Pakistan Economy - News & Updates - Archive

[Neo]

Pakistan's performance on most MGDs unsatisfactory

LAHORE (October 24 2006): The Asia and Pacific region as a whole is on track to achieve most of the millennium development goals (MDGs), but progress in many individual countries, including Pakistan, is slow and performance on some vital targets is unsatisfactory, according to a new report titled 'Millennium Development Goals: Progress in Asia and the Pacific 2006'.

The report is produced through a regional partnership between Asian Development Bank (ADB), United Nations Development Programme (UNDP) and UN Economic and Social Commission for Asia and the Pacific.

It says that regional targets, such as halving poverty and hunger, achieving universal primary education, and eliminating gender disparity in education, are on track or have already been achieved. And, progress on these is impressive compared to sub-Saharan Africa and even Latin America.

The report pointed out that two-thirds of Asians, or a total of 1.5 billion people, are still without access to basic sanitation. The region is also home to roughly three times as many underweight children and people living on less than $1 a day. The region is not progressing fast enough to meet some important targets, including infant mortality and access to basic sanitation in urban areas. Meanwhile, HIV prevalence is actually on the rise and the proportion of people with access to improved water sources is declining.

The regional scorecards presented in the report mask some drastically uneven progress across countries. Many of the developing countries of a region that stretch from the Pacific to Central Asia are likely to miss or even regress from a wide range of MDGs, including the targets on child health, and diseases, such as HIV and TB.

The countries of most concern are identified in the report by combining a measurement of their current level of deprivation against progress on the MDGs. Using this, they are grouped into the following four categories.

MOVING AHEAD: Making good progress and with a latest status better than average for the region, including Armenia, Azerbaijan, People's Republic of China (PRC), Kyrgyz Republic, Malaysia, Palau, Thailand, and Vietnam.

LOSING MOMENTUM: Would have to accelerate progress to be able to meet targets, although from a relatively favourable latest status, including Fiji Islands, Kazakhstan, Samoa, and Uzbekistan.

CATCHING UP: Making progress but their latest status is below the region's average, Afghanistan, India and Nepal.

FALLING FURTHER BEHIND: Causing greatest concern because they score negatively on both progress and latest status indexes. These countries include Bangladesh, Indonesia, Laos People's Democratic Republic, Mongolia, Myanmar, Pakistan, Papua New Guinea, and Philippines.

The report avers that there is also a wide divide between progress seen in urban and rural areas. Of the 2 billion rural dwellers world-wide without access to basic sanitation, 1.5 billion were in Asia and the Pacific in 2004. Yet in that year, only one-third of all Asians living in rural areas had access to basic sanitation compared to 74 percent of urban residents. "Much remains to be done if governments in the region are serious about delivering the MDG promises to their poor and to achieve sustainable development," the report adds.

It says that at present, too many countries that score low on the progress or status of the education and health targets commit only a small proportion of their GDP to these sectors. And, countries of most concern in the region are often among those not receiving enough from trade or aid.

The report concludes that while developing countries must commit to supporting institutions and policies that promote the sustainable economic growth required to achieve the MDGs, developed countries must also deliver on providing more and more efficient aid and ensure fair trade and a more equitable share of global prosperity for poor people.

 

[Neo]

24.2 percent households report much better living standards: survey

ISLAMABAD (October 24 2006): According to the latest survey of Pakistan Social and Living Standards Measurement (PSLM), only 24.2 percent have reported better or much better economic situation, while 51.5 percent households reported no change and 23.9 percent households reported that situation has gone worse.

The survey of PSLM 2004-05 by Federal Bureau of Statistics (FBS) covered 76,520 households of the entire country on a range of social sector issues like education, health, housing, water supply and sanitation showed some encouraging results. Karachi district emerged on top in literacy.

An interesting finding was that only 6.5 percent households were satisfied with the working of police, 11 percent were satisfied with agriculture extensions, 11.8 percent with veterinary services, 36 percent with government basic health facilities and 10.5 percent were satisfied with family planning services. However, 60 percent of households expressed their satisfaction with schools.

It made a startling revelation that as many as 86.6 percent of households in Pakistan have their own house, whereas 7 percent live on rented accommodation. Islamabad has the lowest percentage of personal accommodation with 58.8 percent, while 37 percent live in the rented or subsidized rented units.

The report further states that the percentage of houses with one room has declined from 38.1 to 24.2 percent, while houses with 2 - 4 rooms increased from 55 to 68.7 percent and more than five rooms increased from 6.9 to 7.1 percent.

The report says that Gross Enrolment Rate (GER) for primary schools (age 5-9) increased from 72 percent in 2001-02 to 86 percent in 2004-05 as reported by Federal Bureau of Statistics survey of 2004-05 conducted under Pakistan Social and Living Standards Measurement (PSLM) 2004-05.

According to report, Narowal district in Punjab, Karachi in Sindh, Abbotabad in NWFP and Ketch in Balochistan with GER 130 percent, 111 percent, 117 percent, and 110 percent, respectively, have been ranked as top districts within the provinces for primary education.

The Net Enrolment Rate (NER) of primary education is substantially lower than GER due to overage enrolments but has also shown increase in the enrolment trend from 42 in 2001-02 to 52 in 2004-05, supporting the GER findings.

The information in the report has been collected from all schools public, private and also including deeni madaris. Though the enrolment has declined in the government schools from 74 percent to 72 percent for the same period, it has been 100 percent in the poorest districts like Bhakkar (Punjab), Tharparkar (Sindh), Upper Dir (NWFP), and Jhal Magsi (Balochistan).

The middle level (age 10-12) GER is 41 to 46 percent, while for NER it is 16 to 18 percent and considered more realistic due to enrolment of overage students. The increase in the Matric level (age 13-14), GER (42 to 44 percent) and NER (9 to 11 percent), the report says.

The report says that the real impact will be observed after four/five years when the existing primary level cohort will reach Matric level. Moreover, the increase has taken place in both sexes across all provinces, it added.

