Pakistan Economy - News & Updates - Archive

[Owais]

Sindh inaction worsens edible oil crisis

ISLAMABAD (August 05 2006): Edible oil supply crisis is deepening as Sindh government has not yet intervened to ensure that All Pakistan Oil Tankers Owners Association (APOTOA) does not block lifting of edible oil for consumption of ghee industry. APOTOA is blocking lifting of imported edible oil since July 31.

Pakistan Vanaspati Manufacturers Association (PVMA) had raised the issue with Sindh government the other day, demanding safety and security to EOCCTA to help lift and transport edible oil to ghee industry in different parts of the country.

In a letter addressed to the Governor and Chief Minister of Sindh, it expressed apprehension that APOTOA action disallowing lifting of edible oil from the port for the mills could create serious ghee and cooking oil problem across the country.

It also brought the matter to the notice of Tanker Association of Pakistan (TAP) through a separate letter. The PVMA wanted quick action from Sindh government as stoppage of edible oil tankers' loading by APOTOA was a serious matter and its persistence for a long time could add to ghee/cooking oil prices hike and subsequently force the industry closure.

PVMA said that APOTOA was giving threats to EOCCA against lifting edible oil from the ports. It said: "PVMA likes to inform the Sindh government that continuation of the crisis could block the supply of vegetable ghee/cooking oil throughout the country and create a serious problem for the public at large."

It said that PVMA demands that APOTOA should be directed to allow EOCCA to fill tank trucks of imported edible oil of various PVMA member units without further delay.

PVMA appreciated ECCOTA co-operation and demanded that Sindh government should direct APOTOA to do the same in the best interests of all stakeholders of ghee sector.

The crisis in pushing ghee and cooking oil prices up in the open market and its persistence will hurt the end consumers. The timing of the crisis is also critical. APOTOA has forcibly stopped loading of tankers of imported edible oil for the whole country when holy month of Ramazan is around.

 

[Owais]

Cement sector grows by 12.59 percent

KARACHI (August 05 2006): The cement sector growth has increased by 12.59 percent on year-on-year basis as a total of 18.4 million tonnes cement was produced in the country in FY06 as compared to 16.3 million tonnes in the corresponding period in FY05.

The performance of cement sector remained satisfactory during FY06 (July-June) as the sector managed to grow at a decent pace. Looking at break up in cement sales, export figures showed a negative growth due to additional demand in the country.

Capacity utilisation of the sector stood at 87 percent during FY06 compared to 91 percent recorded in FY05. The analyst said that they expect that the capacity utilisation of the cement sector to reduce further to 70 to 75 percent by the end of FY07 because of expansions in the sector. "We remain optimistic on cement sector as the government has started its drive to construct dams and mega projects as implicitly mentioned in the budget FY06-07", they added.

D.G. Khan Cement is expected to announce its financial results soon for the full year ending June 2006. Earnings of the company is expected to surge by 70 percent to Rs 2,865 million (EPS Rs 12.43) as against Rs 1,682 million (EPS Rs 7.30) during FY05.

Tariq Hussain Khan of the Atlas Capital Markets said that profitability is to grow mainly on the back of a 66 percent increase in the company's top-line to Rs 8,788 million compared to Rs 5,280 million previously, whereas cost of sales are expected to grow by only 33 percent leading to an increase in gross profits and margins by 124 percent to Rs 4,358 million and 49 percent respectively.

DGKC produced 2.13 million tonnes of cement during the period under review, which was up 17 percent from 1.8 million tonnes during FY05. However, amidst an increase in demand in the overall industry, the company marginally lost market share, which stood at 11.6 percent as a result of expansion by Lucky Cement.

 

[Owais]

Pak-US trade likely to increase by 50 percent

Washington: A free-trade pact with the United States would create jobs and prosperity in Pakistan that would help a U.S. ally in a volatile region combat religious extremism, the country's commerce minister said on Thursday.

Commerce Minister Humayun Akhtar Khan said in a speech in Washington that a bilateral free-trade agreement would "help Pakistan enormously" but also open the South Asian nuclear power's market of 150 million people to U.S. business.

Pakistan President Pervez Musharraf, who first proposed the FTA in December 2004, believes that "the long-term solution to handling the extremism problem in Pakistan is to economically improve Pakistan," Khan said.

