Pakistan Economy - News & Updates - Archive

[Neo]

Foreign trade, manufacturing

By Sabihuddin Ghausi

THANKS to liberalisation, the foreign trade sector including manpower export, is over $50 billion in a $140 billion plus GDP.

In just six years, foreign trade has increased from less than $20 billion a year to more than $45 billion in 2005-06 and seems to heading for further but slower pace of expansion in the current fiscal year.

But trade liberalisation has flooded Pakistan’s market with imported goods that has impacted adversely on domestic industrial growth. The captains of trade and industry are facing tough competition in their home markets.

A gradual reduction in import duty and removal of non-tariff barriers have opened the Pakistani market for all sort of goods that include children apparels from Thailand, herbal cosmetics from India, detergent soaps from Turkey, South Africa, Dubai and Lebanon, cheese and butter from Denmark, Holland and Sweden and of course China is a giant hub from where a wide of range of goods are supplied.

Pakistan’s miscellaneous imports from China are now worth about $3 billion that include all varieties of consumer items from dining table stuff to kitchen ware, furniture, curtains, beverages, chocolates and candies and what not.

After sustaining a trade imbalance of $12 billion in 2005-06, official trade statistics reported more than $4 billion trade deficit in the four months of current fiscal year which is 18 per cent higher than the deficit in same period last fiscal year.

Textile is about 10 per cent of Pakistan's GDP, engages about 40 per cent of industrial labour and should cater to the needs of 160 million people of the country. But in last four months, export of a dozen textile products and cotton fetched only $3.32 billion as against $3.55 billion realised last year. The four months textile export earnings do not match the proportionate target fixed by the government for all these products.

Decline in textile exports would further create pressure on the trade balance, which, as a result can bring pressure on the rupee, a report of a local brokerage house warns that share of textile exports has slipped down to 58pc from 60 per cent.

Industry is now reporting closure of knitwear and garment units and looms. And Akbar Sheikh, the chairman of WTO Cell in All Pakistan Textile Mills Association (Aptma) in Lahore fears closure of more than one million spindles by June next year.

Not only the textiles but almost the whole range of export has been hit hard by the export slump. Decline in exports are now recorded for sport goods, carpets, leather, surgical goods, naphtha and many other items.

How would one explain a rather dismal economic and business environment for industrialists, workers and consumers in Pakistan but the neighbouring two giants — India and China — with more than a billion people in each country- are marching ahead with a fast growth rate, manageable inflation rate and rising number of middle class consumers.

Economists say that India and China derive their strength from their own markets. Their domestic market is expanding with every passing day adding more to the consumer numbers. The strength of the domestic market has imparted tenacity to the Indian and Chinese business to make deep inroads in international markets. Now Indians and Chinese are buying retail outlet networks in Europe and USA, industries and services institutions.

Pakistan remains a fragmented and not so prosperous market, with consumers’ purchasing power at pretty low levels. There is no institutional linkage between the government and the business though an international commercial banker is prime minister and top businessmen are there in the federal and provincial governments.

The trade bodies that include the apex Federation of Pakistan Chambers of Commerce and Industry lacks proper credentials as legitimate elected representative of the businessmen because it has on its membership a big number of fake and paper chambers and trade associations.

Then there is built-in conflict of business interest conflict between the spinners and the ginners and between the spinners and value added sector in textile, between cane growers and millers in sugar, between leather good manufacturers and tanneries. For decades these conflicts have persisted and get blown up into big controversies. No trade body, government agency or any political party which is supposed to represent all interests-consumers, workers, manufacturers and traders -have never made any serious attempts to work out an arrangement that should ensure a fair and just share in cake to each and every one.

Akbar Shaikh concedes that textile exporters got involved in a price war after the expiry of textile export quota in January 2005. The foreign buyers in Europe and USA are taking full advantage. The buyers are now placing big orders beyond the capacity of Pakistani textile industry.

The foreign buyers want goods to be delivered at the local warehouse and now at the shelf of their store in their cities. Only four Pakistani exporters are now in a position to service Wal Mart orders,” he disclosed. Indian businessmen got together to buy a reputed retail outlet network in Europe to reach the consumers directly.

In Pakistan, only one business house has set up retail outlets on a modest scale in Hong Kong and Dubai and is planning to expand his network. In India, the business and government has been able to develop a rapport. The businessmen give substantial input in the formulation of policies. The interest of the consumers and workers is articulated by a powerful media, parliament and the trade unions.

