Pakistan Economy - News & Updates - Archive

[Neo]

'Investment-GDP ratio is low to achieve seven percent growth'

KARACHI (December 16 2006): Major crops output seems healthy, and massive investment in corporate farming may give some positive surprises. Yet growth may tally at around 6.8 percent for the current fiscal year.

This was stated by Khaldoon Bin Latif, Economist/Business Analyst with AKD Investments, in an interview with AAJ TV's program, 'Money Matters'. He added that 7 percent growth target will remain to be achieved due to capacity constraints.

He said investment as percentage of GDP was very low to sponsor 7 percent growth. With increased saving investment ratio economy could maintain its long-term growth momentum, but for increase in investment, the economy needed to improve its savings. Saving has been low for last three years because the real return on all saving instruments has been negative, or mildly positive.

He said that 95 percent of entire banking industry deposits are of less than six months tenure. The biggest savers in this country are not individuals but institutions and, until and unless they are given incentives to save, the investment ratio would not pick up.

He said that interest rate sensitivity of the economy was limited and until the entire system integrated it would remain low. The only way to increase it is to develop the debt market. SBP in its annual report, highlighted this point. Investment class can diversify savings in a developed debt market. Allowing corporations to invest in NSS would not help in achieving this motive. Government sector, which is less riskier than the private sector will absorb the liquidity and private sector investment will crowd out and this will be an eventual drag on the private investment, which is the engine of growth for any economy.

 

[Neo]

Arrangements for Expo Pakistan 2007 reviewed: 1000 delegates to attend event

KARACHI (December 16 2006): Federal Minister for Commerce Humayun Akhtar Khan presided over the first meeting of the steering committee of 'Expo Pakistan 2007' to kick off preparations of this mega event to market the country's products.

The minister deliberating upon the arrangements, to be undertaken for the success of this mega event, said that as many as 1000 delegates from all over the world would be attending the event to be held from March 29 to April 02, 2006.

The Chief Executive, Trade Development Authority of Pakistan (TDAP), Sindh Minister for Industries and Commerce, head of different government bodies, and representatives of the FPCCI, KCCI and various trade chambers and bodies of the country attended the meeting.

The meeting decided that the inauguration ceremony would be held at the 'Bara Dari' instead of Karachi Expo Centre and President Pervez Musharraf would grace the occasion.

During the meeting, the minister and the members of the committee observed different presentations regarding the preparations of the event.

Expo Pakistan 2007, to be held in Karachi is a gateway to the true commercial and cultural richness of Pakistan. It is an ideal one-stop sourcing event, showcasing the premium and value-priced products of Pakistan and will act as a global marketplace for interaction.

Expo Pakistan 2007 is recognised by the government of Pakistan as an important feature of its trade policy to showcase Pakistan, its quality and exotic products to the world. Export Promotion Bureau, first time in the history of Pakistan, held the "Expo Pakistan", a mega trade event in February 2005.

Expo Pakistan 2005 provided an ideal window for the businesses around the world to look more closely into Pakistan's industrial capabilities and explore further opportunities to make business partners with Pakistan for above the edge market superiority in their country.

This event was a resounding success and more than 1200 foreign visitors from 77 countries, Ministers for Trade and Commerce of 15 countries and delegates of 38 Chambers of Commerce assessed the quality "made in Pakistan" products displayed by 450 export-oriented businesses of Pakistan.

It provided a platform for Pakistani exporters and foreign buyers to interact and develop the long-lasting business relationship. During Expo 2005, memorandums of understanding (MoUs) were signed by Pakistani chambers of commerce with the visiting chambers of commerce of different countries.

 

[Neo]

Deal signed for $207 million Japanese loan

ISLAMABAD (December 16 2006): The government of Japan on Friday signed a loan agreement for $207 million (Â¥23.157 billion) under its 'Official Development Assistance' (ODA) for two projects pertaining to basic economic and social infrastructure to help boost economic development in Pakistan.

According to break-up, Japanese government has extended this amount for two projects-Indus Highway Construction Project (Phase III) $174 million, and the Dadu-Khuzdar Transmission System Project ($33 million).