"We believe that our future lies in being part of the international mainstream and getting our people prosperous and getting our people more educated and getting women in the right place in our society," he said.

Khan told the Institute for International Economics (IIE) that $1 billion in Pakistani garment exports to the United States would create 200,000 jobs, affecting more than a million people in a country where families average six members.

"You can imagine the impact that would have on our society and, in particular, the women in our society," he said.

The Washington-based IIE issued a study on Thursday showing that an FTA would increase bilateral U.S.-Pakistan trade by forty to fifty percent, benefiting U.S. exporters of grain, processed foods and machinery, and Pakistan's textile sector.

Pakistan, which is negotiating a bilateral investment treaty with the United States, remains committed to multilateral trade liberalization under the World Trade Organization, Khan said.

But a proliferation of bilateral or regional free trade pacts, some of which diverted trade away from Pakistan, made it "essential for Pakistan to explore a very aggressive trade diplomacy policy," the minister said.

 

[Neo]

WASHINGTON (August 05 2006): Commerce Minister Humayun Akhtar Khan, who met the senior US officials and interacted with American business leaders, has reported "very good progress" vis-à-vis efforts for negotiating a Pakistan-US free trade agreement (FTA).

"We have had good discussions with senior US officials and the response of the American think tanks and entrepreneurs to the roll out of the outcome of the study on Pakistan-US FTA was also heartening," he said on Thursday after holding several meetings with American officials.

During his meetings with officials, including US Commerce Secretary Carlos Gutierrez, US trade representative Susan Schwab and Under Secretary of State for Economic, Business and Agriculture Josette S Shiner, the Commerce Minister also discussed the Pakistan-US bilateral investment treaty and establishment of reconstruction opportunity zones in Pakistan.

"We discussed about the FTA negotiations, the bilateral investment treaty we intend to move very fast on the establishment of reconstruction opportunity zones and a US team would be on its way to Pakistan shortly to look into the issue in detail," he said about the outcome of his meetings.

Pakistan's Ambassador to the US Mahmood Ali Durrani was also present during the meetings with senior officials. About his interaction with the US business leaders at the Institute for International Commerce, Humayun said the roll out of the study spelled out enormous benefits of the FTA for both the countries.

The Minister also met Senator Lincoln D Chafee, a member of the Senate Foreign Relations Committee, and Senator Jay Rockefeller, member of the US Finance Committee as America's trade agreements have to go through the Senate Finance Committee.

"The study on FTA quantifies the problem it makes easier to reach American business and textile industry that we are not causing any harm to the US local textile industry and it also makes it easier for us to reach approval forums - various House and Senate Committees at the Hill as we are now able to substantiate our argument with sound facts and figures," he said.

Earlier, the Commerce Minister addressed a gathering of leading American entrepreneurs, and informed them about Pakistan's remarkable economic turnaround.

He said Pakistan was for increasing its trade with the international community as in line with President Pervez Musharraf's vision it wanted greater trade and not aid to sustain its growth.

Gary Hufbauer, representing Institute for International Commerce and Javed Burki, an economic expert, also addressed the gathering and spoke about the benefits of the FTA between the two nations.

 

[Neo]

LAHORE (August 05 2006): Provincial Industries and Investment Minister, Muhammad Ajmal Cheema has said that Sundar Industrial Estate (SIE) would be instrumental in increasing the provincial GDP (gross domestic production) and Rs 100 billion investment, was expected in next three years.

Talking to newsmen, Cheema appreciated the developmental work done by Punjab Industrial Estates Management Company at the estate. He said that production of cement had increased by 160 percent over the last few years, reflecting more and more economic activity. Chairman PIE, Mohsin M. Syed and Directors PIE, Mansoor Abbas and Saeed A. Khan were also present on the occasion.

The Minister hoped that total volume of investment at SIE would touch the mark of Rs100 billion within 3 years. The estate had so far attracted investment worth Rs8 billion.

About Punjab Government's efforts to replicate SIE model in other parts of the province, he said that Faisalabad Industrial Estates Development and Management Company (FIEDMC) had been set up. "Faisalabad will soon have a Garments city and Textile city on public-private partnership basis," he said. He said the IInd phase of Multan Industrial Estate (MIE) will also been launched with an objective to expedite the process of industrialisation in Southern Punjab.

