Pakistan Economy - News & Updates - Archive

[Owais]

Decks clear for shipping protocol with India

KARACHI (October 29 2006): Decks have now been cleared for signing of the shipping protocol between Pakistan and India, following the approval by Indian cabinet of the revised protocol between the two countries.

The signing of the protocol, which had already been approved by Pakistan Cabinet earlier, will give a big boost to the sea borne trade between the two countries. The protocol had been pending during past eight months, awaiting Indian cabinet's approval.

The revised protocol will allow lifting of cargo between Pakistan and India by third-country vessels from each other's ports, which would enhance the tonnage under the flags of both countries and also would result in competitive shipping rates.

Minister for Ports and Shipping Babar Khan Ghauri said that this step would go a long way in promoting private investors in the shipping sector as now more ships would be able to fly Pakistan flag and both countries' ships could lift third-country both bulk cargo and containers. This would also boost the economy and subsequently bring down freight charges.

Director General Ports and Shipping, Captain Anwar Shah, welcoming the decision said that informal trade in the shipping sector was around $2 billion but now the benefit would go to both countries and there would be no double handling.

Pakistan already has 'Mega I' flying Pakistan flag in the private sector. Now Mega II and Mega III would also be flying Pakistan flag. Currently, they are plying under Sri Lanka flag.

In December last year, Babar had stated that Karachi-Mumbai service would start soon after the signing of shipping protocol in 2006. Licence in this connection has already been granted to a Pakistan company, which would comply with Indian merchant shipping law requirements.

According to Captain Shah, the Habibullah group has received the licence after carrying out necessary feasibility studies. Now, more ships from the private sector would be encouraged to come forward. Nissan shipping had also stated that when the shipping protocol would be signed, it too would also fly Pakistan flag.

The protocol, to be signed shortly, would accelerate private sector participation and help Pakistan's economy generate employment opportunities. This would go a long way in reducing poverty in the country.

It said the consortium was holding talks with major LNG producers, but did not name them.

"Dana Gas has the objective to develop a network of LNG terminals mainly in the MENA (Middle East and North Africa) region and to tap into the LNG value chain including LNG trading activities," the statement said.

It said Dana Gas signed a co-operation agreement with SBM, under which the United Arab Emirates firm would focus on LNG marketing activities and SBM on the supply and operation of LNG floating storage and regasification terminals.

"The newly formed alliance will initially target LNG terminal projects in Pakistan, Lebanon and Kuwait," it said.

Pakistan, which has its own gas fields, expects to have a supply deficit as soon as 2008. Plans to import LNG and pipeline gas from Iran and Turkmenistan are based on projected gas demand growth of about 6.5 percent a year.

Industry sources in Pakistan have said they expected the LNG terminal to be completed around 2010.

Dana Gas was set up to deliver gas to utilities and industrial users in the UAE. With an agreement to import Iranian natural gas delayed, Dana Gas' second-quarter earnings came entirely from investments and financing activity.

The firm said it aims to invest in the upstream gas industry in the Middle East, the transmission and distribution sector and gas-related industries such as petrochemicals.

The statement said natural gas consumption in the Middle East has been growing by an average 5.9 percent a year in the last 10 years, driven mostly by demand for power generation due to growing populations and an industrialisation drive.

 

[Owais]

Five percent regulatory duty imposed on sugar import: duty relief withdrawn

ISLAMABAD (October 29 2006): The Central Board of Revenue (CBR) has imposed 5 percent regulatory duty (RD) on the import of four different types of sugar and also withdrawn exemption of 10 percent customs duty on the import of the commodity with effect from October 14, 2006.

The board issued two notifications on Saturday for the assessment of sugar at the import stage following the imposition of customs/regulatory duty. According to an SRO.1074(I)/2006, the CBR has levied 5 percent regulatory duty on import of raw cane sugar (HS Code 1701.1100); raw beet sugar (HS Code 1701.1200); white crystalline cane sugar (HS Code 1701.9910) and 5 percent RD has been imposed on the import of white crystalline beet sugar (HS Code 1701.9920).

Through another SRO.1075 (I)/2006, the CBR has amended SRO. 567(I)/2006 of June 5, 2006 to withdraw exemption of 10 percent customs duty on the import of sugar. The board will charge 10 percent duty on the import of raw cane sugar; raw beet sugar; white crystalline cane sugar and white crystalline beet sugar.

Sources told Business Recorder that notifications have been dispatched to the collectors of customs for compliance, as both the imposition of 5 percent RD and restoration of 10 percent customs duty on the import of sugar would be applicable from October 14.

In a meeting with the Pakistan Sugar Mills Association (PSMA) in Lahore on October 10, the government had agreed to safeguard the sugar industry through tariff-based regime to check dumping of sugar in the market. The crushing operation in Sindh will start from November 1 and in Punjab from November 15, 2006.

The PSMA had demanded imposition of RD on the import of sugar. In its annual review, the PSMA had said that the international sugar market prices were down, whereas the government has to clamp down any import duties to stop further inflow. It has predicted 3.5 million tonnes sugar production during 2006-07 season, one million tonnes more than the last year's 2.5 million tonnes.

 

[Neo]

Ensuring peace in Balochistan top priority: Shaukat

ISLAMABAD (October 29 2006): Prime Minister Shaukat Aziz has said rapid development of Balochistan, welfare of its population and ensuring peace in the province are the major priorities of the government, and economic and political initiatives are being made in tandem to expedite growth and development in the province.

