Pakistan Economy - News & Updates - Archive

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Agro-based industries in remote areas to be promoted ​

SIALKOT (October 12 2007): Punjab government has prepared a plan for the promotion of cottage and agro-based industries in remote and neglected areas of Punjab. Official sources told Business Recorder here on Thursday that under the plan loan-facility would be extended to the SMEs, businesswomen and other interested persons for setting up new industrial units as well as up-gradation of existing industrial units in Punjab.

Sources said that people would be encouraged to establish agro-based industries in their respective areas by offering them incentives and concessions. The concept of this programme was to generate employment opportunities for the skilled and semi-skilled persons besides discouraging the rapid rural migration towards cities, sources added This proposed programme would also be helpful in broadening strong industrial base and ensuring the development process in far-off and neglected areas of Punjab.

Business Recorder [Pakistan's First Financial Daily]

 

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Auto sector sales surge by 23 percent ​

KARACHI (October 12 2007): The cumulative sales of auto sector surged by 23 percent however, the sales of cars, trucks and tractors declined by 2 percent, 3 percent and 12 percent respectively during the first quarter of FY08. On the other hand, on month-on-month basis, the cumulative sales of auto industry fell by 5 percent, with a biggest decline registered by the car segment.

Car sales declined by 37 percent to 11,000 units in September 2007 against 17,700 units in the month of August 2007. Major reasons assumed behind the lower sales volume during the month of September were imposition of one percent special excise duty and 2.5 percent withholding tax and a subsequent increase in prices, Hettish Karmani, an analyst at Atlas Capital Markets said.

With capacity constraints, sales of the assemblers during the first quarter of FY08 surged by 2 percent only. Pak Suzuki Motor Company sales increased by a mere 2 percent to 28,400 units and Indus Motor sales surged by 4 percent to 12,800 units.

A surprise growth was witnessed in the sales volume of Dewan Farooq Motor Limited which posted a sharp rise of 25 percent to 2,900 units and managed to increase its market share during the quarter to 6 percent from 5 percent during the same period last year. The market share of Pak Suzuki Motor Limited and Indus Motor stood at 59 percent and 27 percent respectively.

Business Recorder [Pakistan's First Financial Daily]

 

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Seven new coal blocks to be developed in Sindh ​

KARACHI (October 12 2007): The Sindh government has decided, in principle, to develop another seven coal mining blocks in Thar and other provincial coal fields to expand the operation for exploration of coal, Business Recorder learnt here on Thursday.

The development of seven new coal blocks would take the total number of coal blocks to 11 in the province where exploration activities would be undertaken. It may be pointed out that the exploration work in four coal blocks of Thar coal field have already been carried out by various international and local mining firms.

Official sources in Sindh mines and mineral development department said the authority was considering developing additional mining blocks in Thar so as to expand the exploration operation to cater the growing demand for coal being used in thermal power plants.

Comprehensive studies have been conducted to finalise the development of additional blocks and ensure the viability of coal exploration in these blocks, they added. Sources said that international tender had had been floated for expression of interest (EoI) from international as well national firms to develop two blocks in Thar. Other five coal mining blocks, which have been planned, would be developed in districts of Sanghar, Khairpur, and Tando Jam.

At present, the coal production in Sindh is about five million tonnes per year and the department has envisaged increasing the coal production to over 20 million tonnes by 2015. Thar coal-field is the largest in the country spread over an area of 9,100 sq. km located at a distance of 380-km from Karachi. It has estimated coal deposits of about 175.506 billion tonnes and considered the best for power generation.

Sources said that though preference would be given to local firms, but ironically most of the firm did not have adequate equipment required for exploration and mining of coal on larger scale under the conditions at Thar coal field. Tenders would purely be awarded on the merit and expertise of the firm, they added.

Sindh mines and mineral development department has also plans to develop soon more coal mining blocks in Lakhra coal field near Dadu and Sonda-Jheruk coal field near Thatta after carrying out studies in the said fields.

