Pakistan Economy - News & Updates - Archive

[Neo]

Investment boom amid political shadows​

As gunship helicopters start to hover over the scenic Swat valley, multiple suicide bombers strike at different locations and nation waits for the Supreme Court to render its decision regarding the legality of Pervez Musharraf’s re-election, Islamabad is rife with rumours. Political scene is too captivating for people to spare a thought for economy.

The tale, therefore, of a galloping Pakistani economy growing at over seven per cent told by the State Bank in its annual report, released last week, failed to lift the sagging spirits of local manufacturing classes strained by fears, uncertainty and real or perceived economic hardships.

It is more intriguing than interesting that a record level of investment that elevated the total investment to GDP ratio to 23 per cent in FY07 up from 21.7 per cent in 2006 failed to excite the local private sector players who are supposed to act as engines to keep the growth on track.

The State Bank of Pakistan current annual report, however, calls the investment trend ‘impressive’ that it says “is a result of continued strength of domestic demand, a sharp rise in foreign direct investment as well as a healthy increase in public sector development programme”. It hails the economic policies being pursued when it states: “these have successfully transformed the initial consumption-led growth impetus of a few years back to a greater role for sustainable investment-led growth”.

A closer look at the composition of sectors feeding into making of remarkable 23 per cent investment rate clearly demonstrated that record FDI $5.1 billion (above three trillion in rupees) committed in a variety of sectors, over the year 2006-07, contributed substantially to investment numbers.

In the banking sector acquisition of Union Bank by Standard Chartered Bank, of the Prime Bank by ABN Amro Bank, of the Crescent Bank by the Samba Group of Saudi Arabia, etc also contributed. In the telecommunication sector all major international companies’ (Telenor, Warid, etc) injected new investment to outsmart their competitors in massive Pakistani market. Other sectors that foreigners found attractive were oil and gas exploration, construction, and retail business.

This investment played a deciding role in pulling investment ratios up as percentage of the GDP. Besides, there was a massive rise in portfolio investment that is currently at record levels. The government claims that public sector spending in infrastructural project has also made a contribution in arriving at magnificent numbers.

Leaders of the multinationals belonging to companies instrumental in realisation of strong investment figures were away and not available to comment on the sustainability of the trend. “The head of American Business Council Iqbal Bengali and President of Overseas Chamber of Commerce and Industry Zubyr Soomro are out of country and cannot be reached for comments on a short notice” Hasan Kemal of ABC told Dawn.

The local private sector representatives, reached by Dawn in different cities were nervous when not depressed. “When investment is not directed towards industry in the milieu of Pakistan it will not be sustainable” Tanvir Sheikh President Federation of Pakistan Chamber of Commerce and Industry responded. “The real wealth of the country is not increasing as a huge percentage of investment made is repatriated by the foreign companies in form of profits and dividends”, he said sounding unhappy with the policies that he felt ignored local manufacturers and indigenous entrepreneur class.

Shafqat Ellahi, Chairman All Pakistan Textile Mills Association said from Lahore that it is hard for him to make a generalised comment on the composition of the trend of investment and the prospects of the sustainability of the trend. “In textile, the investment has dwindled by no less than 50 per cent for a variety of reasons”, he said. “The investment is concentrated in areas where the government has engineered good returns such as banking”, he said hinting at government’s soft policies towards certain sectors.

He still commended the government for achieving good investment rates and felt that the local players in manufacturing sectors share part of the blame for their weak contribution, as they, in his view, are still largely export oriented and have failed to realise the potential of the domestic market.

“We will have to find ways to capitalise on highly favourable demography of the country. About 100 million strong people are under 30 years and they are out there in the market waiting for us to provide them viable new options. The government and the private sector need to meet the challenge head on. So far we operate as the government does in our own domains for provision of utilities and security. That is an expensive proposition for a sector operating on narrow margin”.

“Unfortunately, we are compromising our future without much ado. The growth of large scale manufacturing has declined from 10.7 to 8.8 per cent. Still the attempt is to paint a rosy picture. When investment is limited to a narrow band of sectors and that too in services primarily, in my view, the robust investment trend will not be sustainable in the long run”, Ameen Bandukhda, an industry leader from Karachi told Dawn.

“This is also a period when the private sector credit off take has actually dwindled”, he said.

“The strong investment led by foreign companies reflects the confidence of shrewd, trained globe-trotting international investor is an expression of their confivdence in Pakistan and their approval of economic policies being pursued by the present government” Dr Salman Shah, a government economic wizard told Dawn recently.

