Pakistan Economy - News & Updates - Archive

[Neo]

ADB wants Pakistan to cut deficit, inflation

ISLAMABAD, Oct 19: The Asian Development Bank has urged Pakistan to lower its fiscal deficit and inflation with a view to further improving the country’s economy.

Pakistan's overall fiscal deficit could increase to five per cent of GDP in 2006-07, including expenditures related to earthquake reconstruction, equivalent to 0.6 per cent of GDP, it further stated.

In its latest "South Asia Economic Report (SAER)", the bank also termed "still high" eight per cent inflation in the country. It said that inflation declined in 2005-06 and that significant decline in food inflation was in part offset by higher oil prices. Tight monetary policy and measures, such as liberalised imports of food and other essential items in short supply helped combat inflation.

However, the ADB believes that Pakistan would be able to achieve seven per cent GDP growth during the current financial year because of the recovery in the agriculture sector, and higher private investment and increased development spending are projected to boost economic growth.

When contacted adviser to the ministry of finance Dr Ashfaque Hasan Khan did not agree with the ADB report and insisted the government would achieve its 4.2 per cent fiscal deficit target in 2006-07. Likewise, he said that earthquake related expenditure would also remain under the target.

Dr Khan said that inflation stood at 7.9 per cent and not eight per cent as was claimed in the ADB report. He said the government was hopeful to achieve its inflation target of 6.5 per cent in 2006-07, which would further come down to 5.5 per cent during 2007-08.

The report said the budget 2006-07 continued the growth-oriented policy stance, and development spending was projected to increase to 4.9 per cent of GDP. The budget also aims at increasing revenues through broadening the tax base, and the tax-to-GDP ratio is projected to rise by 0.4 per cent of GDP.

It said that Pakistan's GDP growth had slowed in the fiscal year 2005-06 to 6.6 per cent, largely because of the impact of adverse weather conditions on major crops. This significantly reduced growth in the agriculture sector and in agro-based industries, particularly cotton textiles and sugar.

"Slower growth in money supply during the last financial year and continued tight monetary policy should reduce inflation to 6.5 per cent in 2006-07," the report said.

The State Bank of Pakistan maintained a tight monetary policy stance in 2005-06, and the rate of increase in broad money was below operations without significantly raising the benchmark six-month Treasury bill rate. In July 2006, the SBP accelerated the monetary tightening by raising the cash reserve requirement, the statutory liquidity requirement, and its policy rate by 50 basis points to 9.5 per cent.

The development expenditure in 2005-06, the report said, increased by 37.8 per cent to 4.1 per cent of GDP compared to 2.8 per cent two years earlier. Similarly, the fiscal deficit increased to 4.2 per cent of GDP, including expenditures amounting to 0.85 per cent of GDP on earthquake relief and rehabilitation.

Domestic production was unable to meet the increase in domestic demand in 2005-06, and imports rose more than twice as fast as exports. Imports were also boosted by the large increase in the oil import bill and trade deficit increased sharply.

The current account deficit swelled to 4.4 per cent of GDP. However, because of a more-than-two-fold increase in foreign direct investment to $3.5 billion, including privatisation proceeds, a well-received $800 million Eurobond issue by the government, larger inflows of official assistance, and lower amortisation. Official foreign exchange reserves rose by $955 million to $10.8 billion.

The ADB report also said that import growth was projected to slow down significantly during the current financial year, as tight monetary policy dampens growth in domestic demand, and exports are likely to more or less sustain their growth because of improved agriculture production, and the reduction by the European Union of the anti-dumping duty on bedlinen exports and restoration of some benefits under the Generalized System of Preferences. However, the current account deficit is expected to rise to 5.5 per cent of GDP.

Growth in South Asia has been accelerating since the early 1990s, and its economic performance during the last decade-and-a-half has been impressive. Economic growth has contributed to significant reduction in poverty in the region. "Today, South Asia stands at a point where the potential for sustained high growth and poverty reduction is excellent." The region has a unique opportunity to drastically reduce poverty over the next decade, provided the right policy choices are made.

South Asia is well established on a high growth path, with strong and improving macroeconomic fundamentals. While India is in the lead, the improvement in performance in South Asia is broad-based.

"In macroeconomic management, the key areas of concern are inflation and increasing current account deficits. This may require curbing domestic consumer demand through appropriate monetary and fiscal policies, and action on domestic energy prices to improve energy use efficiency," the report added.

