Pakistan Economy - News & Updates - Archive

[Neo]

Do elected govts breathe life into SMEs?​

KARACHI: Small and medium enterprises worked as an engine of growth for all the developed nations which today have around 96 per cent of SMEs and only four per cent large-scale manufacturing.

Unlike the large-scale manufacturing sector which largely depends upon foreign technologies and know-how and bank funding, SMEs all over the world developed and grew on indigenous skills and methods.

Consequently it is of paramount importance that for the growth of SMEs enabling environments should be provided at the grassroots level and all hurdles and bottlenecks should be removed. Simple and transparent systems should be evolved which should suit local conditions and skills.

This means that without robust growth in SMEs, the country could not achieve sustainable economic and industrial growth. There could be stray achievement here and there with high growth periods but they could not be of a permanent and sustainable nature.

On an average, SMEs all over the world provide 80 per cent jobs and contribute up to 38 per cent to the GDP. However, in Pakistan SMEs had never been on the priority list of successive governments which did not only result in haphazard and slow growth but also deprived the country of real and sustainable growth.

The low literacy rate had been the main factor for slow growth in SMEs, because this deprived the sector of much-needed skilled manpower and necessary knowledge to run a business or industrial establishment. The Information Technology (IT) sector could not flourish in Pakistan because its basic need is knowledge of the English language. Labourers in Pakistan mostly speak the Urdu language or their respective mother tongues.

The low literacy rate also inhibits SMEs from understanding laws and huge manuals meant for setting up and running any business or industrial establishment.

It is unfortunate that many of our laws still belong to the colonial era and they had never been translated into the national or local languages, which could allow SMEs to benefit and grow at a faster pace.

All federal and provincial departments directly linked with the setting up and running of industrial and business establishments still have cumbersome laws and procedures which even an educated person could not understand what to talk of being fulfilled by SMEs who have extremely scarce resources and knowledge.

For example, take the Employees Old-age Benefits Institution (EOBI), the Sindh Employees Social Security Institution (SESSI) and the Labour Department which are still being run on such methods which could easily retard the growth of any industrial or business establishment. The field inspectors have the powers of land revenue and could put any businessman behind bars over a small fault or violation of law.

Zafar Iqbal, president of the Small and Medium Enterprises Alliance (SMEA), said if the government was serious about the growth of the economy and industrialisation in the country it would have to simplify rules and regulations and also remove unjust laws which cause a lot of unnecessary hardships to SMEs who could not afford to enter into cumbersome procedures and could not hire consultants.

Citing an example, he said if any enterprise had ten workers it would have to be registered with the EOBI. Similarly, if an establishment has five workers or more it, it will have to be socially complaint with SESSI. But on many occasions it has been experienced when a worker leaves his job and the total number of a setup declines below ten or five, these institutions do not accept and keep asking for deposits for the total number of workers declared at the time of registration.

Mr Iqbal said that the most cruel and funny thing is that many such levies are supposed to be paid by the business or industrial establishment even if it suffers losses. Consequently, there is a great need to look into basic irritants which are hindering SMEs growth.

There are innumerable expenditures SMEs have to face in the process of doing business. Despite the fact small setups do not have huge funds but they have to pay illegal gratification sometimes, which further add to their financial problems. At times they also have to pay consultants to seek their guidance and at others pay ‘speed money’ to ensure the work is done.

Zulfikar Thaver, president, Union of Small and Medium Enterprises (Unisame), said, while explaining why only two per cent out of the Public Sector Development Programme (PSDP) fund is spent on SMEs, promotion and development of SMEs is no charity, it is their right.

He said there is vast scope for SMEs in each and every sector, including agriculture and agro-based industries. But these could not be fully tapped until and unless the system is simplified and unnecessary involvement of government departments are curtailed.

Both the leaders were of the firm opinion that such far-reaching changes could not be made by a totalitarian government or even so-called elected governments. However, only a popularly-elected government truly representing the downtrodden masses knowing their problems could only bring about changes at the grassroots level badly needed to give indigenous prescription for all ills presently engulfing the SMEs.Even after 60 years, most of our laws and systems still belong to the colonial era and we have not tailored them to suit our interests and according to the needs of our level of skills to ensure fast industrial development which could only be made by promoting SMEs all over the country.

http://www.dawn.com/2007/08/05/ebr11.htm

 

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Developing sector products’ export fails to hit the jackpot​

KARACHI: Like the traditional exportable items, the export of developmental products was not so impressive during the financial year 2006-07 as a number of items in this category fell short of their whole year’s targets.

For the whole year, government set a target of $1.348 billion for financial year 2006-07, however the actual export proceeds of developmental sectors stood at $1.267 billion. “Though there was some growth in the export of some products in this category, overall export could not be termed impressive to enhance the products of these shares in the overall export of the country,” exporters of these items said.

The developmental sectors include engineering goods, including cutlery, marble and granite/onyx manufacturing, fish and fish preparations, fruits and vegetables, chemical products, gems and jewellery, meat and meat preparations, cement, furniture, etc.

The export performance of these items in fiscal year 2006-07 also marred the efforts of the government to boost the export of non-traditional sectors especially much focus was on the promotion of export of these items in the last trade policy.

The country’s main reliance on few sectors, especially textile for its export earnings has been causing troubles because of stiff competition, the textile sector is confronting from its regional competitors.

According to an analyst of the foreign trade, despite the efforts of the government to switch over from the textile to other sectors for boosting the exports for long-term basis the policies in this regard have not worked out, because no tangible incentives have been offered to these sectors like the textile sector.

