Pakistan Economy - News & Updates - Archive

[Neo]

Wednesday, October 11, 2006

Worldcall Telecom earns about Rs 1 billion profit

* Announces 15% bonus share g Board of directors recommends increasing company’s authorised share capital to Rs 9b

KARACHI: The board of directors of Worldcall Telecom Limited has recommended a 15% bonus share issue for the shareholders, as the company in the financial year ended June 30, 2006, has posted a profit after tax of nearly a billion rupees.

The company began operating in December 2004 and in seven months of the previous financial year had posted a Rs 19.2 million loss by June 30, 2005. However, in the financial year ended June 30, 2006, the company has managed to earn post-tax profit of Rs 947.6 million.

Analysts pointed out topline growth as the major factor behind the fast improvement in gross profit that helped the company to post decent gains.

According to the financial results announced at the Karachi Stock Exchange (KSE) on Tuesday, net revenue of the company increased by 542 percent in the financial year ended June 30, 2006 against the net revenue of Rs 677.8 million in the previous financial year ended June 30, 2005.

The direct cost moved up by 339 percent to Rs 2.67 billion compared with Rs 607.83 million for the last seven months of previous financial year.

Gross profit of the company in the period under review increased by over 2,000 percent to Rs 1.6 billion compared with gross profit of Rs 70.02 million in the last fiscal year.

In the last financial year the company had managed to post operating profit of Rs 591.7 million compared with the Rs 21.4 million loss at the operating level in the previous financial year.

Worldcall Telecom earned pretax profit of Rs 1.18 billion in the financial year ended June 30, 2006 against the loss before taxation of Rs 31.9 million earned in the December-June period of the previous financial year.

Worldcall Telecom Limited remained the second in volume with trading of 20.27 million shares at the Karachi Stock Exchange and its share price closed at Rs 12.80 from Rs 12.20, after a gain of 60 paisas.

In order to facilitate the issue of bonus shares, the board of directors has also decided to increase the authorized share capital of the company from Rs 7,750 million to Rs 9,000 million, subject to the approval of the shareholders at the upcoming general meeting.

 

[Neo]

Wednesday, October 11, 2006

‘Pakistan seeks to enter global equity market’

ISLAMABAD: With the successful implementation of first generation structural reforms and gaining economic stability, Pakistan entered into international capital markets through the issuance of the debt instruments.

“Pakistan has so far floated three sovereign bonds, the last one we float on March 23, 2006,” Dr. Ashfaq Hassan Khan Advisor Ministry of Finance told here on Tuesday. He said that Pakistan successfully issued $500 million ten-year notes and $300 million thirty-year bonds in the international debt capital market on March 23.

The Advisor said that this transaction, which represented the first international 144-A bond issued by Pakistan since 1999,raised significant interest amongst US institutional investors. He further said that by issuing ten and thirty years bonds, Pakistan completed its primary objective of establishing a full Pakistani International yield curve in record time. Dr. Ashfaq said it is important to note that this offering was the largest ever-funding exercise of the government.

He said the largest deal prior to this transaction has been the $600 million SUKUK or Islamic Bond in the year 2005. He said it was the longest ever tenor achieved by Pakistan.

Dr. Ashfaq said that both the new ten-thirty year offerings were debut offerings for Pakistan by US dollar yield curve was extended out to thirty years in just two years time. He said the most emerging markets sovereign issues have taken a longer time to extend their yield curve from five to thirty years.

The Advisor said it took Philippines four years and Brazil and Turkey three years to extend their yields curve to thirty years. Having established a relationship with global investors in the international capital markets, Pakistan has now decided to establish a relationship with Global Depository Receipts (GDR) offering for the best corporate assets namely the OGDCL, NBP, UBL, HBL and KAPCO with a listing on London Stock Exchange. He added that this would be totally a new set of global investors who will be investing in the share of these scrips.

 

[Neo]

Wednesday, October 11, 2006

WB to continue assisting govt’s petroleum sector reforms

ISLAMABAD: The World Bank has urged upon the Government of Pakistan to implement pending reforms initiatives in the petroleum sector reforms to make them sustainable. However, the World Bank has announced that it would continue to provide assistance in realising the full benefits of oil and gas sector liberalisation and reforms.