"South Asia stands at critical juncture today, where the potential for sustained high growth and poverty reduction is excellent", the report added. A unique opportunity exists to drastically reduce poverty over the next decade, provided the right choices are made, said Kunio Senga, Director General of ADB's South Asia Department.

The report says that intra-regional trade and investment offers immense opportunities for accelerating growth and reducing poverty in South Asia. India could become a hub for stimulating the growth of intra-industry trade in the region and boost the inflow of foreign investment into South Asia.

 

[Neo]

920 new companies registered in 1stQ

ISLAMABAD, Oct 17: The Securities and Exchange Commission of Pakistan (SECP) has registered 920 companies in the first quarter of the current financial year.

The new monthly incorporations were 347, 309 and 264 in July, August and September respectively, show the commission’s official statistics released here on Tuesday. The Company Registration Office (CRO) Lahore registered the most number of companies 324, CRO Karachi 285 and CRO Islamabad 211.

The CROs at Peshawar, Faisalabad, Multan, Quetta and Sukkur registered 42, 28, 17, nine and four companies respectively.

Of the 920 companies, 898 were limited by shares comprising 21 public unlisted companies, 840 private companies, and 37 single member companies. In addition, the commission also registered 11 foreign companies, nine associations not-for-profit and two companies limited by guarantee.

Total authorised capital and paid-up capital of the companies limited by shares amounted to Rs50.881 billion and Rs2.102 billion, respectively.

The services sector recorded 161 new incorporations, followed by 121 in trading, 64 in Information Technology, 59 in communication, 50 in fuel and energy, 49 in the real estate development, 38 in construction and 37 in textile sector.

The SECP encourages and facilitates corporatisation of all businesses so that the corporate sector contributes towards the economic development of the country, a statement issued here stated.

 

[Neo]

Trade with India to reach $2bn this fiscal: 302 items on positive list

ISLAMABAD, Oct 18: Pakistan has diverted its global trade of $1.332 billion to India following the inclusion of 302 new importable items, mostly raw materials, industrial machinery and its parts, in the positive list to increase the volume of bilateral trade, officials told Dawn on Tuesday.

With the full utilisation of these importable products from India, which were currently imported from various countries, the volume of bilateral trade between Pakistan and Indian would reach around $2 billion during the fiscal year 2006-07. Indian would then become Pakistan’s sixth largest trading partner after the US, the EU, China, Saudi Arabia and the UAE.

Pakistan has recently added 302 new items to the positive list for trading with India. The total number of trading items with India now comes to around 1,075. The enhancement of the positive list will also increase the scope of Safta between Pakistan and India, as more items will be considered for duty reduction under the agreement.

Officials said that out of 302 new items, import of 111 raw materials, 171 machinery and parts and 19 other items were allowed from India following demands from various stakeholders, particularly from some industries. The other items include surgical related equipments, homeopathic medicines and diesel locomotives.

According to the officials, only 20 items out of total 302 were placed under Pakistan’s sensitive list of the Safta agreement. This means that 282 items will be eligible for duty reduction under Safta.

Pakistan has already had a huge trade deficit with India and the liberalisation of trade will further swell trade deficit, as Pakistan’s exports are not increasing at that pace as it should be because of non-tariff barriers in the Indian market.

The officials said that though Pakistan trade gap would widen with India, the import of these items from India at cheaper cost than what was being paid now would save huge amount of foreign exchange for the national kitty.

The officials, however, did not mention the exact amount of saving Pakistan would achieve due to diversion of trade of these items from global partners to

India. “We assumed that it would help a lot in reducing the cost of doing business as reduced freight and other charges would make the products less expensive for our industries,” the officials added.

The State Bank of Pakistan in its report identified greater potential of Pakistan-India trade in the range of $1 billion to $5.2 billion in a year as according to an analysis of bilateral trade composition in the year 2004. The reports identified 1,181 items worth $3.9 billion common between Pakistan’s exports and Indian imports. Similarly, against 2,646 common items of Pakistan’s imports worth $7 billion in the year 2004, India had exports worth over $15 billion.

The study found that in case of over 50 per cent of these items, the unit values for Pakistan’s imports are more than the unit value of Indian exports, hinting at the possibility of the import potential from India to Pakistan of many of these items at far cheaper cost than what is being paid now. The study assesses Pakistan’s average national saving in foreign exchange between $400 million and $900 million provided the Pakistan government expands its positive list of importable items from India.

