Pakistan Economy - News & Updates - Archive

[Neo]

Malakand-III power project and NWFP’s industrialisation​

By Mohammad Ali Khan

THE Malakand-III hydropower project, having a generating capacity of 81MW electricity, is expected to go into commercial production by the end of this year. But differences have cropped up between the government and the industry as to how the electricity should be distributed.

While the government wants to sell the electricity to Wapda, the industrialists want the province to have its own transmission and distribution company.

The hydropower project (M-III) is the first ever self-financed hydropower station installed by the NWFP government. NWFP possesses immense resources for hydropower generation and out of the 40,000MW potential of the country, 70 per cent is located in the province.

Likewise, the country’s installed capacity of hydropower stations is about 6,595 megawatt, out of which 3,767 megawatt is in the NWFP (more than 50 per cent).

Work on the M-III project was initiated by the previous government with the aim of feeding the local industry with cheaper electricity enabling it to compete with the industries of other provinces.

The government had planned to set up an industrial estate near Daragai (Malakand), a few kilometres downward the main power complex, to create job opportunities and attract investment ..

But, now the government has changed its plan and decided to sell 71MW electricity to Wapda and the remaining 10MW to sick industrial units after a consultant termed the setting up of the industrial estate in hilly areas non-feasible.

About 10MW electricity would be provided to sick industrial units elsewhere in the province through wheeling charges by Peshawar Electric Supply Company’s (Pesco) distribution network.

The provincial authorities at present are in contact with the National Electric Power Regulatory Authority (Nepra) for securing a 'good' per-unit price for the 71MW electricity.

According to officials, Wapda, being the purchaser has offered 3.2 cent per unit price for the project in line with the Federal Hydro Policy 1995, whereas the provincial government wants at least five cent per unit price.

The provincial government has recently hired a legal adviser, who will file a petition with Nepra for getting the maximum per unit price.

The MMA government has been attaching high expectations from the forthcoming project, at least Rs1 billion to Rs1.5 billion additional income through electricity sale.

The NWFP industrialists, however, are unhappy over selling power to Wapda instead of giving it to them on subsidised rates as planned earlier. They believe the decision will dash the hopes of building a sound industrial base in the province and set a bad precedent.

President of the Industrialists Association, Peshawar, Numan Wazir, says: "At the International Investment Conference, organised by the NWFP government some two years back, the Sarhad Chamber of Commerce and Industry (SCCI), and Employees Old Age Benefit Institute (EOBI) signed a Memorandum of Understanding (MOU) for financing remaining construction work on M-III. This is sufficient to gauge how much the local business community is interested in the project."

The industrialists, he says, on various forums have advocated transmission of such electricity to local industrial units through wheeling charges by using the Wapda transmission lines because this is the only way to tackle unemployment and poverty.

He explains: "The M-III would generate electricity at the rate of Rs1.92 per unit as compared to Wapda's Rs5.50 per unit, and cheaper electricity would ultimately boost the industrialisation and create employment.

Electricity to be generated from such project could be supplied to industries through wheeling charges by using the distribution network of Wapda. The officials of Irrigation Department, however, have a different view. They say a huge provincial set-up will be needed to look after the distribution mechanism and overall financial and administrative affairs of the project.

"Thus, managing a huge public utility organisation will increase the financial liabilities of the provincial government. Whereas, selling out electricity to Wapda will be an easy way to generate revenue without affecting the already incapacitated government institutions," the officials said.

In response to government worries, Mr Wazir clarified that Pesco or any other distribution company is legally bound through the Nepra Act to distribute electricity in the province generated from any of these hydroelectric projects.

He said that the M-III should be converted into a private limited company registered under Companies Ordinance 1984 with the Security and Exchange Commission of Pakistan for its future operations.

The Company should have a board of directors 50 per cent from the government and 50 per cent from the private sector with a chief executive and other staff on contract with market-based salaries.

The province's relations with Wapda, in his views, in the context of prevailing stand off over net hydro-profit issue is not very good, therefore at this stage the M-III deal would deprive the province of a golden opportunity that it could materialise for boosting its industrial growth.

“The M-III is the first-ever attempt to exploit the hydro-power generation potential in province through installation of small stations. The unemployment ratio in NWFP is higher than in all other federating units so we have to encourage labour intensive industrial units for creating new jobs and it cannot be possible unless the government feed the local industry with cheap electricity," Mr Wazir remarks.

http://www.dawn.com/2007/07/16/ebr8.htm

 

[Neo]

Surging capital inflows and sliding export growth​

By Abdus Salam

The surging capital and financial inflows are catching up with export earnings of merchandise and are close to initially reported exports at about $17.5 billion for fiscal year 2007.

A high economic growth is attracting global investors awash with excess money interested primarily in take-over of running local banks and other enterprises and encouraged by the measures taken to integrate the domestic market with the global financial system.

Foreign investment at $7 billion is top contributor to capital and financial inflows, exceeds workers remittances of $5.5 billion and is about three times the much lower levels of committed external assistance at $ 2.5 for July-March fiscal 2007.It follows the worldwide trend of foreign investment and remittances — both individually exceed the global aid flows.

Yet another major trend is that bulk of the foreign investment is in the form of foreign direct investment at $5.2 billion. While the privatisation proceed has dwindled to a mere $133 billion , much of the foreign investment has gone into take-overs of local private firms – banks, cigarette and telecom companies. Helped by reforms ( high capital requirements) foreign stakes are now close to fifty per cent of the paid- up capital of banks.