To a question, Cheema said the annual loan disbursement by the Punjab Small Industries Corporation (PSIC) had touched the mark of Rs3 billion against Rs500 million few years ago.

 

[Neo]

ISLAMABAD, Aug 4: Four out of five major projects including gas import pipelines planned by the government to meet energy shortage are unlikely to be materialised, creating fears of severe energy crisis after three years.Informed sources told Dawn that Gwadar port, three gas import pipeline project - Qatar, Turkmenistan and Iran - and import of liquefied natural gas projects were planed for implementation by the ministry of petroleum and natural resources and Planning Commission between the period of 2006 to 2011.

According to a latest status report of the petroleum ministry, the import of gas from Qatar was no more a feasible option because of shortage of surplus gas in Qatar and hence out of discussions. Mr Ehsanullah Khan, the pointman who used to interact with Pakistan government on behalf of Crescent Petroleum of Sharjah for more than 15 years is currently working as Pakistan’s ambassador in one of the countries in the Middle East. The multi-billion dollar Turkmenistan-Afghanistan-Pakistan (TAP) pipeline project is currently faced with seven major bottlenecks, says the petroleum ministry. These include non-confirmation of uncommitted gas volume by Turkmenistan regarding Daulatabad gas field, uncertainties or lack of clarity with regard to price of the gas to be demanded by Turkmenistan and security situation in Afghanistan.

Also there are significant difficulties in the expected implementation of security and risk mitigation measures proposed by the Asian Development Bank’s consultant and usual delays of the Turkmen government in complying with the decisions taken by the tripartite steering committee.

The ministry has also identified as bottlenecks the third party guarantees for the required gas allocation by Turkmenistan government and internal political situation in Turkmenistan. Pakistan had planned under its 30-year Energy Security Plan to commence the project in 2007 and complete it in 2011 - both targets seem unachievable in the given conditions.

The Iran-Pakistan-India pipeline also is moving very slowly due to stalemate over the finalisation of gas pricing mechanism. The rituals like exchange of delegations among the three countries have been very frequent but there has been no progress on at least four issues - gas pricing, project structure, project framework agreement and joint declaration.

The three countries have now agreed to appoint a consultant to suggest a price for Iranian gas to be delivered to the two energy-deficient South Asian countries after their officials failed in New Delhi to agree on a gas tariff. Pakistan and India have proposed two consultants — Poten and Partners and Vicce — and have asked Iran to select between the two so that a report could be finalised within a month or so.

In this project, political interests of the three nations are at odds. One of the obstacles in this project is that Pakistan prefers to have this pipeline as a bilateral project with Iran to ensure maximum gas quantities but both India and Iran want its extension to India.

Similarly, India and Pakistan have a common interest in low gas prices of not more than $4.5 per Million British Thermal Units (MMBTU) but Iran wants a higher price of $7-8 per MMBTU. Both India and Pakistan are also concerned about Iran’s complicated international decision making process and Iran’s slow reaction and response to various issues and think that Iran’s price tag was "unreasonable".

The three countries have also been failed to appoint a lead sponsor to conduct a feasibility study of the project despite discussing this issue for many months. The government of Pakistan had envisaged this project to start in 2007 and complete in 2011 but appeared far from becoming reality as scheduled.

The ambitious Gwadar port was another major initiative towards meeting energy requirements in addition to other transit trade activities but would largely depend on security situation in Balochistan where a full fledged operation was still in progress.The fifth and the only project that did not face any bottleneck at present is import of Liquefied Natural Gas Project but its in-built difficulties of high spot market rates would haunt the nation for long. This project envisaged import of 500 million cubic feet of gas per day (MMCFD) by 2010. The detailed feasibility study of the project would be undertaken by a private sector joint venture to be appointed by December 2006.

 

[Neo]

KARACHI (August 05 2006): The City District Government Karachi (CDGK) on Friday signed a memorandum of understanding (MoU) with Saudi Arabia, Kuwait, Qatar and Oman to construct seven-star hotel, world-class shopping plaza and multi-storied commercial and residential centres in the metropolis.

District Co-ordination Officer (DCO) Fazlur Rehman on behalf of the CDGK formally signed the MoU with consulate generals of Saudi Arabia, Kuwait, Qatar, and Oman, who reciprocated on parts of their respective governments, at a local hotel.