Analysts said that trade with India, still under one billion dollars -- was not large to have an impact on the overall export performance, but it had the potential to become large if both the countries approached it in the right way and did not make quick changes in policies and procedures.

They pointed out that complementarities existed between the two countries in the sectors of agricultural products, tires, minerals, iron and steel, chemicals and pharmaceuticals, automobiles and their spare parts, leather, new and renewable energy technology and cooperation between small and medium enterprises. Pakistan is a competitive supplier of cotton goods, particularly men’s apparel, home textiles and fabric.

 

[Neo]

Pakistan facing umpteen problems in finalising gas projects

20 October 2006

ISLAMABAD — Pakistan government is experiencing difficulties to finalise even one gas pipeline project out of the three proposed projects relating to Qatar, Turkeministan and Iran due to various reasons.


An official of the ministry of petroleum and natural resources is not sure whether these three gas pipeline proposals will materialise in near future that has pushed the government to look for other alternatives to meet the growing gas requirements in the country.

Qatar, he said, will not lay a gas pipeline upto Pakistan by saying that it did not have enough gas reserves, therefore, it was no more considering the proposal.

The emerging frightening situation in Afghanistan particularly due to the increasing incidents of suicide bombings by Taleban has extensively marred the chances of laying Turkeministan gas pipeline via Afghanistan.

And due to consistent opposition by the US government, the official said, the much talked about $7 billion Iran-Pakistan-India (IPI) gas pipeline project was also in doldrums despite a broad understanding reached between Islamabad and New Delhi over it. He conceded that Qatar has conveyed to Pakistan that it did not have enough gas reserves which could be imported. "This is what they have conveyed to us and that is why we are not very hopeful about it," he said.

The situation in Afghanistan, the official pointed out, was not conducive for bringing gas pipeline from Turkeministan, although Daulatabad gas reserves were in huge quantity which could be imported by the neighbouring countries including Pakistan.

"You tell me how can we have any gas pipeline from Turkeministan keeping in view the increasing fighting in Afghanistan," he said.

But the official was not all that pessimistic about IPI gas project saying that some positive developments have taken place to have the pipeline laid from Iran to Pakistan and then to India.

However, he did not raise political issues like the continuous opposition by the Bush administration about the IPI and said: "I cannot talk about it as this has to be discussed and finalised between the top authorities of both the countries," he said acknowledging that the issue was not all that simple.

Responding to a question, the official said that the cost of the IPI gas project could be more than $7 billion due to increasing steel prices in the international market. Steel, he said, was a major component for determining the exact cost of the project.

He said discussion on price formula for Iranian gas was still to be concluded after which the issue of transit fee will be decided for taking the pipeline upto to India.

The official did not say any thing whether the royalty of gas to be charged from India could range from $500 million to $600 million. "There is no decision about it as the issue is still to be negotiated." He called for early settling of pricing formula about which Iran was not showing enough flexibility. Once that formula was agreed upon, he said, other issues like project structure, framework, quality and quantity of gas and other commercial and legal issues will be decided.

To a question, he said that it has been agreed with India to appoint a U.K based Singapore consultant — Gaffney Cline — to help sort out issues relating to gas pricing between Iran, Pakistan and India.

 

[Neo]

Pakistan remittances from UAE soar 34.6pc

19 October 2006

KARACHI — Pakistani expats residing in the UAE remitted $190.82 million during the first quarter (July-September 2006) of the current fiscal year as against $141.72 million remitted during the same period last fiscal, registering an increase of $49.1 million or a mammoth 34.64 per cent.


Overall, Pakistan received $1,233.59 million remittances from abroad during the July-September 2006 quarter of the current fiscal year as against $1,002.65 million during the same period last fiscal, showing an increase of $230.94 million or 23.03 per cent.

The amount of $1,233.59 million includes $0.98 million received through encashment and profit earned on Foreign Exchange Bearer Certificates (FEBCs) and Foreign Currency Bearer Certificates (FCBCs), according to the State Bank of Pakistan.

As for the month of September 2006 alone, the overseas Pakistanis remitted $421.74 million as against $341.10 million in September 2005, depicting an increase of $80.64 million or 23.64 per cent. The inflow of remittances from the US during the July-September 2006 period amounted to $311.87 million as compared to $283.33 million in the corresponding period last fiscal, and from Saudi Arabia $242.79 million as compared to $174.32 million. Moreover, a total of $173.47 million was remitted from four GCC states including Bahrain, Kuwait, Qatar and Oman as against the previous figure of $130.79 million. The current and previous figures in case of the UK remained $102.23 million and $110.96 million respectively, and in case of the EU countries $36.43 million and $26.85 million respectively.

