Pakistan Economy - News & Updates - Archive

[ST1976]

Trade deficit rises by 67 percent in first quarter

SBP data says that imports stood at $6.89 billion, whereas exports totalled $4.164 billion, leaving trade imbalance (in goods) of $2.759 billion. The services account also witnessed a large imbalance, of $1.329 billion, during July-September 2006 as inflows, under this account, stood at $653 million against outflows of $1.982 billion. Thus, on balance, total trade deficit (goods and services) stood at $4.053 billion.
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According to economic experts, this external disequilibrium in the shape of current account deficit may have a significant impact on the value of rupee. Besides, it would translate into a larger increase in Pakistan's net foreign debt position. A large and growing public debt could also eventually put upward pressure on interest rates and crowd out private investment.

this is a serious case that total export of pakistan was around $4.817bn (including merchandise and service export)for the first quarter while total trade deficit for the same period was about $4.053bn. here growing trade deficit is mainly covered by foreign remittances and FDI inflow. remittances are OK but the FDI pakistan is getting will be taken away after a certain period. also FDI in real state and energy business doesn’t increase export like that of FDI in manufacturing sector where pakistan is getting no FDI. pakistan cant afford this much luxury of import for a long. government need to work very hard to control this growing trade deficit. we can understand why import is increasing but there is no reason why export has almost 0% growth. right now, foreign reserve of pakistan is enough for 3 months of import only. immediate steps need to be taken otherwise pakistan may face economic crisis like what ASEAN faced in late nineties. and once pakistan will loose confidence of foreign investors, it will take a long time to back on internation market.

 

[Neo]

Mobilink’s investment to touch $2.5bn mark

KARACHI: Nov 10: With the additional investment of $500 million the total investment made by Mobilink would touch $2.5 billion by the end of 2006. This was stated by Zouhair A Khaliq, president and CEO of Mobilink.

“Today, we are one of the largest private foreign direct investor (FDI) in Pakistan and contribute significantly to the national exchequer by way of taxes, duties and royalties.

We are committed to the economic prosperity of the country, provide direct and indirect employment to more than 5,000 people and contribute towards social causes,” Khaliq said in a statement.

Despite several hiccups in the quality of its service, the company has maintained a lead in the market by being the first to reach 20 million customers mark. Mobilink’s emphasis in recent months, however, has been on improvement in infrastructure.

The company intends to invest another $500 million imminently to facilitate the rapid increase in network capacity and enhance technological infrastructure to address some of its critical connectivity issues.

Last week, Chairman and CEO of Orascom Telecom--the parent company of Mobilink--Mr Naguib Sawiris was in Pakistan recently to receive Tamgha-e-Quaid-Azam. On the occasion he announced his group’s intention to invest in the tourism sector.
http://www.dawn.com/2006/11/11/ebr14.htm

 

[Neo]

Property boom emerging again

KARACHI: The property market of Karachi is once again attracting a lot of money these days due to stable stock, gold and currency markets. Particularly, a large number of new schemes of plots as well as flats near the Northern Bypass have been announced (and also extensively advertised), which are drawing a number of buyers.

A luxury flat of 180 square yards in a recently announced project, 10 kilometres from Sohrab Goth, is priced at no less than Rs4 million. This gives an idea of how expensive the houses are, even if located in the outskirts of the city.

A residential plot of 80 square yards in a project near the Northern Bypass is available at Rs249,000, although it is as far as 35 kilometres from Sohrab Goth. In the same scheme, a residential plot of 120 square yards costs Rs379,000.

Most of the buyers of plots and flats in these projects are Pakistanis living abroad, who have come to their home country for celebrating Eid. As they have money, they put it in property so that when they return after a few years of extremely hard work they have a spacious home to live in.

Builders say Pakistanis working in Arab countries and the US are the most attractive clients for them because they are able to make timely payments. It is for them that most of the builders announce and advertise their projects around Eid days.

Builders say usually they experience difficulties in obtaining agreed money from buyers residing locally, but those working abroad are their ideal buyers.

Similarly, in a much advertised scheme, which is located far away from the main city, a 200 square yard plot is being offered at a price of Rs695,000 and 400 square yard plot for Rs1,395,000.

The commercial plots in such schemes are even more expensive. A 400 square yard plot is priced at Rs2,995,000. In another scheme, a 100 square yard commercial plot is being offered at Rs700,000 and 200 square yard plot for Rs1,800,000.

