Pakistan Economy - News & Updates - Archive

[Neo]

Tuesday, March 27, 2007

PM okays Export Plan Pakistan:

Govt plans to increase textile exports to $25b

* The plan has highlighted that against the total requirement of 12,750 technical graduates in various fields of textile only 7,950 are available and the industry is faced with a shortage of 4,800 graduates

By Sajid Chaudhry

ISLAMABAD: Prime Minister Shaukat Aziz has approved and has directed the implementation of the Export Plan Pakistan for textile and clothing sectors aimed at increasing textile exports from $9.8 billion to $22-$25 billion during 2006-2013, a senior official at the Ministry of Textile Industry told Daily Times on Monday.

The implementation action plan for textile and clothing sectors include incentives and facilitation measures for human resource development, availability of raw materials, cluster development, energy generation distribution and conservation, setting up of joint ventures, economies of scale, high value addition, setting up of laboratories and marketing plan.

The plan has highlighted that against the total requirement of 12,750 technical graduates in various fields of textile only 7,950 are available and industry is faced with a shortage of 4,800 graduates. The action plan has directed the exporter associations to hire immediately foreign technicians to fill the skill gap. Incentives for this initiative include the government to reimburse 50% of the cost and insurance and exemption from government taxes, including income tax on foreign technicians.

To meet the acute shortage of trained shop floor manpower in the textile chain, especially for value-added garments and made-ups. The action plan includes provision of incentives for creation of Modal Garment Factories by reputed Chinese garment manufacturers using Chinese management to serve as demonstration projects. Garment training institutes would be established to attract women workforce at the village and town level within one to two years time period.

It has been pointed out in the plan that know-how for synthetic weaving, processing, dyeing and finishing is limited. To meet this challenge the plan seeks to establish world class training institutes and upgrade existing ones with need based curricula. The government would provide funding to existing universities, collages for their development to international standards. The government would establish steering committee represented by stakeholders for guidance management of this initiative.

The plan points out that right quality and quantity of cotton is not available due to issues such as likely shortage of quantity by 20%, contaminated raw cotton, absence of sufficient varieties of cotton and inadequate supply of ELS, organic and naturally coloured cotton in the country. The action plan seeks to ensure production of contamination free cotton as it increases foreign exchange earnings by 10%-20%. Organic cotton production to be encouraged in the country because it is twice valuable as compared with traditional one. The government to resolve all impediments to ensure widespread cultivation of bio-tech cotton. The Plant Protection Act and Rules would be updated to eliminate non-tariff barriers to import. The government to ensure strict enforcement of provincial cotton standardization Acts for production of standardized clean cotton.

The plan has highlighted that usage of synthetic filament are nominal in Pakistan. Duties on synthetic material are discouraging its use. The action plan would help consolidation of cotton research facilities and the Pakistan Cotton Committee to be restructured. The government to allow zero rating of all synthetic fibers used in the textile exports. The government is to strengthen synthetic fiber research institutes at Karachi and would establish new institutes at Faisalabad and Lahore.

The export plan has viewed that textile industry is scattered. It militates against natural synergies to reduce the cost of production and meet environmental standards. Under the action plan, all existing industrial concentrated areas would declared as Industrial Parks under the industrial Cluster Development Program (CDP). Investment in common energy generation and distribution facilities and waste affluent plants through the private sector consortia would be encouraged. The government is to ensure uninterrupted gas supply to industrial parks and an energy conservation program would be augmented to achieve efficiency in energy use and it has been directed to hire international consultants for batter planning and execution of industrial parks.

In the area of production, the action plan seeks to encourage joint ventures with some internationally reputed textile firms in bleaching, dying, printing, designing and finishing.

In the area of economies of scale, the action plan directs to provide incentives to facilitate merger companies by way of merger tax credit of 15% on merger asset value. A study to be initiated to ascertain and enforce minimum capital requirements in textile companies within three years.

The EPP has highlighted that capacity of weaving is low and not sufficient to feed installed capacity of dyeing and printing, this results in intra-sectoral imbalance which affects total chain particularly value added sector. To these challenges, the action plan aims at weaving; primarily the unorganized sector would be encouraged to become formal one. This will enhance its productivity and access to institutional financing. Dedicated financing line would be established for weaving at concessionary rates to incentivize investment. To acquire state-of-art weaving technology, a technology up-gradation fund is to be created and size of the fund and modalities of its disbursement would be determined by the textile industry.

Because of shortage of quality laboratories in the country, the action plan seeks to establish accredited laboratories at common facilities centres.

