Pakistan Economy - News & Updates - Archive

[Neo]

Pak-Japan trade on the rise ​

Sunday, November 04, 2007

LAHORE: Pakistan, despite achieving excellent economic growth, could attract a meagre $164 million in Japanese foreign direct investment during the past five years mainly due to security concerns of Japanese investors.

Japanese Ambassador to Pakistan Seiji Kojima stated this while addressing Association for Overseas Technical Scholarship’s 8th SAFAAS Convention here.

He said though the security situation in Lahore was Ok and not so bad in Karachi, Islamabad and Faisalabad as reported in media but it acted as a main deterrent to investment. However, he added, the trade between the two countries was on the rise.

He said Japan exported goods worth $1.76 billion to Pakistan last year compared with only $208 million exports from Pakistan to Japan. Pakistan could increase its industrial and services exports by improving the quality of products, he suggested.

He said the Japanese government through its scholarship programme had upgraded the skills of more than 135,000 people from all over Asia. About 13,000 of them were from South Asia and 2,000 from Pakistan.

He said the reason for offering fewer scholarships in the region was that most of South Asia had closed economies.

The intra-regional trade in South Asia was also very low, he said and hoped the trade in the region would substantially increase under the South Asia Free Trade Agreement (SAFTA). He said with the opening of economies the number of scholarships for this region would also increase.

Engineering Development Board Chief Operating Officer Almas Hyder, on the occasion, said Pakistan had made commendable efforts for joining the globalisation process. The country has adequate infrastructure, energy and finances but it lacks skilled manpower which has deprived it of taking full advantage of high economic growth.

He said Pakistan needed support from economic giants like Japan for enhancing the skills of its human resource through increased scholarships.

Pak-Japan trade on the rise

 

[Neo]

Trade with China: Pakistan suffers trade deficit of $2.957bn​

ISLAMABAD: Trading with China has given Pakistan a trade deficit of $2.957 billion during the fiscal year 2006-07, Daily Times found out on Saturday.

Pakistan’s exports to China amounted to $575.903 million as compared to the imports from China of $3.533 billion leaving a trade deficit of $2.957 billion during July-June period of the last fiscal year.

The figures are based on trade under Preferential Trade Agreement (PTA) and an Early Harvest Programme leading to Free Trade Agreement (FTA) between the two countries and now both the countries have entered into a FTA operational with effect from July 1, 2007.

According to details regarding the bilateral trade, Pakistan has been unable to benefit the trade with its friendly neighbour China as Pakistan has suffered a trade deficit of $7.552 billion during the last four fiscal years (2003-2007). During the last four years Pakistan’s total exports to China amounted to $1.682 billion as against the imports from China worth $9.233 billion during 2003-07.

According to yearly details of bilateral trade for the fiscal year 2005-06, total exports to China were $463.919 million as compared to imports of $2.705 billion projecting a trade deficit of $2.242 billion.

A trade deficit of $1.488 billion was the result of bilateral trade during the fiscal year 2004-05 when Pakistan’s exports amounted to $354.092 million as compared to the imports worth $1.842 billion from China in this fiscal year.

By the end of fiscal year 2003-04 Pakistan’s exports to China were $288.259 million and imports from China stood at $1.153 billion, which resulted into a trade deficit of $865.211 million.

Five-Year Development Programme on Trade and Economic Cooperation between Pakistan and China signed between the two countries seeks further liberalisation of bilateral trade under FTA and taking bilateral trade to about $15 billion by the fifth year of five-year programme 2007-2011. The five-year programme is expected to continuously deepen and give major boost to China-Pakistan bilateral and economic cooperation and trade.

By the fiscal year 2010-11 Pakistan’s exports to China would be $15 billion. Special Chinese Economic Zones are being set up in Pakistan to allow Chinese investors to set up export-oriented industries and tap potential of the local market as well as regional exports markets.

An understanding reached between the two countries reveals that bilateral trade between China and Pakistan would be made equally beneficial and both the countries would ensure equal amount of imports as well as exports. Some key importers from China have recently visited Pakistan and had held negotiations with local producers of raw materials as well as semi-finished products so that imports from Pakistan are enhanced to equalise the trade balance between the two countries.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

MoU signed for 600 MW coal-powered plant​

KARACHI: Sindh Coal Authority and Sindh Corbon Energy (Pvt) Ltd signed a memorandum of understand (MoU) on Friday for setting up a 600 MW coal-powered plant in Thar area.