The projects being built in the main city are certainly more expensive. On average, flats in Clifton and Defence areas are priced at Rs5,000 per sq ft, in Bahadurabad at Rs6,000 per sq ft and in PECHS Rs6,000 per sq ft. In Gulistan-e-Jauhar, which is an area of lower middle and middle income groups, flats are available at Rs2,500 per sq ft on average.

Besides, the financing facilities being offered by banks and other institutions are also a factor behind this activity in the construction industry, as now people can obtain loans from more sources. In recent years, the monetary authorities of the country have encouraged banks to lend money for housing, giving impetus to this industry.

 

[Neo]

Mineral sector to get $50m help: WB

KARACHI: The World Bank has committed more than $50 million to assist government in sustainable mineral sector development with a particular focus on Balochistan as a pilot case.

A document issued by the international donor agency suggests the bank is offering a total of $56 million for the mineral sector with an objective to contribute to economic development through export earnings, taxes and royalties, employment and community level well-being.

“The core objective is to assist the Government of Pakistan in implementing its strategy to accelerate sustainable mineral sector development by (i) strengthening governance, transparency, and capacity in the management of mineral resources, with particular emphasis on community development, environmental compliance, and equitable sharing of mineral resource benefits, and (ii) attracting private sector mining investment,” said the project information document (PID) issued by the World Bank.

“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.”

It said the project was expected to yield increased private-sector investment in the mineral sector as a result of collection and dissemination of basic geodata and improved investment enabling climate through enhanced legal and fiscal frameworks in line with international practices.

At provincial level, it said, the project was expected to be an IDA Credit with indicative cost of $48 to $55 million. Most of the project activities would be implemented simultaneously, but certain reforms at the provincial level including development of provincial mining regulatory framework and community development policies would start after overarching federal level frameworks were established, added the document.

“Production and management of geo-data includes establishment of a mineral resource information centre for the management and dissemination of mineral resource information; compilation of existing and collection of new basic geo-data; and activities to support sector promotion,” said the World Bank.

“A Provincial Regulatory Framework and Institutional Strengthening includes, restructuring of provincial regulatory and fiscal frameworks relating but not limited to licensing, cadastral services, environmental compliance, mine health and safety, inspection and training; and institutional modernization and strengthening.”

The international agency also focuses federal institutions for the potential growth of the sector as the document says improvement of the federal legal, regulatory framework, fiscal and taxation Regimes and Institutional Framework would the part of such campaign.

“It includes modernising and strengthening legal and fiscal frameworks, monitoring of industry activities, enforcing regulatory and environmental compliance, and institutional modernisation and strengthening as well as technical and non-technical capacity building,” it added.

It says development of a Template for Provincial Mineral Concession Rules and Regulations includes development of standardised rules and regulations for the award, renewal, cancellation and administration of mineral rights, and coordination of standardised mineral cadastre system at the provincial level.

“Formulation of National Sector Policies for Sustainable Development includes modernisation and strengthening of existing policies using international best practice duly adjusted to local conditions and formulation of consultation and planning frameworks to ensure community well-being for both large and small-scale mining,” said the World Bank document.

At federal level, it says, coordination and promotion of mineral sector development and dissemination of basic geo-data includes establishment of a national mineral resource information centre and institutional strengthening and capacity building of the Geological Survey of Pakistan.

 

[Neo]

Cruise liner to provide big boost to UAE-Pak tourism
11 November 2006

DUBAI — The Gulf Dream Cruise, with 240 passengers on board, arrived in Dubai from Karachi on Thursday evening amid celebrations.

The Consul-General of Pakistan, Abdul Hamid, said the luxury cruise liner would give a boost to tourism ties between both the countries.

The passengers included both Indians and Pakistanis who travelled to Karachi by air just to enjoy the sea journey.

Raghu Katria, an Indian, said, “I flew to Karachi so that I could take the cruise which I enjoyed immensely. They must serve Pakistani cuisine though,” he said. “I go cruising every year and I must recommend this cruise to all people.”

Also present on the cruise were Pakistani singer Shehzad Roy and pop group Bombay Vikings.

However, several families with children said the delay in receiving visas upon arrival was the only hitch during the two-day journey.

Rizwan Mohiuddin, President of the Gulf Dream Cruise, said the company was the first to be granted a licence by the Pakistani government. The ferry does not offer regular transportation, but a fun-filled journey including on board entertainment such as theatre, games and restaurants, he added.

“We are hoping to promote tourism between the two countries and give people in Pakistan and the UAE an opportunity to sail across the Gulf waters and the Arabian Sea.”

Pakistani passenger Toufiq Hamdani said, “The cruise is much cheaper compared to the costs of international cruises. We enjoyed it.”

The Gulf Dream Cruise will run a weekly ferry service between Dubai and Karachi.