Remittances from Canada, Australia, Norway, Switzerland, Japan and other countries in the first quarter amounted to $175.00 million as compared to $128.51 million in the corresponding period of last fiscal.

The monthly average remittances for July-September 2006 comes to $411.20 million as compared to $334.22 million in same period of last fiscal.

The inflow of remittances into Pakistan from almost all countries increased last month as compared to September 2005.

As per the break-up, remittances received in September 2006 remained $108.28 million from the US, $77.45 million from Saudi Arabia, $65.85 million from the UAE, $58.05 million from other GCC countries including Bahrain, Kuwait, Qatar and Oman , $32.85 million from the UK and $11.83 million from EU countries as compared to the September 2005 of $94.40 million, $54.76 million, $48.70 million, $45.30 million, $38.57 million and $9.70 million respectively.

Remittances from Canada, Switzerland, Australia, Norway, Japan and other countries in September 2006 amounted to $67.25 million as compared to $48.50 million in September 2005.

 

[Neo]

World Bank lauds Pakistan’s poverty reduction efforts

WASHINGTON, Oct 18: Preliminary estimates released on Wednesday by the World Bank show that Pakistan’s poverty rate declined by 5 percentage points in the first half of this decade.

The bank’s World Development Report for 2007 also praises Pakistan as “one of the top 10 global reformers” last year.

In a separate report titled, “Can South Asia End Poverty in a Generation?, the bank notes that due to recent economic growth, there’s more political will and extra money available to tackle key obstacles to eradicating poverty in Pakistan and other South Asian countries.

The bank points out that South Asia has an estimated 400 million young people aged 12 to 24, or about 30 per cent of all youth in developing countries. The expected increase in working age population offers a tremendous opportunity for economic growth in South Asia, provided the greater labour supply is productively employed, and that saving and investment increase.

Economic growth has made it possible for South Asian countries, including Pakistan, to pursue “second-generation” reforms, such as the privatisation of public enterprises, deregulation of industries and financial sector reforms.

While they are politically much more sensitive, these reforms are also more feasible when GDP is growing at 6 per cent a year. First, some of the growth is the result of partial progress on these reforms.

Pakistan, for example, has privatised most of its banking sector, “with impressive early results.”

Thanks to economic reforms, especially trade reforms, South Asian countries have improved the efficiency of their economies … all these countries experienced an increase in TFP (total factory productivity) growth, and in TFP’s contribution to overall growth in the decade following reform.

Between 1968 and 2001, manufacturing value added increased by a factor of 6 and 7 in India and Pakistan, respectively.

The ratio of exports to GDP in Pakistan, Bangladesh and India, however, remain considerably lower than in Malaysia, Thailand and Korea; in fact they are lower than these East Asian countries’ ratios in the 1960s.

Thirdly, a significant feature of the leading East Asian economies such as China, Malaysia and Thailand is the speed with which they have moved up the technological frontier. Increasingly, their exports consist of products embodying high technology. In India and Pakistan, on the other hand, high technology intensity products are still a small share of manufactured exports.

http://www.dawn.com/2006/10/19/top10.htm

 

[Owais]

WAPDA to get additional Rs 5.1 bln for improve power services: PM


ISLAMABAD (updated on: October 20, 2006, 23:03 PST): Prime Minister Shaukat Aziz on Friday said the government will provide an additional amount of Rs. 5.1 billion to WAPDA to improve the power distribution and generation in the country.

He was chairing a meeting here at the Prime Minister House to review the overall situation in the power sector.

The premier said that the government would make all possible efforts to bridge the gap between demand and supply of electricity.

He said that currently electricity demand is increasing by 6 to 8 percent, which is reflective of economic growth and improved living standards.

Shaukat said that present shortfall in the demand and supply is due to expansion of middle class over the years.

He said that during the last year, 19000 tube wells were installed and 15000 villages were electrified across the country.

The premier said that by the end of 2007 every household will be provided electricity under the Roshan Pakistan Programme.

He said that the government will make all out efforts to meet the power needs of domestic and industrial consumers.

Chairman WAPDA, Tariq Hameed updated the Prime Minister about the ongoing development schemes.

He said that ongoing repair of transmission lines and maintenance work will improve the power situation further in the country.