Talking to Balochistan chief minister Jam Mohammad Yusuf, the Prime Minister said the government is working to bring development, stability and growth in Balochistan by focusing both on mega projects as well as micro development schemes, which would lead to creation of jobs, better facilities of life and prosperity for the people.

He said more than Rs 160 billion allocated by the federal government for development projects in Balochistan are a manifestation of the government's commitment to bring the province at par with more developed areas of the country.

The Prime Minister said the quota for the people of Balochistan has been increased on the basis of the last population census, which will increase their representation in various services.

He asked the Balochistan chief minister to step up efforts of the government for providing technical and vocational training to Baloch youths. He said the government is focusing on imparting skills training to the people of Balochistan to improve their prospects for getting employment.

Official sources said implementation of development projects, party matters and enhancing role of police also came under discussion. The process to convert 'B areas' into 'A areas' and recruitment of people of Balochistan into various services was also discussed.

The chief minister appreciated the interest taken by the federal government in the development of Balochistan. He said the Prime Minister's recent visit to Balochistan and the development packages announced by him have contributed to strengthening the faith of the people in the federal government for bringing development and prosperity in Balochistan.

He said while the completion of mega development projects will change the economic landscape of the province, micro-finance programmes will bring more prosperity to the people and will help them improve their living standards.

 

[Neo]

$100 million to be spent on big cities in Punjab

FAISALABAD (October 29 2006): The Punjab Large Cities Development Project will be launched in Faisalabad, Lahore, Rawalpindi, Multan and Gujranwala, which will be completed with the financial assistance of $100 million of International Bank for Reconstruction and Development (IBRD) under a phase-wise programme.

Pakistan is currently rated as one of the most urbanised country in South Asia with one-third population out of total population of 160 million lives in urban areas.

According to official sources, the Punjab Large Cities Development Policy Loan is designed to promote economic growth and improve infrastructure service delivery in the major cities of Punjab. The project will assist cities in developing strategic investment plans and improved service delivery in solid waste, urban transport, and strengthening local finances that support infrastructure investment and service delivery.

According to an update project study report, Punjab is Pakistan's most urbanised province, with roughly 36 percent of its population living in urban areas. While its capital, Lahore, is home to about 7 million people, the Punjab also has four other cities with populations in excess of one million, namely Faisalabad, Rawalpindi, Multan and Gujranwala. Not surprisingly, the population density of the Punjab is more than 31/2 times the rest of Pakistan.

According to data from the Development Data Platform (a World Bank Database), Pakistan's largely urban-based manufacturing and services sectors accounted for 77 percent of GDP in 2003, while contributing to over 90 percent of GDP growth between 1999-2003.

Given its above average national urban structure and still rapidly urbanising process, the Punjab is perhaps uniquely poised to place its cities at the center of its economic development and poverty alleviation strategies. However, cities in the Punjab face many challenges, including a projected doubling of the population by 2021 if current growth rates hold.

The proposed DPL's objectives are consistent with the Draft CAS for FY'06-09, which notes that while the urban sector was an area of limited engagement during the previous CAS, devolution has created opportunities for deeper engagement and the Government of Pakistan has accorded greater priority to urban development with a particular focus on the "mega-cities".

Official sources stated that the Punjab Large Cities DPL has benefited from ongoing analytic work on local government issues in the Punjab, ranging from municipal finance to land and housing, as well as solid waste management and water supply.

The DPL will also complement the Punjab Municipal Services Improvement Project (PMSIP), which deals with capacity building and the provision of services in the small municipalities of the Punjab.

 

[Owais]

Refinery project near Gaddani declared EPZ

ISLAMABAD (October 29 2006): The government has declared that an oil refinery would be established in Balochistan as 'Export Processing Zone' (EPZ). The Ministry of Industries and Production issued a notification on Saturday notifying the jurisdiction of the oil refinery for operating as EPZ.

According to the notification, the government has declared 1811 acres land, located at Mouza Mawali Junubi and Kund, sub-Tehsil Gaddani, District Lasbela, Balochistan, duly demarcated, fenced and bounded as 'Export Processing Zone' for setting up of an oil refinery project. The north and south sides of the EPZ cover private land, whereas the east and west sides of the project comprise private/government land and Arabian sea, respectively.

 

[Owais]

MFD conditionally approves restoring fisheries supply to EU

KARACHI (October 29 2006): The Marine Fisheries Department (MFD) has given conditional approval for restoration of fisheries supplies from K-1 Auction Hall at the Karachi Fish Harbour for its onward export to European Union (EU).

MFD Director General Syed Qamar Raza told Business Recorder that he had conducted an inspection of the Harbour here on Saturday and observed some improvements that had been brought in there, however, there was much room for further improving conditions to meet the requirements.

He said the MFD had restored the supplies on the condition that within next three months, all the needed changes should be made as per the commodity standards of EU, otherwise, the action would be taken again in case of no improvement in the harbour.

"Noticing some of the improvements, the conditional approval has been given for restoration of fisheries supplies. However, there is much more to be done to meet the community standards of EU," he said.