Commenting on the deceleration in large scale manufacturing the SBP annual report says: “LSM growth appears to reflect a broad moderation in external and domestic aggregate demand, as well as capacity and input constraints in some industries. The textile sector contributed almost a quarter of the increase in value-addition in LSM during FY07”.

Contrary to observations of the private sector, the annual report finds the growth momentum sustainable on the strength of persistent increase in real investment.

The contribution of the portfolio investment was particularly found by most commentators to be symptom of higher availability of liquidity globally. “There is a lot of cash roaming around internationally in search of respectable returns. We cannot count too much on this kind of investment either. These investments are footloose and can leave at will”, an analyst said referring to the role of portfolio investment in the 1990s East Asian crisis.

The political mess needs to be cleared up, the threat of violence handled in way that atmosphere of distrust recedes. The situation is tumultuous. A transparent transition to civilian rule can rekindle hope amongst people. The local industry is unhappy over many policies of the present dispensation that they see as oriented towards international business interests at their cost. Majority of businessmen still find the current team of rulers more dependable than politicians but are reluctant to defend them, the way they used to a few months back.

Investment boom amid political shadows -DAWN - Business; November 05, 2007

 

[AgNoStiC MuSliM]

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.

Its not necessarily propoganda. "Electrifying a village" probably only indicates putting in the required infrastructure - whether there is enough electricity to supply them 24/7 is another matter.

 

[Neo]

FTA with Malaysia finalised ​

ISLAMABAD (November 05 2007): The long-awaited Free Trade Agreement (FTA) with Malaysia has been finalised which would be implemented from January 2008, after formal approval of the Cabinet, sources in Commerce Ministry told Business Recorder.

Initially, an agreement on 'Early Harvest Program' (EHP) was signed in December 2005 during the Prime Minister's visit to Malaysia and effective from January 2006. Sources said that reduction of tariff on palm oil was a major issue in the negotiations as import of palm oil from Malaysia involves substantial quantity having annual value of over $375 million. Pakistan offered to reduce tariff on palm oil by 10 percent on a margin of preference on January 1, 2008 and further 5 percent on January 1, 2010 and to which Malaysia finally agreed.

The schedule of concessions, which is an integral part of the agreement, has been divided into four Faster Tracks (FT) suggesting elimination of tariff in two reductions by January 1, 2009 and Normal Tracks (NT), on products in this track would be eliminated by January 2012.

Sensitive Tracks(ST) has been further divided into three-sub-tracks ie (a)Sensitive track -where tariff will be reduced to 5percent by 2011. In case of Pakistan, however, for certain products, attracting applied MFN tariff of 15percent tariff would be reduced to 5percent in 2014.

(b) Sensitive track (2) - where tariff would be reduced to 10 percent by 2014.

(c) Sensitive track (3) - where tariff will be reduced to 20 percent by 2009 or 2011.

Pakistan has also offered reduction of 20 percent tariff on margin preference concerning 129 tariff lines where Pakistan had given the same treatment to China in FTA.

Sources said that both countries have also kept a list of products in the highly sensitive category where tariff will not be reduced for the present. Besides, there was also an exclusion list, which would be kept outside the bilateral agreement. These products are mostly related to national security requirements, protection of human health or safety, animal or plant health, environment and for religious reasons.

Malaysia will eliminate tariff on about 80 percent of Pakistan's existing imports into Malaysia whereas Pakistan has covered only about 23 percent of current imports of Malaysia in this category.

Commerce Ministry claims that it has protected all its core manufacturing industries which include auto sector, electronics, footwear, leather products, locally manufactured chemicals and machinery, paper, garments and synthetic textiles, articles of wood and furniture etc.

Pakistan has gained market access for all our core products like cotton yarn, cotton textiles, bed linen, home textiles, jewellery, kinnow, mangoes, some engineering goods, leather products and minerals etc.

To ensure that no circumvention takes place and preferential tariff is applied on the goods originating from the respective FTA partners, the provisions of Rules of Origin, appearing in chapter 3 of the agreement would be followed by both the countries.

The criterion to confer origin is that either the goods are wholly produced; or the value-addition is not less than 40 percent of its contents, or that the goods produced undergo a change of tariff heading on 4-digit HS. Besides, product-specific Rules of Origin were also negotiated with the consensus of all the stakeholders in Pakistan.