Upon arrival in Dubai, passengers will be taken on a tour of the city and vice versa.

However, tourists travelling from Dubai to Karachi will have to arrange for their own visas if they are not residents of Pakistan. The round fare for a trip starts at $559. Executive class costs $775 while one has to pay $850 for First Class. Passengers can take a one-way trip too.

The 196m long vessel weighs 23,000 tonnes and has 540 rooms. It can accommodate up to 1,250 passengers and 400 crew members.

The cruise offers seasonal trips starting from November this year to February 2007 with six to seven cruises each month. The next season will start in November 2007.

 

[Neo]

Pakistan Aims to Raise $15 Billion From Asset Sales in 5 Years

By Khalid Qayum

Nov. 10 (Bloomberg) -- Pakistan plans to raise as much as $15 billion in five years selling state assets, including stakes in energy companies and banks, as accelerating economic expansion draws investors to the South Asian nation.

``Over the next five years, our target is that between $2 billion to $3 billion should come from privatization'' annually, said Salman Shah, adviser on finance to Prime Minister Shaukat Aziz, in a Nov. 8 interview in the Pakistani capital Islamabad. ``As the economy grows, our reforms deepen and we're trying to tell the Pakistan story, we are getting a good response.''

Pakistan needs investment to boost growth and bridge a current account deficit that, according to the Manila-based Asian Development Bank, may reach $8.5 billion in the fiscal year to June 30 from $5 billion last year. Pakistan's government forecasts the $129 billion economy will expand 7 percent this year, from 6.6 percent growth last year.

``The government has a fairly long list of assets that can be privatized,'' Shah said. Some of the proceeds from the asset disposals will go toward the repayment of $35 billion of overseas debt.

Pakistan plans to sell shares in five oil and gas companies this fiscal year, including global depositary receipts in the biggest explorer Oil & Gas Development Co. and in the country's three largest banks. It also plans to sell stakes in Pakistan State Oil Ltd., the country's biggest fuel retailer, and the largest gas producer, Pakistan Petroleum Ltd.

Overseas Investment

The funds from asset sales will help the country increase foreign direct investment to $5 billion this fiscal year, he said. Overseas investment in the South Asian country tripled to $1 billion in the quarter to Sept. 30 after having more than doubled to $3.5 billion in the last fiscal year from $1.5 billion in the previous 12 months.

The country's widening current account deficit is not a ``concern'' as the country seeks economic growth and as global oil prices decline, Shah said.

Pakistan's current account deficit widened last year after the country's oil import bill increased 67 percent to $6.66 billion. Pakistan imports 85 percent of the fuel it uses domestically.

``Our financial flows are so strong'' on overseas investment and from asset sales ``that we will be building up our reserves,'' he said. The rising current account deficit is being driven by import of ``machinery and raw material, which are ingredients of an expanding economy. At some point in time our current account deficit will start coming down.''

The Asian Development Bank said in a report on Nov. 2 that the current account deficit was a potential risk to the country's medium-term economic prospects.

`Satisfied With Situation'

Standard & Poor's, which had said in June it may have to cut the country's outlook because of concerns about government debt, has been reassured by the economic performance.

``Standard & Poor's is satisfied with our situation,'' Shah said. ``They will be looking at Pakistan in perspective of the performance of the economy and revenue collection,'' which has been buoyant.

There was no domestic threat to the economy as there was a national consensus on economic management, Shah said. As far as external factors are concerned, the impact of developments in Iraq and Iran could become threats to growth prospects.

The results of the U.S. midterm election aren't expected to lead to any changes in policy toward the South Asian nation.

``Pakistan has bipartisan support from the U.S.,'' Shah said. ``The U.S. interest in Pakistan is long-term.''

The move to tighten monetary policy this year will slow imports and prevent the economy from ``overheating,'' he said. The government wants economic growth to stay in a band of 6-8 percent, the adviser said.

Monetary Policy

The central bank's move to increase the benchmark lending rate to commercial banks by 0.5 percentage points to 9.5 percent on July 31 ``is having a positive impact,'' Shah said. ``We are in watch mode to see how things move, and if we think we further need to tighten it up we will definitely tighten it up.''

Pakistan's trade deficit widened by 32 percent to $3.16 billion in the first quarter ended Sept. 30 as exports increased 13 percent to $7.43 billion. The government expects the trade gap to narrow to $9.4 billion this fiscal year from $12.1 billion last year.

The government won't cut imports to help the economy to grow and will be satisfied with foreign currency reserves that can pay for at least six months of imports, Shah said.