The Indian banks support their business and government to give them proper policy guidelines. Indian textile now aspires to raise export to $65 billion by 2013 for which the industry is being upgraded, marketing is being streamlined and banks and other institutions are offering support.

 

[Owais]

Over $290 million foreign investment in bourses


ISLAMABAD (updated on: December 05, 2006, 18:10 PST): Foreign investors have made investments of over $290 million in the stock exchanges during the current fiscal year up to December.

A private television channel reported that $290.743 million were invested.

US with $125.2 million investment in Pakistani stock exchanges during the five months of the current fiscal year topped the list among the investing countries, while Singapore with $104.5 million acquired second position.

Among the countries taking out investments from the stock exchanges during this period, Switzerland with $28.8 million withdrawal remained on top of the list.

Foreign investors withdrew $102.6 million from the stock exchanges on the first day of the sixth month of the current fiscal year.

 

[Owais]

Power failures cost Karachi industries Rs 2.50 billion

KARACHI (December 05 2006): Industries located in Karachi have suffered approximately Rs 2.50 billion loss due to power failures during the last two days. Chairman SITE Association of Industry, Ameen Bandukda said that winter rains that hit the city on Sunday and Monday disturbed the industrial activities and several industries had to stop their operations in the SITE area, while the rest were hit by slow production.

He told Business Recorder on phone that SITE is the largest industrial area of Pakistan, where more than 3,000 industries are in operation. The load shedding started at 3pm on Sunday, which continued till 1pm on Monday disturbing more than 50 percents industries of the SITE industrial area alone.

Two shifts - 12am to 8am and 8am to 4pm - in SITE industries were completely suspended whereas the third one - 4pm to 12am - partially suffered, he lamented.

The 50 percent industries in SITE have roughly lost Rs one billion in production terms during the two days, he said. The government also suffered in terms of tax collection to the extent of Rs 200 million, he added.

Replying to a question, he said that although export orders have not affected but feared if load shedding continued, export orders might be either delayed in meeting the dateline or cancelled altogether.

"To meet export orders and avoid losses, we have announced next Sunday as working day and decided to run all industries without any brake for the next 15 days."

But if the load shedding continued, we might not be able to fulfill our export commitments, he warned. Korangi Industrial Area, which is the second largest industrial area of the metropolis, also faced the same situation due to power suspension.

Power failure, which started on Sunday afternoon and continued till Monday, badly hit the entire production schedule, said former chairman, Korangi Association of Trade and Industry (KATI), Shiekh Manzar Alam said.

More than 45 percent industries have been affected due to load shedding in Korangi industrial area inflicting a loss of more than Rs 500 million in just two days, he asserted.

Often the material used in producing towels gets stuck-up in the machines when it is in the printing process and stops suddenly as a result of power failure, he informed. "The towel becomes useless for them as it receives such shades which are not required during the dying process," he noted.

Chairman, F.B Area Trade and Industry, Masroor Ahmed Alvi told Business recorder that industrial production also suffered in the F.B area on Sunday and Monday and more than 55 percent industries remained closed for the last 24 hours.

The chairman said that F.B industrial area has also suffered a loss of more than Rs 350 million. It has badly affected the exports, as 90 percent units of F.B industrial area are export oriented, he added.

North Karachi industries have also undergone losses to the extent of Rs 400 million due to power interruptions and rains, said an industrialist of the area who did not want his name to be quoted.

He said that on Monday the workers also did not turn up due to heavy downpour, while power was restored by late afternoon. Because of the shortage of workers, the production could not be resumed to 100 percent capacity, he added. "We have been requesting the KESC that in the national interest they should ensure continuous power supply to industrial areas, but no heed has been paid to our appeal," he lamented.

Landhi Industrial area is, however, an exception because 70 percent industries in the area have their own power generation plants. The remaining 30 percent industries which do not have their own arrangements and depend on KESC for power supply face Rs 250 million loses, said former chairman Landhi Association of Trade and Industry (LATI) Shabaz Ali Malik.

 

[Owais]

Paktel and Insta must pay dues before close of business: PTA

ISLAMABAD (December 05 2006): Pakistan Telecommunication Authority (PTA) on Monday said that since Paktel and Instaphone are defaulters of $29.1 and $58.2 million, respectively, on account of licence fees, would never be allowed to wind up their operations.

Briefing the newsmen on issues pertaining to telecom sector, the PTA chairman, Shahzad Alam Malik, upset by the poor telecommunication services in the country, warned Pakistan Telecommunication Company Limited (PTCL) and cellular companies to improve services, or be prepared for action.

