The One Belt, One Road Initiative, also known as CPEC is changing the dynamics of infrastructure and the construction industry in Pakistan. As experts have speculated, the CPEC project is fuelling the growth and development of the construction industry. With the right measures and steady pace, this development can even pave the way for Pakistan’s bailout by the IMF. Although various challenges had emanated over time, this mega project despite all the scrutiny has a huge potential that is yet to be discovered more in the years to come.
Since its inception, up to 3,240MW capacity of energy has been added up to Pakistan’s national grid which totals up to 11% of the current energy capacity of the country. China has made a whopping investment of $62 billion in short and long-term projects that will fully envisage by the year 2030.
One of the key trends of this huge infrastructural investment in the development of Balochistan which will open new avenues for the exploration of natural resources reserves. The reserves are estimated to be worth trillions and have the potential to further strengthen the economic development of Pakistan. It is noteworthy that the construction industry is at the heart of this development.
The One Belt, One Road initiative primarily revolves around the development of roads, motorways, railway lines, highways, bridges, seaports, and airports. These infrastructural developments are stacked up with enhancing energy production to cater to the emerging needs. Zarea.pk is back with its insights and in this article, we are going to give an overview of three ways in which the CPEC project will impact the construction industry in Pakistan.
Since the inception of the CPEC project, huge growth in demand for construction materials has been witnessed. The increased job opportunities in the construction sector is another rising trend.
One of the most important construction materials which are being widely used is cement. Currently, there are 28 cement plants operational in Pakistan. The cement industry accounts for 40 billion rupees per year in the GDP of Pakistan. The total capacity of these cement plants is up to 17.3 million tons. This industry contributes up to 20 million rupees per annum to the national exchequer. The cement industry has undergone a crisis since 2017, owing to various factors. One of the various factors is the demand and supply mechanism. Cement production surpasses the demand for its utilization due to limited government investment in infrastructure projects.
Recently, Prime Minister Imran Khan initiated The Naya Pakistan Housing Scheme, but apart from a few projects, the prospects are lower at the state level. Amidst all the crises, CPEC offers a huge prospect for the utilization of construction materials like cement. Recently, the demand skyrocketed and led to record-high sales of cement. Due to the progression of mega projects like the CPEC, the production capacity has nearly doubled during the past five years.
The main categories of cement widely used in Pakistan include White cement, Fly ash, and Portland Pozzolana Cement.
Steel is another major construction material that is much in demand due to the mega project i.e. CPEC. Unlike the cement industry, the state-run Pakistan Steel Mills (PSM) is far below the production capacity to meet the emerging demands of the construction industry. Pakistan has a total of 780 million tons of iron ore which constitutes 35% of iron. But the production capacity is not well-aligned with its rich possession of reserves.
PSM produces 1.1 million tons of steel per year, which is sufficient only to meet 16% of the total steel demand. A major proportion of steel used in the construction industry is imported due to this shortage. According to estimates, private construction companies import more than 4 million tons of raw materials per annum. Situated in South-East of Karachi near port Muhammad Bin Qasim, the PSM spreads over an area of 18,660 acres. The major production of PSM includes galvanized sheets/pipes, billets, hot-rolled coils, slabs, and corrugated sheets, etc.
Megaprojects like CPEC and Naya Pakistan Housing Scheme are a herald for the construction industry in general and the steel industry in particular as they are pushing it towards the pressing challenge of increasing production capacity. The demand and supply principle can potentially change the existing landscape of the steel industry.
There are some private steel companies as well that can take up the center stage if the production capacity is strategically enhanced.
With enhanced connectivity by road, not only the transportation costs would be reduced with more ease and convenience but also new markets will open up. Pakistan could export its access to construction materials like cement to more countries. Currently, Pakistan exports cement to Afghanistan, Oman, Qatar, Tanzania, Sri Lanka, Malawi, and Mozambique. It also used to export cement to India but the political ramifications de-escalated the exports.
The cement industry can double its revenue and increase its export capacity upon the completion of this mega project. The One Belt, One Road initiative will also strengthen the inbound influx of construction materials. The procurement and supply chain of construction materials will be enhanced by 360 degrees.
As mentioned earlier, CPEC is improving the energy production capability of Pakistan. The impact of increased energy production in the years to come is twofold. It will not only make the existing processes more efficient but the currently underutilized sectors like the steel industry will heavily benefit from it. With the advancement in technological framework and energy, the production of steel can be revolutionized. This can prove to be a huge prospect of a revival of the sectors which are severely affected due to technical and structural limitations.
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