The adult literacy (15 years and above) has been worked for the first time and has risen 43 percent in 'Pakistan Integrated Household Survey (PIHS 2001-02) to 50 percent in PSLM 2004-05.

According to this, Rawalpindi 75 percent in Punjab, Karachi 78 percent in Sindh, Abbotabad 65 percent in NWFP, and Quetta 65 percent in Balochistan are top districts within the provinces for literate persons over aged 10 years and above.

The report on the health says that prevalence of sickness/injuries is less in the districts of Punjab than other provinces.

The report on health covers sickness/injuries, immunisation, Diarrhoea and the use of pre and post-natal services. It says that 93.38 percent cases of sickness/injuries visited the health consultants. Regarding immunisation based on mother's recall; at least one immunisation had increased from 74 percent to 83 percent. While measure that include mother's recall as well as record of immunisation given to child shows a rise from 53 percent to 77 percent in the proportion of one year old who are fully immunised.

Children suffering from diarrhea under the age of five has increased from 14 to 16 percent and Sindh has shown significant increase from 11 percent to 18 percent, which may be attributed to shortage of clean drinking water, says the report.

Bhawalpur with 28 percent in Punjab, Larkana 30 percent in Sindh, D.I. Khan 29 percent in NWFP and Gwadar 34 percent in Balochistan province are considered the most affected districts within provinces for diarrhea.

According to the report, female pre-natal consultations increased from 35 percent to 50 percent in the period from 2001-02 to 2004-05, but post-natal consultations remained low with 23 percent in 2004-05, it said. Moreover, tendency of Tetanus Toxoid injection for pregnant women increased from 46 percent to 51 percent and was highest in Sialkot with 87 percent among all cities of Pakistan.

Electricity facility has reached to 83.9 percent (2004-05) from 70.5 percent (2001-02) houses with Sialkot at the top with 99.29 percent. The usage of gas has also increased from 20.2 to 29.5 percent. Karachi and Lahore are declared top consumers of gas with 89.18 percent and 77.85 percent households enjoying this facility.

Similarly, tap water supplies have improved from 25 percent to 39 percent in the specified period. Balochistan and NWFP are the most deprived provinces of drinking water facility owing to reduction in water resources from water pump resultantly increase in use of poorest of resources from 20 to 25 percent in rural areas, it added.

The survey of households showed that 51.5 percent reported no change of their economic situation, while 24.2 percent reported better or much better with 23.9 percent reporting for worse. Regarding the facilities offered and their satisfaction of the facilities/services, 36 percent reported satisfaction on government basic health facilities, 10.5 percent satisfied with the family planning services, 60 percent with schools, 11.8 percent with veterinary services, 11 percent with agriculture extension and 6.5 percent with the police.

It is also notable that most of the districts in Punjab and Sindh are generally less satisfied with the services/facilities as compared to NWFP and Balochistan, the report says.

http://www.brecorder.com/index.php?id=490073&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Moody's rates $250m phone company's notes

Dubai: Moody's Investors Service has assigned a (P)B3 senior unsecured rating to the proposed $250 million notes issuance (due in 2013) of mobile operator Pakistan Mobilink Communications Limited (Mobilink).

Moody's says the proceeds will be used partly to refinance bank loans and fund ongoing capital expenditure. At the same time, Moody's has assigned a (P)B1 corporate family rating to Mobilink. The outlook for the ratings is stable.

This is the first time Moody's has assigned ratings to Islamabad-based Mobilink. Moody's says it expects to affirm the ratings and remove the provisional status upon satisfactory review of final documentation and completion of the issuance.

"The (P)B1 corporate family rating reflects Mobilink's strong position as Pakistan's largest mobile operator, and as facilitated by management's ability to rapidly roll out extensive network coverage as well as establish its brand to enhance prospects for strong subscriber and revenue growth," says Moody's Charles Macgregor, a VP/Senior credit officer, lead analyst for the company.

The rating also reflects the increasingly competitive and fragmented nature of Pakistan's cellular market, the challenges Mobilink faces in managing its growth strategy and profit margin, and its projected negative free cash flow position due to substantial growth-driven capex spending and a resultant increase in debt and financial leverage.

In accordance with Moody's global rating methodology for telecommunications companies, Mobilink's overall performance measurements indicate a Ba3 rating category, one notch above its (P)B1 corporate family rating category.

At the same time, the (P)B1 corporate family rating factors in the company's substantial debt-funded capex plan, medium-term refinancing risk, and moderate risk of financial demands from its parent.

 

[Owais]

Canadian company to explore oil, gas in Sindh


CALGARY (updated on: October 24, 2006, 15:17 PST): The Jura Energy Corporation on Tuesday announced that its Joint Venture Partner, Petroleum Exploration (Pvt) Limited has entered into a Seismic Data Acquisition Contract with the Oil and Gas Engineering Company of Sichuan Petroleum Administration for exploration of oil and gas in different areas of Sindh province of Pakistan.

The Contract provides for the shooting of approximately 600 kilometres of 2D seismic over five exploration licences, Mirpur Mathelo, Kandra (Lower Goru), Salam, Badin IV North and Badin IV South, and one Development Lease, Kandra (SML); all Blocks being located in Pakistan in the Middle and Lower Indus Gas Basins.

The Jura holds between a 37.5% and 50% participating interest in each Block.

The SPA will mobilise its crew from China to Pakistan within the next sixty days and all seismic surveys have been estimated to be completed within eight to twelve months from the Contract award.

The Jura is based in Calgary, Alberta, and listed on the Toronto Stock Exchange.

 

[Owais]

World Bank to help Punjab develop large cities

ISLAMABAD (October 24 2006): The World Bank will be assisting Punjab Government in developing large cities to promote economic growth and improve infrastructure, service delivery in major cities of Pakistan, says a press release of World Bank.

In this regard the World Bank and the Government of Pakistan signed a grant agreement on Friday for $750,000 to help finance preparation activities for Punjab Large Cities Development Policy Loan (DPL), administered by World Bank Policy and Human Resource Development (PHRD) program, funded by the Government of Japan.