The private sector has been asked to identify and transfer or relocation of infrastructure of closing research institutes and laboratories from the Western countries. In the area of marketing, the action plan aims at interaction with internationally known companies, holding of roadshows for investment and development of linkages with France, Italy, and Japan for the establishment of joint ventures with mega buyers and producers. International cotton merchants would be encouraged to establish cotton warehouses in Pakistan. Integrated supply chain warehouses abroad to be established to promote generic advertisement to help companies address marketing challenges. To be competitive, R&D support is needed to produce specialized value-added products to have a chance to go to the upper market and create a niche.

http://www.dailytimes.com.pk/default.asp?page=2007\03\27\story_27-3-2007_pg5_1

 

[Neo]

Tuesday, March 27, 2007

Indo-Pak trade: favour or benefit?

The Indian foreign minister, Pranab Mukherjee, says India is ready to consider some “unilateral” steps to address the concerns of Pakistan in order to operationalise the South Asia Free Trade Area (SAFTA). He says Pakistan has been insisting that its trade with India is “not free” and therefore it wants to trade on the basis of a “positive list” of goods. Therefore he thinks India should look into the issues raised about SAFTA by Pakistan and try to remove them “unilaterally”, perhaps meaning that India should do so without asking for a quid pro quo.

Mr Mukherjee has also dwelt on the importance of “connectivity” between the two countries by air, road and railroad. He pointed to an old problem: the goods of Afghanistan go to India by road (up to the Wahga Border, near Lahore) but no Indian goods can go back to Afghanistan by the same trucks. India has to trade with Afghanistan via Karachi on the Pak-Afghan Transit Trade terms. Clearly the Indian foreign minister wants a road link to Afghanistan.

The above observations are obviously meant to anticipate the coming South Asian Association for Regional Cooperation (SAARC) summit, April 3-4, in New Delhi. India says it will be discussing proposals to boost trade and ease travel restrictions within South Asia. Of course, as usual, attempts will be made to resolve the perennial problem of visa restrictions while the people of South Asia look on in wonderment because such “removals” of restriction take but a bomb blast to be put back in short order.

The Indian foreign minister, who was once India’s finance minister and knows the trade issue well, wants Pakistan to implement SAFTA and drop its objections to the non-tariff barriers that India has erected to gain competitive advantage and which are seen to be unfair by its neighbours. If he is able to persuade his side to resolve the issue even “unilaterally”, this would be a wise step forward. Pakistan’s objections to some of the Indian inputs into production fall in the category of subsidies and must be seen as such. Who will want to trade if it brings nothing but internal economic damage and no advantage?

Outside South Asia, experts wonder at India and Pakistan’s inability to take advantage of each other’s proximity and increase the bilateral volume of trade in order to take advantage of low transportation cost. According to them the biggest barriers to trade are political. Because of India’s market size and central location, 80 percent of intra-regional trade in South Asia is to or from India. All of India’s neighbours share a concern about being overwhelmed by Indian goods. “Decades of mutual political hostility and suspicion compound the challenges in trying to build strong trade relations between India and Pakistan”.

Significantly, both sides tend to see progress on issues like trade as a ‘favour’ to the other country rather than a benefit to one’s own country. Pakistan, moreover, has been reluctant to move too fast toward normalisation of trade and other relations with India lest the issue of Kashmir gets left behind or is sidetracked. But this may no longer be the case as the people in Pakistan have lost the stomach for war with India and wish to rely on normalisation rather than conflict to solve the Kashmir problem. India should now take a close look at what Pakistan really wants and see if the complaint is genuine on the basis of a purely economic argument.

The two sides need to advance quickly on their separate tracks: India must rationalise its unfair competitive advantage in trade with Pakistan; and Pakistan must set aside its residual hesitation about normalisation by removing the conditionality of ‘Kashmir first’. It must reform its regional attitude and move towards becoming a ‘trading hub’ affording road and rail links to Central Asia. It would be far easier for Islamabad to discuss transit trade with India than bilateral trade while India keeps on subsidising the economy to some extent.

On the other side, the mind must be clear about how India wants to reach Central Asian markets. If the idea is to go via Iran by building and using a new port at Chah-Bahar, then talking to Pakistan, as Mr Mukherjee does, about “connectivity” is of little use. Of course, one doesn’t mean that Pakistan should be given a monopoly of transit trade; India must make up its mind over whether it wants to use the Chah-Bahar port as an alternative against Pakistan or as a parallel route that it might need if trade volumes increase in the coming years.