Sources said that product-specific rules provide further protection to agriculture and industrial products.

For agricultural products including prepared foodstuffs, the criterion of wholly obtained or produced in the territory of exporting country has been adopted. Since Malaysia, except palm oil, depends mostly on imported fruits, vegetables grains and other agricultural produce, the net beneficiary for market access will be Pakistan where such products are produced in large quantities.

For cotton and blended textiles, the criterion of conferring origin would be a 'Yarn Forward Rule' ie only the import of fibers is allowed and spinning, weaving and finishing of fabrics should be carried out within each country to get the benefit of preferential tariffs. Pakistan can easily comply with this criterion of origin.

Accordingly, the tariff reduction modality read with the product-specific Rules of Origin ensures protection to our core industrial and agricultural products.

Although most of the goods placed in the fast track by Malaysia have applied tariff of zero percent, the Bound Rates of Malaysia in WTO are much higher. Under this bilateral FTA, Malaysia has bound the rates of tariff, which were at zero percent on January 1, 2006. The rates of tariff, which were higher, especially textiles, would also be reduced to zero percent creating a level playing field for Pakistan.

Pakistan will authorise Trade Development Authority of Pakistan (TDAP) to issue certificate of origin to the exporters. In the case of Malaysia, the certificate of origin shall be issued by Ministry of International Trade and Industry (MITI).

In the area of trade in services, both countries have offered market access to each other beyond their current multilateral commitments in the WTO.

In the ongoing Doha Round of negotiations, both countries have also tabled their respective initial offers for negotiations at the multilateral level. These initial offers will become binding on both countries after the conclusion of the Doha Round.

While preparing the initial offer to WTO under the Doha Round a mandate was secured by the Ministry of Commerce from the ECC. Under the FTA with Malaysia, Pakistan has offered market access on services to Malaysia within the parameters decided by the ECC. In fact, the ECC had agreed to provide equity of 70 percent in mode 3 (commercial presence) but the equity offered to Malaysia is only 60 percent. In the financial services, the offer of Pakistan is 49 percent. Compared with our multilateral commitments of Uruguay Round, Pakistan's offer to Malaysia is WTO plus.

Malaysia in its schedule of commitment for 'services' has offered a WTO plus package by opening more sectors and sub sectors and increasing equity limits for investment in the field of services. The most important concession secured from Malaysia is in the field of Islamic Banking and Takaful.

Malaysia has allowed 100 percent equity to Pakistan in these sub-sectors sources said, adding that this is a concession which is even beyond Malaysia's initia1offer to the WTO in the Doha Round. Besides, Pakistan will be the first country, which has been offered 100 percent equity in these sectors by Malaysia.

The overall package of trade in services was negotiated with Malaysia with the complete consensus by all relevant stakeholders like State Bank of Pakistan (SBP), Ministries of Information Technology, Industries, Production and Special Incentives, Food Agriculture and Livestock, Higher Education Commission, Board of Investment, Telecommunication Corporation, Securities and Exchange Commission of Pakistan etc.

For real market access in trade in services, mutual recognition arrangements are also necessary. As an overall package of the FTA, a framework agreement on 'Mutual Recognition Arrangements' was also negotiated.

This framework agreement will enable stakeholders of both countries to move forward and avail the market access provided under the FTA.

For initiatives in investment, the negotiations built upon an earlier bilateral agreement on the 'promotion and protection of investment' which was signed in Kuala Lumpur on July 7, 1995. Board of Investment was the focal authority to negotiate the investment chapter.

The commitments negotiated for investment shall not be available to any other country and the bilateral investment treaties signed by Pakistan so far will also have no impact on the bilateral investment regime in FTA.

Both countries have agreed that investors shall be accorded a treatment by both countries not less favourable which is accorded to their own investors. This principle (National Treatment) will have certain exceptions as agreed in the negotiations annexed to the chapter of investment.

For reducing cost of doing business cooperation between customs administrations of both countries is essential as all the imported and exported goods pass through this barrier.

Although both countries have undertaken to reduce/eliminate tariff gradually yet to safeguard against any surge of imports due to trade on preferential tariff bilateral safeguard measures have also been agreed by both countries. The Rights and Obligations to initiate trade remedy measures available under the WTO have been kept intact.

