Pakistan Economy - News & Updates - Archive

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Unrest destroying Swat economy​

THE armed conflict in Swat has badly affected the local economy and the livelihood of the bulk of the population in this scenic valley and a popular tourist resort. The unrest in the area started after the army launched a massive operation against the militants last month.

Whereas the government does not have any authentic data on physical and human losses, according to media reports, more than 300 people, including militants, security personnel and civilians, have been killed and the material losses run into billions of rupees.

Apart from hotel, tourism and horticulture industries, the economy of Swat is based on silk and cosmetics manufacturing units, which provide employments to thousands of local workers.

Information gathered from the volatile region indicates that the ongoing conflict has not only resulted in migrations of people southward but has also badly affected the local businesses.

Since the military operation was launched in the area, more than 350 silk and cosmetics factories have been closed rendering thousands of workers jobless. The prolonged closure of these units is also posing threat to their future operation.

The silk industry is mostly located at Rahimabad, Nengulai, Lower Bandai, upper Bandai, Matta, Kabal, while cosmetics factories have been set up at Gumbad Mera, Navay Kalay and Rehmanabad.

The silk industry, sources say, was already in crisis because of increasing cost of production, and the prevailing unrest may make its survival more difficult.

This industry, which played a significant role in shaping the local economy, was established in early 60s, when the valley was an autonomous state governed by the Wali, Miangul Jehanzeb.

The silk industry was set up in this tax-free zone on the condition that the machinery once installed would not be shifted elsewhere. Investors from Sindh and Punjab had established this industry, which was fed by comparatively cheap raw material from Afghanistan.

Investment in this industry improved the socio-economic condition of the people of the area enabling them to give their children quality education.

Same is the case with the cosmetic industry, which swiftly replaced the silk industry. Many silk units closed down because of higher prices of raw materials. According to locals, most of the leading brands of cosmetics are produced in Swat.

Many of the units are now closed and their revival would take time because most of their technical staff belong to other provinces and are reluctant to return unless the situation improves.

If the clashes continue, the industrialists would scrap the machines, because even now, they are unable to pay the power and water bills and the rent of the factory premises, says a unit owner.

Swat, a valley of scenic beauty, beautiful landscapes and snow-capped mountains, is an attractive resort for both the domestic and international tourists. The area also enjoys a rich historic legacy and has several historical places of tourists’ interest. This has encouraged the private sector to invested billions of rupees over the years in the tourism industry.

According to Zahid Khan, the president of Hotel Association, more than 25,000 workers are employed by some 500 hotels of the Swat district. The industry is mainly dependent on tourism for its business. Its growth has remained at the lowest ebb because of security concerns for the last couple of years. But still, it is the main source of income for thousands of families.

Horticulture is another source of livelihood and business in Swat districts. It has orchards of fine apples, parsimon (Japanese fruits) peaches, apricots, plums, walnuts and other different fruits.

Heavy shelling by security forces has destroyed hundreds of fruit orchards and vegetable fields, thus depriving the people of their earnings. Those who migrated from the area, have been the worst hit.

The horticulture business involves huge working capital, which the farmers normally borrow from banks for purchasing seeds, pesticides and fertilisers. But this time, most of the people would not be able to get a fair return on their investment because of damages caused by the ongoing conflict.

The conflict has also affected a number of mega development projects in the adjacent areas. Among these projects is the Malakand-III hydropower project initiated by the NWFP government. The project, which will generate 81MW electricity, has been delayed due to various reasons including the current Swat conflict.

According to Sarhad Hydel Development Organisation (SHYDO) officials, the project is now almost complete to start commercial generation but has been delayed as the Chinese engineers have left the area after the deployment of army and are reluctant to return and complete the leftover work.

Work on three other hydro-power projects in districts of Kohistan and Shangla has slowed down because the Chinese engineers have been shifted to Islamabad for security reasons.

Officials at district administration and the local business community want that the government should first gather authentic data about the financial losses and then extend a compensation package as relief to the affected people.

Unrest destroying Swat economy -DAWN - Business; December 31, 2007

 

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Bullish trend on KSE ​

KARACHI (December 31 2007): The share market, Karachi Stock Exchange (KSE), witnessed bullish trend during the outgoing week as the benchmark KSE-100 index hit at all-time high level of 14,814.85 points. It, however, finally closed below that level as the investors opted for profit-taking on available margins.

The KSE-100 index finally closed at 14,772.08 points level with a net gain of 113.25 points on week-on-week basis while the parallel free float market capitalisation-based KSE-30 index surged by 115.53 points on weekly basis and finally settled at 17,578.78 points level on the end of the week.

