According to AL Habib Research, the Short-Term Impact on Cement Sector is Neutral. The Prime Minister Imran Khan on Saturday, September 05, 2020 announced an ambitious PKR1,113 billion package for the development of the country’s financial capital and set up a coordination and implementation committee led by Sindh Chief Minister Syed Murad Ali Shah to bring all “stakeholders and authorities” together, to make key decisions, remove hurdles and ensure their implementation;

The prime minister announced the “historic” package titled ‘Karachi Transformation Plan’ comprising PKR92bn water supply projects, PKR267bn solid waste management, stormwater drains clearance and resettlement projects, PKR141bn sewage treatment plan, PKR41bn road projects and the PKR572bn mass transit, rail and road transport project;

“In this [development] package, the provincial government would pool its share and so will the federal government that would make the total around PKR1,100 billion,” Prime Minister Imran Khan said;

 Meanwhile, PPP chairman Bilawal Bhutto-Zardari welcomed the PKR1,113 billion package announced by the Prime Minister but claimed that his party’s government in Sindh would actually be contributing PKR800bn against the Centre’s share of PKR300bn; A market pundit identified the ‘indirect’ long-term benefits of the ‘Karachi Transformation Plan’

We, at AL Habib Capital Markets (Pvt) Ltd. (AHCML) had the opportunity to talk to a market pundit about the ‘Karachi Transformation Plan’.

Following are the key takeaways:

1. “The ‘Package’ is predominantly ‘transportation’ based. The Malir Expressway and Link Road projects shall serve to substantially improve the connectivity with DHA City, ASF Housing Scheme and Bahria Town and the benefits incidental to their respective development shall be a big advantage”;

2. “If properly implemented within the specified time frame and schedule, the ‘Karachi Uplift Package’ may lead to large scale development of housing sector along the Super Highway”;

Nothing exciting for the cement sector in the short-term, however We, at AL Habib Capital Markets (Pvt) Ltd. (AHCML) had the opportunity to talk to leading cement market pundits about the impact of the

‘Karachi Transformation Plan’ on the cement sector. The ‘Central Idea’ of both those talks was “the projects would take time to materialise; hence no positive impact on the cement sector in the short-term”. Following are the key takeaways of our talks with cement sector pundits: 1. “The projects proposed under the ‘Karachi Transformation Plan’ would see silver lining after at least 12-18 months (First 6 months Planning, Next 6-12 months Tendering and Procuring) if initiated today. Hence no immediate gain for the cement sector (in at least the next 12 months)”;

2. “Federal and Provincial governments have to pitch-in. This may take time to materialise”;

3. “Most of the projects in the ‘Karachi Transformation Plan’ are on loan-based funds from international donors and such propositions take their own time”;

4. “The ‘Mother of all problems’ for construction projects that may indirectly benefit from the ‘Karachi Transformation Plan’ would be how to get ‘Right of Way between Katchi Abadies”;