Pakistan’s construction industry grew by 16.82% year-on year (y-o-y) in 2006, driven primarily by increased state-spending on infrastructure development –specifically road construction and powergeneration projects – and reconstruction work in the quake-affected areas. BMI forecasts the industry to grow at 9.27% y-o-y during 2008-2012.

The government has announced a number of road and highway development projects across the country.

The third deep-sea port at Gwadar, developed in collaboration with China was inaugurated in March 2007. Major projects planned in the country include the US$43bn Model city on the islands of Bundal and Buddo near Karachi; the US$7.42bn gas pipeline from Iran to Pakistan and India; the US$6.5bn Diamer-Bhasha dam, and the US$4-5bn oil refinery in Baluchistan.

Despite having extremely liberal investment laws –100% foreign equity is permitted in the manufacturing and infrastructure sectors – the country has not managed to attract much foreign investment. Prolonged political unrest and disputes with neighbouring India have had an adverse bearing on the country’s business environment. High corruption levels and lack of a sound legal infrastructure exacerbate the situation further. The Pakistani economy – despite being among the largest in South Asia – has to bear with widening trade deficits and mounting inflationary pressures. Within infrastructure development, residential construction has been one of the most neglected areas.

Despite all odds, the Pakistani construction sector has displayed impressive growth. BMI expects the growth to slowdown slightly from 2007 and average around 9% up to 2012. The industry is forecast to be worth PKR420.33bn (US$6.04bn) in 2012. Against the backdrop of a sizeable grey economy and underreporting, the industry’s contribution to the overall gross domestic product (GDP) is likely to average 2.52% during the forecast period.