He said that with additional allocation of funds WAPDA will be able to ensure smooth supply of power to the end users.

 

[Owais]

Commerce, CBR advised to impose 15 percent duty, waive regulatory duty on sugar
ISLAMABAD (October 21 2006): To fulfil the pledges made with Pakistan Sugar Mills Association (PSMA) for timely starting crushing operation, the Ministry of Food, Agriculture and Livestock (Minfal) has forwarded an advice to Ministry of Commerce and the Central Board of Revenue (CBR) to impose 15 percent import duty on refined or raw sugar and waive regulatory duty on sugar export, sources in the Food and Agriculture Ministry said.

Following intensive talks between PSMA representatives and Secretary, Food, Agriculture and Livestock, Ismail Qureshi, it was agreed to start the crushing operation from November 1 in Sindh and from November 15 in Punjab, approving PSMA's demands with a set of conditions.

After waiving 50 percent equity condition for getting bank loan, Secretary Food and Agriculture, Ismail Qureshi told Business Recorder on Friday, the advice for imposition of import duty and waiving off regulatory duty have been sent to the concerned department. "The Central Board of Revenue (CBR) will issue an SRO in this regard soon," Qureshi said.

When asked about another demand of PSMA that TCP would not release sugar stocks as market intervention, he said that it was conditional and the Corporation would not intervene till the end of November, if the millers started crushing timely.

"There will be no restriction after November if the prices remain stable", he said. However, the TCP would carry out its operation to provide sugar to Utility Store Corporation (USC), he added. "The government is fulfilling what it pledged with the millers on October 4," Secretary Qureshi said. Some of 16 mills in Sindh have started their boilers, which is a positive sign both for the millers and the cane growers, he said.

 

[Owais]

SPI maintains double-digit rise
ISLAMABAD (October 21 2006): The Sensitive Price Indicator (SPI), for the lowest income group up to Rs 3,000, has been maintaining double-digit rise for the last several weeks compared to the corresponding weeks of last year, as given by Federal Bureau of Statistics, and is 11.60 at present.

Prices of 46 items, out of 53 included in the Sensitive Price Indicator (SPI), have shown increase as compared to the corresponding week of last year. The SPI year-on-year basis of 53 essential daily use items for the week ending on October 19 has shown 9.86 percent increase as compared to the corresponding week of the last year.

The weekly bulletin of Federal Bureau of Statistics (FBS) shows that on year-on-year basis the prices of some essential commodities and kitchen items, which hit the low-income group the most, have risen.

These items are tomatoes 81 percent; potatoes 20 percent; gram pulse 54 percent; moong pulse 40 percent; mash pulse 53 percent; sugar 22 percent; vegetable ghee 9 percent; wheat 3 percent; gur 15 percent; curd 10 percent; milk 11 percent; tea 12 percent; salt 24 percent; chicken 16 percent; kerosene 7 percent; firewood 21 percent; gas 20 percent; diesel 4 percent and LPG 18 percent.

The SPI bulletin, based on data of 53 items from 17 urban centres, showed that 11 items registered increase, and 10 declined, while prices of 32 items remained unchanged as compared to last week' figures.

The FBS data show that though the prices of 32 items posted no change during the week, they are costlier as compared to the corresponding week of last year. For example, diesel increased by 4 percent; petrol 3 percent; gas 20 percent; kerosene 7 percent; firewood 21 percent; matchbox 8 percent; bread 9 percent; curd 10 percent; milk 11 percent; mutton 13 percent and beef by 13 percent.

Several items showing decrease against last week's prices are still higher when compared with the corresponding week of last year. These are tomatoes, wheat flour, sugar, vegetable ghee, moong, gram and mash pulses and LPG.

It is noted from the report that the increase and decrease in prices for most of the items remained marginal ie well below, or around, one percent from last week's prices, except that of LPG, which decreased by 7 percent from last week's price.

According to the FBS report, for people in lowest income group of up to Rs 3000, the SPI shows that the increase is 11.60 percent, for Rs 3001 to 5000, it is 11.19 percent, for Rs 5001 to 12000, 11.09 percent, and for above Rs 12000 income group, it is 9.79 percent.

 

[Owais]

Banks asked to ensure ATM service round the clock

KARACHI (October 21 2006): The State Bank of Pakistan (SBP) has directed all banks that adequate backup arrangements should be made to ensure availability of ATM service round the clock. The SBP observed that incidents of "ATMs out of cash/service" are on the rise, particularly during the days of first Ramazan, Eid holidays and other long weekends.