Business Recorder [Pakistan's First Financial Daily]

 

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Deep-sea well drilling starts in Indus Delta ​

Friday, October 12, 2007

KARACHI: After missing one deadline after another for the past 16 months, Shell Development and Offshore Pakistan BV finally started drilling a deep-sea exploration well earlier this month in the Indus Delta, government officials said on Thursday.

The location of the exploration well, Anne-X in block 2345-1, offshore Indus-E, is 200 kilometers southwest of Karachi in the water depth of more than 1,300 metres, a senior official of the Ministry of Petroleum told The News on condition of anonymity by telephone from Islamabad.

Shell, with a 25 per cent stake, is the operator of the Joint Venture in which the state-run Oil and Gas Development Company (OGDC), Pakistan Petroleum Ltd (PPL), Premier Offshore BV and KUFPEC Pakistan BV are the other partners.

OGDC holds 30 per cent stake in the venture followed by PPL’s 20 per cent, while both Premier and KUFPEC each have 12.5 per cent share, the official said.

“Shell started the drilling of the deep-sea well in quite a hush-hush manner because of the security concerns,” the official said. “The entire drilling operation is spearheaded by expatriate crew including many Americans.” A drill-ship of Transocean Inc, one of the world’s largest offshore drilling contactor, has been deployed at Indus Delta for the drilling.

Earlier, Shell planned to start the drilling in August, but it missed the deadline again as it did several times in the past, he said. Industry officials said that the delay led to serious protest by the ministry and the Joint Venture partners.

Sources said that the drilling was delayed because of the unavailability of the drill-ship which was carrying out exploration in the Indian Ocean. Later it had to be sent for maintenance, they added. The ministry official said that Anne-X is being drilled as a vertical hole down to the planned depth of 3,000 meters. “This deep-sea drilling is a big challenge. State-of-the-art technology is being employed on this project.” Indus Delta has many similarities with other oil and gas producing deltas like Mahakam (Indonesia), Niger (Nigeria) and Nile (Egypt) in terms of their age, sediment thickness, tectonic style and rock properties, industry officials said.

It is considered to be prospective for oil and gas exploration considering its location. The block is spread over 7,300 square kilometers and has a water depth ranging from 200 to 1,700 meters. “Indus is the last unexplored offshore places in the world where in the past 11 wells were drilled. Three of these wells had gas shows including one with oil but none with commercial gas flow,” the official said.

“Indus is the second largest delta in the world after Amazon, formed by continuous flow of water from Himalayas, Hindukash and Karakoram mountain ranges,” said Dr M M Rabbani, Director General National Institute of Oceanography (NIO). “Indus River discharged 400 to 500 million tonnes of sediments in the basin annually.”

Thickness of delta sediment exceeding 7km is thermally mature, which suggests presence of organic content, he said, adding: “Indus Delta has a sediment thickness of up to 12km.” The petroleum ministry official said Anne-X is only the second deep-sea drilling endeavor in this basin. The first one, PAKG2-1, was carried out by a Joint Venture led by Total in 2003. To date, 17 offshore wells have been drilled but none proved commercially viable.

PPL remains the only Pakistani company, which drilled an offshore well Pasni X-2 in 2005 as an operator. Saad Bin Ahmed, analyst for Capital One Equities, was skeptical about the prospects of hydrocarbons in this basin.

“PPL was also optimistic about Pasni, but nothing came out,” he said. “To believe (Indus) delta contains substantial oil and gas reserves is over optimism considering the past results.”

But Fawad Khan, analyst for KASB Securities, said that interest of multinationals like British Petroleum and ENI show that the region has a strong potential for the discovery of hydrocarbons. Pakistan has coastline that spreads over 1,990km. Its offshore is subdivided into Indus and Makhran deltas.

