the south by the end of FY21, from PKR480/bag and PKR620/bag, respectively, in March 2020.

Having said that, the risks of lower cement prices and depressed demand had not been wholly allayed. Weakness can emanate from the lack of an increase in government spending from FY20 levels (flattish budget allocation or PSDP), a delay in the start of low-cost housing schemes or a concurrent slowdown in exports. Prolonged lockdown conditions could also lead to severe liquidity issues for some producers.

Riaz Haq said...

#Pakistan PM #ImranKhan unveils Rs. 330 billion for low-cost #housing incentives, including down payment assistance, low-cost #mortgage financing and Sharia-compliant loans. Banks to set aside 5% of portfolios for mortgage lending. #NayaPakistanHousing https://tribune.com.pk/story/2254544/pm-imran-unveils-mortgage-financing-plan-to-revive-virus-hit-economy

Prime Minister Imran Khan has made another move to revive the coronavirus-hit economy with an initiative to promote the housing and construction sector with Rs330 billion of mortgage financing by the commercial banks in just 18 months.

The prime minister himself unveiled the plan for the revival of the construction sector after a maiden meeting of the newly formed National Coordination Committee on Housing and Construction on Friday.

Commenting on the government's initiative, a leading property developer and businessman Ejaz Gohar said that it was the first plan, which would make it affordable for the low and middle income people to build houses with mortgage financing of as low as 5 to 7% mark-up.

The commercial banks would allocate 5% of their portfolio amounting to Rs330 billion for the construction activities.

He noted that around Rs20 trillion was circulating in the informal unregistered economy and now was the opportunity for the people to get the huge amount of money declared by investing in the real estate sector by December 31, 2020.

Now a person with an income of Rs30,000 to Rs100,000 can build a house of 5-marla with the mortgage financing at 5% and that of 10-marla at 7% mark-up.

Gohar observed that mortgage financing started in the United States 82 years back to kick-start its economy. The government will give a subsidy of Rs30 billion for the construction of houses.

The prime minister has planned to hold meetings of the housing coordination committee every week to remove hurdles that come in the way as the country is far behind in terms of home mortgage financing as compared to the developed world.

As Covid-19 had hit hard the global economy, Pakistan too suffered a great deal due to the pandemic with rise in unemployment and shutting down of businesses, the government's measures for the construction sector would be a much needed timely relief.

Many economically strong countries like China, the United Kingdom, Italy and Spain were forced to impose strict lockdowns spread over months to contain the cases of Covid-19. However, economically fragile countries like Pakistan were caught in a dilemma as the option of complete lockdown was a recipe for disaster, especially for the vulnerable section of the society which comprised a significant portion of the country’s population.

Prime Minister Imran Khan – known for his leadership qualities since his cricketing days – went for a policy of smart lockdown, balancing the need to halt the spread of coronavirus and keep different sectors of the economy functional simultaneously.

The strategy largely worked and the primary sectors of economy are now open with the number of coronavirus cases after hitting the peak are lowering on a daily basis.

In order to deal with the adverse effects of Covid-19, the government had announced a relief package worth Rs1.2 trillion on March 24.

An important component of Pakistan's economic revival plan was the second phase of China Pakistan Economic Corridor (CPEC).

Despite hurdles, Pakistan and China went ahead with the second phase of the mega project during the last two years. After undertaking of the infrastructure, road and energy projects across Pakistan in the first phase, the focus was shifted to the building of eight special economic zones and socioeconomic and human development with the Chinese financial assistance of $1 billion.

The Pakistan Tehreek-e-Insaf government established the CPEC Authority and appointed Lt General (retd) Asim Saleem Bajwa as it head.

Bajwa set his sights on executing vital projects, including M8 motorway from Gwadar (Balochistan) to Ratodero (Sindh) and $230 million Gwadar international airport.

Riaz Haq said...