Despite the emerging political uncertainties, the foreign investors from the USA, the U.K. China South East Asia and the Middle East have invested in a wide range of economic activities during the last fiscal year. This includes hot money that has gone into portfolio investment in the local capital market, now close to$1 billion. Similar is the appetite by international capital market for global depositary receipts (GDRs) which fetched $888 million ( OGDC $738 million and MCB $150 million). The government also accessed the international markets for raising $750 million for Eurobonds which were oversubscribed.

With income tax reduced from 60 to 35 per cent for banks and from 45 to 35 per cent for private companies, foreign investors have been richly rewarded. They remitted profits and dividends of $760 million in eleven months of fiscal 2007 against $504 million of the previous year. Many multinationals and banks re-invested their earnings for buy out of local units or expansion of their local operations.

The capital and financial inflows not only helped to meet the widening trade gap of some $13-14 billion but contributed to an overall external surplus of $373 million and foreign reserves of some $15 billion. And despite the widening trade and current account gap, the inflows help to keep the exchange rate stable.

While the accessing a wide range of sources for money and investment does seem to help to exercise economic sovereignty, one cannot ignore the fact that nation states are required to submit to the” discipline” of the international financial system which itself suffers from lack of discipline. Much of the direct foreign investment is not going into creating new production capacity but into in acquisition of the existing enterprises. These investments are not meant to realise the export potentials but to meet domestic demands.

The GDRs or the Eurobonds are going into financing of fiscal and current account deficits. The portfolio investment mayl dry up at the first sign of an economic downturn or serious political instability.

The big question is whether the capital and financial inflows would raise production capacity and exports.( international finance is used to making more money from the capital market dominated by speculative activity rather than investment in real economy). The sharp fall in export growth indicates that this is not happening. In the present stage of development, export of manufactures could offer competitive advantage where foreign investment is not coming.

http://www.dawn.com/2007/07/16/ebr12.htm

 

[Neo]

Record development spending and weak delivery system​

By Dr Abdul Karim

In an election year, record budgets have been presented by the federal as well as provincial governments. Special attention has been paid to development expenditure which has been enhanced substantially — both within Public Sector Development Programme and out side of it.

Budget allocation is an essential pre-requisite for undertaking any activity in the government sector.

What provides the sufficient condition is how much and how well the allocation is actually utilised. At present, public sector has not much to show on both counts. Institutional capacity to undertake the task is not enhanced corresponding to the scope of work. As a result, allocations are seldom fully utilised in the given manner. This is officially recognised by the item “operational shortfall”, in the budget provisions.

According to Federal Budget in Brief, FY 08, development expenditure by federal ministries\divisions\corporations for FY 07 was provided at Rs435 billion against which the utilisation, as per revised estimates was Rs394.5 billion, a shortfall of 9.3 per cent. As a case of achievement in physical terms, 3,000 beds were to be added in Hospitals\RHCs\BHUs during FY 07 but only 2.5 thousand (76 per cent) were added. This situation underlines the urgent need for capacity building in the public sector.

Given the capacity, there are many factors, which militate against proper use of funds. Public functionaries only care for the legal propriety in the sense that the expenditure remains within the budget allocation. Whether the objective is achieved, in terms of the satisfactory quality of work and in the most cost effective manner, is given little importance.

The new prime minister’s secretariat has a chandelier worth Rs20 million. Obviously, this expensive lamp has no functional value in an office building except ego satisfaction but its opportunity cost in a poor country like Pakistan is primary schools and dispensaries that could be provided with thus sum in the so far neglected remote villages.

The common perception is that government money is nobody’s money. As a result, there is an avoidable tremendous waste in the public sector. The actual genuine expenditure on a project is only a fraction of the cost booked. The end result is sub-standard work, which often needs repair even before completion of the project. An interesting specific case may be cited.

In Karachi, one lane of the Liaquatabad flyover, within a few months’ of its opening, was closed as the it caved in. The official explanation was that a trailer truck had a flat tyre and it stopped to change it. The road could not stand its weight and caved in. This speaks volumes of the performance of planners, designers, executioner and monitors. The repair cost must have been treated as development expenditure. Such instances are innumerable. The most unfortunate aspect is that no heads roll in such cases even when precious human lives are lost

Ghost institutions and ghost workers at a massive scale are perhaps a unique phenomenon in Pakistan. It was reported that at one time there were as many as 23,000 ghost pensioners in Pakistan Railway. For a World Bank funded education project, army was used to detect ghost teachers in the funded institutions and it came up with no less than 40,000 such teachers.

The Economic Survey FY 07 gives the gist of Education Census 05, which should be an opener for country’s managers. It reveals that of the total institutions covered by the census, five per cent or 12,737 educational institutions were non-functional, of which 11,589 schools and 1,148 other institutions were in the public sector. Out of them, 35 per cent were without a boundary wall, 31 per cent lacked dinking water facility, 54 per cent had no electricity, 38 per cent had no proper latrine and six per cent were without a building. As far as the condition of the school buildings, only 51.6 per cent were in satisfactory condition,, 26 per cent needed minor repairs,17 per cent needed major repairs, and 5.7 per cent were found to be in dangerous condition.