Deep-sea well drilling starts in Indus Delta

 

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Services trade: Growing imports increase deficit by 23.73 percent​

KARACHI: Fast growing imports of services further increased the deficit in services’ trade by 23.73 percent during the July-August period of current financial year to $1.141 billion as compared with $922 million in the corresponding period of last year.

According to latest statistics of services trade released by Federal Bureau of Statistics (FBS) on Thursday, exports of services also grew by 12.25 percent during the first two months of this fiscal, however it was much behind 20.09 percent growth witnessed during this period of last year. Exports of services totaled to $481 million in the period under review over $428 million in the corresponding period of last year and imports stood at $1.623 billion in the said period as against $1.351 billion in the same period of last year.

In month of August 2007, the trade deficit in services widened by 51.47 percent to $593 million as compared to $392 million in the same month of last year.

Exports during the month recorded 14.82 percent growth to $260 million over $226 million in the corresponding period of previous year and were up by 17.57 percent as against $221 million in the preceding month of July this year.

Imports grew by 38.04 percent in the month under review to $854 million over $618 million in the August of last year and depicted an increase of 11.01 percent over $769 million worth of services imported in July this year. “The deficit in services will continue to increase as the exports of services are unlikely to match the fast growing trend of the imports due to weak exports of services base,” analysts said.

As the economy is expanding fast, the requirement of services is increasing which is to be met through import as country lacks the capability in this regard, Samiullah Tariq, Analyst at Investcap believed.

Whether it is IT, financial, shipping and construction sector, country has to rely on the imported services as well as the number of tourists visiting the country has drastically gone down in the recent years while more and more Pakistanis are visiting abroad, which is resultantly adding into the imports bill of services. On the other hand, export sector mainly relies on government services, mainly comprising the defence services, which over the years the dominated export sector.

The country’s exports of services are confronted with a number of issues, which obstructed to tape the vast potential of the export in this sector like quality, acceptance of professional credentials, visa problems and the most importantly the image problem, which the country has been confronting since long.

Daily Times - Leading News Resource of Pakistan

 

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US to provide $145m under FATA uplift plan this year​

ISLAMABAD: The US will provide $145 million this year as the first installment of a total of $750 million it has pledged to provide Pakistan over five years for the development of the Federally Administered Tribal Areas (FATA).

The support is aimed at helping the government establish its writ in the Tribal Areas, according to a document made available to Daily Times. The funding is being provided to Pakistan for being a front line ally of the US in the war against terror. An agreement to this effect was signed a fortnight ago between Pakistan’s Economic Affairs division secretary and the USAID mission director here. US Deputy Secretary of State John Negroponte announced the FATA development plan and the allocation of funds needed during his visit to Pakistan in June 2007.

Daily Times - Leading News Resource of Pakistan

 

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Boosting IT exports to Gulf states​

ISLAMABAD, Oct 11: The Gulf Cooperation Council (GCC), the world’s third fastest growing IT sector, offers huge potential for Pakistan Information Technology industry, observes an official of Pakistan Software Export Board.

There would be major drives to step up IT exports to the GCC countries, the official said, adding “the Pakistan’s IT exports to the Gulf had been increasing over the years, but there is still considerable potential to boost software exports to this region”.

He said several IT companies of Pakistan had succeeded in making inroads in the fast growing IT market of the Middle East.

According to the official the Middle East and North Africa (MENA) IT market was set to grow from $6.9 billion in 2003 to $13.4 billion in 2008.

The UAE and Saudi Arabia are alone accounted for 77 per cent of the Gulf region’s current annual IT related spending of $4.94 billion, which is projected to increase to $5 billion this year, the official said.

According to a statement issued here on Thursday several Pakistani IT companies had developed successful business relations and had established their offices in Middle East.

Boosting IT exports to Gulf states -DAWN - Business; October 12, 2007

 

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Sindh to pay Rs 67 billion interest on foreign loans by 2050 ​

KARACHI (October 13 2007): Sindh government will pay around Rs 67.75 billion as interest to international financial institutions by 2050 on amounts received from these financial bodies, Business Recorder learnt here on Friday.