A World Bank Statement issued here on Tuesday stated that Government of Pakistan has undertaken a deregulation and reform programme in the past seven years. The World Bank has been an active partner in this endeavour, and upon Government request, it has provided technical assistance and advisory support in liberalising the sector. These reforms have helped in achieving:

An enhanced level of exploration and production activity, resulting in a number of new gas discoveries, which enabled domestic gas production to increase by about 50 per cent from about 2.4 to 3.6 billion cubic feet per day.

A transparent Gas pricing framework - linking producer prices with consumer tariffs - has been implemented. This has enabled gas companies to plan and undertake investments to transmit the increased volume of gas to consumers. The petroleum downstream market has been deregulated, with fuel oil, diesel and LPG prices determined entirely by the market. For other products, prices were pegged to international prices and adjusted periodically. Due to the unprecedented hike in international oil prices, this process has been interrupted in recent months.

Oil & Gas Regulatory Authority (OGRA) has been established, which oversees the operation of the sector and arbiters the conflicting interests of different stakeholders (consumers, investors, government, etc).

Improved product specifications have been introduced in the market (lead-free petrol, low-sulfur diesel, etc), and natural gas as a cleaner fuel has replaced liquid fuels in the automotive and power generation sectors.

 

[Neo]

EU, WWF launch BMP for Cotton & Sugarcane in Pakistan
Wednesday October 11, 2006

BAHAWALPUR: The European Union Commission and WWF have formally launched four year project "Better Management Practices for Water Thirsty Crops" worth one million Euros to ensure sustainable sources of freshwater to support the livelihoods of poor communities in Pakistan.
This project will create a mechanism for increasing water availability and reducing pollution by decreasing the amount of water and pesticide use in Cotton and Sugarcane production.

EU provides the funds to the tune of 0.75 million Euros and the implementing partner WWF for this project provides remaining 0.25 million Euros. The project aims to promote better management practices on Cotton and Sugarcane that improves environmental quality and enhances the livelihoods of the farmers.

The objectives of the project will be achieved by developing and implementing appropriate "ON farm" Better Management Practices in Faisalabad and Bahawalpur. It focuses discourage access use of pesticides sprays in Cotton fields and encourage natural way of farming for these crops.

While speaking at the formally inauguration ceremony of the project which was largely attended by the local cotton growers and stakeholders, the Head of European Union Commission Pakistan, Michael Dale said that agriculture and water has become an intertwined issue and lack of sustainable practices that are employed in agriculture such as excessive use of irrigation, imbalance use of fertilizers, irrational use of pesticides, health impact on the farming communities are a few to mention.

He said that this project would contribute towards elimination of the just spoken perils to the environment. He said that for the improvement of farmers livelihood and environment it was necessary to promote natural way of farming on modern lines so we can save farm and farmers.

He said that training of farmers through farmers field schools and building the capacity of farmer organizations through training of trainers would be a prosperous step forward creating the field trained human resources in agriculture sector which could contribute in sustainable development. He said that a recent completed European Commission regional project on IPM implementer by FAO has proved the training of farmers through farmer?s field schools, which have achieved remarkable results in the cotton growing areas of Pakistan. He said that the project addressed the issues of sustainable agriculture and rural development, environment protection, trade, human health and most of all hopes for the poor through quality farmer education.

He said that on the success of this project the government of Pakistan has launched its own programme on IMP. Mr. Dale expressed hope that the partnership of this programme with Agriculture departments would bring good results in terms of testing the innovative better management practices and their wider dissemination to resource poor farmers living even in the remote areas. Earlier, Project Director Hammad Naqi Khan gave a detailed briefing about the project and said that though the project has been started for last nine months but today it was formally launched with first batch of trained farmers for better management practices for water thirty crops. He said that the project would promote Better Management Practices (BMPs) by small and large scale sugarcane and cotton farmers in Bahawalpur and Faisalabad by 2010.

These BMP centers in Bahawalpur are addressing the level of water used, the amount of pesticides and chemical fertilizers applied and the variety of seeds used in the project. He said that through this project, the farmers are mobilizing to reduce pesticide on Cotton fields and reduce use of chemical fertilizers by Cotton and sugarcane growers. The representative of Farmers? Welfare Association Bahawalpur said that the yield has increased due to the BMP implementation. We used to spray ten times which was very expensive and now we spray twice and cotton is softer and whiter, eventually easier to sell in the market. Dr. Iftikhar Ahmed, DG WWF Pakistan Ali Asghar Habib and Deputy Director WWF Derk Kuiper also spoke on the occasion.