Trading activity further improved during the week as the average daily volume of ready market increased to 299 million shares as compared to 216 million shares traded a week earlier. The average daily turnover of futures market surged to 61 million shares against 25 million shares of the previous week.

The overall market capitalisation increased by Rs 34 billion to Rs 4.543 trillion on the end of the week as compared to Rs 4.509 trillion on the same day a week earlier.

This week was the three-day week as the market remain closed on December 25 on account of Quaid-e-Azam birth anniversary while the KSE management announced to close the market on December 28 due to law and order situation in the city after assassination of PPP Chairperson Benazir Bhutto. The previous week was also a three-day week due to Eid holidays.

The market started on a bullish trend on Monday and the KSE-100 index broke its previous record (14,787.55 recorded on October 19, 2007) and closed at its all-time highest level of 14,791.92 points. The index gained 133.09 points on the first day of the week on the back of strong interest of foreign and local investors mainly in banking and oil sector stocks.

The KSE-100 index hit 14,832.30 points intra-day highest level for the first time in its history on Monday. The market remained closed on Tuesday due to birth anniversary of Quaid-e-Azam. On Wednesday, the market continued its upward trend and the KSE-100 index closed above the 14,800 historic level for the first time in its history at 14,814.85 points with a fresh gain of 22.93 points. The market started on a positive note and the KSE-100 index hit 14,875.79 points, highest ever intra-day high level, but the profit-taking in some select stocks pushed the index in negative zone at 14,765.88 points intra-day low level.

Late buying in some banking stocks supported the index to close in positive with a marginal gain of 22.93 points. The overall market capitalisation surged by Rs 9 billion to reach new high level of Rs 4.555 trillion.

On Thursday, the market took downturn on the back of profit-taking opted by the market participants. Although the market started on a positive note and the KSE-100 index hit 14,875.40 points intra-day high level, but it failed to continue its upward trend as the market participants opted for profit-taking on available margins. Finally, the KSE-100 index closed at 14,772.08 points level down by 42.77 points.

Business Recorder [Pakistan's First Financial Daily]

 

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Oil shortage hits country: PSO declares force majeure ​

ISLAMABAD (December 31 2007): The Pakistan State Oil (PSO) has declared force majeure in the wake of riots, showing its unavailability to transport diesel and other petroleum products from Karachi to upcountry.

The PSO declaration created a crisis for the government, which immediately convened an emergent meeting in Islamabad on Saturday last to work out some alternative arrangements to resume supply of oil and avert the looming crisis. PSO and any other Oil Marketing Company (OMC) can declare force majeure to show unavailability in transporting oil from the port or main depots to upcountry in the case of any natural calamity or the crisis unmanageable.

Sources said breaking out of riots following PPP chairperson Benazir Bhutto's killing in Rawalpindi on December 27, PSO could use the option of force majeure. Now the responsibility of oil transportation and supply to upcountry lies with the federal government.

Sources said after PSO declaration, the federal government decided to bring in the National Logistic Cell (NLC) and Pakistan Railways (PR) for transporting oil from Karachi to Punjab and other parts of Pakistan.

The meeting was told here that the on-going riots have affected oil supply from Karachi to other parts of Pakistan and some urgent arrangements were needed to avert a serious crisis in coming days.

After the meeting an official told Business Recorder that the federal government has engaged NLC and PR for lifting oil from Karachi to maintain supply to upcountry.

The riots, which had erupted after Benazir Bhutto's killing in Rawalpindi on December 27, have spread out across Pakistan, bringing life to a standstill. The transport is off the road since the happening. All kinds of activities have come to a complete halt. This situation was of course bound to hit oil supply and threaten its availability to the consumers.

The new arrangements for lifting oil from Karachi to upcountry can hardly work since PR and NLC can not work as the situation is getting out of control in many parts of Pakistan, specially in Sindh. The official said: "We are worried about transportation of oil from Karachi port to other parts of Pakistan as the stocks available with the OMCs and dealers and petrol pumps are perishing quickly.

Business Recorder [Pakistan's First Financial Daily]

 

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Oil and gas production ​

(December 31 2007): The government's efforts to exploit natural carbon resources in Pakistan to increase the indigenous share in energy supplies have proved largely unfruitful, as local oil and gas production remained stagnant during 2004-05 to 2006-07, says a Recorder Report quoting data from an official report.

The study, which covers oil and gas production over the last three years, indicates that the country's total daily oil production in FY2004-05 was 66,079 barrels which, instead of going up, declined to 65,577 barrels in 2005-06, though it showed an upward trend in 2006-07 by touching 67,438 barrels.

However, the impact of the increase in production was not substantial enough to help Pakistan secure an increased share in the total consumption, and thereby cut down oil imports.