Pakistan is facing a shortfall of ten (10) million housing units growing at a rate of 0.35 million per year.

https://www.tabadlab.com/wp-content/uploads/2019/05/Tabadlab_Mortgage-Design-Low-Cost-Housing_Working-Paper-02.pdf


The
government has announced the Naya Pakistan Housing Program (NPHP) to facilitate the construction of
five (5) million units. To assist buyers with home ownership, the State Bank of Pakistan (SBP) has relaxed
the prudential regulations that govern lending in the housing sector. The SBP policy allows for low-income
households to purchase housing units against a self-amortizing fixed rate mortgage (FRM) for a period of
12.5 years. Khalil and Nadeem (2019b) have shown that announced prices for housing units under NPHP
(Phase I), and the prevailing income levels amongst the low-income target segments, the SBP policy is not
likely to achieve its objectives.
This paper reviews international literature analyzing various mortgage designs, followed by an overview of
two options that may provide the optimum model of mortgages for low-cost units in Pakistan. A proposal for
a low-cost housing finance scheme, in light of local characteristics, is then presented along with a
framework for managing and measuring the scheme.
Instead of encouraging self-liquidating fixed rate mortgages for low-cost housing units (as recommended by
the SBP policy), the government should provide outside equity in the form of shared equity mortgages
(SEMs) to assist prospective buyers to become home owners. The joint equity in this proposed path forward
will maximize initial down payment and thus reduce the amount to be financed by banks. This will limit the
debt incidence for the borrower. Studies show that such mortgage structures increase affordability, and limit
the losses of borrowers, as well as losses to the wider economy under recessionary conditions. Additionally,
based on practices in developed mortgage markets, the amortization period of the mortgage should be
doubled from 12.5 years to 25 years. The paper concludes with a discussion on implementation modalities
and discussion points pertaining to the proposals presented.

Riaz Haq said...

“The natural, geographical and cultural environments of China and Pakistan are very different from each other, so during construction, we worked out measures to adapt to local conditions and shared our construction experience with our Pakistani friends.”

https://www.thenews.com.pk/print/770493-china-s-construction-giant-shares-its-experience-with-pakistan

This was stated by Dong Zhihong, deputy general manager of Asia Pacific Division, China Civil Engineering Construction Corporation (CCECC), in an interview with China Economic Net (CEN).

Take the mountainous areas in Pakistan as an example. “It is difficult to conduct construction work there as the geological conditions are not that favorable.”

Therefore, “blasting, protection, and support of high slope, tunneling and excavation technologies are applied to the construction project site after certain improvement and optimization,” Mr. Dong added.

At present, the commencement order was issued by the employer, and work including the take over of the site, the construction of temporary camps for administration office and dormitory, the construction of temporary facilities (batch plant, canteen), and the removal of existing avionics facilities on the runway was completed.

Riaz Haq said...

#Pakistan #cement production has grown from 35 million metric tons in 2015 to 55 million metric tons in 2021. #CPEC #NayaPakistan #housing #infrastructure #construction #exports https://www.globalcement.com/news/item/13839-update-on-pakistan-march-2022

https://twitter.com/haqsmusings/status/1504176499032616960?s=20&t=bRjXPJL-GLBVBoMhFkJVwA

Update on Pakistan, March 2022 - Cement industry news from Global Cement

https://www.globalcement.com/news/item/13839-update-on-pakistan-march-2022

(Graph in the article shows Pakistan cement production growth from 35 million tons in 2015 to 55 million tons in 2021)

Data from the All Pakistan Cement Manufacturers Association (APCMA) shows that cement despatches have been steadily growing since the mid-2010s with a blip in 2020 caused by the start of the Covid-19 pandemic. The upward trend has been driven by local sales. Exports have generally grown at the same time, with more variance, but they are yet to regain the high of nearly 11Mt reported in 2009. On a rolling annual basis, local sales have remained steady since mid-2021 but exports have been slowly falling. In April 2021 they were 9.17Mt but by February 2022 they were 7.33Mt. For the February 2022 figures APCMA blamed this on the growing cost of production, rising international freight rates, mounting coal prices and a trade ban with India. On that last point for example, Pakistan-based producers exported 1.21Mt of cement to India in the 2017 – 2018 financial year before exports stopped after February 2019. Despite a brief respite in the spring of 2021 talks are still ongoing to resume trade with India.