 

[Owais]

54.2 percent rise in July-August current account deficit



ISLAMABAD (October 12 2006): Pakistan's current account deficit during the first two months (July-August) of 2006-07 rose by 54.2 percent to $1.89 billion, against $1.226 billion recorded in the same period of 2005-06.

More worrisome during the period under review was that resident deposit holders withdrew $58 million (in July they deposited $19 million and in August withdrew $77 million) from foreign currency accounts (FCA), primarily because of the stable rupee, against $38 million they deposited during the same period last fiscal year.

Inflows in these accounts could prove a cushion in moderating current account deficit but, unfortunately, it turned negative and then deteriorated the current transfers, too.

It is worth mentioning that the multinational donors have, time and again, cautioned the government by pinpointing the burgeoning current account deficit as a gray area of the country's economy.

During 2005-06, the deficit reached 4.7 percent ($5.68 billion) of the GDP against only $1.784 billion during 2004-05. And now, the Asian Development Bank (ADB) has projected Pakistan's current account deficit at $7.9 billion (5.5 percent of GDP) by end-June 2006-07 in its Asian Development Outlook (ADO) released last month.

With the start of the new fiscal year, fuelled by a $2.844 billion trade deficit, the country's current account deficit (excluding official transfers) in two months witnessed an increase of $664 million or 54.2 percent to $1.89 billion against $1.226 billion in corresponding period of last fiscal year, the State Bank of Pakistan (SBP) reported on Wednesday.

Independent economists are of the view that the widening current account deficit was posing threat to the economy simultaneously on both internal and external fronts. They also have questioned, time and again, as to how long the trade deficit can continue on that trajectory without disrupting the economy. And, how much longer Pakistan can continue to spend more than it earns and support the growth.

The government's economic managers, on the other hand, were of the view that Pakistan is enjoying an economic boom and the current account was manageable by borrowing from abroad, remittances, drawing down reserves and inflow of investment.

The country witnessed this current account imbalance as trade deficit (in goods and services) jumped to $2.844 billion during July-August 2006 from $2.075 billion in corresponding period of previous year. The trade deficit figures have been worked out using the freight-on-board (FOB) value of imports and exports.

The central bank's data shows that goods import stood at $4.713 billion whereas exports totalled $2.756 billion thus leaving a trade imbalance (in goods) of $1.957 billion. The services account also witnessed a large imbalance of $887 million during July-August 2006 as inflows under this account stood at $426 million whereas outflows totalled $1.313 billion. Thus on balance, total trade deficit (goods and services) stood at $2.844 billion.

The factors responsible for this huge deficit included higher outflows on account of transportation, travel, insurance, construction services, royalties and licence fees.

Pakistan had to spend $531 million on transportation account whereas its earning under this head was only $187 million. Thus, the net deficit in the service account due to chartering of vessels for imports, export shipment was $344 million.

Another factor responsible for big services' account deficit was a net outflow of $168 million on account of overseas travelling. Pakistan had to spend $208 million to finance personal and business-related travelling abroad of individuals and groups whereas it earned only $40 million under this account. Hence the services account deficit in July-August 2006. The same applies to spending on insurance and royalties and licence fees paid to international organisations and their employees operating in Pakistan.

The imbalances in the trade and services were so large in July-August 2006 that the current account turned negative despite a strong build-up in current transfers. Net current transfers rose to $1.473 billion during the period under review, from $1.243 billion in corresponding period last fiscal year.

Current transfers went up as Pakistan received $812 million in workers' remittances or foreign exchange sent back home by overseas Pakistanis during the period, up from $661 million in a year-ago period.

According to independent economic experts, this external disequilibrium in the shape of current account deficit may have a significant impact on the value of the rupee. Besides, it would translate into a large increase in Pakistan's net foreign debt position. A large and growing public debt could also eventually put upward pressure on interest rates and crowd out private investment.

