Pakistan Economy - News & Updates - Archive

[Owais]

FDI may cross $6 billion by year-end: Advisor

LAHORE (March 11 2007): Dr Salman Shah, Advisor to Prime Minister on Finance and Revenue has said that foreign direct investment (FDI) that was not more than 300 million dollars in 1999 is likely to cross 6 billion dollars by the end of this financial year.

While addressing the members of Federation of Pakistan Chambers of Commerce and Industry (FPCCI) zonal office here on Saturday, he said that Pakistan's economy size has increased more than double from 60 billion dollars in 1998 to 140 billion dollars. Our economy is bigger than the Egypt, Taiwan, Saudi Arabia, UAE, Iran and Middle East despite the fact that Middle Eastern countries have oil reserves.

He said the construction of mega dams is inevitable for maintaining the present growth rate. The economy is growing at an average rate of 7 percent for the last five years and hydel electricity is must for the sustainability of economic growth. "We are trying to bring down fiscal deficit from four to three and half percent" he maintained. He said that only cheap electricity could slash the cost of doing business to compete the international market.

Dr Salman urged the businessmen to tap the potential of 700 billion dollars Chinese market and free trade agreement between the two countries could facilitate enhancing exports from Pakistan. 'Pakistan government is setting up investment companies having equity share ratio of 60:40, through joint ventures with the Chinese counterparts under five-year economic co-operation plan and Chinese would run these companies', he added.

Highlighting salient features of the economy, the advisor said the rate of interest on Pakistan Investment Bond has declined by half percent for the first time. However, the food inflation that is about 9 percent needs to be reduced which could only be possible through strengthening supply side. He stressed the need for expanding tax base and said that Pakistan is the only country in the region with lowest tax to GDP ratio of 10 percent and needs further improvement in it.

Talking about potential in infrastructure sector, Dr Salman Shah said that under North Transport Corridor project, infrastructure worth 6 billion dollars including roads, motorways and ports would be completed by the Chinese firms, who have asked us to identify the locations for setting up industrial parks and industrial zones along the motorways which would provide access from Karachi to Khyber.

According to conservative estimates, an amount of Rs one trillion would be spent on infrastructure projects, he added. He also urged the local firms to come forward to exploit the existing potential. About the financial sector, the advisor said that foreign banks are buying local banks and setting up hundreds of new branches like Standard Chartered and ABN Amro etc. Similarly, a Chinese company has purchased Paktel while another wanted to buy PTCL. This reflects the potential that exists in Pakistan, he added.

The government's objective is to focus on investment in education and health sectors. The spending on education including technical and vocational has been increased to Rs 600-700 billion. He invited the private sector to invest in this sector of vital importance. He said that Pakistan, blessed with opportunities, is witnessing rapid growth in its economy.

The demographic situation in Pakistan ensure sustainability of demand for which private sector should invest to harness the potential, he maintained. Our growth is determined by the local market and if we start increasing exports, the growth rate would go up in double digit. The economic growth is a strategy for poverty alleviation and private sector, which is main source of creating jobs, should come forward to play its role in this regard, Dr Salman said.

About the cement and other items' price hike, he said that Monopoly Control Authority is responsible to ensure that the industry may not indulge in cartelisation but it has no power to impose heavy penalties to check manipulation. Responding to newsmen in this regard, he maintained that competition commission is being set up in place of Monopoly Control Authority so that business malpractice's should be checked.

Earlier, speaking on the occasion, President FPCCI, Tanveer Ahmad Sheikh expressed his concern over rising mark-up rate and said that the present mark up has made our products uncompetitive in the world market.

He urged upon the government to take measures for lessening the cost of doing business and said the government must announce some incentives and provide level playing field to the business community.

Meanwhile talking to newsmen, he said that the removal of chief justice of Pakistan would not affect the foreign direct investment and maintained that the foreigners would see that everything in the country is being done in principle.
http://brecorder.com/index.php?id=537218&currPageNo=1&query=&search=&term=&supDate=

 

[Owais]

PPIB plans 10 projects to produce 2255MW electricity


ISLAMABAD (updated on: March 10, 2007, 21:10 PST): The Private Power and Infrastructure Board (PPIB) is planning to commission ten new power projects to private sector which will produce 2255 MW electricity at a cost of $1.691 billion.

According to the PPIB sources, the process to commission these projects is expected to complete in 2007-08 as the processing of these have already been started by the Board.

Giving details, they said among the ten power projects being built by private companies included Orient power project which build the plant at Baloki which will produce 225 MW electricity, at a cost of $169 million.

The other project which will cost $169 million and produce 225 MW electricity will be located at Muridke, Punjab and would be established by the Muridke (Sapphire) power project.

The sources said the third project, to be based in Rawalpindi would produce 150 MW power at a cost of $113 million. Attock General Power Project Company will set up this plant.

Bhikki (Halmore) Power Project Company will set up 225 MW power project at Bhikki which will cost US$169 million. The project is expected to start by December 2008.

The sources said Warda Power Project Company will build this project in the suburb of Lahore Metropolitan at a cost of $150 million. The plant will produce 200 MW electricity to cater local needs.

Another power project by Nishat Chunian a known private company in the textile sector will build a plant of 200 MW at a cost of $150 million in Lahore.

