WEB DESK:The agreement reached between Iran and the P5+1 is historic: that is an understatement.
As is evident from the instant plunge in oil prices and other commodities, the lifting of economic sanctions on Iran has global implications. All those will undoubtedly affect Pakistan.
The connotations for Iran-Pakistan ties hold another dimension. The on again off again status of the Iran-Pakistan Gas Pipeline is perhaps the most anticipated beneficiary. Trade can resume on the books, smuggling into Pakistan should fall and investments through joint ventures can start entering financial markets again.
The trade relaxations to be accorded to Iran will not be effective before December. But some are already concerned about the impact of Iranian products may have on domestic businesses. In particular focus appears Irans cement industry. It has developed significant scale and capacity, so there are fears that Iranian firms can out price Pakistan in the domestic market as well as the region (Afghanistan).
But there is a cogent counter narrative and it is backed by the stellar performance of cement companies listed in Pakistan. Dispatches for the sector are riding on domestic demand even as foreign markets slow down or competition toughens elsewhere. Even if cement from across the border is priced at throw away prices, there is hefty custom duty and GST in place.
But if government wants to spur its infrastructure development plans, it is not outside the realm of possibility that cement imports from Iran be encouraged. Domestic cement companies would not stand for it. But the rest of the construction industry and consumers would stand to benefit from competition. At present the local cement market is a sellers market.
For now, all research reports punted by brokerage houses in the wake of the Joint Comprehensive Plan of Action (i.e. the Iran deal with P5+1), are soothing investors nerves about the impact on domestic cement companies.
That soothing sound could disappear with a deft policy adjustment. The real boon is the opening up to the world of a neighbour country that has deep ties with Pakistan. This can only be good, just not necessarily for the cement firms!
Source: BR research