“Well thought-out strategies are needed to enhance the export of these items and increase their share in overall export, which unfortunately have not been formulated so far,” exporters said.

The breakup of the export of developmental categories show that export of fish and fish preparations stood at $188 million as compared to its target of $210 million in July-June period of 2006-07. The chemical exports were $387 million as against $470 million target, engineering goods were $236 million as against $235 million, cement export stood at $139 million as against the target of $150 million and no export of poultry products was made despite a target of $2 million.

On the other hand, the export of gems and jewellery stood at $44 million as against $35 million target, meat and meat preparations at $41 million exceeding the target of $25 million, the fruits and vegetables export were $113 million as against the target of $150 million, marble and granite/onyx manufacturing were $12 million as against the target of $25 million.

Exporters said that government is least bothered to consult them before setting the targets as bureaucratic style is only concerned with setting the ambitious targets without taking care how these are unrealistic.

They said that there is vast potential in these sectors in the country and also have major market in the world, however the ill-conceived policies and concentration on only few sectors is a big cause in this regard.

About this year’s trade policy, they said that although there were pledges to increase the export of these items, but what remains to be seen is how these are implemented during this year.

http://www.dailytimes.com.pk/default.asp?page=2007\08\05\story_5-8-2007_pg5_1

 

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Silicon to showcase product range at ITCN Asia 2007​

KARACHI: Silicon Technologies will showcase its product range in the upcoming mega event of ITCN Asia 2007.

Mobeen-ul-Haq, Director Sales and Marketing of Silicon Technologies said, “Information Technology has transformed the world from a traditional society to a global village and no country can sustain without streamlining its IT policies at par with the international standards.”

This exhibition does not only serve as a good platform to showcase our expertise but it also portrays a soft image of Pakistan across the world.

Silicon Technologies is providing high quality services to its clients and has official strategic partnership with some of the world’s leading IT concerns like 3Com, Adaptec, AMP, D-Link, Kingston, Moxa, Sony, Tandberg Data, Telenetics and US Robotics.

http://www.dailytimes.com.pk/default.asp?page=2007\08\05\story_5-8-2007_pg5_7

 

[Neo]

Decline in unemployment rate ​

The latest Labour Force Survey depicts a highly encouraging picture of the employment situation in the country. According to the data released by the Ministry of Finance on 30th July, the number of employed people rose to 48.09 million during July-December period of 2006-07 from 47.36 million in July-December, 2005-06.

In other words, 730,000 new jobs were created during this period. Overall unemployment rate declined to 5.3 percent from 6.5 percent during July-December, 2005-06. In rural areas, it fell from 5.7 percent to 4.6 percent, while for urban areas, it came down to 6.8 percent from 8.4 percent.

The female unemployment rate, though still high, is also declining. It came down to 14.5 percent in urban areas from 15.9 percent and in rural areas, it dipped from 8.2 to 6.8 percent.

The Economic Survey, released by the government in June 2007, had also claimed a sizeable reduction in the unemployment rate in the country over the years. It boasted that "the rising trend of unemployment has not only been arrested but it has also started declining since 2001-02".

The unemployment rate which stood at 8.3 percent in 2001-02 came down to 7.7 percent in 2003-04 and fell further to 6.2 percent in 2005-06. In rural areas, the unemployment rate declined from 7.55 percent in 2001-02 to 5.35 percent in 2005-06 while for urban areas it came down from 9.8 percent to 8.0 percent during this period.

Two factors were specially mentioned in the decline in female unemployment rate in the country. Firstly, increased job opportunities and conducive environment had dispelled the impression of discriminatory environment, and secondly, "the availability of micro finance facilities focusing on women particularly in rural areas has given rise to a new wave of rural women entrepreneurs".

The government further claimed that sustained economic growth was likely to reduce overall unemployment rate to 4.0 percent by 2009-10, a target aimed at in the Medium Term Development Framework (MTDF) 2005-10.

The latest statistics released by the government about the level of employment/unemployment are highly impressive. These clearly show that unemployment in the country is not only declining but its rate is almost equivalent to the level of unemployment in the developed countries.

It would also look as if Pakistan has reached nearly the level of full employment because unemployment rate of about 3-4 percent is considered a normal phenomenon in market economies due to shifting of jobs and other transitory factors.

The only problem is that official statistics on unemployment in Pakistan, unlike other countries, are not regarded as trust-worthy. In fact, most of the people would not even care to read and know about this information.

The reason for this total lack of interest is simple. Government statistics do not reflect the ground realities in the country. Contrary to the government statistics, unemployment in the country is so rampant that thousands of unemployed could be seen roaming the streets of every town.

Any ministry could advertise a vacancy for a clerk or other low paid job to have a feeling for the increasing unemployment level in the country and the hopelessness associated with this.

Increasing robberies, other street crimes and deteriorating law and order situation are partly the result of growing unemployment in the country. The claim of the government that micro finance has given rise to a new wave of rural women entrepreneurs simply appears to be no more than wishful thinking.

In our view, the government must revisit the definition of unemployment as soon as possible, to obtain an accurate picture of the true dimension of the problem.

According to government documents, "unemployment is defined as all persons ten years of age and above who during the reference period were: a) without work, ie were neither in paid or self employment nor employed as unpaid family helpers, b) currently available for work, ie were available for paid employment or self employment, and c) seeking work, ie, had taken specific steps in a specified period to seek paid or self employment."

Obviously, such a broad definition of employment would hardly leave any body unemployed. It is, however, another matter that people other than those compiling such statistics will not believe it nor will they be amused by this.