Shiekhupura (Atlas) Power Project will set up the plant between Shiekhupura and Lahore and will produce 200 MW electricity at a cost of $150 million. Gujranwala (Gulistan) power project which will set up the plant in the city. The power plant will produce 200 MW electricity. The project will cost $150 million, the sources said.

PPIB sources said other project will be built at Sahiwal by Sahiwal (Saif) power project which will produce 225 MW and at a cost of $169 million.

The sources said another project is to expand existing IPPs near Lahore and will enhance 405 MW power. The expansion project will cost $304 million.

About the facilities offered to the private sector the officials said that the PPIB has provided "One Window "facility to private sector investors in matter concerning establishing power projects and related infrastructure.

Giving the details of the facilities, the officials said that these matters includes negotiation of the implementation Agreement (IA), provide support to the power purchaser and fuel supplier while gas supply agreement (GSA), other related agreements.

The PPIB will play a role of liaison with the concerned local and international agencies for facilitating and expediting progress of private sector power projects.

brecorder.com

 

[Owais]

Pakistani banks to start operations in China soon: Kasuri

LAHORE (March 11 2007): Pakistani banks will soon start their operations in China and Chinese banks would have presence in Pakistan, while China also expressed readiness for setting up economic zones and Information Technology (IT) parks in Pakistan.

Foreign Minister Khurshid Mehmood Kasuri stated this while speaking at a reception hosted by the Ministry of Foreign Affairs in honour of Consular Corps, here at State Guest House, on Saturday. Honorary Consulates of different countries as well as US Principal Officer, Bryn Hunt attended the reception.

Khurshid Kasuri maintained that Pakistan is committed to developing and strengthening trade and economic relations with the rest of the World, both bilaterally and multilaterally. 'Pakistan has played a pioneering role in the development of regional agreements like Economic Co-operation Organisation (ECO), Saarc and Developing-8 (D-8). We have joined Asean Regional Forum (ARF) and are working towards membership of some of the other regional frameworks or economic co-operation,' he said.

Kasuri further said Pakistan's independent position on issues of international importance like Lebanon, Iraq, the Iranian nuclear issue, Iran-Pakistan-India Gas Pipeline, Pakistan's membership of the Asean Regional Forum, increasing engagement with the Shanghai Co-operation Organisation and the conduct and management of difficult relationships with Afghanistan and India, are all signs of an active and independent foreign policy. So far, he said Pakistan has skillfully navigated through these turbulent times. 'We have managed to maintain and improve our relations with all the major powers even though their interests may not always coincide with ours. However, given the dynamics of the international system, we are continuously examining our options to protect and promote our national interests in the face of developments that pose new challenges and our policy of proactive engagement in a changing world will remain unwavering,' Kasuri said.

Talking about Pak-US relations, he said since 9/11, Pak-US relations have undergone a profound change. 'The engagement today is both deeper and broader, going well beyond counter-terrorism co-operation. Whenever Pakistan and the US have worked together, both countries and the world have benefited. Whenever Pakistan-US relations have frayed, the interests of both countries have been hurt (such as in the post-Soviet Afghanistan),' he said. "We believe Pak-US relationship is vital to a durable structure of peace, stability, economic growth and prosperity at regional and international levels."

Answering a question, Kasuri said legislation made by the US House of Representative is a matter of concern for the National Assembly Defence Committee and public circles. However, he hoped that US Senate will not approve the law being against the US interests. "It was in the US interests that feelings of lacking trust about US should not arise among the Pakistani people," he said.

Answering another question, he said Pakistan wants "negotiated solution" of Iranian nuclear programme. "We stand firm against aggression on Iran and our deeds speak lauder than words," he replied.

About Indo-Pak relations, Kasuri said as a result of peace process started in January 2004 and the Composite Dialogue, there has been significant improvement in the atmospherics between the two countries. The bilateral trade has increased from around 200 million dollar to more than 1000 million dollar, almost a billion.

Regarding Jammu and Kashmir, Kasuri said: "We have made clear to India that there is a need to move from conflict management to conflict resolution. Both sides have agreed to the need to build on convergence's and narrow down divergences on Kashmir".
http://brecorder.com/index.php?id=537255&currPageNo=2&query=&search=&term=&supDate=

 

[Introvert]

‘Pakistan Steel to earn Rs 2b profit this fiscal’​

KARACHI: Pakistan Steel will have an operating profit of Rs 1.5 billion to Rs 2 billion, with record sales of products worth Rs 29 billion, during the current fiscal year.

Pakistan Steel Chairman Maj Gen (Retd) Mohammad Javaid told journalists at a press conference that in previous fiscal year, the organisation suffered a loss of Rs 1.8 billion and Rs 20 billion product sales.

In Feb 2007 alone, the PS sales were worth Rs 2.95 billion and in March it is expected to be Rs 3 billion, both highest in the history of the largest industry of the country. The chairman hoped that in the year 2006-07, production capacity would be about 85-90 percent as against 62 percent during the corresponding year.