``It's important we maintain a prudent level of reserves and carry on the growth of economy rather than slow down significantly,'' he said. Pakistan's foreign currency reserves were $12.5 billion last week, or equivalent to about seven months of import.

To contact the reporters on this story: Khalid Qayum in Islamabad, Pakistan, at kqayum@bloomberg.net .

http://www.bloomberg.com/apps/news?pid=20601080&sid=aQZpeHiQkKEw

 

[Neo]

World Bank's MIGA helps promote FDI in Pakistan

KARACHI (November 12 2006): Foreign investors interested in opening up businesses in Pakistan can offset potential non-commercial risks to their investments with the help from the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group. That was the key message of a business roundtable held on Saturday here, said a press release here.

The event, hosted by the Institute of Bankers, Pakistan (IBP) drew representatives from about 10 leading banks and financial institutions. Kicking off the event were Board of Investment (BoI) Director General Arif Elahi, SBP governor's Adviser on development finance Azhar Iqbal Kureshi, and Institute of Bankers, Pakistan (IBP) Chief Executive Muhammad Saleem Umer.

Inaugurating the roundtable discussion, Kureshi stressed the importance of foreign direct investment for the economic development of Pakistan and the importance of MIGA in providing guarantee for such investments, particularly in large infrastructure projects.

Muhammad Saleem Umer welcomed MIGA's initiative to share with Pakistani bankers how the agency's political risk instruments can play an important role in security foreign direct investment in developing countries, including Pakistan.

Foreign direct investors can play a critical role in reducing poverty by building roads, providing clean water and electricity, and above all, providing jobs. But foreign direct investment into developing countries is often inhibited by concerns about political risks.

The government cannot shoulder the burden-financially or technically-of addressing the country's development needs alone. The private sector can help economies grow and avert the need for governments to use funds better spent on acute social needs.

Speaking at the event, MIGA Chief Counsel Srilal Perera and Investment Officer Hal Bosher discussed how MIGA gives private investors the confidence and comfort they need to make sustainable investments in developing countries by providing political risk insurance; technical assistance; and dispute mediation services.

"MIGA is committed to promoting socially, economically, and environmentally sustainable projects," said Perera.

"A MIGA-supported project is already helping in developing a more efficient telecommunication infrastructure in Pakistan," he said. "MIGA has provided Orascom Telecom Holding SAE of Egypt a guarantee for $79 million to cover its $88 million equity investment in Pakistan Mobile Communications Limited."

Perera also highlighted the improved financial terms encouraged by MIGA's coverage, including better access to project finance, lower borrowing costs, and longer loan tenors.

MIGA can also help Pakistani entrepreneurs minimise risk while investing in other developing countries. Investment Officer Hal Bosher spoke about opportunities for Pakistani investors in Afghanistan. In the past one year, MIGA has supported three projects in Afghanistan, including a pharmaceutical manufacturing plant, a microfinance project, and a cotton ginning project. All three projects were underwritten under the agency's Small Investment Program.

"We at MIGA are able to cater to the different risk preferences and unique needs of both large, complex transactions and small investments," said Bosher.

"Our Small Investment Program is tailored to provide a flexible and competitive political risk insurance product tailored to the needs of small investors"

 

[Neo]

Five-year uplift plan for Pakistan: Chinese advance team due on November 16

ISLAMABAD (November 12 2006): A Chinese advance team will reaching Islamabad on November 16 on three-day visit to finalise, before the scheduled visit of Chinese President Hu Jintao with a huge private sector delegation, a 'five-year development plan' for Pakistan, official sources told Business Recorder here on Saturday.

They said that the team, headed by an Assistant Minister, would hold discussions with all concerned ministries at the Economic Affairs Division (EAD) to give final touches to the agreements to be signed, most probably, on November 23 in Islamabad.

"Both countries are negotiating projects of investment of upto $30 billion, and agreements will be signed during the visit of Chinese President," sources said.

They said that all focal ministries have been directed to complete their homework over the proposed agreements to avoid any inconvenience during discussions with the Chinese advance team.

The main projects would be related to infrastructure, new Gwadar international airport (NGIA), new Islamabad international airport (NIIP), establishment of six nuclear power projects, an oil refinery at Gwadar, and a pipeline to deliver its refined products to Kashgar, besides coal mining and power production in Thar.

For the oil refinery, the Ministry of Industries and Production has issued notification recently declaring the refinery area as 'Export Processing Zone' (EPZ).

"We have declared 1811 acres land located at Gaddani, duly demarcated, fenced and bounded to be a zone for setting up of oil refinery project," sources added.

