Pakistan Economy - News & Updates - Archive

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Wednesday, June 06, 2007

Budget 2007-08: Insurance sector to be developed on modern lines

* Taxable income to be determined after deduction of insurance premium
* Capital element of annuity receipts to be exempted from tax .

By Sajid Chaudhry

ISLAMABAD: The Federal government is all set to announce some tax relief measures to remove bottlenecks in the development of insurance sector on modern lines in the budget 2007-08, an official told Daily Times on Tuesday.

Prime Minister Shaukat Aziz while according approval to new Insurance Policy, in principle, had approved some tax relief measures on April 13, 2007 and these were to be announced in the upcoming budget, the official said.

According to the official, the new Insurance Policy aims at achieving high life insurance penetration in the country. In this regard, the policy seeks to allow deduction of life insurance premium in determination of taxable income for the individuals. According to the official, this incentive in India, South Korea, Malaysia and Singapore is the reason for relatively high life insurance penetration as compared to Pakistan.

The new insurance policy aims at increasing penetration, removing impediments to insurance industry’s development and outlining a more rational role of the public sector in line with international practices. The percentage of life insurance in the country, which presently is 0.28 percent, is among the lowest in the region and the immediate goal has been set at to enhance it to 1% in a period of three years. Under the new insurance policy insurance cover against terrorism, crop insurance, cover against earthquake and micro insurance facilities would available in the country.

Analysis carried out by the Ministry of Commerce indicates that insurance industry had failed to penetrate rural areas and provide insurance cover to socially deprived people. In order to address this, two initiatives would be taken. Firstly group insurance would be made compulsory, so that all workers would be compulsorily insured under the labor laws. The necessary process to achieve this is being initiated in consultation with the Ministry of Labor and Manpower. Secondly a framework would be developed under which all insurers would be required to write a certain proportion of their business in rural areas as well as amongst those socially deprived. While the framework was being formulated the two state owned direct insurers, i.e. State Life and NICL, would immediately introduce micro-insurance schemes and would also co-ordinate the efforts of the task force to be constituted for this purpose by the ministry.

The policy highlights that annuities taken out are currently taxable beyond a negligible limit, even though the single premium paid to affect the insurance is not deductible. It also pointed that amount to taxation of capital constitutes double taxation.

The policy proposes that capital element of annuity receipts be exempted from tax or allow deduction of annuity premiums in determining taxable income from individuals especially for annuities taken for defined purposes like pensioners, retirement saving schemes. The policy has pointed out that in health sector general insurance companies are required to levy a federal insurance fee of 1% and central excise duty of 5% on premiums, which are than paid across to the federal government. This does not apply to life insurance companies.

http://www.dailytimes.com.pk/default.asp?page=2007\06\06\story_6-6-2007_pg5_1

 

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Wednesday, June 06, 2007

Pakistan’s success rate of projects stands at 58%

ISLAMABAD: The success rate of Pakistan’s selected 113 important projects implemented during 1985 to 2006 stands at 58 percent, according to the development assistance evaluation report of the Asian Development Bank (ADB).

The success rate of projects in Pakistan has been remarkably static, with no evidence of improving performance, and this should be of concern for the authorities, said the evaluation report.

It said that in 1970s, the total 26 projects were selected for rating and their success rate was calculated at 58 percent. During 1980s total 54 projects were evaluated and their success rate was found at 59 percent. Similarly, in 1990s some 33 projects were evaluated and the success rate was 58 percent. The report is the first whole programme study of operations in Pakistan prepared by the Operations Evaluation Department (OED) of ADB. In preparing this report, OED followed its guidelines for the conduct of country assistance programme evaluations (CAPE).

Pakistan remains one of ADB’s major clients in terms of public sector borrowing. From 1985 through 2006, ADB approved 171 loans for 127 projects for a total of $14.2 billion. The Asian Development Fund (ADF) accounted for 89 percent of the loans but only 44 percent of the amount. The balance of 11 percent of the loans and 56 percent of the amount came from ordinary capital resources (OCR), the report mentioned.

The average level of lending has approximately doubled since 2001, as compared with the previous five years. Pakistan now has the most projects in its portfolio classified as multi-sector covering rural development, social services, rehabilitation, and mixed infrastructure. Almost inevitably, these well-intentioned holistic projects suffer from the complexity of the design and implementation arrangements, the report highlighted.