The PTA chairman said that "the regulator takes full responsibility that the services of the above said two companies would not stop and 1.4 million subscribers of Paktel and three hundreds thousands of Instaphone would be taken care of" he added.

It may be recalled that the Millicom International, parent company of Paktel, had to pay $29 million on account of license fee. It should have to clear their dues before taking any final decision. The Instaphone, whose payment on account of licence fee instalment is due, also wants to sell it out.

Giving details, the regulator said both the Paktel and Instaphone had got license renewed during 2004 and 2005, respectively, against an Initial License Fee (ILF) $291 million each. The operator had defaulted the Paktel on account of $29.1 million instalment, which was due in October 2006. In addition to ILF, the operator owes approx. Rs 19 million to the Authority on account of numbering charges and RBS dues.

He said that the Paktel had requested to defer its ILF instalment, which the Authority turned down. In the case of Instaphone, he said its license was renewed in 2005 on ILF of $291 million. The schedule of payment of 50 per cent of ILF was spread over a period of three years.

The operator had paid $21.55 million so far from total outstanding of ILF $58.2 million thus $36.65 million are yet to be paid. In addition, the company has also defaulted in paying total outstanding of Rs 119 million against Annual License Fee, USF, R&D, Numbering Charges and Spectrum Administration fee, he added.

"The company has also not provided Annual Audited Accounts for the year ended December 31, 2005 following which a show cause notice to Pakcom (Instaphone) was served giving 30 days time to explain its position. The PTA will take further action after the expiry of this period in the light of provisions of Telecom Act," he added.

About other issues including Mobile Number Portability (MNP) and Quality of Services (QoS), Shahzada Alam said the MNP implementation was being delayed mainly because of PTCL failure in upgrading its system.

He said the PTA had directed all concerned operators to upgrade their switches for early implementation of MNP after finalising a process guidelines for cellular mobile operators as well as for subscribers, which was discussed at length in the recent board meeting of operators.

The Telecordia has handed over the hardware and software for implementation and after testing between operators it is expected that system would be on by January/February 2007, he maintained. The PTA chairman, gravely disappointed over the telecommunication service in the country, also hinted at what he underlined an early countrywide Quality of Service (QoS) survey to bring about an improvement in the standards of services.

The authority, he said had taken the strong exception of prevalent trend in quality and the problems being faced by cell phone users in the shape of severe congestion, call connection errors, frequent call drops and excessive and unjustified billing. The companies to take appropriate measures to improve QoS before the conduct of this survey otherwise the regulator would have no other option but to take action as per provision of the Telecom Act.

 

[Owais]

Pakistan becoming consumer market: PIAF

LAHORE (December 05 2006): A record increase in trade deficit, persisting high inflation and sharp rise in loans are major areas of concern as these factors are not only increasing poverty but also multiplying problems of common man.

These views were expressed by PIAF chairman Mian Abuzar Shad, vice chairmen Irfan Qaiser and Khamis Saeed Butt while talking to newsmen here on Monday in reaction to the SBP report.

The PIAF leaders maintained that high increase in trade deficit was making the forex reserves weightless and this indicates that Pakistan is fast becoming a big consumer market instead of a manufacturing destination.

They called for adopting urgent measures to strengthen agriculture and industrial sectors of the country. They said that there is a need to bring down the cost of doing business in the country, as the same was rendering the Pakistani goods non-competitive in the global market.

"A visible decrease in rate of large-scale manufacturing from 15.6 percent to 9 percent is a negative trend, which needs to be checked immediately. Ground realities call for immediate action from the concerned quarters otherwise the situation would be out of hands in coming years," they added.

 

[Neo]

Pakistan may lose UAE basmati rice market

ISLAMABAD, Dec 4: Pakistan will lose 400,000 tons of rice market in the United Arab Emirates in the wake of the proposed move to make DNA testing mandatory for clearance of rice shipments at Dubai ports.

Well-placed sources told Dawn on Monday that some UAE based millers were lobbying for promoting the UK branded DNA test to recapture their eroding market share of basmati in the Middle East following growth in export of basmati from Pakistan.

The DNA testing of UK is a type of non-tariff barrier (NTB). It was developed by UK scientists to tighten imports as per their local labelling requirements, the sources said and added that the Pakistani officials were again seemed ignorant as was in the case of Indian Pusa rice registered as basmati in the EU.