Director Shah Rukh signed the MoU on behalf of Corbon Energy Ltd while Sindh Coal Authority was represented by DG Mines Syed Abbas Ali Shah.

In a briefing to the minister on the occasion, it was informed that in the first phase, Sindh Corbon Ltd would set up a 300 MW coal-powered plant in Block-VI at a cost of $350 million while $250 million would be spent on the second phase of 300 MW plant.

Talking to the company officers, Minister for Mines Irfanullah Khan Marwat welcomed them and asked them to start work and said the government will extend them all cooperation.

He said this plant would greatly help overcome the power crisis besides flow of large-scale investment into Sindh Province and availability of employment to jobless while the Tharis would be the higher beneficiaries.

Mr Marwat said the signing of agreements for installation of coal power plant would bring a major revolution in the country and a new Thar will emerge.

He said the foremost effort of the government is that all coal plants start operations on their schedule. app

Daily Times - Leading News Resource of Pakistan

 

[Neo]

50,000 villages electrified in last four years, says PM​

ISLAMABAD: Prime Minister Shaukat Aziz has said that the government has electrified 50,000 villages in the last four years whereas previous governments had electrified 10,000 villages only.

The prime minister said this while talking to Federal Minister for Petroleum Liaquat Ali Jatoi, who called on him at the Prime Minister’s House on Saturday. He said the growing demand of electricity in the rural areas had increase manifold due to rapid economic growth and improvement in the standard of living of the people.

Jatoi briefed the prime minister about the new power generation projects and said that financial close for 775 MW of new projects had been achieved in the private sector and that several new projects in the private sector were underway to produce a total of 2,000 MW of electricity to meet the growing demand, which would yield $ 2 billion in the power sector.

He said that eleven new hydel projects were being planned in the private sector through the Private Power and Infrastructure Board (PPIB), which would produce an additional 2,500 MW to meet surging demand of electricity across the country including industrial, domestic and agricultural needs.

Aziz also reviewed the water situation and expressed satisfaction that enough water was available in the storages both at the Mangla and Tarbela Dams to meet the needs of the Rabi-Crops.

He emphasised the need for better management and conservation practices in distribution of water at the provincial level so that farmers particularly those at the tail end could get adequate water for their irrigation needs.

It was noted during the meeting that water distribution under Indus River System Authority (IRSA) accord was proceeding satisfactorily as demanded by the provinces. It was also noted that share of the NWFP and Baluchistan province had been enhanced to meet their growing needs, which would further increase their agricultural output, enhance their income and create more job opportunities.

The prime minister said that because of structural reforms agenda and macro-economic policies undertaken by the government, the economic outlook had changed completely. The middle class, he said, was expanding, level of poverty was on decline thus enhancing the buying power of the people resulting in more household appliances and increase in demand for electricity. Record development had taken place both in rural and urban areas during this government’s tenure, he added.

The prime minister said that thousands of villages had been provided electricity under Khushal Pakistan Programme besides making provision of electricity for tube wells for agricultural purposes.

The government intended to provide electricity to all areas of the country by the end of the year 2007, he said, adding that the number of tube wells installed during the last four years was around 45,000, which was a record in the sector.

Aziz expressed hope that in the upcoming general elections, the Pakistan Muslim League (PML) and its allies would succeed on the basis of good governance and record development projects. He said people wanted continuity of policies and leadership to ensure continuity of growth and development.

Jatoi updated the prime minister about various initiatives undertaken by his ministry for new projects and for improving the existing ones so as to bridge the gap between demand and supply of electricity. He also updated the prime minister about the status of ongoing development projects initiated in his constituency. The completion of the projects would bring further improvement in the living standards of the people, Jatoi added. nni

Daily Times - Leading News Resource of Pakistan

 

[Neo]

Seafood export up 105 percent in September ​

KARACHI (November 04 2007): Despite European Union ban, export of fish and its preparations grew by 18.223 million dollars - 105 percent - during September 2007 as compared to 8.907 million dollars in August 2007. Talking to Business Recorder on Saturday, seafood exporters linked the growth with the available catch of August, which could not be exported during that period.

However, they expressed dissatisfaction over the continued EU ban on seafood for the last nine months, pulling down export significantly. "Efforts are not being made sincerely by Marine Fisheries Department (MFD) to get this ban lifted," they alleged.