The biggest problem of such exaggerated statistics would, of course, be the possibility of complacency and lack of interest in tackling the important issue of unemployment if this is not fully and openly recognised by the government as such. It needs to be pointed out, however, that in this editorial note we are only talking about the statistics on unemployment and not other aspects of the issue.

http://www.brecorder.com/index.php?id=600602&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Pakistani buffaloes are ‘black gold’​

* Khalid Maqbool and Bryan Hunt open Dairy Training and Development Centre at UVAS

LAHORE: “Pakistani buffaloes are black gold and a great asset to the country,” Governor Khalid Maqbool said while speaking at the opening ceremony of the Dairy Training and Development Centre at the University of Veterinary and Animal Sciences (UVAS), according to a press release on Saturday.

US Consulate Principal Officer Bryan Hunt presided over the occasion. He said the US was proud to be a partner in the growth of Pakistan’s dairy sector.

He said the centre would prove to be a landmark in the development of dairy sector of Pakistan. He said, “We hope that the centre will produce educated and skilled people for the dairy industry.” The governor said the development of livestock sector was key to poverty alleviation. He said Pakistan had great potential in livestock, poultry and fisheries.

UVAS vice chancellor Prof Dr Muhammad Nawaz said livestock was an important sub-sector of the agricultural economy of Pakistan. He said, “The centre will not only develop the dairy sector, but will also add value to it.” He said the centre would help in training as well as developing formal partnerships across the dairy sector.

Higher Education Commission executive director Prof Dr Sohail H Naqvi, UVAS dean Prof Dr Talat Naseer Pasha, officials from the UVAS and the Small and Medium Enterprise Development Authority (SMEDA) were also present on the occasion.

The governor said the centre would set up a modern dairy processing plant for research and training purposes for students, doctors of veterinary medicine, personnel of dairy technology and industry, farmers and other stakeholders.

He said, “It will develop a formal partnership between academia and the dairy sector to ensure that the centre is supported and meets the needs of the dairy sector.” He said Pakistan’s dairy sector had received investment from both public and private sector since the formation of the Dairy Strategic Working Group by the Pakistan Initiative for Strategy Development and Competitiveness project. He said the project has also been supported by the Industries Ministry and the SMEDA.

http://www.dailytimes.com.pk/default.asp?page=2007\08\05\story_5-8-2007_pg7_24

 

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Pakistan economy burdened as oil imports hit record​

By M. Aftab (Analysis)

5 August 2007

ISLAMABAD — Oil and petroleum products are hitting a record, on the back of spiralling oil prices in the global market and rapidly rising demand, straining the economy.

The petroleum imports are the biggest spender, that is widening the trade deficit with implications for balance of payments. But, Pakistan will continue to be a big market for oil imports in the foreseeable future, as the growth in demand is more than 10 per cent a year. The government’s efforts to sustain a 7 per cent plus annual growth in GDP, an expanding domestic market for consumer goods and services, and higher export targets require creating larger exportable surpluses, are pushing oil imports.The domestic efforts to produce more energy — oil, gas, electricity, and coal, are likely to take four to five years more to help meet the energy demand.

Pressed by this growing demand, and to ease pressures on the balance of payments, the government has annnounced incentives and tax breaks for foreign and domestic producers of oil and gas in the form of the just-unveiled Petroleum Exploration and Production Policy (PEPP)-2007.

The State Bank of Pakistan (SBP), the central bank, for which it was officially issuing foreign exchange, has now shifted a part of the growing oil import bill to the inter-bank forex market, in order to conserve the official reserves.

A 10 per cent rise is indicated in petroleum group imports for the just ended fiscal 2007. The amount spend on imports reached a record $ 7.34 billion, or 24.3 per cent of the overall imports. Oil imports, at $7.34 billion in fiscal 2007 were 9.96 perc ent higher compared to $ 6.675 billion in 2006, Federal Bureau of Statistics (FBS) reported this week. The increase was more pronounced because of 'the surge in quantity' of imported oil and petroleum products, besides the rising oil prices, the FBS said. Saudi Arabia, UAE, kuwait and the Gulf are the key sources of crude oil and petroleum products imported by Pakistan.

Fiscal 2007 saw overall imports surpassing all targets and rising to $ 30.5 billion. The value may rise close to $ 35 billion during the current 2008 fiscal. Overall exports in 2007 were $ 17.01 billion, falling short of the target of $ 18.7 billion. The export target for 2008 is $ 19.2 billion. The trade deficit widened to a record $ 13.49 billion in 2007. Among the oil group, imports of petroleum products alone were $ 3.733 billion in 2007, up from $ 2.88 billion in 2006 — an increase of 29.59 per cent. But, the crude oil import showed a decline of 4.94 per cent to $ 3.61 billion in 2007, compared to 2006.

While the government is worried about the rising energy cost, oil imports and the domestic production is a key source of its revenue collection. The collection from the oil and gas sector was a record Rs72 billion in the first nine months of 2007. The amount surpassed the government’s own target of Rs42 billion for 2007. The amount in 2006 was Rs46 billion. According to the Ministry of Finance, the above collection is besides the indirect taxes, the government receives from petroleum products and gas as 15 per cent General Sales Tax (GST), Excise Duty, surcharges and other levies. The oil and gas surcharges rose to Rs51 billion in the first nine months of 2007, up from Rs 31.6 billion in 2006.