"We are preparing the exporters and the harbour for the EU's inspection, which is due shortly. There were some deficiencies, which have been pointed out and an ultimatum to the Karachi Fish Harbour Authority (KFHA) of three months has been given to remove them, otherwise the ban would be re-imposed," Qamar Raza remarked.

The MFD suspended the supplies intended for export to EU from the fish harbour about one month back following the deficiencies in the landing, handling, storage and display of seafood until the relevant requirements are fully met and facility is resubmitted for inspection and approval of the MFD.

The suspension of supplies was resisted by fisheries-related provincial departments and seafood export sector accusing the MFD of destroying the seafood industry and the export sector.

However, in order to facilitate the exporters, all the establishments approved for export to EU countries were advised to implement the Vendor Assurance Programme (VAP) through purchasing the raw material directly from the approved boats until the Auction Hall at the Harbour are operated under Standard Operating Procedures (SOP).

Meanwhile, in a letter, the MFD cautioned that if immediate improvements were not brought at Karachi Fish Harbour, Pakistan would not be able to pass forthcoming European Union inspection and might face new challenges under WTO regime.

"National as well as EU regulations don't permit to handle the food (fish and fishery products) intended for exports in unhygienic manner and in the international market significant changes regarding food security have been taken place and these would continue to occur," it mentioned.

The MFD said the implementation of hygienic standards were in the larger interest of the country, adding that it was the Karachi Fish Harbour Authority (KFHA), which was not realising its responsibility concerning maintenance of harbour facilities and handling of fisheries products under improved hygienic conditions as per the requirements of EU.

The communication pointed out that on August 26, during the inspection of Harbour, a number of major deficiencies were observed and notified to the KFHA for rectification by the committed date of September 15, 2006. However, despite the commitment of the department concerned, no remedial steps were taken to improve the situation meeting the commodity standards.

The MFD had given the guarantee on behalf of all the stakeholders to EU and now it was its responsibility to ensure all the guarantees. "We want all related issues regarding exports to EU are resolved and the sector should be ready for next inspection," Qamar Raza said. Pakistan seafood export has shown a record increase of $198 million in the last financial year, over around $140 million export of previous year.

 

[Owais]

Textile body takes stock of causes of seven percent fall in exports

ISLAMABAD (October 29 2006): The textile Industry has undergone 7 percent decline in its exports in the last two months due to delay in taking notice of the looming crisis in textile sector exports.

The decline started some eight months ago, whereas the standing committee held a meeting on Saturday which, according to a committee member Mrs Yasmeen Rehman, was held after a delay of four months. The standing committee meeting, chaired by Nazir Jatt was held on Saturday to review the factors causing the decline and how to rectify the situation.

Textile Ministry Secretary Masood Alam briefed the committee about different factors, which hurt the competitiveness of the industry. Among these were rise in cost of utilities, taxes, mark-ups and sales tax on raw materials. The committee discussed incentives to the industry to ensure its competitive edge internationally.

The volume and income of textile exports have dropped to the extent that it is even less than Cambodia. The committee noted that China, India and Bangladesh, the main competitors of Pakistan, were offering several incentives to the textile sector.

However, the exports of Pakistan regarding bed wear eg bed sheets, towel etc have seen better results than last year. The committee decided to meet again on November 6 to look for recommendations and suggestions of eminent industrialist Zubair Motiwala and would also hear the point of view of Tariq Saeed Saigol about how to reinvigorate the industry to make it competitive, and reduce the cost of doing business.

It was strongly felt that to meet the World Trade Organisation (WTO) challenges there was dire need to bring major changes to enhance the textile trade. Revision of export finance rates, State Bank of Pakistan mark-up rate on textile loans, solving crisis of spinning industry, reducing gas and electricity charges, skill development training programme and following clean cotton programme efficiently, offering subsidy etc were discussed at length in the meeting.

Moreover, expediting commercial counsellors in foreign countries to appoint professionals with experience and knowledge of exports especially in textile. The committee would put the recommendations to Prime Minister at the earliest for approval after finalising them in the November 6 meeting.

The meeting was attended by Farid Paracha, Chaudhry Manzoor, Pervez Malik, Haroon Ehsan Paracha, Mehmood Sultan, Rahmatullah Khalid, Asiya Nasir and Joint Secretary Mintex Tipu Muhaabat Khan.

According to the Ministry, causes of decline in exports are: the textile industry is experiencing higher cost of production because of high mark-up rate, which used to be as low as 3.5 percent, and now has increased to nine percent. This is leading to about 15 percent price differential in Pakistan's products with its close competitors viz China, India and Bangladesh.

The value-added sector viz home textiles and garment industry have been urging reduction/compensation in the power and gas rates, which are said to be higher than the competitors. Increasing FTAs/PTAs and other trends eg overseas acquisitions of international chains by India of American Pacific, Dan River etc such outsourcing capabilities are not available to Pakistan's exporters.

Other factors hurting the exports are GSP and anti-dumping duties. Moreover, rising costs of utilities ie gas, electricity tariffs plus cost of finance and wages have increased the cost of production and made exports uncompetitive compared with Bangladesh etc. Increased cost of finance has slowed down capital formation and expansion/value-addition.

SUBSIDIES BY CLOSE COMPETITORS: China is giving 13 percent cash subsidy for garment exports plus free electricity for exporting firms. India allows five percent rate reimbursement of normal interest rate and further incentive of capital subsidy of 10 percent extended from 20. 04. 2005 to encourage some sectors besides export marketing finance programme create and enhance export capability and competitiveness of the textile industry.