Sources in Sindh Finance Department said that according to an estimation the provincial government has to pay around Rs 1.5 billion every year to balance the interest rate on international loans, apart from the payment of real debt amount.

Foreign debt burden on Sindh government has exceeded Rs 123 billion during the last four to five year, which had been borrowed for execution of mega development projects in the province.

The debts have mainly been received from two organisations--Asian Development Bank (ADB) and World Bank (WB)--, of which half have been borrowed on highly inflated rates, which means that the rate of interest can be changed with variation of dollar prices in the international market.

The Sindh government has also signed several agreements with ADB and WB under which it will receive Rs 116 billion during coming years, which will take total foreign debts on the province to Rs 240 billion, sources said.

It is interesting to note that paper work and planning of some mega projects are still not complete, while the loan has already been sanctioned. "The paper work and planning of the most of projects have almost been completed and work on rest of the projects will be finalised soon," they added. However, they did not give details how the government would pay back these loans.

Business Recorder [Pakistan's First Financial Daily]

 

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World Bank approves additional financing of $75 million for PPAF ​

ISLAMABAD (October 13 2007): The World Bank has approved additional financing of $75 million for Pakistan Poverty Alleviation Fund (PPAF). This additional financing will support new social mobilisation component and aims at mobilising community organisations and local support organisations in 25 districts, says a press release.

The PPAF has changed the lives of more than 10 million people since it began operations in 2000. Under the program, 10,000 community infrastructure projects have been completed and more than half of these provide safe drinking water or access to safe sanitation and 1.2 million micro-credit loans have been provided with 99.8 percent repayment rates and over 200,000 people have been trained in various skills.

PPAF is an apex organisation and is currently working with 70 partners organisations, who have formed over 66,000 community groups in more than 27,000 villages in 111 districts across the country.

It aims at reducing poverty in communities by providing micro credit, small-scale infrastructure, training programs and capacity building through civil society organisations.

PPAF is also helping communities in rebuilding their lives after the devastating earthquake by supporting for reconstruction of 10,000 houses and launching 350 schemes in different sectors including water supply, link roads, health and educational facilities in the earthquake affected areas.

This will lay foundation for the scaling up of PPAF poverty reduction programs under the planned Third Alleviation Fund Project and other activities; including linking with local government and development schemes of provincial and federal government.

The project will also finance a leadership cadre of 250,000 women and men who would be trained to manage the Community Organisations and Federations and to manage the linkages with outside organisations for long-term sustainability.

Business Recorder [Pakistan's First Financial Daily]

 

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780 percent rise in foreign investment in cement sector ​

KARACHI (October 13 2007): Cement sector attracted $41.4 million foreign investment during July-August this year, depicting a surge of 780 percent against $4 4.7 million of same period of 2006-07, industry sources told business recorder on Friday.

Cement industry is rapidly growing due to huge local and international orders, as presently South East Asia region, Gulf counties and India are facing huge shortage of cement due to tremendous development work.

On the other hand Pakistani cement sector is main beneficiary of the regional cement shortage, which is filling the shortage gap by exporting cement to these countries, industry sources said.

They said that improved infrastructure, cheap labour and easy availability of raw material for cement making are some chief reasons behind this increasing foreign investment.

According to SBP statistics, foreign investment in cement sector got a raise of $36.7 million during July-August this year, as compared to same period of last year. External demands for cement from Gulf countries is growing. This has attracted foreign investors in the cement sector.

Business Recorder [Pakistan's First Financial Daily]

 

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50,000 homes to be electrified with Rs 50 million 'Solar Homes' plan ​

FAISALABAD (October 13 2007): The Alternative Energy Development Board (AEDB) has prepared a 'Solar Homes' programme, which will be implemented at a total cost of Rs 50.35 million, while research on development of one kw fuel cell vehicle in the country will be implemented at a cost of Rs 4.03 million.

