Pakistan Economy - News & Updates - Archive

[Neo]

Pakistan, falling under the category of low income developing countries, needs restructuring and reform to reduce poverty. Apart from focusing on enhancing the economic growth rate, direct poverty eradication measures are needed. Steps taken to strengthen SME and the micro business sector (which can generate large number of employment and self- employment opportunities) through specialised financial institutions and relief in taxation and tariff rates to small and medium-size businesses, are moves in the right direction.

However, the non-availability of necessary infrastructure, particularly utility services is impeding the expansion of this sector. Infrastructure development programme needs to be vigorously pursued as envisaged in the PSDP programme.

Structural reforms need to be directed to both the formal and informal sector for achieving sustained economic growth and removing inequalities. Economic activities must have a favourable impact on the informal sector as well. There are severe social and economic imbalances particularly between urban formal and rural informal sectors. Poverty and unemployment levels are much higher in the rural sector. The lack of employment opportunities reduces household incomes.

Merely providing social safety nets and low cost services for the poor is not a sustained approach towards alleviation of poverty of a magnitude that exists today. Focus should be on the development of human capital through informal and formal employment and exposing the informal sector to new technologies.

Pakistan’s overall poor performance with regard to the education and health sectors has been the main contributor towards aggravating the poverty situation. Education sector reforms aiming at providing education for all, improving the quality of education with emphasis on higher and technical education need to be implemented and monitored vigorously. The country has failed to improve even the enrolment rate at the primary level; the only exception is Punjab where offers of cash incentives have rapidly improved the enrolment rate.

Improvements in the education and health sectors need to be evaluated on the basis of their impact on the development of human capital which is a necessity for achieving sustained high economic growth rates. Social sector reforms in education and health must aim at formulating policies to produce a highly skilled and energetic work force capable of making use of new technologies. Vocational and higher education needs to be promoted on priority basis.

Spending on the health sector has no doubt been enhanced, but still a majority of areas do not have access to health facilities. Despite a significant increase in the number of doctors and paramedical staff, hospitals and dispensaries in rural areas are understaffed and do not have the necessary equipment and apparatus. Due to a lack of effective supervision and monitoring at all levels, the funds allocated for the health sector are widely misused. Reform agenda, in the health sector in particular, must be directed towards improving delivery of services.

The second generation reforms contained in the agenda relate to the restructuring and capacity building of institutions and improving governance at all levels to sustain the process of change.

Restructuring of the financial sector has shown positive results, but restructuring process in certain entities like the Central Board of Revenue have failed to give desired results because their regulatory authorities are dysfunctional.

Revenue mobilisation efforts of CBR are much below the mark. Tax – GDP ratio, instead of showing improvement has fallen back to just over nine per cent. Conflict ridden political environment also impedes the government’s sincere efforts to introduce new measures to remove economic and social imbalances.

However the solution lies with the government itself. Good governance is the pre-condition; it must enforce rules of conduct to achieve harmony in all aspects of national life.

 

[Neo]

Rebuilding costs

By A.B. Shahid



THERE were times when one remembered monsoons for an exciting romantic encounter in the rain but not anymore. Rains, almost everywhere, now tend to be ferocious and unforgiving. Weather experts blame rains’ fury on industry-driven atmospheric pollution and planet warming but arrogant growth-driven governments and profit-driven businesses no longer heed weather experts’ wailing.

For the people of Pakistan, the 2006 monsoon leaves behind painful memories; TV channels showed the world how they suffered. While the damage suffered by people in the hinterland was unusually high compared to earlier monsoons, the cities suffered beyond their capacity to bear and, Karachi – Pakistan’s biggest industrial and financial centre – suffered the most.

The response speed of the administration shows that damage to the infrastructure will take years to repair. A look at just the road network shows that almost all thoroughfare were damaged, and pretty badly. While the repairs will cost huge sums of money, during the repair phase transport will become a nightmare, and will escalate the industry’s costs. The extensive damage to drainage, power and telecom lines could cause widespread frustration and unmanageable chaos.

Inability of the country’s biggest industrial city to function at its pre-monsoon pace (which was by no means satisfactory) will have negative consequences for the economy as a whole because repair work will result in postponing development work elsewhere. That isn’t all; repair expense will enlarge fiscal deficit beyond its already ascending projections. Public sector borrowing will suck in more bank credit and starve private sector borrowers. Economic growth will suffer due to the huge losses suffered by the industrial and commercial sector.

Industries in almost all major industrial cities could not operate at their usual pace because of prolonged power outages, and suspension of transport due to network breakdowns. Both domestic and export orders worth billions were lost/held up either completely or for their better part, reducing the prospects of growth, revenue collection, and export earnings. Following rains that began on July 31, most factories in SITE, Korangi and North Karachi industrial areas were without power for a week; they could run only for a few hours a day on their own power.

Based on 05-06 GDP figure (Rs6,130 billion at current factor cost with Karachi producing half of it), estimated losses in those seven days alone exceeded Rs55 billion. These losses will triple or quadruple until life returns to normal in the coming weeks or, perhaps, months.