India, is also offering export product development programme 5 - 7 years soft-term loan at 20 percent margin, zero rating of all innovative taxes, surcharges like education cess, under the duty drawback. Incidence of duty on HSD/ furnace oil has also been factored in the drawback calculation.

Bangladesh, the Ministry said, was providing 5 percent cash incentives/subsidy to export industries using local yarn and fabric. Duty drawback in services used by textile export industries rates are water 60 percent; electricity: 80 percent; telephone: 60 percent; C&F Agents 100 percent; insurance 100 percent; and deduction of tax at source of 0.25 percent on total export proceeds of knitwear and readymade garments as final settlement of tax liability.

Sources in the Ministry told Business Recorder that following main measures had been taken by the Ministry: R&D facility of 6 percent to woven and garments on export since April 2005; 5 percent facility extended to home textiles on export; and 3 percent facility provided to dyed and printed fabrics on export from 1.7.2006.

State Bank of Pakistan has reduced mark-up rate on Export Re-Finance by 1.5 percent to bring it down from 9 percent to 7.5 percent. Facility at SWAP is being extended to the industry to change high cost loans to low cost loan under LTF-OEP scheme, except spinning.

In addition to this, a scheme for production of standardised and clean cotton has been launched with collaboration of provincial governments. Sales tax on import and local supply of major inputs/raw material used in the entire manufacturing chain of textile industry has been made zero rated.

Moreover, Mintex has started projects to establish Textile City at Karachi and Garment Cities at Karachi, Lahore and Faisalabad. It has also launched Stitching Machine Operator Training (SMOT) and EDF has allocated Rs 96 million for this purpose.

Federal Textile Board has been set up to implement contamination-free cotton, project financing for small and medium entrepreneurs and liaison with all stakeholders. The Prime Minister has constituted 'National Textile Strategy Committee' (NTSC) to devise short-, medium- and long-term strategies for Textile Industry, and the Committee would submit its report by December 31, 2006.

 

[Neo]

Sunday, October 29, 2006

Industrial units asked to invest in HR development

FAISALABAD: International Labour Organization (ILO) is planning to launch a project on ‘Marketing of Labour’ in Pakistan, said Dr Rashid Amjad, Director Policy Planning of ILO here Saturday.

During a meeting with President of Faisalabad Chamber of Commerce and Industry (FCCI), Muhammad Ayub Sabir, he said that cooperation of private sector was imperative to bridge the gap between the required and available skilled manpower in the country.

He also asked the industrial units to invest in Human Resource, which would ultimately payback in the form of increased quality and production. Earlier, President FCCI, Ayub Sabir said that the shortage of trained manpower has become a daunting challenge for Pakistan's industrial sector.

 

[Neo]

Sunday, October 29, 2006

Sino-Pak rail link soon

ISLAMABAD: Pakistan and China are expected to sign an agreement to lay down a rail link between the two countries during Chinese President Hu Jintao’s visit next month. “The Chinese president is expect to visit Pakistan on November 23, and the two countries will sign the agreement on this occasion,” sources told Daily Times. The sources said the Planning Division had approved a project to study the feasibility of a 750 kilometre rail link from Havilian, Abbottabad district, to the China border. The study will start after the agreement is signed. The sources said discussion on the technicalities of the project would start on November 11, when the Chinese deputy economic minister is due to visit Pakistan, accompanied by a technical team. The new rail link will be an important route for Pakistan to Central Asian countries, and help make Pakistan the “trade and energy corridor” the government keeps talking about. The sources said the two countries would also enhance cooperation in railways construction, locomotives and railways signalling systems. The link will further ties and the two countries have already signed an Agreement on Expanding and Deepening Bilateral Trade and Economic Cooperation in February 2006. According to the agreement, the two countries have set up a Joint Working Group for economic cooperation and formulated a five-year programme to enhance Pakistan-China trade and economic cooperation. The two countries will also start upgrading the Karakoram Highway in the near future, the sources said.

 

[Neo]

Malaysian firm bidding for $300 million coal power plant

KUALA LUMPUR (updated on: October 30, 2006, 12:39 PST): Malaysia's second-largest power producer Malakoff is bidding for a Pakistan power plant construction and management contract worth up to 300 million dollars, a report said on Monday.

Malakoff is one of 16 firms which last year submitted bids to construct, operate and manage a 1,000MW integrated coal-based power plant near Karachi, the New Straits Times said.

It was pre-qualified for the job early last month and is expected to know by the end of next week whether it has been successful, the daily quoted company sources as saying.

Other companies in the running are Sumitomo of Japan, Siemens and Reinhaul of Germany, and AES Corp. of the United States, it said.

Malakoff, which is being taken private by 22 percent owner Malaysian tycoon Syed Mokhtar Al Bukhary, has been looking abroad for new sources of revenue.

Last year it joined forces with state energy producer Tenaga Nasional and the government's investment arm Khazanah Nasional to secure a 2.6 billion dollar deal to build the Shoaiba power and water desalination plant in Saudi Arabia.

 

[Neo]

Pakistan energy firms post strong profits

KARACHI (updated on: October 30, 2006, 14:16 PST): Pakistan's two largest exploration and production firms posted strong profit growth in their fiscal first quarters on rising oil and gas prices and higher output.