The loan will be used to assist cities in developing strategic investment plans and improved service delivery in solid waste, urban transport, and strengthen local finances that support infrastructure investment and service delivery.

The Japan HRDF has contributed over $250 million since 2000 in various programs to various countries and is one of the largest funds managed by the World Bank.

The Japan PHRD Fund supports five main programs; The PHRD Technical Assistance (TA) Program, the Joint-Japan/World Bank Graduate Scholarship Program (JJ/WBGSP), the PHRD-World Bank Institute (WBI) Capacity Development Program, the Japan Staff and Extended Term Consultants (ETC) Program, the Japan-World Bank Partnership Program.

This project's objective will be met through implementation of three consecutive Development Policy Loans of $100 million each, says a press release of World Bank.

The PHRD grant will support activities required for the preparation of the project and may include preparation of feasibility studies, environmental, social, economic assessments, stakeholder consultations, studies and workshops, surveys, and provision of technical services.

 

[Neo]

Pakistan takes to alternative software

New Delhi, Oct 24 (IANS) Pakistan, often criticised for software 'piracy', is placing its faith on the Free Software and Open Source options to get out of this trap and also build local skills.

Also called Free/Libre and Open-Source Software (FLOSS), it is a family of software liberally licensed to grant the right of users to study, change and improve its design through the availability of its source code.

Fouad Riaz Bajwa, general secretary of a network called the Free and Open Source Software Foundation of Pakistan (FOSS-FP), told IANS: 'FOSS-FP was (thought of) in February 2004, and set up actually in 2005. Our goal is to help people identify open alternatives to 'pirated' (or illegally copied) software.

'Our aim is also to identify processes by which people, governments, enterprise and the civil sector can use Free/Libre and Open Source Software for their sustainable economic development.'

Bajwa said this was being done by working with universities, linking up with the Pakistani public sector infrastructure and seeing whether it can be utilised for FLOSS education.

Free Software and Open Source still has only a marginal presence in the world of computing. But it is becoming increasingly attractive to a range of governments, for a diverse - sometimes conflicting - set of reasons.

Kerala recently took a major decision to officially shift education in schools to Free Software. Countries like Brazil and South Africa also support its use, as does China, though some of the latter's concerns are based around security.

In Pakistan, the attempt is also to build skills. FOSS-FP has been holding short-duration, single-day literacy campaigns. 'We give (students) free training on installing and using Ubuntu Linux, Open Suse, Red Hat Fedora Core,' Bajwa said.

Free Software comes in the form of different 'distributions'. Although each works in somewhat different ways from each other, there is commonness, and learning the different 'distros' can be a challenge.

FOSS-FP is also trying to promote and build the FLOSS software developer community in Pakistan.

'We want to build a community around FLOSS, and help them in terms of making available open source resources, advocacy and collateral (marketing materials), mailing lists, wikis (to share information) and portals,' he says.

FOSS-FP's site claims to have received nearly 600,000 hits, and has 580 members. 'We have members in Malaysia, India and Dubai,' Bajwa says with pride.

http://www.dailyindia.com/show/73602.php/Pakistan_takes_to_alternative_software

 

[Neo]

Pakistan's economic growth may rise to seven percent of GDP: ADB

ISLAMABAD (October 25 2006): Pakistan's economic growth is likely to rise to 7 percent of GDP owing to recovery in agriculture sector, higher private investment, and increased development spending, says the latest Asian Development Bank (ADB) report.

The report, 'South Asia Economic Report: October 2006', which has been published by ADB for the first time, covers the data/ figures up till September 30, 2006. This new series of publication will be issued biannually.

It says that though the inflation declined in 2006, it is still higher at 8 percent due to high oil prices. Tight monetary policy and measures taken by State Bank of Pakistan in 2006 are likely to bring down the inflation to 6.5 percent in 2007.

The report says that fiscal deficit increased to 4.2 percent of GDP, development spending is projected to increase to 4.9 percent of GDP and overall fiscal deficit could increase to 5 percent in 2007. Moreover, the current account deficit is expected to rise by 5.5 percent of GDP.

According to the report, Pakistan's GDP growth slowed down in FY2006 to 6.6 percent, 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. Recovery in the agriculture sector, higher private investment, and increased development spending are been projected to boost economic growth to 7 percent in FY2007, it adds.

Inflation declined in FY2006, but was still high at 8 percent. A 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 in FY2006 and continued tight monetary policy should reduce inflation to 6.5 percent in fY2007.

The State Bank of Pakistan (SBP) maintained a tight monetary policy stance in FY2006 and the rate of increase in broad money was below the growth in nominal GDP.

SBP kept liquidity tight through open market operations without significantly raising the benchmark 6-month Treasury Bill rate. In July 2006, 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 percent.

The government continued with its expansionary fiscal policy initiated in FY2005, aimed at increasing development spending and accelerating growth. In FY2006 development expenditure increased by 37.8 percent, to 4.1 percent of GDP compared to 2.8 percent two years earlier.

In FY2006 the fiscal deficit increased to 4.2 percent of GDP, including expenditures amounting to 0.85 percent of GDP on earthquake relief and rehabilitation. The FY2007 budget continues the growth-oriented policy stance, and development spending is projected to increase to 4.9 percent of GDP.

The budget also aims to increase revenues through broadening the tax base, and the tax-to-GDP ratio is projected to rise by 0.4 percent of GDP. The overall fiscal deficit could increase to 5 percent in 2007, including expenditures related to earthquake reconstruction, equivalent to 0.6 percent of GDP.

Domestic production was unable to meet the increase in domestic demand in FY2006 and imports rose more than twice as fast as exports. Imports were also boosted by the large increase in the oil import bill and the trade deficit increased sharply. The current account deficit swelled to 4.4 percent 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.