Commercial markets fared no better. Most of them remained inaccessible, and their ground floors and basements (often serving as warehouses) were flooded, with billions worth of stocks destroyed wholly or partly. Bulk of these losses can’t be retrieved because businesses find outlay on insurance a mere waste. Irrespective of their questionable practices, the fact is that a huge number of businesses will end up with losses, and sales and income tax collection will take a dip.

It is well worth asking, “why was the damage so extensive whose economic fallout will be enormous?” Undoubtedly, rain was ferocious but should the infrastructure collapse on such a scale, especially the parts built recently using modern design and construction technology. Should we blame this monumental collapse on modern design and construction technology? Or was it due to the dishonestly or incompetence, or both, of the builder-supervisor combine? Or was it because the government ignored weather forecasts and did not prepare in advance for the coming tragedy?

Whichever the case, this mess places in doubt the expertise of Pakistani construction planners, supervisors and builder/contractors. This is no ordinary affair. It needs in-depth investigation, before more of the taxpayers’ money is placed in their hands for squandering it away. An investigation to identify the culprits would be in the interest of the civil engineering fraternity and construction contractors. In the absence thereof blame will lie squarely with engineers and builder/contractors.

Things (obvious even without a formal investigation) indicate chaotic (or was it simply callous?) management of the city by its present and previous governments. The way the sewerage and rainwater drainage systems were blocked to help build huge plazas, led to the disaster. Rainwater simply couldn’t find its way to the sea.

Planners and constructors of new roads paid no attention to road banking nor verified that drains running alongside were unblocked to drain the rainwater off the roads. It is shocking that CDGK has not updated its decades old city map showing the underground network of gas, water, sewerage, power and telecom lines.

Given the recent frantic pace of construction (and burying of scores of fresh sewerage lines, with scant concern for their connectivity), it is anybody’s guess what is the network’s shape, and are the drains inter-connected. In this milieu, it is no surprise that gutters keep overflowing as if it was Karachi’s fate.

This apathy encouraged builders to go on doing what they are doing – build plazas with no concern for what will happen to the city’s sewerage and utility supplies system. Over-flowing gutters are not the only example of citizens’ apathy; they don’t protest against a lot that their city governments shouldn’t be doing. Because the protesting forums (all credit to them) are not supported by the citizens as openly and effectively as they should be, city governments go on doing what they consider right in their wisdom.

No one would like to obstruct the city government; it will amount to craving for the old corrupt bureaucratic system. This, however, doesn’t imply foregoing accountability. Whatever happened in the last few weeks proves that the city planners lack competence, if nothing else.

City governments must not be allowed to compound their offence by mis-prioritising development work, and refusing to take good advice. Many city government functionaries are inexperienced. That this is so, is proved by the fact that these governments simultaneously launch too many development projects without realising that such a policy dilutes planning and supervision effort, and over stretches contractors’ resources, which results in poor work quality, defective finish, and also pushes up resource prices. This is a recipe for disaster.

While city governments must carry the blame essentially for execution errors, the federal government carries a far bigger share of responsibility for what we face now. In the last six years, in spite of repeated assertions by concerned observers, the government did not commence a massive infrastructure refurbishment exercise that had become overdue.

Even if you set aside everything else for a start, just look at the expansion in power generation capacity and building of water reservoirs. Growth in these sectors was negligible. Yet, the government pursued a policy of low fiscal deficit (ironically, close to the EU level) and low allocation for PSDP, and in spite thereof, held out assurances about development.

In this backdrop, it is worth asking whether the government was pursuing a sustainable growth policy or some other (the feel-good?) policy. It would be a folly to believe that growth can be sustained without strengthening both physical and social infrastructures of a country. Dams, bridges and railway networks are collapsing because of their continued neglect due to insufficient allocation for their maintenance, and substantial waste of those already inadequate allocations.

It is a dangerous scenario because, while the pressure of population growth requires building new dams, bridges, roads, highways, railways and a host of other things, the existing infrastructure is slowly but surely falling apart. In such a backdrop, our priorities must be re-building the collapsing infrastructure and adding to it to meet rising demand. But do we have the resources for both?

The advice to suck out the post-9/11 liquidity from the banking system, and use it for rebuilding the infrastructure not only fell on deaf ears, but also was denied by the policy-makers. Now that much-needed resource base is stuck in un-productive uses and lending banks can pull it out pre-maturely, only at the expense of suffering losses.

The other alternative is to pick up the begging bowl once again (that we were told had been broken forever). ADB, which voluntarily offered substantial funds for re-building Karachi’s collapsing infrastructure, may not be as willing to foot the repair bill a second time simply because we wasted the earlier bail-out.

It is imperative that we don’t cover up the past errors but discuss them openly so that lessons are learnt, a lot more eyes besides the city government’s can see and prevent things from going wrong.

 

[Owais]

Indus Motor Company (IMC) plans to double its production

KARACHI (August 28 2006): The Toyota Indus Motor Company (IMC) plans to double its production capacity from 50,000 units to 100,000 per annum by the year 2010, a plan in line with industry's target to raise its output from the current 215,000 units to 0.5 million by 2012.

In an exclusive interview with Business Recorder, Indus Motor Company CEO Pervaiz Ghias said the local auto industry employing over 400,000 persons had recorded an average growth of 35 percent per annum during the last few years.