According to the regional comparison given in the report, Pakistan projects have a similar level of success as those in Bangladesh and Nepal, but lower than those of Bhutan, India, and Maldives. Projects in Pakistan have a higher overall level of success than those in Sri Lanka since the 1970s.

The report stated that the success rate of projects in Pakistan has been remarkably static, with no evidence of improving performance. The performance of projects in Bangladesh, by contrast, has improved markedly. India is little changed, Sri Lanka is improving, and Nepal has deteriorated. The ADB success ratings have trended up from below 60 percent for the approvals in the mid-1980s to above 80 percent for those approved in 1999. The difficult development context in Pakistan probably contributed to the static performance of its projects over this period.

The analysis of project success, contained in the report, by sector shows major differences in performance for Pakistan projects. Projects in the water supply, sanitation, and waste management sector performed the worst, with only a 20 percent success rate overall (albeit on small numbers) and a 50 percent success rate for projects approved in the 1990s. The next worst performing sectors were education, with a 29 percent success rate (also on small numbers) and 50 percent success rate for projects approved in the 1990s; and finance, with a 30 percent success rate overall, influenced by poorly performing projects with development finance institutions in the 1970s and 1980s, and a 50 percent success rate for later projects.

Health, nutrition, and social protection projects had a 40 percent success rate (also based on small numbers), improving to 50 percent for 1990s. Although many of the balance of projects not rated successful were assessed as partly successful (i.e., desired results were not fully or efficiently achieved, or not sustained), this performance is dismal. Essentially, Pakistan increased its debt in exchange for economic and social benefits that were less than expected, the report disclosed.

The agriculture sector, the largest group with 33 projects, had an overall success rate of 55 percent with no trend to improvement by decade. Multi-sector projects had a 56 percent success rate overall. However, the multi-sector success rate dove from 75 percent for projects approved in the 1980s to only 25 percent for those approved in the 1990s, influenced by the poor performance of projects supporting the Social Action Programme. ADB’s most successful projects have been in its traditional infrastructure areas. Energy projects had an 81 percent success rate overall, but with a falloff for 1990s approvals to only 50 percent, which was associated with the move to focus more on the policy framework and structural issues.

http://www.dailytimes.com.pk/default.asp?page=2007\06\06\story_6-6-2007_pg5_11

 

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OMV Discovers Gas with the Tajjal-1 Well in Pakistan
Tuesday, June 05, 2007

OMV announced the discovery and successful testing of gas in its Tajjal 1 exploration well in the Gambat Exploration Block in Northern Sindh province, Pakistan. This is an area where OMV has discovered two major gas fields, Miano and Sawan, which were brought on stream in 2001 and 2003. The new discovery by OMV (Pakistan) Exploration GmbH, a 100% subsidiary of OMV, is the second this year after the announced Latif discovery in March. Both discoveries confirm the potential for further reserves in Related Products this area. The exploration well reached a final depth of 3,845 m and encountered a total of 21 m net gas pay in three layers at depths of 3,600 to 3,800 m. Further appraisal activities for the area like the drilling of additional wells are envisaged.

Helmut Langanger, OMV Executive Board member responsible for Exploration and Production stated: "I am delighted about this second discovery in our Middle East core region within only a few months. It confirms the significant potential of this block and allows us to integrate the new discovery in our existing infrastructure. This enables us to proceed with our plans for further growth in Pakistan."

Out of the three layers the main was successfully tested in the beginning of May 2007 confirming the potential of the new discovery. Test results show that the well is capable of flowing around 3,400 boe/d (approx. 20 mn scf/d) from the tested zone. However, the actual flow potential and size of the field will be determined after a long term test and appraisal of the field.

The drilling rig has moved off and planning for further evaluations and production testing are ongoing. OMV is the operator of a joint venture with the partners Eni AEP Limited (Eni), Pakistan Petroleum Ltd (PPL) and Government Holdings (Private) Ltd (GHPL).

The new discovery is located approximately 15 km from the existing infrastructure of the Sawan field, which sits conveniently between the markets of the two Pakistani gas suppliers, Sui Northern Gas Pipelines Ltd. and Sui Southern Gas Company Ltd., enabling OMV to deliver to both networks. In adding new reserves through exploration activities in this area OMV strengthens its position as strategic hub.