Not trading freely is simply unnatural. India and Pakistan still trade but in a roundabout way through the ports of UAE, increasing the cost and not really benefiting the consumers. But more lethally, the two engage in contraband trade or smuggling to the tune of $2 billion a year. Sadly, so far the attitude on both sides is that of mistrust, with each side waiting for the other to back off. This hasn’t worked in the past and it will not work in the future. *

http://www.dailytimes.com.pk/default.asp?page=2007\03\27\story_27-3-2007_pg3_1

 

[Neo]

ADB plans $200m multi-tranche facility for Pakistan

27 March 2007

ISLAMABAD — Asian Development Bank (ADB) plans to provide $150-200 million "multi-tranche facility" to help strengthen the country's insurance, pension and savings systems.

Pakistan has formally sought the one time multi-tranche facility from the bank, the initial details of which were reportedly discussed between Prime Minister Shaukat Aziz and ADB Director General Juan Miranda when he visited Pakistan last month.

According to an ADB official, the full details of the loan were still to be worked out but the bank has agreed to offer considerable funding for bringing improvements in the insurance, pension and savings systems.

The government anticipates that new one tranche facility could be up to $200 million. However, the bank has assured that it will initially provide a $3 million technical assistance to fund a study on the issue.

According to the ADB, there are "governance" issues in the pension, insurance and savings systems which needed to be sorted out to make them highly efficient.

Pakistan's pension system at present has been described by the bank as "fragmented" without a central framework for regulation or supervision to encourage retirement savings and protection for beneficiaries. It is, therefore, appropriate to support the development of a policy that will encourage retirement savings through regulations and appropriate incentives. The technical assistance will assess institutional constraints of the National Savings Scheme (NSS) and recommend measures to improve transparency in financial management. It will also assess the merits and feasibility of moving towards a funded scheme managed with a well-conceived investment policy in government securities. It will also support streamlining, modernisation and computerisation of operations already initiated by Central Directorate of National Savings (CDNS).

The bank believes, the financial sector has an important role to play to increase resource mobilisation, improve efficiency of allocation, enhance access to financial products and services, contribute to the sustainability of social safety nets and safeguard economic stability.

Regulation and governance of Pakistan's capital market and the corporate sector, the bank maintained, gained some credibility with the commencement of the Securities & Exchange Commission of Pakistan's (SECP) operations at the beginning of 1999. SECP's role was further enhanced in 1999 when it was assigned regulatory responsibility for private pensions and other non-bank financial institutions including leasing, housing and investment banks. Given the critical importance of SECP for capital and non-bank financial markets, it is important that it has adequate capacity — skills, systems, and procedures — to effectively discharge its functions.

http://www.khaleejtimes.com/Display...h/business_March725.xml&section=business&col=

 

[Janbaz]

In post 823 it is said that Pakistan was to achieve 7% growth in the next couple of years. If that is so then will our rankings change globally and will we be amongst the fastest growers? Just a thought!

 

[Neo]

We already belong to that exclusive club of fastest growing econmies, 7% is good and only a few rise above 8% and we're able to sustain it.

I expect the GDP to grow above the projected 7% due good amount of rain and a bumper wheat and cotton crop and ca 15% growth in LSM. In a few years, probably by the end of the next five year plan 8-10% growth target well be met if the next government doesn't screw up things.

 

[Janbaz]

Current account deficit a potential threat: ADB
Outlook report forecasts 6.8pc growth for Pak economy in FY 2007

By Israr Khan

ISLAMABAD: Despite Pakistan’s better economic prospects for 2007, the economy would continue to face some potential threats, including growing current account deficit, continuing high inflation and the emerging power and gas shortages, the Asian Development Bank (ADB) reported on Tuesday.

In its Asian Development Outlook (ADO) 2007, the bank has forecast that by end of this fiscal Pakistan would achieve 6.8 percent economic growth on the back of sharp rise in investment last year and moderation in oil prices. The economy’s main pillar — agriculture — would grow by four percent, large-scale manufacturing by 8.6 percent and services sector by more than seven percent in FY 2007, somewhat off last year’s fast pace.

However, shortages of natural gas and suspension of its supply to a number of industrial units to meet the rising demand for household consumption (because of exceptionally cold weather) will likely depress industrial growth, which along with the ongoing slowdown in exports will dampen the expansion.

The potential risk to economy ó the current account deficit — is projected to edge up to $6.5 billion or 4.5 percent of GDP in FY 2007. Inflation is expected to decline further but because of the upsurge in food prices and higher prices of raw materials, it is projected at 7 percent, above the central bank’s target of 6.5 percent.

The bank further says that despite a decrease in the domestic oil price, the petroleum levy will likely continue to yield significant income, as will receipts from the US for logistics support operations for Afghanistan. Current expenditures, though, are expected to exceed the budget estimate, because of expected overruns in the interest payment on domestic debt. On balance, the fiscal deficit is likely to rise to 4.5 percent of GDP in FY2007, coming in at the planned level.