The Ministry says, it collected Rs23 billion in the form of surcharge on oil in the first sixth months of 2007 on the back of higher international prices. Although the Ministry made this collection, the Oil Marketing Companies (OMCs), importing and marketing petroleum and oil products in Pakistan, complain that the government has not paid them their Price Differential Claims (PDCs) which they insist totaled Rs18 billion as of May 31. The Ministry had also decided to grant a Rs10 billion subsidy on oil prices in the National Budget-2007 covering PDC of diesel.

The PDC, OMCs claims rose to Rs18.4 billion as of July 15.Trouble now is brewing on the oil front. It may add to the list of several domestic problems, ranging from judicial crisis to militancy, if OMCs are not paid their claimed amount of PDC. The OMCs, this week, threatened to "disrupt the oil supply chain in Pakistan in case the government does not pay them the Petroleum Differential Claim." In case the OMCs carry out the threat, the country and its economy may experience a jolt. The country already is facing bad news from the global market as the oil price is moving around $ 75 a barrel.

Again, Pakistani consumers, already hard hit by a 16 per cent food inflation, in an election year, will encounter a bad news from the oil front. Dr. Salman Shah, Adviser to Prime Minister Shaukat Aziz on Finance and Economic affairs, says the government may increase domestic oil prices in future, in case its prices continue moving around $ 75-78 a barrel in the international market. If the government does not increase the domestic prices, the PDC of OMCs will rise further to Rs 22 to 23 billion by August 10, from the July 15 amount of Rs18.4 billion.

OMCs point out that motor gasoline in the international market has recently declined, while diesel has risen by Rs6.38 a litre. The OMCs say, they will not be in a position to continue supplying diesel at the present domestic rate as its international price has gone up.

Indications are that the government is not raising the domestic oil prices for political considerations in this year of national elections, in which the ruling party and the President of the country are facing considerable opposition. In view of this, the government is absorbing a Rs5 billion hit a month in order not to raise prices. But after a few months it may have to raise prices and stop absorbing this loss, as Dr Shah has indicated.

http://www.khaleejtimes.com/Display...t/business_August74.xml&section=business&col=

 

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New industrial vision seeks to enhance institutional capacity of SBP and SECP​

ISLAMABAD — Pakistan government is likely to soon restructure and strengthen non-banking finance companies to make them an integral part of financial services industries.

The 'Industrial Vision' approved by the federal cabinet yesterday also called for further enhancing the institutional capacity of the State Bank of Pakistan and the Securities and Exchange Commission of Pakistan (SECP) to make them "effective regulators and supervisors of the financial system".

It further asked the government to automate the existing manual systems (banking operations) and developing local and wide area networks, connecting various departments and offices across the country.

"Pakistan must continue the reform process with particular emphasis on ensuring autonomy and competence of the regulators and promoting professional management at all levels of decision making in the financial institutions".

It also asked the government to implement the privatisation process efficiently and prudently so that 90 per cent of the banking assets would be in the private hands.

A well-functioning financial system that efficiently channels funds and that can be invested for most productive uses, is essential for industrial development and growth.

Recognising the importance of financial reforms in the process of industrial development and economic growth a series of measures have been adopted in recent years with a view to removing various distortions in the financial system, minimising government's interference in the banking system and strengthening the prudential regulations.

"While these measures have led to an improvement in the financial system, much more needs to be done to transform the financial sector into an efficient and market-driven financial system".

Boosting agriculture

The government was also urged to achieve a sustained growth rate of 5-6 per cent in agriculture which is imperative to ensure a rapid growth in national income, macroeconomic stability, improvement in distributive justice and reduction in poverty.

"This can be realised by exploiting the achieved potential of all the sub-sectors of agriculture, diversifying agricultural production towards high value crops, and conserving land and water resources.

A higher level of investment in agricultural research and development (R&D) activities supported by favourable policy instruments, human resource development, and necessary physical and institutional infrastructure could prove a catalyst towards achieving enhanced productivity and the desired growth rate.

Energy sector

It also believed that the goals of the industrial vision cannot be realised without an effective energy sector. The supply-demand analysis shows that the current rate of change in supply will result in power shortages in Pakistan, adversely affecting the growth process. Therefore, Pakistan needs to concentrate not only on the expansion of energy resources but also on improving efficiency of resource use. For expansion of power supply it is important to increase the supply of power from traditional resources like hydel, thermal and nuclear and from other sources.

Transport system

For safe and efficient transportation network a number of measures were also are proposed which included: modernisation of the maintenance system, introduction of user charges, human resource development through training in transport management and maintenance standards and enhanced participation of the private sector in transport projects. It recommended the revival of Karachi circular railway and introduction of light rail transit system in Lahore as part of measures to improve urban transportation.

An efficient and good quality transport system contributes to economic growth by lowering domestic production cost through timely delivery of raw materials, facilitating market integration, and helping to strengthen competition. Major issues in the transport sector are: inadequate physical capacity, inadequate maintenance system, poorly targeted investment priorities, operational and financial inefficiencies of the public investment and lack of private sector participation. The rational allocation of inland freight traffic between rail and road network, privatisation of railway's operation in selected sections and inclusion of private sector in development o roads, airlines, ports and shipping, and inland navigation can help in improvement of the efficiency of the sector.

The vision also carried out an in-depth study of the major sub-sectors of all the three productive sectors of the economy — agriculture, industry, and services — and within each sub-sector identified key issues and challenges, sets outs strategic objectives and targets, and spelld out a detailed plan to realise the vision.

http://www.khaleejtimes.com/Display...t/business_August69.xml&section=business&col=

 

[Neo]

Pakistan cabinet clears action plan to revamp textile industry​

ISLAMABAD — Pakistan government has approved an action plan that seeks to transform the weakening textiles sector into a strong, dynamic and internationally competitive industry led by the private sector.