The agreement was signed here by EAD Secretary Muhammad Akram Malik on behalf of Pakistan government, while Tesuo Schioguchi, Senior Executive Director, Japan Bank for International Co-operation (JBIC) represented his country.

 

[Neo]

Inter-city bus service: Korean firm keen to invest Rs 1.5 billion

KARACHI (December 16 2006): A Korean transport company has shown keen interest to invest Rs 1.5 billion in inter-city bus service in Sindh. A three-member delegation of Daewoo transport company met Sindh Minister for Labour, Transport, Industries and Commerce, Adil Siddiqui and informed him that the company wanted to start Karachi-Hyderabad Daewoo bus service with the investment of Rs 1.5 billion.

The Korean delegation, headed by Executive Officer Daewoo Company, Ching Il Kim, informed the minister that the company had been providing services in Pakistan's 35 cities and now they intended to expand their network across Sindh. After Karachi-Hyderabad route the company would start Karachi-Sukkur route and later on the operation would be linked with entire country, Kim said.

The company has applied for three acre of land on the Super Highway, 3.5 kilometres away from Sohrab Goth, for bus terminal to start Karachi-Hyderabad operation, he said.

The Sindh minister said that the foreign investment in the transport sector would provide international standards of travelling to the local people. Plenty of opportunities were available for foreign investment in transport and logistic in the province.

 

[Neo]

Govt not paying heed to SBP advice: High monetary growth

KARACHI, Dec 15: Credit to private sector during the last five months remained half of what it was during the corresponding period of previous year, but the monetary growth was significantly higher mainly on account of the government’s speedy borrowing.

Despite frequent advices by the State Bank, the government kept borrowing from the banking sector which caused the growth of monetary assets more than last year.

The high government borrowing would hamper the State Bank’s effort to bring down the inflation to 6.5 per cent from above eight per cent by the end of this fiscal year.

Data released by the SBP on Friday showed that the credit supply to private sector during July-December 2006-07 was 6.65 per cent against 12.21 per cent during the same period last year.

The monetary assets showed a growth of 4.28 per cent during the first five months of the current fiscal compared to 3.42 per cent over last year corresponding period.

Analysts said what pushed the monetary growth high was the higher currency growth which was just below than last year. During the said period currency grew by 10.58 per cent compared to 12.12 per cent during the corresponding period of last year.

The government borrowed Rs98.649 billion for budgetary support during the same period against the full year target of Rs120 billion.

Analyst said the government borrowing was inflationary and making SBP efforts ineffective to keep tight grip over the monetary growth and inflation.

The tight monetary policy has almost halved the credit off-take to private sector which could be resulted into slow economic growth but it would serve the purpose to curtail the inflation.

“High cost infrastructure projects require huge inflows of money which is being pumped through borrowing from the banking system,” said Imran, an economic analyst.

He said the government was also spending for earthquake construction but it failed to find out any alternate source for borrowing.

The central bank has been advising the government to issue bonds to meet its liquidity requirement while the World Bank and IMF have been extremely critical about the slow growth of revenue generation.

“The revenue growth does not match with the economic growth while the base of taxpayers is also out of economic growth pattern,” said Asif Ali, adding that share of indirect taxes has been increasing for five years.

The analyst said if the borrowing pattern of the government continued inflation would not show any sign of easing and the output of manufacturing sector may decline due to costly credits.

 

[Neo]

Plan to develop jewellery sector

KARACHI, Dec 15: The government is working on a proposal for introducing a degree programme in jewellery design and technology at Karachi University and is also establishing a training centre at University of Balochistan.

This was stated by the Federal Minister for Industries, Production and Special Initiatives Jehangir Khan Tareen while chairing a meeting at PIDC House here on Friday.

The meeting reviewed the progress of Pakistan Gems and Jewellery Development Company (PGJDC), a subsidiary of PIDC. The objective of the company is to promote upgradation of the local gems and jewellery sector through induction of modern equipment and practices to enhance value addition and exports.