Under this plan, more than 54,000 homes will be electrified through wind and solar sources by 2010. According to official sources, Pakistan has not so far used its solar potential to save on conventional energy, although its central and southern parts can be used for solar thermal power plants in addition to water/home heating in the north where gas is currently used for heating purposes.

The solar potential can be gauged from Jacobabad in southern parts, which is an excellent location for solar energy, as it receives 2,142 kWh solar irradiation/square metre/year, which works out at 230 KWh /m2/year.

Despite the high generation cost of solar power at present, the mid-term prospects are promising due to the expected technological improvements and economics of mass production of PVs. Recent developments point to nearly 41 percent efficiency of sunlight conversion, which could reduce the cost of generation to the order of 8 - 10 cents per unit, (as in oil-based plants).

Furthermore, the AEDB has also prepared a plan to establish a demonstration unit for solar thermal power plants technologies at an estimated cost of Rs 39.8 million. Solar Water Pumping and Desalination Unit will be established at an estimated cost of Rs 33.040 million.

For several years, official sources said, climate change has been attributed to human activity and the resulting emission of greenhouse gases (IPCC, 2007). Consequently, there has been growing focus on alternative forms of energy.

The contribution of alternative energy in the overall energy mix in Pakistan is negligible at present. However, the first wind farms are in the implementation stage. These projects will be eligible for carbon credits to reduce the tariff.

The Alternative Energy Development Board (AEDB) has been established to facilitate development of renewable energy projects. At least 5 percent of the total electricity generating capacity of the country (ie 9,700 MW) is targeted to be based on these sources by the year 2030. AEDB would also develop and implement off-grid electrification programme for rural areas. In addition, under the remote village electrification programme, the first 400 villages (54,000 homes) will be electrified through wind and solar sources by2010.

Since 2001, global wind capacity has nearly doubled to 47,760 megawatts and is cheaper than natural gas even without subsidies. On good sites, wind is even closing in on coal. The world's global sales of wind power equipment are projected to reach $49 billion a year by 2012. The global wind industry now employs well over 100,000 people, and Germany alone expects to have more than 100,000 wind energy related jobs by 2010.

Pakistan has some excellent sites to exploit wind energy. A section of the coastal area of Sindh has been identified as having wind power potential of 50,000 MW. The annual average wind speed, at 50 metre height, at Gharo, Mirpursakro and Talhar sites in Sindh is 6.5 metre/second and the capacity factors for wind turbines at these sites are estimated to be in the range of 23 to 28 percent.

With improved site studies, wider wind mapping, better project planning, R&D and learning cost of wind energy projects can be reduced to acceptable levels of around 6 cents/kWh, and even below.

Wind energy has the disadvantage of being intermittent, but it is ideal for 'pump storage' whereby it can be used for pumping water back into a reservoir of, say a hydropower plant, during periods of lean use.

Official sources said that many new technologies and sources of energy are currently being investigated. As part of Vision 2030, the development of such systems will need to be completed as a matter of priority in order to meet the looming oil crunch. In all cases, the true costs will need to be worked out for all competing forms of present and future energy--coal and its derivatives (health costs), hydroelectric plants in the Northern Areas (contribution to and danger from seismic activity), nuclear (waste handling, de-commissioning, and availability of fissionable material), solar cells (monopolies, and toxic wastes from production), fuel cells (secondary source costs), wind energy (low availability and storage issues which it shares with solar), fusion (time factor), ethanol (more sugarcane/biomass).

Business Recorder [Pakistan's First Financial Daily]

 

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Foreign engineering firms may capture Pak market ​

Sunday, October 14, 2007

LAHORE: With a contribution of less than three per cent to exports, the local engineering sector mainly comprising small and medium enterprises is likely to surrender the domestic market to foreign companies as the economy further opens up.