Recognising the fact that to increase bilateral trade, cooperation and harmonising sanitary and phyto-sanitary measures and standards is essential, the agreement contains specific provisions in these areas. The concerned stakeholder Ministries like Ministries of Food, Agriculture and Livestock, Science and Technology and Pakistan Standards and Quality Control Authority will interact with their counterparts in Malaysia to ease non-tariff measures which affect the movement of goods across borders. Similarly, the observations of international applications relating to intellectual property have also been reaffirmed.

While implementing the bilateral FTA, certain disputes relating to interpretation or application of the agreement may arise. A dispute settlement mechanism was agreed.

To resolve the bilateral disputes emphasis has been placed on bilateral consultation. In case disputes are not resolved in this manner, a settlement of arbitral tribunal comprising arbitrators of both countries and chaired by a third arbitrator from a country other than Pakistan and Malaysia has been agreed. The arbitrator will work in accordance with a procedure similar to mechanism of dispute resolution in the WTO.

Sources said that Federal Board of Revenue (FBR) may issue a notification for reduction in tariff for imports from Malaysia with effect from January 1,2008.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

US to review aid after emergency ​

ISLAMABAD (November 05 2007): The United States will have to review its financial aid to Pakistan after President Pervez Musharraf declared a state of emergency, Secretary of State Condoleezza Rice said on Sunday.

"Obviously we are going to have to review the situation with aid, in part because we have to see what may be triggered by certain statutes," Rice told reporters travelling with her in Jerusalem, adding that the United States still wanted to cooperate with Pakistan on counter-terrorism issues.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Investors uneasy, not panicked ​

KARACHI (November 05 2007): The state of emergency may shake stocks and rattle creditors when markets open for business on Monday, but the economic fallout from President Pervez Musharraf's move is expected to be limited.

Although the economy has grown by an average 7 percent per year over the past four years and foreign investment has hit record highs, brokers at home and analysts abroad said there were no fears of an imminent stock market crash or a loan payment default.

A perception of higher risk may hurt any premium Pakistan could have demanded on deals such as a global depository receipt, worth at least $644 million, for shares in state-run National Bank of Pakistan, expected on sale next month. Other deals include the acquisition of a majority stake in Saudi Pak Bank by a consortium, including Bank Muscat and Japan's Nomura Holdings and a stake in Pakistani cable and telecom operator World Call by Oman Telecommunications. Brokers expect the Karachi Stock Exchange 100-index to fall at the open by as much as 500 points, or about 3.5 percent, short of the 5 percent fall where a mandatory trade suspension rule kicks in.

In the credit market abroad, where the country has floated four Eurobonds, spreads may widen on its credit default swaps by 50 to 100 points, from around 350 basis points, reflecting higher political risk. "Because of the political risk you could see the CDS trade wider. An actual default is not likely because there's not a lot of paper coming due in the near term," said Lehman Brothers, Hong Kong-based analyst Yang-Myung Hong.

US RESPONSE: Beyond the initial response, the market is likely to assess the situation - the strength of street protests by opposition parties, if any, and possible sanctions by the international community - and if the status quo prevails, a rebound is likely.

"In the medium-term, (what's important is) the response from the US with regard to this. If you think about the political implications (of the state of emergency), it's really the status quo," said J.P. Morgan Asia Pacific equity strategist Adrian Mowat. Brokers in Pakistan termed the US response as 'soft'. Washington has pumped about $10 billion into Pakistan in the past five years and views the country as a bulwark in its battle against al Qaeda. "I don't think foreigners are going to get out of the market," said Aqeel Karim Dhedhi, chairman of AKD Group.

Shuja Rizvi, a director at Capital One Equities, said the exposure of foreign investors to Pakistan was small compared with the global opportunity in emerging markets, and that most would simply ignore political developments.

He estimated that the special convertible rupee account that foreigners use for investing in local capital markets stands at less than $1 billion"

At the end of the day investors, both local and foreign, want to see stability and continuity. Unless that is threatened I don't see a great impact on financial markets," said Munir Ladha, chairman of local brokerage firm, Eastern Capital Ltd.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Symposium recommends coal-based power generation ​

KARACHI (November 05 2007): The international symposium on Sindh Coal (Lignite) held here recently has called upon Nepra, PPIB, Wapda to realise that development of coal energy was in the larger interests of Pakistan and not Sindh as Sindh is already surplus in power. This assertion came in the recommendations released by the symposium on Sunday.

The symposium urged the authorities to reassure policies, identify gaps and find solutions for development of indigenous resources of energy and coal. Pointing out that Thar coal is minable, the symposium recommended that mining should be taken up on war footing by choosing most economical and technically viable methods.