On the corporate side the country’s largest cement producer by capacity, Lucky Cement, drew the same conclusion as the APCMA with its half-year results to 31 December 2021. Its local sales volumes were down a little but its exports were down a lot. It noted that the reason its local sales were falling but national industry local sales were up slightly was due to some competitor plants being non-operational in the previous year. However, the company managed to keep sales revenue and earnings increasing year-on-year by successfully combating growing input costs with price rises. Bestway Cement, the country’s other large producer, reported a tougher situation in the second half of 2021, with both local sales and export volumes down. This was attributed to a boom in construction activity in the second half of 2020 as Covid-19 lockdowns were eased. Demand for cement since then was said to be ‘sluggish’ due to inflation and high commodity prices. It also pinned its marked fall in exports on political and economic instability in Afghanistan. However, turnover and operating profit were both up due to higher selling prices.

Elsewhere in the sector news since the start of 2021, Pakistan’s exports to South Africa remained stymied in early 2020 due to a review of ongoing tariffs and the government decision to restrict infrastructure projects to only using locally produced cement. On the sustainability front the APCMA started to set out its decarbonisation strategy in November 2021. It may have a long way to go given that a think tank reported earlier in the year that the cement sector was the largest emitter of coal-related CO2 emissions in the country, even more than power generation. Alongside this plenty of capacity additions have been announced. Lucky Cement started commercial cement production at its 1.2Mt/yr integrated Samawah cement plant in March 2021. Various new cement plants and upgrades to existing plants have been proposed by Bestway Cement, Cherat Cement, Fauji Cement, Kohat Cement Company, Lucky Cement and Maple Leaf Cement. Finally of note to a sector troubled by energy prices, in September 2021 the Pakistan International Bulk Terminal said it was going to upgrade its coal handling capacity to around 17Mt/yr by 2024.

Riaz Haq said...

Pakistan allocates Rs800 billion for FY23 PSDP
June 11, 2022

https://pkrevenue.com/pakistan-allocates-rs800-billion-for-fy23-psdp/

The country presented the federal budget 2022/2023, which envisages PSDP worth 800 billion rupees for the next fiscal year.

It has been centered on improvement in sectors such as water resources, transport and communication, energy, higher education, health, science and technology, and balanced regional development.

The emphasis of PSDP is also on revival of CPEC and related projects for inter-provincial and regional connectivity with equal importance to Special Economic Zones to promote trade, industrialization and create job opportunities.

The major thrust in the Information and Communication Technology sector including establishment and operations of Special Technology Zones.

Under the PSDP, the government has allocated 44.179 billion rupees including foreign aid of 1.3 billion rupees to the Higher Education Commission for implementation of 151 development projects.

The allocation indicates an increase of one hundred percent over the last year.

An allocation of over 197 billion rupees has been made for 117 power related projects.

These include hydro power generation projects such as Diamer-Bhasha, Mohmand, Nai Gaj and the fifth extension of Tarbela. Initiatives like developing water storages, automatic telemetry system, rainwater harvesting, decreasing water losses, ground water regulation and management would be undertaken in consultation with the stakeholders.

Over nine billion rupees have been earmarked for Ten Billion Trees Tsunami Programme Phase-I to achieve the target of planting 500 million trees.

Similarly, over 563 million rupees and over 1.2 billion rupees have been allocated for installation of weather surveillance radars at Multan and Sukkur respectively.

The Federal PSDP has also proposed an amount of 1.5 billion rupees to complete the emergent nature of small flood schemes all over Pakistan.

An allocation of 227 billion rupees has been made for strengthening efficiency of transport and logistics for domestic commerce and regional connectivity.

The high impact infrastructure projects to be completed under Public Private Partnership mode include Sukkur-Hyderabad Motorway, Sialkot-Kharian Motorway, Kharian-Rawalpindi Motorway, and Karachi Circular Railway. Under the CPEC, D I Khan-Zhob section is under discussion with the Chinese side for financing and it is expected to be launched in the next financial year.

The concessional financing agreement for landmark ML-1 project is to be finalized in the second quarter of the next fiscal year and subsequently arrangements will be made for groundbreaking of the project.

A comprehensive National Action Plan for agriculture modernization has been prepared in terms of capacity building, agricultural product processing technology extension, fishery science and technology, aquaculture and aquatic products processing.

Riaz Haq said...