Engineering experts have urged entrepreneurs and government planners to coordinate in facilitating the local engineering industry by lowering the cost of doing business, providing increased access to funds, capacity-building to connect globally and improving global marketing.

They pointed out that the exports of engineering goods had not increased in line with the increase in total exports during the past one decade. The share of engineering goods’ exports, they added, was still less than three per cent of the total exports. The engineering sector has been the real growth promoter and accounted for over 60 per cent of the total global trade.

They said exports from the engineering sector in Pakistan were limited to the electrical and mechanical industry only and pointed out that engineering and construction services, engineering design services, energy and telecom were also part of the engineering sector, besides light engineering (for example fans), home appliances and auto part sub-sectors, which should lead growth in exports.

Engineering experts considered high interest rates as a small component in the cost of doing business in Pakistan and said that the cost of engineering goods increased due to wastages that occurred owing to unscheduled and frequent electricity breakdowns.

Also, closure of industries for long periods due to official holidays pushed up the cost and they cited the example of four straight holidays announced on the occasion of Eid this year.

They said no local construction company had the capability to build a 70-storey building, encouraging construction companies from Bosnia, Turkey, Dubai and Malaysia to start mega residential and commercial projects. They said these companies were likely to stay on after the completion of projects and grab a share from local construction companies for smaller projects as well.

They said the construction industry in Pakistan would have to gear up to thwart the challenges posed by the foreign construction companies in the future.

They said the situation in the automobile industry was not as bright as was being propagated by the planners. Pakistan is saving just 30-40 per cent of foreign exchange on locally-produced cars as indigenisation has not been carried out on a rational basis.

They pointed out that although the government claimed that the local car industry had indigenised 53 to 73 per cent of auto-parts, their value was too small even for cars with 73 per cent deleted parts when compared to the cost of 27 per cent parts that had to be imported.

In other words, even for the highest deleted car models the country has to pay over 50 per cent in foreign exchange.

Engineering experts also blamed entrepreneurs for their failure to raise funds through secondary markets. No engineering concern in Pakistan has the capacity to meet even 25 per cent requirement of any component required by any leading global car-maker. They said the inability to reach global markets also increased the cost of production.

The engineering experts, however, appreciated the government’s policy of entrusting the responsibility of engineering sector development to the private sector. They said the former chief executive officer of the Engineering Development Board, who belonged to the private sector, took bold steps to encourage local entrepreneurs to participate in international engineering fairs and broaden their horizon.

However, the EDB has been working without a head for eight months as the private sector CEO was forced to resign due to a non-cooperative bureaucracy. The government has once again appointed a private sector entrepreneur as the EDB head who would again need compliance from the bureaucracy which should be ensured.

Foreign engineering firms may capture Pak market

 

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KSE-100 jumps 1,600 points in Ramazan ​

Sunday, October 14, 2007

KARACHI: Ramazan remained a blessing for equity investors at the Karachi bourse that saw benchmark KSE-100 index gaining 1,600 points (i.e. 12.5 per cent) in with a surge of Rs662.5 billion in market capitalisation.

Ramazan is the ninth month of the lunar year and the month of fasting for the Muslim faithful. It started on September 14 with the sighting of moon in Pakistan and ended on October 13 this calendar year 2007.

During this month, the chief benchmark KSE 100-share Index augmented by 1,599.90 points or 12.437 per cent to close at 14,463.78 points at the last working session ahead of Eid-ul-Fitr, held on Thursday (Oct 11).

The 100-Index breached through three major psychological barriers successfully during Ramazan i.e. 13,000 points, 13,500 points and 14,000 points. It also crossed the mark of 14,500 points threshold, but never succeeded to sustain with the sessions concluded.

The lunar month resumed as many as 19 day-long trading sessions at KSE, out of which 14 closed in green territory, while remaining five sessions finished up their day businesses in red. Therefore, the 100-Index registered a sum of 1,813.07 points with 14 sessions closing in positive while remaining sessions closing in opposite column minimized the month high gains by 213.17 points.