A leading rice exporter on condition of anonymity told Dawn that he had warned of this possibility and development long time back but the powers within Rice Exporters Association of Pakistan (Reap) did not then pay heed to the warning and instead took a short-term political view on it. “Now unfortunately, it is possible that within a short time, the UAE could start demanding shipments that are DNA tested based on the controversial UK DNA testing system,” he added.

Pakistan unfortunately, despite the trade’s opposition, earlier adopted the DNA testing ‘as an interim measure’ for export of basmati to the EU. Adoption of this controversial test even as ‘interim measure’ gives it the stamp of Pakistan’s official approval, he said.

“If this happens our exporters will face serious impediments to their exports initially to Dubai and then to the entire Middle East, including Iran,” the exporter warned.

The exporter said that the government should not accept the UK DNA testing protocol for basmati as it was mostly based on samples of admixture unofficially and casually obtained by the UK authorities while putting together this testing protocol.

The UK test did not include all approved basmati varieties of Pakistan and it did include informal varieties that may or may not be in existence or from Pakistan. “We must emphasise that an indigenous Pakistan DNA testing protocol must be developed urgently,” he added.

“Our indigenous test must be based on all approved basmati varieties growing anywhere in Pakistan and with known approved non-basmati varieties as adulterants/admixtures”, the exporter added.

 

[Neo]

Record cement sales in November

KARACHI, Dec 4: Cement sales for the month of November, 2006 stood at two million tons, which was the highest-ever sales, recorded in any single month. Sales for November showed growth of 68 per cent over 1.19 million tons of cement despatches in the corresponding month of the previous year.

Figures released by All Pakistan Cement Manufacturers Association (APCMA)) on Monday put the total sales for five months of the current financial year (July-Nov 2006) at 9.05m tons, which was 26 per cent higher than sales of 7.23 million tons in the corresponding five months of last year.

They said that the higher despatches reflected a pick up in housing construction activity and a spur in exports. Exports for November of the current year stood at 1.70 million tons, which was 75.4pc more than 0.97m tons in the same month last year and represented 46.6pc growth over the five months year-on-year to 9.54 million tons, from 6.51m tons.

Cement analyst Khurram Shahzad at InvestCap said: "Exports had picked up pace mainly to Afghanistan, where reconstruction work had gathered pace, besides exports to growing markets in Dubai, the Middle East and Lebanon." He reasoned that manufacturers had pushed larger number of bags overseas, because of rising demand and better prices in the export markets.

Local sales registered growth of 68 per cent to 1.84 million tons for November this year and 23.25 per cent increase in despatches to 8.10 million tons for five months, compared to sales at 1.10 million tons for November and 6.58 million tons in five months last year.

Analyst Khurram observed that as economy grows so will the demand for cement. He said that the industry would have to stabilise prices so as to protect mainly the smaller producers. He thought that the larger manufacturers could survive due to their economies of scale, but it would be difficult for smaller units to maintain their profitability. Eventually, the smaller cement mills may have no option but to merge with larger units just as happened in the banking sector.

Cement sales for all of the previous year ended June 30, 2005 was 21 million tons and most analysts visualized demand to grow at 15 to 18 per cent, which presented brighter picture for the industry, provided there was stability in local prices, increase in demand and the start of some of the mega projects that the government has in mind.

For the current fiscal, government has allocated a record Rs435 billion in the budget for the development of infrastructure. The government has also reiterated several times its decision to go ahead with the construction of big dams for storage of water and generation of electricity.

The reconstruction work in vast region that was devastated by earthquake of October last year has yet to begin in right earnest. But analysts said that until the manufacturers were able to reach a 'bench-mark price' and the 'distribution of local markets' industry- wise, exports would be the major driver of earnings growth.

 

[Neo]

Sites for 480MW plants selected

ISLAMABAD, Dec 4: Wapda has identified 316 new sites on canal falls for generating an additional 480MW of electricity to tackle the growing power shortfalls across the country.

Official sources told Dawn on Monday that it was becoming increasingly difficult for the government to adhere to the National Energy Security Action Plan aimed at tackling the increasing electricity shortages. Wapda officials were, therefore, directed to initially build five small and medium-sized hydropower projects in Punjab, they said.

In association with the Power Department of Punjab, Wapda officials will be constructing dams of 25MW to 50MW capacity for generating 160.16 GWh cheaper renewable energy annually. Of the 316 sites identified for the purpose, 48 have a potential of more than 2MW.

Supply of power from non-conventional sources even in small qualities would help meeting power shortages to some extent, said the sources.

