Khan’s Construction Bet Sees Cement Firms Boosting Investment

(Bloomberg) -- Pakistani cement companies are investing to expand capacity a year after Prime Minister Imran Khan chose the construction sector to stimulate the economy.

Lucky Cement Ltd., Bestway Cement Ltd., and D.G. Khan Cement Co. are among more than half-a-dozen firms to announce plans in recent months. Pakistan’s cement production capacity will increase by 31% to 91 million tons after the announced expansions are completed, according to Insight Securities Pvt.

Khan’s government last year said it will subsidize low-cost housing and forgive tax evaders if they invest in construction projects. Banks have also been asked to increase their outstanding mortgages by at least 5% by December. Cement stocks have outpaced the nation’s benchmark index.

“Construction-related activities have a very, very big multiplier effect in emerging economies,” said Waleed Saigol, director at Maple Leaf Cement Factory Ltd. “The government has realized that the private sector has to play a leading role in getting the wheels turning again.”

A group of 19 cement manufacturers have seen their shares rise 67% in the past year, compared with the KSE-100 Index’s 30% gain. About 1,000 projects have registered under the government initiative with the boom just about to start on the ground, according to Mohammed Hassan Bakshi, a member of Khan’s Naya Pakistan Housing Program.

The construction boom is also having other effects. Pakistan’s consumer home finance, which is one of the lowest in South Asia, has increased by 18% to a record 97.8 billion rupees in May, according to Foundation Securities Pvt. The country has also seen its first real estate investment trust in more than six years.

The nation’s economic growth is “supported by a continued strengthening of domestic consumption and resilient manufacturing and construction activity,” Fitch Ratings Ltd. said in May. However, a fresh wave of Covid-19 cases “could disrupt the positive momentum.”

©2021 Bloomberg L.P.