 

[Owais]

SBP accepts Rs 16.327 billion bids in treasury bills auction


KARACHI (October 12 2006): The State Bank of Pakistan in its fortnightly Treasury Bills auction received bids worth Rs 26.327 billion against its target of Rs 15 billion, which was 1.75 times of the amount on offer. By maintaining its last cut-off yield, it accepted Rs 5.5 billion for 3-month bills at a cut-off yield 8.6417 percent.

In six-month bills, it lifted Rs 1 billion at 8.8142 percent, and in 12-month bills the accepted amount was Rs 9.827 billion. On Thursday there is Rs 35.78 billion OMO maturity, and T/bills' maturing amount is Rs 5 billion.

Despite total maturity of Rs 40.78 billion, banks refrained from aggressive bidding in the auction due to the need to adjust their weekly average position. And now being mid-Ramazan, the cash requirement shoots up requiring Rs 10 to Rs 15 billion. This will raise the amount of currency in circulation.

Keener interest was seen in one-year T/bills auction, due to higher return. If the compounding factor is taken into consideration, there is less charm in three-month bills, unless the SBP has to match its placement. Otherwise, it's a losing proposition. There is also good arbitrage opportunity for a bank placing funds in longer tenor and borrowing from the market, since the cost of borrowing is below 8.5 percent, on daily basis.

Banks short in government securities do get opportunity regularly through open market operation (OMO). On average, SBP has been keeping it OMO rates stable around 8 percent, and does not allow excessive volatility in line with its monetary policy. Two weeks are offered through OMOs at around 8.5 percent, whereas one-month outright T/bill is offered by the central bank at 8.55 percent.

Money market dealers are looking for tighter conditions by year-end. Tighter liquidity conditions could have emerged, but delay in sugarcane crushing till November and further delay in wheat sowing until late November has given some respite to the banks, even though seasonal borrowing of cotton started in October.

The seasonal demand is likely to continue for the next six months. It is estimated that seasonal borrowing would be somewhere between Rs 40 billion and Rs 50 billion.

A dealer of a foreign bank managing his bank's Asset and Liability Management (ALM) book, says, "I see exciting days ahead as we are approaching year-end. In the remaining five auctions in 2006 there is T/bill maturity of Rs 219.607 billion. We have to keep an eye on government borrowing from banks and the year-end demand for rupee by banks for window dressing of balance sheets.

I remember, last year Rs 30 billion bank deposits were shed in a short span of time. My information is that branches of some of the leading Pakistani banks are already offering 11.30 percent on 3-month interbank deposit, and seasonal demand is yet to pick up. So, I am keeping my fingers crossed."

Meanwhile, in the interbank foreign exchange market, the rupee tested 25-month low of 60.69 per one US dollar during the week. The rise in dollar coincided with long weekend in USA due to Columbus Day holiday and nuclear explosion conducted by North Korea.

Pakistani rupee followed the Asian currency and showed some weakness as there was no inward report of dollar on the first day of the week. Fall in the value of rupee was also due to corporate and Ministry of Defence payments, which were close to $70 million. Average weekly oil payments ranged between US $125-150 million. The rupee is likely to recover and retest at 60.60 per dollar by next week. The rupee has strong support at 60.75, says a foreign exchange dealer.

Dollar gained strength in the international market, which also saw weakening of Asian currency. Demand for dollars and gold surged as safe haven buying emerged. But news of slump of US housing market is likely to dampen the enthusiasm.

Home building probably dropped at a 20 percent annual rate in the third quarter, the biggest slump since the last three months of 1990. The US growth is now likely to be weaker than 3 percent. If the US economic numbers show further signs of weakness, Fed may act quickly by slashing its overnight repo rate by 25 basis point.

Says an analyst who specialises in currency trading: "I think. for Pakistani importers its good time to hedge their foreign currency as dollar will soon take further beating. For the remaining days of this last quarter of 2006, dollar will take the beating. Euro has strong support at 1.2450, unless 1.2320 surrenders for 1.2750.

Cable is a buy around 1.8420, with support at 1.8320 for a move to 1.8880. While Yen is likely to further weaken towards 120.50 areas before forming a base, its strong resistance line lies at 121.80 before recovering to 116.50." Gold will find strong resistance at $592 per oz and is likely to touch $530 by year-end.

 

[Owais]

Low growth in July-September duty collection due to tariff revision

ISLAMABAD (October 12 2006): The nominal growth in customs duty during the first quarter (July-September) of 2006-07 was due to the massive tariff rationalisation on imports of raw materials/inputs announced in the budget, sources said on Wednesday.