In order to minimise such incidents and to ensure continuous availability of ATM facility, the SBP in its guidelines for banks said disruption of service for regular maintenance should be properly planned and communicated in order to avoid inconvenience to card holders. Any major breakdown, along with reasons thereof, should immediately be reported to the payment system department, SBP.

A maximum downtime of ATMs from 12 of midnight to 8am to process Zakat deductions and closing of books of accounts on the first of Ramazan, June 30 and December 31 would be admissible.

Special arrangements should be made to replenish cash in ATMs during long weekends and holidays. For this purpose, extra cash cassettes to refill ATMs may be arranged to mitigate risks associated with the opening of cash vaults at branches during holidays. Comprehensive operating procedures should be put in place to timely resolve cases of out of cash, breakdown of ATMs, systems and network.

The SBP announced the above instructions will come into force with immediate effect. All banks and switch operators are required to comply with these guidelines.

 

[Owais]

Exporters suffer Rs 2.8 billion loss due to cut in drawback rates
ISLAMABAD (October 21 2006): The exporters suffered a loss of Rs 2.8 billion due to reduction in duty drawback rates on import of raw material/inputs used in the finished products exported during 2005-06. While reviewing the budgetary impact of relief measures in 2005-06.

A CBR quarterly report said that there had been net gain of Rs 3.3 billion of customs duty in 2005-06 due to huge saving of around Rs 2.8 billion from rebate on the items where duty has been decreased.

In the 2005-06 budget, the customs duty was reduced on certain textile items ie PTA from 20 percent to 15 percent (refundable U/S 21(a)(b) of Customs Act, 1969 read with SRO 450(I)/2001), from 20 percent to 3 percent on chips, 6.5 percent on fibres, 7 percent on yarns, and from 25 percent to 14 percent on fabrics of man-made yarns, blended yarns etc.

As expected, this tariff reduction resulted in a growth of 114.8 percent in the value of imports while dutiable imports grew by 145.4 percent. This substantial growth in dutiable imports made up for the loss due to tariff reduction. Consequently, the collection of customs duty increased by 28.8 percent.

In absolute terms, the gross collection increased from Rs 1.7 billion in 2004-05 to Rs 2.2 billion in 2005-2006. A gain of around Rs 489.2 million has been recorded during 2005-06 against annual projected loss of Rs 2 billion for 2005-06.

As far as net collection is concerned, there has been an estimated gain of Rs 3.3 billion due to huge saving of around Rs 2.8 billion from rebates on the items where duty had been decreased.

According to the report, the collection of duty from yarn increased by 4.1 percent, fibre by 25.4 percent and fabrics by 74.6 percent during current fiscal. The reduction of customs duty has encouraged imports substantially, ie yarn by 101.9 percent, Fibre by 153.1 percent, and fabrics by 97.8 percent.

Exemption of Customs Duties from Urea @ 5 percent: The import of urea has been exempted from the customs duty in budget 2005-06. The import of urea has increased by 108.8 percent while a loss of Rs 204.1 million in duty was recorded during 2005-06. The loss in duty is line with the estimated loss of Rs 244 million during 2005-06.

Tariff Reduction from 20 percent to 15 percent on Agricultural Tractors: The tariff had been reduced on agricultural tractors from 20 percent to 15 percent in budget 2005-06. Consequently, the value of imports has jumped by about 66.7 percent while collection of duty grew by Rs 142 million against projection of loss of Rs 60 million.

Decrease in duty on edible items: In response to reduction in Customs duty rates, the dutiable imports of edible items went up by 9.9 percent during fiscal 2005-06 while duty collection declined by Rs 244 million against a loss of Rs 140 million projected at the time of budget 2005-06 declaration.

Tariff Reduction for Agricultural machinery and equipment: The value of imports of these items increased by 31.9 percent while additional collection of Rs 119 million was registered against annual projection of a loss of Rs 610 million.

Tariff rationalisation on Plants, Machinery and Equipment including their parts: Capital inflow was important for stepping up the pace of development of the industry. Customs duty on locally made plants, machinery, and equipment was reduced to 10 percent and duty on parts equated with the duty on machinery parts to which they form part. Moreover, the local manufacturing machinery parts subjected to 10 percent duty were allowed to import raw material @ 5 percent ad valorem.