The bank has also warned that any deterioration in the security environment would be another risk to the economy. In addition, the ending in 2008 of China-specific safeguards imposed by the US and EU against textile and clothing imports could further weaken Pakistan’s textile export prospects.

The Asian Bank has also pinpointed some important structural challenges, which it says should be tackled promptly to sustain the present growth trend. Despite healthier investment, the investment-to-GDP ratio is still low relative to countries that have experienced sustained strong growth. Even if investment in the country is underestimated, gross capital formation in 2004 was less than half of that in the PRC and about 60 percent of that in India or Thailand. Total factor productivity has improved, but insufficiently either to compensate for low investment or to sustain high growth. Similarly, gross savings as a share of GDP need to pick up substantially.

About the banking sector, the report says: “Over the last three years, improved business confidence and rising inflows of foreign direct investment (FDI) have buoyed private investment, but negative real interest rates on bank deposits and rising consumer demand have helped push down national savings, further widening the investmentñsavings gap.

With a sharp rise in the current account deficit, the contribution of net exports of goods and non-factor services became negative for the first time in 6 years.” Another structural issue is the narrow industrial base, which is linked to the lack of a diversified export base, which in turn must cope with rising international competition.

Human capital development remains a major structural challenge. Despite the recent rise in pro-poor spending, historical under-investment in human capital has critical implications for growth and competitiveness. Public spending on education was only two percent of GDP in 2004, compared with six percent in Malaysia, four percent in Thailand, and three percent in China and India.

Finally, critical physical infrastructure bottlenecks impede high growth. The government is tackling these structural challenges over the medium term by committing to reform, by strengthening the enabling environment for investment, and by prioritising resource allocation for infrastructure development and the social sectors.

Growth in textiles and clothing, however, is expected to soften, on lower than targeted output of cotton and weakening export demand. The significantly larger public sector development program, reconstruction of earthquake-affected areas, and greater supply of cement will all boost construction output in the outgoing fiscal.

Import growth is set to decelerate in FY 2007, on account of moderation in the oil import bill, weaker demand for consumer durables, and some rundown from an apparent buildup of inventories in FY 2006. Nevertheless, sustained growth and the forecast rise in investment are projected to keep import growth at about 9 percent.

Exports too will rise, but the high domestic cost of production in the textile and garment sector as well as stiff competition from the People’s Republic of China (PRC) and India are likely to restrict total export growth to about 8.0 percent.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=48628

 

[Janbaz]

Inflation runs loose from economic managers’ grip
Mismanaged economy leads to price hike of essential commodities available in abundance

By Mansoor Ahmad

LAHORE: The economic managers seem to have loosened their grip on the economy with prices of ghee, sugar, rice, milk, fruits and vegetables hitting historic peaks in recent months while the industrial sector remained sluggish.

There is no rationale behind increase in prices of different commodities. Economists are at a loss to find what is driving the rates up. Is it the greed of the entrepreneurs? Or the cost of production has suddenly increased? Is it due to supply-demand gap or flaw in government policy? It seems to be a mixture of all.

Economy is growing at a high rate of seven per cent, but at the expense of consumers. When onion was available in Lahore at Rs50 per kg, it was abundantly available in Rajanpur at Rs12. It was a matter of transferring the vegetable from high supply to deficit region.

It did happen but under the patronage of hoarders who minted money by controlling release of stocks. The government lacks credible institutions to control hoarding and facilitate prudent distribution of commodities.

Pakistani consumers are paying higher prices of sugar, as the government desires to protect this highly influential industry. The millers have held back payments to the farmers as a safeguard to prevent government’s efforts to lower sugar rates. Their threat is open and clear if sugar rates fall, there would be no payment to the farmers. This case relates to the absence of government’s writ.

Pakistan had adequate basmati rice production last year. The farmers parted with their produce by selling it at government prescribed support price. The rates have doubled as hoarders increased rates on higher export demand. This is case of supply and demand and supply.

In an effort to open the economy the government has reduced duties on the finished products without bothering to adjust the duty structure for imported raw materials and other inputs for locally produced goods.

The duties on imported inputs of locally manufactured rubber solution, leather, artificial leather and many other local products are higher than the duty government charges on the imported products. India faced the same situation and rectified it immediately to ensure survival of the local industry. This example relates to irresponsible governance.

Rates of locally produced printing paper used for note books and school books have increased in recent months by Rs8000 per tonne. There is no rationale behind this increase. It is a clear case of excessive profiteering. The inaction on government’s part cannot be justified.

Local milk processors have increased the rates of their packs and powdered milk by hefty margin twice in past six months. The government takes action against milk retailers if they increase their rates but overlooks excessive price hike by corporate sector. This shows that government penalizes the weak and patronizes the rich.