In FY 2007 import growth is projected to slow down significantly 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 bed linen exports and restoration of some benefits under the Generalised System of Preferences. However, the current account deficit is expected to rise to 5.5 percent of GDP.

 

[Neo]

CBR told to give exemption on $100 million NBP loan to PSO

ISLAMABAD (October 25 2006): The Ministry of Finance has directed the Central Board of Revenue (CBR) to give income tax exemption on foreign currency loan of $100 million granted to an oil distributing company by National Bank of Pakistan (NBP) branch in Bahrain.

A tax official told Business Recorder on Tuesday that NBP, Bahrain, had granted a foreign currency loan to PSO in 2001. However, the CBR later decided to withdraw tax exemption granted on the said loan and also refused to accept tax exemption application for 3-year rollover.

The External Finance Wing of Finance Division has informed the CBR that although NBP Branch at Bahrain is controlled and managed by NBP Head Office, Karachi, but its operational matters, including accounts and audit, are controlled by the laws and regulations of the monetary authorities of Bahrain.

In addition, the above foreign currency loan was arranged by NBP Bahrain by obtaining the deposit money from individuals/entities residing in Bahrain at some costs based on LIBOR. The NBP is obliged to pay agreed costs in terms of interest/rental to its clients without deduction of tax.

With the withdrawal of exemption, the NBP will not be able to pay the agreed interest to its depositors. Moreover, the overall income of NBP is taxable in Pakistan under the prevailing laws, he added.

He said that keeping in view the factual status, CBR has been requested to consider to agree with the grant of tax exemption under Clause-77 of Part-I of the 2nd Schedule to the Income Tax Ordinance for the original loan amount and under Clause-72 of Part-I of the 2nd Schedule of the Income Tax Ordinance, 2001 for three years rollover by treating the above NBP's loan as foreign currency loan, the official said.[/B]

ISLAMABAD (October 25 2006): The Ministry of Finance has directed the Central Board of Revenue (CBR) to give income tax exemption on foreign currency loan of $100 million granted to an oil distributing company by National Bank of Pakistan (NBP) branch in Bahrain.

A tax official told Business Recorder on Tuesday that NBP, Bahrain, had granted a foreign currency loan to PSO in 2001. However, the CBR later decided to withdraw tax exemption granted on the said loan and also refused to accept tax exemption application for 3-year rollover.

The External Finance Wing of Finance Division has informed the CBR that although NBP Branch at Bahrain is controlled and managed by NBP Head Office, Karachi, but its operational matters, including accounts and audit, are controlled by the laws and regulations of the monetary authorities of Bahrain.

In addition, the above foreign currency loan was arranged by NBP Bahrain by obtaining the deposit money from individuals/entities residing in Bahrain at some costs based on LIBOR. The NBP is obliged to pay agreed costs in terms of interest/rental to its clients without deduction of tax.

With the withdrawal of exemption, the NBP will not be able to pay the agreed interest to its depositors. Moreover, the overall income of NBP is taxable in Pakistan under the prevailing laws, he added.

He said that keeping in view the factual status, CBR has been requested to consider to agree with the grant of tax exemption under Clause-77 of Part-I of the 2nd Schedule to the Income Tax Ordinance for the original loan amount and under Clause-72 of Part-I of the 2nd Schedule of the Income Tax Ordinance, 2001 for three years rollover by treating the above NBP's loan as foreign currency loan, the official said.

 

[Neo]

IDA to provide $50 million for mineral resources uplift

FAISALABAD (October 25 2006): The International Development Agency of the World Bank will provide finance assistance of $50 million for 'Sustainable Management of Mineral Resources' to assist Pakistan Government in implementing its strategy to accelerate sustainable minerals sector development by strengthening governance, transparency, and capacity in the management of mineral resources.

The particular emphasis on community development, environmental compliance, and equitable sharing of mineral resource benefits, and attracting private sector mining investment.

In a project 'Study report', Michael Stanley, Senior Mining Specialist, Oil, Gas, Mining and Chemicals Department of World Bank said the core objective of the project 'Sustainable Management of Mineral Resources' is that the provincial level reforms will be implemented in Balochistan as a pilot case, and will aim to provide a demonstrative effect so that other provinces follow with similar reforms.

He hoped that the project is expected to yield the following outcomes:

(i) increased private sector investment in the mineral sector as a result of (a) collection and dissemination of basic geodata, and (b) improved investment enabling climate through enhanced legal and fiscal frameworks in line with international practices;

(ii) improved institutional capacity at the federal and provincial levels to manage the mineral sector;

(iii) increased taxes/royalties revenues at federal and local levels;

(iv) formulated policies on mitigation of potential impacts of mining on associated communities and on increased benefit sharing at the community level; and

(v) improved efficiency and transparency of licensing process through a harmonised mineral licensing system.

The borrowers' objective is for the mineral sector to contribute to economic development through export earnings, taxes and royalties, employment, and community level wellbeing.

Michael said that Pakistan has a rich mineral endowment, but the current contribution from the production of solid minerals to the GDP is about 0.5 percent, significantly below a global range of between 2 and 8 percent of GDP. Pakistan's near term growth potential exists with commercial exploitation of Saindak copper and possible future exploitation of Reko Diq copper deposits, Duddar zinc-lead deposit and other polymetallic deposits, Punfmin iron ore deposit, Thar coal, gemstones, and construction materials including dimensional stones.

It is estimated that with sufficient capital and a favourable investment climate Pakistan's solid minerals sector has the capacity to contribute annual foreign exchange earnings in the range of $1.5-2.0 billion or 2-3 percent of GDP, contribute annually $200 million to tax revenues of federal and provincial governments, stimulate secondary and tertiary economic activity, promote growth and provide employment and community development in the largely remote rural regions of the country, he added.

He said that the Pakistan Government has started the reform of the sector by formulating in 1995 a National Mineral Policy (NMP). The NMP decentralised licensing, regulatory, oversight functions, and taxation to provincial governments to achieve efficiencies and promote local economic development.