CPEC Results According to Wang Wenbin of China

https://twitter.com/bilalgilani/status/1677391745112477696?s=20

Bilal I Gilani
@bilalgilani
CPEC projects are creating 192,000 jobs, generating 6,000MW of power, building 510 km (316 miles) of highways, and expanding the national transmission network by 886 km (550 miles),” Foreign Ministry spokesman Wang Wenbin told reporters in Beijing."


Associated Press of Pakistan: On July 5, Prime Minister Shahbaz Sharif while addressing a ceremony to mark a decade of signing of the China-Pakistan Economic Corridor (CPEC), said that CPEC has been playing a key role in transforming Pakistan’s economic landscape. He also said that the mega project helped Pakistan progress in the region and beyond. What is your response?

Wang Wenbin: The China-Pakistan Economic Corridor (CPEC) is a signature project of China-Pakistan cooperation in the new era, and an important project under the Belt and Road Initiative. This year marks the 10th anniversary of the launch of CPEC. After ten years of development, a “1+4” cooperation layout has been formed, with the CPEC at the center and Gwadar Port, transport infrastructure, energy and industrial cooperation being the four key areas. Projects under CPEC are flourishing all across Pakistan, attracting USD 25.4 billion of direct investment, creating 192,000 jobs, producing 6,000 megawatts of electric power, building 510 kilometers of highways and adding 886 kilometers to the core national transmission network. CPEC has made tangible contribution to the national development of Pakistan and connectivity in the region. China and Pakistan have also explored new areas for cooperation under the framework of CPEC, creating new highlights in cooperation on agriculture, science and technology, telecommunication and people’s wellbeing.

China stands ready to work with Pakistan to build on the past achievements and follow the guidance of the important common understandings between the leaders of the two countries on promoting high-quality development of CPEC to boost the development of China and Pakistan and the region and bring more benefits to the people of all countries.

https://www.fmprc.gov.cn/eng/xwfw_665399/s2510_665401/2511_665403/202307/t20230706_11109401.html

Riaz Haq said...

The mega undertaking (China-Pakistan Economic Corridor or CPEC) has created nearly 200,000 direct local jobs, built more than 1,400 kilometers (870 miles) of highways and roads, and added 8,000 megawatts of electricity to the national grid, ending years of blackouts caused by power outages in the country of 230 million people.


https://www.voanews.com/a/top-china-official-visits-pakistan-marking-cpec-milestone/7204256.html


Chinese Foreign Ministry spokesman Wang Wenbin told reporters in Beijing earlier this month that CPEC projects "are flourishing all across Pakistan," making a "tangible contribution" to the national development of the country and to regional connectivity.

But critics say many projects have suffered delays, including several much-touted industrial zones that were supposed to help Pakistan enhance its exports to earn much-needed foreign exchange.

The country's declining dollar reserves have prevented Islamabad from paying Chinese power producers, leading to strains in many ties.

Pakistan owes more than $1.26 billion (350 billion rupees) to Chinese power plants. The amount keeps growing, and China has been reluctant to defer or restructure the payment and CPEC debts. All the Chinese loans – both government and commercial banks – makeup nearly 30% of Islamabad's external debt.

Some critics blame CPEC investments for contributing to Pakistan's economic troubles. The government fended off the risk of an imminent default by securing a short-term $3 billion International Monetary Fund bailout agreement this month.

Security threats to its citizens and interests in Pakistan have also been a cause of concern for China. Militant attacks have killed several Chinese nationals in recent years, prompting Beijing to press Islamabad to ensure security measures for CPEC projects.

Diplomatic sources told VOA that China has lately directed its diplomats and citizens working on CPEC programs to strictly limit their movements and avoid visiting certain Pakistani cities for security reasons.

"They [Chinese] believe this security issue is becoming an impediment in taking CPEC forward," Senator Mushahid Hussain, the chairman of the defense committee of the upper house of the Pakistani parliament, told VOA in an interview earlier this month.

"Recurring expressions of concern about the safety and security of Chinese citizens and investors in Pakistan by top Chinese leaders indicate that Pakistan's promises of 'foolproof security' for Chinese working in Pakistan have yet to be fulfilled," said Hussain, who represents Prime Minister Shehbaz Sharif's ruling party in the Senate.