The country's biggest listed firm, the Oil and Gas Development Co. Ltd. (OGDCL), on Monday reported a 36.7 percent jump in July-September net profit to 12.33 billion rupees ($203.3 million) compared with 9.02 billion rupees in the same period last year.

The state-run firm also announced an interim cash dividend of 1.75 rupees per share. The government plans to list the company on the London Stock Exchange through an issue of global depositary receipts (GDRs) by December.

Also on Monday, state-run natural gas producer Pakistan Petroleum Ltd. (PPL) posted a 41.8 percent jump in profit for the quarter to Sept. 30.

PPL's net profit in the July-September period was 3.80 billion rupees ($62.65 million) compared with 2.68 billion rupees a year earlier.

PPL is also high on the government's privatisation agenda. The country's third-largest listed company has a market value of around $3 billion and the government has pre-qualified four companies to bid for a 51 percent stake in the firm.

Analysts said the strong earnings growth for PPL came on the back of phasing out of discounts on wellhead gas prices from the Sui and Kandkot fields.

"The periodic revision in the price of the Sui field, and higher international oil prices to a lesser extent are the two main contributors towards this growth," said Suleman Amir Ali, analyst at brokers Invest Capital and Securities.

Under a wellhead pricing formula agreed with the government, PPL will increase its gas price by 25-26 percent a year until the end of the first half of 2007. State-owned institutions absorb some of the increase without passing it on to customers.

PPL's gas production is estimated to have increased by 8.5 percent as it increased output from the Qadirpur, Sawan, and Manzalai fields and began production from the Makori field, said Ali.

Oil and condensate production were expected to rise about 5.5 percent year-on-year in the quarter on higher production from Adhi, Manzalai and Makori fields, he said.

The company did not release production figures with its financial statement.

OGDCL, which produces 59 percent of Pakistan's oil and 25 percent of its gas, and has a market capitalisation of around $11 billion, also benefited from the higher oil prices and production.

Analysts said the company's oil production rose an estimated 9 percent year-on-year during July-September. An average rise of 23 percent in gas prices during the period also supported the growth, they said.

The company hopes to enter its first overseas exploration venture next year, Arshad Nasar, the firm's chief executive, told Reuters in an interview earlier this month.

OGDCL plans to invest about $2 billion over the next three years on exploration and production activities, including a target of drilling 41 new wells in 2006/07, Nasar had then said.

At 0750 GMT, PPL shares were up 80 paisas at 265.35 rupees, while OGDCL shares were down 1.20 rupees at 154.80, in a broader market that was up 0.15 percent.

 

[Neo]

Poverty down to 24pc, says Musharraf

ISLAMABAD, Oct 28: President Gen Pervez Musharraf on Saturday underlined the need for facilitating the common man’s access to resources by expanding economic opportunities.

During presentations made by the Pakistan Poverty Alleviation Fund (Ppaf), he said financial assistance should be provided to poor segments of society to eradicate poverty from the country.

The president said the government had brought down the poverty ratio from 34 per cent to 24 per cent, adding that efforts should be made for more reduction of poverty in coming years.

He said people’s living standard was being improved through creation of jobs in cities and development of agriculture sector in rural areas.

He asked Ppaf to extend its activities to remote areas, particularly Balochistan. He said focus should be on provision of safe drinking water to people and canal water for agriculture.

The president appreciated Ppaf for launching projects in 2,000 villages.

The meeting was informed that Ppaf had joined the government efforts in reconstruction of quake-hit areas and built 115,000 houses and rehabilitated 1,000 infrastructure projects.—Online

http://www.dawn.com/2006/10/29/nat20.htm

 

[Neo]

Taking the bull by the horns

By Nasir Jamal

If everything goes according to the script, Pakistan will reap a record wheat crop next year. Farmers firmly believe that the wheat output will surpass the official target of 22.50 million tons fixed for the next crop, which will be ready for harvest in April.

The optimism about the next wheat yield stems from favourable weather conditions as well as certain timely initiatives – reduction in the prices of fertilizers(especially phosphate and potash) and increase in the wheat support price – recently announced by the government to help the farmers partly cut down their input costs and offset the negative impact of rising inflation.

The government initiative to slash the prices of fertilisers, especially that of DAP, is expected help the growers save approximately Rs12 billion over the next one year in the shape of reduced expense on inputs.

Wheat growers will benefit the most as a result of the cut in the prices as they use about 60 per cent of the total fertilisers sold for both Rabi and Kharif crops. In addition, the lower prices will encourage the farmers to increase the use of fertilisers, particularly DAP that pushes up the final crop yield.

The decision to increase the wheat support price to Rs425 per maund for the next crop from Rs415 per maund last season is likely to make the farmers richer by Rs1.65 billion, according to AgriForum chairman Ibrahim Mughal. The net benefit that the wheat farmers are going to reap from these two government decisions is going to be around Rs8.5 billion or more.

The government’s decisions to facilitate the growers for a better wheat yield are apparently driven by three considerations:

1) Pakistan wants to raise its wheat output to 30 million tons by 2015; 2) Islamabad needs agriculture to grow by 4.5 per cent so that the overall GDP growth rate target of seven per cent fixed for the current financial year is achieved; and, 3) The ruling coalition led by Prime Minister Shaukat Aziz will be going into elections towards the end of 2007 and will require the support of farmers if it wishes to return to power.