He spoke in detail about Rs 4 billion ongoing capital repairs of the PS, bulk with foreign collaboration, which after completion, would make it rejuvenated and integrated, having sustained production of 1.1 million tonnes per annum for next 15 to 20 years.

http://www.dailytimes.com.pk/default.asp?page=2007\03\11\story_11-3-2007_pg5_8

 

[Neo]

Measures being taken to provide relief to low-income group: Prime Minister

LAHORE (March 11 2007): Prime Minister Shaukat Aziz has said that due to economic self-reliance, the government is now in a position to provide more resources for development projects and record funds have been allocated for health, education and infrastructure development sectors.

He expressed these views during a meeting with Punjab Chief Minister Chaudhry Pervaiz Ellahi here on Saturday, disclosed an official. Organisational affairs of Pakistan Muslim League, overall political situation of the country, law and order as well as development projects in Punjab were discussed in the meeting. Punjab Governor Lieutenant General Khalid Maqbool (Retd) was also present on the occasion.

The Prime Minister said that direct measures are also being taken to provide relief to the common man especially low-income group. He said that Atta, sugar and pulses are being provided to the citizens at concessionary rates through utility stores. "The PML has been organised tremendously under the leadership of Chief Minister Chaudhry Pervaiz Ellahi in Punjab and would achieve a landslide victory in the next general elections," he added.

The chief minister said that concerted efforts are being made for organising PML at every level and all wings of the party have been activated. He said that party office-bearers, Nazims and assembly members are striving collectively for the provision of relief to the masses and implementation of reforms agenda. "The office-bearers and workers of other political parties are joining PML in large numbers, as they are deeply impressed with the development strategy, reforms agenda and public service programme of Punjab government," he added.

According to him, there is a great deal of enthusiasm in the people for receiving membership of Muslim League, due to which party network is fast expanding. Effective measures have been taken for provision of essential items to people at reasonable rates and stabilising prices of Atta. Sasta ration scheme is running successfully in the province and thousands of poor families are benefiting from this programme. Administrative machinery has been geared up and mega projects are being completed expeditiously in the province while transparent utilisation of development funds has been ensured through financial discipline.

Prime Minister Shaukat Aziz appreciated the development strategy adopted in Punjab and expressed his satisfaction over the pace of development activities in the province.

http://www.brecorder.com/index.php?id=537269&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Rs nine billion earmarked for Fata schemes

PESHAWAR (March 11 2007): A comprehensive plan is being followed for the fast development of Fata to address the basic needs of the masses particularly in education, health and drinking water supply sectors.

This was stated in a presentation on Fata given to the participants of Armed Forces War Course 2006-2007 of National Defence University Islamabad at Governor's House here on Saturday. Secretary to Governor Azmat Hanif and Secretary Law and Order Fata Arbab Muhammad Arif conducted the presentation.

The participants were briefed on the history, geographical importance, legal and administrative systems in the tribal areas and the key challenges that the government was facing in the aftermath of 9/11.

They were informed that a substantial increase had been made in the development budget of Fata recently. Rs 9 billion had been earmarked for developmental schemes in different sectors in order to remove the backwardness of the area besides creating economic opportunities for the tribal people.

Tribal areas are laden with mineral resources, whereas high quality marble has been found in Mohmand Agency. The available mineral potential is being exploited through improved mining practices, and a Marble City was also being established in Mohmand Agency.

Extension of Rural Support Program in Fata and establishment of Fata Development Authority would further boost govt efforts for fast track development in the tribal areas. The participants were also told about the new and innovated development initiative of Sustainable Development Plan (Vision 2015). Under this comprehensive plan, Rs 130 billion would be spent over a period of nine years and all the projects under this plan would be formulated through a consultative process.

http://www.brecorder.com/index.php?id=537277&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Private sector to set up 10 power projects

ISLAMABAD (March 11 2007): The Private Power and Infrastructure Board (PPIB) is planning to commission 10 new power projects to the private sector that will produce 2,255 MW electricity at a cost of $1.691 billion. According to PPIB sources the process to commission these projects is expected to complete in 2007-08 as the processing have already started.

Giving details, they that among the ten power projects being built by the private companies Orient power project at Baloki will produce 225 MW electricity at a cost of $169 million.

The other project which will cost $169 million and produce 225 MW electricity will be located at Muridke Punjab and would be established by the Muridke (Sapphire) power project. The sources said the third project to be based in Rawalpindi would produce 150 MW power at a cost of $113 million. Attock General Power Project Company will set up this plant.

Bhikki (Halmore) Power Project Company will set up 225 MW power project at Bhikki will cost $169 million. The project is expected to start by December 2008.The sources said Warda Power Project Company will build this project in the suburb of Lahore Metropolitan at a cost of $150 million. The plant will produce 200 MW electricity to cater to the local needs.

Another power project by Nishat Chunian a known private company in the textile sector will build a plant of 200 MW at a cost of $150 million in Lahore. Shiekhupura (Atlas) Power Project will set up the plant between Shiekhupura and Lahore and will produce 200 MW electricity at a cost of $150 million. Gujranwala (Gulistan) power project will set up the plant in the city. The power plant will produce 200 MW electricity. The project will cost $150 million, the sources said.

PPIB sources said other project would be built at Sahiwal by Sahiwal (Saif) power project will produce 225 MW at a cost of US $169 million. The sources said another project is to expand existing IPPs near Lahore and will enhance 405 MW power. The expansion project will cost US $304 million. About the facilities offered to the private sector the officials said that the PPIB has provided "one-window facility.

http://www.brecorder.com/index.php?id=537243&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

March 11, 2007
Coal share in energy mix to be augmented

By Ihtashamul Haque

ISLAMABAD, March 10: The government has decided to enhance the share of coal in overall energy mix from 7 per cent to 20 per cent for generating additional 20,000 megawatts of electricity in next 20 years.