The production had gone up from 45,000 to 200,000 units during the same period, he said, adding the government was projecting the sale of 500,000 units by 2012 as a part of its Automobile Vision while industry was looking for 350,000 units by 2010.

Pervaiz said the auto sector in Pakistan had the potential of becoming a major driver of economic growth, adding the Indus Motor Company alone had contributed Rs 12 billion to the exchequer in FY06.

He said the transformation of local auto industry into globally competitive and export-oriented force needed investment, acquisition of latest technologies, expansion in existing capacities, and rationalisation of tariff regime for its integration into the global supply chain. "All of this necessitates government's support to the local auto manufacturers in the form of a consistent long-term policy," Ghias observed.

Commenting on the import of used-cars, he said the policy was making its impact felt in the local industry, which at the first instance, may seem positive as the delivery of clog of cars seemed to be addressed to. "However the matter if analysed on a long-term and macro-level identifies some serious consequences for both the industry and the country," he added.

Last year, he said the imported reconditioned cars accounted for a market share of 19 percent, which was only four percent previous year. This ratio was equal to the 25 percent of the total production capacity of the local plants.

"If 46,000 cars - figures available till June 30 - are imported each year, there would be no expansion plans on the side of local manufacturers," Pervez Ghias remarked.

Although, the government had restricted import of used-cars over five-year-old, but still much more needed to be done by way of non-tariff restrictions so that the misuse of transfer residence and gift scheme was stopped by unscrupulous second-hand car importers who evaded taxes and document transaction. "Domestic demand has to be met by the domestic industry, as is the policy in all other countries," he said.

"The industry has been instrumental in transferring technology to vendors and dealers. The development of this industry would result in substantial foreign exchange savings, which would be drained, as if a short-term solution to address supply and demand gap, the imports of cars continues," he cautioned.

The Indus Motor Company is the second largest local manufacturers of cars in the country accounting for the 18 percent of the total market share in the last fiscal year.

At present, it produces the leading brands; Cuore in the 800cc class and Toyota Corolla in the 1300cc class. One car is assembled every four and a half minutes at the state-of-the-art IMC plant at Port Qasim.

"The quality is according to international Toyota standard. We do not say that a car is made in Japan or Pakistan, we say it is made in Toyota just like the other 62 plants elsewhere in the world. There are regular quality audits that ensure the standards are maintained," Ghias maintained.

On the issue of premium, IMC CEO said that there were two solutions to this problem, one, was increased production that was being done by the local players and the other was government control over transactions by way of documentation and checking source of funding.

"It is the unauthorised dealers and fake buyers ie resellers that were creating artificial demand and the customer was forced to resort to buying on premium. The issue creates bad name for the manufacturers and we condemn this activity," he added.

Duplicate Post Neo. see post # 2012

 

[Owais]

MoF and MoC vie for control of insurance entities


ISLAMABAD (August 29 2006): Finance Ministry is facing tough resistance from Commerce Ministry for taking control of the 'profit-making' public sector insurance entities including State Life Insurance Corporation (Slic), sources told Business Recorder here on Monday.

Both ministries are on collision course for the past one year, but practically the war of words was seen at a recent meeting on insurance sector. The meeting was presided over by Prime Minister Shaukat Aziz.

The more interesting aspect of this controversy is that Asian Development Bank (ADB) is fully backing the Finance Ministry's viewpoint, saying that insurance business was being hurt by Commerce Ministry, sources said.

Finance Ministry, in its presentation to the Prime Minister, argued that insurance entities were financial institutions, being administered by finance ministries throughout the world. It stressed that the management of insurance companies should be transferred to it, instead of Commerce Ministry.

Dr Salman Shah, Prime Minister's Advisor on Finance, who was representing Finance Ministry, also pleaded that insurance business was not being properly handled by Commerce Ministry due to unskilled manpower, and that appropriate measures were needed to streamline this business, which could only be undertaken by Finance Ministry.

Sources said that Commerce Minister Humayun Akhtar opposed the proposal tooth and nail, asking why Finance Ministry was demanding shifting of insurance entities.

He also questioned whether Commerce Ministry was not part of Government of Pakistan, which is administrating this sector since 1983.

He also criticised Asian Development Bank for backing Finance Ministry on the issue, arguing that his ministry was doing its best to facilitate investment in the insurance sector, and the questions raised by the donor carried no weight.

Since the privatisation of banks, Finance Ministry has been making efforts to take control of profit-making insurance entities, which is not acceptable to Commerce Ministry, Humayun said, according to sources.

He said that his ministry was in favour of liberalisation of insurance sector and it had already asked the Privatisation Commission to initiate the sell-off process of Alpha Insurance Company.

Sources said that the Prime Minister heard viewpoints of both ministries but did not comment. He, however, directed Commerce Minister to revise the composition of Board of Directors of insurance companies, as most of the directors were occupying these slots, carrying a lot of privileges and perks.

The Prime Minister in a meeting of Cabinet Committee on Privatisation (CCoP) a few months back had directed Commerce Ministry to transfer Slic to Finance Ministry, but the Ministry showed reluctance in implementing the order.