According to official statistics, the export of fish and its preparations grew by 18.223 million dollars in September 2007 as compared to 8.907 million dollars in August 2007, registering a robust growth of 9.316 million dollars or 105 percent.

However, during the first three months (July-September) of the current fiscal year, export of these items slumped by 11.083 million dollars or 24.36 percent. The export of fish and its preparations shrank to 34.415 million dollars during first three months of the current fiscal year as compared to 45.498 million dollars during the same period of the 2006 fiscal year.

On yearly basis, the export of fish and its preparations also came down by 1.524 million dollars or eight percent during September 2007 as compared to 19.747 million dollars during the same period of the 2006 fiscal year.

"The MFD's newly designated chief does not have any expertise in the field of fisheries and is taking illogical and arbitrary decisions due to which exporters are facing severe problems," said Pakistan Seafood Industries Association Chairman Hanif Khan. About growth in seafood exports during September, he said that though export to the EU was not allowed, it was being made to several other countries in the Far East and the Middle East.

He said the EU ban on the seafood export was unjustified because the export to Japan, China, Egypt, South Africa etc, was being made on a regular basis and these countries never complained about issues raised by the EU.

Criticising the EU ban, he called it a black law, which should not be imposed on raw items as its limits were confined only to finish products and the EU should review its ill-perceived restrictions. Hanif said that local exporters were complying with the general manufacturing practices (GMP) to ensure the safety and hygiene of seafood products.

Business Recorder [Pakistan's First Financial Daily]

 

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Fiscal Year 2007: machinery import growth down to 8.1 percent ​

KARACHI (November 04 2007): Machinery import growth fell to 8.1 percent during FY07 from 40.6 percent of previous year mainly due to low imports of motor vehicles, textile and telecom machinery. The State Bank data shows that overall machinery imports amounted to $8.999 billion during fiscal year 2000-07 as compared to $8.323 billion during of 2005-06.

In fact, machinery import other than aircraft amounted to 2.6 percent during FY07. The State Bank said that whereas there was decline in motor vehicles, textile machinery and telecom and electrical machinery imports, which together constituted 52 percent of overall machinery imports, there was increase in power generation, agriculture and construction machinery according to the needs of the fast growing domestic economy.

There was robust growth for the third successive year in the import of power generating machinery recorded, at 44.8 percent to $740 million. The imports of construction and mining machinery also registered robust growth of 16.9 percent against 35.2 percent of FY06.

Textile machinery import declined by 38.5 percent to $502 million as against the decline of 12.0 percent to 817 million dollars in FY06. Office machinery imports stood at 309 million dollars, construction and mining at 222 million dollars, electrical machinery & apparatus 651 million dollars, railway vehicles 37 million dollars, road motor vehicles 1.342 billion dollars, aircraft, ships and boats 934 million dollars and import of agricultural machinery & implements stood at 166 million dollars.

As a result of increase in imports of tractors for the third year in a row, the import of agriculture machinery recorded 17.7 percent growth during FY07 as compared to 91.7 percent and 95.8 percent growth during FY06 and FY05 respectively.

Business Recorder [Pakistan's First Financial Daily]

 

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SME industrial estates to be set up in major Punjab towns ​

SIALKOT (November 04 2007): The Punjab government has evolved a strategy for the establishment of SME industrial estates in Punjab. Business Recorder learnt through reliable sources here on Saturday that under the plan, the SME industrial estates would be set up in major industrial towns, including Sialkot and work on the plan would be executed in near future.

The step was being taken for the redress of the problems being confronted by the SME sector, which is the backbone of the national economy of the country. All basic facilities would be ensured to the SMEs in these proposed SME estates, sources said.

Special focus was also being accorded on the development of industrial sector on modern and scientific lines aimed at tracking it modern production lines aimed at enhancing export volume and bringing industrial revolution by setting up large-scale industries, including agro-based industries in the province.

Under the programme, the provincial government has introduced certain schemes for the development of small and medium industries besides loan facilities was being extended to the small and medium businessmen enabling them to upgrade their industrial units for setting up new industrial projects in the Punjab.

More than Rs 1 billion had been set aside for diminish the financial problems being faced by the businessmen engaged with small and medium industries as well as for removing the hitches which were hindering the process of setting up of new industrial projects.

Apart from this, the government was also providing loan facilities for the advancement and expansion of agro-based industries and dairy development, engineering and information technology in the province.