OMV is the biggest international natural gas producer in terms of operated volumes in Pakistan. As the operator of the Sawan and Miano gas fields, as well as the Kadanwari processing facilities, OMV is now responsible for operating more than 100,000 boe/d (600 mn scf/d) covering approximately 16% of Pakistan's demand for natural gas. The total daily net production of OMV in Pakistan amounts to approximately 19,100 boe/d (115 mn scf/d).

Consortium partners Gambat are OMV (Pakistan) as operator with 35%; Pakistan Petroleum with 30%; Eni with 30% and Government Holdings (Private) Ltd. with 5%.

OMV (PAKISTAN) Exploration GmbH is a 100% subsidiary of OMV Aktiengesellschaft and has been active in Pakistan since 1991. OMV (Pakistan) employs 539 Pakistanis and 15 expatriates. The activities of OMV are currently concentrated in the central Indus Region, where OMV has established itself in a strong position as an operator, but is also expanding in other areas of the country. To date, OMV has invested approximately US $197 million in exploration, appraisal activities and field development. OMV's first success was the discovery of the Miano gas field in 1993 with Miano 1, which opened a new play type of stratigraphic trapping. In 1998, OMV discovered the large Sawan gas field, for which commerciality was declared in December 1999.

http://www.rigzone.com/news/article.asp?a_id=46012

 

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Pakistan Issues License for Kunri Block

KARACHI, Jun 05, 2007 (Dow Jones Newswires)
Pakistan granted a license to a joint venture led by a local firm for oil and gas exploration in the south of the country, the Ministry of Petroleum and Natural Resources said Tuesday.

The joint venture, Pakistan's New Horizon Exploration and Production Ltd. and Kuwait Energy Co., will invest about $16.05 million to explore the Kunri Block in the southern Sindh province.

The block covers an area of 2,485.93 square kilometers "The joint venture has committed to drill three exploratory wells during the initial term of first three years," the ministry said in a statement.

As Pakistan meets more than 80% of its energy requirements through imports, including about $3 billion worth of crude a year, the government has been encouraging domestic and foreign firms to increase exploration activities in the country.

In recent years, Pakistan's liberal policy has attracted a number of foreign firms in the exploration and production of hydrocarbons, making it one of the largest foreign investment areas.

The country is still struggling to increase domestic oil production to about 65,000 barrels a day. It hopes to produce 100,000 barrels a day within five years.

Pakistan also produces little over 3.5 billion cubic feet of natural gas a day, which meets 50% of its total energy needs.

The government has set a target of drilling 100 exploratory wells each year, compared with an average of 60 a year previously.

According to official estimates, Pakistan has 27 billion barrels of estimated oil reserves, of which only 3% has been explored.

It also has an estimated 280 trillion cubic feet of natural gas reserves, of which only 42% has been explored so far.

http://www.rigzone.com/news/article.asp?a_id=46013

 

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'Iran to hold seminars on investment scope in Pakistan'

KARACHI (June 07 2007): The Consul-General of Iran, Masoud Mohammad Zamami, has informed the business community that foreign investment cell of Iran's Economic Ministry has made a plan to hold seminars on investment opportunities in Pakistan.

Addressing members of Korangi Association of Trade and Industry (Kati) on Wednesday, he said that two-way trade target between Iran and Pakistan has remained limited to one billion dollars, and added that there was need to further increase this target.

Zamami termed the current environment in Pakistan as favourable for economic and trade activities. He said that Pakistan and Iran enjoy best cordial relations, and added that Iran was the first country to recognise Pakistan as an independent state. Likewise, Pakistan also acknowledged Iran after Islamic revolution in Iran. Both Iran and Pakistan helped each other in difficult times, he added.

The Iran Consul-General said that anti-Muslim forces were conspiring against Muslim countries and trying to make them economically weaker. In this scenario, the Muslim countries must unite and formulate a joint strategy for better future.

He said that Iran consulate would provide a list of all exhibitions scheduled to be held in Iran, and would invite Pakistan's business community to participate in them.

The Consul-General noted that Pakistan's markets are full of imported dry fruit, tissue papers and other goods from European countries, whereas Iran also produces same products in good quality, quantity and on competitive price.

http://www.brecorder.com/index.php?id=574075&currPageNo=1&query=&search=&term=&supDate=

 

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Government taking steps to slash debt-to-GDP ratio: advisor

ISLAMABAD (June 07 2007): Advisor to the Prime Minister on Finance Dr Salman Shah has said the government is taking steps to bring down the debt to GDP ratio from 52 percent to below 20 percent in next 5 to 7 years.