The World Bank (WB) has also asked the government to liberalise insurance industry through reforms in line with the banking sector. "Insurance penetration is very low as compared with other countries at Pakistan's income level which requires further consolidation and liberalisation of the industry," sources quoted WB mission on Implementation Completion Report (ICR) as saying.

The WB is of the view that the county's banking sector has gone through beneficial structural reforms, but the rest of the financial sector had not been subjected to reform process to that extent.

 

[Owais]

SBP issues guidelines for livestock financing


KARACHI (August 29 2006): The State Bank of Pakistan (SBP) on Monday issued 'Guidelines for Livestock Financing' to facilitate and encourage the banks/financial institutions in enhancing flow of credit to the livestock sector.

The 'guidelines' cover all areas of livestock financing business, including loan purpose and objectives, product development, eligibility of borrowers, delivery channels, monitoring mechanism, etc.

With the issuance of the 'guidelines', banks/financial institutions are expected to considerably enhance the flow of credit to this important sector of the economy. Banks may adopt the guidelines in their present form or with some modifications that suit their organisational needs and market characteristics.

Livestock is the largest sub-sector of agriculture, accounting for 47 percent of value-addition in the sector, and constitutes about 11 percent of GDP. The disbursement of credit to the agriculture sector has witnessed significant growth during last few years as a result of sector-friendly policies of the State Bank of Pakistan and efforts of the commercial banks.

However, the livestock sub-sector could not get due share in the substantially enhanced flow of credit to the agriculture sector.

In view of the contribution of the livestock sector to GDP, and employment creation, especially in rural areas, the SBP had established a 'Committee of Experts' to devise strategy for increasing the share of institutional finance to this sector, which has huge growth potential. In the light of the recommendations of the 'Experts Committee', and inputs from stakeholders, including banking sector and Ministry of Food and Agriculture and Livestock (Minfal), the State Bank has framed these guidelines.

The State Bank of Pakistan has asked all concerned to visit its website: www.sbp.org.pk for detailed guidelines.

 

[Owais]

Bangladesh asks Pakistan for duty-free market access

KARACHI (August 29 2006): Bangladesh has invited Pakistani traders to increase import volume and urged Pakistan's government to allow duty-free access to its products. The issues were raised at a joint meeting of the Pakistan-Bangladesh Business Council held in Dhaka, late Sunday.

In a statement received here, the Pakistani side assured enhanced efforts for sourcing diversified products from Bangladesh as well as to assist in trade promotion efforts of Bangladesh for improving market access.

Federation of Pakistan Chambers of Commerce & Industries (FPCCI) president Chaudhry Muhammad Saeed led the Pakistani delegation while Federation of Bangladesh Chambers of Commerce & Industries (FBCCI) president Nasir Hussain led the Bangladeshi side at the joint meeting where Bangladesh foreign affairs adviser Reaz Rahman was the Chief Guest. Both the sides were agreed to cooperate in the full implementation of Safta and Joint Business Council (JBS) could be a forceful tool for expansion of trade and investment.

The meeting also agreed to strengthen co-operation in areas of ICT, agriculture, services and technology. FBCCI and FPCCI decided to set up a committee for settlement of trade disputes comprising members from the FPCCI and FBCCI. To promote bilateral trade and economic relations, the FBCCI and FPCCI agreed to undertake studies to identify areas of bilateral co-operation.

Pakistan-Bangladesh Joint Business Council meeting would be held regularly every year in either country. The next joint meeting will be held in Islamabad at a mutually convenient date. FBCCI and FPCCI will exchange information about availability of products and industrial processes facility of industrial training, sources of financing offers and requests for joint ventures and licensing and identification of possible partners.

They will exchange professional experience relating to services rendered to their respective members, facilitating their relationships and providing adequate support for the successful outcome of specific programmes.-PR

 

[Owais]

Exhibitions vital for attracting investment: 'Build Asia 2006' show inaugurated


KARACHI (August 29 2006): International exhibitions are important for creating positive image of Pakistan, especially of Karachi, and attracting foreign investment by highlighting opportunities to boost confidence of international business community.

This was stated here on Monday by Karachi City Naib Nazim Nasrin Jalil at a press briefing while inaugurating 'Build Asia 2006' exhibition at Karachi Expo Centre, organised by 'Ecommerce Gateway'.

She said that the government realises the significance of Karachi as hub of business activities in the country and believes that it is of utmost importance that the city keeps playing its due role in the progress of economy.

"The government also gives emphasis to improve law and order in Karachi to attract investors from around the world," she added.

With the completion of various mega projects, co-ordinated progress in social sector, and provision of civic facilities, the city would assume a significant position among the world's modern and beautiful cities in the coming years, she said.

She asked Pakistani companies operating in Dubai and other countries to come forward and start mega projects in the country and contribute to government's efforts for making Karachi a 'Mega City'.

She said that Karachi City government has initiated housing projects for low-income people and in this regard draws of 80 square yards and 120 sq yards plots were held, and about 50,000 people were facilitated.

Housing projects on 240-yard and 400-yard plots were also in pipeline, she said, and added that it was a major achievement of the City government.

She asked the builders to provide low price construction material to the allottees of plots so that they could be able to have their own houses at reasonable cost.

