Pakistan Economy - News & Updates - Archive

[Neo]

Punjab ADP to be raised to Rs 125 billion

LAHORE (May 29 2007): The total volume of annual development plan (ADP) will be raised to Rs 125 billion in the upcoming Punjab budget against previous year's Rs 100 billion. "The Punjab budget for the year 2007-08 will be pro-poor and tax-free" Minister for Chief Minister's Inspection Team, Colonel Shuja Khanzada (retd), said here on Sunday.

He said the economic reforms introduced by the present government had generated more resources for the provinces. He said the federal budget would also have a lot for the low-income groups of the society.

http://www.brecorder.com/index.php?id=569988&currPageNo=1&query=&search=&term=&supDate=

 

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TDAP initiates 'African Plan' for engineering goods export

KARACHI (May 29 2007): The Trade Development Authority of Pakistan (TDAP) has initiated a plan targeting 15 African countries to market engineering products in collaboration with the Engineering Development Board (EDB). This 'African Plan' envisages boosting the country's exports to the big African markets.

Under the initiative, taken by TDAP, 15 countries of Africa are to be targeted. In the first phase, the potential of particularly Pakistan's engineering goods in these markets would be explored, which would be followed, in the second phase, by marketing strategy to penetrate this region.

These 15 countries include Morocco, Algeria, Tunisia, Libya, Egypt, South Africa, Mauritius, Mozambique, Angola, Kenya, Tanzania, Sudan, Ethiopia, Nigeria and Senegal.

At present, studies and surveys are being conducted by TDAP with the help of Pakistan embassies in these countries and of Hamid Kidwai, Pakistan's roving ambassador to African countries, who is also engaged in exploring the enormous potential and opportunities for exports to African region.

Pakistan's exports to African markets have remained stagnant over years both in terms of volume and money. Exports figures are also not so impressive keeping in view this populous region of the world.

The latest region-wise export statistics indicate that the country's exports to the African region were almost negligible in first eight months of current financial year, with a growth of only 0.54 percent. For instance, the exports to South Africa were up by 1.4 percent, and to other African countries were either stagnant or depicted negligible growth.

TDAP Executive Director Marketing Riaz Khan said that TDAP's initiatives in increasing the exports has identified African countries as the potential area for export of engineering goods and services in view of having lenient certification procedures, as against EU countries.

In this regard, to get the inputs from engineering sector, TDAP is organising a seminar in Lahore this week to make an effective marketing strategy for boosting engineering goods exports to Africa.

The exports of engineering goods registered 6.71 percent growth in July-April period of this financial year to $185 million against $174 million in the same month of last fiscal year. However, the share of exports of these goods to African region was almost negligible despite having huge potential of these items in the countries of Africa.

Pakistan exports electric fans, transport equipment, other electrical machinery, machinery specialised for particular industries, auto parts & accessories, etc, as engineering goods.

http://www.brecorder.com/index.php?id=569990&currPageNo=3&query=&search=&term=&supDate=

 

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Engineering Development Board to turn into authority

ISLAMABAD (May 29 2007): Engineering Development Board (EDB) will shortly be upgraded to Engineering Development Authority of Pakistan (EDAP) and an Ordinance has already been submitted to the government for clearance and promulgation, said Abdul Hafeez Chaudhry, CEO EDB.

The ordinance clearance is expected in early July, he said during a meeting with two-member mission of Dutch Centre for the Promotion of Imports from Developing Countries, which called on him on Monday.

According to an official statement, Mr Chaudhry, however, clarified that the promulgation of EDAP ordinance will not affect the nature of the body and it will continue to play the role of facilitator to the engineering industry rather than a regulatory authority.

The CEO EDB briefed the mission on priorities of the government in development of industry and highlighted the philosophy and background of establishment of various companies for developing these sectors. He said that the basic idea was to encourage the concept of public-private partnership.

CEO, EDB also identified capacity building needs of EDB as a Business Support Organisation. He said that CBI could help in enhancing the export capabilities of engineering industry under their prescribed programmes.

On a query about the role of EDB in policy making, he mentioned the current exercise of tariff rationalisation being carried out by the Board and informed that 17 committees were constituted to interact with various sectors and sub-sectors of the industry.