According to the report, things in gas production sector too displayed a similar trend, in sharp contrast to official claims, because domestic gas production in 2004-05 was 3.685 mmcfd, which increased to 3.838 mmcfd in 2005-06, but remained stagnant in 2006-07. Like oil and gas, LPG sector too displayed a mixed trend.

The production of liquefied petroleum gas increased from 1,051 tons a day in 2004-05 to 1,462 tons, showing a healthy trend, though the trend lost its vigour the next year, because the daily production could not rise beyond 1,523 tons. Experts maintain that domestic oil production over the last many years has averaged 60,000-66,000 barrels a day, depending on the activities of E&P companies, which cannot be termed a major achievement.

They believe that Balochistan and upper regions of NWFP can make a difference to the country in terms of oil and gas exploration, though the prevailing tenuous security situation there has adversely impacted exploration and production activities.

The largely stagnant trends in oil and gas sector, which our report indicates, should be a cause of serious concern to the government because energy sector serves as a catalyst of economic growth all over the world. It fuels manufacturing, power-generation and services sectors. It has been predicted that when the overall growth rate picks up, the oil import bill too will go up, putting pressure on the balance of payments unless exploration and production activities are geared up well in advance.

According to the available data, as many as 42 companies are at present working in the country, with 118 exploration licences and 127 leases. Further, OGDCL has been engaged in exploration and production work over the last four decades. Even then our exploration and production performance has not been quite enviable. According to a research study, our domestic gas production increased by 23.4 percent, while oil production registered an increase of only 6.6 percent in 2005-06.

Paradoxically enough, despite the increase in domestic production, the country's oil import bill increased by 35 percent to $4.2 billion in 2005 due to its heavy dependence on oil imports as well as the rising oil prices in international market.

This ought to have prompted the government to speed up exploration activities to offset the mounting oil demand. In 2005, our indigenous hydrocarbon production remained skewed towards gas, which is said to have accounted for 90 percent of the combined domestic oil and gas production. But here too the production level has not kept pace with the demand.

A major trade policy concern of Pakistan has been to augment its manufactured exports in the world trade, which calls for greater competitiveness of our exports. But the rising international oil and gas prices, coupled with almost stagnant domestic production will further erode the competitiveness of our exports if additional energy resources are not developed in time.

The widening gap between supply and demand has therefore put us in a desperate race for time and investment. (It is said that we will need an investment of $20.4 billion in power sector alone by the year 2013. But can we arrange this type of investment?)

The government should ask oil and gas companies currently engaged in exploration and production work in the country to undertake fast-track projects so that we are able to retain the competitive edge in international market. There is also need for the energy bureaucracy to activate its field staff to get things done speedily.

Secondly, the government should evolve a strategy to ensure a peaceful environment in Balochistan and parts of insurgency-hit NWFP so that oil and gas exploration activities can be carried out in relative peace. Only by launching a multi-pronged, pro-active initiative can the government achieve these targets.

Business Recorder [Pakistan's First Financial Daily]

 

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Pakistan needs Rs 66bn to improve irrigation network, says ADB​

* Report warns country’s dams losing storage capacity
* Govt claims more than 41,459 watercourses lined from 2004-05 to 2006-07

ISLAMABAD: Pakistan requires over Rs 66 billion to improve its irrigation network, Asian Development Bank (ADB) says in its recent report titled ‘Country Water Action: Pakistan Irrigation Links Government with Farmers’.

The ADB warns in its report that Pakistan’s water network is on the decline and dams are losing storage capacity due to siltation and huge volumes of water seep through canals in poor condition, wasting an estimated two-thirds of total available water every year.

Pakistan has more than 160,000 watercourses comprising distribution network that takes water directly to the farms. More than half of these watercourses are in Punjab province, the biggest agricultural producer. The system commands a land area of 14.3 million hectares, making it the backbone of Pakistan’s agriculture and contributes one-fourth of country’s total gross domestic product (GDP).

The ADB report further says that big reservoirs in Pakistan store some 20 million-acre feet (MAF) of water and farmers across the country also pump an estimated 40 MAF of groundwater to irrigate their lands. Since ‘National programme for the improvement of watercourses’ (NPIW) started in 2004, 40,300 watercourses have been improved out of a targeted 87,000 watercourses.

Govt claims: However, the government claims the target set for financial years 2004-05 to 2006-07 is to line 38,200 watercourses across the country but the NPIW has been able to line more watercourses than the actual targets. The total watercourses lined during this period are 41,459. The total funds released for this period stand at Rs 19.713 billion of which 8,306.148 million were released to Punjab, 3,803.093 million to NWFP and 2,122.331 million to Balochistan.

The funds released to Sindh and FATA stood at Rs 5,132.399 million and Rs 63.454 million respectively to improve watercourses under NPIW programme. The government has also set the target for 2007-08 of lining 18,700 more watercourses across the country.