The situation in the health sector is similar. There are hospital buildings without doctors and equipment. If doctors are there, there may be no equipment and medicines. The story is all too familiar to be dilated upon.

The World Bank has, in its latest Country Report, urged Pakistan to improve public financial management, accountability, transparency, and enhance the capacity of public sector managers to meaningfully use credible financial information for better and informed decision making. This says a lot

If development expenditure is to make any meaningful contribution to economic growth and poverty alleviation, the entire existing system from A to Z- project preparation, its execution, continuous monitoring, post project audit and appraisal will have to be revamped, to ensure that the objectives have been achieved in the best possible manner. This is a gigantic task but worth all the effort. Cosmetic changes to placate the donor agencies would not do.

The overarching problem is corruption which, apart from its importance for every aspect of civil society, affects as much government revenue as expenditure. Instead of accepting rampant corruption as a national culture, it should be dealt with, in earnes, as national cancer. Corruption cannot be curbed without “honest to God” prompt and objective system of punishment and reward. I have advisedly used the word curb and not eliminate, because corruption has been there and will remain, like any other crime, sin and vice. It is thus not just the existence of a phenomena but its magnitude.

In case it is of minor proportion and cannot adversely affect the system, it can be lived with, as the system will keep it in check. However, if it assumes proportions, which overwhelm the system to paralyse it and one can get away with anything through this, it is a matter of grave concern.

http://www.dawn.com/2007/07/16/ebr13.htm

 

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Foreign exchange inflows​

Banks remained flushed with foreign exchange throughout the week that ended on July 13 and foreign exchange reserves rose to a new all-time high of $15.63 billion on July 7. The State Bank, taking advantage of growing foreign exchange, amended its November 2004 decision of selling dollars to banks to finance oil import bills.

The central bank asked them to buy part of their requirement including the dollars needed for financing imports of furnace oil from the inter-bank market. But the decision did not have an adverse impact on the health of the rupee for the time being: the rupee closed at 60.37 a dollar on July 13 — unchanged at the last weekend closing.

But bankers say since the move has created more demand for dollars it might impact the rupee if the foreign exchange inflows lose steam in coming weeks, for two reasons.

First, the State Bank is now trying to minimise its net selling of foreign exchange to keep the rupee stable as it is inviting criticism from the IMF. And secondly, international oil prices have reached 11-month highs (London North Sea Crude at $77 a barrel and New York Light Sweet Crude at $73 a barrel) threatening to widen the trade deficit.

But bankers say in addition to traditional inflows through exports, foreign investment and remittances from overseas Pakistanis, payment by telecommunication companies in foreign exchange for renewal of their licenses is also keeping the rupee stable. During the week ending on July 13, the inter-bank market received a substantial chunk of foreign exchange from a foreign telecom giant that paid the first installment of its licence renewal fee of a little less than $300 million.

Huge forex inflows into the banking system continues to push up rupee liquidity levels making it quite a challenge for SBP to siphon off additional liquidity from the system to keep monetary expansion in check. (Overnight lending rates remained soft in the inter-bank market throughout the week and oscillated between 3-5 per cent at the end of the week on July 13).

During the outgoing fiscal year, monetary expansion of 17 per cent against the target of 13.5 per cent was partly responsible for a high inflation of 7.8 per cent against the target of 6.5 per cent.

For the current fiscal year the inflation target is 6.5 per cent but the monetary growth target is yet to be fixed.

During the week under review, the SBP closed the doors of three-day repo facility on investment banks and development finance institutions and asked them to borrow from commercial banks when in need of liquidity. The move would help in keeping the liquidity levels from rising too high in the inter-bank market and thus keep interest rates stable. That is a must to continue sending signals about a tight monetary policy stance and keep inflation within tolerable limits.

The central bank is likely to announce its monetary policy for July-December 2007 towards the end of this month and in all likelihood it would not drop its guard against soaring inflation.

“As interest rates have reached high levels, SBP may not raise repo rate but it would certainly use other tools to continue a tight monetary policy,” said a senior central banker. At the end of May 2007 average lending rate shot up to 11.32 per cent—much to the chagrin of businesses that complain that it is hurting their growth prospects.

High interest rates in FY07 were partly responsible for lower private sector credit off-take. Upto June 31 FY07, private sector’s borrowing from banks totalled Rs291 billion indicating that on June 30 it could have touched Rs300 billion against the target of Rs390 billion.

During the week under review, the SBP released latest data on sectoral credit flow, which showed that growth in personal loans including consumer finances substantially fell in eleven months of FY07. In July-May FY07 banks offered Rs52 billion personal loans down 62.7 per cent from Rs84.6 billion in July-May FY06.

And within consumer financing the sharpest decline was seen in car financing. In eleven months of FY07 banks made Rs10 billion car financing whereas in eleven months of FY06 they had offered three times more—Rs30.4 billion.

Senior bankers identify high car financing interest rates and low demand for automobiles as two key reasons for this slump.—Mohiuddin Aazim

http://www.dawn.com/2007/07/16/ebr23.htm

 

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Telecom investments to touch Rs393 billion ​

PTA to facilitate Wimax operators

By Israr Khan

ISLAMABAD: The Pakistan Telecommunication Authority (PTA), in its quarterly review, has projected that by the year 2010, the telecommunication sector would attract about Rs393 billion local and Foreign Direct Investment (FDI), whereas total revenue of the sector would reach Rs387 billion by the same fiscal.