It called for declaring realistic and flexible upfront tariff for coal-based power projects on original coals of different coal fields. The general concuss for Thar coal tariff was for 9-10 US cents.

It emphasised upon implementation without delay of decision of the meeting held by the President of Pakistan on July 20 on Thar Coal calling upon the energy advisor for determination of upfront tariff for lignite based power projects, prepare a schedule of tariff for power projects of different sizes.

It recommended reconstitution and empowerment of technical committee of the task force on Thar coal and Sindh government approached the advisor to call meeting at the earliest in the light of recommendations of the symposium. The symposium observed that among other technical hindrance which are of minor nature, the issue of tentative tariff is main impediment in the use of Thar coal for energy.

Government of Pakistan must have political will to announce an acceptable tariff if it was at all serious to use these resources for solving energy crisis of Pakistan as it was done in 1994 when an upfront tariff opened the gates to IPPs to come to Pakistan. It recommended that PPIB should allow Sindh province to issue licenses for setting up power plants up to 200 MW instead of 50 MW, which is not viable for coal-based projects.

Representatives of FPCCI recommended that tariff on coal should be based on affordability, profitability, transparency, least dependency and involving fully the stakeholders and Wapda and KESC provide guarantees to buy coal based energy. The symposium called for taking up detailed exploration work for greater resources of Thar, to have complete picture of underground resources, rechargeability of aquifer and sustainability of underground water.

It called upon the Sindh and federal governments to facilitate mining process. It said underground gasification being reportedly a better alternate from economical and environmental point of view be examined and underground mining design must be prepared on urgent basis. The two-day symposium was inaugurated by Sindh Chief Minister Dr Arbab Ghulam Rahim.

Fascinating papers were presented at five technical sessions and 22 presentations made highlighting the dimensions about coal with focus upon Thar coal, its exploration, tariff and qualification in terms of economic principles of demand, supply and price.At the inaugural session Dr Ing Gotz Justus from Germany had stated that coal presents the largest deposits of 175 billion metric tons in Asia and suitable for power. He had termed it better than the lignite deposits of Germany and many other world countries where it is being utilised for power.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Need stressed to build water reservoirs to avoid shortage ​

ISLAMABAD (November 05 2007): An inquisitive look at the world's history shows that the ancient civilisations usually thrived on the banks of rivers from where they pampered themselves by using water routes for trade purposes, besides setting their armies to venture in their neighbourhood.

In Pakistan, the mighty river Indus along with its tributaries is undoubtedly lifeline for the whole countrymen. It not only nourishes lands and inhabitants but also sustains their livelihood.

However, in the face of population growth, demands on its surging and gushing ******** are today more urgent and critically pressing. Today, we are confronted with acute water shortage, partly due to climatic changes in the shape of El Nino factor and partly due to the fast depletion of underground water cycle.

The bulk of our population is increasing like gigantic rolling snowball and it is estimated that by the year 2025 Pakistan would become fourth most populous country in the world.

One can imagine the hazardous implications of feeding a mammoth population with scant resources. By year 2050, about two third of the world population would be affected by the paucity of water. On one hand water scarcity is plaguing the world population and on the other large quantity of river water go waste directly into the seas without being properly utilised.

Under such uncertainty, many analysts believe that future wars would be flared over the possession of water resources. Many a nations went through pangs of destruction and glory of acme by fettering natural resources especially of fresh water.

One of its forms can be construction of dams, which are built to serve two main purposes, first for irrigation and storing urgently required water in both cases of floods and drought and for hydro-power generation.

In this way they can cater to the water needs of industrial and agriculture sector as well as for household usage. There is no contention over the issue that Pakistan is in the dire need of comprehensive water management, supply of cheap electricity and definitely construction of water reservoirs.

We are indeed fortunate that gracious God has bestowed us with precious wealth in the form of everflowing rivers giving a cosy feeling to its inhabitants.

So to overcome this lingering problem fast construction of fresh water reservoirs like Kalabagh, Bhasha, Akhori, Katzarah Skardu, Gomal Zam, Kurram Tangi etc, dams are need of the hour.

Planning Commission of Pakistan which has started the preparation of the Tenth Five Year Plan (2004-05-2008-09) in July 2004, had advocated the completion of ongoing small and medium dams such as the Gomal 2am Dam (1.14 MAF), Mirani Dam (0.30 MAF), Kurram Tangi Dam (1.2 MAF), Satpara and Sabakzai dams (0.3 MAF).