Commenting on short collection of customs duty of Rs 28.9 billion in July-September 2006-07 against Rs 28.6 billion, sources said that the government would suffer revenue loss of Rs 6.7 billion due to change in customs duty structure. The revenue impact due to these relief measures was evident from duty collection figures in the first quarter of current financial year.

Moreover, the Board is not collecting customs duty on certain items on which sales tax is being collected at import stage. For example, the Board is collecting reasonable amount of sales tax on import of POL products, fertilisers and sugar.

Sources said that the restriction of five years on import of vehicles under gift, personal baggage and transfer of residence schemes is one of the major factors, which resulted in less amount of duty collection from vehicles. Prior to the restriction, a large number of over five years old vehicles were imported. As a result of this change, the duty collection drastically came down during the quarter.

Under tariff rationalisation, the customs duty was reduced on 200 raw materials and parts/components, 100 different types of equipment of broadcasting sector, 95 machinery/equipment, 89 types of electrical appliances, 54 items of telecommunication-related equipment, 49 industrial inputs and duty was reduced on import of 43 organic/inorganic chemicals in the budget.

Duty on 80 items belonging to construction and steel sectors was reduced. It included duty reduction on secondary quality flat rolled steel products from 25 percent to 20 percent.

The duty rate on trucks of five tons and above capacity was reduced to 40 percent and that on their CKD kits to 10 percent. Dump trucks and trailers for prime movers were placed in the same duty slab. Customs duty on import of prime movers was slashed to 15 percent and was exempted on CKD kits to the extent of non-indigenised parts. Duty on CNG buses in CBU condition was brought down from 20 percent to 15 percent.

Duty has been either abolished or reduced on over 200 raw materials, parts and components used in the sectors like aluminium, condensers manufacturers, electric fans, shoes/footwear, gas appliances, horticulture, master batches, screw manufacturing, seamless pipes industry, steel, foundry, casting and forging sector, telecom, PVC industry and stationery manufacturers.

Duty was reduced from 25 to 20 percent and 10 to 5 percent on 12 types of cutting tools of artisans, skilled and semi-skilled workers, whereas 14 chemicals of the textile processing industry were exempted from customs duty. Duty on 16 machine tools has been brought down from 25 to 20 percent and 10 to 5 percent.

Duty on import of 11 different types of raw materials used by the plastic industry has also been reduced. Moreover, seven inputs of leather industry were exempted from customs duty.

Duty on entire tariff heading 8471, for computers, except CRT monitors in second-hand condition, has been exempted. Computer parts and accessories falling under HS headings 8473.3010 to 8473.5000 have also been exempted from customs duty.

The import of bicycle chain parts and components was exempted from customs duty, while duty on bicycle chain and free wheels was slashed from 20-25 percent to 15 percent.

Therefore, all these factors resulted in decrease in customs duty during the first three months of the current fiscal year, sources said.

 

[Owais]

'Pakistan emerges as ideal destination for investment'

LAHORE (October 12 2006): Punjab Minister for Industries, Commerce and Investment, Muhammad Ajmal Cheema has said that Pakistan has become an ideal destination for foreign investment. "A number of world renowned multinational companies are planning to invest in Pakistan", he said while talking to a delegation of German investors that called on him at his residence.

The minister said that the taxation system in Pakistan had been simplified. He said that the government had fixed export target of US $18 billion for the current fiscal year.

He said that privatisation policy was going on very successfully, adding that the state-owned enterprises (SOEs) like PSO, State Life Insurance would be privatised in near future. The minister said that the government was paying full attention to road infrastructure besides industrial progress and for this purpose, the Rs 14 billion Lahore-Sialkot Motorway would be initiated soon. He said that small industrial estates would be developed along the Motorway.

 

[Owais]

Disbursements under NBP's "Rozgar scheme" to begin from next month


KARACHI: Sanctions and disbursements under the "Rozgar scheme" of National Bank of Pakistan (NBP) will start in November this year.

This was stated by NBP president Syed Ali Raza while talking to newsmen at the Iftar here Tuesday.

He said that due to short working timing in Ramazan and the large number of loan applications, the processing was slow. However, he noted that the processing will get momentum after Ramazan.