The Asian Development Bank (ADB) has agreed to provide conditional financial support to help build five dams in Punjab, provided the project is executed by national and multi-national contractors through national and international competitive bidding (NCB/ICB).

Prior to tendering, the Punjab government will complete power purchase agreement, consents, land acquisition, environmental compensations, financial commitments and bidding documents under the guidelines of the ADB.

The energy generated through these five sites will be sold to the distribution companies of Wapda or the National Transmission and Distribution Company (NTDC) at a negotiated tariff.

Five sites identified for generating power in Punjab are Marala, Chainwali, Deg Outfall, Okara and Pakpattan. This is expected to increase additional hydel capacity in the coming years.

The ADB wants that before the mobilisation of ICB or turnkey contractors, the preliminary works like construction of site offices; accommodation for clients, consultants and contractors' personnel; and related facilities should be completed through NCB to avoid delay in completion of the project.

 

[Neo]

Tuesday, December 05, 2006

Industrial output suffers 50-60% loss due to rains

By Tanveer Ahmed

KARACHI: The industrial production suffered badly on Monday due to the rain-related problems, which varied from 50 to 60 percent in different industrial areas of the metropolis.

The power failures, accumulation of rainwater, low-attendance of workers and traffic-jams because of dug-up roads, wrecked havoc on the industrial production.

However, unlike past, when major power breakdowns caused by heavy downpours in the monsoon season dealt a severe blow to the industrial activities, this time there were lesser losses reported due to the power failures, but the major factor this time around was the low-attendance of workers, who faced difficulties in reaching their workplaces because of the bad weather.

The industrialists complained of facing difficulties in transportation of export shipments because of the conditions of the roads, which turned worse from their already depleted state because of the accumulation of rainwater, making it difficult for the heavy vehicles to move to and from the industrial areas.

Putting the industrial losses in millions of rupees, the industrialists lashed at the civic agencies for their inefficiency to act to provide relief to the citizens in such situations and make possible the drainage of rain water properly, particularly in the industrial areas so that the wheel of industry could be kept moving on uninterrupted.

The Site Association of Industry Chairman Ameen Bandukda put the production losses at around 50 percent due to rain related problems and said that in terms of rupees, it could be one billion rupees as the movement of export shipments also suffered during the day.

Amin pointed out that although, the electricity breakdowns hit the industrial production, the major culprit was the low-attendance of workers and the condition of the road infrastructure, which caused the problems in the area. The SITE industrial areas have over 3,000 units, which employed around 550,000-600,000 employees.

The Korangi Association of Trade and Industry chairman Masood Naqi also put production losses in millions and said that over 50 percent losses were estimated in the production because of rain-related problems. However, he pointed out that there was no major problem of electricity during the rain as the outage of power lasted a very short span of time.

He attributed the losses mainly to the low-attendance of workers, which was just about 40 percent during the day as they faced difficulties to reach out their workplace due to the less than normal movement of public transport. The past chairman FB Area of Association of Trade & Industry Rehan Zeshan told Daily Times that the industrial activities in the area also suffered badly with major losses being recorded by the industry.

He also complained about workers turning up in low numbers, accumulation of rainwater and bad condition of roads, which caused hindrances in the movement of traffic. The FB industrial area has 2,500 units in which 90 percent are export-oriented units. The export shipments also suffered due to these factors, he added.

Dawood Usman Jhakoora, former chairman North Karachi Association of Trade & Industry said that the industrial activities slowed down considerably because of the rain-related problems. The North Karachi area comprises mostly of 2,500 small and medium units employing 125,000 people.

 

[Neo]

Tuesday, December 05, 2006

Production of cotton rises 2.25% since last year

KARACHI: The Pakistan Cotton Ginners Association (PCGA) has released the cotton arrival report at the ginneries across the country on Monday.

The spokesman of the PCGA said that 8.978 million bales arrived compared to last year’s 8.781 million bales till Dec 1, showing a meager increase 2.25 percent in the national production.

According to PCGA, Punjab has shown an excess of 4.83 percent production with 7.112 million bales while the Sindh registered a decline 6.51 percent with 1.866 million bales output.

He said the textile mills’ purchases show a brisk trend this year, with 6.498 million bales procured this year compared to last year’s 6.034 million bales. Private sector exporters bought 67,350 bales compared to last year’s 52,600 bales till Dec 1.

He said unsold stocks at ginneries included 1.041million bales of lint and 1.408 million bales of phutti (seed-cotton).