Cooking oil and ghee rates have increased in the local market due to increment in the global rates of edible oils. These rates could be brought down by reducing the government levies on the product that averages Rs23 per kg. The government has not done so indicating its insensitivity towards consumers.

Some multinationals have been resorting to outsourcing manufacture of shampoo sashay (small 5cc plastic pouch) to Vietnam and other Far East countries. The cost of producing them outside Pakistan should definitely be lesser that prompted the companies to out source them. In this case it is due to higher cost of doing business in Pakistan.

Banking sector of the country is booming. Banks are making hefty profits. They are providing loans at very high rates and are paying nominal mark-up to their depositors. This calls for better regulatory role of the central bank.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=48629

 

[Owais]

Macroeconomic growth buoyant: Asian Bank pinpoints structural challenges

ISLAMABAD (March 28 2007): The Asian Bank's Annual Development Outlook 2007 has pointed out that a number of structural challenges face Pakistan despite buoyant macroeconomic growth in recent years. The growing current account deficit, continuing high inflation, and the emerging power and gas shortages are potential risks to the country's medium-term economic prospects.

Any deterioration in the security environment would be another. In addition, the ending in 2008 of PRC-specific safeguards were imposed by the US and EU against textile and clothing imports could further weaken Pakistan's textile export prospects.

Despite sound macroeconomic management policies and pursuit of structural reforms in key areas, the report says. Important structural challenges remain and have to be tackled promptly to sustain the present growth trend, it added.

Despite healthier investment, the investment-to-GDP ratio is still low relative to countries that have experienced sustained strong growth. Even if investment in the country is underestimated, gross capital formation in 2004 was less than half of that in the PRC and about 60% of that in India or Thailand. Total factor productivity has improved, but insufficiently either to compensate for low investment or to sustain high growth.

Similarly, gross savings, as a share of GDP needs to pick up substantially. In recent years, the demand-driven growth and negative real interest rates on bank deposits have contributed to low savings.

Another issue is the narrow industrial base, which is linked to the lack of a diversified export base, which in turn must cope with rising international competition.

Human capital development remains a major structural challenge. Despite the recent rise in pro-poor spending, historical under-investment in human capital has critical implications for growth and competitiveness. Public spending on education was only 2.0% of GDP in 2004, compared with 6.0% in Malaysia, 4.0% in Thailand, and 3.0% in the PRC and India. Unsurprisingly, the human development index rating was the lowest among these countries as well.

The government has, however, announced its commitment to increasing education expenditures to 4.0% of GDP. Finally, critical physical infrastructure bottlenecks impede high growth. The government is tackling these structural challenges over the medium term by bringing reform, strengthening the environment for investment, and by prioritising resource allocation for infrastructure development and the social sectors.

The main issue is exports' heavy reliance on textiles as well as limited geographic diversification. Between them, textiles and clothing, cotton, leather, rice, and sports goods account for over three-quarters of total exports - textiles and clothing alone for three fifths. Thus a downturn in these segments has a significant overall impact.

Another issue is that the bulk of Pakistan's trade is with a handful of countries, particularly in Europe and North America. It is expected that the growth in trading volumes in those regions will decline in 2007, hitting Pakistan's exports there.
http://brecorder.com/index.php?id=543866&currPageNo=1&query=&search=&term=&supDate=

 

[Owais]

37 percent rise in July-February duty-free imports

ISLAMABAD (March 28 2007): Duty-free imports during July-February (2006-07) have shown 37 percent increase against the corresponding period of last fiscal year. Sources told Business Recorder on Tuesday that during the period under review major items of duty-free imports included mobile phones and raw materials/inputs of industrial sectors.

Giving a comparison of dutiable and duty-free imports, sources said that dutiable items showed growth of 4 percent during eight months of current fiscal year against last year. Contrary to this, duty-free imports increased considerably in 2006-07.

They said that decrease in customs duty collection in 2006-07 has been witnessed due to massive tariff rationalisation in the last budget. The Board had worked out revenue implications of Rs 6.7 billion due to change in customs duty structure in 2006-07 budget.

The revenue loss of customs duty during the period under review would be compensated by the growth in domestic taxes. The reduced rates of duty on a number of items had encouraged investment, reduced the cost of doing business in many sectors making them internationally competitive. The growth in sales tax and income tax had resulted due to massive tariff rationalisation in the budget.

Meanwhile, CBR analysis has shown that the gross and net collections of customs duties realised during July-December 2006 stood at Rs 68.7 billion and Rs 60.7 billion, respectively. The difference between gross and net collections, amounting to Rs 8 billion, has been paid back as refund/rebate.

