Chi­nese in­vest­ment in coal, power sec­tors boosts En­gro’s for­tunes: CEO

The Gulf Today - Business - - REGION -

KARACHI: Pak­istan’s chem­i­cal­sto-en­ergy con­glom­er­ate En­gro Cor­po­ra­tion has seen its for­tunes rise on the back of mas­sive Chi­nese in­vest­ment, but plans to shape its fu­ture growth around the coun­try’s vast pop­u­la­tion and ex­pand­ing mid­dle class, its chief ex­ec­u­tive said.

En­gro Cor­po­ra­tion, best known for its fer­tiliser and petro­chem­i­cals fac­to­ries, as well as en­gi­neer­ing projects, is Pak­istan’s largest listed con­glom­er­ate, and af­ter re­cov­er­ing from a brush with bank­ruptcy in the early part of this decade is now sit­ting on a $500 mil­lion cash pile.

It has been a ma­jor ben­e­fi­ciary from Bei­jing’s Belt and Road Ini­tia­tive splurge, work­ing with Chi­nese firms on coal and power projects worth bil­lions of dol­lars.

En­gro’s ris­ing for­tunes since 2012, when its fac­to­ries were crip­pled by gas short­ages, mir­ror the im­prove­ments in Pak­istan, a nu­clear-armed na­tion where eco­nomic growth has ac­cel­er­ated due to vast Chi­nese in­vest­ment and a sharp drop in mil­i­tancy and power out­ages.

In the near term, En­gro’s out­look is linked to a mile-long $1.5 bil­lion coal mine in the Thar desert near the bor­der with In­dia, part of Bei­jing’s pledge to in­vest about $60 bil­lion in Pak­istan.

But with Pak­istan’s new govern­ment hint­ing it may re­view Belt and Road con­tracts due to con­cerns they were too ex­pen­sive, some an­a­lysts see risks on the hori­zon for En­gro and say planned power plants around the mine may strug­gle to ob­tain fi­nanc­ing.

Ghias Khan, En­gro’s chief ex­ec­u­tive, told Reuters this week he was “pretty con­fi­dent” the govern­ment would not re-open deals with sov­er­eign guar­an­tees.

“If they do, that will have a very neg­a­tive im­pact,” Khan said.

CON­SUMER GROWTH

This year Pak­istan’s econ­omy has also been shaken by a short­age of dol­lars, and spec­u­la­tion Islamabad may turn to the In­ter­na­tional Mon­e­tary Fund (IMF) to ease cur­rent ac­count pres­sures. Un­de­terred by Chi­nese in­vest­ment jit­ters and the re­cently wob­bly econ­omy, Khan said En­gro was weigh­ing ac­qui­si­tions and start­ing new busi­nesses in agri­cul­ture, health­care, real es­tate, com­mu­ni­ca­tions and other con­sumer-linked sec­tors to profit from ris­ing in­comes in the Mus­lim ma­jor­ity coun­try of 208 mil­lion peo­ple, 60 per cent of whom are aged un­der 30.

“We’ve come to a re­al­iza­tion what has got­ten En­gro where it is to­day is not good enough for our next phase of growth,” Khan said in an in­ter­view at En­gro’s head­quar­ters in Karachi.

“What we are proud of is our abil­ity to ex­e­cute large-scale projects and put up large in­dus­trial com­plexes. But we are mind­ful we have to get into busi­nesses which are more re­lated to the pop­u­la­tion growth, and take us closer to the con­sumers.”

In Karachi, mush­room­ing shop­ping malls and ever-ris­ing num­ber of cars on the road point to a mul­ti­year con­sumer boom as peo­ple’s dis­pos­able in­comes have dou­bled this decade, an­a­lysts say.

Khan com­pared Pak­istan’s cur­rent eco­nomic level, pop­u­la­tion growth and per capita in­come, which stands at about $1,600, to where China, South Korea and In­dia were at ear­lier points in their de­vel­op­ment.

“If you look at sec­tors that did well when they were where Pak­istan is to­day — like real es­tate, au­to­mo­biles, health­care, lo­gis­tics — ev­ery­thing is some­how re­lated or linked to pop­u­la­tion growth or the mid­dle class,” Khan said.

The com­pany, born out of an em­ploy­ees’ buy­out of Exxon’s Pak­istan op­er­a­tions in the 1990s, was also look­ing to go deeper into the petro­chem­i­cals sec­tor, and was ex­plor­ing projects to set up naph­tha, eth­ane crack­ers or polypropy­lene fa­cil­i­ties in the ports of Karachi or Gwadar, Khan added.

What En­gro will do with its cash pile of about 60 bil­lion ru­pees ($490 mil­lion) has been a hot topic in Pak­istan’s eq­uity mar­ket.

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