The wheat output target fixed for 2006-07 is up by about 0.8 million tons from the last year’s production of 21.7 million tons. This year farmers are expected to grow wheat on 20.903 million acres – 15.93 million acres in Punjab, 2.27 million acres in Sindh, 1.88 million acres in the NWFP and 0.83 million acres in Balochistan. This compares with 20.53 million acres of land brought under wheat cultivation during last year.

Farmers say the area to be brought under cultivation of wheat will also surpass the official target because of wet weather that actually encouraged farmers in the Barani areas in Sindh as well as Punjab to start sowing since the first half of this month. The wet weather conditions will also help improve the final output of the crop.

The national average wheat yield per acre too is estimated to rise to 27 maunds per acre this year from last year’s 26.43 maunds. Though it looks like an ambitious target if the past is anything to go by, it still is achievable in view of the positive steps taken by the government to encourage the wheat sowing.

The wheat yield per acre is highest in Sindh (30 maunds) followed by Punjab (27.94 maunds), Balochistan (21 maunds) and the NWFP (16.66 maunds).

If everything goes right, Pakistan, which will begin the next wheat harvest with a carry-over stock of over one million tons, will have at least two million tons of surplus.

The government’s recent initiatives like increasing procurement price to encourage wheat production in the country apart, farmers in Punjab strongly favour reduction in their input costs. “The increase in the wheat procurement price is good. But higher procurement price always leads inflation to rise, ultimately impacting negatively on the input costs. Therefore, the government must ensure that the farmers’ expense on inputs is reduced,” says Mughal.

“There are around one million tube-wells and 425,000 tractors that will be operating during wheat sowing and afterwards. The government must slash the rates of diesel and electricity, which form a major part of the farmers’ input expense, required to operate tube-wells and tractors,” says Mughal.

He says the wheat output can be increased manifold if the government ensures increase in the availability of certified seed. At present only 14-15 per cent certified seed is available with the public and private sector. “Ideally, 20-25 per cent of the total seed used should be certified ,” he says.

Besides, he says, weeds are a big threat to the crop and cause a loss of 15-20 per cent in the final outcome in addition to adding to input costs as farmers have to use greater quantity of fertilisers than is required.

“Should the government provide easy, long-term credit to farmers for purchasing herbicides to fight the threat of weeds, we can substantially increase our output. Total amount required to fight the threat of weeds will not be more than Rs4 billion. But its ultimate benefit to the economy will be greater than Rs20 billion. Should we increase our per acre yield by one maund, farmers will get an additional Rs8.8 billion. You can imagine the kind of impact it will leave on their lives.”

Farmers also fear that the surplus crop will bring its own old problems with it and increase their post-harvest losses as the government’s procurement is slow and inefficient.

“The government enters the market quite late. By the time it comes into action, it is already too late for the hapless farmers who do not have arrangements to store their produce. They are forced to sell their produce at discounted rates, far less than the official procurement price, just to make sure that it is not wasted,” says Mughal.

“The government needs to start addressing these issues – input costs as well as post-harvest difficulties faced by growers in selling their crop – right away. If it is done and these issues addressed properly, we can become a permanent wheat exporting country to such destinations as Iran, Turkey, India, Afghanistan, etc in the years to come,” he says.

But the question is: “Who is going to take the bull by horns?”

 

[Neo]

Technologies for increasing wheat crop

By M. Ather Mahmood & Dr A.D. Sheikh

Pakistan is predominantly an agricultural country. However, the yield of almost all the crops obtained is far less than their potential.

The cop production technologies developed through research are there but their adoption remains limited. This requires an efficient and effective information flow about agricultural technologies from the researchers to the farmers.

Wheat is the country’s most important agricultural commodity and contributes 13.7 per cent to the value-added in agriculture and three per cent to the GDP. Its share in the total cropped area is 37 per cent.

Being staple food grain, it contributes 42 per cent of total calories required per capita per day. The wheat straw is also important as fodder. Consequently, it occupies a central position in agricultural economy and policies.

A wide gap exists between the national average yield (about 2586 kg/ha), progressive farmers’ yield (about 5000 kg/ha) and potential yield (about 6800 kg/ha).

Pakistan has been a net importer of wheat for the past several decades. This situation is not enviable. It is believed that the future increase in wheat production will come through yield enhancement since land resources will decline.

The area under wheat should preferably be decreased to accommodate pulses and oilseed crops to overcome the gap in their supply and demand. Efforts to increase the wheat productivity have always been the concern of the researchers who have developed technologies for its production.

The agricultural department publishes brochures and booklets for recommended production technologies for each crop. These are considered as recommended technological package.

The technological package includes varietals selection, land preparation practices, sowing schedule, seed rate, fertilisers, irrigation schedule, weed control, insect pest and disease control and harvesting. By adopting these recommended technologies, the farmers can get higher yield.

The Technology Transfer Institute (PARC), Faisalabad has undertaken a study to assess the adoption of wheat production technologies in the rice-wheat and mixed cropping zones of the Punjab.

The survey was conducted in three important districts of the rice-wheat zone namely Sialkot, Gujranwala and Sheikhupura and three districts of mixed zone namely Faisalabad, Jhang and the T.T. Sigh. A total of 180 wheat growers were randomly interviewed (90 from each zone) for the collection of requisite data.