He said that the approximate existing rates of lint and phutti on the open market are Rs 2400-2500 per maund and Rs 1100-1200 per 40 kg respectively in the Punjab.

The government’s revised support price for phutti is Rs 1025 while its old support price for lint is Rs 2269, which is yet to be revised, he added.

Due to the massive crop damage particularly by cotton leaf curl virus (CLCV) and mealy bug in Khanewal, Multan, Vehari and Lodhran districts, the cotton crop assessment committee has reduced the national output target from 13.82 million bales to 12.41 million bales, he said.

 

[Owais]

Over $290 million foreign investment in bourses

ISLAMABAD: December 05, 2006: Foreign investors have made investments of over $290 million in the stock exchanges during the current fiscal year up to December.

A private television channel reported that $290.743 million were invested.

US with $125.2 million investment in Pakistani stock exchanges during the five months of the current fiscal year topped the list among the investing countries, while Singapore with $104.5 million acquired second position.

Among the countries taking out investments from the stock exchanges during this period, Switzerland with $28.8 million withdrawal remained on top of the list.

Foreign investors withdrew $102.6 million from the stock exchanges on the first day of the sixth month of the current fiscal year.

Duplicate post mate
see post # 3107

 

[Owais]

7.8 percent economic growth to be achieved this year: Salman

LAHORE (December 06 2006): Advisor to Prime Minister on Finance, Dr Salman Shah, has said that the government expects to achieve economic growth of 7.8 percent in the current fiscal year, while in future it would be kept in the range of 6 to 8 percent.

He expressed these views while talking to newsmen at Lahore University of Management Sciences (LUMS)-World Bank conference on 'Growth and Competitiveness' here on Tuesday. Balochistan Governor Awais Ghani, Federal Industries Minister Jahangir Khan Tareen, Dr Hafeez Sheikh, Arshad Zuberi of Business Recorder and others were also present at the conference.

Salman said that due to the government's prudent economic policies, during the last four years the growth had ranged between 7 and 8 percent, which it wants to maintain and there is potential to do it. He said that there were some areas challenging the economic growth that would be met with more reforms. "In this connection, recommendations from the conference would be considered," he added.

According to him, mark-up cannot be reduced without bringing stability in inflation, which was gradually coming down. Moreover, labour laws would need changes to meet the requirements of globalisation. Nevertheless, the cost of doing business and productivity needed to be ensured under the WTO scenario, he added.

While addressing the conference, Dr Salman said that economy of Pakistan was passing through very exciting transition. He said that the private sector was in the lead with economic growth rate averaging around 7 percent over past three to four years, resulting in substantial reduction in poverty and improving standard of living of the people. "The objective of the government is to sustain this growth over the foreseeable future. This will enable us to pull out of the poverty quagmire and not only achieve the millennium development goals by 2015 but to also launch the country on a path of modernisation, development, international integration and prosperity," he said.

He said: "Today, we have created an environment, both domestically and globally, that would help Pakistan achieve its full potential. We have now in place a growing economy, a dynamic private sector, a vibrant parliament, a totally free media, an independent judiciary and a reasonably functioning bureaucracy. The progress achieved so far permits Pakistan to gaze in the future and visualise Pakistan as a leading emerging nation of the world. If we continue to grow at our current rates the economy would be among the top six, or seven, emerging economies of the 21st century."

He said he was of the firm view that Pakistan's double-digit manufacturing growth rate would lead to Pakistan emerging as a major manufacturing hub. He added that the potential to create gleaming new factories producing quality goods from textiles to engineering, consumer durables to pharmaceuticals, chemicals to hi-tech products at prices that domestic and global markets demand were within reach.

He assured the audience that investment in higher education and technical training would continue to increase rapidly to produce manpower to man the knowledge-based economy of the 21st century Pakistan.

"We are destined to become the logistics, trade, tourism, energy and manufacturing hub that would connect China, Central Asia, West Asia and the Middle East with India and South Asia. We are close to completing our new port city of Gwadar, the world's busiest sea lane for oil tankers. It would be established as a major transhipment port, particularly for oil and oil products including petrochemicals," he added.

He said: "Our second-generation reforms are designed to create effective institutions of a private sector-driven competitive market economy. We are establishing a new competition 'authority', a new statistical authority, reinforcing our security and exchange commission and deepening our capital markets. We are demutualising our stock markets and introducing new systems to ensure transparency of transactions. Our public institutions are being reformed and so is our private sector."