Addressing the signing ceremony, Sindh governor Dr Ishratul Ibad said city nazim Syed Mustafa Kamal was working for the development of Karachi with an apt vision.

"It is an important step toward the creation of mega city and, in fact, the development of Karachi is the development of Pakistan," he added.

City nazim Mustafa Kamal said with the help of other Islamic countries the first seven-star hotel in Pakistan, which would be amongst the top hotels in the world, would be constructed in the metropolis.

Due to economic-friendly policies, huge foreign investment has taken place in the country, and several other such projects on Build-Operate-Transfer (BOT) basis in the city are in the pipeline, he added. He hoped these projects would help boost livelihood of common citizen. He said the construction work on these projects would start by this year.

 

[Neo]

KARACHI: Pakistan’s information technology (IT) industry has been able to achieve exports worth $72 million in the financial year 2005-06 compared to exports of $46 million in 2004-05, a Pakistan Software Export Board (PSEB) statement said on Friday.

“According to statistics released by the State Bank of Pakistan on July 24, 2006 to Pakistan Software Export Board, there is an overall 56 per cent annual increase in IT exports by Pakistani IT companies,” the statement said.

It said Managing Director PSEB Yusuf Hussain appreciated the efforts of the ministry of IT and telecom and congratulated the growing industry on this achievement. He gave due credit to all the stakeholders for the success and promised them continued support from the government through PSEB, added the statement.

“The government of Pakistan has been proactively developing the IT sector for the last few years,” it said. “The incentives include tax exemption till 2016, establishment of IT parks with low rent, foreign ownership of equity invested in IT and 100 per cent repatriation of profit allowed to IT companies.”

It elaborated major spending had taken place in hardware consultancy services, software consultancy services, maintenance or repair of computers, export of computer software and other computer services.

The maximum contribution to these earnings had come from computer software export, accounting for 63 per cent of the total exports, with an overall increase of 44 per cent compared to computer software exports last year, it added.

“The top five companies that have contributed the maximum share to IT exports are Netsol Technologies, Ovex Technologies, TRG Private Ltd, Systems Private Ltd and Elixir Technologies,” said the PSEB statement.

 

[sigatoka]

“The government of Pakistan has been proactively developing the IT sector for the last few years,” it said. “The incentives include tax exemption till 2016, establishment of IT parks with low rent, foreign ownership of equity invested in IT and 100 per cent repatriation of profit allowed to IT companies.”

Giving tax breaks and subsidising rents selectively for certain industries creates distortionary effects in the economy and does not contribute to maximising overall welfare of the nation.

A lower tax rate for IT results in a higher tax rate for all other industries. Giving subsidies for rent to IT sector means taxing all other industries more.

The different treatment of industries leads to competition for all industries to lobby for favourable treatment. This lobbying costs the economy resources which is a total waste.

100% repatriation of profits should be a policy allowed for all investment within the nation. It will increase investment in the country across all industries. Secondly it will cut down on the wasteful costs that businesses and individuals engage in sending money outside the country illegally. This is also a deadweight loss.

I personally have never understood the speacial treatment of the IT sector. I mean, helping the textile sector at least has the benefit of increasing employment greatest for tax dollor forgone. (Textile sector is extrememly labour intensive.) Secondly helping the textile sector at least has the positive impact on the poorest sections of society (usually women from poor background) while the IT sector is dominated by people who are already intelligent and middle class. All of us abhor the idea of taxing the poor more than the rich (% wise) and yet most do not oppose the helping of the rich mroe than the poor.

 

[Owais]

Used car imports strike down resale value of local cars

KARACHI:At least 61,479 used vehicles have thus far been imported into the country since the government permitted import of used vehicles, which has not only struck down the ‘on-money’ on locally manufactured new cars, but also made a significant difference in the resale value of these vehicles.

The government had allowed import of used cars in the budget for the financial year 2004-2005 in view of the ever-increasing demand of vehicles in the country.

Dealers here told that the local made used cars, which were earlier available at Rs450000, could now easily be bought in the range of Rs350000 to Rs375000.

However, they were of the view that the slump in the demand of the locally made cars would be short-lived, as the non-availability of the spare parts of the imported used cars has already started proving to be a source of trouble for the buyers, which would again drive them back taking interest into the locally manufactured vehicles.