They said that on the North and South is private land, while on the East is private/government land and on the West is Arabian Sea, and the land is owned by Mahmod Haroon.

The Chinese President would make a formal announcement for setting up the oil refinery with a total refining capacity of 21 million tons oil per annum. The project would have two components, including a petrochemical complex and oil storage with an investment of $12 billion.

Sources said that both countries would also sign an agreement regarding establishment of special zones for Chinese companies, besides further co-operation in defence field. A Pakistan delegation, headed by Planning Commission Deputy Chairman Dr Akram Sheikh, has already completed negotiations on different agreements with the Chinese team in Beijing and set the pace for tangible announcements during the visit of President Hu Jintao.

 

[Neo]

Country may have 0.5m tonnes surplus sugar next year

* Sugar price unlikely to come down
* Sugar production could be up 20-25% because of higher sugarcane output

KARACHI: In spite of the expected high production in the current fiscal year, sugar prices are unlikely to ease due to its high production cost and export of jaggery to Afghanistan through official channels.

“The Pakistani sugar industry has set a production target of 3.5-3.6 million tons for the next season sugarcane crushing for which is to begin by the middle of November this year,” said Zaka Ashraf, Chairman of the Pakistan Sugar Mills Association (PSMA), by phone from Lahore on Saturday.

“The sugar industry can easily achieve this target because of 25-30 percent higher production of sugarcane,” he added.

Because of low production of sugar in the last fiscal year, sugar price had touched Rs 45 a kg and above by the middle of 2006. But the government’s strategy to import sugar through the private and public sectors helped to bring the prices down up to Rs 33-34 a kg.

“It would be difficult for the sugar millers to further bring the prices down from this level as the government had set Rs 60 per 40 kilograms the price of sugarcane in Punjab and Rs 67 per 40 kg in Sindh,” said Iskander Khan, Chairman of the PSMA NWFP.

He said: “The federal government has levied a 15 percent import duty on sugar, but it has not accepted the long-standing demand of the PSMA to impose regulatory duty on jaggery manufacturers, nor has it done anything to stop its export to Afghanistan.”

“Around 80 percent of sugarcane in the last crushing season was used to make jaggery in the NWFP, and only 8,000 tons of sugar was produced,” he said, adding: “The price of jaggery has jumped to Rs 55 a kg in the NWFP from Rs 25 a kg.” Owing to the poor policy of the federal government in the last crushing season, the CBR had to lose Rs 800 million under the head of general sales tax and other taxes, an official claimed.

Market experts said the country would have another prices crisis during the next crushing season as the country would have 0.4-0.5 million tons of excess sugar. Now the Trading Corporation of Pakistan (TCP) has 600,000 million tons. Private importers have around 200,000 tons sugar in their warehouses. If the PSMA of all three zones achieved their sugar production targets, the country would have above 4.2-4.4 million tons of sugar against its total consumption of 3.8 million tons. The production of sugarcane is likely to be higher by 25-30 percent this year.

The sugar associations said all sugar mills would start crushing by the end of November.

In the last fiscal year the government had imported nearly 850,000 tons of sugar through the TCP compared with 98,677 tons last year.

Two years old sugar crisis is expected to end in 2007, as sugar production is likely to be higher this year than in the last two years.

Sugar price had shot up by 150 percent from Rs 18-19 per kilogram in December 2003 to Rs 45 in March 2006.

“The previous fiscal year was the worst in terms of sugar price, as its rates were all time high throughout the country because of the government’s policies,” a PSMA office-bearer said.

“The federal government has not prepared any long-term policy for the sugarcane growers nor for the sugar industry, which may create trouble for the growers and millers in the coming crushing season over the price issue,” he added.

The State Bank of Pakistan in June this year imposed a 50 percent cash margin on all loans to private traders for the purchase of sugar in a move to counter hoarding. The SBP withdrew the cash margin restrictions in October.

The federal government had imposed as ban on the export of sugar to Afghanistan, a source said, adding: “But it is still being smuggled out to Afghanistan.”

 

[Neo]

LSM index posts 10.94% growth in July-Aug of current fiscal

KARACHI: The Large Scale Manufacturing (LSM) index has registered a 10.94 percent increase in July-August period of current financial year over the corresponding period of previous year.

However, the LSM index recorded a growth of 7.49 percent in month of August of ongoing fiscal year against the same month of last financial year. LSM index witnessed 12.98 percent growth in July this compared to same month of previous year, the official statistics suggest.

The LSM index is based on the latest production data of 100 items provided by Oil Companies Advisory Committee (OCAC), Ministry of Industries & Production and provincial bureau of statistics.