According to the official sources the objective was to restrict the unfavourable impact of high cost of imported energy to the national economy and improve the energy supply by developing coal as strategic national asset in line with the Energy Security Plan.

However, they admitted that it was becoming difficult for the government to attract foreign investment in the coal mining sector due to countless problems including inadequate institutional arrangements, no focus for coal development and harsh climate conditions.

“No real success has so far been achieved to attract sizable investment in the coal mining despite offering adequate incentives to the investors,” an official said. Law and order problem, he said was also one of the main reasons while perhaps more fiscal incentives need to be offered to the international companies for effectively developing coal industry in Pakistan, he said.

The ministry of petroleum and natural resources has informed the higher authorities that large capital was required to have any integrated coal and mining and power generation programme to remove the growing power crisis in the country.

It said that there was no industrial support services existed and that there was also a need for clean coal technologies and developed human resource base to attract investment in the mining field.

The ministry conceded that Pakistan had no mechanised coal mining and that the human resources were needed to be developed within the country to harness the coal reserves of 175 billion tons in Thar subsequently.

Considering various problems, the federal government and the Sindh government have agreed to jointly establish Thar Coal Mining Company to develop coal as “strategic national asset”.

Sindh is expected to receive a large sum as royalty from coal beside inexpensive electricity by attracting foreign investment in coal mining through the proposed mining company.

One of the major objectives of establishing the company was to encourage Independent Power Producers to plan commissioning of power plants on Thar coal.

The ministry of petroleum and natural resources and the government of Sindh will be the equity holder partner of the proposed company.

The plan is to produce and market the planned quantity of coal and coal products efficiently and economically with due regard to safety, conservation and quality.

The main thrust of the company will be making its operations as per market requirements besides maintaining at the same time financial viability to meet the resource need. Also, the company will develop available cost efficient clean coal technologies for harnessing Thar coal for other utilisation option like liquefaction, co-generation and extraction of high unit value chemicals.

It will develop an open cast mine on an evaluated coal Blocks at Thar having capacity of minimum 6 million tons annually for supply to 1,000-mw power plants.

The geopolitical events of new millennium, sources said, highlight the fragility of the world’s energy supply system and volatility of prices. Ever-increasing crude oil prices have constrained the world at large to develop their indigenous energy resources for energy security.

Sources said that Pakistan has witnessed an accelerating development during the last few years. However, its power growth could not commensurate with the development of other sectors.

http://www.dawn.com/2007/03/11/ebr4.htm

 

[Neo]

March 11, 2007
Need for huge investment in human resource development

LAHORE, March 10: Advisor to Prime Minister on Finance and Economic Affairs Dr Salman Shah on Saturday stressed the need for more investment in human resource development saying a better demographic profile could prove a major strength of the country.

“We can transform this comparative advantage into economic strength of the country by putting in more money into human resource development,” he said while addressing the members of business community at Zonal Office of the FPCCI here.

FPCCI President Tanvir Ahmad Sheikh and Vice-President Azhar Saeed Butt were also present on the occasion.

The adviser said that the ever-increasing middle class coupled with rapid urbanisation process had given a fillip to demand of consumer items in the country, adding that the presence of a large young population promised further expansion in the middle class.

Dr Shah said that the government was planning to raise the allocations for education and health sectors as a part of socio-economic uplift efforts.

He said that competitiveness and productivity had to be increased to put the country on the track of rapid growth.

He said that Pakistan had to boost its exports to the countries like China.

“We should look at China as market, not only as a donor. This country made imports worth $700 billion last year,” Dr Salman Shah said.

He hoped that the Pak-China Economic Zone being developed near Lahore would attract huge investment from China.

Dr Shah hoped that the foreign direct investment (FDI) would touch the mark of $6 billion during the year 2006-07.

Talking about government’s efforts to construct more dams in the country, he hoped that the construction of mega water reservoirs would go a long way in bringing more prosperity to the country.

He said that the government was committed to constructing five new dams by the year 2016.

“An enhanced storage capacity can help have more predictable water resources and sustainable agriculture in the country,” the advise said.

He said that generation of more hydel power was necessary as rapid economic growth had taken the annual power consumption growth rate to double digits.

He said that there was need of doubling the allocation for Public Sector Development Programme (PSDP) as Pakistan needed to spend 8 to 10 per cent of GDP on the development of its infrastructure to ensure sustainable economic development.

Responding to a question, he said that Monopoly Control Authority (MCA) was being transformed into Competition Authority with an objective to check the process of cartelisation.

http://www.dawn.com/2007/03/11/ebr5.htm

 

[Neo]

Projects being completed as per international standards

LAHORE (March 12 2007): Punjab Chief Minister Chaudhry Pervaiz Elahi has said that the government is providing additional resources to pace up work of development projects being under way in the province.

He stated this while chairing a high-level meeting to review performance of various departments such as agriculture, livestock, communication and works, irrigation, information technology, forests, wildlife and fisheries at Chief Minister House here on Sunday.