Meanwhile, following the ban on the import of more than five-year-old vehicles by the government in the current budget has resulted into the swelling of ‘on-money’ on locally manufactured new cars, which has rocketed high by 100 percent during one-month only, market sources told.

 

[Owais]

IFC to provide help in energy, communication sectors

ISLAMABAD: International Finance Corporation (IFC) is ready to provide financial assistance to Pakistan for the energy sector and National Highway Authority projects.

IFC Acting Country Director, Nadeem Siddiqui told this here in a meeting with the Advisor to prime minister for finance, Dr. Salman Shah.

He told that the energy, electricity and communication sectors in Pakistan have immense potential for development and IFC wanted to extend financial cooperation in these sectors.

Pakistan infrastructure project development policy also came under discussions during the meeting.

 

[Owais]

UBL expands overseas network

DUBAI (August 06 2006): United Bank Limited, Pakistan's third largest commercial bank owned by the Consortium of Abu Dhabi Group and Bestway Group of UK, announced its new strategic initiatives in the Middle East and its network expansion at a press conference here on Saturday.

Atif R Bokhari, President and Chief Executive Officer of UBL, said that commercial banking has proven to be the core strength of UBL in the Middle East.

The bank is focusing across the spectrum on contracting, real estate, trading, downstream oil and gas industry and participating in financing of infrastructure projects of national importance.

The bank has redefined product parameters and recently launched a highly competitive mortgage finance product in UAE. By next September, debit card facility will be introduced here, which will be followed by Qatar and Bahrain by the year-end. To enhance market reach, the bank is in the process of setting up various electronic banking service units across UAE. Moreover, it is also expanding its ATM network at airports, shopping malls and other prominent public places in the Middle East. The branches are being renovated and upgraded to state-of-the-art showroom outlets for maximum customer convenience. The franchise is underway to open a branch each in Doha and Aden during current year.

To expand its overseas franchise, the bank recently established representative office in Almaty, Kazakhstan. With average GDP growth rate of 9 percent per annum for the past five years and, being the second largest oil producing country on the Caspian Sea, there exists immense business opportunities in Kazakhstan, including the banking sector.

The Representative Office of UBL, which will act as a hub for operating in other CIS countries, will focus on capturing increasing trade flows between Kazakhstan and UBL franchise countries.

New initiatives from the bank include the signing of a Memorandum of Understanding (MoU) between UBL and China Development Bank to establish a co-operative partnership to promote bilateral trade between Middle East/Pakistan and China.

China Development Bank (COB) is the largest policy bank in China and in recent years has shown keen interest in enhancing China's active role in economic co-operation with the Middle East countries and Pakistan.

UBL and COB will work jointly to promote commercial ties between China and UBL network countries in the following areas of mutual co-operation:

Use of combined network of both banks to develop a platform to promote commercial ties among the Gulf investors and Chinese counterparts;

Correspondent banking relationship between UBL and CDB financing significant trade business between GCC and China;

Holding of 'mad shows' in China, United Arab Emirates and Qatar to enhance the awareness of investment opportunities in China among investors of Gulf countries, and vice versa

United Bank is also considering to set up its representative office in Beijing, for which approval from the State Bank or Pakistan has already been obtained.-PR

 

[Owais]

Rules of business: top bureaucracy considering massive changes

ISLAMABAD (August 06 2006): The country's top bureaucracy is mulling for massive changes in the rules of business with the provision to make politicians accountable for wrongdoings. Official sources told Business Recorder that the Secretaries' Committee, comprising all Federal Secretaries, in its recent meeting observed that the bureaucracy acts on the directives of respective ministers.

But later the administrative Secretaries are made responsible for what the ministers did during their tenure.

"Minister Incharge of a ministry, instead of administrative incharge (Secretary), should be accountable to the subcommittees of National Assembly and Senate and Public Accounts Committee (PAC)," sources said quoting some of the committee members as suggesting.

They said that Prime Minister Shaukat Aziz has already agreed to incorporate changes in the law to protect the bureaucracy from National Accountability Bureau (NAB) and other agencies so that they could take decisions in the national interest.