On the basis of their recommendations a tariff package has been sent to CBR for incorporation in the forthcoming budget. He also said that majority of the recommendations will be accepted by the CBR keeping in view the past experiences.

Chaudhry who is also the Additional Secretary of Ministry of Industries, Production and Special Initiatives briefed the mission about various initiatives taken by the Ministry for industrial development of the country. He said that the government was pursuing the policy of de-regulation, value addition, enhanced efficiency and competitiveness, industrial growth and improvement of exports. To achieve these objectives the Ministry has initiated a number of projects, he added.

Vincent Rouwmaat, head of the mission said that the main objective of their visit is to assess training needs of EDB and the industry on Export Marketing to EU. He added that CBI was also interested to improve their operational relationship with the Board. The Mission member showed keen interest in the sector/sub-sector studies carried out by EDB.

A detailed presentation on EDB with special emphasis on exports strategy for the engineering industry was given to the Mission by Raazia Shakir, Acting Deputy General Manager EDB.

http://www.brecorder.com/index.php?id=569994&currPageNo=3&query=&search=&term=&supDate=

 

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Malaysian firm to get power plant assets in Pakistan

KUALA LUMPUR (May 29 2007): Malaysian company Tanjong has said it is going to acquire seven power plant assets located in Pakistan, Egypt, Bangladesh and Sri Lanka from CDC Globeleq Holdings Limited for 493 million dollars.

In a statement here on Monday, the company said its 55 percent-owned unit Pendekar Energy Limited had entered into a conditional share purchase agreement with the CDC Globeleq Holdings Limited for the planned acquisitions. The power plants have a total effective installed capacity of 1,434-megawatt, according to the statement. The plants were governed by power purchase agreements, which would expire between 2012 and 2029, said Tanjong.

http://www.brecorder.com/index.php?id=569925&currPageNo=1&query=&search=&term=&supDate=

 

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Power outages to cripple economic growth: expert

KARACHI (May 29 2007): The current shortfall of over 1,000 Megawatt (MW) power can slow down country's economic growth in the short-term and cripple it in the long-term. Less availability of energy to country's industrial sector in the past five decades suppressed the economic growth and increased burden on import eventually causing severe damage to the national exchequer.

Experts in energy sector told Business Recorder on Monday that the on-going power shortages could retard the pace of economic growth unless it was dealt with soon under a well thought out energy security plan.

Country's master development plan must include supply of affordable energy to industrial sector and the general consumers. The government should provide energy security, sovereignty and sustainability to achieve its development targets.

"Affordable energy is the lifeline of economic development, the engine of growth and the essential driver of economy to create employment opportunities, they said, adding that "strong economic base enable countries to negotiate their interests with outside world in all segments of co-operation."

The country is the largest user of gas is power sector. Electricity generated from gas is the cheapest economic option and takes the shortest time to set up new generation facilities like combined cycle plants.

"Regular large electricity deficit looming in the country would 'choke' the economic growth as poor planning and lack of futuristic approach has contributed to this situation," an expert pointed out. The expert said, "We should explore new ways and means to bridge the shortfall of gas so that country's economy could continue to grow."

To supplement the dwindling natural gas, liquefied national gas (LNG) supply and re-gasification, provision of energy security and segmental increase options have become a reality, the expert said.

It may be recalled that the country till 2004-05 lacked an integrated national energy data and outlook that establishes a need to develop the first integrated energy plan on fast track basis, the expert added. He said to achieve a GDP growth of over 7.5 percent for the next 25 years as envisioned by the federal government, commensurate growth in primary energy supplies is essential.

An integrated energy plan spread over the next 15 years (2008-2023), based on timeline, economic priorities, has to be developed by 'Planning Commission' with inputs from the industry and needs to supported timely by the federal government in terms of policies and incentives.

The plan to be based on development of optimum energy-mix, maximisation of indigenous coal and hydel resources in medium to long-term and providing sufficient incentives for the development of nuclear and renewable energy and strategic storages.

The plan should be effectively in place to implement oil and gas exploration offshore waters in Sindh and Balochistan coastline. The medium to long-term plans for bulk movements using water courses instead of roads. It also includes development of downstream energy infrastructure including pipelines and refineries, setting up of new port facilities like Single Point Mooring (SPM) to cater to the future economic size ships (save precious foreign exchange on tariff).