The decline by 3.9 percent and 1.2 percent in the gross and net collections of customs duty was mainly due to drop in the volume of dutiable imports by 1.3 percent. Due to shrinking of the base, the customs duty target of Rs 70.9 billion was missed by 14.3 percent during first half of 2006-07.

The growth in imports during previous fiscal year was nearly 35 percent and of dutiable imports 31 percent. This growth dwindled substantially during the first six months of 2006-07. The customs duty target for 2006-07 had assumed 15 percent growth in the value of imports and dutiable imports.

It is estimated that if the current trend continues during the remaining months of current fiscal year, the gap between the target and collection of customs duty would widen to about Rs 20 billion, which needs to be plugged. Considering this changing scenario, the target of customs duty needs revision but without altering the overall revenue target, the report added.
http://brecorder.com/index.php?id=543891&currPageNo=1&query=&search=&term=&supDate=

 

[Owais]

Portfolio investments up by over $100 million

KARACHI (March 28 2007): In terms of balances placed under Special Convertible Rupee Accounts (SCRAs), latest data on which were released on March 24, 2007, portfolio investment in Pakistan increased by $100.7 million, to $649.9 million, during the fortnight ended on March 22.

On March 9, the level was estimated at $549.2 million, indicating a net disinvestment of $8 million since March 1, when the level stood lower at $541.3 million. Earlier on, portfolio investment had reached the year-high level of $557.2 million on February 28, including $176 million received during February alone. Between March 9 and 22, the position, except for a couple of minor downward movements, improved consistently to its present level.

Total fresh investments during March so far were around $93 million distributed among USA $78.3 million, the Netherlands $41.2 million, Malaysia $32.9 million, Hong Kong $6.2 million and Kuwait $2.1 million, besides a minor inflow of $0.2 million originating from UAE, partly offset by disinvestments amounting to over $68 million during the same period, effected by Singapore investors (about $27.5 million), Swiss investors (about $20.5 million), UK (over $18 million), and BV Island (about $1.4 million). A few minor disinvestments were recorded in the case of Australia, Luxembourg and Qatar.

Overall, by March 22, the largest investor during FY07 so far was by USA ($454 million) followed by UK ($81.4 million), Singapore ($71.6 million), Malaysia ($33 million), Hong Kong ($29 million) and relatively smaller amounts by Germany, Bahrain and Oman.

Withdrawals of about $61 million by Switzerland, $6.7 million by UAE,, $5.8 million by Australia, $2.2 million by France, $1.7 million by BV Island, $1 million by Luxembourg and smaller amounts by Bahamas, Liberia, Guernsey, Saudi Arabia and Qatar during the year partly neutralised the impact of the above-mentioned inflows.
http://brecorder.com/index.php?id=543899&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Credit Suisse in Pakistan soon

HONG KONG: Head of the Credit Suisse Asia, Oswald J. Gubel on Tuesday said his company will soon start its operations in Pakistan. Talking to newsmen after a meeting with PM Shaukat Aziz here, he said Pakistan has made tremendous progress in the economic sector and there is a vast scope for international financial associations to invest in the country. He said that Pakistan has very strong fundamentals in the economic sector which are important for foreign investment.

http://www.thenews.com.pk/daily_detail.asp?id=48649

 

[Neo]

March 28, 2007
Corporates unfold plans to invest $6.4 billion

By Dilawar Hussain

KARACHI, March 27: Top twenty companies listed on the Karachi Stock Exchange (ranked by market capitalisation) have already unfolded plans to invest about $6.4 billion in the next four years.

Does that reflect long-term confidence in the country and economy? May be — at least up to this point in time. Corporates are probably putting in more money in horizontal and vertical expansion of their units now than in the last five years.

But due to the recent street hullabaloo, investors are biting their finger nails, lest some of those companies decide to put their plans on the hold.

Stock market listed companies are as few as 655 and as everyone knows; two-thirds of them are either dead or dying. So how about the non-listed companies, the figures of which runs over 40,000?“The investment intentions of large non-listed corporates (including new foreign investors) are even more impressive,” says Ahsan Chishty, analyst at BMA Capital. Estimates vary from $54 billion to $73 billion over the next 4 years. Some part of those plans was reflected in overseas investment flows during the current calendar year.

Foreign investment has been a significant portion of total investment in FY07, which investors hope to lead to the government’s goal of 7 per cent GDP growth for the current fiscal to end-June 2007.

Foreign direct investment (FDIs), which in July-Feb 2007 period stood at $2,971m against $1,522 million same period last year – represented an increase of 95.2pc year-on-year. Domestic investment has also taken a significant leap. Public investment, targeted at close to USD6bn, stood at USD2.4bn in the first six months of the financial year.