The breakup of data shows that OCAC index declined by 11.53 percent in July-August period of this financial year whereas in August alone, the index was down by 17.30 percent.

The Ministry of Industries & Production index was up by 10.56 percent in first two months of current financial year whereas in month of August, it depicted a growth of 9.53 percent.

The data complied by the provincial bureaus of statistics suggests that this category index was up by 15.93 percent in first two months of financial year 2005-06 over the previous year and in August alone, it went up by 8.86 percent compared to August of previous financial year.

In the petroleum production sector, the statistics show that Jet fuel production dipped by 8.83 percent in July-August 2005-06 and 17.40 percent in August. Kerosene Oil production was up by 4.83 percent and 21.53 percent in July-August and August period of current financial year respectively.

In the first two months, Motor Spirits production dipped by 7.59 percent, High Speed Oil production by 16.00 percent, Furnace Oil by 16.03 percent, Lubricating Oil by 20.85 percent and LPG production by 2.87 percent.

In the Ministry of Production & Industries Index, the production of cigarettes was up by 12.74 percent in first two months. Cotton yarn by 14.53 percent, cotton cloth by 13.77 percent, paper & board 9.58 percent, caustic soda by 9.57 percent, steel products by 5.94 percent, pig iron by 104.63 percent, glass plates & sheets by 2.04 percent and cement production by 10.29 percent

The auto sector performed well in the first two months of current financial year and contributed substantially in the overall index growth, Tractors production was up by 20.44 percent by standing at 8162 units in first two months, trucks high by 4.51 percent by standing at 718 units, buses by 4.92 percent at 192 units, jeeps & cars production by 14.86 percent at 27478, motorcycles production by 2.86 percent at 122153 units.

Whereas, the production of soda ash dipped by 2.89 percent, phosphate fertilizers by 11.42 percent and coke production by 34.28 percent.

In the Index of Provincial Bureau of Statistics, vegetable ghee production was up by 0.78 percent in July-August period, cooking oil was up by 4.53 percent, starch and its products by 14.17 percent, beverages by 22.78 percent, cycle tyres by 42.62 percent, cycle tubes by 12.66 percent, motor tyres by 13.72 percent, air conditioners by 27.48 percent, electric meters by 16.13 percent, switchgears by 124.39 percent, diesel engines by 64.53 percent.

Whereas the production of TV sets declined by 37.19 percent, bicycles by 16.00 percent, electric bulb by 15.21 percent and blended-tea by 1.96 percent.

 

[Spring Onion]

http://www.khaleejtimes.com/Display...vember/business_November374.xml&section=busin
ess


US, Pakistan plan joint study of select economic sectors
FROM A CORRESPONDENT

13 November 2006



ISLAMABAD — The United States and Pakistan have jointly finalised a plan to conduct several studies on the global competitiveness of selected economic sectors to help increase Islamabad's exports.


As a first step, officials said, the growing motorcycle industry of Pakistan has been selected for carrying out a policy analysis.

The Competitiveness Support Fund (CSF), a joint venture the Ministry of Finance and the US Agency for International Development (USAID) will examine where competitiveness already exists within targeted sectors and where it can be improved.

CSF will use the studies to forward recommendations to the government of Pakistan on policy interventions it should take to make certain sectors more internationally competitive.

The first sector selected by CSF is the growing motorcycle industry in Pakistan. Other analyses will follow on the automotive and food processing sectors. Motorcycle Industry estimates show that last year a total of over 700,000 motor cycles were produced in the country. The industry has been experiencing a healthy growth rate of around 30 per cent per year for the past 4-5 years. It is estimated that production will cross the million units mark by 2008.

To identify the prospects and problems/obstacles of the motorcycle industry, a high-level delegation from CSF recently visited Karachi and met the key stakeholders. A follow-up visit is scheduled for the first week of September to Lahore for an interaction with the stakeholders there as well.

Presently there are 43 motorcycle assemblers in the country that have been licensed by the Engineering Development Board (EDB). Out of these, there are 3 Japanese assemblers (Honda, Yamaha and Suzuki), while the remaining 40 assemble Chinese motorcycles. These assemblers buy parts, sub-assemblies and assemblies from over 200 large, medium and small vendors located in Karachi and Lahore. It is estimated that the motorcycle industry employs more then 200,000 people directly and indirectly.

There are a number of government agencies that are involved in regulating, controlling and monitoring the motorcycle industry. These include the Engineering Development Board (EDB), the Pakistan Standards and Quality Control Authority (PSQCA), the Ministry of Industries & Production (MOIP) and the Central Board of Revenue (CBR).