Their completion within the Tenth Five Year Plan is expected to increase the water availability by 4.69 MAF.

Raising of the Mangla Dam and construction of various canal projects, watercourse-lining etc would further increase the water availability. Wapda has reported in the Ten Years Perspective Plan (2001-2011) that ground water currently supplies over 40 percent of water for agricultural productivity and the sustainable ground water potential is 64 MAF.

However, according to Wapda the gross potential is 26 MAF, but out of this 20 MAF is non-usable saline ground water, thus only 6 MAF is sustainable ground water.

It is indeed unfortunate that Pakistan despite having the precious wealth of rivers teeming with life giving waters has not so far developed inland water transport, which may be the cheapest means of transportation.

This concept was not innovative to this land as from the history of Moenjodaro to Alexander the Great and then onwards to Arabs and British, they utilised this facility.

With the completion of these water reservoirs and inland water transport, national economy would get a spur resulting in new vistas for progress.

Political mistrust, distortion of technical information, prejudice among the previous governments jeopardised these projects.

When China can build 312 dams, Turkey 135 dams, India 34 dams, Japan 132 dams and Iran 80 dams above 50ft to 200ft height, then why cannot we!

The sincerity of the government cannot be doubted as the country would face acute water shortage in 2025 and would require 20MAF water to meet its requirements. It seemed that after all the long-standing issue has been put on the right anvil by the present government. Time is ticking up and calling us to respond to the clarion call otherwise our failure would take us into the blind ally of backwardness without any light on the end of the tunnel.

Business Recorder [Pakistan's First Financial Daily]

 

[Spring Onion]

Neo did you post the news about KES recorded 17 years bearish trend.

lost 635 points.

Though it has regained today but yesterday it was a record low in last 17 years

 

[Always Neutral]

In the short time business will maintain their nerve but new overseas investments will definately be delayed. KSE maybe proped up the Govt. artificially so as to paint a rosy picture.

Regards

 

[Neo]

I agree, this is what we call panic reaction.

 

[Always Neutral]

KSE loosing points maybe due to Standard and Poors downgrading the investments rating of Pakistan from stable to negative yesterday which makes it very hard for LSE and NYSE companies to invest in Pakistan. I am sure Pakistan PM must be trying to limit the damage to minimum as he is an economist who worked for US banks and understands these things.

 

[Neo]

Logistics performance ​

Pakistan behind UAE and India

Tuesday, November 06, 2007

LAHORE: Pakistan needs to speed up its National Trade Corridor programme as it is ranked 68th out of 150 economies in the World Bank Logistics Performance Index, much below its competitors UAE and India ranked 20th and 39th respectively.

The WB report, released on Monday, is the first analysis of its kind which provides some insight into the cost of poor logistics in relation to the country’s competitiveness and the sources of higher cost. Beyond cost and time taken to deliver goods, the predictability and reliability of supply chains are increasingly important in a world of just-in-time production sharing.

Using a five-point scale, the Logistics Performance Index aggregates more than 5,000 country evaluations. It is complemented by a number of qualitative and quantitative indicators of the domestic logistics environment, institutions and performance of supply chains (such as costs and delays).

Pakistan is striving to make its ports the hub of trading activities of the region to serve as a transshipment point for the Middle East, South Asia and Central Asian States. Currently, the United Arab Emirates and to some extent Indian ports are preferred for transshipments in the region due to their efficient operations.

The World Bank report shed light on the hurdles which Pakistan would have to overcome before it could hope to challenge its neighbours. Otherwise, according to logistics’ experts, Pakistan would end up as a trade passage for landlocked countries of Central Asia only. Among various logistics’ parameters, Pakistan is ranked 69th in efficiency of its Customs department compared with 20th rank achieved by UAE and 47 by India.

In infrastructure, Pakistan’s position among 150 global economies is 71st, with the UAE at 18th and India 42nd positions. In international shipments, Pakistan score 2.72 points to attain 65th position; UAE with a score of 3.68 was ranked 13th and India 39th scoring 3.08 points.

In logistic competence the World Bank placed Pakistan at 63 with UAE occupying 20th and India 31st position. The ranking was assigned on the basis of tracking and tracing of good, domestic logistic costs and timeliness.

As far as tracking and tracing of consignments is concerned Pakistan with a score of 2.72 is at number 76 position, UAE is ranked 13 and India 42 under this parameter. The domestic logistic cost in Pakistan is lower than the UAE which is ranked 98th in that area. India, at 46th position, has lower domestic logistic cost.