Addressing a pre-budget seminar "A milestone in continuation of economic reforms" organised by Press Information Department (PID) here on Wednesday, he said that policy makers have set the target to reduce the public debt to GDP ratio to 49 percent in next financial year.

He said the government has to follow the Fiscal Responsibility and Debt Limitation Act. We have to operate within the discipline of the law to deal with the volume of domestic and foreign loans and government should avoid excessive borrowing.

Dr Shah said it is necessary to reduce the fiscal deficit to less then 3 percent for achieving the target to reduce the debt to GDP ratio less then 20 percent in next 5 to 7 year. The fiscal deficit stands at 4.2 percent in 2006-2007 and it will remain 4 percent in next three years following impact of the quake-hit areas. In the coming 4-5 years, the fiscal deficit will come to around 3.5 percent.

Commenting on the current judicial crises, he said the judicial crisis would not have any negative implications on the economy of Pakistan. Both the local and foreign investors have shown confident in the present regime. During the road shows, investors understand that the present government and political parties would not disturb the current economic momentum and growth rates. If the imports/exports and other economic activities continued with the same pace during the existing political situation, it would have no negative impact on economy.

He said the economy and politics should not be inter-linked to avoid any negative impact on the economy. In case of total breakdown, the government could face problems on the economic side, which is not possible in the current situation, he said.

During 1996-1998, he said the past governments had issued defence saving certificates at highest rate of 18 percent to borrow Rs 50 billion from the investors for controlling the budget deficit. Now, the present government has to pay Rs 50 billion as principle amount on these certificates along with Rs 200 billion as interest to the investors. This would result in making payment to the tune of Rs 250 billion to the investors during 2007-2009 due to the policies of the past government.

He further said the work is underway on Diamer-Bhasha dam. Similarly, the construction of Neelum-Jhelum will be started after announcement of budget. There is a need to develop consensus on the dams as financing is not an issue for the dams, which could easily be arranged domestically as well as globally.

He said the domestic food inflation is comparatively less than the global food inflation during last year, evident from commodity price index analysed by UK economist. The global prices showed an increase of 11 percent and food commodities showed an increase of 18.1 percent last year. On the other hand, Pakistan has shown less increase in food inflation during the same period.

Referring to the Economist, UK of June 2, he said the commodity price index of leading economies has shown increase during the same period. Countries like Russia, Turkey, India, Indonesia, Argentina and Colombia has shown increase in inflation.

The target for inflation for the next fiscal is 6.5 percent and we hope that the food inflation would remain under control due to many factors. The factors like excellent wheat crop; good production of pulses and bumper sugar crop with its no shortage would result in sustainability of the major food items.

According to him, the government would establish the farmers market in major cities to facilitate the farmers for selling their products directly to the general public. This would help bring down the food inflation in the country.

Dr Salman Shah said the government is considering to convert the weekly Sunday markets into daily Bazars giving an opportunity to the farmers to directly sell their commodity minimising the role of the middlemen. It would ensure availability of food items, vegetables, fruits and consumer products at cheaper rates.

Outlining the major initiatives of budget, he said the major objectives of budget included relief to the common people in the form of increase of pay and pensions; employment opportunities to skilled and unskilled labour workforce. Infrastructure development for both urban and rural development; Human Resource Development and need to improve productively level as well as encouragement of public and private partnership have also been initiated in the budget.

He said that the agriculture sector performed well and registered growth at 5 percent.

Advisor to the PM on Finance said the government has set over rupees one trillion revenue target for the Central Board of Revenue (CBR). For achieving the target, tax should be collected from all potential sectors and burden of taxes should not be on few sectors.

Dispelling impression about the devaluation of rupee, he said exchange rate is stable and the inflation remained at 6.5 percent because of the government steps. Pakistan has competitive edge over the India and China due to its exchange rate stability as compared to currencies of these countries.

He said the government would float dollar-bond for 30 years period in next fiscal taking into account the excellent response of international investors towards the Euro bond. The Euro bonds subscription has gone up to seven times more to 3.5 billion dollar against the demand of 500 million dollar.

On the issue of workforce, he said Pakistan has developed its large labour force, which is the fourth biggest force in the world after India, Chain and USA. Now the government has worked out a policy to make its youth into skilled labour for enhancing the productivity of the country.