The federal government remained responsible for sector promotion and co-ordinating across federal, provincial, and regional governments. However, the results are still below expectations mostly due to relatively slow implementation of the NMP, and uncertainty created by inadequacies of provincial mining concession rules, which fail to meet international standards; and lack of knowledge of the mineral potential of the country, he added.

To address these circumstances and to achieve greater international competitiveness, study report stated that the Pakistan Government in November 2005 requested the Bank to assist it with: strengthening mineral sector institutions and legislation at both the federal and provincial levels; improving respective social and environmental performance and community wellbeing; establishing transparent, uniform and non-discretionary provincial mineral cadastre systems; and promoting investment opportunities by disseminating Pakistan's mineral resource information and geo-data globally.

Michael said he hoped that the proposed project would contribute to CAS objectives as follows:

(i) strengthening the enabling investment climate - the project will assist developing a regulatory framework for mining sector development and sector investment in a manner that is competitive and in line with best international practice, adjusted to the particular conditions of Pakistan; and

(ii) supporting pro-poor policies - the project will assist formulation of sustainable development policies, including preparation of community development plans for mining communities (most are in remote areas), mitigation of adverse impacts of mining on communities, and greater benefits sharing at the local level.

This project will also build on the successful dialogue between the Bank and the Government on mineral sector development through reviews, strategic analysis and stakeholder dialogue over the past three years. The proposed project is a direct extension of this dialogue.

The Bank's lending will bring unique expertise on development of sustainable mineral sector given its successful growth experience in similar operations in Ghana, Peru and Tanzania, as well as in Madagascar, Mauritania, Mozambique, Papua New Guinea and other countries. The project will also benefit from the results and recommendations of the Extractive Industry Review of 2003, and the Management Response of 2004, he clarified.

 

[Neo]

World Bank to provide $300 million for trade corridor improvement

FAISALABAD (October 25 2006): The International Bank for Reconstruction and Development (World Bank) will provide a loan $300 million to Pakistan for National Trade Corridor Improvement Program (NTCIP) to reduce the cost of trade and transport logistics and bring services' quality to international standards to reduce the cost of doing business in Pakistan and ultimately enhance export competitiveness, and accelerate industrialisation.

According to official sources, Planning Commission; Central Revenue Board, Ministry of Railways, Ministry of Communications/National Highways Authority, Ministry of Ports & Shipping, and Ministry of Defence will jointly achieve the project objectives through a comprehensive multi-sector reform program aimed at streamlining procedures and improving services and physical infrastructure.

The scope of the current program includes railways, the road transport industry, ports, trade facilitation and air transport.

At the end of the reform program, official sources stated, the following outcomes are expected:

-- Reduced share of domestic transport and cost of non-factor services in the total value of commodities;

-- Overall reduction of transport and transit costs and times for goods using the National Trade Corridor;

-- Increased rail share of long distance freight traffic;

-- Reduction in the operating deficit of railways, with objectively determined and targeted subsidies;

-- Better corridor user satisfaction;

-- Improved safety and reliability of transport operations; and

-- Improved procurement practices and enhanced accountability of the entities involved in NTCIP.

In a project study report on 'Key Development Issues and Rationale for Bank Involvement', World Bank expert Jean-Noel Guillossou, Senior Transport Economist, co-TTL , Amer Zafar Durrani, Senior Highway Engineer, co-TTL stated that the poor performance of the trade and transport logistics sector significantly reduces the competitiveness of the actual and potential export industries and ultimately hurts the country's overall economic growth.

The transport system in Pakistan generates high economic losses from a mismatch between supply and demand for transport services and supporting infrastructure.

It is estimated that the inadequate and inefficient transport system is imposing a cost to the economy of about 4 to 6 percent of the GDP, constraining economic growth, reducing export competitiveness and hindering social development, they added. Both experts said that an efficient transport system is a prerequisite for Pakistan to become globally competitive.

They said that the Pakistan government with World Bank support has developed a strategic approach for the transport sector, focusing first on the National Trade corridor linking Pakistan's major ports in the South with its major cities and trade corridors to the North. The objective is to promote an integrated approach to planning, investing and managing the National Trade Corridor transport logistics system.

The Government of Pakistan and the World Bank agreed on a financing program, which includes a programmatic Development Policy Loan (DPL), specific sub-project investment lending and a technical assistance loan. The Bank and GOP agree that a multi-sector policy-oriented DPL to support implementation of reforms acting as triggers for specific sub-project investment lending would be most effective.

The technical assistance loan will help to prepare and monitor reforms and provide the additional analytical underpinning. Investment lending will ensure that the transport infrastructure provides the capacity and the level of service expected to satisfy the increasing demand, they added.

According to the report, the World Bank has provided, and will continue to provide, analytical support to develop the framework to guide sub-sector policies (for highways, railways, ports and trade facilitation), including pricing, regulation and enforcement, medium term budgetary frameworks, restructuring and progressive commercialisation of public entities and strengthening of institutions (National Highway Authority, Pakistan Railways, etc).

The study report says that Fiscal Year 2006, ended in June 2006 with generally good economic outcomes. GDP growth was a robust 6.6 percent, exports grew by 14 percent, and average inflation decelerated from 9.3 percent in FY05 to 7.9 percent in FY06. Growth in recent years has been broad-based with all key sectors of the economy making a significant contribution.

Foreign investors' interest in Pakistani assets remained strong, with the sale of KESC and the partial sale and transfer of management control of PTCL in FY06.

Presenting the Transport Sector Overview, the study report said that the prospects for continued rapid growth over the next 3 years were good, provided political and macroeconomic stability were maintained, that structural reforms and investments to reduce the cost of doing business continue, and that domestic savings and public and private investment increase.

On the macroeconomic stability front, the key challenge is to arrest the widening of the current account deficit. Imports have been growing rapidly, and the current account deficit has risen to $5 billion in FY06 (3.9 percent of GDP) up from $1.5 billion in FY05 (1.4 percent of GDP).