The federal cabinet on Wednesday approved the much delayed 'Technology-Based Industrial Vision and Strategy for Pakistan's Socio Economic Development' which seeks to provide appropriate incentives particularly to the textiles sector.

The plan also stressess the need to diversify engineering and electronics industry. The main focus on the engineering sector is on bridging the widening technology gap with the developed countries by providing a conducive environment including the required technology, financial and physical infrastructure and creating a seamless integration with emerging trends of global production systems.

The prime minister will head a special committee to achieve the objectives of the industrial vision. Also, a working group has also been set under the chairmanship of the deputy chairman of planning commission to ensure implementation of various recommendations given by the authors of the vision, a source who was present in the cabinet meeting said.

The Chairman of Higher Education Commission Dr Atta ur Rehman and the economists at Pakistan Institute of Development Economic

(PIDE) including Dr AR Kamal are the main authors of the new industrial vision.

The government was advised to address the challenges being faced by the textiles sector which included lack of trained manpower, low quality standards and low technological base, lack of research and development and too much reliance on cotton.

The key elements of the action plan for the textiles sector include improving the regulatory and policy framework, human resource development through improving the research institutions and encouraging the private sector to invest in skill enhancement and developing technology upgrdation, rewarding value addition, ensuring quality standards and establishing common facility centres in the areas of garments, knitwear and sample development.

The action plan also seeks to establish a "fully integrated chemical industry in Pakistan" to achieve higher economic growth and lessen foreign dependence on the imports of chemical products.

The ministry of petroleum and natural resources in partnership with the private sector has been proposed to undertake an action plan which would cost Rs72 billion to help achieve self-sufficiency and the development of the agriculture sector.

"There are many proposals currently being looked into to set up a fully integrated chemical industry", a source said.

However, he said that the centre will have to consult all the stakeholders including the provinces before finally arriving at any consensus about the setting of a fully integrated chemical industry in the country.

The action plan also called for reducing the cost of production of leather products by lowering the prices of utilities with a view to considerably enhance their exports. The government was asked to help increase the export of leather products through improved productivity and by rationalising tariffs and import of chemicals.

Pakistan's exports of leather to European countries were declining due to shifting of tanning industries to China, South Korea and other Asian countries, The exports to the United States, the main market for leather apparel have declined by over 9 per cent.

The cost of production is very high in Pakistan compared to its competitors like China and India. The high cost of various inputs especially utilities and taxes make the country's productive uncompetitive in the international market.

According to the vision, in leather and leather garments industries, only 15 per cent of the workers are qualified and experienced. Finishing recipes are prepared by uneducated technicians. Exported leather goods during the storage and transportation develop problems like spew because of the chemical reaction.
http://www.khaleejtimes.com/Display...t/business_August43.xml&section=business&col=

 

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Indian investment in Pakistan increases ​

ISLAMABAD, Aug 3 (APP): The country has received $0.6 million in private investment from India during the last two financial years. In 2005-06, Pakistan had received $0.5 million investment from India, while it received $0.1 million in 2006-07, The Malaysia Sun reported.

The inflow of foreign private investment in the country in last fiscal year 2006-07 was the highest ever in the last five years.

The inflow of foreign private investment of the Asia region has posted decline in FY 2006-07 and stood at $216.3 million as compared to the FY 2005-06.

The decline in investment is depicting less interest of investors from Gulf countries.

However, Pakistan has received $6.945 million in FY 2006-07 from the western European countries, which have increased to $1.947 million as compared to FY 2005-06.

The foreign inflow in the country from the North American countries has increased in FY 2006-07 to $951.9 million as compared to the FY of 2005-06.

According to the official documents, the inflow of foreign private investment came from US and China was highest with total amount of US investment being $946 million and Chinese investment at $712 million.

http://www.app.com.pk/en/index.php?option=com_content&task=view&id=14098&Itemid=49

 

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Task force on Horticulture competitiveness established to increase exports to US $ 1 billion by 2012 ​

ISLAMABAD, Aug 3 (APP): The government has established a Task Force for Horticulture to increase its exports to US $ one billion by 2012 in the Global horticulture market US $ 80 billions.

The Task Force headed by the Advisor to the Finance and Economic Affairs Dr.Salman Shah would provide a common platform for the all stake holders to discuss and develop a common strategy for the horticulture sector in Pakistan, Competitiveness Support Fund (CSF) sources said.

It was also decided to set up five sub committees of the Task Force to identify long term and short term implementation plan to leverage the existing export base and improve upon it.

The sub committees include Horticulture Finance, Horticulture Infrastructure and Markets, Regulation and health certification, Processing and Canning and Production Management.

These Sub Committees, in consultation with Steering Committee under the Ministry of Food and Agriculture would formulate their recommendations within two weeks to remove hurdles and devise a strategy for improving export and domestic performance of horticulture industry of Pakistan.

It was further decided that the Board of Investment in consultation with the stakeholders would recommend to the Government for giving horticulture the status of an industry.

The Competitiveness Support Fund, through its recently completed study on the “Policy Analysis on the Competitive Advantage of the Food Processing Sector in Pakistan “, proposed an Action Plan for the Government to improve the competitiveness of the horticulture industry and to boost its exports for the country’s benefit.

http://www.app.com.pk/en/index.php?option=com_content&task=view&id=14106&Itemid=49

 

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OMCs decline to increase oil storage capacity ​

ISLAMABAD (August 06 2007): The private sector oil marketing companies (OMCs) have declined to become part of government plan for building up storage capacity to increase the country's strategic oil reserves, saying that their low profit/margin does not allow them to go for any such big investment-demanding initiative.