He said the government has increased the budget of National and Vocational Training Educational Centres (Navtec) from Rs 500 million to Rs 2.5 billion in 2007-2008. CBR Member Direct Taxes Salman Nabi was also present to represent CBR on the taxation issues.

http://www.brecorder.com/index.php?id=574048&currPageNo=1&query=&search=&term=&supDate=

 

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Privatisation generates $7 billion since 1991

ISLAMABAD (June 07 2007): Minister for Privatisation Zahid Hamid said on Wednesday that privatisation process generates $7 billion since 1991 through 164 transactions. The minister stated this in an interview with a private business news channel here on Wednesday.

He said that privatisation and deregulation are the cornerstone of economic policies of the government. Zahid Hamid further said that investment climate in Pakistan is now very conducive for foreign direct investment (FDI) adding most of the reforms have been institutionalised. He said PSO, NIT privatisation, GDRs of UBL and IPO of HBL would be completed before June 30.

Zahid Hamid said that leading international firms are in run for PSO. Zahid Hamid said that GDRs of NBP, HBL, KAPCO would be offered in early Financial Year 2008. He further said that IPOs of Steel Mills, State Life and Parco would be held in FY08. Zahid Hamid said that discussion for sale of PPL is continued.

He said that technical issues have been addressed for sale of SNGPL and SSGCL.

Zahid Hamid said that 51-54 stakes in Faisalabad and Peshawar Area Electricity Companies up for divestment while Heavy Electrical Complex, Pak Machine Tool Factory, salt and coal mines to be privatised.

He further said that government might consider another issue of GDRs of ODGCL adding KESC keen to enhance its production capacity.

Zahid Hamid said 1000 MW Jamshoro power station will also to be privatised.

Zahid said that 20 percent of FDI flows goes to manufacturing sector while FDI composition includes 11 percent oil and gas; 3 percent power; 33 percent telecom; 21 percent financial sector and 10 percent other service. He added that Chinese companies to invest in steel sector adding Etisalat to pay second tranche of PTCL by the end-June after transfer of properties.

http://www.brecorder.com/index.php?id=574049&currPageNo=1&query=&search=&term=&supDate=

 

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Rural income generation: Smeda launches Ahan scheme with ADB's help

FAISALABAD (June 07 2007): The Small & Medium Enterprise Development Authority (Smeda) has launched 25 projects of "Aik Hunar Aik Nagar (Ahan)" with the financial assistance of Asian Development Bank in the country. Marketing Manger, Ahan, Shaher Yar Tahir, said this while addressing the members of Faisalabad Chamber of Commerce and Industry, here on Wednesday.

He said that the primary objective of Aik Hunar Aik Nagar (Ahan)/Rural Enterprise Modernisation Project is to reduce poverty by supporting employment generation activities economic growth and enhancing competitiveness of the micro and small business in the rural areas.

These projects envisage enabling the rural business to access a range of business development services, including appropriate technologies and financial capital. The direct benefits are expected to flow from increased employment and income earning opportunities in the rural areas, particularly for wage earners, women and poor producer groups with potential to engage in a higher level of commercial activity, he added.

Shaher Yar hoped that through these measures there would be increased value-addition in the products sold improved commercial linkages between rural MSEs and the larger urban business. Increased demand for goods and services will add to overall benefits.

Pakistan has a total population of 156 million people of which around 68 percent still live in the rural areas. Economic growth depends on the overall economic activity in the rural areas. With the continuous drop of the share of agriculture in GDP, it is imperative that non-agriculture/farm based avenues for economic opportunities be explored.

Pakistan, to meet its goal of reducing poverty, needs to expand non-farm economic opportunities in addition to agriculture in the rural areas to create diversified non-farm sources of income. This is how rural poverty rates start to decline. In addition, rural-urban migration rates are placing pressure on the urban infrastructure and environment. Thus, there is a pressing need to provide non-traditional work opportunities in the rural areas, he added.

He explained that the project envisages to study and emulate OTOP (One Tambon, One Product) of Thailand and OVOP (One Village One Product) of Japan and other similar programmes for income generation of rural and per-urban population. This is aimed to identify the best practices and adopt the same for design and implementation of Rural Enterprise Modernisation initiative of the Government of Pakistan (Ahan) programme keeping in perspective the overall policy to use the private sector as the engine for rural enterprise development.