Nasrin said that several other housing projects were also on the cards, and as soon as the provincial government would approve availability of land the projects would be started.

In reply to a question about hardship the recent monsoon rains had caused, she said that a 'bill' would be floated in the city council to make it mandatory to build storm water drains along all new roads. The system would also be applied to present road network, step by step.

She said that the city government was being criticised for the rain-related problems. She clarified that the local government was not alone responsible for the chaos, and other bodies like KPT and cantonment were also equally responsible.

Earlier, the Naib Nazim visited pavilions of Pakistani and foreign countries. She invited them to explore investment opportunities in the country and participate in the development of Karachi as 'Mega City'.

She praised entrepreneurs from Turkey, China, Germany and other countries participating in the exhibition. The exhibitors assured her of their participation in the city's fast moving construction industry.

Dr Khursheed Nizam, President, E-commerce Gateway Pakistan (Pvt) Ltd, said that the event would improve Pakistan's image globally as a modern and progressive country.

The international exhibitions allow participants to have the opportunity to explore the immense business and investment, which Pakistan offers. Many ventures, partnerships and joint ventures find their roots through participation in the exhibitions, he added.

 

[Owais]

Resolution of new IPPs problems directed


ISLAMABAD (August 29 2006): The Minister for Water and Power, Liaquat Ali Jatoi, on Monday conducted open hearing on problems faced by new independent power producers (IPPs), and directed concerned departments to remove the bottlenecks immediately.

He also gave one-week time to Orient Power to sign Implementation Agreement (IA), while Attock Refinery (125 MW), Orient (225 MW), Star (140 MW), Sapphire Electric (225 MW) and Saif Group (225 MW) were told to sign IA within one month.

The representatives of IPPs, who were invited by the Minister for hearing their problems, complained that Private Power Infrastructure Board (PPIB), Wapda, Nepra and Ogra were not extending full co-operation for new projects, which was the need of the hour to overcome power shortage.

Sources said the Minister was holding a formal meeting, but to hear the problems he invited IPP reps individually in his office in the presence of officials of those departments which the IPPs believe were not extending full for cooperation. PPIB said that the IPPs were honouring their commitments they had made at the time of submission of their projects.

Jatoi heard the viewpoints of new IPPs and asked them to complete their projects in time so that the government could meet the growing demand of power, adding that the government would extend all possible assistance and remove bottlenecks to increase power generation capacity.

He said that the government had simplified procedural requirements for new and existing investors in the power sector and exempted them from various taxes and duties.

The meeting was attended by Secretary and Adviser of the Water and Power Ministry, Additional Secretary Petroleum, Chairmen Wapda, Nepra, Vice Chairman Ogra, MD PPIB, CEOs of the future IPPs and senior officials of the Ministry, PPIB and Wapda.

 

[Owais]

'Oil outlet at Gwadar may generate $0.33 billion revenue annually'


ISLAMABAD (August 29 2006): One million barrel daily oil outlet capacity at Gwadar could generate $0.33 billion revenue annually, International Institute of Policy & Conflict Resolution (IIPCR) executive-director Dr Gulfraz Ahmad said.

He was speaking at a conference on "Global Energy Security and Regional Peace Through: Alternative International Petroleum Storage and Loading Terminals Outside the Strait of Hormuz" arranged by the IIPCR and Pakistan Engineering Council (PEC) here, on Monday.

The Gwadar port could assist in facilitating expected increase of 10 million barrels daily movement of oil in 2020 for east-bound regions through this strait, in which China alone would be requiring five million barrels per day, he added.

Emphasising the role of Gwadar as a port, which has sufficient capacity to handle big oil tankers of 0.5 million barrels, he said the port is nearer compared to the other options of oil terminals such as East-West Pipeline across Saudi Arabia to the port of Yanbu and the Abqaiq-Yanbu natural gas liquids line across Saudi Arabia to the Red Sea. Such options would be very expensive and long as compared to Gwadar, he added.

Speaking on the problem, he said, the Strait of Hormuz has reached its maximum capacity handling container, transporting 20 million barrels of oil per day and there is a considerable need to meet the transportation requirements with two percent increase in the oil demand globally per year.

The Strait of Hormuz is only 34 miles wide, out of which only a narrow strip of six miles is available as deepsea for convenient movement of big oil tankers, he added. Two miles each for incoming and outgoing ships with two miles strip parting them is just not sufficient to handle the increasing world oil demand, he added.

This is choking in the Strait and in coming 13 to 14 years, he said, the oil flow is expected to reach 34 mbpd, he added.

Considering this challenge, the world would have to device new alternatives. The east-bound countries are seeing considerable growth in their economies, talking especially of China, whose energy appetite is unending and also for other Asian countries, he said Gwadar is ideally suited to meet oil needs of this zone.

Pakistan is also looking toward raising a 21 million tons oil refinery in collaboration with China at Gwadar in coming eight to 10 years. The present oil refining facilities in the country is 10 to 11 million tons, he added.

Further elaborating the issue, he said the oil is the main source of global energy meeting for 38.5 percent of the demand.

Other energy sources are gas, 23.7 percent; coal, 24.7; while hydel and nuclear have over six percent contribution each.

