LAHORE, Dec 21: Builders and construction materials manufacturers are quite upbeat about the possibility of securing substantial business that is likely to come their way when rebuilding of Afghanistan starts.
But their optimism is punctuated with many ‘ifs’ and ‘buts’, the main concern being the nature of Kabul’s future ties with Islamabad.
“It is a unique opportunity comparable to the one we got in the 1970s when huge construction activity was undertaken in the Middle East,” says Sarmad Amin, a builder and a former vice president of the Lahore Chamber of Commerce and Industry.
“We squandered that opportunity by supplying only cheap labour to the Arab states. On the other hand, many Turkish and South Korean firms grabbed the opportunity and, in the process, became international companies. Pakistan has got yet another chance. It is now for us to grab it,” he adds.
Economist Salman Shah says the post-Taliban Afghanistan offers immense opportunities for Pakistan’s construction industry as the new Afghan regime needs to build physical infrastructure, houses, roads, bridges, buildings and what not. “Besides skilled manpower including engineers and consultants, Afghans would need to import huge quantities of such construction materials as cement, steel billet, and glass that can easily be supplied from Pakistan.”
The contractors and builders estimate that the reconstruction effort for the war-torn Afghanistan in the next five years would be between $6-10 billion. They hope that at least 75 per cent of the funds for reconstruction coming from the international donors would be spent to undertake construction activities, anticipating that Pakistan could secure a share of $2-2.5 billion.
“Pakistan’s construction sector has many strategic advantages because of our geographical proximity, established means of communication, common language and historic links with Afghan contractors who have been working in Pakistan for the last 25 years,” says Akbar Shaikh, the chairman of the All Pakistan Contractors Association.
Shaikh says the share of any single country in the effort for rebuilding Afghanistan depends mainly on how do the donor nations wish to go about it. It is still not clear if they want to carry it out through their own companies or under the umbrella of World Bank. They are yet to issue guidelines for awarding contracts.
“What, however, is interesting is that even if the American and European companies get the contracts, it will be advantageous for them to work through Pakistan. But it depends on how effectively we — the government and the private sector — promote ourselves in the face of competition from China, Turkey, Iran, India and other nations bordering Afghanistan,” says the APCA chairman. “We should not forget the fact that other countries would also be competing for the business,” says Amin. “Like Pakistan, others also have a close geographical proximity to Afghanistan. We must strive for getting contracts for work in the southern parts of Afghanistan that are nearer to our borders and where we can be more efficient and effective as compared to the other countries.”
Besides the construction firms, Shaikh says, “manufacturers of construction materials like cement, steel billet, steel pipes, ceramic tiles and glass also stand to benefit immensely if we get our share in the Afghan reconstruction.”
However, Shah says, “it will largely depend on which companies go there. If construction companies — say from India or Russia — are entrusted by the new Afghan government for the reconstruction of the war-ravaged country, they would source these materials from their own countries”. “If our companies are allowed to go into Afghanistan, then our (construction) industry would be able to harvest the benefits of peace in that country.”
“Our construction materials manufacturing industry is not internationally competitive. Its incompetitiveness comes from both the inherent weaknesses of the industry as well as the regulatory framework.” Yet, he adds, this issue can be addressed to a large degree by setting up an export-friendly framework specific for Afghanistan. “Certain restrictions on export of construction material to Afghanistan by surface will have to be eased. In some areas, the government may have to allow subsidy and in others remove or substantially slash current taxes,” says Shaikh.
Amin says the government must come out with an “Afghanistan- specific incentive package” to encourage exports by land. “If it is done, our construction materials industry can be competitive.”
The builders are not satisfied with what the government has done so far to secure business for them in Afghanistan’s reconstruction. No Pakistani consultant or contractor was invited to participate in a seminar held on Afghanistan’s reconstruction last month in Islamabad.
“The private sector cannot go to Afghanistan on its own,” Amin says. He adds the government has to lead the efforts.
“The first thing to be done in this connection would be to constitute a task force comprising engineering consultants, contractors, and construction material manufacturers to comprehensively study the situation and come out with proposals how to proceed in future.”
“We must not be overly optimistic about a role in Afghanistan’s reconstruction by assuming that we have access to that country,” says Shaikh. “Other countries also have access to Afghanistan and in the case of Iran it can approach both southern and northern parts.”
The main hurdle in the way of securing business in Afghanistan would be the nature of Pakistan’s future relationship with the new administration in Kabul, says Shaikh. “The head of the new Afghan government seems to be sympathetic towards Pakistan while his ministers do not. Indians have already opened their embassy in Kabul while Pakistan is yet to make a move in this direction,” he says.
“The success of any effort to secure a share in Afghanistan’s reconstruction will hinge on how effective and efficient is our foreign policy towards that country and the nature of our ties with Kabul’s new rulers. It is for the government to open the doors for the private sector,” Amin adds.
Salman Shah says: “Pakistan could also help Afghans at a later stage in their efforts to rehabilitate their industry, agriculture, irrigation, banking, etc.”