KARACHI: It’s safe to say that the China-Pakistan Economic Corridor (CPEC) is anything but controversy free. Issues ranging from route disagreement to transparency concerns have all surfaced, making the $46 billion deal a highly publicised affair. With critics and sceptics weighing in on its future, Bestway Group CEO Zameer Choudrey believes that if properly executed, the CPEC can be a game-changer for the country.
It should reap significant direct and indirect long-term economic benefits for the country as a whole, Choudrey said.
“CPEC will ensure that the economy will grow at a faster pace generating employment and business opportunities for many industries and the cement industry will be at the helm of it, directly benefiting from its various spin-offs,” Choudrey told The Express Tribune.
Bestway Cement, a subsidiary of Bestway Group UK, became the largest cement-maker in Pakistan after taking over management control of Pakcem Limited (formerly Lafarge Pakistan Cement) in April 2015. With 8 million tons (including Pakcem) production capacity, Bestway Cement has over 17% market share in the cement industry that has a combined production capacity of 45 million tons.
Domestic demand to rise more
Pakistan has the fifth largest population in the world, yet its per-capita cement consumption rate is the lowest in the region. But it has immense potential, he said.
Unfortunately, as a consequence of decades of sub-par economic performance and under-investment in infrastructure and housing, Pakistan has amassed a housing and infrastructural deficit, Choudrey said. “Government is focusing on infrastructure development on a large scale that has also got a helping hand from the rise in housing development.”
As these activities gather pace, so will the cement consumption, which bodes well for the cement industry, he commented on the growing cement demand in the country.
Domestic demand has been growing at 8% to 9% per annum over the last few years and we expect this growth rate to pick up at above 10% per annum, he said on cement demand in the next five years.
Choudrey added that domestic cement consumption has shown continuous growth during the last five-year period mainly due to cheap input costs and gradual improvement in economic activities. However, on the contrary, cement exports have maintained a continuous downward trajectory in this period due to rising competition and other challenges in export markets.
Price war unlikely
Speaking on the expansion plans of cement players, he said three companies have already announced their expansion plans and another plant is in the pipeline, expected to be operational in late 2016.
“The industry’s capacity utilisation currently stands at around 80%. By the time all these plants come into production, the capacity utilisation will have reached a level where a price war would be unlikely,” said Choudrey on question of price war – a competition among cement players to grab larger market share by reducing cement prices.
Bestway cement’s export markets are Afghanistan and India – the two target markets for cement industries located in the north region of the country.
Declining exports have significantly impacted the entire cement industry, some more than others. In the last financial year, cement exports by the industry declined by 12%, said Choudrey.
“Bestway has not been immune to this either. However, Afghanistan and India remain the core markets for Bestway and we will continue to aggressively pursue those and other export markets.”
He said that Afghanistan remains the largest export market for his company followed by India. Exports to Afghanistan are likely to continue declining, albeit at a slower rate.
“Indian market holds a lot of promise for Pakistani cement, however, the potential will only truly materialise once relationships between the two neighbours have normalised and trade is liberalised.”
There are at present opportunities for us to sell cement to a number of African countries. International market for cement is highly competitive, so we continue to actively seek out opportunities wherever they may be, he added.
Commenting on the acquisition of Pakcem, Choudrey said it has not just been a strategic investment for Bestway, but it is the largest cement sell-off in Pakistan to date.
The writer is a staff correspondent
Published in The Express Tribune, January 11th, 2016.