The primary objective of this study is to carry out a policy analysis of the competitive advantage of the local motorcycle industry, along with identification of the problems being faced by the sector.

 

[Neo]

UAE fund mulls $5b investment in Pakistan

DUBAI: A state-managed fund in the United Arab Emirates is considering investing five billion dollars in an oil refinery in Pakistan, the federation’s official WAM news agency reported on Sunday.

The project was discussed at a board meeting of the International Investment Company (IPIC) of the largest UAE emirate of Abu Dhabi, WAM said. “With an estimated capacity of 200,000 to 300,000 barrels per day, the refinery is expected to play a positive role in boosting the Pakistani economy. It will also support the UAE drive to diverse its sources of income.” The board expects IPIC’s profits in the current year to hit one billion dirhams (270 million dollars), the news agency added.

 

[Neo]

Shaukat for finding ways to eradicate poverty

HALIFAX (November 13 2006): Prime Minister Shaukat Aziz on Sunday urged the world community to fulfil its obligations and work together with utmost sincerity and commitment to find ways and means through creating employment and income generating opportunities for the poor segments of society to eradicate poverty.

Delivering keynote address at the Global Micro-Credit Summit here, he that said poverty "is the gravest challenge" facing humanity at present, and "poverty and social deprivation lie at the root of extremism". He proposed a five-point holistic and inclusive strategy for promotion and spreading micro-credit in countries with high poverty levels.

The Prime Minister called for fighting poverty from a common platform by pooling energy and resources of the international community to rid the world of poverty, hunger, disease and deprivation.

He said that governments in developing countries must demonstrate a strong political commitment towards supporting microfinance, coupled with imparting technical and vocational skills to the poor for sustainable income generation, involvement of multiple actors and institutions to ensure microfinance outreach to the target groups, secure commitments at the global level to ensure macro economic and regulatory frameworks to support the growth of microfinance and mainstreaming of the microfinance into the financial sector as a commercially viable proposition.

He said that extremism breeds a festering sense of injustice and denial of economic opportunity, and multiple interventions are required to cause a dent into poverty.

He said there was need for a lasting and sustainable poverty reduction strategy and it must focus on creating income-generating avenues for the poor and the disenfranchised, particularly the women. He said that Pakistan has successfully implemented a stabilisation programme and wide ranging structural reforms, which have put the economy back on the track of sustainable growth and poverty alleviation.

"Pakistan's poverty reduction strategy has brought down the number of people below the poverty line from 34.5 percent in 2001 to 23.9 percent in 2005," he said.

He referred to 'Fiscal Responsibility Law' and said that it has been promulgated to ensure fiscal discipline and to obviate future policy slippages.

The Prime Minister said that Pakistan has implemented a Poverty Reduction Strategy, built on four pillars of accelerating growth, investment in human development, promoting self-employment through microfinance and social safety nets for the most vulnerable groups.

Shaukat Aziz said Pakistan government has also established strong foundations of micro-finance in the formal sector, along with extending support to civil society institutions.

Khushhali Bank was set up as the first specialised microfinance institution and a law was promulgated to provide separate regulatory framework for micro-credit institutions, he said.

He said that four specialised microfinance banks have been established at district level in Pakistan. He also referred to a variety of institutional models to increase micro-credit coverage to the poor, including the Pakistan Poverty Alleviation Fund, rural support programmes and credit lines for microfinance by commercial banks and leasing companies.

He said that Pakistan is combining micro-credit with skill development and social mobilisation as a comprehensive strategy to enable the poor to make the best use of borrowed resources.

Appreciating the efforts of Nobel Laureate Professor Yunus in the field of micro-credit, he said he established a successful example in this regard by establishing successful model of the Grameen Bank of Bangladesh.

The Prime Minister also appreciated the contribution made by the Micro-credit Summit Campaign since 1997. He also welcomed the objective of the Summit to officially launch the campaign's extension to 2015 by which time it is hoped to ensure that 175 million of the world's poorest families, especially women, would receive credit for self-employment as well as 100 million of the world's poorest families would move from below one dollar a day to above one dollar a day, adjusted for purchasing power parity.

He said that serious challenges, in terms of widening inequality between rich and poor nations, are creating islands of opulence amid oceans of poverty.

He said that war, illiteracy, poverty, pandemics, social injustice and intolerance still haunt the world while poverty is the gravest challenge facing humanity at present.

He said the poor suffer from lack of income and assets; they have little or no access to basic human needs such as health and education; they are handicapped because of social exclusion and voicelessness.