The main reason for this has been strong import demand, fuelled partly by healthy economic growth and higher oil prices, but also by loose monetary policy pursued and a rupee appreciating in real terms over the past few years. The Government and the central bank plan to take additional steps on the monetary, exchange rate and fiscal fronts to reduce demand pressures and curb the current account deficit.

Although the transport sector is functional, its efficiency is relatively low with long waiting and travelling times, high costs and low reliability. These factors constrain Pakistan's ability to integrate into global supply chains, which require just-in-time delivery.

According to the study report, the main weaknesses of the present transport system can be summarised as follows:

-- High port costs, resulting in higher charges to users than might be considered desirable in terms of overall economic policy, increasing openness to world economy and stimulating trade and allowing Pakistan to capture a share of the regional and global market share.

-- Long dwell times for inbound containers due to low port productivity and undue delays at customs (100 percent of containers are examined physically). The result is congested terminals and the need to construct additional facilities, which could be avoided by taking actions, which reduce dwell times and congestion.

-- Relatively shallow draft in ports, which will increasingly limit direct shipping connections as the size of container vessels on direct services increase. Calls from smaller vessels providing feeder services would result in higher shipping costs compared to other ports in the region, which have a higher depth.

-- Poor highway conditions and weak highway management, which prevent the main road infrastructure to provide the required levels of service. Forty-four percent of the road on the National

Trade Corridor is in fair or poor condition. Available capacity is limited by pedestrians, non-motorised transport, and grossly overloaded, small obsolete, slow moving trucks. As a result, road services are generally slow (around 25 km/h) and unreliable.

Exporters and importers have developed special costly arrangements for high-value freight operating under time constraints:

-- High truck overloading, which leads to road damage, high accident rates, slow speeds and congestion. Fatalities/100 million vehicle kilometers are 10 - 20 times higher in Pakistan than in Europe, North America or Australia. As a result, while the trucking industry in Pakistan has low direct costs, its external costs are high.

-- Insignificant levels of rail freight traffic, which do not reflect the intrinsic potential of rail. The rail system has been largely abandoned by the private sector. The rail could increase its share of the freight market in view of its competitiveness on long distances (about 800 km) as demonstrated in other parts of the world.

-- Pakistan Railways is unprofitable and financially unsustainable. It is unable to service its debt and has been often unable to fully fund its operating costs and pension payments. To continue to operate, Pakistan Railways has received significant subsidies from the Government (US $133 million in 2004 and US $65 million in 2005). The 2005 financial statements show an improvement of the operating account with a slight profit of about US $4.6 million, before depreciation and interests. This profit is generated by non-railway activities, however. Excluding these activities, the deficit on the operating account would have been US $41.7 million and the need for subsidies of about US $106.6 million. The reported deficits are distorted by the low levels of depreciation used in the accounts of Pakistan Railways. The deficit would increase by about US $60 million if international standards were adopted.

-- Incomplete implementation of the customs reform agenda. The simplification, modernisation and harmonisation of procedures and documents are at the heart of the trade facilitation agenda with customs clearance being the main focus. Significant progress has been made already with the average customs clearance time reduced from seven to less than one day comparable with international standards. Full implementation of the new system will allow clearance procedures to be moved away from the border while, at the same time, reducing opportunities for informal payments and providing incentives for importers and exporters to obey existing regulations.

Weak, fragmented and relatively under-developed freight forwarding/logistics sector. It has yet to transform to provide the breadth of services and levels of vertical integration, which are increasingly found elsewhere and are necessary for the export-oriented manufacturing sectors, particularly in textile and clothing.

 

[Neo]

Pakistan's globalised companies - what next?
By Farhan Bokhari

The beginning of a marketing campaign this week by Pakistan's largest mobile phone company, seeking to raise $250 million from its first global bond, is indeed a significant milestone in the country's economic history.

For the financial markets, this marks yet another occasion when a Pakistani market plans to head overseas to raise capital.

This move by Pakistan Mobile Communications (Pvt) Ltd, commonly known as Mobilink, comes just at a time when the largest oil and gas exploration company, known as OGDC (Oil and Gas Development Company) is expected to soon head to international markets to raise up to $1.5 billion through the issuance of a GDR (Global Depository Receipt).

The government is considering plans to similarly offer shares from three public sector banks (Habib Bank, United Bank and National Bank) as well as the 'Kot Addu' power company, similarly through GDRs on international markets. At the same time, one of Pakistan's largest banks known as the Muslim Commercial Bank has just recently positioned itself for a foray to similarly tap international capital markets with a GDR on offer.

Such offers come with the upside of consolidating moves by Pakistan's larger companies, seeking to raise not just capital on global markets, but also their profile. Once considered just exclusive domestic players, some of Pakistan's key companies have become known entities to global investors.

Domino effect

This is the combined result of not just a demonstrable yearning to tap the global markets, but more importantly, the consequence of an economic recovery.

Banks, telecom and energy sectors, to name just some of those in a recovery mode, have seen their profits rise considerably over a period of time.

Consequently, such high returns give them the financial profile to become noticeable for international investors, who are actively seeking to chase the best possible deals around the world.

However, what must follow these otherwise complementary developments, are two important trends. On the one hand, it's vital for those Pakistani companies which haven't already caught on the trend of reaching out to global markets, to consider internal reforms of the kind which would give them the edge to become global players.

By becoming increasingly profitable and robust, such companies have the opportunity to position themselves as the most thriving players within the community of Pakistani companies.

Once they achieve that goal, their next frontier would indeed be that of positioning themselves for similar forays into international capital markets.

Getting noticed

In the long run, this would allow such companies to become players who would then be well placed to be noticed by international investors.

To translate the success of the few which are now preparing to reach out to international markets, to the benefit of the many more that have still not ventured out in this way, requires not just a recognition on the part of the corporate players themselves, but also a necessary push by the government.