The imports of plants, machinery and equipment including parts largely increased by 49.4 percent while dutiable imports also went up by 59.7 percent during 2005-06. The growth in imports did not only compensate the drastic effects of duty reduction on duty collection but also increased the collection from Rs 4.8 billion to Rs 6 billion during the same period of PFY. An additional amount of Rs 1.2 billion in duty resulted in 2005-06.

Decrease in duty on raw material: The customs duty on a large number of raw materials was reduced in the budget FY 2005-06 to lower the cost of doing business, expanding industrial production, and accelerating the economic activities.

The report said that policy initiatives were successful as all items exhibited positive growth in imports except raw materials of photography and cinematography. Due to reduced rates of duty on raw materials, the imports of these items had gone up by around 31.6 percent while the collection of customs duty declined from Rs 9.6 billion in 2004-05 to Rs 7.2 billion during 2005-06. This entailed a decline of Rs 2.5 billion or 26 percent against annual estimate of loss of Rs 2.6 billion for 2005-06.

Despite growth in the imports of 10 out of 11 raw materials, decline in customs duty was recorded in 9 items due to lowering of duty rates.

 

[Owais]

Kuwait group to set up 0.1 million bpd refinery near Port Qasim

ISLAMABAD (October 21 2006): Noor Financial Company of Kuwait, a major international investment group, will set up an export-based oil refinery at Port Qasim at a cost of $1.2 billion on 'build-own-operate' (BOO) basis, having crude refinery capacity of 100,000 bpd.

The project will be ready by 2010. Noor Financial Company and the Government of Pakistan had signed a memorandum of understanding (MoU) for the project during Amir of Kuwait's visit to Pakistan in June this year.

Noor Financial Investment Company is engaged in investment and financial activities in Kuwait, Middle East, Asia and other emerging markets. It was established as a sister organisation of National Industries Group (NIG), one of the largest industrial groups in the Middle East, listed at the Kuwait Stock Exchange.

As per MOU, Noor Financial Company and National Industries Group would, either solely or in co-operation with other parties, complete the project in four years.

Pakistan would provide all necessary assistance to Noor and NIG to facilitate participation in joint venture for the project. It will assist in processing approvals for requisite licences and any aid at regulatory approvals as per rules and policies and incentives applicable on the project.

In order to attract investment in the downstream refining sector, the government offers incentives under the Petroleum Policy, 1997 for establishment of the new oil refinery project at any location of investor choice. It has linked up import-parity-price formula to Singapore-FOB spot price for the new oil refineries.

The government also allows import of crude oil from any source subject to price economics after lifting local crude allocated if any. The new oil refinery also enjoys concessionary rates of duties/taxes for equipment not manufactured locally.

The new refineries are free to sell their products to any marketing company, or they can set up their own marketing companies.

The government also ensures the investors' continuation of the policy of de-regulation in the lube industry, retail outlets development to ensure healthy market competition, improve quality and better customer services.

It is worth mentioning that the demand of deficit petroleum products will be met in the country after commissioning of the new coastal oil refinery of 12-13 million ton per annum capacity as planned by 2010.

The MOU said that the parties agreed to co-operate in establishing joint venture along with other local and international investors to promote oil and gas industry.

 

[Owais]

EPZA records $17.209 million rise in 2005-06 exports

KARACHI (October 21 2006): The Export Processing Zone Authority (EPZA) has recorded an increase of $17.209 million, or 10 percent, in the cumulative export figures of the EPZA during 2005-06 as compared to 2004-05. This was stated by Rukhsana Saleem, Chairperson of EPZA, in a press statement here on Friday.

"The exports touched $233.209 million in 2005-06 against $216 million during 2004-05," she said, adding that this also included export figures from Sialkot Zone, which started operation this period.

The statement said this notable increase had been made possible due to consistent efforts of the Authority to create a healthy and positive investment environment in the zones.

"All operational procedures have been simplified and the investors are being facilitated in quick completion of import and export documentation," she said.

She said that recently the condition of obtaining import certificate has been abolished in the zones, which has been greatly appreciated by investors.

The revival of closed units in Karachi Export Processing Zone was also playing a major factor in increasing exports from the zone, she said. With the reactivation of good number of sick units, the export volume was expected to go still higher.