Pakistan has a total population of 156 million people of which around 68% still live in the rural areas. Economic growth depends on the overall economic activity in the rural areas. With the continuous drop of the share of agriculture in GDP, it is imperative that non- agriculture/farm based avenues for economic opportunities be explored.

Pakistan, in order to meet its goal of reducing poverty, needs to expand non-farm economic opportunities in addition to agriculture in rural areas in order to create diversified non-farm sources of income so that rural poverty rates start to decline. In addition, rural-urban migration rates are placing pressure on the urban infrastructure and environment. Thus, there is a pressing need to provide non-traditional work opportunities in the rural areas, he added.

Focusing on project approach of developing strong linkages with all concerned, Shaher Yar said, Ahan activities will be co-ordinated by Ahan cell to be housed within the Smeda.

The Ahan Cell staff will develop the outreach and resources to build the business competencies of small rural enterprises. The cell will undertake preparatory work with the help of international and local experts to design and implement a market driven development programme, identifying areas for further research, initiating collection of required data and designing pilot projects in selected sub sectors.

For this purpose, Cell will have dedicated staff for enterprise/cluster development, product development, quality assurance, technical assistance and marketing and distribution. Ahan Cell will also lead to the design of the organisational and operational framework for Ahan Pakistan Rural Enterprise Modernisation Company (REMC), (outreach strategy, structure, an initial business plan, standard operating procedures, etc). It will also help setting up of REMC under section 42 of Companies Ordinance, he added.

Earlier, Muhammad Ayub Sabir, President Faisalabad Chamber of Commerce and industry presented welcome address and highlighted the proposals of FCCI. Brigadier Ahmad Riza Siddiqui (Retd), Secretary Faisalabad Industrial Estate Development and Management Company (FIEDMC) and Chaudhry Zahid Iqbal also addressed the members.

http://www.brecorder.com/index.php?id=574003&currPageNo=2&query=&search=&term=&supDate=

 

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'Efforts on to bring industrial revolution'

LAHORE (June 07 2007): Punjab Minister for Information Technology Abdul Aleem Khan has said the government wants industrial revolution in the country and is making sincere and serious efforts to achieve this goal.

While speaking at annual general meeting of Lahore Township Industries Association (LTIA) on Tuesday, Aleem said that maximum funds were being provided to the Industrial Estates to equip them with all necessary facilities.

He said special attention was being given towards the development of infrastructure to make it of international standards so that the foreign investors could get benefit of available business opportunities. Newly elected LTIA President Fida Hussain promised to continue work for the betterment of industrialists of the area. He said the LTIA was thankful to the Quaid-i-Azam Industrial Board for improving law and order situation in the area.

Speaking on the occasion, Lahore Chamber of Commerce and Industries President Shahid Hassan Sheikh paid rich tributes to Punjab Chief Minister Chaudhry Pervaiz Elahi for expediting public-private partnership in the province.

He said the Quaid-e-Azam Industrial Board had done a marvellous job by spreading a network of roads, adding that industrial community should work in the larger interests of the country. Quaid-e-Azam Industrial Board President Mian Nauman Kabir thanked the Chief Minister for reposing confidence in the private sector and pledged to turn the Industrial Estate exemplary industrial estate of the country.

http://www.brecorder.com/index.php?id=574095&currPageNo=2&query=&search=&term=&supDate=

 

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Energy crisis threatens LSM growth

ISLAMABAD: The government Wednesday expressed concern over the lingering energy shortage and termed it as a potential threat to the country’s economic growth, especially of large-scale manufacturing (LSM), which followed 8.8 percent growth this year against the set target of 13 percent.

Jahangir Khan Tareen, the Federal Minister for Industries, Production and Special Initiatives while talking to reporters blamed the energy shortage (gas and electricity) as the sole reason for decline in large-scale manufacturing.

According to the government estimates, Pakistan’s industrial sector has recorded a growth of 6.8 percent, falling significantly short of the 11 percent budget estimates. In the backdrop of the current situation and persistently electric break down in the country (especially in the economic hub Karachi) could further aggravate the situation and ultimately economic growth.

Besides, the Minister also informed that there is also about 6 percent decline in oil refining output, as some of the refineries have stopped work due to the energy shortage. It also reflects in the LSM decline due to short supply of oil and oil products.