The authority also says that the sector has the potential to attract huge investments, as many international players are interested to invest in this sector. These players in Wimax Broadband markets would replace small Internet Service Providers (ISPs) and local Wimax operators, the authority therefore plans to further facilitate acquisition and mergers and make more avenues available for wireless operations (Wimax).

PTA quarterly review says, “In March 2007, PTA presented its vision 2010 to further develop the sector. According to the vision, the authority made projections for different telecom indicators including potential telecom market investments and demand etc. Total investment according to estimates would grow to Rs393 billion whereas total revenue will reach Rs387 billion by 2010.”

Huge price reductions due to large scale competition are also expected in the local telecom market as a consequence of changes in international markets. PTA therefore would be working on IP based Interconnection Mechanism, SLA among operators, and amendments in interconnection regulations to accommodate operators to interconnect at PTCL co-locations.

Wimax along with VOIP (voice over internet provider), will have the potential to bring a revolution in FLL and broadband markets which is an ideal combination to bridge the digital divide. PTA therefore plans to rollout USF to expand fixed network in addition to lowering FWT taxes, which would increase the WLL tele-density, it said.

The cell phone market is expected to grow by 57 per cent by 2010, in this regard activation charges and withholding tax levy on telecom services is required to be further reduced to increase potential markets.

Similarly, there is potential of 3 to 5 million broadband customers; therefore, framework for mobile Wimax is needed to be well defined. Since Wimax and VOIP can create another revolution in Pakistan, legal framework of SIP/VOIP is further required. Accordingly, fixed number portability and symmetric termination rate framework should also be developed to increase the fixed (wire/wireless) density.

http://www.thenews.com.pk/daily_detail.asp?id=64670

 

[Neo]

Trade Policy today ​

ISLAMABAD (July 18 2007): Federal Minister for Commerce Humayun Akhtar Khan will announce Trade Policy 2007-08 on Wednesday after formal approval by the federal cabinet. Informed sources in Prime Minister House told Business Recorder that export target is most likely to be $19 billion minus plus envisaging 8 percent growth in exports during the year.

However, final approval will be given by the federal cabinet to be chaired by the Prime Minister Shaukat Aziz. Target for imports during the current fiscal has not been fixed as was done last year, because the government could not control imports.

"Our imports consist mainly on machinery, raw material, petroleum products and food items whose import cannot be curtailed without impacting economic growth and prices. These imports are essential for sustaining economic activities and stabilisation of prices by augmenting supply position," said an official of Commerce Ministry.

The sources said that the policy has been finalised at a meeting in the Prime Minister House attended by Governor State Bank of Pakistan (SBP), Prime Minister's Advisor on Finance, Dr Salman Shah, Commerce Minister Humayun Akhtar Khan and Chairman Federal Board of Revenue (FBR), Abdullah Yusuf.

Ministry of Commerce, which has miserably failed to achieve the export target of $18.7 billion for the fiscal 2006-07 was focusing on two major proposals in the trade policy, ie incentives for Export Oriented Units (EOUs) and long-term export financing facility for the exporters.

On Tuesday, the ministry officials confirmed that exports hardly crossed $17 billion but did not have any information on imports. However, unconfirmed reports suggest that imports were of $30.7 billion against the target of $ 28 billion.

Humayun Akhtar Khan, who is very vocal against the SBP and Finance Ministry for not taking him into confidence on monetary policies which affect foreign trade, gave a presentation to the meeting and recommended several measures to increase exports and provide incentives to exporters. The sources said that the minister would reveal the steps taken so far to increase exports to the US and European Union (EU) and the reasons of decline in exports.

He would also mention progress on RoZs to be funded by the US in tribal areas and expected fruits of Free Trade Agreement (FTAs) especially with China and Sri Lanka, besides on-going negotiations with other countries.

http://www.brecorder.com/index.php?id=593778&currPageNo=1&query=&search=&term=&supDate=

 

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Extremists trying to divide society on economic lines: President ​

ISLAMABAD (July 18 2007): President General Pervez Musharraf said that the fringe of the society is afflicted with the unfortunate malaise of extremism and terrorism and this is the only threat from within the country faces today.

Addressing the students of Education City of Heavy Industries, Taxila on Tuesday, the President underlined that extremists are trying to divide the society on economic lines between rich and poor which is a lopsided logic. He said there is no external threat to Pakistan as the armed forces are strong enough and fully capable of repelling any aggression.

President Musharraf said it pains him what we are doing to ourselves. He said people who are not educated enough to understand Islam claim to understand it which is a terrible thing. He said in Islam suicide bombings is haram (illegal) and stressed that our religion does not allow anybody to take his life or life of his fellow human beings.

The President underscored that the extremists ignore that part of the teachings of Islam, which does not suit their purpose. He said the extremists are claiming that they want Islamic system in the country but they forget that the system in Pakistan is Islamic. The constitution of the country does not permit any law repugnant to its teachings. He said Pakistan is an Islamic republic.

The President said Pakistan, like any other society has its ills and we are trying to remove them but that does not mean that it is not an Islamic State. He said the country is following the vision of the Quaid-e-Azam, which espouses an enlightened and forward-looking Islamic State.