The Pakistani government and regulators involved with corporate functions, must begin pushing companies far more aggressively than what they have done so far, to conform to global standards that make them competitive in the face of rigorous international standards. On the other hand, the kinds of moves presently being considered by the corporates venturing outwards must not cause an oversight of Pakistan's many pressing economic challenges fundamental to its economy.

For long, the country has followed a primarily flawed model of development, where prosperity of a few has often led to increasing ignorance of the needs of the many more who are essentially members of the lower middle and lower income groups.

The ultimate measure of economic growth and prosperity of a country has to be driven by the quality of lives led by its people.

The current spate of indications surrounding Pakistan's economic recovery, though impressive, do not necessarily underline the ways in which the country's people stand to benefit directly from companies reaching out increasingly to global capital markets.

http://www.gulfnews.com/business/Comment_and_Analysis/10077222.html

 

[Neo]

Pakistan's rising land prices an impediment to foreign investment

25 October 2006

ISLAMABAD — The rising land prices in Pakistan have been identified by the government as one of the major impediments to sizable local and foreign investment in the housing sector.

The Ministry of Housing and Works and the Board of Investment (BoI) feel that land prices in the country needs to be rationalised and brought down by working out a comprehensive long term policy.

They have jointly finalised a draft of the "Housing and Real Estate Development" - Sector Profile that calls for formulating new policy measures to remove the growing housing shortage across Pakistan.

The draft also urges the government to announce attractive package to the foreign and local investors to come forward and invest in rural housing schemes. "There are many private and cooperative housing societies which are being established in the urban areas but not a single society is being set up in the rural areas," it added.

This would be the second effort to lure some meaningful local and foreign investment in the housing and real estate sector, following a number of incentives that were offered to the investors in the National Housing Policy aimed at offering affordable housing for the poor.

There is a growing consensus that a rapid growth in housing finance can significantly contribute to the economy in the form of additional employment and support to variety of allied industries.

The copies of the draft have been sent to the economic ministries, State Bank of Pakistan (SBP), the banking institutions and other concerned agencies in order to come up with a final report to be approved by the cabinet for effective implementation.

The BoI and the ministry of housing and works are of the view that the financial institutions should give mortgage loans for housing purposes at market rates. In this regard, all commercial banks will be encouraged to advance loans for housing and housing projects by earmarking a "substantial percentage" of their loan portfolio like other industries and commercial projects. The central bank is being requested to set up a "housing refinance window" for long term funds from multilateral agencies.

Institutions maintaining insurance funds, provident fund, EOBI funds etc shall be encouraged to invest a part of their portfolio in the housing and construction sector including long term housing bonds.

Part of the sale proceeds of valuable public land will be set aside to provide plots for low income housing and housing for the poor and needy at "concessionary rates."

Similarly, the draft also urged the financial institutions and housing institutions to float long term bonds at market rates to raise housing finance. Also, housing finance institutions shall be promoted to encourage savings and provide credit from community based finance and other sources.

The draft sought the support of the provincial governments to urgently identify land in and around urban and local settlements for housing development.

It called for suitably amending land acquisition laws to make provision for unified transparent and market oriented system and litigation minimisation.

The provision of trunk infrastructure shall be the responsibility of Wapda, PTCL, SNGPL,SSGCL, KESC

etc. The cost of trunk infrastructure will be an additional charge to the public and private housing development schemes with the planned areas.

The construction sector in Pakistan has grown by 7.9 per cent against 3.1 per cent last year and a yearly target of 5.4 per cent.

As a result of this growth, the sector has realised an investment of $89.3 million since July 2004. It is anticipated, according to the draft, that the growth in the sector will be multiplied manifold in the near future.

Building and construction sector is among the identified sectors of the government as the driver of economic growth. There are strong backward and forward linkages associated with construction and housing sector and hence a spurt is actively in this sector unleashes a chain reaction in other industries. It is also said that not less that 40 industries are linked to construction and housing sector.

Construction industry alone provides impetus to these 40 industries.

As the government aims at alleviating poverty and improving revenue collection, a focused attention to the industry can help in achieving both the objectives.

According to the official estimates, Pakistan has over 19.3 million housing units.

About 24.8 million housing units for a population of 148.7 million people are required. Hence a shortfall of 5.5 million homes is estimated as of end June 2004.

On an annual basis, the country needs 570,000 units against the actual supply of 300,000.

http://www.khaleejtimes.com/Display...business_October718.xml&section=business&col=

 

[Neo]

Wednesday, October 25, 2006

Pakistan, China to set up joint investment company

By Sajid Chaudhry

ISLAMABAD: Pakistan and China are set to announce establishment of a ‘Pak-China Joint Investment Company’ and other forms for cooperation between financial institutions, an official at Economic Affair Division told Daily Times on Tuesday.

The establishment of Pak-China Joint Investment Company would be an initiative to be undertaken under Pak-China Five-Year Development Programme in financial sector cooperation.

Recognizing the importance of strengthening financial sector cooperation to facilitating and implementing Pak-China Five Year Development Programme, both sides would commit to taking effective measures to intensifying financial sector cooperation including establishment of a Pak-China Joint Investment Company and other forms of bilateral exchanges and cooperation between financial institutions.

This five-year development Programme for promotion of trade and economic cooperation between the two nations would be initialed during November 9-12 in a first meeting of Pak-China Economic Cooperation Group. The group is comprised of top officials of the both countries mainly of economic ministries and departments.

The Chinese Assistance Minister will be arriving Pakistan to participate in first meeting of Economic Cooperation Group (ECG) and the said five-year Programme would be formally signed during Chinese President’s visit to Pakistan starting from November 23, 2006.

A 15 member high level Chinese delegations visited Pakistan during July 2006 to finalise agenda of the meeting of recently constituted Pak-China Economic Cooperation Group (ECG). The delegation was comprised of officials from China International Engineering Consulting Corporation (CIECC) headed by Mr. Gou Husheng, Vice President and Chief Economic of CIECC, Dr. Hu Donsheng Deputy Director General of Department of Planning Business, CIECC and the other members of delegation are Xin Zhongli of Foreign Economic Cooperation, Du Zhenli Department of IT, Li Kaimeng Department of Policy Study, Zhang Xi of Metallurgy, Li Hua of Policy Study, You Bojun of Social Servies Business, Dr. Xu Yudong of Business Planning, Lu Xainghai of Agriculture and Water, Zhou Beiwen of Energy Business, Zban Jinwen of Petrochemistry, Light Indsutry and Textile Business and Wang Ping of International Business.