It is also worth mentioning in an Asian Development Bank (ADB) study of the energy crisis in Asia, has urged the Asian countries including Pakistan for finding ways to avert and address the big issue of energy for joining the ranks of developed countries.

Large population pressure would further add to the issue and the bank estimates that by 2011, continent would consume more than that of the developed counties.

In the backdrop of energy shortage, the government is staving for striking an agreement with Iran for natural gas import to meet the energy requirements. The Iran-Pakistan-India (IPI) project if materialized would help the country in meeting the energy shortage of the fast growing countries Pakistan and India of the region.

To a query, the minister responded that food inflation was also a also a huge issue which further aggravated the general inflation hovering between 7.5 to 7.9 percent. He termed it as demand and supply issue, which need immediate measures to address. He said that the government was aware of the food inflation and was making all out efforts to bring it down.

http://www.thenews.com.pk/daily_detail.asp?id=59406

 

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June 07, 2007
Inflation to reach 8pc: adviser

ISLAMABAD, June 6: The consumer price inflation will creep up to around eight per cent by the end of June 2007 against the target of 6.5 per cent mainly due to rising prices of food items, says Adviser to Prime Minister Dr Salman Shah.

“The inflation — measured through the consumer price index — target will be exceeded in the May-June period. It would be around 7.7 to 7.9 per cent,” Mr Shah conceded here at a pre-budget seminar organised by the press information department on Wednesday.

He said the end year inflation depended on the current two months — May and June — calculation. However, he said this year the inflation was driven by food prices, particularly the prices of perishable food items.

The adviser also hinted on relaxation of the monetary policy by start of next fiscal year on the pretext that the inflation would hopefully come down to 6.5 per cent. With this possible reduction in inflation, he said the State Bank of Pakistan would not need to further tighten the monetary policy.

“This is not our domain to talk about it. However, the SBP would definitely consider rationalising the interest rates,” he added.

He said the core inflation—non food and non energy—was around five per cent, which he said remained less than the target of six per cent during the period under review.

He said that food prices depended on two main factors —consumption and international prices. Another factor was interest of farmers, on which the government wanted to give maximum relief.

He said that it was a complex situation to be brought under control as many players were involved in the food supply chain. However, he claimed that food prices remained at around 10 per cent during the current fiscal year as against the 11 per cent in the international market.

The adviser said that food inflation would be under control in the current month as there was a record growth in wheat production followed by sugarcane and rice.

http://www.dawn.com/2007/06/07/top7.htm

 

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June 07, 2007
Pakistan to hire banking, financial experts: Reforming economy

ISLAMABAD, June 6: Pakistan has assured the World Bank and the Asian Development Bank (ADB) to shortly hire international legal and regulatory experts to reform its financial and banking systems.

Informed sources told Dawn that both the international donors have expressed their concern over reports of scandals in the Karachi Stock Exchange and ‘insider trading’ by bankers that marred the image of Pakistan’s financial and banking institutions at home and abroad.

They have asked the government to develop a “national strategy” for inclusive financial services that should incorporate all types of institutions including commercial banks, micro-finance banks, rural support programmes and other non-government organisations.

Both the donors told Islamabad that Pakistanis working in the banking and financial sector should work like international sector specialists who must have an extensive working knowledge of banking, micro-finance, international best practices and new technology being used in the financial sector.

Sources said the World Bank and ADB believe that Pakistan needed the services of international legal experts who should provide advisory support to the State Bank of Pakistan and the Ministry of Finance in conjunction with the relevant agencies, stakeholders consultants and forums to ensure adequate inputs and participation of stakeholders groups.

They were of the view that Pakistan required international legal support for providing technical assistance for applications for lower cost funds, transfers and remittances in Pakistan markets, conducting of feasibility study for national mobile money transfer, VSAT applications for other technological changes aimed at improving outreach of sustainable financial services including to the poor and rural areas.

However, the donors said that those international financial and legal experts, whose services were to be acquired, should have comprehensive information and experience about regulations, pertaining to banking and micro-finance in Pakistan. In addition they should also have good understanding about Pakistan’s financial and banking sector.

Similarly, sources said that Pakistan was told to develop expertise for domestic Islamic finance and that the experts in the field must have good working knowledge of Islamic finance and experience in an Islamic financial institution. In addition, the specialists should demonstrate good understanding of the Islamic financial sector in Pakistan and its current regulatory framework.