Sources told Business Recorder on Sunday that the government had received the proposal of building up its strategic oil reserves from the World Bank to increase storage capacity from 22 days' to 40 days' reserve.

The idea was discussed at different levels and finally, at a meeting chaired by President General Pervez Musharraf, it was agreed in principle that since Pakistan needs to increase strategic oil reserves to some reasonable level, the World Bank's proposal was worth implementing.

The meeting tasked the Ministry of Petroleum and Natural Resources to push up Pakistan State Oil (PSO) and the multinational OMCs to invest in building up more oil storage facilities to increase Pakistan's strategic reserves. Being a public sector company, PSO had no other option but to say yes to any government call, and it undertook construction of oil storage house at Gwadar port, but none of the private sector OMCs, including Shell, Shavron and Attock Petroleum, came up with a positive stance.

On behalf of the private sector OMCs, the Oil Companies Advisory Committee (OCAC) informed Prime Minister Shaukat Aziz, in writing, that Pakistan's market demand and rate of return on investment were inadequate for huge immovable investment required for construction of new oil storages.

The World Bank has taken up the issue of oil storage capacity with the government time and again and has demanded to increase it to a reasonable level. Its officials believe that Pakistan needs to have 45 days' oil reserves. Pakistan's existing storage capacity is only 20 to 22 days' reserve.

OMCs are not comfortable with the government on oil pricing policy of not passing on the market rates to the end-consumers. They are of the view that the policy of capping the prices was resulting in creating financing problem for oil import operation. They claim that the government owes over Rs 23 billion as differential on oil buying and selling prices.

http://www.brecorder.com/index.php?id=601586&currPageNo=1&query=&search=&term=&supDate=

 

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Need stressed to realise importance of mining sector ​

QUETTA (August 06 2007): Mining sector in Pakistan needs serious attention of policymakers to make Pakistan more prosperous and self-reliant, said sources close to mining industry.

They say that although Pakistan is a resource-rich mineral country where more than fifty metallic, non-metallic and industrial minerals are abundantly available, yet its mining and quarrying sector is slow to grow up to its potential.

Over a period of sixty years of independence, this vital sector of Pakistan has no sign of any substantial engine of growth for the national economy. In almost six decades, this sector has grown by little over 9.5 percent only. As such, its meagre share of just 0.5 percent in the GDP does not fully reflect the actual potential of the sector.

There are several fundamental factors for the mining sector retarded growth. These factors include deplorable lack of infrastructure, lawlessness, resource constraints, non-availability of hi-tech and risk capital, vulnerability to outlaws feudal tribal chiefs, bureaucracy's tricks and pressure on the mining settlements.

Now the present government seems to have come out with a well conceived strategy for metallic, non-metallic and industrial minerals development on most modern lines under a plan to grow up to their potential. The plan provides for Pakistan Stone Development Company with the collaboration of the private sector. The public-private Sector Company has taken steps for economic exploitation and correct utilisation of minerals with easy access to national and international markets for better returns to the investors.

Under National Mineral Policy, the Federal and Provincial Government have ensured investments and incentives. These governments jointly taken steps to provide basic infrastructure like water, power, gas, better means of transport, truckers and trains, safety measures for the investors, mining manpower, machinery and materials in the mineral rich areas of the country. Under the plan, investments have been ensured and encouraged on 5-point broad-based grounds. Investment in small-scale mining involving less than Rs 300 million is confined to Pakistani nationals.

Corporate merger of small-scale mine operators is encouraged. Pakistan Geo-Data Center has come up as an autonomous body to collect, store, update and manage entire countries geo-data. The Federal and Provincial governments have been geared up to provide grants for the respective corporations and companies to promote task on priority minerals and priority areas. To attract more investments in the mining sector, mining concession rules have been provided for four types of mineral titles: reconnaissance license, exploration license, mineral deposit retention license and mining lease.

http://www.brecorder.com/index.php?id=601685&currPageNo=1&query=&search=&term=&supDate=

 

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'Road infrastructure plays key role in economic progress' ​

ISLAMABAD (August 06 2007): Road infrastructure has a profound and enduring impact on the economic fabric with pivotal role in propelling country's economic growth on swift velocity. The most effective and sustainable way to address the scourge of poverty is to link backward and far-flung areas with the developed areas.

Construction of new roads opens new vistas and avenues of opportunities to those areas and their lives are changed forever. A network of quality roads can spur economic growth and help the country realise its geo economic potential.

Early completion of a road networks connecting agricultural centres and industrial zones of the country with main road arteries of the country and onward linkage to trading centres of the countries of the region is top priority of the present government.

"On completion of the National Trade Corridor by 2012", says Minister for Communications Shamim Siddiqui, "the cargo travel time from Karachi to Peshawar would be reduced from 72 hours to 36 hours, and road losses would be reduced to the tune of over $1 billion per annum which will reduce annual transportation cost by 10 per cent.

"We are revamping the existing infrastructure and are focusing to develop a new one that would carry good promise to achieve our ends. Rupees 520 billion will be spent on rehabilitation and upgradation of highways and motorways in the country during next five years," adds the Minister.

"Under the vision of President General Pervez Musharraf, roads network of the country is being revamped as a strong communication system was essential for the progress and prosperity of the country", says Shamim Siddiqui.