In the case of timing, Pakistan is ranked 68th compared with 17th position enjoyed by the UAE and 47th rank by India. The rate of physical inspection of goods by the Customs is three per cent in the UAE, 10 per cent in Pakistan and 25 per cent in India. The Customs takes 0.9 days for clearance in the UAE and 2.4 days in both India and Pakistan.

Average lead time for export (from shipment to port of loading) is 3.5 days in the UAE, 3.2 days in Pakistan and four days in India. The average lead time for imports is 4.1 days in the UAE, 3.7 days in Pakistan and 4.7 days in India.

Pakistan has reformed its Customs clearance system and in many procedures it is on a par with or in some case has an edge over both India and the UAE. However, as a logistics support package, the country is way behind both the countries. Lopsided improvement instituted in some fields, if not accompanied with matching improvements in other fields, is essential to make Pakistan the hub of trade in the region.

The number of border agencies for exports are four in the UAE, 3.2 in Pakistan and 2.9 in India. The number of border agencies for imports are 3.9 in the UAE, 2.9 in Pakistan and 2.4 in India.

Possibility of review procedures is 36 per cent in the UAE, 60 per cent in Pakistan and 39 per cent in India. Typical charges of a 40-foot export container are $380 in the UAE, $382 in Pakistan and $601 in India. Typical charges for a 40-foot import container are $388 in the UAE, $444 in Pakistan and $619 in India.

Logistics performance

 

[Neo]

ADB helps Pakistan develop energy model ​

Provides $2m for the project

Tuesday, November 06, 2007

ISLAMABAD: The Asian Development Bank (ADB) is helping Pakistan develop an energy model which will enable the country pursue an energy sector development plan to meet the needs of an expanding economy.

“The ADB is extending a $2 million grant for Pakistan’s Integrated Energy Model estimated to cost $2.5 million. The government of Pakistan will cover the balance,” the ADB announced on Monday.

“The outcome will be a functioning energy planning unit producing regular integrated analysis of strategic energy options,” said Jim Liston, principal energy specialist of ADB’s Central and West Asia Department.

Pakistan’s Medium-Term Development Framework 2005-2010 sets out to achieve an eight per cent annual growth in Gross Domestic Product (GDP), while energy consumption is estimated to expand 12 per cent a year for the same period. This expected growth will put pressure on energy supply.

The country’s energy analysts believe Pakistan needs to come up with an integrated, optimal energy sector plan. The energy sector is covered by various ministries, with no single body having a dominant role in managing the industry. The country is also a net energy importer, with its energy needs supplied by multiple sources.

Advanced computer software applications available in the international market can model a country’s overall energy demand and supply situation, and these integrated energy models can help planners assess the impact of various policy scenarios and support good decision-making.

Pakistan currently does not use such an integrated energy modeling tool. Its primary energy supplies totaled 58 million tons of oil equivalent in 2005-06. All domestic natural gas production is consumed and, without higher production, growth will need to be met through imports.

Rising oil consumption and flat oil production have led to more imports. A lack of refining capacity also leaves Pakistan heavily dependent on petroleum products’ imports.

Electricity supply is also limited due to insufficient generation capacity, resulting in an estimated 1,500 megawatts (MW) of unmet demand.

The country is currently pursuing a wide range of energy projects, among them the development of international gas pipelines. The government is also looking into the development of coal reserves in Tharparkar deserts and private sector power generation projects with a total capacity of 2,000 megawatts using imported coal.

The government also plans to proceed with a large multi-purpose dam on the Indus River for irrigation needs and to provide 8,000 MW of electricity-generating capacity.

According to the ADB, a trained energy planning team will manage the unit and propose strategies for meeting energy requirements at a low cost and in a sustainable manner for consideration by the national policy-makers. The factors, which will be addressed by the unit, include finance, economics, energy supply, national resources, energy use, environmental impact, technologies, energy efficiencies and socio-political impact.

ADB helps Pakistan develop energy model

 

[Neo]

Investments, exports at stake ​

Tuesday, November 06, 2007

KARACHI: Equity experts have opined that local markets might come out of current crisis if government announces its future plan regarding the holding of general elections as per schedule in January 2008.

But the statements of politicians were intensifying the uncertainty, as prime minister of Pakistan had hinted one year delay in holding this election, they viewed. On Monday, the first working day at Karachi bourse following emergency, the KSE 100-share Index fell 636 points or 4.57 per cent to close at 13,279.24 points.