The Chief Minister said that an effective monitoring system has been evolved under project management units to ensure quality work and timely execution of uplift projects. He said the PMUs have improved efficiency of all departments, while Planning and Development Department is also extending consultancy services regarding management and its role in the preparation and approval of developmental schemes is commendable. For the first time in Punjab's history, the uplift projects are being completed as per international standards, he said and asked the departments to adopt effective strategy and modern techniques to take forward the economic agenda of the government, he added.

Chaudhry Pervaiz Elahi said a satellite hub is being established at a cost of Rs 450 million to ensure access to inter-net at low rates, while Software Information Technology Park is another hallmark, which will expedite economic activities and help create employment opportunities. He said police patrolling posts are being automated to improve their performance as well as maintain criminals' record properly and 1124 Helpline being set up to help out the masses.

He further said the obsolete system of land and revenue record is being replaced with new management information system, which will remove the people's problems of property mutation, documentation and other related matters.

The Chief Minister directed the IT Department to chalk-out a comprehensive strategy for its promotion. The government also took solid steps to promote agriculture and improve financial conditions of the growers, and a new system of agri products marketing will be introduced to facilitate the farmers, he maintained.

He said Agri Research Board is reconstituted so as to keep the growers abreast about new agri researches to get enhanced yield. The Chief Minister said the government is expanding the road network under a comprehensive programme that will definitely pace up trade activities. He also directed the departments' concerned to ensure quality of work in the road and infrastructure projects.

He said the government's effective programme to curb water theft is bearing fruit and now the tail-end growers are getting adequate irrigation water. Hefty grants are being spent on canal lining, renovation of barrages and brick-lining of water courses to put the irrigation system on modern lines, he added.

http://www.brecorder.com/index.php?id=537521&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

March 12, 2007
Achieving the $45 billion export target

By Sultan Ahmad

A LEAP in exports from $16.5 billion last year to $40-45 billion by 2013 would be a big jump. But it would be achievable only with better strategy and aggressive efforts.

While during the last seven years the export rose from $7.8 billion to $16.5 billion (110 per cent) as the prime minister claims, then the new target is achievable and can become a reality, says Commerce Minister Humayun Akhtar. At present export is growing at the rate of only four per cent.

But almost tripling the exports target would certainly demand far greater ingenuity, wider imagination and aggressive efforts on a sustained and escalating basis.

Prime Minister Shaukat Aziz approved the export plan presented by Deputy Chairman of the Planning Commission Dr Akram Sheikh, who had worked hard on it with inputs from the relevant ministries including those of commerce, industry and textiles.

With the end of the textile quota system and increased globalisation of economy with new players like Vietnam and Cambodia entering the export arena vigorously, the global economic paradigm for a textile-exporting country like Pakistan has to be changed to keep pace with the developments.

The government is trying to enter the Free Trade Agreements with major and minor countries. It has signed FTA deal with China which offers great opportunities to Pakistan exports. A similar deal is being negotiated with the US, the European Union and the Gulf Cooperation Council. It has already signed an FTA with Sri Lanka which has become operational. Negotiations for such a deal are also going on with Bangladesh, Nepal, Malaysia and Jordan.

These agreements would open up vast markets with large demands, particularly in China. Pakistan should have surplus to meet their needs. If that is not done, goods from other countries with no or nominal tariff would flood our markets, as Chinese goods are doing at highly competitive prices. So we have to defend our own markets through open market mechanism and try to export more and more.

We have in addition the Reconstruction Opportunity Zones option offered by the US to export goods produced in the earthquake zones and in underdeveloped zones of the country like the tribal areas to be exported tax-free. We have to make best use of this and profit by it promptly.

To enlarge the exports to $45 billion by 2013 we have to first fix the annual targets of an escalating scale and send them to the Federation of Chambers of Commerce and Industry and its constituent chambers to make them full partners in the grand effort and prod them to do the best they can.

Exports, as the prime minister says, is the lifeline of the country which has to be raised from 13 per cent of its GDP to 15 per cent. With the GDP growing fast at 6-7 per cent annually or more, the volume of each percentage will be increasing heavily and we have to meet the challenge year after year.

While the government is trying to open new markets by seeking FTA with many countries, the exporters have to explore their own markets in them and firm them up through mutually binding arrangements.

We have to diversify our exports vigorously by including a large number of unconventional items instead of concentrating excessively on the textile sector beginning with raw cotton and coarse cotton yarn.

We have to make our textiles as well as leather exports more value-added. The fact that Pakistan earned $1.2 billion from rice exports last year suggests that we could earn more from agricultural exports if we develop them properly and promote their sale.

Exporters have to focus on garments and make them increasingly value-added and their brands have to earn a name abroad for quality, style and packaging.

Today the value addition of garments in Bangladesh is higher than value-addition in Pakistan not to speak of the Indian output which is higher than Bangladesh garments. This situation must change and the Pakistan government should work hard to export more garments and earn more foreign exchange.

To achieve such ends, Pakistan needs highly skilled workers and in large numbers. The prime minister says the government is training workers in large numbers to meet the future needs of the industry .It is hoped that efforts would produce enough workers to produce quality goods to boost export.

Of course, the industry, as a whole, and the export industry in particular need a steady supply of adequate power and gas. Their demand would go on increasing and that has to be met.