The free-float market capitalisation based 30-Index surged by 2,138.69 points or 13.676 per cent to 17,775.94 points during the same corresponding month.

Despite of the short-span trading sessions held during the outgoing month, KSE managed to record comparatively good turnover. The average daily turnover stood at 244.402 million shares with a total trade of shares of the entire month at 4.643 billion shares.

Heavy tactical buying poured in more Rs662.496 billion or 17.597 per cent in the overall market capitalization to stand at Rs4.427 trillion to date.

The gradual elimination of the dubious politics in the country invoked investors from all walks of life came in active for accumulation of stocks. Foreign portfolio investors were prominent among them with high inflow of fresh funds.

Balances in the Special Convertible Rupee Account (SCRA) turned positive for the first time during Ramazan from standing negative this fiscal year 2008. At present, the inflow of foreign portfolio investment stood over US$151 million to date (according to SBP website) from US$60 million in negative a couple of days before the Ramazan started.

SCRA is foreign funds account maintained by SBP. Funds in this account are invested or disinvested at the country’s stock exchanges and various government schemes, it is learnt.

The market participants’ calculation of witnessing a definite possible power-sharing deal between Gen Musharraf and Benazir Bhuttoo triggered massive buying on across the board.

Investors continued to advance their positions on across the board following everyday changing political scenario favoured the government amid market participants.

It was all in line with the market expectations that happened on political front. For example (1) Supreme Court (SC) rejected all petitions against Gen. Musharraf and allowed him to contest presidential election in army uniform; (2) the appointment of Gen. Pervez Ashfaq Kiyani as Vice Chief of Army Staff and then Chief of Army Staff when Musharraf doff his army uniform in near future; (3) the general amnesty to all politicians for the period from 1986 to 1999 vide National Reconciliation Ordinance (NRO) and last but not the least presidential election held on due date on October 06 after SC permission

Now President Musharraf had been re-elected for the next tenure with majority votes, according to the media reports. And the power-sharing deal between Benazir Bhuttoo and President Musharraf had already been announced done. This newly developed situation turned uncertainty on the political front into the investment-friendly atmosphere at KSE.

Almost all the favourite stocks in the limelight in financial, energy, fertilizer and telecom sectors were accumulated extensively. Therefore, OGDCL, PPL, POL, Engro Chemical, FFBQ, Lucky Cement, DG Khan Cement, NBP, MCB Bank and many more in front line and second tier stocks closed with inflated share price.

As far as the outgoing week (Oct 08 to 12) performance is concerned than KSE-100 index remained bullish for the seventh consecutive week and touched its all-time high at 14,486 level on Oct 09, 2007. During the outgoing week, market gained three per cent or 364 points to close at 14,463. Amid average daily volume reached its 12-week high and stood at 334 million shares.

KSE-100 jumps 1,600 points in Ramazan

 

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Afghan trade team to visit Lahore ​

LAHORE (October 14 2007): A high level private sector trade delegation from Afghanistan will visit Lahore after Eid-ul-Fitr to import Pakistan made diesel engines for agricultural purpose. Chief executive officer KAM Engineering, Engg Khalid Saeed Khan told APP here on Saturday that the Pakistan made KAM diesel engines have become very popular in Afghanistan, compared to all brands of those made in India, and are being successfully used for agricultural purposes.

He said the Afghan team will visit the state of the art plant and see the engine assembly process, using indigenous technical know-how and expertise, which has helped to control the price of the product with minimum overhead expenses.

In their war torn country, the Afghans are now inclined to bring maximum area under cultivation to meet the ever increasing need for food grains. For this purpose, they need quality agri inputs and implements, and Pakistan made products offer the guarantee to compete in terms of quality and price, said the firm's director marketing, Sh Amin Akhtar.