“Private domestic investment is harder to gauge given the extent of under-reporting of balance sheets by SME’s in the country,” says the analyst.

In the share of fixed investment advances, which constituted 21 per cent of total banking sector stock in September 2006, against 21.6 per cent in December 2005, the fixed investment advances taken by SMEs have remained steady at 1.7 per cent.

An interesting development in the current fiscal year has been the rising incidence of portfolio investment as a percentage of total foreign investment. Since 2001, FDI has constituted almost 89pc of total foreign investment.

In contrast, portfolio investment in the July-Feb FY07 period stood at $1,649 million, representing 35.7 per cent of total foreign investment. But as significant portion of that amount emanates from the Global Depository Receipts (GDR’s) of OGDC and MCB Bank – which aggregate to $900 million, the actual component of ‘hot’ money flows was still low at 16.2 per cent of the total foreign investment.

After a dismal 2006, when the KSE provided a pittance of about 3 per cent return on equity investment, stock strategists are confident of a good year (2007) given the low valuations of stocks and alluring emerging markets.

Nothing can be as risky as investing in equities and overseas fund managers would have to be convinced of a greater potential for higher returns in the country’s stock markets over their risk perceptions. Prime Minister Shaukat Aziz is at the moment using his banking skills in Hong Kong to lure foreign investors to Pakistan for both business and investment.

Addressing business community at the Hong Kong General Chamber of Commerce he talked about investment friendly and consistent economic policies being pursued by Pakistan and the level-playing field that he said was “available for all local and foreign investors in all fields”.

One may have no truck with that, but his assertion that per capita income in Pakistan has increased to $846 (which translates to Rs50,760 per head) may have been taken with a pinch of salt by some members sitting at the breakfast table with the PM in Hong Kong on Tuesday morning!

http://www.dawn.com/2007/03/28/ebr1.htm

 

[Neo]

March 28, 2007
Rising inflation multiplying poverty

By Shahid Iqbal

KARACHI, March 27: Why poverty is rising despite high growth in the country is obvious from the State Bank’s latest report which says that the extent of one-month (February 2007) increase in food inflation is close to five-times of the five-year January-February increase.

This calculation showed that the buying power of poor eroded by the sudden rise in food prices, which is the basic real cause of unchecked multiplying poverty growth.

The SBP issued “Inflation Monitor” on Tuesday which said that year-on-year the CPI inflation rates in February 2007, when compared with the rates in January 2007, showed upward movements in overall inflation as well as in its two broad components of food and non-food inflation.

“This is mainly due to an unusually high one-month increase (February over January) in CPI and its components. Overall CPI increased by 1.0 per cent, which is twice the five-year average of January-February increase,” said the SBP report.

It said the increase in one-month non-food inflation is one-third higher than the respective five-year average.

The food inflation rose to 10.0 per cent in February 2007 from 7.5 per cent last year. The food inflation was also higher than January when the food inflation was 8.7 per cent.

January was the only month after August 2006 when the food inflation slipped to single digit but in February it again reached double digits.

The headline CPI inflation though declined to 7.4 per cent in February 2007 on year-on-year (YoY) basis from 8.0 per cent registered in the same month of last year, but rose against 6.6 per cent in January.

The main contributing factor for this rise was food inflation which was 1.3 percentage points more than that of the previous month. Non-food inflation also increased and was recorded at 5.6 per cent.

The increase in YoY inflation is due to a rise in prices of some major food items and some components of fuel & lighting group, specifically electricity charges, said the report.

The contribution of food items in the basket of CPI has been increasing and has gone almost by 45 per cent since last year.

The report said the contribution of food group in overall inflation was 55.4 per cent in February 2007 which was marginally higher than that of January 2007 (1.6 percentage points), but was significantly higher than 38.3 per cent contribution of food during the corresponding month last year.

Like food inflation, non-food inflation also increased from 5.2 per cent in January 2007 to 5.6 per cent in the month of February 2007. This marginal rise in inflation is primarily due to an increase in almost all groups of non-food group including fuel & lighting, apparel, textile & footwear, education, house rent index, household furniture & equipment, transport & communication, cleaning and laundry & personal appearance.

http://www.dawn.com/2007/03/28/ebr4.htm

 

[Neo]

March 28, 2007
EC offers to send technical adviser: Seafood exports to EU

By Aamir Shafaat Khan

KARACHI, March 27: The European Commission (EC) has offered to provide a technical adviser to the Ministry of Food, Agriculture and Livestock (Minfal) to guide the government on certain corrective measures which can be taken to resume seafood exports to European Union countries.

“We are ready to accept the EC offer of an adviser who will be a foreigner,” a senior official in the Minfal told Dawn on Tuesday. He, however, said that the government would first ensure before calling up the foreigner in our land that how maximum the adviser could be helpful in resuming seafood exports to the European countries. The official said the government is yet to fix any specific time-frame in this regard.