In areas of very high demand growth rate between 12 to 25 percent, utilisation of redundant furnace oil (FO) infrastructure needs to be considered for setting up power plants. Direct import of electricity from the Central Asian Republics (CARs) surplus hydel power through Wakhan strip to Terbella and also from Iran to Gwadar.

Establishment of natural gas fired power plant as National Power Regulatory Authority (Nepra) long-term fuel supply guarantee is available for furnace oil, whereas power plant on natural gas, when run on furnace oil, can pass through the additional cost to consumer.

The experts said that as per government announced plans, the coal-based power plants and associated infrastructure offer plenty of opportunities. New sites being offered for Hydel based power may provide additional opportunities to potential investors, they added.

Nuclear options may be limited to the government resources and may be difficult to structure in absence of foreign direct investment (FDI), they said, adding that ambitious target for alternate and renewable energy needs extensive government support should be integrated with base thermal plants. They said, the government should encourage exploration of hydel and coal potential to fill the gap on sustainable basis and the renewable energy can only be a viable option with technological advancement.

http://www.brecorder.com/index.php?id=569955&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

‘Market on course to cross 13000 barrier’

KARACHI: The market’s bullish behaviour is based on fundamentals and the index is set to touch the 13000 level in the coming weeks, said Mohammed Sohail, Director Equity at JS Global Capital.

Talking to The News, he predicted that all the major sectors will remain in the limelight, particularly cement, banking and oil. He said the current rally is driven by positive expectations about the coming the budget, which have boosted the investor confidence.

He said the investors believe that this is going to be the last budget before the election, so the government would try to make it as friendly as possible. These expectations have positively affected the investors' psyche which is helping the index to continue with its record-breaking spree. Another important reason fuelling the bullish sentiments is the State Bank of Pakistan's recently released third quarterly report in which the tone is upbeat about the economy’s performance.

The SBP report stated that the GDP growth rate would surpass the target of 7 per cent in the fiscal year 2007 on the back of three major sectors agriculture, manufacturing and services. Pakistan's fourth Euro bond was 7 times oversubscribed had added to the market’s positive sentiments, he said.

Price-Earning Ratio is still in the single digit which is currently at 9.8.Other regional emerging markets like Indonesia and Philippines, whose long-term foreign currency credit ratings are just one notch better than Pakistan's that is BB- are trading at FY08F Price Earning of 14.5 and 15.6, respectively. So in case of any upgrade of Pakistan's credit rating on the back of its rising foreign exchange reserves there lies a substantial upside potential to take Pakistan equity market's leading Price Earning to around 14-15. At the same time, Pakistan market offers 5.4 people dividend yield, not available in other regional markets.

http://www.thenews.com.pk/daily_detail.asp?id=58023

 

[Neo]

Pakistan missed Indian wheat tender

ISLAMABAD: Pakistan has suffered a massive loss amounting to Rs7 billion as exporters were sluggish in participating in an Indian tender for importing one million tonnes of wheat.

“None of Pakistani wheat exporters or associates in Dubai or Hong Kong participated in the tender floated by New Delhi for the import of one million tonnes of wheat to meet its requirements,” a senior government official at the Ministry of Food, Agriculture and Livestock (MINFAL) revealed to The News.

“Had Pakistani exporters participated in the Indian tender, they would have fetched $115 million. However, the exporters missed the bus and lost an opportunity to earn Rs7 billion,” the official argued.

The Ministry of Food, Agriculture and Livestock on May 3 allowed the private sector that they could export wheat from their own stocks to regional countries including India via rail link through Wagah border. Besides that, the government had earlier permitted export of 0.8 million tonnes of wheat.

The May 3 decision allowing export of additional 0.5 million tonnes of wheat was India-specific, but the exporters were not encouraged by the Indian offer, he added. India also extended the bidding date on the request of Pakistani officials, but it is strange that not a single bid was submitted.

It would have not only improved confidence-building measures between the two arch-rivals, but also helped the exporters to capture the huge Indian market, which would be a regular net importer of wheat in coming years, he said.