The prime aim of setting up of large-scale industries was to ensure strong industrial base and keep the economic wheel moving in the province. The maximum establishment of industries will not only help in doubling the export volume, but also create wide job opportunities for the educated, skilled and unskilled labour, sources added.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Pakistan an emerging hub of IT in future: experts ​

WASHINGTON (November 04 2007): Pakistan has a lot of encouraging factors to emerge as a new hub of information technology growth in the next five years, prominent IT experts and global studies that also take into account geo-strategic challenges, say in their latest assessments.

"The prospects remain bright because the fundamentals of the Pakistani economy are solid and the country is expected to sustain high levels of investment and capital inflow, chief executive officer of a California-based company that pioneered IT services business in Pakistan, said in an interview.

Backing up his optimism with his long experience, international trends and global IT companies' search for English speaking workforce for their fast-paced growth, Najeeb Ghauri, the head of Netsol Technologies, says Pakistan can gain its rightful share in the bulging world market.

On the economic front, continued upbeat performance rising investment, a 7 percent average growth, healthy foreign exchange reserves level, soaring home remittances - and global financial institutions forecast of sustained high growth in the medium-term reinforce Ghauris confident outlook.

He said that maintaining political stability and overcoming security challenges will be important to lending further appeal to Pakistan's status as an emerging economy and further bolstering international investor confidence.

"So coming few months will be very important -- but overall the picture is hopeful as far as IT growth is concerned, said Ghauri, whose company expanded its business to one billion rupees in Pakistan last year. According to A T Kearney Global Services Location Index 2007, Pakistan is listed among countries holding out a vast potential and being financially more attractive than some major current destinations while an international study last year rated Pakistan as a major IT business hub in half a decade.

Highlighting advantages the South Asian country offers in terms of its skilled, English proficient yet inexpensive human resource, some of the ingredients considered vital to prospering the IT business, experts put Pakistan ahead of India and China as it also offers increasingly open and well-regulated business environment, Pakistan's exports of IT and services have grown by 50 percent year-on-year for the last three years. An upcoming 17-storey IT park in Lahore and growing software companies in Karachi symbolise the country's aspiration to advance in the futuristic field.

Pakistan Software Export Board now has an ambitious target to boost exports of software, services, call centres and BPO from US $1.4 billion in the fiscal year ended June to about $4.5 billion by 2010. By then, the overall IT and services industry in the country is also expected to grow to $10 billion from the current $2.4 billion a year.

A key advantage that ranks the country ahead of even bigger regional economies is the human capital the South Asian country boasts of in the long-term perspective. About 100 million of its 160 million people are aged below 25 years and with proliferation of IT institutions and infrastructure, a huge number is likely to go for the attractive profession.

Acknowledging the demographic advantage, a leading American entrepreneur told Pakistan's top economic managers in Washington that the country would have the second largest English-conversant population outside the English-speaking world.

Najeeb Ghauri, who is founding member of the US-Pakistan Business Council, says efforts are also underway to foster a better relationship with US companies as a number of them show keen interest in availing opportunities that most notably include services and financial sector. His own Nestol Technologies is slated to launch local public sector, e-government services.

Besides, Pakistan is also striving to enter the offshoring marketplace largely through contact centers and back-office services. Companies have set up approximately 100 contact centers in the country in the past three years. In addition to telemarketing, Pakistani workers provide payroll, accounting and human resources work.

However, the country also needs to establish quality higher education centers to rise to international expectations and demands over the longer-term, stresses Ghauri, who is a member of Pakistan Human Development Fund.

In addition, Pakistani professionals' greater international exposure , he feels, can also enhance its status as an emerging IT hub. In this context, he agrees to the idea of invigorating efforts to maximise the number of H1-B category American visas for Pakistani professionals since that will help market the country's potential and also improve its image.

Business Recorder [Pakistan's First Financial Daily]

 

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'Punjab Internet City' to be established ​

LAHORE (November 03 2007): Punjab government will establish 'Punjab Internet City' with a cost of Rs 1.28 billion near Kala Shah Kaku where local and foreign IT companies would be provided land to enhance direct foreign investment, strengthen international links and promote industrial sector.

This was stated by the Punjab Chief Minister, Pervaiz Elahi while chairing a meeting of the Punjab Information Technology Board (PITB) here on Friday. Elahi said that a 17-storey Software Technology Park was also being constructed in Lahore to expedite the pace of investment in the IT sector and enhance international links besides creating job opportunities for 10,000 people.