He said: "We are developing an industrial strategy for the country that would provide a hassle-free environment to our industrialists. Modern industrial parks, special economic zones and free trade and warehousing zones, with all requisite infrastructure facilities and communications and connectivity are being created. Moreover, we are also rationalising and reducing the number of taxes, creating a tax system that would promote employment-generating manufacturing.

"Our ports have to be vastly improved. Work has already been initiated through the $5 billion North-South Trade Corridor Project with participation by the World Bank, Asian Development Bank (ADB) and the private sector."

Dr Salman averred that there were plans to create value-addition in the agriculture sector through innovative research and development. He said that construction of five mega dams on the river Indus and expansion of cultivable area were necessary measures underway. "Each mega dam would cost over $6 billion, and annually add 3 percent to GDP growth," he added.

On energy, he said that Pakistan's requirements were growing at double digits rate. To ensure security in energy, to maintain accelerated growth and to remain competitive, gas pipelines, LNG terminals, exploitation of new domestic reserves and development of thermal and hydel power projects were in various stages of implementation.

He said: "IFC and the World Bank in the report entitled 'Doing Business in 2006: South Asian Countries Pickup Reform Pace' declared Pakistan as the top reformer in the South Asian region and Number 10 reformer globally".

He said that the stock market had been rated among the best performing markets over last six years in the emerging markets in the world. The debt-to-GDP ratio continues to decline and touched 55 percent, a far cry from over 100 percent ratio six years ago. The country continues to grow on solid macro economic foundations, he said.

"Pakistan's privatisation program is one of the most advanced in the region, attracting investment from all regions. All public sector holdings would be privatised. Opportunities exist in infrastructure, financial sector, power, oil and gas, manufacturing and shipbuilding. Foreign investors enjoy an even playing field. We welcome investors who invest in green field investments that exploit our strategic location to provide multiple corridors of regional cooperation--pipelines, trade, industry, transportation and tourism," he added.

 

[Owais]

Temasek unit to buy PICIC bank


KARACHI (updated on: December 06, 2006, 14:16 PST): The NIB Bank Ltd., a subsidiary of Singapore's state investment agency Temasek, said on Wednesday it would buy a majority stake in Pakistan Industrial Credit Investment Corp. (PICIC).

An industry source familiar with the deal said NIB Bank would pay about $300 million for the stake in PICIC, which focuses on financing industrial development projects in Pakistan.

NIB Bank's President Khawaja Iqbal Hassan confirmed the intended purchase of PICIC shares, but gave no price.

"We intend to complete the transaction very quickly, as soon as possible," Hassan told Reuters. "After acquiring PICIC, we will be among the top 10 players in the country in terms of assets and distribution network."

The NIB Bank is one of several foreign banks eyeing investment opportunities in Pakistan, attracted by reforms that have laid the platform for rapid growth and rising incomes. Others include Barclays Plc., ABN AMRO and HSBC, according to bankers.

The NIB Bank will pay 82 rupees per share for the PICIC stake -- a 9 percent premium to PICIC's Tuesday close -- but the source did not say precisely how much it would acquire.

"NIB Bank has agreed to buy a majority stake in PICIC at approximately $300 million," said the source. "The acquisition will be done though NIB Bank and not directly by Temasek."

BANKING REFORMS

Analysts said, at that price, the lender would be able to acquire more than 50 percent of PICIC which, according to its Web site, was set up in 1957 with World Bank help.

PICIC shares rose 1.26 percent to 76.20 rupees by 0825 GMT.

In a notice to the Karachi Stock Exchange PICIC said it was selling a majority of its shares, but did not identify the probable buyer.

PICIC had total assets of 40.5 billion rupees ($664.9 million) at the end of 2005, according to its Web site. It says its commercial banking arm is Pakistan's sixth-largest bank, with 129 branches by the end of this year.

Major banking reforms pushed through by Prime Minister Shaukat Aziz, the finance minister whom President Pervez Musharraf poached from Citibank and then promoted to premier, have helped the economy's rehabilitation.

Banks' profits grew 87 percent in 2005 and are expected to grow at about 44 percent this year, according to analysts.

Last July, Temasek tripled its stake in Pakistan's small commercial NIB Bank (NDLC-IFIC Bank) to 72.6 percent, which was then worth about $57 million.

Temasek is also the biggest shareholder in Standard Chartered Plc. which, in August, agreed to buy Pakistan's Union Bank Ltd. for $511 million.