He said oil reserves with the big five (Iran, Iraq, Saudi Arabia, UAE, Oman) are enough for 100 years, and so the oil would remain a main source of energy for a long time, and the Strait of Hormuz, he said, would not be able to meet the increasing world oil demand.

To resolve this problem, petroleum exporting countries of the Persian Gulf could create outlets for oil outside the Gulf to augment their export capacities to meet the global oil demand. This could be done by setting up adjunct oil storage and loading terminals beyond the Strait in the Gulf of Oman and the Arabian sea. They could also pump some additional oil through sub-sea pipelines to alternative outlets and augment their export capacities without adding to the congestion of the Strait of Hormuz.

Fortunately, there are a number of options for locating adjunct/alternative terminals outside the Strait of Hormuz along the coast of Iran, Pakistan and Oman. He said this is the appropriate time to give this concept a focussed attention, as it would take over a decade or so for the facilities to be created and oil export arrangements to be operative.

Pakistan Engineering Council chairman and planning commission deputy chairman Dr Akram Sheikh said theme of the today's meeting is important not only for Pakistan but is equally so for the region and indeed for the world.

The modern day world depends heavily on commercial energy for sustaining its economy and lifestyle. Global energy security has assumed new dimensions, challenges and concerns.

Promoting global energy security relates to the peace and prosperity of mankind. In that context, Pakistan is fortunately situated at the hub of a regional energy corridor. It provides land links to West Asia, Central Asia, and South Asia.

It can contribute to the capacity and security of the global oil movement, especially from the Persian Gulf countries to east-bound markets in South Asia, south-east Asia, and Pacific Asia by making available its new deepsea port at Gwadar for alternative international petroleum storage and loading terminals to the Gulf oil exporting countries.

Adviser to prime minister on energy Mukhtar Ahmad said a lot of work is to be done in this regard from the concept to the implementation stage. It has multilateral advantages. It is hoped we could take this forward meaningfully. There is an acute need for a combined move between various departments to make it a success.

Special envoy to prime minister and former ambassador Riaz Khokhar said we must ensure harmony and security within the country to make this project more attractive and viable for other stakeholders in the region to support it.

Many other prominent members of the intelligentsia attending the roundtable discussion participated actively.

There was a proposal from a participant for making Gwadar as trans-shipment-free port collecting only rental charges. This would interest oil exporting countries and investors and would help in expediting the operation of the port.

 

[Owais]

Islamic Finance Indicators: task force discusses compilation guide draft


KARACHI (August 29 2006): The draft of compilation guide on Prudential and Structural Islamic Finance Indicators (PSIFIs) was discussed at length by the task force set up by Islamic Financial Services Board (IFSB) at its meeting held under the auspices of the State Bank of Pakistan (SBP) in Karachi.

The development of 'Prudential Islamic Finance Database' will help gauge Islamic banks' contribution to the economic growth and overall financial sector development.

The document will serve as a 'guiding tool' to IFSB for development of macro prudential analysis and assessing the structure and state of development of Islamic financial services industry. It also intends to serve as a supplement to International Monetary Fund's 'compilation guide' of financial services industry.

The meeting of the task force was attended by representatives of Islamic Banking Department, SBP, other central banks/monetary officials, prominent consultants in the field of Islamic banking, Islamic Development Bank (IDB) and Islamic Financial Services Board (IFSB). The State Bank of Pakistan is the founding member of IFSB.

Islamic Financial Services Board (IFSB) is an international standard setting body of regulatory and supervisory agencies having interest in ensuring soundness and stability of Islamic financial services industry. It represents a strong commitment by the regulatory and supervisory bodies to embark on collective and systematic efforts to develop prudential guidelines and best practices for Islamic financial services industry.

In advancing its mission, the IFSB promotes the development of a prudent and transparent Islamic financial services industry through introducing new or adapting existing international standards consistent with Islamic Shariah principles, and recommend them for adoption.

To strengthen and streamline statistical information on Islamic financial services industry (IFSI) world-wide the IFSB had formed the task force on Prudential Islamic Finance Database

 

[Owais]

Government urged to reduce cost of inputs making exports competitive


FAISALABAD (August 29 2006): "We do not want any subsidy we want only level playing field," said Pakistan Textile Exporters Association (PTEA) Chairman Arif Tauseef here on Monday while briefing newsmen on problems confronting textile exporters.

He said that Pakistan's textiles were overly burdened with duties, high cost inputs and inflationary credit finance. "Research and development support extended recently by the government to home textiles and made-ups sector is basically intended to boost exports of the country. But this is not the real solution to the problem. The real problem is that exporters are facing tough competition in international market from rival countries' exporters. Pakistan's exports are comparatively costlier due to high cost of production in the country," he said.

He said that the cost of inputs like gas, electricity and credit finance were comparatively higher in Pakistan and hence Pakistan's exports were incompetitive in international market. It was for this reason that the country's exports did not fare well in the quota phase-out regime and a declining trend started when fabrics' exports in July 2006 plummeted to $154 million from $207 million of November 2005.

In the context of heavy investment of $4 billion in machinery and 2.5 times investment in infrastructure (land, building, labour, raw material, electricity, gas) the exports should have reflected an increase of 40 percent in quota phase-out period but the performance was rather negative, he added.