He added that 40,000 people have been provided IT training in the province. He said it was a good omen that international companies were taking special interest for investment in the IT sector in Punjab. PITB Chairman, Rizwan Amin Shaikh said in a briefing that 100,000 people would get training in IT in the second phase in 35 districts of the province.

Chief Secretary Punjab Salman Siddique, Chairman P&D Suleman Ghani, Secretary Finance Sohail Ahmed, Secretary Home Khusro Pervez, Chairman Punjab Information Technology Board Rizwan Amin Shaikh, Fast Director Professor Dr Qaiser Durrani and other board members also attended the meeting.

Business Recorder [Pakistan's First Financial Daily]

 

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Microsoft launches genuine software initiative in Pakistan ​

KARACHI (November 03 2007): Microsoft, the global software leader on Friday announced its genuine software initiative programme in Pakistan, aimed at checking software piracy through education and engineering measures.

"Piracy has become a significant issue in Pakistan with eight out of 10 software being used illegally and incurring $143 million loss to the country's IT industry," said Farhan Junejo, License Compliance Manager, Microsoft-Pakistan.

Microsoft will raise awareness among computer users and pirated CDs sellers about the benefits of licensed software and its recognition through education," he said in a press statement issued here. "We will also inform the end-users and resellers about the risks associated with the illegal software," he added.

Through engineering measures, Farhan said, "Microsoft will make greater investment in anti-counterfeiting technologies and product features that are harder to break by pirates." The new technology will also alert the computer users about the presence of pirated software on their systems, if any, he added.

Farhan cautioned that pirated software is a risky affair for the computer users, because it may result in criminal and financial penalties for violation of the copyright law. Executives of the company may also be held individually liable for any copyright infringement within that organisation, he added.

Furthermore, the businesses using unlicensed software are unable to receive valuable product updates that protect the genuine software users from security threats such as viruses, he said.

The persons using non-genuine software are also ineligible for any technical support, when the software develops some fault, he said. Ultimately, businesses that install unlicensed software run the risk of their workforce productivity loss and damage to their reputation, he added.

Farhan has advised businesses to protect themselves from counterfeiters by purchasing software from authorised resellers operating in all the major cities. The customers can also ensure they are purchasing the original software by demanding its Certificate of Authenticity, he added. He said piracy is affecting the global $175 billion software industry, which employs 2.3 million people around the world. Only last year the software industry lost about $40 billion to global software piracy, he added. Farhan hoped the microsoft genuine software initiative being launched in the piracy prone countries will go a long way in reducing current global piracy rate of 35 percent.

Business Recorder [Pakistan's First Financial Daily]

 

[Interceptor]

50,000 villages electrified in last four years, says PM​

ISLAMABAD: Prime Minister Shaukat Aziz has said that the government has electrified 50,000 villages in the last four years whereas previous governments had electrified 10,000 villages only.

The prime minister said this while talking to Federal Minister for Petroleum Liaquat Ali Jatoi, who called on him at the Prime Minister’s House on Saturday. He said the growing demand of electricity in the rural areas had increase manifold due to rapid economic growth and improvement in the standard of living of the people.

Jatoi briefed the prime minister about the new power generation projects and said that financial close for 775 MW of new projects had been achieved in the private sector and that several new projects in the private sector were underway to produce a total of 2,000 MW of electricity to meet the growing demand, which would yield $ 2 billion in the power sector.

He said that eleven new hydel projects were being planned in the private sector through the Private Power and Infrastructure Board (PPIB), which would produce an additional 2,500 MW to meet surging demand of electricity across the country including industrial, domestic and agricultural needs.

Aziz also reviewed the water situation and expressed satisfaction that enough water was available in the storages both at the Mangla and Tarbela Dams to meet the needs of the Rabi-Crops.

He emphasised the need for better management and conservation practices in distribution of water at the provincial level so that farmers particularly those at the tail end could get adequate water for their irrigation needs.

It was noted during the meeting that water distribution under Indus River System Authority (IRSA) accord was proceeding satisfactorily as demanded by the provinces. It was also noted that share of the NWFP and Baluchistan province had been enhanced to meet their growing needs, which would further increase their agricultural output, enhance their income and create more job opportunities.