The EPZA chairperson said that industrial activities in KEPZ Phase-II where infrastructure development is almost complete were likely to start shortly. "About 20 approved projects of Phase-II have executed licence agreement with the Authority, completing ground work for start of construction of factory buildings," the statement added.-PR

 

[Owais]

USA's $12.1 million raises SCRAs to $225.5 million


KARACHI (October 21 2006): The USA brought in fresh funds amounting to $12.1 million on October 18, raising its balances to $67.1 million and the overall balances under non-resident Special Convertible Rupee Accounts (SCRAs) surged to $225.5 million.

Hong Kong's balances also increased by $0.3 million to $11.3 million the same day. UK withdrew $0.4 million from its balances and its net cumulative flow during the year on October 18 reduced to $67 million, thus allowing USA to occupy the second position since the beginning of the year.

Qatar also withdrew a small amount. All in all, these forward and backward movements resulted in overall increase of about $12 million in SCRAs on October 18. No other noteworthy development was observed.

It may, however, be of interest to note that before being relegated to the third position on October 18, UK overtook Singapore--the then first positioner on September 28 when its balances rose to $55.6 million compared with Singapore's $44.1 million. Singapore, however, re-emerged to occupy the top slot on October 3 when its balances under the unique portfolio arrangement rose to $98.8 million--a position it has managed to maintain so far. Its balances on October 18 amounted to $101.4 million.

The October 20 update made available at the time of writing of this report showed that on October 19 balances under SCRAs had increased to $230.5 million--an increase of about $5 million over the level attained on October 18 including net inflows of $6 million (USA: $3.5 million, UK: $2.5 million) and net outflows of $1 million (Hong Kong: $1 million, Qatar: negligible).

 

[Owais]

Foreign investors keen to acquire Pakistani companies: minister


ISLAMABAD (October 21 2006): The Federal Minister for Privatisation and Investment, Zahid Hamid, has said that foreign investors are showing great interest in Pakistani companies, including banks. He stated this while addressing a meeting of the Board of Privatisation Commission (BPC) here on Friday.

He said that due to the excellent performance of the economy as a result of the innovative and highly successful economic reforms introduced by Prime Minister Shaukat Aziz under the guidance of President Pervez Musharraf, which have been acknowledged by the world at large, has generated exceptional investor interest in Pakistani companies, including banks.

He informed the PC Board members that during the first quarter of FY 2006-07 foreign investment, including FDI and Portfolio investment, had shown significant increase as compared to corresponding period of last FY. The remittances were also much higher than in the corresponding period of last year, he added.

He said that the consistency and continuity of the economic policies of the government had greatly increased investors' confidence in Pakistan economy and encouraged them to avail of the exciting investment opportunities through the privatisation program green field investment as well as through the stock market.

The government is considering proposals for launching GDR of UBL, NBP & HBL in the international markets after completion of GDR of ODGCL with proper sequencing. Most of the major transactions, like PSO, NITL, Fesco, Jamshoro Power Company, and PPL were at an advanced stage, he added. The Board took various decisions relating to the privatisation process of various transactions.

The meeting was informed that Expressions of Interest (EOIs) from prospective investors for acquisition of minimum 90 percent shares of Heavy Electrical Complex (HEC), together with management control, on an 'as is, where is' basis have been invited by November 22, 2006.

The meeting was further informed that pre-bid moot for the sale of moveable and immovable assets of Services International Hotel (SIH), Lahore, on 'as is where is' basis had been held.

According to the decision of the Cabinet Committee on Privatisation (CCOP), the successful buyer would construct a five-star industry standard hotel at the prime location of Shahrah-e-Quaid-e-Azam, Lahore.

Six parties participated in the said meeting which include:

1. Associated Group,

2. Hashwani Hotels,

3. Marwat Enterprises,

4. Noor Financial Investment Company,

5. SA Builders; and

6. Tristar Group.

Four parties participated in another pre-bid meeting for the sale of minimum of 90 percent shares of Hazara Phosphate Fertilisers Ltd (HPFL). The parties, which participated in the pre-bid meeting, included 1-Al-Tuwairqi Group of Companies, Karachi, 2- Chanar Sugar Mills Limited, Lahore, 3- Regal Food Products Ltd UK facilitators: TN Associates, Islamabad; and 4-Warble (Pvt) Limited (Allahdin Group of Companies), Lahore. The bidding of both SIH and HPFL will be held accordingly.

The meeting reviewed the progress and status of the privatisation process of various upcoming transactions and Secondary Public Offering of United Bank Limited (UBL) and the Initial Public Offering (IPO) of State Life Insurance Company shares through capital market under the program, 'Privatisation for the People', which has benefited a very large number of small investors in the past.