Shaukat Aziz said there is need to improve the coverage and outreach of micro-credit to the majority of poor populations.

Referring to measures taken by Pakistan government to eradicate poverty, he said the government has implemented an ambitious and all-encompassing reform agenda, covering all aspects of national life; political, administrative, social and economic which has brought about a positive change in the country and the process of national renewal is well under way.

The Prime Minister said that political institutions have been reformed, women and minorities have been given greater representations, democratic norms and practices have been institutionalised, accountability and transparency are the order of the day.

"We have all the ingredients of a sustainable democracy--a vibrant opposition, a free media, an independent judiciary and, above all, an informed public opinion", he said.

The Prime Minister said that in the economic sector, Pakistan has successfully implemented a stabilisation programme and wide-ranging structural reforms, which have put the economy back on the track of sustainable growth and poverty alleviation.

He said Pakistan is now one of the fastest growing economies in the region and hopes to sustain a high growth trajectory of 6 to 8 percent. He said the government has adopted a variety of institutional models to increase the coverage and outreach of micro-credit to the poor.

He said the government is also encouraging the private sector to come forward, and the regulatory role of the central bank is that of a policy maker, enabler and facilitator and the policy framework promotes public-private partnerships and private sector initiatives.

The Prime Minister said these initiatives have led to positive outcomes as evidenced by substantial growth in the micro-finance sector in Pakistan over the last six years.

He termed the start of Greenfield micro-finance banks, entry of commercial banks, diversification of products, manifold increases in the number of borrowers and development of distribution network as conduits for income generation, particularly for women, landless farmers and workers without assets.

The government, he said, is combining micro-credit with skill development and social mobilisation as a comprehensive strategy to enable the poor to make the best use of borrowed resources.

Concluding his keynote address, Prime Minister Shaukat Aziz said, "We have to learn from each other, share our insights and experiences, and adopt the best practices."

http://www.brecorder.com/index.php?id=496071&currPageNo=1&query=&search=&term=&supDate=

 

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ADB for amending SECP laws to facilitate investment

ISLAMABAD (November 13 2006): The Asian Development Bank (ADB) has asked the federal government to amend laws and ordinances related to Securities and Exchange Commission of Pakistan (SECP) to facilitate investment and improve corporate governance standards, official sources told Business Recorder.

Sources said an ADB team of Financial Management Governance Program (FNGP) is scheduled to visit Pakistan from November 22 to 29 to discuss these issues with the quarters concerned for which the bank has already committed a loan of $80 million subject to the fulfilment of agreed conditions.

The main thrust of the bank is to amend the Companies Ordinance, 1984, further improving corporate governance standards, the Trust Act, 1988 to meet modern investment requirements, the SECP Act, 1997, SECP Ordinance, 1969 and the Central Depository Act, 1997.

Sources said the ADB is also of the view that the SECP should encourage de-mutualisation and integration through electronic communication network and alternative trading system for the establishment of a dynamic national market.

They also said the SECP has also been asked to issue guidelines and regulations for opportunities de-mutualisation offer in the new markets. The mission would also discuss issues related to Postal Life Insurance and other insurance companies, they added.

The ADB had committed $260 million loan to restructure SECP and insurance sector, of which the bank disbursed $100 million as first tranche, while $80 million was given in September last, they added.

The remaining $80 million tranche would be disbursed as and when the government fulfils the commitments. However, the government would pay commitment charges to the bank till the conditionalities are met, the sources said.

It is interesting to note that the finance ministry is making efforts for taking control of the 'profit-making' public sector insurance entities, including the State Life Insurance Corporation (Slic) with the ADB support.

But the commerce ministry is on collision course with the finance ministry for the past one year on this issue, saying that why one organisation was being taken from one ministry without any solid justification.

"The ADB is fully backing the finance ministry's viewpoint, saying that insurance business was being hurt by commerce ministry's handling of the organisation," sources said.

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

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

 

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Investment under CFS up by 13.4 percent

KARACHI (November 13 2006): Total investment under CFS (Continuous Funding System) had been increased by 13.4 percent to stand at Rs 28.0 billion during the week ending on November 11, 2006 against Rs 24.7 billion a week earlier, while the cost of borrowing at CFS counter went down by 50 bps on week-on-week basis.

Interestingly, out of total CFS investment, on an average, 98.6 percent was recorded in the old 32 scrips while only 1.4 percent was recorded in the new scrips.

An analyst at JS Research said that this was owing to the fact that the new scrips, added to CFS, are less liquid as compared to old ones. The average rate in old scrips of CFS stood at 16.7 percent, whereas it stood at 18.4 percent in case of the new scrips.