The prime minister said that because of structural reforms agenda and macro-economic policies undertaken by the government, the economic outlook had changed completely. The middle class, he said, was expanding, level of poverty was on decline thus enhancing the buying power of the people resulting in more household appliances and increase in demand for electricity. Record development had taken place both in rural and urban areas during this government’s tenure, he added.

The prime minister said that thousands of villages had been provided electricity under Khushal Pakistan Programme besides making provision of electricity for tube wells for agricultural purposes.

The government intended to provide electricity to all areas of the country by the end of the year 2007, he said, adding that the number of tube wells installed during the last four years was around 45,000, which was a record in the sector.

Aziz expressed hope that in the upcoming general elections, the Pakistan Muslim League (PML) and its allies would succeed on the basis of good governance and record development projects. He said people wanted continuity of policies and leadership to ensure continuity of growth and development.

Jatoi updated the prime minister about various initiatives undertaken by his ministry for new projects and for improving the existing ones so as to bridge the gap between demand and supply of electricity. He also updated the prime minister about the status of ongoing development projects initiated in his constituency. The completion of the projects would bring further improvement in the living standards of the people, Jatoi added. nni

Daily Times - Leading News Resource of Pakistan

Thats propaganda there is shortage of electricity how in the hell did they find excess electricity.

 

[Neo]

Thats propaganda there is shortage of electricity how in the hell did they find excess electricity.

Its no propaganda mate, the programme is well supported and ducumented by ADB.
But I agree it doesn't rhyme with the mega shortage we're facing in major cities like Karachi.

 

[Interceptor]

Its no propaganda mate, the programme is well supported and ducumented by ADB.
But I agree it doesn't rhyme with the mega shortage we're facing in major cities like Karachi.

Its just propaganda people are sleeping on the streets of Karachi and its like this across every city in Pakistan when its summer.

There are no projects that spell this.

They haven't even aided the Kashmir's and the only thing they are doing is selling Pakistani assets and from that money they then are fixing a road building a bridge polishing a lantern poll.

 

[Neo]

Governance reforms: melting resistance to change​

The Punjab government is all set to receive a soft term credit facility to the tune of $1.550 billion from the Asian Development Bank (ADB) to be disbursed over a period of five years for deepening the governance and economic reforms initiated in 2004, achieve the Millennium Development Goals (MDGs) and to improve administration of justice in the province.

Out of the total loan amount, the Manila-based multilateral lender is providing $750 million to the province for undertaking the second phase of its economic and governance reforms under the umbrella of its flagship – the Punjab Resource Management Programme (PRMP). Launched in the late 2003 to carry out policy reforms to improve governance for rapid economic growth, the PRMP, in the words of senior ADB official Ramesh Subramaniam, is regarded within the bank as a model programme for its replication in other parts of the world in future.

Another $400 million will be provided to the province for improving the administration of justice. The previous financial assistance provided by the bank under this programme, according to officials, could not produce the desired results because it was carried out through the federal government.

“It is now being felt at the ADB that the programme will give better results if the access to justice reforms programme is implemented directly by province (under the direct guidance of high court) itself,” says an official involved in loan negotiations with the lender.

The remaining sum of $400 million will be disbursed to Punjab to facilitate its effort to achieve the MDGs, which the government has repeatedly claimed in the recent past to achieve in all areas except in public health care.

The provincial government completed in March this year the first phase of governance and economic reforms programme with the financial assistance of $400 million from the ADB. Some of the achievements of that reforms programme include the development of strategies for managing province’s huge expensive debt accumulated in the 1990s, reducing incidence of poverty (Punjab-Poverty Reduction Strategy Paper) and enhancing spending on areas and sectors that can have greatest impact on poverty (Poverty Focused Investment Strategy).

In order to ensure the critical elements of continuity and certainty in the availability of resources for the medium term (three years) development projects, the Medium Term Development Framework (MTDF) was devised. Planning and budgeting processes were linked together through Medium Term Budgetary Framework (MTBF).

Other important achievements included establishment of a pension fund and a GPIF to make the pension and provident fund liability a self-sustaining, off-the-budget item with a view to freeing up financial resources for enhanced spending on pro-poor social and economic sectors. A provincial procurement authority has also been set up.

In the second phase of its reforms programme, government plans to improve provincial public pension and GP fund administration, strengthen linkages between budgeting and expenditure and planning over a medium-term of three years through the development of a Medium Term Expenditure Framework (MTEF), undertake provincial civil service reforms with a view to improve the efficiency and output of provincial bureaucracy for better public service delivery and facilitate growth of private sector as engine of economic growth and as a partner of the government in the provision of quality services to the people of the province.