Sources said that the central bank was expected to conduct professional survey for the development of national instrument on Islamic finance.

There should be certain surveys which should cover the Islamic financial markets in Pakistan to provide important baseline data for monitoring the sector characteristics and demand for growth and development.

http://www.dawn.com/2007/06/07/ebr3.htm

 

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Pakistan's trade deficit likely to hit $14b in 2007-08

MENAFN - 07/06/2007

(MENAFN) A senior official at the Pakistani Ministry of Finance said that the country's trade deficit is expected to widen to $14 billion in the fiscal year 2007-08 against the projected target of $9.4 billion, set for the current financial year, Khaleej Times reported.

The official, who said that foreign exchange reserves were expected to touch an all time high of $15 billion by June 30 this year, conceded that some of the major targets relating to trade deficit, current account deficit, imports, exports, inflation, industrial production and large scale manufacturing will be missed during the current financial year.

Another official said that a decision has been taken to substantially increase direct taxes by reducing customs and excising duties in the next budget. He added that the number of industrial, commercial and domestic power consumers have increased significantly due to which the number of tax payers were also increasing throughout Pakistan.

http://www.menafn.com/qn_news_story_s.asp?StoryId=1093155763

 

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Pakistan: economy swells to $160bn

Pakistan is among the fastest growing economies in the world as its economy has reached the size of $160 billion from a mere $70 billion a few years earlier, Federal Advisor on Finance Dr Salman Shah said on Tuesday.

Talking to PTV, he said a national consensus should be evolved for not disturbing vibrant policies of any past government in a bid to ensure the country’s development. Every political party should pledge that good policies of past governments will not be discontinued,î he said.

Pakistan attracted a record investment of $6 billion last year. The volume of economy is increasing. According to a labour survey, five million new jobs were created last year, while investment to GDP ratio was 23.5 percent.

The economy, he said, has come out of the Selective Default (SD) in 1999 to B-1. The target is to improve the ratings further up to AAA and take the debt to GDP ratio to 20 per cent.

It was 100 in 1999. Now it is at 50 percent. The share of the income of middle class from total income of the country has increased to 56 percent, up from 46 percent recorded in recent years, he said.

While the share of bottom 20 percent population has increased from 5 to 12.5 percent, indicating that income is flowing towards middle and lower class as compared to upper class. From 1999 to 2007 only agriculture production remained 10 times high. A bumper wheat crop of 23.5 million tonnes was harvested this year.

He said the leading investment bank Goldsman Sach has reckoned Pakistan one of the largest economies of the world in the coming years. The country has the fourth largest workforce in the world. Pensions and salaries would be increased in the coming budget more than the ratio of inflation. Subsidy would be offered on food items and oil.

He said currently inflation ratio is around 7.5 percent and the salaries would be enhanced more than that. Old pensioners would be provided comparatively more increase.

Employment schemes would be announced in the budget with subsidies on mark-up. Small development schemes would be encouraged in villages aiming to make them self-sufficient. ‘Aik Hunar Aik Nagar’ programme would be initiated in far-flung areas to develop handicrafts, food processing, and home-made industries, he said.

The FATA Development Authority has been established to expedite development in backward areas. All basic amenities would be provided to the countryís far-flung areas. The network of First Women Bank would be expanded aiming to provide adequate opportunities to women entrepreneurs. The concept of a Reconstruction Opportunity Zone (ROZES) is being developed for allowing duty-free export of their products to the USA.

http://www.freshplaza.com/news_detail.asp?id=2424

 

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China mobile to invest another $ 500 million next year
ISLAMABAD, Jun 7 (APP): World's biggest telecom operator China mobile having 320 million subscribers in China plans to invest another $ 500 million next year as the investment atmosphere is very conducive here. Executive Director China Mobile Pakistan Sikandar Naqvi Thursday told CNBC channel that a sum of $ 1.2 billion has already been invested in Pakistan.

China mobile plans to cover every corner of the country within the next two years. The focus of China mobile would be rural and far flung areas of Pakistan as the unserved areas have immense potential, he said.

Vowing to provide value added services to customers of Pakistan he said every village of the country will be provided mobile services.

Telecom sector has already attracted a combined investment of around Rs 77 billion during last year.The matching investment is expected during the coming years to ensure services for still unserved areas.
http://www.app.com.pk/en/index.php?option=com_content&task=view&id=10319&Itemid=2