Chairman National Highway Authority Major General Imtiaz Ahmed says roads not only provide impetus to the economic development but also promote inter-regional harmony and integration among people from different areas of a country. He said, we in NHA also believe in the fact that "the road to progress and prosperity leads through development of network of quality highways".

Apart from harmony and establishment of co-ordinated transport system, he said, NTC would also facilitate international and bilateral trade, tourism and traffic in transit for landlocked countries, which hopefully will culminate into tangible benefits and economic prosperity of the people of Asia Pacific region.

Pakistan's primary artery and the main North-South corridor linking Karachi with Torkham on Pakistan - Afghanistan border via Lahore, Rawalpindi and Peshawar the National Highway N-5 is the mainstay of the country's road network and its economic lifeline.

http://www.brecorder.com/index.php?id=601684&currPageNo=1&query=&search=&term=&supDate=

 

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Taming inflation with monetary policy​

THE State Bank of Pakistan has further tightened its monetary policy in an effort to achieve the inflation target of 6.5 per cent set for this fiscal year. But the government still needs to do a lot to control food prices to make this happen.

In the last fiscal year, CPI inflation rose 7.8 per cent against the target of 6.5 per cent but food inflation soared to 10.3 per cent.

Government borrowing: The State Bank has advised the government to contain its inflationary borrowings from the central bank by observing quarterly ceilings and by retiring Rs62.3 billion during this fiscal year...

Besides, the SBP has asked the government to finance its budgetary requirements more through long-term financing sources including Pakistan Investment Bonds and less from short- term borrowing from commercial banks. This would raise the cost of domestic borrowing for the government particularly after increase in the discount rate. But it would certainly help fighting inflation as a major chunk of long-term borrowing can be made through non-bank sources which is least inflationary.

It would deepen the secondary market for long-term bonds and provide corporates particularly insurance companies and provident-fund and pension fund managers to park their long-term funds profitably.

Interest rates: In its monetary policy for July-December 2007, the SBP has also raised its discount rate from 9.5 to 10 per cent—the second 50 basis points increase in the rate after July 2006.

The move had an immediate impact on the benchmark six-month KIBOR, which rose 30 basis, points on the first day after the announcement of the policy. It went up from 9.96 per cent to 10.26 per cent. Treasurers of local and foreign banks say it may now remain well above 10 per cent.

The SBP increased the yield on treasury bills as well. It raised the cut-off yield on the benchmark six-month T-bills the very next day after the policy announcement by 20 basis points—from 8.9 per cent to about 9.1 per cent.

Bank treasurers expect the yields on T-bills would rise further as the government would be borrowing more from the commercial banks and less from the SBP.

Business concern: Businessmen are concerned that banks would soon increase their lending rates as a result of the latest tightening of the monetary policy. This would dampen the demand for private sector credit and have an adverse impact on industrial activity.

“This would ruin the industry,” remarked Mr. Tanvir Sheikh, president of the Federation of Pakistan Chambers Of Commerce & Industry.

“It seems that the central bank keeps tightening the monetary policy to let banks make huge profits at the cost of the industry,” he blamed.

Mian Muhammad Latif, chairman of Chenab Group, said that the latest monetary policy would destroy textiles industry beyond repairs.

“The central bank should have realized that textiles and other large-scale industries provide jobs to millions of people and even if some of them are forced to close down it would render thousands jobless.”

He warned that the outcome of frequent tightening of monetary policy would be that, textiles, the largest foreign exchange earner, would loose its competitive edge.

Industrial growth: In the last fiscal year, Pakistan’s industrial sector grew at 6.8 per cent against the target of 9.1 per cent. And within this, the large-scale manufacturing sector grew 8.8 per cent—far below the target of 13 per cent.

A major reason attributed by industry for this slowdown in industrial activity was an increase in the interest rates.. The weighted average lending rate of banks rose from 10.40 per cent in June 2006 to 11.33 per cent in June 2007—a rise of 93 basis points over one year.

A slowdown in the industrial activity took its toll on exports—and exports grew only 3.4 per cent to $17 billion against the target of $18.6 billion. Textile exports grew 5.3 per cent to $10.7 billion. (Bangladesh, a close competitor of Pakistan in exports, posted 16 per cent growth both in its overall exports as well as in textile exports during the same period. Its overall exports rose to $12.2 billion and textile exports totalled $9.2 billion).

Bnakers: President of National Bank of Pakistan Syed Ali Raza dismissed as baseless the perception that interest rates would automatically increase after a 50 basis points increase in the SBP’s discount rate. “We are mature enough to realise that if the interest rates are increased beyond a limit, cash flow of our clients would be hit and that would be detrimental for our business too,” he remarked.

“If industries are burdened with very high interest rates, they would naturally stop servicing bank debts, and banks would have make provisioning against these bad debts. Of course, a banker would not like this situation.”

Besides, Mr. Raza added, banking system is wallowing in excess liquidity; the demand for bank credit is already low and borrowers can now shop around as banks compete fiercely with each other. “All this means that the latest tightening of monetary policy would not necessarily make bank borrowing expensive for a vast majority of our clients,” he said.

“But I assume that 10-20 per cent borrowers may have to borrow at a higher rate now than before but it would be because of their lower credit worthiness.”

Reserve ratio: The central bank has also made some changes in reserve ratios. In January, it had hiked cash reserve requirement from five to seven per cent on demand liabilities of banks but reduced it from five to three per cent on their time liabilities.