The PRMP reforms programme seeks to reduce poverty through substantial improvement in public service delivery in the province with particular focus on pro-poor sectors by restructuring the systems and the government’s business processes for efficient and effective management of public resources. The focus of these reforms remains capacity building and effective use of people – both civil servants responsible for delivering services to the people, restructuring of institutions and their functions, creation of fiscal space for rescuing resources for pro-poor sectors.

The provincial government used the major portion of the loan – around 80 per cent of the proceeds – received during the first phase of the reforms programme to retire expensive federal cash development loans (CDLs) to create fiscal space for increased spending on the pro-poor sectors.

The loan to be received by government for the second phase of reforms programme – to be called as the Punjab Government Efficiency Improvement Programme (PGEIP) – will also be used to swap the expensive federal loans and capitalise the recently established provincial pension fund as well as the General Provident Investment Fund (GPIF).

Officials admit that there has been a strong resistance to reforms programme, but say, the situation is changing fast. “It is not easy to reform or change; to get the people agree to change is always the most difficult part of any reforms programme. But the situation is changing and departments have begun to own the reforms agenda,” says a senior PRMP official.

“We have been asked to carry out comprehensive assessment of the reforms implemented so far so that we know as to how much distance has been covered and how much is yet to be covered,” he says. “Several departments also want it. That reflects a change in the mindset within government.”

In spite of different development initiatives in social and economic sectors and an expensive image-building media campaign run by government to project its achievements ahead of this year’s general elections, Punjab’s development level remains far below its actual potential and social indicators continue to lag.

The Pakistan People’s Party alleges that the governing Pakistan Muslim League has already spent Rs8 billion – Rs5 billion during three months from July to September alone – on the

Continued on P.IV

Governance reforms: melting resistance to change -DAWN - Business; November 05, 2007

 

[Neo]

Concerns in the growth profile​

Business leaders, bankers and economists share concerns with the State Bank of Pakistan (SBP) over the emerging challenges facing the national economy — a stubbornly high inflation, widening of current account deficit, sluggish export growth and mounting debt servicing liability — well-articulated in its 2006-07 annual report, released last week.

However, they do not draw the same level of satisfaction as expressed by the central bank on ‘’investment-led growth of seven per cent a year for the third consecutive year in 2006-2007,” simply because its sustainability is now a big question mark.

‘’Investment mainly flowed in services sector---banking, insurance and telecom---and is almost touching a saturation point’’, Asad Saeed, an economic consultant observed while expressing doubts whether more investment will come in these sectors in the coming days. The President of the Federation of Pakistan Chambers of Commerce and Industry, Mr Tanvir Sheikh wondered as to how the private sector’s demand for bank credit has fallen when investment is driving the economic growth.

‘ ‘It is because giant telecom companies, big banks and insurance companies have managed to get loans from lending consortia for their investment on a reasonably good discount rate on the basis of big volume of their business. But many of the textiles and other businesses could not obtain such concessions and hence a fall in private credit demand; the 14 per cent plus interest rate is too much,’’ Majyd Aziz, a former President of Karachi Chamber of Commerce and Industry explained.

The unusual high growth in services sector has emerged as a conspicuous factor in the economy that has attracted businessmen as well as economists. The SBP report points out that services sector has proved its significance in the economic growth during the past few years with its share reaching an all-time high of 53.3 per cent. But the bottom line of the report is, ‘’the data compilation process is not in line with the importance of the sector’’.

Not many businessmen and economists however draw any satisfaction from the fact given in the

SBP report that services sector is now 53.3 per cent of the national economy. It showed eight per cent growth in 2006-07 against a target of 7.1 per cent. It was more than 9.6 per cent in 2005-06. Industry was targeted to grow at 9.1 in 2006-07 against which it grew by 6.8 per cent. Agriculture was expected to grow by 4.5 but showed a growth of five per cent. In short, the commodity sectors were projected to grow by seven per cent but grew by six. The President FPCCI said that growth in non -commodity sector is always inflationary. It should be in consistence with the growth in real commodity sectors.

‘ ‘We have a hollow commodity sector’’, Asad Saeed observes while pointing out that India and China depend a lot on their commodity sector--agriculture and industry-for their sustainable growth. Bangladesh and Sri Lanka enjoy international community support and show good export growth. ‘’We have a demoralised business community, an expansionary fiscal policy and we do not enjoy that level of support from international community as being given to our neighbours’’ a business leader with known political affiliations with ruling Muslim League said.

