Will Engros success entice others?

The New Year celebrations began a notch earlier at Engro Corporation as the long-awaited worlds largest urea plant commenced operations on trial basis. The commencement of the urea plant at Daharki laid to rest all the concerns in industry circles that the prevailing gas curtailment might push the plant start-up beyond February.
The plant commencement, despite a slight delay of a couple of months, is indeed a big achievement and a matter of pride for Engro, the farmers community, the government and the industrial sector as a whole.
The government would now stop importing urea which will provide a much-needed breather to the fiscal managers who are already facing tough constraints. The over-a-billion dollar plant is the heaviest investment in the industrial sector in Pakistans recent history - and for Engro to have successfully arranged such huge financing is a tremendous feat.
The successful plant completion may also be a real motivation for potential foreign and local investors and should also be a message to those who doubt Pakistan as a going concern. But the real question is whether Engros success will entice others to invest heavily in the industrial sector or not? Are the conditions conducive enough for the investors?
It should be kept in mind that when Engro started the project, Pakistan had a relatively investor-friendly environment and bank financing was readily available - unlike today where government borrowing is busy crowding out private borrowers.
Having said that, the nature of business in which Engro invested should also be given due consideration. The fertiliser business is a high-margin business in Pakistan by virtue of the strong pricing power that rests with the manufacturers and their ability to pass on any cost increase to the end user, without worrying about the sales volume.
This is a position that not many businesses enjoy in the country. And therefore, it might be too premature to generalise that Engros success should translate into more investment in the industrial sector. Apart from the business nature, the high interest rate scenario has made it difficult to arrange huge financing, as Engro did for its plant.
Moreover, the energy-deficit scenario also plays into the minds of investors as Pakistan faces its worst energy crisis. This is where the investors get reluctant to expand in the industrial sector, as gas and electricity load-shedding result in massive losses, something which new investors cannot afford especially in such a high-risk scenario.
Engro itself is facing massive gas curtailment, which would result in the closure of its new plant very soon, which is something of a dampener for any investor watching from the outside. In a nutshell, Engros success should be lauded; but if investment in the industrial sector is to pick up, the government needs to provide a more conducive environment and bring about the energy reforms soon - or else the dearth of investment will continue.