He said no nation could prosper and progress if its security is not guaranteed from external and internal threats. He said the peace comes through strength and not through weakness as the weak does survive.

The President was briefed about research and development activities at AARDIC on his visit that AL-KHALID and AL-ZARAR project has helped save seventy-three million dollars of foreign exchange. He was further informed about the production of these state of the art battle tanks. The HIT is manufacturing two hundred and thirteen AL-KHALID and three hundred and five AL-ZARAR tanks and also developing T-80 UD tanks.

The President directed the HIT to go for aggressive marketing and hire more PhDs in Science and Engineering. The AL-KHALID main battle tank has been upgraded with more powerful engine and armour. It has 125mm smooth bore gun and fire control system, which is fully computerised. The tank among the top notches in service has 70kilometer of maximum speed.

http://www.brecorder.com/index.php?id=593782&currPageNo=1&query=&search=&term=&supDate=

 

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Sustaining economic growth pace termed biggest challenge ​

ISLAMABAD (July 18 2007): The biggest challenge the country is faced with is how to sustain the ongoing economic growth momentum within a stable micro-economic framework. This view was echoed by Dr Salman Shah, Advisor to Prime Minster on Finance, and Umer Ayub, Minister of State for Finance, at a workshop on 'PRSP-2' here on Tuesday.

The workshop focused on three themes: 'Ensuring demographic dividend'; 'financial sector deepening and economic development'; and 'competitiveness, growth and poverty reduction'.

Salman said that, linked with the challenges of sustaining growth in stable macroeconomic framework, there were other challenges of job creation, poverty alleviation, improving social indicators and strengthening the country's physical infrastructure to ensure of 6-8 percent growth in the medium term.

The purpose of the workshop was to discuss in detail the Poverty Reduction Strategy Paper (PRSP-2) that has been going on for the last one and a half year. PRSP-2 is an advanced form of PRSP aimed at taking into account the recent socio-economic developments while addressing the shortcomings of the original PRSP.

The adviser said that rising per capita income and the growing middle class along with higher inflows of workers' remittances would continue to fuel domestic demand that would be helpful in sustaining growth momentum.

"Realising the significance of the phenomena of demographic dividend for an emerging economy like Pakistan, the government has initiated a large number of employment generation programs that include National Internship Program and Establishment of the National Vocational and Technical Education Commission (NAVTEC), besides increasing budgetary allocation for social sectors like education, population and health," he said.

He told the participants that the government believes in an efficient private sector, supporting the public sector, in order to drive the economic growth of the country.

"A strong private sector development strategy would be a key element in enhancing the competitiveness of the private sector. The strategy would focus on lowering the barriers to developing small and medium enterprises, removing irritants to private sector growth and country's physical as well as social infrastructure," he added.

He said that the empirical evidence suggests that financial development would always stress upon the growth of income of the poorest of the population.

Umar Ayub said that strong economic growth on sustained basis in a stable macroeconomic environment was critical for job creation, poverty alleviation and improved social indicators. He emphasised that to convert the ongoing demographic transition into demographic 'dividend' was a major challenge around which the PRSP-2 was structured.

"A decline in dependency ratio would increase savings and, therefore, investment would be a key determinant of strong economic growth", he told the audience. Regarding Financial Deepening and Economic Development, a background paper, presented at the workshop, said the development of financial markets and institutions was a critical and inextricable part of the economic growth process.

Keeping in view the importance of financial deepening for economic development, Pakistan's medium-term financial sector strategy would focus on the following areas:

-- Broadening access to middle and lower income groups.

-- Development of new liability products to utilise savings of small savers.

-- Corporate restructuring to support financial sector reforms.

-- Infrastructure financing.

-- E-banking.

-- Private equity, Pension and Provident funds.

-- Investment banking.

-- Human resource development and capacity building.

-- Promotion of Islamic banking.

-- Further strengthening of supervisory regime & strengthening Risk Management.

-- Prioritising key pro-poor financial instruments like microfinance through increased outreach and entry of new financial institutions.

http://www.brecorder.com/index.php?id=593874&currPageNo=2&query=&search=&term=&supDate=

 

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Software export target fixed at $165 million ​

KARACHI (July 18 2007): The government has fixed 165 million-dollar target for software export for the 2007-08 fiscal year, which is 52 million dollars higher in value as compared to the last year's target of 108 million dollars, industry sources said on Tuesday.

They said that the country's software export had witnessed a smart growth during the 2006-07 financial year, successfully achieving the target set by the government.

Keeping in view the excellent growth of the local market's share in the global trade, the government has given the fresh task to the software exporters to achieve 165 million-dollar target by the end of current fiscal year.

Exporters believe that the newly assigned export target would not be a difficult task to achieve because the potential foreign investors are diverted to the Asian region to get their projects completed at comparatively much cheaper rates as compared to the developed countries, which were considered information technology (IT) giants.

"The software export target of 165 million dollars would not be difficult for us as a number of international business houses, which have their headquarters in the West, are in negotiations with their Pakistani counterparts," said President of Pakistan Software Houses Association Ashraf Kapadia. "The potential foreign buyers are coming to Asian markets, particularly to Pakistani ones and this fact is also evident from the achieved export target of software and relevant products, which is commendable," he remarked.

"The official statistics have not yet been received for the month of June of the 2006-07 fiscal year, however, we could estimate the software export figures provisionally at 110 million dollars, which will be a new record by the national market", he said when approached to inquire about the software exports.