Business Recorder [Pakistan's First Financial Daily]

 

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Greek Company awarded contract for 220 megawatts power plant Phase-I ​

KARACHI (October 14 2007): The Karachi Electric Supply Corporation (KESC) has awarded the contract for Phase-I of the 220 MW power plant to METKA, EPC contractor, a Greek Company of international repute, whereas Phase-II for 565 MW is under process, it is reliably learnt.

The General Electric (GE) are the manufacturer of the 220 MW power plant consisting of four GTs of 50 MW each and one steam turbine would add approximately 20 MW. The EPC cost of the project is around 186 million dollars including approximately 11 million dollars for chiller equipment.

According to a source in KESC, the bids for new power plant Phase-II of approximately 565 MW are in the process of evaluation and the contract is likely to be finalised shortly. The new power plant project Phase-I and Phase-II would be financed through medium and long-term financing facilities from local and international financial institutions, in addition to equity injection, as under:

International Finance Corporation (IFC) 125 million dollars, Asian Development Bank (ADB) 150 million dollars, syndicate of local banks Rs 12,500 million, and equity financing by KES Power and Government of Pakistan through Redeemable Preference Shares (RPS) Rs 6,000 million.

These financing arrangements would be utilised in a phased manner according to the requirement of funds for Phase-I and Phase-II of the new power plant. The cost estimate and efficiency level of the new power plant favourably match rather excel the benchmarks set by National Electric Power Regulatory Authority (Nepra) and would as such be approved by Nepra.

The evaluation of bids had been carried out in a highly professional manner by the consultants of international repute. The contract with METKA has been legally examined through in-house lawyers as well as external experts on contract laws aiming at safeguarding interest of the Company.

The setting up of a new power plant had been one of the top priority areas of the new management from day one and various proposals had been under consideration. Siemens power plant of 830 MW was also evaluated but could not be finalised because of unfavourable delivery schedule. Advance payment of Euro 25 million to Siemens has been refunded except retention money of Euro four million, which would be received back shortly.

At the last extraordinary general meeting of KESC Ltd, the Chairman had informed that 75 percent of equity injection through RPS, viz Rs 4.5 billion would be contributed by the new owner. This is in addition to initial investment of 265 million dollars at the time of privatisation of the Company in November 2005.

The medium and long-term financing facilities of upto Rs 37 billion being availed from local and international financial institutions were successfully managed with the sponsors' support and guarantee. Insofar as retention of KESC shares by the new owner is concerned it is mandatory for them to hold majority shares in the capital of the Company, following the agreement with Government of Pakistan.

The extraordinary general meeting had resolved and approved issuance of additional share capital to IFC and ADB without making a right share. The turn around strategy devised and actively pursued by KESC management with the complete support of major shareholders, is likely to produce improved operational and financial results which would benefit all the stakeholders, especially the minority shareholders during the future years.

The subscription of shares by IFC and ADB, the Chairman believed, would send a positive signal to all stakeholders. Some of the benefits that will accrue to KESC would be that the equity investment from multilateral institutions would greatly enhance KESC's image and profile.

KESC could draw upon the resources, expertise and best practices from these financial institutions, as they have considerable utility experience in other countries. The services offered by IFC include a tariff rationalisation seminar based on experiences from financing of electric utilities eg in Brazil and India. Besides this a grant of seven to eight million dollars is being provided for financing low-income connection regularisation schemes.

Improvement in corporate governance, as these financial institutions will independently assess the KESC operations and will provide feedback for corrective actions, thereby improving the monitoring, financial reporting and evaluation system.

The rate offered on the long-term facility has been reduced during the construction phase and for the remaining period this saving in interest cost is considered as a premium paid by IFC/ADB for obtaining the loan to equity conversion option.

The estimated saving from reduction in interest rate would be 14.50 million dollars, and estimated saving due to reduction in outstanding balance, assuming option is exercised in 2010 would be 14.00 million dollars. The total savings would thus be 28.50 million dollars.

Business Recorder [Pakistan's First Financial Daily]