LAHORE: Economists expect rebuilding of quake-hit areas of Azad Kashmir and NWFP to considerably boost sales of construction material in Punjab and leave a positive impact on the provincial economy. However, cement manufacturers do not seem very excited about this upcoming opportunity.

“We do not know when reconstruction of the quake-hit areas will start. Nor do we know the scale of additional demand it will create. We have been increasing our production capacities in the hope that the government will soon announce such projects as construction of the Kalabagh Dam, and that the pace of reconstruction in the neighbouring war-ravaged Afghanistan will pick up in the short-term. We forecast that the additional demand for cement that will be created by the rebuilding of the quake-hit areas is not expected to be very huge,” a cement manufacturer, who asked not to be named, told Dawn.

The All Pakistan Cement Manufacturers Association (APCMA) says the cement production capacity stands to increase from the existing 18-19 million tons to 28 million tons by the end of 2006, and to 40 million tons before 2007 ends. About two-thirds of total manufacturing capacity is installed in Punjab and NWFP.

“There will be no shortage of cement in the country. Hence, I don’t see prices rising,” said another manufacturer when asked if rebuilding in AJK and NWFP could result in increase in the price of cement. The producers are worried that the capacities being added at this time may become idle if reconstruction in Afghanistan fails to pick up or if the Pakistan government delays execution of its plans to construct large infrastructure projects. “Some of the new production will be absorbed by reconstruction effort in the quake-affected areas, but it is not likely to be massive,” they say.

As far as other construction materials like glass, steel, cables, etc., are concerned, builders and developers say the country will have to import them from abroad to meet the additional demand to be created by the reconstruction effort in the quake-affected areas. “These items have always been in short supply in the country,” said a leading builder. “The shortfall will have to be met through import of such materials.”

Economists, however, say the reconstruction in the quake-hit areas will definitely leave a positive impact on Punjab’s economy. “We’re already witnessing a surge in the sales of the manufacturers of corrugated steel, tents and pharmaceuticals (as the government tries to provide temporary shelters to the survivors of quake, and protect them from disease and effects of harsh winter),” say the economists. Prices of such items have also shot up in cities like Lahore.

“It (rebuilding of the affected areas) will create a huge opportunity for the construction material industry of Punjab,” the economists say. “In fact, there can be a shortage of certain construction materials which would have to be imported to meet the extra demand, or local manufacturers of these items will have to work overtime for ensuring consistent supplies to the affected areas.”

But they say that the rebuilding of the quake-hit areas, which is expected to begin in April next year after the completion of a seismic survey (to ascertain safe places for rebuilding) may result in a tightening of the labour market in Punjab. “As rebuilding begins in Kashmir and NWFP, a sizable portion of the existing labour would move to those areas for jobs. Most construction workers from the affected areas have already left Punjab to take care of their families in the quake-hit areas. This movement of workers will further tighten the labour market in the province for some time.”

Another possible negative impact that the rebuilding may have on Punjab’s economy is the likely cut in development expenditure. “If the government does not receive the funds pledged by multilateral and other donors in aid, grants and loans, it will have to cut its development programme and divert resources to the reconstruction effort. It means that lesser funds will be available for undertaking development projects in Punjab and elsewhere.”

Multilateral donors had pledged over $6 billion in aid, grants and loans to help Pakistan in its effort to rebuild the quake-hit areas of Kashmir and NWFP.

The preliminary damage and needs assessment released by the Asian Development Bank and the World Bank in the middle of November had estimated that Pakistan needed $5.2 billion to effectively implement its relief, recovery and reconstruction strategy. Of this, $3.5 billion is for rebuilding of housing, schools, health facilities, roads and other public infrastructure.

Nevertheless, the economists say the “positive impact of reconstruction on the provincial economy and the industry will offset the negative effects”.