"The country's software exports have crossed the mark of 70 million dollars during 2005-06, registering first time ever a 50 percent growth of the local IT firms, as the Western firms started turning more and more towards Pakistan for IT-enabled services to cut costs and raise profits", Kapadia remarked. He said some 1,200 software houses were operational across the country, of which Karachi enjoyed the largest share of about 40 percent.

The country's IT industry has emerged as the fastest growing sector this fiscal, mainly supported by phenomenal jump in the operations of call centres during the last two years. More than 140 such centres are currently operational mainly in Lahore, Karachi and Islamabad, offering employment to around 5,000 people. Defined as a unit, the call centres have adequate telecom facilities, trained manpower and access to database providing precise information to customers.

The advancement in telecom technology has made it possible that a person, handling the call operations, could provide the communication and interaction facilities in a proper manner.

Sindh IT Department has also planned to build a 10,000-seat call centres in Karachi, which would provide one-window services to foreign and local investors, on which work is going on at an accelerated pace. The authorities appear to realise importance of the potential opportunities and claim that they have spent billions of rupees for subsidising various activities of immediate relevance to the industry, including managed participation of local exporters in international exhibitions and acquiring quality certifications.

http://www.brecorder.com/index.php?id=593898&currPageNo=2&query=&search=&term=&supDate=

 

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Feasibilities ready: Pak-China moot in August to negotiate billions of dollars joint venture projects ​

KARACHI (July 18 2007): Pakistan has prepared feasibilities for a large number of potential joint venture projects, worth billions of dollars, for negotiations between Chinese and Pakistani entrepreneurs at the investment conference scheduled for next month.

The Director-General, Board of Investment (BoI), Arif Elahi, said here on Tuesday that Investment Advisor, Ministry of Finance, Dr Junaid Ahmed, has identified potential areas for Pak-China investment in his report. He said that more than 150 top businessmen from China would attend the Pak-China Investment Conference, and added that the Chinese government and entrepreneurs were serious to have joint venture projects in Pakistan.

Similarly, Pakistani entrepreneurs have also shown keenness in joint ventures with Chinese businessmen, he added. He said that Pakistan is seeking Chinese investment in steel production, naphtha cracker project, oil refinery, paper mills, manufacture of construction and earth moving equipment, auto sector, hand and cutting tools, container manufacturing, hydropower project, Thar coal mines, gasification projects, etc through joint ventures.

The BOI D-G said that feasibilities of these projects are ready and land has been identified so that the investors from both sides could assess the potential of the projects and start negotiations right away.

The proposed integrated steel mills, having production capacity of two million tons per annum, would need an investment of $ 450 million. The land is available for this project at Port Qasim.

Based on direct reduction iron (DRI) technology, this plant would produce steel through 'electric arc furnace' (EAF) route to cater to fast growing demand in Pakistan. Another project is naphtha cracker unit with production capacity of 650,000 tons annually. This would cost $ 800 million.

The third major project on the list is an oil refinery, with a capacity of refining 6 million tons crude per annum. The land for this project is available at Gwadar, which is estimated to cost $ 5 billion.

China has the expertise in paper making and Pakistani entrepreneurs can discuss possibilities of setting up paper mills in Pakistan under joint venture, using local raw material. The project will cost Rs 3 billion to produce 100,000 tons high quality paper.

Another important project is the manufacture of construction and earthmoving equipment in Pakistan under joint venture with China at a cost of Rs 500 million. Automotive foundry will need an investment of Rs 1 billion to produce 20,000 tons iron and steel casting.

The hand tool and cutting tool plants will need investment of Rs 300 and Rs 360 million, respectively. Steel container manufacturing plant will cost Rs 1.5 billion, while the cement plant would require an investment of Rs 14 billion, or $ 234 million.

The coal mining and methane gasification project will require investment of $ 250 million, and the land is available in Thar area. Pakistan will also invite Chinese investors to set up a cargo village at Karachi Port at a cost of $ 100 million.

Similarly, Pakistan will ask China to set up China industrial cities in Karachi, Lahore, Hub, Winderr, Gwadar, Attock or Nowshera. Pakistan will also seek Chinese investment and expertise in setting up cattle, dairy and poultry farms and animal and poultry feed manufacturing plants.

http://www.brecorder.com/index.php?id=593938&currPageNo=1&query=&search=&term=&supDate=

 

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Pak-German ties in science and technology strengthening: chief minister ​

LAHORE (July 18 2007): Punjab Chief Minister, Chaudhry Pervaiz Elahi has said that bilateral relations between Germany and Pakistan in engineering, science and technology, agriculture and other sectors are growing rapidly due to which local and foreign investment as well as the pace of economic development is increasing in the province.

He was talking to Ambassador of Federal Republic of Germany to Pakistan, Dr Gunter Mulack at Chief Minister Secretariat, here on Tuesday. Honorary Consular of Germany Anis-ur-Rehman and Principal Secretary to Chief Minister, GM Sikandar were also present on the occasion.

He said that launching of PIA flights from Lahore to Frankfurt would further strengthen mutual contact between the two countries. He said that setting up of Metro and Cash & Carry stores by a German company would help in providing guidance to farmers as well as marketing of agri-production, which would result in prosperity of farming community, stability of prices as well as improvement of the quality of food items.