Water is the other necessity of the industry which should be met by the government. In fact, the infrastructure as a whole should be earnestly taken care of by the government.

The gas pipeline from Iran could solve the energy problem to some extent. But the project may not start functioning until the fag end of the seven year export documentation plan.

The export can’t be raised to $45 billion if approached in conventional manner, but with vigorous effort it is achievable. The exporters have to play a much larger role and consistently.

There is need for extensive research by official institutions and non-official bodies like the Chambers of Commerce. FPCCI should play a larger role in promoting such research and the commercial secretaries abroad should be made to report to them as well.

The FPCCI’s prime function should not be handing over scores of export trophies to exporters each year and holding dinners and lunches for top officials including the ministers. The FPCCI and its affiliate chambers should play a larger role in exploring new markets for Pakistani goods and for new items in new areas.

Participation of our exporters in some trade exhibitions abroad is not enough. The FPCCI should play an active role in research with adequate subsidy from the government which is going in that direction now.

The number of holidays should be reduced and declaration of holidays suddenly should be avoided. Workers going on protest should avoid violence, disruption and interruption in the flow of exports.

Above all, the exporters should not seek a high-rate of profit which they can ensure in local market through cartel like arrangements. Over here they can create artificial shortages through such cartels and profit a great deal.

They can’t do that abroad and hence have to be content with a lower rate of profit that may discourage them from participating in the export market. That should not happen now as the big exporters are the ultimate gainers.

There have been increasing reports of misuse of export refinance at concessionary rate of interest. The latest is the misuse of export refinance for rice. Such exporters are reported to have caused shortages in the market of course along with high prices. Such abuses of export refinance should be eliminated.

The $40-45 billion target to be achieved within seven years from now when the export moving at a nominal rate of only four per cent ,is a real challenge. Neither the government nor exporters can afford to fail or have setbacks as in the past when the gaps between the targets and the reality were very large.

http://www.dawn.com/2007/03/12/ebr13.htm

 

[Neo]

Rising trade deficit: solutions

TRADE deficit surged in the first eight months of the current fiscal year to a new record of $8.890 billion, up 18.47 per cent, as compared to the same period last year. With this trend persisting and getting more pronounced, the trade gap soared from a mere one billion dollars in 2003 to $12 billion in 2006, hitting new highs every year. It is the outcome of abnormal annual fluctuations in export earnings and import bills. A positive development this year is the drastic fall in import growth from last year’s 38.8 per cent to the current 9.95 per cent -- a factor which, unfortunately, has been more than neutralised by the dismal export performance. The export growth plummeted from 14.3 per cent to less than four per cent in the same period.

The government and the business have both failed to tackle the worsening problem though both are engaged in considering the subsidy required to give the textile exports a competitive boost. Just this week, the ministry of textile reportedly recommended Rs29.76 billion tax incentive but a final decision is yet to be taken. The subsidy would not be a permanent solution as it would adversely affect the already deteriorating terms of trade. The textile industry would need to do without its crutches as quickly as possible and to improve productivity by seriously addressing its own structural problems. It suffers from low-scale operations, deficient labour and management skills, poor quality of goods and slow movement from the middle to high value-added chain. The clothing industry is not integrated into global distribution system under which direct involvement of retailers helps exporters acquire the competitive skills. Similarly, at home the big industrial units are not integrated into organised production network through strategic alliances, sub-contracting and outsourcing that could provide small and medium-size industries markets through improved productivity. The industry needs a higher per capita output, on-job training, skill upgradation and dissemination of new knowledge and technique about changing fashions and shifting markets. Many experts have come to believe that the textile industry has is a weak case for subsidies as it cannot even compete with newcomers like Bangladesh and Vietnam. A view gaining ground is that the government being too focused on textiles has neglected many other sectors with potential for export. About 75 per cent of the exports originate from four basic sources: cotton, leather, rice and sports goods. Exports are concentrated in few items and few countries. Diversification in terms of items and destinations needs a sound and effective strategy for export-oriented industrialisation. Unless export earnings rise at the required pace, trade deficits would be difficult to manage with the external financial flows drying up sooner or later if foreign exchange earnings do not keep pace with hard currency spending.

While boosting exports, there is also a need to conserve foreign exchange earnings by reducing imports, wherever possible. The current level of imports at over $28 billion indicates the potential for increasing indigenous production that could meet much of the rising domestic demand in areas of comparative advantage. This opportunity is being neglected by business. Import substitution and boosting exports should be the core element of any effective trade policy. Foreign direct investment that involves transfer of technology, skill development and marketing should be attracted in export-oriented industries, which is not the case now.

http://www.dawn.com/2007/03/12/ed.htm#1

 

[Owais]

Pakistan ordnance factory ordered to pay Rs 140 million sales tax

ISLAMABAD (March 12 2007): The Customs, Central Excise and Sales Tax Appellate Tribunal, Islamabad, has directed Pakistan Ordnance Factory (POF), Wah Cantt, to pay Rs140 million on the supply of electricity to its subsidiaries used for production of arms and ammunition during 1999 to 2001.

Member, Technical, Muhammad Wali Khan, has recently issued a judgement against the factory upholding the order of the Collector, Adjudication, Rawalpindi. The case of POF was pleaded by Ijaz Akbar, Chartered Accountant, while departmental representative submitted its case on behalf of CBR.