Besides that, the export to India would have brought handsome foreign exchange, as shipments from Pakistan were much cheaper giving it the whole bid and other offers in coming months. India needs to import more than three million tonnes of wheat to meet local demand.

The Economic Coordination Committee of the Cabinet in its last meeting suspended wheat exports till further orders and hoped the decision would not only help procurement agencies to achieve the target, but also stabilise escalating wheat and flour prices in the country.

http://www.thenews.com.pk/daily_detail.asp?id=58026

 

[Neo]

May 29, 2007

Pakistan wants BIT a part of FTA with US

ISLAMABAD, May 28: Pakistan has asked the United States to make the Bilateral Investment Treaty (BIT) a part of the proposed Free Trade Agreement (FTA) instead of signing them separately in order to remove persisting differences between the two sides over the issue.

Informed sources told Dawn on Monday that both the governments had failed to remove their differences over the signing of BIT, particularly because of the United States, which kept on seeking unprecedented protection of American investment in Pakistan.

Pakistan has proposed to the US to sign FTA in line with the agreements it earlier signed with a number of countries including Qatar, Oman, Bahrain, Singapore and a couple of South American countries.

"We have proposed that the FTA should have certain portion of investment rather than having a full fledge BIT keeping in view the hardened position taken by both the sides over the issue," a source said.

He said both the governments were expected to shortly hold new round of talks to narrow their differences over the BIT aimed at making it a part of the FTA.

According to informed sources, both sides were not willing to soften their hardened stand over BIT although US had earlier accepted that the "judicial and legislative actions" of Pakistan should not be allowed to be challenged in any international court of law.

The US side, they said, had conceded to differentiate between the "bad faith and the error of judgment" and that the decisions announced by superior courts of Pakistan will not be challenged without any legitimate justification.

In return, Pakistan had accepted that the treaty will be applied with retrospective effect, meaning that any thing pertaining to the existing American investment could also be challenged.

Pakistan, in this regard, had assured the US government that it will be obligatory to Islamabad to give compensation to the US investors in case of their dispute, which has not been settled.

One of the cases in point was the dispute that erupted few years ago over the opening of a US restaurant chain – McDonald - in Lahore.

Sources said that Pakistan had also subdued to American pressure to accept additional forums other than International Centre for Settlement of Disputes (ICSD) to deal with arbitration clauses. The US side maintained that since a number of rules of ICSD were needed to be upgraded, other centres for dispute resolution should also be considered.

The US side was insisting to have more than one international forums to settle investors disputes, while Pakistan wanted only the ICSD. Also, Pakistan wanted the US investors to exhaust the local remedy in Pakistani courts before opting for any international forum in case of any dispute.

Pakistan had also argued that there will be a wastage of time and money to also approach other dispute resolution centres and that let the ICSD alone be approached in case of any dispute.

US Assistant Secretary of State for South Asia and Central Asia Mr Boucher, when visited Pakistan in January this year, had said that there were some "serious technical problems" which were blocking the signing of the treaty.

A source said that Pakistan had been asking the US officials to change their draft law on BIT for signing of the proposed treaty. "In many previous rounds of talks, the US side used to say that since this draft on BIT had been approved by the American Congress, there could be no change in it.

"We have told the Americans that if they are coming with a prepared mind to continue insisting on the acceptance of draft law approved by their Congress, then we are afraid it would not be possible to sign this treaty," he said.

http://www.dawn.com/2007/05/29/ebr3.htm

 

[Neo]

Parco exports 60,000 tons of petrol

KARACHI, May 28: The Pak-Arab Refinery Limited (Parco) has, so far, exported around 60,000 tons of petrol since October 2006 and is likely to meet its current fiscal year target of 80,000 tons by the end of June.

Sources in the refinery said that the company plans to export around 140,000 tons in the next fiscal in case local consumption of petrol continues to decline owing to rapid conversion of vehicles to CNG and LPG.

However, much depends on response from the government which will take a decision in view of demand and supply position. The refinery seeks permission from the government before issuing every international tender in the media.

Parco had issued a global tender last week for 20,000 tons June-end shipments.

The government had given a go-ahead for petrol export last year after smelling that local petrol had become surplus in view of its falling sales caused by the meteoric rise in prices.