The Chinese delegation had discussed the existing state of affairs of Pakistan’s economy and trade and future plans for its development in medium term and long term. The delegation also discussed the domestic economic development, the industrial structure and its main characteristics, level and structure of domestic consumption, market structure and its main characteristics. Pakistan’s opinion on current situation of the economic and trade cooperation between the two countries, problems and their solution. Pakistan’s overview for the existing investment projects from Chinese enterprises, problems and directions, which need to be improved.

The areas that would be included in five-year plan for promoting cooperation amongst the two countries are relating to all sectors of economy. Agriculture, Pakistan’s main targets and request of agricultural Programmes in next five years, possible fields and projects in the areas like grains, cotton, animal husbandry, dairy products, livestock, agri-irrigation and water saving technology, manufacturing, textile industry, electronic appliances, machinery and equipments, automobile industry, building materials. Transportation, water supply, sewage treatment in main cities, mining industry cooperation and mineral processing, energy resources, tale-communication network conditions and application conditions, information application and equipped conditions, electronic products manufacturing industry conditions, electronic information industry development plan, exhibitions and conferences, tourism industry, project contract, business and trade, financial services, management services, education and training, technology cooperation and human resource, frame work and method of economic and trade cooperation, investment environment and financing arrangements.

 

[Neo]

Wednesday, October 25, 2006

Cotton output forecast at 12.4m bales in 2006-07

KARACHI: Initial cotton production of the country has been forecasted 12.4 million bales in April 2006-January 2007 cotton crop output, down from a targeted 13.86 million bales, a government statement said.

The country’s main federal committee on agriculture was held Tuesday to review summer crop estimates and set a target for the upcoming winter crops.

“Despite torrential rains and high floods in Punjab and Sindh during last monsoon season, the cotton production losses are low. “Good news is that the last flowering of cotton has raised the possibility of even higher production,” the statement said, adding that the estimate for 2005-06 cotton output was about 12 million bales.

“These numbers are of the first estimate and can be expected to be enhanced during the 2nd and 3rd estimates,” the statement said, without specifying when subsequent estimates will be released.

The country’s cotton crop of around 365,000 acres (147,710 hectares) has been damaged due to floods resulting from heavy monsoon rains, the official said.

The agriculture ministry had earlier estimated the 2006- 07 cotton crop output was likely to total 13.86 million bales, up from 13 million bales in 2005-06.

Pakistan’s cotton harvest usually begins in September in Sindh province and October in Punjab province.

The statement said sugarcane production in the 2006-07 crop year is estimated at 51.8 million tonnes, 16 percent higher than last year’s production, while rice output is estimated to be unchanged from 5.4 million tonnes in the last crop year.

The committee also set a 22.5-million-ton target for 2006-07 wheat crop output, up from 21.6 million tonnes produced in the last crop year, the statement said.

Agriculture constitutes about 25 percent of Pakistan’s gross domestic product, which is forecast to grow 7.0 percent in the current fiscal year that began in July, up from 6.6 percent growth recorded in the last fiscal year that ended June 30.

According to government estimates, the country’s agriculture sector is expected to grow 4.5 percent this fiscal year, compared with 2.5 percent in the previous fiscal year.

 

[Neo]

Wednesday, October 25, 2006

Pakistan developing new high yield rice varieties

KARACHI: Pakistan is working towards developing new rice hybrids using its existing Basmati strains for a multiple increase in yields to boost output and exports, a senior Pakistani rice scientist said.

Rice is one of the major farm commodities produced in Pakistan and more than half the output is exported. According to the U.S. Department of Agriculture estimates, the country’s rice output in the 2006-07 marketing year on a milled basis is estimated at 5.6 million metric tonnes of which around 2.9 million tonnes may be exported.

Pakistan is expected to be among the top five exporters of rice by volume in 2006-07.

“We are using Chinese rice material and our own Basmati lines to develop new types of rice with a potential to even double the current yields,” MB Cheema, a scientist with Pakistan’s Experimental Seed Production Unit said in an interview to a foreign news agency.

Even though the new types being developed wouldn’t qualify as Basmati hybrids because one of the parent varieties would be non-Basmati but could nevertheless mark an improvement is several characteristics of long grain rice.

He said new lines of rice have been developed with potential annual yields between 5-6 tonnes a hectare, but work is still at an initial stage and may take a few more years for tests to be conducted on various parameters.

Cheema said current basmati hybrids give annual yields of around 3-4 tonnes a hectare.

Cheema said the new types are being tested using several parameters including length, width and breadth of grain, water absorption ratio and cooked grain elongation ratio.

“Our major breeding efforts are directed towards improving plant type of long and extra-long grain rice,” said Cheema.

Long grain rice is between 6.7 millimeters and 7.4 millimeters, he said and added that grains above 7.4 millimeters are extra-long grain. Cheema said hybrid rice breeding has been going on for over a decade now in Pakistan.

Pakistan is also working on new types of Basmati. In Pakistan, around 2.6 million hectares of land is covered by rice.

Cheema said in Pakistan’s Punjab province, nearly 96 percent of rice output is Basmati.

Basmati is the world’s costliest rice, known for its unique aroma, grain length and taste. It is grown in certain select areas of India and Pakistan. Research work is also carrying to develop new Basmati hybrids, he said.

The long grain super Basmati was released for general cultivation in Pakistan nearly a decade ago.

In 2000, tall long grain Basmati-2000 was approved for cultivation in Pakistan’s Punjab province.

Cheema said so far Pakistan has developed several new lines of Basmati, some of which are undergoing research trails.