He said that the ministry was also negotiating a memorandum of understanding (MoU) with Geological Survey of Pakistan for conducting survey of mines.

The meeting was informed about a business plan for establishing a common facility training and manufacturing centre for gems laboratory and jewellery manufacturing.

The proposal for allocation of 11 acres for the gems and jewellery industries at Korangi Industrial Park Project was also came under discussion.

A detailed presentation was given to the minister on the ongoing activities of the PGJDC. It was informed that various seminars on gem mining were being conducted in collaboration with foreign consultants of USAID.

It was further informed that a programme was conducted by foreign consultant in collaboration with USAID for the training of trainers.

The meeting was told that a shipment of jewellery worth $2.4 million has been made against orders received at Bangkok Jewellery Fair (2006).

A project for development of quality silver jewellery and branding of 18 karat gold jewellery have been initiated by the private sector to cater to the export market.—APP

 

[Neo]

Pakistan, WB ink polio pact, $41.6 mln debt turned grant

ISLAMABAD: December 16, 2006: Pakistan and World Bank on Saturday signed 'The Assignment and Release Agreement' for partnership in polio eradication project, converting $41.6 million International Development Association (IDA) credit into a grant.

The agreement was signed by Secretary Economic Affairs Division Mohammad Akram Malik and World Bank Country Director John W. Wall in a ceremony held here.

World Bank Country Director W Wall after signing the agreement said the overall objective of the project was to support government's efforts to eradicate polio.

It will help supply the Oral Polio Vaccine (OPV) for the country's Supplementary Immunisation Activities (SIAs), he added.

Secretary EAD Mohammad Akram Malik on the occasion said that IDA was supporting the government in polio eradication initiative in partnership with technical agencies (UNICEF, WHO) and several development partners.

"It is the success of the project that the IDA credit has been converted into a grant," he added.

He said IDA grant will be financed by the Bill and Melinda Gates Foundation.

 

[Neo]

Industries on a declining course

Rising interest rates, fuel costs allow China to capture local market; Bangladesh, Cambodia grab exports

By Mushfiq Ahmad

KARACHI: The industrial sector of the country, after showing some improvement in the last few years, is now on a declining course, because of it being unable to compete with other developing countries of the region and elsewhere.

The number of buyers of our industrialists is decreasing very rapidly, both at the export market and the domestic market.

While the domestic market has fallen to the mighty Chinese, our share of the export market has been grabbed by minnows like Bangladesh and Cambodia.

Since fiscal year 2003-04 the industrial production had shown positive growth. At one stage its contribution to the economy rose to 26 percent.

The industrial sector showed double-digit growth in recent years, but looking at the current trading scenario where our producers have started losing buyers in local and foreign markets, it is imprudent to believe that the industrial sector would sustain its growth.

Of late there are reports Pakistani industrial units closing down because of influx of cheap Chinese products. And only recently the State Bank has reported that our export market has been grabbed by Bangladesh and Cambodia. That is why a large number of exporters have plans to move to Bangladesh. And none of these events have occurred unpredictably.

People with foresight were anticipating the current situation for quite sometime while the Musharraf regime was sitting in oblivion.

If you were to ask an industrialist about his problems, he would like to consume too much of your time. However, a very high cost of energy and high interest rates are their major and genuine problems.

The industrial sector grew impressively when the interest rates were low. As soon as the State Bank started tightening its monetary policy to contain inflation, the growth rate began to decline. It is difficult to understand what purpose a tight monetary policy serves when high inflation occurs because of supply side shocks.

The central bank should keep a check on those who borrow money to buy commodities for hoarding and property for speculation. Why should the interest rates be high for those who want to set up an industrial unit or need working capital?

While the fuel prices are high for every country since the Iraq war began, the prices of gas and electricity are not as high in the competitors as they are here. It is certainly the biggest hurdle in the way of industrial growth. And it seems our authorities are going to fail in their task of making cheap energy available to its manufacturing sector.

The power crisis seems to be unending for this country as the political forces keep fighting over flow of water. And very soon we are going to have to import gas and imported gas will never be cheap.