Details showed that the Collectorate of Sales Tax, Adjudication, had detected certain irregularities during audit of the factory record pertaining to August 1999 to May 2001. It detected that the factory had supplied electricity to its subsidiaries without charging sales tax. Total 207,587,492 units of electricity were supplied to its subsidiaries during this period. The market value of such supplies comes to Rs 978,456,130.00 by multiplying units supplied with market price. Thus, sales tax not deposited comes to Rs 146,768,419.00, which reflected that the factory had contravened certain provisions of Sales Tax Act, 1990.

Secondly, the unit had failed to issue serially numbered tax invoices at the time of supply. The factory failed to provide data of power generation and its supply during the period under review, as tax on electricity was imposed from August 16, 1999. Keeping this in view, the Collector, Adjudication, issued a show-cause notice to the factory.

Adjudication officials observed that the factory should pay the principal amount of sales tax along with additional tax penalty. Against the decision of the Collector, Adjudication, the unit filed an appeal with the tribunal to set aside the order passed by adjudication authorities.

The factory's lawyer opined that the order of adjudication officer was vague, which did not mention any sections of the Sales Tax Act for recovery of sales tax. He further pleaded that the entire electricity generated was self-consumed, ie, used in the production of arms and ammunition, which are exempt under the sales tax law. Moreover, generation of electricity and its self-consumption by the factory did not attract the provisions of section 3 of the Sales Tax Act, 1990 as the element of transfer of property from one person to another was lacking and hence no sale/supply took place, the factory lawyer said.

The Tribunal quoted a judgement of a sugar mill, saying, "Once a taxable goods has been supplied by a registered person to itself it would fall within the definition of taxable supply".

The Tribunal said that it was clear that the exemption of one product, which is exempt or non-taxable, did not exclude the production of another product from the ambit of taxable activity of goods. The Tribunal referred to a number of judgements, including an order of the Supreme Court of Pakistan.

The Tribunal concluded that, "the factory's consultant has argued at the bar on minor and curable defects of the show-cause notice issued to the appellants (factory). In this case the onus of proof was on the factory that there was no in-house or self-consumption of the electricity so generated contained as has rightly been pointed out by the department.

They never informed this tribunal the position, which is contrary to the stand taken by the revenue department, and failed to discharge their burden as to the quantum of usage of electricity on commercial basis or using the same for the purpose of manufacture/production of taxable goods or exempt goods." The Tribunal would not distribute the order of the Collector, Adjudication, the judgement added.

http://brecorder.com/index.php?id=537476&currPageNo=1&query=&search=&term=&supDate=

 

[Owais]

Foreign exchange: SBP asked to furnish details about investment

ISLAMABAD (March 11 2007): Senate Standing Committee on Finance, Revenue, Economic Affairs and Statistics has directed the State Bank of Pakistan (SBP) to furnish complete details about the investments it made through utilising foreign exchange reserves.

During committee's meeting on Saturday, Senator Ahmed Ali, chairman of the committee informed the members that SBP would provide information about the rationale behind these investments in foreign exchange.

The SBP has been asked to submit the following information to the standing committee: How much investment has been made in foreign exchange, where and at what rates, currency in which investment is made and who is managing this investment.

Committee's chairman said that they have been in contact with the SBP for obtaining requisite information. In this regard, the SBP would provide complete data to the committee.

Appreciating the CBR performance and outcome of reforms, the committee chairman said that the tax authorities are going on the right rack for smooth implementation of reform projects surpassing revenue targets. The Secretary General, Revenue Division and Chairman CBR, M. Abdullah Yusuf briefed the Senate committee on CBR's performance.

He said that the board has collected Rs 513.6 billion in first eight months (July-February) of the current financial year against Rs 419.3 billion in the same period last fiscal, reflecting a growth of 22.5 percent. The revenue collection during this period is Rs 19 billion more than the target set for the first eight months of 2006-2007.

Giving details of improvement in voluntary compliance in July-December 2006, as compared to the corresponding period of 2005, the Chairman said that CBR has achieved a growth of 19 percent in number of returns filed (1.5 million v/s 1.3 million), 94 percent in payments with returns (Rs 45 billion v/s Rs 23 billion) and a growth of 131 percent achieved in advance tax payments (Rs 59 billion v/s Rs 26 billion).

He said that the number of returns filed now were 1.6 million, which are growing at the rate of 20% per annum for the last three years. On Tax Administration Reforms Programme (TARP), CBR Chairman informed the committee that the steps taken under this programme have already yielded encouraging results.

The steps included successful implementation of Universal Self-Assessment Scheme (USAS) across all taxes, simplification and improvement in laws of income tax, federal excise, customs and sales tax.

He said that the CBR Headquarters, Income Tax structure, Audit and Inspection, Training, Intelligence and Valuation Directorates have been transformed and started working on functional lines. Sales Tax system was already operating on functional lines, he added.

Regarding establishment of model units under TARP, the Secretary General, Revenue Division informed the committee that 2 out of 3 Large Taxpayers Units (LTUs) have already been established in Karachi & Lahore. Third LTU is under construction in Islamabad and it will start working by June, this year. Besides, 6 Medium Taxpayers Units (MTUs) have been established in major cities of the country. Similarly, 4 out of 13 Regional Tax Offices (RTOs) have started operations. Moreover, Model Customs Collectorates (MCCs) have been operating since 2004.