Parco had exported 300,000 tons of petrol in 2001-02 and earned $75 million at a price ranging between $235 and $260 per ton at that time, the sources said.

Sources said this year’s actual earning from the 60,000 tons of petrol export could not be known.

However, the government had decreased the price of petrol to Rs53.70 from Rs57.70 per on Jan 16, 2007, but its sale is yet to pick up significantly.

It is unlikely that petrol consumption will get a big boost as a majority of buyers are more interested in purchasing CNG-fitted vehicles, especially 800-1,000cc cars. Those who have already converted their vehicles would hardly switch over to petrol. The maximum ex-depot sale price of petrol is Rs53.70 per litre while its ex-refinery price comes to Rs33.59 per litre.

The government eats up Rs6.19 per litre in shape of petroleum development levy, Rs 7 as general sales tax and 0.88 paisa as excise duty.

Other levies include Rs2.78 per litre of inland freight equivalent margin recommended by the OCAC and has been tentatively accepted subject to the basis of actual monthly freight computation.

The margin of distributors and dealers comes to Rs1.52 and Rs1.74 per litre, respectively.

According to the chairman of CNG Station Owners Association (CNGSOA), Malik Khuda Bux, over 1.2 million CNG-fitted vehicles are plying roads and around 1,400 fuel stations are in operation all over the country.

An investment of Rs40bn had been made and more than Rs10bn was in the pipeline, he said.

More than 200 cars (new locally assembled, used and new imported cars) start plying roads daily in the country and 60 per cent of them are CNG-fitted vehicles.

Pakistan has emerged as CNG leader in Asia and the third largest user in the world after Argentina and Brazil, he added.

Head of Research at Jehangir Siddiqui, Mohammad Sohail, said in July-March 2006-2007 overall industry petrol sales had dropped by five per cent as compared to the same period of last fiscal despite the fact that petrol rate declined by Rsr4 per litre in mid-January this year.

“I don’t think that petrol sales will pick up as CNG is still cheaper by 50pc as compared to petrol even after a cut of Rs4 per litre.

“If petrol prices come down below Rs50 per litre, its sale can slightly improve. Besides, petrol has been facing another threat from rising consumption of LPG in auto sector.”

http://www.dawn.com/2007/05/29/ebr6.htm

 

[Neo]

May 29, 2007

German firm to set up dairy plant

LAHORE, May 28: Following the investment by a multinational German store 'Metro' in Pakistan, a Germany based dairy products company will also invest here and a delegation of the firm will soon visit Pakistan in this regard.

Punjab Minister for Industries Ajmal Cheema talking to industrialists at a reception on Monday said that the German company was interested in setting up a dairy plant in the Punjab.

He said that Pakistan had become investors' ‘paradise’ and its foreign exchange reserves had risen to over $13 billion.

The minister said that 'Metro' will establish two stores in Lahore, one at Bund Road and the other at Thokar Niaz Baig. Besides, the company will also impart training to Pakistani farmers on modern storage and marketing techniques of fruits and vegetable.

http://www.dawn.com/2007/05/29/ebr7.htm

 

[Neo]

May 29, 2007
Growth rate better than last year’s 6.6pc, claims Aziz

ISLAMABAD, May 28: A rather low per capita income and manufacturing output marred an otherwise good 7.02 per cent growth rate in national economy — a fraction above the 7 per cent target — on the back of better results in agriculture and services sectors during the current financial year.

Prime Minister Shaukat Aziz said the growth rate was better than last year’s 6.6 per cent and described it as ‘very robust growth’. It reflected the government’s positive economic policies.

He was speaking to newsmen after the finalisation of the current year’s economic data by the National Accounts Committee (NAC) headed by statistics division’s secretary. It was for the first time that results of the NAC were released before the meeting of the National Economic Council, which would meet on May 31.

He said all the three components -- agriculture, LSM and services -- of the economy performed better than expected and specifically mentioned agriculture sector that grew by 5 per cent, against a target of 4.5 per cent. Within agriculture, crop out put increased by 6 per cent and livestock by 4.3 per cent. He said these figures would further improve by next year.

Services sector was estimated to have grown by 8 per cent, against a target of 7.1 per cent but still lower than last year’s growth of 8.8 per cent. The impressive growth in services sector was chiefly because of massive profits of the banking industry that offered much lower returns to depositors against higher interest on loans.