He said that the real reason of this reverse trend was exorbitant escalation in the cost of inputs like electricity, gas and petroleum products, he said.

The PTEA chairman said that in the new world trade regime, financial support and subsidies on exports were of no real avail as the benefit was either passed on to the foreign buyers or was wiped out by other factors. He cited the example of reduction in export refinance rate of 1.5 percent announced recently in the textile package in July 2006, which has been offset by proportionate KIBOR rate in August 2006. The facility has been eroded even before the exporters could avail of it, he said. Subsidies and support are no solution to boost exports, he said. The real solution is to reduce cost of inputs like gas and electricity to provide level playing field to Pakistani exporters visa-a-vis their rival countries' exporters and thus make them competitive in international market, he said.

He said that liquidity crunch was also hampering the turnover of exporters. He said that exporters felt relieved when sales tax was made zero-rated and this positive measure was welcomed, but billions of rupees were still stuck up in deferred sales tax refund cases withheld due to minor objections and verifications even 450 days after zero-rating. Had this amount of exporters been released, their liquidity position would have eased, he said.

Protective duties on polyester, dyes and chemicals charged to exporters are another burden on exports making them incompetitive, he said. Impact of these duties in cost-push is about 8 percent, he said. He urged the government to return this levy on exports.

Duty drawback rates have again been slashed without taking the exporters into confidence. Resultantly, huge stocks with duties paid on them would adversely affect the cost of exportable goods rendering exports incompetitive, he said.

The PTEA chairman said that last year an investment of Rs 180 billion in textile machinery and infrastructure facilities was made by exporters with the aim of value-addition and providing employment opportunities to people. This investment was intended to give quantum jump of 40 percent to textile exports but surprisingly the exports for July 2006 went down by 4 percent, which means that actual decrease in exports was around 44 percent. The exporters are wondering what the future of huge investment on machinery and value-addition would be. The exporters apprehend that if this trend continued there would be large-scale unemployment and the workers would come on the road and create law and order situation.

Arif urged the government to take a realistic view of the matter and facilitate the exporters by actually zero-rating the exports through reduction in cost of inputs removing burden of protective duties, easing liquidity through pending sales tax refund and reducing cost of gas and electricity to make exports competitive in real terms.

 

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ISLAMABAD, Aug 28: A UN delegation led by Dr Hafiz A. Pasha, assistant secretary general, United Nations, called on Dr Salman Shah, adviser to prime minister on finance and economic affairs, here on Monday.

Dr Pasha briefed the adviser about the UN programme in Pakistan with reference to economic growth and human development.

The adviser briefed the delegation about different developments in the country. He said the textile industry would become a major engine of growth in this country. He said there was a significant increase in investment in developing the manpower in Pakistan to drive the economic growth.

He informed the delegation about the growth in the banking sector in Pakistan. “Quality and competitiveness have been the hallmark of our economic policy,” he said and hoped that cooperation between Pakistan and the United Nations would further grow in coming years.

 

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Tuesday, August 29, 2006javascript:; http://www.dailytimes.com.pk/print.asp?page=2006\08\29\story_29-8-2006_pg5_4

* Former foreign secretary Riaz Khokhar says govt needs to analyse Chinese plan for energy import through Gwadar Port, as Beijing is negotiating five oil and gas pipelines with CARs

ISLAMABAD: Former foreign secretary Riaz Khokhar has said the government needs to analyze the Chinese plan for energy import in future as Beijing is negotiating around five oil and gas pipelines with Central Asian Republics.

There must be a careful study to examine whether China would require Gwadar Port facilities for future oil and gas import, he added.

He said this while taking part in a discussion on a research paper presented by Gulfaraz Ahmed, Executive Director of the International Institute for Peace and Conflict Resolution (IIPCR), an institute of National University of Science and Technology (NUST). The roundtable discussion, was jointly organized the IIPCR and the Pakistan Engineering Council (PEC), on Monday.

In his paper, Mr Gulfaraz said Gwadar Port is one of the suitable options for east-bound oil trade for South Asian, Southeast Asian and Asia Pacific markets as it would be impracticable from 2020 onwards to ship increasing quantity of oil through the present route of the Strait of Hormuz.

Besides Gwardar Port, the new Iranian deep-sea port at Chabahar and some ports on the coast of Oman are other likely choices for oil trade as the present choke point of oil trade at Hormuz is becoming congested and it could affect global energy security as well as regional peace.

He said around 60 million barrels per day oil is imported, which represents the scale of global oil trade. At present oil is available and maritime routes are able to handle the required shipping flows. The availability of oil is, however, shrinking due to declining reserves and a number of oil-surplus countries such as China, Malaysia and Indonesia. They would become net importers of oil in coming years. Around 57 percent of global oil reserves are concentrated primarily in a few countries of the Gulf, which are likely to outlast many other sources of the world oil supply. It is generally visualized that the global reliance on the oil reserves of the Gulf countries will continue to increase in the foreseeable future.

The Oman option would be suitable for south-bound oil meant for European and US markets. The Iranian Chabahar Port is suitably located for south and east bound oil movement, he said.