"We have out sourced the processing under Rozgar scheme and a separate company was examining the applications.

The company is checking and verifying contact numbers and locations of loan seekers to minimize the chances of frauds, he added.

Raza pointed out that over 175,000 applications have been received so far under the scheme and more were pouring in.

"I see a quantum jump in the disbursement and the bank is expecting to disburse Rs 10 to 15 billion per annum under the scheme, he noted.

To a question about the non-performing loans, he said that 90 per cent loans are secured and have provisions in the balance sheet. As soon as they (loans) are recovered they directly go to the profit and loss account, he added.

Talking of the issue of NBP Global Depository Receipts (GDR), he said it will be done keeping in view of the market conditions. The time of issue and amount will be decided later, he said

 

[Owais]

Cell phone subscriber base crosses 40m mark


KARACHI: Cell phone subscriber base crossed 40 million mark for the first time ever, as mobile phone companies added almost seven million fresh customers during the first quarter of 2006-07 on continued popularity of the service across the country.

Latest figures compiled by Pakistan Telecommunication Authority revealed that cellular phone connections stood at over 41.50 million by September 2006, which crossed 34 million by the end of last fiscal.

“By September 30, 2006 total number of cellular subscribers stood at 41.50 million (41,502,203),” said a PTA official. “It reflects a 16.8 per cent growth in total cellular subscriber base from July to September 2006.”

He said during first quarter of the fiscal almost seven million (6,995,646) new connections were sold on the back of comparatively cheaper tariff offers due to increased number of service providers.

“So there was over 25 per cent mobile density rate by September 2006,” said the PTA official.

 

[Owais]

NBP permitted to open branch in India


NEW DELHI: Reserve Bank of India’s (RBI) cross holding norms for private sector banks do not permit Habib Bank of Pakistan to come to India, because of which only one bank from the neighbouring country--National Bank of Pakistan--is likely to be given entry initially.

Habib Bank along with the state-run National Bank of Pakistan had applied to RBI, India's banking regulator, for starting operations in India, while SBI, PNB and Bank of India had sought approval for going to Pakistan.

Switzerland-based Aga Khan Fund for Economic Development, which holds 51 per cent in Habib Bank, is also a promoter of Development Credit Bank in India.

Its holding in DCB will come down to 31 per cent from 57.47 per cent after its equity dilution in the ongoing IPO by the bank.

RBI's cross holding norms do not allow the private sector banks to hold more than 5 per cent stake in another bank, which is the reason why Habib Bank is not being allowed to enter India, Finance Ministry sources told PTI.

It's only a regulatory issue that does not permit Habib Bank to start operations in India, they said.

Initially, only the National Bank of Pakistan is likely to be allowed to enter India, and as such either SBI or PNB will be permitted entry into Pakistan on a reciprocal basis, the sources said.

First of all, it would be seen how the National Bank of Pakistan operates in the country before allowing any other banking entity into India, they said.

However, so far a proposal on allowing NBP has not come to the Finance Ministry and is pending with the RBI only, they added.

 

[Neo]

Trade deficit widens to $1 billion in Sep

ISLAMABAD: October 12, 2006: Pakistan's trade deficit widened to a provisional $1.0 billion in September from $838 million in September 2005, official data showed on Thursday.

The trade deficit for July-September of fiscal 2006-07 was $3.2 billion, compared with a deficit of $2.4 billion in the same period a year ago.

 

[Neo]

New power generation projects to help meet electricity shortage: PM

ISLAMABAD: October 12, 2006: Prime Minister Shaukat Aziz on Thursday said new power generation projects in the private and public sector will help the country meet its growing demand of electricity.

Talking to Liaquat Ali Jatoi, Minister of Water & Power, at the PM House, the PM emphasised the need to pursue more hydel and renewable energy projects and to tap all available resources of energy including coal, solar, wind, and biomass for generating electricity.

Aziz said the demand for electricity was growing as a result of high economic growth, increase in per capita income, growing middle class, increased foreign investment in industrial projects and electrification of urban and rural areas.

He said the government was encouraging projects on public-private partnership basis to meet demand of electricity. He said it was an excellent opportunity for the private sector to invest in this sector.

The Minister for Water and Power updated the PM on the latest situation in the power sector and informed him that there was no load shedding in the country except where maintenance and renovation work was in progress.