Stocks guru, asked not to be named said stocks market run on economic fundamentals, and due to the imposition of ambiguous emergency, which looks more like martial law was about to devastate these fundaments any moment.

“Condemnation messages from world political and economic powers, in the backlash of emergency imposed by the Chief of Army Staff, were not just game of words. But they could express their angers by banning Pakistani exports to their countries. Our export orders could divert to other counties as well. This action of world players would put a big dent in our economic fundamentals and its possible negative impact would be seen at the local bourses in the days to come,” experts said.

“We have only one way out from this crisis situation and that is to hold the general elections as soon as possible. The presentation of general election’s plan would minimise the uncertainty on political front and might restore the investors confidence,” they added.

Market experts expressed that in this age of technology our military government cannot succeed in hiding the information from everyone any more. The excessive use of Internet and the revival in the usage of transmitters after pulling private TV channels off air would enhance the uncertainty, they further said and added that speculators would use this available open-secret information against the long-term investors to mint the money and run away.

They identified that surging volumes of shares in the bearish market was more alarming as compare to recording lower volumes in bullish market. The enhanced turnover at this juncture showed the widespread confusion among the investors, they further said.

Investments, exports at stake

 

[Neo]

Local firms allowed to outsource services: Oil, gas exploration​

ISLAMABAD, Nov 5: The government has allowed local petroleum companies to outsource up to 70 per cent of technical services to foreign firms for becoming operators of oil and gas fields for exploration and development.

This is one of the many relaxations allowed to the domestic companies on the instructions of President General Pervez Musharraf a few days ago followed by formal approval of the Economic Coordination Committee (ECC) of the cabinet.

A senior government official said the stringent pre-qualification criteria to become eligible to bid for concession agreements in the original policy cleared by the ECC a few months back had been contested by a number of local companies and had been made quite flexible on the intervention of the president.

The domestic companies would now be allowed to form joint ventures among themselves by putting together resources of two or more companies and show contract with foreign services companies for drilling, surveys and seismic activities.

Likewise, the domestic companies would also be allowed to provide upfront bank guarantees up to 50 per cent of their work plan for the exploration and development of natural resources.However, the companies would be tied under the concession agreements to a strict time-line for the implementation work programme and the eligibility criteria would be defined under Management Information System (MIS) programmes for ranking instead of being at the discretion of government functionaries.

The official said standard operating procedures (SOPs) would be developed over the next few weeks in consultation with companies for security of exploration and development fields.

For expeditious development of oil and gas fields, a new prequalification system has been introduced to encourage quality companies with technical expertise, proven track record, and financial capability, to become onshore and offshore operators.

In Policy 2007, the government has also introduced a bid evaluation system to ensure transparency. Bids would now comprise work programme in terms of work units the bidder intended to follow for the quick development of the block, with a 80 per cent weight and Gas Price Gradient (GPG), to be calculated on the basis of 20 per cent weight when the reference crude price is above $45 per barrel. This bid evaluation system will expedite exploration activity and minimise prices.

The price of gas has been linked to the price of a basket of crude oils being imported by Pakistan by offering higher returns through removal of a price cap on gas sale prices.

The new policy also allowed the oil and gas producers to sell gas to third parties, instead of being under compulsion to sell their production to the government alone under the existing policy. However, the producers would be required to pay a windfall levy in case third party sale prices are higher than the prices fixed by the government.

If under this policy, half a trillion cubic feet (TCF) gas is injected into the system by 2009-10, the weighted average price would increase by about 3.5 per cent. The new price of gas, at a $60 per barrel of crude oil reference price, would be around $3.0-3.3/MMBTU.

The government claims that if this quantity is not produced locally, the government would need to import alternative fuels such as LNG and fuel oil. At the $60 a barrel crude oil reference price, LNG price would be around $7/MMBTU and fuel oil price about $10MMBTU.

All the existing domestic and foreign firms have been offered another incentive by allowing same facilities to the existing companies who are not yet in the production phase. However, they, in case of conversion to the terms of policy 2007 would be allowed at a GPG of 0.2 after $45 per barrel crude oil price reference.

Presently, 42 companies are working in Pakistan with 118 exploration licences and 127 leases. The daily production of gas is around four billion cubic feet and 70,000 barrel of oil.

Local firms allowed to outsource services: Oil, gas exploration -DAWN - Business; November 06, 2007