Mar 08 - 14, 2003



HAFEEZUR REHMAN BUTT, is known as one of the top builders and carries a distinctive name in the field of construction industry. He worked in the field of construction for over a decade in Hong Kong and England and brought a wide spread experience to the construction industry in Pakistan. Running his own consruction business, Hafeez Butt is the Chief Executive of Orient Group, which had developed many prestigious housing and building projects in Karachi and other parts of the country. Recently, he has entered into an agreement with Saudi group Kanooz for an investment of over $100 million in housing and construction industry. This would be first ever agreement of such a large scale with any foreign partner in Pakistan. As an outstanding civil engineer, he carried the distinction of being elected as the Chairman of Association of Builders and Developers for five times in the years of 1992, 1994, 2001, 2002 and 2003 to his professional career.

PAGE: The Government of Pakistan in its policies for speedy growth of the national economy has given special incentives to the housing and construction industry which had started producing good results. However, recent abnormal hike in iron and steel prices has sent a wave of resentment in the construction industry. What impact of the exorbitant price of iron and steel bars could be on the housing and construction industry?

HAFEEZ BUTT: You have right pointed out the sudden jump in the steel prices which is an unprecedent development in the housing sector. The gravity of the situation is reflected in the jump of steel prices with in last seven days. The steel prices were already on the higher side at Rs28200 per ton a week ago. As a result of increase in international prices, the Pakistan Steel raised prices by 20 percent three-four days back. However, at the outlets, the steel rolled bars are being sold at a price of Rs53000 per ton by the re-rolling mills. This formidable situation has put the entire construction industry in a state of doldrum as with this sort of increase in the input cost, the builders may not be able to deliver the projects they had booked on the price assumption which have gone up 40-50 percent.

PAGE: Would you like to spell out factors which led to exorbitant increase in steel prices?

HAFEEZ BUTT: Actually, the single line story says that the main reason for this abnormal increase in steel prices is the faulty mechanism of sales and distribution of the steel products. Instead of allowing direct access of the traders to the products, the Pakistan Steel under a policy has restricted the sale of raw material to the re-rolling mills alone. This has creaed a monopoly of a few re-rolling mills over the steel trade. They are charging exorbitant prices at their whims and will from the traders. This monopoly of the re-rolling mills should immediately come to an end to let the wheel of the industry move in future. This not only the construction or housing industry but a large number of allied industries and a large size of auto vendor industries have been pushed to the verge of closure. If a corrective change was not introduced in the sales policy of the Pakistan Steel, this would give a negative signal to the foreign investors because of unchecked prices of steel which is the basic raw material for a large number of engineering sector and down stream industries in the construction industry.



PAGE: There are reports that the iron and steel prices have also gone up internationally, why there is worldwide phenomenon for this sudden jump in steel prices?

HAFEEZ BUTT: Yes, prices have been increased internationally but not to that extent which are being charged in Pakistan. In fact, currently, China is on a spree of buying steel and scrap ships in huge volume. China is lifting steel in bulk to use in its huge under construction of mega water dams and their huge projects which let to increase prices in the international market.

PAGE: What steps you would suggest for addressing the issue on the part of the government?

HAFEEZ BUTT: In the backdrop of the current situation, it is the need of the house that the government should reduce duty on the import of scrap ships to bring down the prices of iron in the local market. The reduction in duty on import of scrap ship besides redressing the price issue would also generate employment opportunities at the Gaddani Beach which is one of the largest shipbreaking site in the world. Another option to bring down the steel prices could be the import of steel from Iran and India where the prices are much cheaper as compared to Pakistan.

The housing and construction industry has started attracted foreign investment specially from Malaysia, Canada and Saudi Arabia. Pakistan offers enormous potential for investment in the housing and construction industries because the growing demand for new housing units every year. Currently, there is a backlog of over 6 million housing units which is being piled up by 4 lakh carried over demand every year. However, unless the cost of inputs was brought down, the foreign investment may not come at the scale the country deserves.