On the Karachi Electric Supply Corporation (KESC), the minister said the situation was gradually improving and the Water and Power Development Authority (Wapda) was giving additional power to the KESC.

He said the KESC was planning to increase its capacity to meet Karachi's growing energy needs.

The minister also briefed the PM on the latest situation about the availability of water in the country. He said adequate water was available in various reservoirs to meet the irrigation needs of Rabi crop.

He discussed various projects related to the irrigation system, the repair of various barrages and other measures taken by the Federal and Provincial Governments to improve water supply to the agriculture sector.

Aziz said water and power were critical for increasing agricultural productivity. He said the federal government in co-ordination with the provincial governments will take all measures for better water management to increase its supply.

The premier appreciated efforts being made by the ministry to attract investment in power projects to augment availability of electricity in the country.

 

[Neo]

IT share in total taxes stands at only 30pc

ISLAMABAD, Oct 11: Unlike other developing countries, the share of income tax in total federal taxes in Pakistan hovered around 30 per cent during the last few years, suggesting massive measures for generating additional revenues from this source.

In emerging economies like Turkey, Mexico, Brazil and Korea, the contribution of direct taxes is gradually increasing and has reached around 45 per cent. The advanced countries like, the US, Belgium, Sweden, Japan, Austria, Germany, the Netherlands, France, Norway and Switzerland are the examples where the share of direct taxes is more than 60 per cent of total tax revenues.

The Central Board of Revenue’s last quarterly report (April-June) of the fiscal year 2006 released here on Wednesday said that despite the fact that the share of income tax in total taxes stood around 30 per cent but even though it has increased from 18 per cent in the early 1990s. It appears that within an international perspective, there is a scope for generating additional revenues from this source.

The report observes that indirect taxes are believed to be regressive in nature as their burden is shifted forward on to the final consumers. On the other hand, the direct taxes, being ‘generally’ progressive, help in maintaining the overall proportionality of the taxation system. Direct taxes also play a key role in ensuring a sustainable level of economic growth and development.

It was pointed out that one of the constraining factors is the rather low contribution of the corporate sector. This is evident from the fact that despite the existence of a reasonable number of corporations registered with the government -- CBR and SECP -- the return filers are low and within those who file returns, only a small fraction declares taxable incomes.

On the other hand, a large majority of the corporations continue to claim business losses or showing nil incomes. Besides absence of corporate tax culture, there is also a concern about the role of withholding agents. One of the findings of a recently concluded study is that the revenue from withholding tax in comparison to its base appears to be quite low.

The report said that the importance of GST as a tax on consumption activities had increased manifold. Its share has gone up to about 41 per cent in total federal taxes in recent years.

In most of the East Asian and other developing economies, the contribution of income and corporate taxes is between six per cent and seven per cent of GDP, whereas it is close to three per cent in Pakistan. Clearly, there is scope to raise this level to the international standards.

Anticipating that the economy will maintain the high growth trajectory, the budgetary target for Fiscal Year 2006-07 has been set at Rs835 billion, showing an increase of 17.2 per cent over the provisional collection of Rs712.5 billion of last year.

Given that the outturn of individual taxes and growth trajectories are materialised, the CBR projections anticipate that the share of direct taxes in total CBR collection will be 31.7 per cent -- higher than last year, and within indirect taxes, the shares of sales tax, excise, and CD will be 60.3 per cent, 12.1 per cent and 27.6 per cent, respectively.

 

[Neo]

Chevron enters Pakistan energy market

ISLAMABAD, Oct 11: Global energy giant Chevron has made its entry into Pakistan’s petroleum market.

In a letter addressed to various Ministries on Wednesday, Caltex informed that it had changed its corporate name from Caltex Oil Pakistan to Chevron Pakistan Ltd.

When contacted the General Manager Public Affairs Irfan Qureshi confirmed the news and added that the brand Caltex would remain unchanged.

Chevron is one of the biggest energy companies in the world, operating in 180 countries. Pakistan now has three of the world’s top companies operating in the petroleum sector. The other two are Shell and Total.

This move by Chevron should signal the government of confidence of international companies taking interest in Pakistan’s economic growth. The government can attract huge investment by these foreign investors by pursuing policies that will keep such international giants tied into Pakistan’s petroleum sector.