The chief minister said the government was setting up three industrial parks on Sialkot-Lahore Motorway while universities of engineering and science and technology were also being established with the cooperation of Germany and Sweden.

He said that land had been earmarked for the university to be established with the cooperation of Germany. He said that as a result of industrialisation in the province there was a growing need for the promotion of education of engineering, science and technology so that the process of industrial development could be expedited and youth could benefit from job opportunities.

He said that the three universities to be established on Lahore-Sialkot Motorway would help in developing a skilled workforce. He said that the setting up of stores in the provincial metropolis by Metro Corporation would promote a spirit of competition in agri-marketing sector while the trade activities of the corporation would help in modernising the system of retail markets and export of agri production.

The German ambassador said that there were strong relations between Pakistan and Germany in various sectors and after Metro other German companies were also taking interest in investment in Pakistan. He said that Lufthansa Airline would start its operation in Lahore and other cities of Pakistan in October this year, which would further promote contacts between the two countries.

He said that PIA flights from Lahore to Frankfurt would help in export of fresh fruit, fish and other essential items. He appreciated the steps taken by the chief minister Punjab for the promotion of foreign investment and development of the province.

http://www.brecorder.com/index.php?id=594018&currPageNo=1&query=&search=&term=&supDate=

 

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Industry urged to focus on components manufacturing ​

LAHORE (July 18 2007): Pakistan industry should focus on manufacturing components instead of relying on assembling foreign pre-designed goods and this objective could be achieved through introducing concept of teaching design rather than merely teaching commercial software operations.

These observations were made by the speakers in the first meeting of Advisory Committee of National Institute of Design and Analysis, which was also attended by a group of industrialists and directors of various departments of the engineering universities of the country.

The meeting also stressed the need for increasing industry-university linkage in a bid to promote self-reliance in the country. The advisory committee decided that two sub-committees ie one for the infrastructure and the other for curriculum be formed in order to proceed further with the project. The meeting discussed the curriculum and courses, which could promote the concept of teaching 'design' rather than merely teaching commercial software operation.

The participants were of the view that that commercial software should be used as a tool to speed up designing and realisation of the designs into final products or tooling. The committee agreed that Pakistan's industry should move towards product design together with producing the tooling such as dies and moulds, which are used to manufacture the components locally. The participants from the universities assured to provide their full support to NIDA.

http://www.brecorder.com/index.php?id=594036&currPageNo=1&query=&search=&term=&supDate=

 

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US firm to build power plant at Dhabeji ​

KARACHI (July 18 2007): Karachi Water & Sewerage Board (KW&SB) and Energy Saving Solutions (Pvt) Limited, INC, USA on Tuesday signed two agreements for installing a 35 MW power generation plant at Dhabeji.

The implementation and power purchase pacts were signed by Ghulam Arif Khan, Managing Director, KW&SB and Zafar Ansar, Chairman Energy Saving Solutions (ESS) in a ceremony held here at a local hotel.

City Nazim and Chairman, KW&SB Syed Mustafa Kamal attended the ceremony as chief guest. Ghulam Arif Khan, MD, KW&SB in keynote address said that the plant would not only ensure an uninterrupted supply of power but also save around 7 billion rupees of electricity bills in the next 25 years. At present the board's electricity bill stands at Rs 2.5 billion.

He said KW&SB being a sole supplier of water to the city was dependent on Dhabeji pumping station for water supply to the metropolis but due to frequent power cuts the board was unable to do its job. He said the ESS would build the plant at a cost of $40 million within 21 months on BOT basis and provide electricity to the board at Rs 3.98 per unit Rs 1.48 less than the rates of Karachi Electric Supply Corporation for the next 25 years.

He said that as per agreement this rate would neither be increased nor decreased by ESS in the coming 25 years. He said the plant would generate 35 MW of electricity in which 28 MW would be utilised by KW&SB, which consumes 30 million unites per months.

The ESS will deposit five percent of the total cost of project to KW&SB as a performance security and hand the plant to it after 25 years, he said. City Nazim Mustafa Kamal in his address said that all aspects of the agreements would be fruitful for Karachiites. He said the Sui Southern Gas Company had assured KW&SB of providing 8 million cubic gas for one year as a fuel for the plant. Zafar Ansar, Chairman ESS also addressed the ceremony.

http://www.brecorder.com/index.php?id=593998&currPageNo=1&query=&search=&term=&supDate=

 

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Govt plans to set up special zone in Lahore​

ISLAMABAD, July 17: The government is finalising a proposal to set up a special industrial zone (SIZ) for overseas Pakistanis at Lahore with an incentive of tax holiday. Informed sources told Dawn here on Tuesday said that the Punjab government would offer suitable land in the provincial capital to help establish the new SIZ aimed at attracting sizable investment by the expatriates.

All the hassle-free necessary infrastructure facilities are expected to be provided to the overseas Pakistanis through a one-window operation on the pattern of Dubai.

Sources said that the SIZ at Lahore was being finalised after a number of potential overseas Pakistanis assured to make new investment in Pakistan.

They had also expressed their willingness to separately invest in capital market, telecommunications, information technology, health, education, housing and agriculture sectors.

The issue of establishing SIZ at Lahore was initially discussed during a two-day international conference which was participated in by over 250 overseas Pakistanis on March 5-6 in Islamabad to help mobilise adequate Foreign Direct Investment (FDI) in the country.