The prime minister said the LSM output had grown by 8.8 per cent. This was, however, significantly behind the 13 per cent target for the current year and even lower than last year’s revised growth of 10.7 per cent. “I am not aware,” said the prime minister when asked as to why LSM data that used to be made public every month in the past was not available this year beyond the first quarter.

Secretary statistics, however, said that the LSM growth data had been finalised for 10 months (July-April) on the basis of information provided by relevant industries, ministry of industries and provincial governments.

The prime minister said that per capita income in 2006-07 had increased to $925, compared with $833 of last year. The government had set a target of $935 in the federal budget 2006-07 for per capita income.

Mr Aziz said the wheat output has been estimated at 23.5 million tons this year and sugarcane production at 54.7 million ton was also 10 million tons higher than last year. Both crops had performed better than expected. Cotton production, however, remained static at last year’s 13 million bales.

He said total size of the gross domestic product (GDP) had touched $146.3 billion. It was marginally higher than budgeted estimate of $145 billion.

Without releasing the full LSM data of about 100 items, the prime minister said sugar production was up by 19.6 per cent, beverages by 28.4 per cent, cotton yarn by 12 per cent, tyre and tubes by 17 per cent and 45 per cent respectively, cement by 21 per cent and steel by 24 per cent.

The prime minister said agriculture growth had been higher than expected and it would help improve the income of most people living in rural areas.

The prime minister said that all sectors of the economy would get boost in the next year budget and maintain a higher growth rate. He said the government would continue with the current policies so that benefits of higher growth were equitable and widespread.

The prime minister said national accounts of the previous years had also been revised. As a result, the GDP growth rate of 8.6 per cent in 2004-05 had improved to 9 per cent while it remained unchanged at 6.6 per cent in 2005-06.

http://www.dawn.com/2007/05/29/top3.htm

 

[Neo]

Tuesday, May 29, 2007

Textile sector should be split into 3: PRGMEA

LAHORE: The Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) has demanded that the textile sector be split into three sections, and has urged policymakers to continue with the six percent Research and Development (R&D) Fund in the next fiscal year.

According to Chairman Ijaz A Khokhar, the ginning, spinning and weaving, apparel (woven and hand-knitted), and home textile industries should now be separate groups.

Making the demands public at a pre-budget press conference, the Association asked for a long term policy, a capping of utility cost for five years at present levels, an increase in the working hours of labourers, announcement of the two percent Travel Support Fund, Export Processing Zone (EPZ) status for garments units exporting over 70 percent of their production, zero rated import of accessories, three per cent R&D on the local sale of fabrics, and a scheme where associations such PRGMEA are entitled to collect 25 percent Export Development Fund (EDF).

Mr Khokhar also lambasted the Commerce Minister for criticising the drop in export in the apparel sector. According to make, the minister had alleged that the textile sector was performing poorly, had low levels of production and obsolete machinery.

“We are far ahead of our competitors in all respect and the present fall in exports is due to the negligence of the government towards the sector,” said Mr Khokhar.

Still, he added, the PRGMEA was actively pursuing the policymakers on issues plaguing it. A letter has been sent to all policymakers of the government to no avail, the chairman. “A long term policy can only be the way forward, provided the government divides the textile sector in three major groups and assess their needs individually,” he declared.

He said all units exporting over 70 percent of their production should be declared Export Processing Units. This would enable them to import raw material at zero rating and bypass other social compliance issues. Similarly, he said, government should also allow zero rated import to apparel accessories. According to the chairman, effluent treatment plants should be planned and constructed at all major export oriented industrial clusters. Mr Khokhar also expressed concern over the government’s decision to reduce the R&D Fund for the apparel sector down to three per cent, despite the Minister of Textile’s assurances of the continuation of the six percent Fund. He said government should immediately announce an extension of the six percent R&D Fund for the next three years to allow exporters to finalise export strategies.

http://www.dailytimes.com.pk/default.asp?page=2007\05\29\story_29-5-2007_pg5_1

 

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7.2 percent GDP growth, 6.7 percent inflation aimed at: NEC to finalise 2007-08 targets on May 31

ISLAMABAD (May 30 2007): The government has projected 7.2 percent GDP growth, 6.7 percent inflation, $8.1 billion current account deficit, and $17.7 billion foreign exchange reserves for the next fiscal year (2007-08), according to sources in Finance Ministry here on Tuesday.