The Gulf countries are expected to export around 22 million barrels of oil daily in 2006. Nearly 90 percent of the exports, 20 million barrels daily, would be transported through the narrow Strait of Hormuz, which constitutes a big choke point for the global oil trade. The oil trade from the same sources, in a little over a decade, could be around 34 million barrels per day. The projected increase of 14 million barrels of daily oil flows in just about 13 years through the already congested choke point could affect the smooth flow of oil affecting the reliability of oil supplies and increasing the freight and shipping costs.

By 2020, the world demand for oil is estimated to cross 110 million barrels daily. The export of Gulf oil is expected to rise to about 34 million barrels, of which around 32 million barrels would have to pass through the Strait of Hormuz on daily basis.

This is close to twice the quantity of oil passing through the Strait of Hormuz at present. The increase in the eastbound oil in 2020 is expected to go up to 10 million barrels daily, of which the export to China alone is likely to go up by over five million barrels daily, Mr Gulfaraz said in his paper.

The Gwadar Port can handle very large crude containers of up to 0.5 million tons dead weight, which form crucial part of the international oil movement. For every one million barrels daily outlet capacity at Gwardar, Pakistan could possibly net over a third of a billion dollars a year in revenues besides other indirect economic benefits, including employment opportunities. This will generate substantial resources to boost Pakistan's efforts to develop the vast and backward province of Balochistan, according to the paper.

Some of the participants, who are retired officials from the civilian and military bureaucracy, however, expressed doubts over the thesis made in the paper. Since other choices are available through Iran and Oman ports, the Pakistan government must be required to declare Gwadar Port an open port with open policy. There must be speedy cargo handling in place at the new port. There must be an environment, which is entirely improved from the outdated facilities being provided at Karachi Port.

Some of the participants, including Lt-General Talat Masood (retd), said much importance should be given to the commercial importance of Gwadar. If we continue to stress on strategic position of Gwadar, then the proposed port will lose its commercial and economic benefits. There must not be a surrender of strategic place to anyone, he said without much explaining.

The roundtable conference was attended by Deputy Chairman of the Planning Commission Engineer Dr Akram Sheikh, Adviser to the Prime Minister on Energy Mukhtar Ahmad and other senior serving and retired government officials. fida hussain

 

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Tuesday, August 29, 2006javascript:; http://www.dailytimes.com.pk/print.asp?page=2006\08\29\story_29-8-2006_pg5_11

KARACHI: Pakistan International Airline (PIA) Corporation announced on Monday a growth of 16.4 percent in revenue in the first half of 2006 to Rs 31.3 billion from the Rs 29.6 billion earned during the same period last year.

The financial results released by the Karachi Stock Exchange (KSE) on Monday said: "The airline losses before tax stood at Rs 5.144 billion in the first half of 2006 against the losses of Rs 1.651 billion in same period last year. There is a growth of 13.4 percent in passenger traffic and an 8.4 percent growth in cargo traffic. The airline achieved 72.3 percent passenger seats factor and 59 percent of cargo load factor between Jan 2006 and June 2006," the statement said.

In the second quarter of the current fiscal year, the airline's revenue increased by 21 percent to Rs 16.7 billion compared with the Rs 13.8 billion earned in April-June, 2005.

During the same period, passenger traffic increased by 17.3 percent, cargo traffic by 15.3 percent. The system passenger seat factor increased to 70 percent and the cargo load factor grew to 60 percent.

During the period Jan-June 2006 revenue increased to Rs 31.3 billion from Rs 26.9 reflecting an increase of 16.4 percent, the financial result said.

PIA's domestic market share increased from 60.4 percent to 69.3 percent, an improvement of 15.6 percent over the corresponding period last year, in spite of a static market.

A statement from the airline added that in the annual report for 2005 it was reported that the aviation industry continued to experience financial constraints globally mainly due to the increase in oil prices and lost over $45 billion since 2001.

Expenses on aircraft fuel increased by 47 percent in 2006 compared with the results of last year, whereas, the increase of 10 percent in operating expenses was mainly due to inflationary trends, an increase in interest rates and currency fluctuations.

 

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LAHORE: State Minister for Commerce, Hamid Yar Hiraj has said that huge potential exists to increase carpet exports up to $1 billion mark.

He was speaking at inaugural ceremony of three-day Regional Carpets Exhibition 2006 here on Monday. Carpet manufacturers and exporters from China, India and Pakistan are participating in the third regional exhibition besides around 170 foreign buyers and over 100 local carpet manufacturers.

Hamid Yar Hiraj said that government had announced several incentives for carpet manufacturers in the trade policy. He added that measures like establishment of carpet city in Karachi and Lahore would go a long way in enhancing volume of exports.

State Minister and Chairman Export Promotion Bureau (EPB), Tariq Ikram said that the establishment of Trade Development Authority of Pakistan (TDAP) would focus on the promotion of exports from traditional and non-traditional sectors. He was of the view that a consistent increase in the export had been witnessed during past six years.

He maintained that the policies pursued by the government had helped increase country’s exports by 85 per cent since 1999. Among others, Vice Chairman Pakistan Carpet Manufacturers and Exporters Association (PCMEA), Maj (retd) Akhtar Nazir also spoke on the occasion.