The main findings of the survey are summarized as follows: Land preparation is the first and important activity to be performed for wheat production. The study results reveal that about 83 per cent of farmers prepared the land as recommended by experts.

Crop production largely depends on the choice of variety. The seed must be healthy, cleaned and treated to get higher yield. If the choice and practices are right as recommended by the experts for that particular area, then there will definitely be higher yield.

About 78 per cent of the respondents sow the recommended varieties. However, the major reliance is still on Inqilab 91.

Timely sown wheat gives higher yield and delayed sowing affects the yield. The wheat experts said that one day delay after November 20 reduced the yield from 15 to 20 kg per acre. The problem of delayed wheat sowing in the rice-wheat zone is due to late rice harvesting.

Similarly, the reason behind late planting of wheat in the mixed cropping zone is the late vacation of the field mainly by sugarcane crop. The survey results reveal that only 54 per cent of the respondents sow wheat in time.

Farm experts emphasise the practice of line sowing rather broadcast method. However, farmers generally practice broadcast method for wheat in order to save time and resources.

The survey results highlight the same fact that only 27 per cent of the growers practice line sowing as per recommendation of the department.

The recommended seed rate for timely wheat sowing i.e., before November 20 is 50kg per acre. If the sowing is delayed to December, then the recommended seed rate is 70kg per acre.

The farm level practice is very contrary to it, the farmers generally apply seed 40kg per acre for timely sowing and little late sowing, and 50kg per acre for December sowing. Only 45 per cent of the farmers apply seed as per department recommendation.

Fertiliser is a key input for better crop production. The timely and balanced use of fertiliser increases the yield by five to 10 maunds per acre. The farmers of survey area generally apply nitrogen and phosphorous fertilisers but they don’t apply the potash fertiliser.

The survey results reveal that only two per cent of the growers apply fertiliser according to the recommendation of the department. The obvious reason for low fertiliser application is its price.

Wheat crop generally requires three to four irrigations at different stages of growth. There are three critical stages i.e., first irrigation normally 20-25 days after sowing, second at boot stage and third at milk stage of grain development. About 88 per cent of the respondents apply irrigation as recommended by experts..

Weed control is important to get higher yield of wheat crop. It is estimated that weeds reduce the yield by 30 to 40 per cent. There are about 75 per cent of the respondents who apply weedicides.

The results of the study clearly indicate that some recommended technologies like land preparation, varieties, irrigation and weed control are well adopted while others like sowing time, sowing method, seed rate and fertiliser application are not so well followed.

Following are some suggestions to improve wheat productivity based on survey results.

* The majority of the farmers fail to timely sow their crop due to number of reasons. There is serious decline of yield due to late planting. We should develop technologies to minimise this problem.

*Similarly, sowing method and seed rate of the majority of the farmers are not as per recommendation of the agricultural department. So, there is strong need to increase the rate of adoption of these technologies.

*The application of fertiliser is the lowest among all the wheat production technologies. The reasons of low application need to be seriously reviewed and properly tackled.

*The adoption of weed control practices is high among the sampled farmers. Efforts should be made to further improve the weed control practices.

*Improve awareness about the recommended technologies.

http://www.dawn.com/2006/10/30/ebr4.htm

 

[Neo]

Luring foreign direct investment

By Hussain H. Zaidi

Foreign direct investment (FDI) is investment in new or existing facilities involving control of a foreign enterprise. As against volatility of foreign portfolio investment in stocks and shares, FDI involves a long-term commitment, and is seen as the most important source of foreign financing.

Investment creates jobs and expands output. For developing countries, FDI is necessary to fill the gap between domestic savings and the desired level of investment. On the other hand, for foreign investors—transnational corporations (TNCs)—the investment oversees serves in the main four purposes: One, it enables them earn far more profits than it would be possible otherwise.

Two, it enables them to locate their manufacturing activities where they can be performed most efficiently or cost effectively. Three, it enables them to re-introduce a product in a foreign market, often by customising it with the foreign country environment, after the product has reached the maturity stage in the domestic market. Four, it enables them to diversify their portfolio and thus minimise risks

The decision to invest in a foreign country, like other business decisions, is based on cost and benefit analysis. Speaking generally, FDI is made in a country, if perceived benefits outweigh perceived costs.

As a principle, FDI is made in those countries where risks are low and returns are high. However, speaking in specific terms, there are many factors in the host country which restrict or promote FDI.

Before we discuss these factors, let’s look at global FDI inflows.

In 2004 were $648 billion. Of these, developed countries attracted FDI worth $380 billion, while developing countries attracted FDI worth $233 billion. This gives developed and developing countries shares of 59 and 36 per cent respectively.

The USA, which attracted FDI worth $96 billion, was the single largest beneficiary of FDI inflows. The USA was followed by China, which attracted FDI inflows worth $64 billion. Hong Kong, a special administrative region of China but a separate customs territory, attracted FDI worth $34 billion.

If we add FDI inflows into Hong Kong to FDI inflows into mainland China, China becomes the largest beneficiary of FDI inflows—a total of $98 billion. Region wise, the European Union (EU 15), received the largest amount of FDI whose value was $197 billion.

Conversely, the entire continent of Africa could attract only $18 billion worth FDI. The least developed countries (LDCs), the economies most in need of FDI inflows, received FDI inflows of only $11 billion.