Actually there was never a serious strategy for increasing industrial production. We owe much to the influx of money from abroad after 9/11. As the banks were flooded with money they were generous in lending. But soon this money found its way into the real estate and stock markets. So it was not an achievement of Shaukat Aziz and company, but only the windfall of 9/11.

It is time the authorities get serious about the industrial sector’s development and adopt a sustainable growth strategy. We must not wait for another 9/11 to happen and give a boost to our dwindling economy.

 

[Neo]

Govt focusing on innovation, competitiveness

ISLAMABAD: Minister of State for Finance, Omar Ayub Khan said on Friday that government is focusing on innovation and competitiveness to attain adequate sustainable economic growth.

He added that the objective of Competitiveness Support Fund (CSF) was to catch up the progress made in various countries on innovation and competitiveness to propel economic growth, enhance quality production and create better employment opportunities for youth.

He was speaking at MoU signing ceremony for promoting knowledge-based agribusiness development. The Memorandum was signed by Pakistan Agriculture Research Council (PARC) and the Competitiveness Support Fund (CSF).

It is a joint initiative of the Ministry of Finance and the US Agency for International Development (USAID) to work together for promoting knowledge-based agribusiness development and long-term growth in Pakistan’s agriculture sector.

Omer Ayub Khan who is also the Chairman of CSF, said that purpose of this initiative was to build linkages between business and research in the country. “Such linkages will spark the kind of information sharing that makes business more dynamic and supports the commercialisation of innovations developed at our research institutions,” he added.

The CSF through its financial facilities will develop appropriate instruments to upgrade the competitiveness of the economy and promote overall competitiveness in Pakistan, which will boost the economic growth and create better employment, the minister said.

He said Pakistan now faced an urgent need to ensure the competitiveness of its enterprises and services and to promote innovation to strengthen its economy which is productive and creates conditions for the economic well-being of citizens.

Explaining the working of the CSF, the minister said the programme would use one of its financial facilities to promote knowledge based enterprises.

According to the MoU, PARC and CSF will undertake joint review of various research projects of PARC with a view to identify research areas for commercial benefits, in consultation with the government, private sector, researchers and academia in the agriculture sector. These programs will complement PARC’s existing projects. An action plan for co-financing of the technical assistance for selected agriculture projects will also be developed. The MEC will comprise of 8-10 members, including PARC, CSF and members from the private sector and academia.

As one of the principal donors of CSF, the USAID will be an observer on the MEC. “This partnership will ensure that Pakistan is better poised not only to understand the needs of the global market, but also meet those needs head-on with a highly skilled, well-trained workforce,” said Acting Mission Director of USAID, Patricia Rader, who witnessed the signing of the agreement.

The CSF will also support PARC in creating linkages with relevant industries and lead the research in areas of livestock sector and dairy development, development of agriculture technologies with emphasis on post harvest technologies and value addition.

 

[Neo]

Over 2m to benefit from President’s Rozgar scheme

ATTOCK: As many as two million unemployed people of the country would benefit from President’s Rozgar scheme, for which National Bank of Pakistan (NBP) has allocated funds of Rs12 billion for the provision of easy loans at its 1250 branches throughout the country.

This was stated by Regional Business Chief, NBP Rawalpindi Region, Mirza Tariq Baig while talking to newsmen after the promotion ceremony of President’s Rozgar Scheme at NBP branch Hazro on Friday.

He said that out of total allocation, Rs1 billion would be utilised in the Rawalpindi region.

He said that NBP has released the funds for the loan so that maximum unemployed persons could be entertained under the scheme.

Mirza Tariq said now the requirement of Matric certificate, guarantor, proof of guarantor’s property and income had been waved off and now applicant will have to submit photographs and CNIC of his and two witnesses only. Besides this facility, free insurance of vehicle and applicant will also be provided, he added. While loan will be approved within 15 days after receiving the application, if all requirements were fulfilled properly, he said.

He said that applicant will pay only 6 percent mark up on loan while six percent will be paid by the government of Pakistan to the bank, while applicant will deposit 15 percent as down payment of total loan while remaining will be paid in equal monthly instalments within the period of five years.