Now it has applied a uniform CRR of seven per cent on time-and demand liabilities of less than one-year and exempted all deposits of one- year and longer maturity to help banks raise long-term deposits.

One of the reasons for a very large banking spread is that fixed term deposits account for less than one third of overall deposits. So, an incentive to banks for mobilising long -term deposits would also narrow the gap between lending and deposit rates, which stood at a whopping 735 basis points at the end of the last fiscal year.

Islamic banks: Recognising the shortage of Shariah-compatible papers used by Islamic banks to meet statutory liquidity requirements, the central bank has allowed them to count their cash in hand and balances with the National Bank towards SLR.

No change has been made in SLR of other commercial banks, which remains at 18 per cent of the time and demand liabilities.

This would help the growing Islamic banking industry expand further.

Export Refinance: The SBP has also decided to phase out its subsidised financing to exporters through refinancing scheme. . And as a first step, it would provide export refinance against 70 per cent of the total export financing requirement—and banks would bear the cost of the remaining 30 per cent on their own.

But the move would not impact exporters as such because they would continue to get export finance from banks at a concessional rate of 7.5 per cent. It would, however, helping curbing inflation because the amount that the SBP reimburses to banks under export refinancing, adds to reserve money and fuels inflation.

Stock market: Stock brokers say the hike in SBP’s discount rates and the incentive given to banks to raise long- term deposits would have a negative impact on the stock market. (The Karachi Stock Exchange 100-share index lost 50 points on the first day after the announcement of the new monetary policy).

“I believe the impact of the discount rate hike would be negative on the equity market. The market is rather disappointed with the SBP decision,” commented Mr. Arif Habib, a former chairman of KSE.

But he said that as supply of new bond issues continues to grow, their yields would remain more or less intact. “As KIBOR increases, the issuer would add fewer percentage points over it than before, making no real change in the yield.”

http://www.dawn.com/2007/08/06/ebr1.htm

 

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The neglect of energy conservation​

THE National Energy Conservation Policy (NECP), approved by the Cabinet in November last year, sets guidelines for energy conservation in all sectors to achieve energy security. Based on the limited experience and expertise available in the country, the policy prioritises sectors in this order: transport, industry, buildings and households, agriculture and power.

The policy also identifies key initiatives and instruments in the following areas: legislation and regulatory framework; public awareness, training, education; making energy conservation an integral part of the energy policies; institutional strengthening and capacity building; public-private-civil society partnerships; energy service companies. The policy also suggests an implementation mechanism and its monitoring.

What happened since November 2006? The National Energy Conservation Centre, the so-called ENERCON, put together an action plan and sent it to the ministry of environment. Among the many problems of ENERCON to be discussed later, a critical one is that from an autonomous body it has been downgraded to an attached department of Ministry of Environment, whose own capacity leaves much to be desired.

The ministry is managed by globe-trotting generalist- bureaucrats, who sit as heads of a large number of small donor-funded projects in almost every field of environment. Their initial ineptitude allowed these projects to be donor-driven.

Now the donors, led by UNDP as the manager of Global Environment Facility, are so used to leading that any semblance of local ownership by experts is subverted in league with the generalist bureaucrats. They like to sit on all committees and enjoy veto power in all decisions.

By chance the ministry got the mega project of Clean Water for All. The issues of capacity apart, the issues of integrity are so crucial that a former secretary of the ministry himself requested the top man in authority to shift the project to another ministry, which turned out to be the ministry of industries.

In a ministry like this, one cannot expect much for an attached department like ENERCON. The action plan sent by it for the approval of the minister did the rounds of all manner of desks for months and was returned by a section officer with a one -line remark that it should be on the pattern of the National Environment Action Plan (NEAP). No comment on what was wrong with it and no reason why NEAP is such a superior document!

If the leisurely implemented pleasure-trip driven NEAP prepared by the UNDP is their ideal, then God help environment. For it will apply to National Sanitation Policy, National Forestry Policy and a couple of others. As one can see, the ministry has too many policies for its size and an inclination to jet-setting. Small wonder, when you read an official piece on environment, such as a chapter in the Medium Term Development Framework or the Economic Survey, it is long on words and short on actionable projects and programmes and their funding. The reason is that these are cut-and-paste jobs from the innumerable consultants’ reports commissioned almost every other day.

In the last mid-year review, the little amount in the PSDP projects, the ministry was allocated was slashed by one-half by the Planning Commission for poor implementation. After the ministry was gutted in a fire blamed on the Lal Masjid zealots, the statement issued by the ministry did not hide its glee in announcing that the records of all PSDP projects had been completely burnt.

End of the story? Nothing to do! Not quite. Now they have all moved to the ENERCON building and have pushed its officers and staff to its remotest corners. The only library on energy conservation is now the office of an additional secretary. The librarian has resigned and the books are disappearing. The committee room is occupied by a minister.

One might feel they would now think more seriously about the implementation of Energy Conservation Policy. Well, till the writing of this article, nobody from the ministry has yet contradicted impressions from newspaper reports and articles that the need for an energy conservation policy has already been recognised officially.

What it proves is the ministry’s lack of awareness that the world over, awareness is half of the energy conservation business. Next week I will dwell on what is happening in the world and what is Pakistan missing by leaving energy conservation to environment ministry alone. There are many players in the field who have failed to get their act together in this vital investment in a sustainable future.

Dr Pervez Tahir, is a former chief economist, Planning Commission and Professor of Economics at the GC University, Lahore. E-mail: perveztahir@yahoo.com.

http://www.dawn.com/2007/08/06/ebr3.htm