All projected targets are to be finalised by the National Economic Council (NEC) in its meeting on May 31. Sources said that since the country had witnessed strong growth momentum during last four years, the prospects for sustained high economic growth in 2007-08 remain excellent.

"With evidence of a strong pick-up in domestic and foreign investments, and better performance in agriculture, manufacturing and services sectors, the real GDP growth for the year 2007-08 is targeted at 7.2 percent," they said.

The Planning Commission is of the opinion that 7.2 percent GDP growth target would be achieved through significant investment, both in public and private sectors and including foreign private investment.

The overall investment has been projected at 23.8 percent of the GDP, with private investment taking the lead, as public sector investment would mainly be on developing physical and scientific and technological infrastructure, sources said.

They said that emphasis in the development strategy for 2007-08 would be on achieving high value-addition in agriculture, including livestock and fisheries, and manufacturing, particularly engineering goods and services.

They said that national savings as ratio of GDP have been projected at 18.8 percent to reach the level of Rs 1,883 billion, and added that maintaining balance at the fiscal, monetary and external levels would be the underpinning factor of sustained macroeconomic stability during 2007-08.

SAVINGS AND INVESTMENT The Planning Commission has projected 2,384 billion investment during 2007-08 against Rs 2004 billion in 2006-07, an 18.9 percent increase, to achieve the targeted growth of 7.2 percent.

Fixed investment is expected to reach Rs 2,221 billion, reflecting an increase of 19.2 percent over the investment during current year. To support the higher growth in GDP, PSDP projection, excluding earthquake rehabilitation allocation, has been project to increase from 4.2 percent of GDP (Rs 365 billion) in 2006-07 to 4.8 percent of GDP (Rs 485 billion) for 2007-08, sources said.

As far as financing of the targeted investment is concerned, it has been projected that about 79 percent would be financed through national savings and 21 percent through foreign savings.

BALANCE OF PAYMENTS According to sources, during 2007-08, exports (fob) are projected to grow by 10 percent, to $18.9 billion, against $17.2 billion estimated for 2006-07.

Projections of exports would be based on assumptions, such as (i) an increase in exportable surplus through increase in agricultural production and manufacturing output, (ii) improvement in productivity of industrial workforce through technical education and on job training, (iii) greater market access through bilateral arrangements, preferential and free trade agreements with regional and other countries and (iv) improvement in the overall competitiveness of the external sector by enhancing value addition in the manufacturing sector.

Imports during 2007-08 have been projected to increase moderately by 9 percent, to $29.6 billion, from $27.1 billion in 2006-07, due to higher volume of import of food items, POL, edible oil and fertilisers. As a result, the trade account is projected to be in deficit by $10.6 billion in 2007-08, against the deficit of $9.9 billion estimated for in 2006-07.

Sources said that prospects for invisible balance would continue to be governed mainly by the behaviour of remittances during 2007-08, which have been projected at $5.8 billion, against expected level of $5.5 billion for 2006-07. Allowing for other invisible receipts and payments, the surplus on invisible account is anticipated at $2.5 billion, against a surplus of $2.8 billion estimated for 2006-07.

CURRENT ACCOUNT BALANCE: With a deficit of $10.6 billion on the trade account and a surplus of $2.5 billion on the invisible account, the current account deficit is estimated close to $8.1 billion in 2007-08, against $7.1 billion in 2006-07.

CAPITAL ACCOUNT: Gross disbursements are expected to be $3.2 billion in 2007-08, compared to $3.5 billion in 2006-07, largely due to decline in disbursements of commodity aid. After allowing for other capital movements, surplus of $3.1 billion is expected to occur in the overall balance in 2007-08, as compared to a surplus of $3.0 billion during 2006-07, according to sources.

However, taking into consideration transactions of the banking system and a buildup of $2.8 billion in foreign exchange reserves, the gross reserves are likely to reach the level of $17.7 billion in 2007-08, compared to a level of $14.5 billion in 2006-07.