The bureaucracy is of the view that the Principal Accounting Officer (PAO), who is usually the Secretary of the ministry, has no executive authority over the autonomous organisations; even then he is held responsible for their actions before the PAC, sources said.

"The prevalent procedure should be reviewed and a staff officer of sufficient seniority, with requisite manpower, be provided to each PAO," the committee opined, according to sources.

Sources said that the Secretaries' Committee showed particular concern over the shortage of human resource available to the government and the major reason for this was cited low salary package in the public sector as compared to private sector.

The committee observed that the well educated and outstanding youngsters were no longer joining government service and the government should review its package being offered to the newcomers and existing officers, sources said.

Former Governor of State Bank and Chairman, National Commission on Government Reforms (NCGR) briefed the meeting that the Commission would recommend attractive remuneration package for new entrants through open, transparent merit-based recruitment at all levels.

Performance-based promotions and career progression for all public sector employees, with compulsory training at post-induction, mid-career and senior management level would be made part of the reforms package, sources quoted him as saying.

"Grant of living wages and compensation package, including decent retirement benefits, would be offered to all civil servants," sources quoted Dr Ishrat as saying.

He said that NCGR would recommend to the government for creation of all Pakistan National Executive Service for senior management positions drawn through competitive process from the federal, provincial and district level civil servants and outside professionals.

 

[Owais]

Pak-US investment treaty to be finalize in next round: Humayun

WASHINGTON: Commerce Minister Humayun Akhtar Khan said both Pakistan and the United States believe that a bilateral investment treaty is "doable" and expressed the hope that next round would be conclusive in reaching an agreement on it.

The Commerce Minister also told a Press Conference that his meetings with senior US officials and roll-out of a study on Pakistan-US free trade agreement have bolstered prospects to that end.

"Bilateral investment treaty is an investment arm of the FTA, and we hope to have conclusive next round on the issue - such a treaty would send a positive signal to US entrepreneurs that Pakistan is a favourable investment destination - and greater flow of investment is what we want to maintain our high growth."

The Minister hoped that something would be on table before the US Congress vis a vis BIT early next year.

He said during his several interactions with the business leaders and US lawmakers on the Hill, he quashed concerns that an FTA between the two countries would harm the local American textile industry.

"We are not seeking unilateral concessions or access, the US companies can also have access to Pakistani market through the free trade agreement.” he added.

 

[Neo]

SIALKOT (August 06 2006): Small and Medium Enterprise Development Authority (Smeda) has prepared a multi-dimensional strategy for the modernisation of Sports goods industry especially the soccer ball manufacturing sector enabling it to cope with the new challenges of global market.

Official sources told Business Recorder here on Saturday that under the programme Sports Industries Development Centre (SIDC) costing Rs 273.11 million would be established shortly in Sialkot.

The Main concept of the project was to enable sports goods sector to adopt new technology of mechanised ball, which was threatening the current hand-stitched inflatable soccer ball.

The main benefits to amass from the project were to facilitate in sustainable Pakistan's position in international market of hand-stitched inflatable balls in general and soccer ball in particular, provide skilled workforce to the sector, help develop imported machinery locally through reverse engineering, develop an indigenous patent for mechanised soccer ball and get it registered internationally, provide assistance in setting up mechanised ball production lines in individual industrial units, developing proto type balls for the industry and developing quality vulcanisation and past molds.

The Sports Goods sector of Sialkot was the main export sector of the city with total exports of about $350 million per annum. The city caters to 85 percent of total world demand of hand stitched inflatable balls, which means around 40 million balls annually worth $210 million.

Sialkot globally known for production of value-added products and quality production of sports goods, surgical instruments, leather garments, musical instruments and sportswear etc and contributing $800 million annually to national exchequer.

The local soccer ball manufacturers were facing serious threats in the form of "Thermo-Molded Ball" that uses medium end technology to produce a ball having most of the characteristics of hand stitched ball.

Under the plan SIDC will introduce thermo-bonded ball technology in Sialkot industry. The SIDC would provide technical know how, trained labour force, reverse engineering prototype development and mold making services besides, the centre will also manufacture and sell thermo-molded balls to the exporters on order.

The capacity of the centre on single shift basis would be 5000 balls per day while the centre will generate employment opportunity for 432 persons.

According to a rough statistics the balls were stitched by a work force than 60,000 including female stitchers and exported to world market.