‘’Ours is still a one-off economy’’ Asad remarked, quoting instances when a growth in livestock pulled up the entire agriculture sector in a year or privatisation proceeds helped balance off the payments in external sector. In 2006-07 it was 17.2 per cent growth in construction that gave some respectable growth number to industry. All these gimmicks put to doubt the sustainability of the economic growth.

‘ “One point of concern in the growth profile is the greater reliance on exceptional growth in key sub-sectors of the economy; ‘’ is how the State Bank has observed in its report on the performance of the national economy. In the services sector, banks and insurance contributed 18.2 in 2006-07 as against 33 per cent a year earlier-- in 2005-06. A growth of 6.9 per cent in public administration and defence is the other sub- sector which contributed in overall eight per cent growth of the services sector. This sub sector---public administration and defence---grew by 10 per cent in 2005-06.

In the five per cent growth of agriculture, major crops that include cotton, sugar cane, rice, maize and wheat contributed 7.6 per cent during 2006-07. But market sources question the growth figures of these crops. The

SBP report endorses government assessment of 23.5 million tons of wheat. But traders and millers put this figure at hardly 20 million tons as wheat supply has already become scarce and prices of wheat flour is Rs21 a kilogramme in the market. So is the case with other crops-- rice and cotton.

A conspicuous feature is the lower 6.8 industrial growth in 2006-07 and a negative growth in electricity and gas distribution. Electricity and gas distribution also showed a fall of 23.8 per cent in 2005-06.. In face of this marked depletion of energy supply, manufacturing grew by 8.4 in 2006-07 and by 10 per cent in 05-06. ‘’Call it economy of energy in the industry’’ a leader of SITE Association explained.

The SBP’s outlook for 2007-08 crops is ‘’positive’’. But reports emerging from different parts of the country do not support the central bank’s optimism. Two main crops-- cotton and rice-- are under pests and viral attack. The textile industry is thinking of importing hree million bales of cotton. The decline in rice crop will affect export and its price in local market is bound to go up.

Majyd Aziz hopes for some revival of value added textile sector from this month. According to him garment exporters have started booking some orders and he hopes more orders will follow. Fawad Ejaz of leather garments industry is somewhat hopeful as after months, the leather garments export showed improvement for the first time in September this year. The government offered six per cent research and development rebate to shoe makers in January last year. He hopes that this concession will start showing results. The industry is asking for same concessions for leather garments for which a representation has been made to the government.

There are doubts on harvesting a 24 million tons wheat crop next season. Fearing a further price spiral, the government on Wednesday put off the decision to offer Rs500 for 40 kilogramme wheat procurement price to growers. Farmers are demoralised and may not sow wheat in many areas..

On the food inflation, the SBP report has sounded a warning. It concedes the food inflation remained high throughout the fiscal 2006-07 due to a number of supply shocks in commodities such as wheat, sugar, vegetables. ‘’This stubbornly high food inflation has raised the suspicion that impact of supply shocks may bring about a permanent increase in underlying inflationary pressures---a phenomenon known as second round effect,’’ said the report. While launching the annual report at a press conference last Monday, the SBP Governor Dr Shamshad Akhtar did not mince words to warn about, ‘’further inflationary risks’’ in days to come particularly because of the rising international oil prices. Government circles say that the 2007-08 budget was drawn up on assumption of international oil prices at $57--58 a barrel. Now that it is fast approaching $100 a barrel. Analysts fear that government may have little choice but to pass on the impact of high international prices on to the consumers if petroleum development surcharge proves insufficient to keep prices stable.

Another alarming feature of the report is 10 per cent rise in the stock of debt and liabilities to more than Rs5 trillion. ‘’The major causative factors for this increase in the total debt and liability stock were the rising level of the current account deficit and a large fiscal deficit that raised the financing needs of the country’’, the report says. Euro bonds and ‘Sukuk’ were the convenient tools for government to offset the current account deficits which are approaching maturity period for repayment in next few years.

All these issues and concerns articulated in the SBP report have not evoked enough response from the government as electioneering is gradually setting in and businessmen and economists fear the economic situation might worsen if no contingency action plan is drawn up and put into operation in next few months.

Concerns in the growth profile -DAWN - Business; November 05, 2007