Pakistan’s seafood exports suffered a setback when the EC de-listed 11 fish processing plants from exporting seafood to the European countries. The delisting of units came as a result of inspection by the Food and Veterinary Office (FVO) officials of the EC in the last week of January 2007.

The EC had informed the government that no consignment of fish products would be allowed entry to the EU states after April 12.

“The Minfal and the Sindh government are jointly making efforts to ensure that the country again starts exporting seafood products within next four to five months,” the official said.

He said a meeting was held on Tuesday with the Sindh government officials and fish exporters in Karachi to review the strategy and discuss as to how deficiencies pinpointed by the EC officials at the processing plants could be overcome. The federal government would remain in touch with the Sindh government till the ban is lifted by the EC, he added.

The official said Pakistan would definitely lose its 20 to 25 per cent share to the EU markets out of its total export of fish and fish products and exporters might not get competitive prices in other countries.

Meanwhile, chairman, Pakistan Seafood Industries Association (PSIA), Mohammad Hanif Khan, said Pakistan might not be fetching the same price as of the EU in other countries.

As far as cuttlefish and squid are concerned, whose landing at the harbour gears momentum in the end of March to end of May, they can be diverted to Far-Eastern markets, but these items would get low prices as compared to high prices offered by the EU buyers.

Similarly, kiddy shrimp, whose peak export season begins from August to October, will remain idle due to ban on EU states. There would virtually be no foreign buyer of kiddy in bulk shipments, besides exporters will be getting low prices as compared to EU in case they make shipments to other countries in low quantities.

He said the EU buyers of Pakistani seafood products are now diverting towards India, Thailand and Bangladesh but they may face problems as exporters of these countries would demand higher prices to cash the situation.

http://www.dawn.com/2007/03/28/ebr3.htm

 

[Neo]

March 28, 2007
Pakistan’s exports to Australia declining

ISLAMABAD, March 27: Pakistan is steadily losing its export share in the Australian market due to high tariff walls and non-tariff barriers for the past few years, officials told Dawn on Tuesday.

Bilateral trade has not grown much, hovering around half a billion US dollars per annum, with a significant trade deficit, owing to various reasons, particularly high tariffs and NTBs on the products of Pakistan’s export interest.

Official figures, available with Dawn, showed even when the average MFN tariffs are as low as 1.5 per cent and 4.1 per cent for agricultural and non-agricultural products, respectively, Pakistan faced pronounced tariff walls and NTBs on the exportable products.

The applied tariffs on textiles, clothing and footwear are still maintained at 17.5 per cent, which poses a challenge of competition to Pakistani exports against the imports from countries with similar level of socio-economic development indicators but enjoying zero duty and other preferential benefits.

An official said Pakistan had requested Australia in September last to reconsider their preferential scheme to have WTO compatible objective, transparent and non-reciprocal criteria.

The business community has already shown their concern with the stringent sanitary and phyto-sanitary standards in Australian market, thereby affecting export of fruits, vegetables and other agricultural products.

Australia has limited imports of fruits and vegetables from most countries, including Pakistan, due to strict SPS rules and regulations. This restricts market access for Pakistan.

The official said Pakistan has sent draft agreement on cooperation between Pakistan and Australia, which is under consideration of Australian Department of Agriculture. However, reasons for delay in finalisation of the agreement are not clear yet.

In temporary movement of natural persons, it was felt that despite having no country quota for skilled persons, the Australian visa control policy accords equal treatment to all, but less equal to some.

Pakistan had raised these queries at a recently held trade policy review of Australia in Geneva. A list of some written questions has also been submitted to Australia.

Australian tariffs on primary products are considerably lower than on semi-processed goods. Thus, tariff escalation constitutes a potential obstacle for industrialisation of developing countries, including Pakistan.

Australia’s revised offer in Mode 4 of Services is appreciated as one in which efforts have been made to cover developing countries’ demands.The coverage states that market access recorded is to the extent of the list of gazetted occupations and their immigration website gives the lists, which include professional services covering most sectors, though not fully, as this is a positive list approach.

However, the requirement of sponsorship, as well as requirement of contract in their revised offer, made during the period under review, lack clarity.

Both ensure that a temporary person has legitimate means of support and someone is responsible for the stay. In other words, a person in the possession of a valid job contract is as good as sponsored or vice versa.

There is a need to explain the difference between a valid job contract that includes terms and conditions, salary package and duration of job and a ‘sponsorship’ in the context of a temporary service provider, added the officer.

http://www.dawn.com/2007/03/28/ebr12.htm