He said such scheme would not only overcome the poverty ratio but also strengthen the country economy and development.

 

[Neo]

'ADB to incline foreign investors to invest in Balochistan'

QUETTA (December 17 2006): The Asian Development Bank (ADB) will incline the foreign investors to make investment in Balochistan in various sectors, including power and coal mining. This was revealed by ADB Country Director Peter Fedon during a meeting with Balochistan Chief Secretary K. B Rind here on Friday.

He lauded the Federal and provincial governments' steps for development of Balochistan, and said those steps would soon transform Balochistan into a hub of trade activities that would consequently boost the trade relations between Pakistan and the neighbouring countries, including Afghanistan, Iran and Central Asian Republics (CAR).

He expressed his satisfaction over uplift schemes in health, education and social sectors and assured more ADB assistance to the province in these sectors.

The Chief Secretary, on the occasion, informed the ADB Country Director about the development projects and law and order situation in the province, and said the provincial government was jointly working with the ADB and other organisations as development partners.

The government was paying special attention to promotion of fisheries and tourism sectors, while steps were also being taken to impart technical education to people, he said, and added that national and international highways were also being upgraded.

 

[Neo]

SPI up 12.49 percent against last year

ISLAMABAD (December 17 2006): The Sensitive Price Indicator (SPI) year-on-year of 53 essential items for week ending on December 14 has registered increase of 12.49 percent as compared to the corresponding week of last year. Income group of up to Rs 3000, with 14.73 percent rise over the corresponding week of last year is quite high.

The other income groups of Rs 3001-5000, Rs 5001-12000 and above Rs 12000 show 14.36, 14 and 11.66 percent increase respectively. This is obvious from the Federal Bureau of Statistics (FBS) bulletin that high prices of the daily use items are hitting hard the consumers in income groups up to Rs 12000.

The SPI bulletin, based on data of 53 items from 17 urban centres, showed that 20 items registered increase, 7 items showed decline, while prices of 26 items remained unchanged during the week.

Since several weeks onions, tomatoes, potatoes, red chillies, and firewood are maintaining upward trends. This week these are showing 243 percent, 206 percent, 23 percent, 40 percent and 13 percent increase respectively from corresponding week of last year as given in the bulletin.

The weekly bulletin shows that the rise in the prices of some daily necessities and kitchen items YoY has been substantial. Vegetable ghee, sugar, gur, salt, tea, pulses, potatoes, curd, milk fresh, beef, garlic, gas, kerosene oil, LPG, are the other commodities, which hit the low-income groups directly.

Out of total 53 given, 44 items over the corresponding year showed increase, which include: wheat 4 percent; sugar 7 percent; salt 25 percent; gram pulse 47 percent; moong pulse 23 percent; mash pulse 43 percent; gur 25 percent; beef 12 percent; milk 14 percent; curd 11 percent; tea 11 percent; match box 10 percent; petrol 3 percent; diesel 4 percent; LPG 9 percent; kerosene 7 percent; and gas increased by 20 percent.

Tomatoes, which saw substantial increase of 46 percent over last week has further gone up by 7 percent this week, while eggs have also seen a rise of 9 percent within a week. Rest of the 18 items are also witnessing continuous increment in their prices for the last several weeks.

Despite cold weather, chicken prices showed downward trend during the week and on YoY basis, but it is not clear whether it is due to increase in supply or change in consumers preference.

Few items showing decrease from the previous week are still dearer on YoY basis. These are sugar, potatoes, onions, gur, and gram, moong and mash pulses. Masoor pulse is the only essential item of interest to the poor, which has seen decline of 6 percent, with price at Rs 42.64 per kg.

 

[Owais]

Kuwait's Mobile Telecom considering to bid for Paktel

KUWAIT (December 17 2006): Kuwait's Mobile Telecommunications Co (MTC), the third-largest Arab telecoms firm, said on Saturday it was considering to bid for Pakistan's Paktel, a unit of Millicom. The Luxembourg-based emerging markets operator, Millicom, said last month it expected to end its 16-year presence in Pakistan next year due to tough market conditions.