At that time the government was also assured to have $3.3 billion new investment which included $300 million by 36 overseas Pakistanis living in Saudi Arabia, $1.1 billion by 55 expatriates living in the US, $84 million by 18 Pakistani investors living in the UAE and $935 million by 38 UK-based overseas Pakistanis.

Beside expatriates, a number of international investors had also attended the conference during which the government proposed new measures for further improving the regulatory environment aimed at increasing foreign investment in Pakistan.

The objective of the conference was to attract investment from middle and high income groups of overseas Pakistanis by highlighting the opportunities and incentives available in Pakistan.

Similarly, the objective was to provide overseas Pakistanis information regarding Pakistan's economic and regulatory environment.

The government, a source said, was providing a platform to overseas Pakistanis to inter-act with private sector and senior decision-makers.

“This is how the government plans to further strengthen our economy by attracting Pakistani Diaspora to invest in their country,” he said.

When contacted, the managing director of Overseas Pakistanis Foundation (OPF), Syed Nayyar Husnain Haider, confirmed that SIZ was expected to be set up at Lahore for which various formalities would soon be worked out with the Punjab government.

“In fact, this is an old proposal which is now being revived for the benefits of overseas Pakistanis,” he said.

Responding to a question, he said those overseas Pakistanis who were looking forward to invest in Pakistan, and wanted to do joint ventures with their Pakistani counterparts had good inter-action with Pakistani officials and the private sector during the international conference held in March this year. It was also attended by professionals residing in foreign countries.

The conference with the theme “opportunities that belong to you,” he said, had provided an opportunity to bring together all relevant stakeholders from public and private sectors and middle and high income overseas Pakistanis.

It also provided the overseas Pakistani entrepreneurs opportunities of investment of interaction with officials of the federal and provincial governments, as well as local businessmen for identifying areas of investment and for forming trade and joint venture partnership.

He said since overseas Pakistanis could play an effective role in further strengthening the country's economy by adequately investing in their country, the government would further consider offering them more incentives and concessions.

According to another senior official of the ministry of privatisation and investment, the government has received an all-time high over $6 billion foreign investment in 2006-07 against $3.9 billion of 2005-06.

He said over $6 billion foreign investment also included $2 billion portfolio investment, of which there were $1.5 billion GDR of OGDCL ($738 million) and UBL's ($565 million).

The private investment in the stock market also exceeded by the end of June 2007.

A 20 per cent foreign investment in the manufacturing sector, 11 per cent in the oil and gas exploration, 33 per cent in telecommunications, 21 per cent in financial business, three per cent in power and 10 per cent in other services was recorded.

He said 41 per cent foreign investment came from Europe which included 18 per cent from the Netherlands, 17 per cent from China, 16 per cent from US, 11 per cent from the Middle East, nine per cent from the UAE.

He dispelled the impression that major foreign investment was attracted from the Middle East.

Answering a question, he said that the biggest portfolio investment came from the US, followed by the UK (33 per cent) and Singapore (15 per cent).

http://www.dawn.com/2007/07/18/ebr2.htm

 

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Tax-to-GDP ratio to be raised to 15.5pc by 2017​

ISLAMABAD, July 17: The collection of general sales tax (GST) has declined from electricity, natural gas, cement and motor cars during the year 2006-07 over the same period of last year.

Official figures released here on Tuesday at the first quarterly conference of collectors of sales tax and federal excise, showed that the GST collection declined by 3 per cent from electricity, 6 per cent natural gas, 8 per cent cement, and 29 per cent motor cars during the year under review over the last year.

With this decline, the overall collection of GST remained short of the target during the year under review.The sectors, which have shown positive growth in the sales tax collection in 2006-07 were telecom (35.8 per cent), POL (5.8 per cent), sugar (26.1 per cent), cigarettes (20.5 per cent), services (20 per cent), beverages 19 per cent) etc.

Chairman Federal Board of Revenue (FBR) Abdullah Yousuf told the collectors that reliance on few major sectors like telecom, POL etc were not advisable and likely to weaken revenue position in future and enhance the organisation’s vulnerability.

“We, therefore, have to carefully analyse the tax potential exists in different sectors of the economy and their contribution in revenue. We must ensure that all due taxes are collected,” the chairman remarked.

He called upon the tax collectors to make concerted efforts to broaden tax base for which enormous potential exists in various sectors of the country.

“Currently, we have a very narrow tax base. Unless we expand this base, we may not be able to enhance our tax-to-GDP ratio, which at present is not at the desired level,” he added.

Mr Yousuf reminded the collectors that the present level of tax-to-GDP ratio was certainly not acceptable to the government. “We have to raise it from present level of 10.5 per cent to 15.5 per cent by the year 2017, as projected in 10-Year taxation plan.

About disposal of refunds claims, the conference was told that an amount of Rs9.1bn refunds had been withheld in 8,757 refund claims till June 30, 2007.

Major sectors, which have recorded significant growth in federal excise collection were cigarettes (17 per cent), cement (22.6 per cent), POL products (24.7pc) and beverages (24.5 per cent).

The chairman, however, directed the Audit Wing to expedite the settlement of both external and internal audit observations. He said taxpayers’ audit should be based on automated, un-biased and discretion-free method.

http://www.dawn.com/2007/07/18/ebr4.htm