On current status of initiatives, chairman CBR said that after extensive business process re-engineering, the pilot project Pakistan Customs Computerised System (PaCCS) has been launched. This automated system has reduced the average cargo clearance time from 5 days to 4 hours for imports and to one hour for exports. The PaCCS operations have now been extended from KICT to QICT and PICT, Karachi. It is hoped that this system would not only save the time of importers/exporters but also considerably reduce the cost of doing business, he added.

On income tax and sales tax side, Tax Management System (TMS) and Sales Tax Management (STMS) have been introduced in model units, which will eventually be taken over by Integrated Tax Management System (ITMS) to ensure international standards.

He said, e-filing of tax returns across taxes has already been started. He informed the committee that CBR has developed a Computerised System of Tax Payment Receipts (CPR) in collaboration with National Bank of Pakistan (NBP) and State Bank of Pakistan (SBP), which has been endorsed by the Ministry of Finance, AGPR and CGA. Now all information regarding CBR staff are available through the newly developed system of Human Resource Information System (HRIS).

CBR Chairman said that board was paying special attention to the capacity building and welfare of its employees. In this connection, he mentioned the training, internal job posting, special emphasis on integrity management and performance related pay and promotions and employees' welfare programme.

He opined that the CBR was a key financial institution because it collects 90 percent of the total revenue of the country, contributes in tax plus non-tax revenue around 65 percent and covers nearly 50 percent of the federal government's expenditure needs.

Talking about the challenges and constraints being faced by CBR, the Secretary General Revenue Division mentioned low Tax-to-GDP ratio, mismatch in sectoral contribution to GDP and taxes, low level of compliance, wide-ranging tax and duty exemptions and large underground and informal economy.

He showed commitment to deal with all the issues through an efficient, fair and equitable system. He said that CBR would continue to be critical institution of the state for smooth economic management and promoting economic growth. Commenting on the performance of CBR, Senator Ahmed Ali congratulated Yusuf on successful implementation of Customs Administrative Reforms (CARE).

Senator Professor Khurshid Ahmed, member of the committee, also congratulated the CBR Chairman for bringing considerable improvement in the CBR in the last few years. He said CBR's reform direction was correct.

However, he said that the CBR needs to take steps to check tax evasion and expand tax base. Senator Safdar Abbasi and Pari Gul Agha also lauded the efforts of CBR Chairman in bringing a visible improvement in CBR's performance and enhancing revenue collection. Legislators, however, were of the opinion that 15 percent GST needs to be revised downward.

While thanking the legislators for appreciating the performance of CBR, Yusuf gave its credit to the present government for taking practical steps including initiation of Tax Administration Reforms Programme for upgrading and improving the taxation system to enable the board to play its due role in rapid economic development of the country. The CBR has presented a detailed report on the import and valuation of batteries by the customs department.
http://brecorder.com/index.php?id=537207&currPageNo=2&query=&search=&term=&supDate=

 

[Owais]

Pakistan bad performer in 40 areas: competitiveness support fund report released

ISLAMABAD (March 13 2007): The Competitiveness Support Fund (CSF) has reported that Pakistan is a bad performer, as compared with India, in 40 areas, including market access, business sophistication and technology application. However, it gave Pakistan better ranking than its archrival in government efficiency having less red-tapism and influence of the powerful in policy making.

The CSF report on Pakistan competitiveness released here on Monday, said that India showed better performance in willingness to delegate authority, staff training, reliance on professional management, incentive compensation, regional sales, research & development and capacity for innovation.

India also outperformed Pakistan in efficiency of corporate boards, staff training, technology transfer, quality of management schools, local competition, buyer sophistication, supplier quantity, venture capital availability and degree of customer orientation.

India also has better basic requirements for institutions, infrastructure, macroeconomic and health and primary education. The areas wherein Pakistan has shown improvement include public trust in government, ethics and corruption, favouritism of government officials, efficiency, undue Influence and interest rates.

Pakistan also outperformed India in other areas such as hiring and firing practices, time required to start business, interest rate spread, real effective exchange rate, macro economy, quality of electricity supply, malaria prevalence and government surplus/deficit.

While releasing the report, Prime Minister Shaukat Aziz said that the CSF report was a wakeup call for the government as well as the private sector, and they should go hand in glove to rise to the challenges confronting its economy. He added that competitiveness is the cornerstone of economic growth which generates more employment and reduces poverty. He said that all arms of the government and the private sector would have to be involved to improve Pakistan's ranking in the global competitiveness index.

Mission Director USAID Pakistan, Jonathan Addleton, reiterated on the occasion USAID's long-term support for competitiveness and economic growth activities in Pakistan.

Arthur Bayhan, CEO of the Competitiveness Support Fund, in his presentation, briefed the audience about the World Economic Forum's Global Competitiveness Report on Pakistan and other countries. In particular, he highlighted the importance of the provincial and local leaders to be part of the competitiveness dialogue. The Competitiveness Support Fund is working directly with each region in addressing the key competitiveness issues at the regional level.
http://brecorder.com/index.php?id=537688&currPageNo=1&query=&search=&term=&supDate=