 

[Owais]

Rs 137.91 billion export refinance released in July-November: SBP

KARACHI (December 06 2006): The State Bank of Pakistan (SBP) released Rs 137.91 billion as export refinance to banks during July-November 2006 as against Rs 120 billion released during the same period last year.

A statement of the SBP issued on Tuesday said this refinance is offered at 6.5 percent ie, 4 to 4.5 percent below six months KIBOR and has so far resulted in a positive impact of Rs 1.07 billion during July-November 2006 for the export sector.

The statement also said that to support major export sector the SBP has been implementing few incentives to the sector offered by the central bank and the government.

This has involved reduction in refinance rates under Export Finance Scheme (EFS), the debt-swap option under rates and the long-term finance scheme for export-oriented projects. (LTF-EOP), and research and development (R&D) support.

The statement said that pursuant to announcement of the debt-swap option under LTF-EOP, the SBP has provided finance of about Rs 13.86 billion through commercial banks against 107 cases to the value-added textile industry in particular and six sub-sectors of the spinning sector in general.

Over and above this amount the industry has availed Rs 8.40 billion under the scheme for new projects. In aggregate, so far, more than Rs 22 billion refinance has been released under this scheme to commercial banks, since its inception on December 2, 2006.

The SBP statement also said that under the research and development support (R&D) scheme, all offices of the SBP BSC across the country have cumulatively released Rs 8.8 billion and cleared about 79,000 cases since July 2005. During July-October 2006 alone, they processed 20,170 cases involving release of about Rs 2.7 billion. In view of the SBP with these incentives, the industry was expected to rationalise its cost structure and consequently increased exports.

However, it is disappointing to note that exports of the sector have shown negative growth in the current fiscal year (July-October 2006) as compared to an increase of 30 percent during the corresponding period last year.

 

[Owais]

2.5 million cotton bales likely to be imported: rains play havoc with quality

KARACHI (December 06 2006): The country is likely to face a shortfall of around 2.5 million bales of cotton, as the recent rains have badly damaged the quality of cotton in Sindh and Punjab, said brokers in the Karachi Cotton Association (KCA) here on Tuesday.

This will result in depending on imported cotton. Pakistan, they estimated, may have to import cotton of 2.5 million bales to meet the demand of local mills, they said.

"Although more than 70 percent of phutti had arrived in the ginning factories till November 30, still 30 percent phutti has been lying in the fields. Widespread rains in Sindh have badly hit the cotton fields in Mipurkhas, Tando Adam, Sanghar, Shahdadpur, and Khairpur districts. In Punjab, all districts, including Multan and Rahim Yar Khan have been affected by rains", a broker told Business Recorder.

He said the cotton crop had matured and was in the last phase of picking when sudden winter rains hit the cotton growing areas damaging a sizeable crop. This situation resulted in an increase in the cotton price by Rs 50 on Tuesday to Rs 2,600 per maund from Rs 2,550 per maund, he said.

The broker said the country depending on imported cotton would be widened by 0.4 million bales in the wake of rising concern by the stakeholders on the crop quality issue. It has also pushed quality premium and if rains continued for a couple of days more the quality, it is feared, would be further damaged and the premium would go up to Rs 50 per maund.

The current year, the cotton crop would be approximately 12.4 million bales as against the demand 14.6 million bales, the brokers said. Every year Pakistan exports the cotton approximately more than 0.4 million bales so this year Pakistan is already facing a shortage of 2.2 million bales, after the rains and damaging the crop this shortfall increased by 0.3 million bales.

So the country is likely to face a shortfall of 2.5 million bales of cotton this season, which would be imported from different countries to meet the shortfall, he added.

"We are spending Rs 1 billion for the import 0.1 million bales and in this season Pakistan would spend Rs 25 billion on the import of 2.5 million bales", said another broker. Till November 30, total 8.9 million bales have been arrived in the ginning factories and 6.5 million bales sold to the textile mills and only one million bales have been in the stock remaining for sale.

On Tuesday, millers offered Rs 50 premium per maund for cotton at the Karachi Cotton Exchange, which was packed in the ginning factories before rains and they are avoiding purchasing the unpacked cotton crop or phutti.

He said that after the rains the colour of cotton has been changed and its white colour has turned into off-white. Contamination also have increased in the cotton and around 0.4 million phutti would be scraped for the growers.

In the current season from May 2006 to date, Pakistan has made 1.4 million bales of import orders to meet shortfall as against last season since August 5, 2005 to April 6, 2006 Pakistan imported 1.691 million bales, source added.