Paktel is the country's fifth largest mobile phone operator and had about 1.5 million subscribers on September 30. "MTC announces that it has expressed initial interest to submit a bid to buy Paktel... ", the bourse said on its Web site.

MTC has taken a $1.2 billion Islamic loan to help fund its expansion and to refinance another $750 million credit facility that complies with ban on lending on interest.

A Paktel acquisition would make MTC, which has operations in 20 countries in the Middle East and sub-Saharan Africa, the latest Gulf Arab company to invest in Pakistan, the world's sixth most populous country.

In September, Pakistan gave Dubai-based Emaar Properties approval to build $43 billion city near Karachi. Abu Dhabi-based Emirates Telecommunications Corp, Etisalat, owns 26 percent stake in Pakistan Telecommunications Co.

Announcing its pullout, Millicom said it decided against making significant investments in Pakistan because of tough market conditions. Pakistani officials had refused to grant delay in payment of a $29 million licence instalment and had not given Paktel permanent access to part of the frequency spectrum, Millicom said.

Like Etisalat, MTC is expanding outside it saturated domestic market. The Kuwaiti telecom firm bought Netherlands-based Celtel last year. MTC's shares rose 3.16 percent to 3.260 dinners on Saturday as the benchmark index posted its sharpest one-day gain in almost nine months.

 

[Owais]

Trade deficit declining due to Govt. policies: Humayun Akhtar

KARACHI: Federal Minister for commerce, Humayun Akhtar has said that the trade deficit was on the wane spurred by the government policies.

Following a meeting of the steering committee of Expo Pakistan-2007 held here, the federal minister told newsmen that the trade deficit for the period July-November worked out to about 18 percent as compared to 147 percent in the same period last year.

Humayun Akhtar said that the trade gap has declined in the wake of rising exports and diminishing imports, as the government has taken several measures for boosting exports, which included garment industry’s research and development support, subsidizing of export refinance and facility of long-term loans extended to the industries.

 

[Neo]

Workers remit $2bn during July-Nov

KARACHI: Pakistan received an amount of $2,092.81 million as workers’ remittances during the first five months (July-November 2006) of the current fiscal year as against $1,683.96 million in the corresponding period of last year, registering an increase of $408.85 million or 24.28 per cent.

The amount of $2,092.81 million includes $1.17 million received through encashment and profit earned on Foreign Exchange Bearer Certificates (FEBCs) and Foreign Currency Bearer Certificates (FCBCs).

During November 2006, workers remitted $448.61 million as against $308.81 million in November 2005, depicting an increase of $139.80 million or 45.27 per cent.

A press note issued by the State Bank of Pakistan on Saturday said the inflow of remittances during the first five months from the US, Saudi Arabia, UAE, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries amounted to $533.46 million, $398.99 million, $318.12 million, $291.47 million, $180.10 million and $62.57 million respectively as compared to $481.54 million, $280.89 million, $243.26 million, $228.25 million, $172.78 million and $47.76 million.

Remittances received from Canada, Australia, Norway, Switzerland, Japan and other countries during the first four months amounted to $306.93 million as compared to $221.63 million in the corresponding period of the last fiscal year.

The monthly average remittances for the period July-November, 2006 comes out to $418.56 million as compared to $336.79 million during the same period of the last fiscal year.

The inflow of remittances into Pakistan from all countries of the world increased last month as compared to November 2005.

According to the break-up, Pakistan received workers’ remittances during November, 2006 from the US ($111.70 million), Saudi Arabia ($80.79 million), UAE ($67.42 million), GCC countries including Bahrain, Kuwait, Qatar and Oman ($59.86 million), UK ($41.65 million) and EU countries ($14.26 million) as compared to the corresponding receipts from the respective countries during November, 2005 ie $89.74 million, $48.30 million, $46.98 million, $47.06 million, $24.10 million and $8.03 million. Remittances received from Canada, Switzerland, Australia, Norway, Japan and other countries during November 2006 amounted to $72.78 million as compared to $43.84 million during November 2005.