The main factors which promote or restrict FDI inflows include the level of demand in the host country, the absence or presence of created assets, protection of FDI, the overall investment climate, the economic environment, and the political situation. We begin with the level of demand. The level of demand in the host country depends in the main on two factors: the purchasing power of the consumer, and the size of the market.

Consumer purchasing power is measured by income. Ceteris paribus, countries with higher per capita income are more attractive markets for foreign investment than countries with low per capita income. One reason for low level of FDI in LDCs and most developing countries is low per capita income. This is a catch 22 situation for these countries.

In these countries, the level of domestic investment is low mainly because domestic savings are low and domestic savings are low, because per capita income is small. These countries need FDI to bridge the gap between domestic savings and the desired level of investment caused by low per capita income. But FDI inflows into these countries are restricted, inter alia, because of small per capita income.

The second factor underlying the level of demand is the size of the market. The larger a market, the greater attraction it holds for foreign investors. This is for at least three reasons. In the first place, a large market has a high level of aggregate demand.

In the second place, a large market makes it possible for businesses to actualize the economies of scale and thus bring down the cost of production. In the third place, in a large market generally surplus labour is available which increases the marginal utility of capital. An obvious example of the relationship between market size and FDI inflows is China.

However, mere market size, though important, is not sufficient to attract FDI. A case in point is India, the second largest market after China, which received only $5 billion FDI in 2004, while Singapore, a country many times smaller than India, managed to receive $16 billion FDI in the same year. This means there are factors other than market size which must be looked into which attract TNCs. One of these factors is created assets, which refer to the existing level of human resources and commercial and physical infrastructure. While countries need FDI to upgrade their created assets, foreign investors need existing level of created assets in choosing a market for investment.

It is created assets which mainly explain why a miniscule city-state of Singapore receives three times more FDI than a giant India. Again, it is lack of created assets that is the main reason for low level of FDI in LDCs and Africa.

The third important factor is protection of investment and the related assets such as intellectual property rights. The host country must put in place a strong legal framework for the protection of investment. Such framework must guarantee to the foreign investor most favoured nation treatment (MFN), national treatment and fair compensation in case of expropriation of investment.

MFN treatment means that any advantages, privileges and immunities granted to the investors of one country are extended to the investors of other countries as well. National treatment means that the host government will not discriminate between foreign and local investors in terms of application of laws, rules and taxes.

Since at present, there is no multilateral investment treaty, countries enter into bilateral investment treaties to ensure that their investors are not discriminated against vis-à-vis other investors from other countries as well as investors from the host country and are also immune from arbitrary change in policies of the host government.

Protection of IPRs is also an important component of an effective legal regime for investment. Generally, investors are reluctant to enter into a foreign country if its laws and administrative procedures do not provide for effective protection of copyrights and patents.

But there are exceptions. China, for example, lacks an effective IPRs enforcement system but still it is the most attractive market for foreign firms. This is due to the huge size of the Chinese market and the fast pace at which the economy is growing for last more than a decade.

The investment climate includes the overall investment policies of the host government. Arguably, the most important of these policies are what are commonly referred to as trade related investment measures (TRIMS). The host government while attracting FDI has some policy objectives to achieve. For instance, they may want to encourage the development of ancillary industries, seek transfer of technology, create jobs in a particular sector or safeguard or improve the balance of payment (BoP) position.

In order that these objectives are achieved, the host government puts many conditions on the foreign investor. Such conditions are called TRIMS. The most common TRIMS are: Local content requirement, which requires that the foreign investor shall use a certain amount of local inputs in production; technology transfer requirement, which stipulates that the foreign investor shall transfer specified technology to local firms; trade balancing requirement, which requires that imports must be equivalent to a certain proportion of exports; foreign exchange restrictions, which restrict access to foreign exchange and thus access to imports.

Export requirement stipulating that a certain proportion of the output shall be exported; remittance restriction place curbs on the right of the foreign investor to repatriate returns from investment; local equity requirement, which requires that a certain proportion of assets must be owned by local persons; and employment requirement, which stipulates that a certain percentage of the workforce employed in a foreign-owned enterprise shall consist of the local people.

While the use of TRIMS may be necessary to achieve some key policy objectives, it is not without problems. In the first place, the use of TRIMS discourages foreign investors, because it deprives them of the freedom to purchase labour and capital inputs from the market where it is most suitable from them.

Moreover, as a rule, firms are reluctant to transfer technology, because technology is the strategic source of their competitive advantage. In the second place, many of the TRIMS, such as the local content requirement, are not approved of by the Agreement on Trade Related Investment Measures of the World Trade Organisation (WTO). Therefore, for both practical and legal reasons, countries should use TRIMS with caution.

The economic environment includes the state of the economy, price and productivity of inputs, availability of finance and subsidies, market-oriented policies like a floating exchange rate, privatisation, growth of the market, and proximity to other markets.Socio-political factors include political stability, law and order situation, government policies, political image of the country, continuity of policies, clean administration and fair treatment to TNCs from the host government.

A country characterised by political instability, bad law and order, poor governance, ad hocism of policies, a negative political image, corruption in high places and lack of fair treatment to foreign enterprises does not have a good potential for foreign investment, because these factors increase the risk of doing business.

http://www.dawn.com/2006/10/30/ebr8.htm