FISCAL POLICY The main thrust of the fiscal policy during 2007-08 would be on strengthening reforms in the tax system and tax administration to further broaden the tax base at the federal, provincial and district levels, improve tax compliance, and minimise tax evasion.

The main objective of the policy would be to allocate adequate resources for development activities, particularly for pro-poor expenditure, in conformity with the Fiscal Responsibility and Debt Limitation Act, 2005, to achieve the projected economic growth of above 7 percent, and reduce further unemployment and poverty and improve social indicators.

MONETARY POLICY The monetary expansion for the year 2007-08 would be in line with the projected GDP growth of 7.2 percent, and CPI inflation at 6.7 percent. The State Bank of Pakistan would continue to follow the tight monetary policy to curb inflationary pressures.

Sources said that concentrated efforts would be made by the government to bring it down during the fiscal year 2007-08 and beyond, adding that reduction in the rate of inflation would be achieved by tight monetary policy and increased supply of essential items.

http://www.brecorder.com/index.php?id=570470&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Rs 520 billion PSDP, Rs one trillion revenue target finalised

ISLAMABAD (May 30 2007): After several hours consultations in more than one meetings on budgetary targets, the government on Tuesday finalised Rs 520 billion Public Sector Development Programme (PSDP) and Rs 1 trillion revenue target for 2007-8.

These targets will be presented to the National Economic Committee (NEC) for its approval, scheduled to meet here on May 31. Prime minister, Shaukat Aziz, will chair the meeting. The government is still indecisive on the issue of increase in salaries/pensions of the government employees and relief to low-income group and these issues will now be decided by the NEC.

The Finance ministry has worked out different ratio with their overall impact on the next budget for increase in salaries/pensions of the government employees. It is also believed that the government will revise upward minimum wages for the public and private sector employees, besides announcing special measures for relief to the poor in the next budget. These measures will be presented to NEC for its approval.

An official privy to Tuesday's meeting decision told Business Recorder that next budget would be tax free as the government plans to increase tax base to achieve enhanced target and the same metrology will be presented in NEC meeting.

The Annual Plan Co-ordination Committee (APCC) had approved Rs 549 billion PSDP for the next fiscal year in its meeting early last week. However, its estimates were revised down after Finance ministry's strong opposition. The Finance ministry's officials had told a high level meeting chaired by the prime minister that major increase in PSDP size would widened current account deficit next year.

The government is facing huge current account deficit and it's a serious worry for its economic team. Even after unprecedented inflows of foreign direct investment (FDI) and remittances that will be around $12 billion by June 30, and using untraditional ways such as global bond issue, it is yet to plug the current account deficit.

http://www.brecorder.com/index.php?id=570465&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Iran hopes to finalise IPI gas deal in June

TEHRAN (May 30 2007): Iran said on Tuesday it hopes to sign a final deal next month for a $7 billion pipeline that transfers natural gas to India through Pakistan, Iranian media reported. The three countries agreed over the price formula for the pipeline in January and a new round of negotiations started in Tehran on Sunday.

"We hope that in this meeting we would be able to prepare the ground to finalise the deal on June 30," senior Iranian energy official Hojatollah Ghanimifard was quoted as saying by the ISNA news agency.

He did not say which issues remained to be settled. The pipeline, known as the "peace pipeline", aims to feed the growing energy needs of the subcontinent but has made slow progress due to political tensions between India and Pakistan and differences between New Delhi and Tehran over the latter's controversial nuclear programme.

Washington accuses Tehran of using its nuclear programme as a cover to build atomic weapons and has repeatedly sought to discourage India from the project. Iran denies the charges. "For carrying out and making this project a reality, India would in no way be influenced by other countries including America," Iranian news agencies quoted India's representative at the talks, S Sunderashan, as saying.

Iran sits atop the world's second-largest gas reserves after Russia. But sanctions, politics and construction delays have slowed its gas development and analysts say it is unlikely to become a major exporter for a decade. Apart from the pipeline, New Delhi is also negotiating with Iran to secure a deal that would see Tehran supply 5 million tonnes of liquefied natural gas a year over a 25-year-period from 2009.

http://www.brecorder.com/index.php?id=570511&currPageNo=2&query=&search=&term=&supDate=