Since the NPIW initiation, farmers say there have been substantial savings on water after their local water systems were given a new lease on life.

Some farmers claim that their crop production has risen by 30 to 50 percent.

Daily Times - Leading News Resource of Pakistan

 

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‘US investors having second thoughts’ ​

Tuesday, January 01, 2008

LAHORE: Benazir Bhutto’s assassination has cast a huge shadow on the country’s attractiveness as an investment destination, says Syed Dilawar Abbas, President Organisation of Pakistani Entrepreneurs of North America (OPEN), Silicon Valley chapter who is on a brief visit to Pakistan nowadays.

Talking to The News, he said in the wake of emergency measures and moves against an independent judiciary, the country’s image had already received a major blow. The investors, especially those in the US, who were starting to question Pakistan’s capacity and commitment to uphold business rules and contracts “must now wonder when political stability will return to the country,” he said.

“When we hold elections, who will participate, who will provide credible leadership to the PPP, which is poised to do well in fair polls, are now questions of equal interest to investors. “The Pakistani diaspora must step up efforts at this challenging time for the country to educate and guide key global influencers and decision-makers,” he added.

On the importance of an independent judiciary, Abbas said it was essential for contract-servicing which was a major concern of corporations making overseas investments. “That is why the countries having better dispute resolution mechanisms are considered the first choice of foreign investors.”

Thanks to the judiciary, Dilawar Abbas said, that Pakistani government honoured contracts signed with Daewoo of Korea and Independent Power Producers (IPPs) despite its reluctance to do so.

“It is critical we move quickly to restore the judiciary’s independence in the country and project Pakistan as an investment destination where judicial process is fair and key pillars of the government are in harmony with each other,” he added.

‘US investors having second thoughts’

 

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Banks borrow Rs55bn from SBP, rupee falls ​

Tuesday, January 01, 2008

KARACHI: The banks had to borrow from the central bank on Monday as overnight rates stayed glued to top levels ahead of the year-end, dealers said.

Overnight call rates ended at 9.90 per cent, unchanged from Thursday’s close, and just below the 10 per cent discount rate at which banks borrowed Rs55.31 billion from the State Bank of Pakistan three-day repo facility.

Banks were closed on Friday and Saturday following the assassination of former prime minister Benazir Bhutto. Banks had borrowed Rs59.32 billion from the facility last week. “The market is likely to remain tight the rest of the week as there are no major cash inflows except for Rs27.2 billion on Thursday,” said a brokerage dealer. “Also, cash demand tends to rise close to year-end,” he said.

In the currency market, the rupee closed at 61.55/60 to the dollar after hitting a six-year low of 61.95, and softer than Thursday’s close of 61.32/34. Currency traders said the central bank was seen intervening to support the local currency from around 61.80-61.90.

Dealers said the rupee eased on increased dollar demand as importers bought the US currency to clear year-end payments. However, they said the rupee was expected to steady in days ahead.

Banks borrow Rs55bn from SBP, rupee falls

 

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Consumer-based growth no more sustainable ​

Foreign reserves running dry, no more family silver left to sell

Tuesday, January 01, 2008

LAHORE: The growth based on consumerism has now become unsustainable, as the country does not have enough foreign reserves or family silver to offer to foreign investors to sustain the ever-growing trade deficit.

The government has been plugging trade deficit for the last two years through foreign direct investment (FDI) including the privatisation proceeds obtained by selling family silver in shape of profitable public enterprises, workers’ remittances and grants/loans. Barring workers’ remittances, other sources of foreign exchange are under severe pressure.

Pakistan’s sovereign rating was first downgraded after the proclamation of emergency in November and now the riots and political uncertainty after the killing of Benazir has forced the global rating agencies to warn of another downgrade.

The government has already disposed off its major banks to the foreigners, the telecom giant PTCL and Ufone are also controlled by the foreigners. Most of the smaller banks have been taken over by major global banks. The investment climate was already deteriorating due to failure of the government to control terrorism. Benazir’s removal through terrorist act has put the last nail in the coffin of investment by the foreigners.

What pains most economists is that Pakistan lost a golden opportunity to claim some share in global markets through skewed investments and expenditures during last five years when the money was flowing in the country.

The economic managers fooled the nation for three years by explaining that the increase in imports was due to increase in the import of industrial machines and raw materials. There is no doubt that there was increase in import of these items but then there was simultaneous increase in the import of the luxury goods as well. The import of bigger cars was liberalized and at one stage crossed $1 billion. The mobile phone import added $1 billion to import bill. The food items imports that five years back were below $1 billion crossed the $3.5 billion mark last year. Only oil bill increase was beyond government’s control that has increased by $5 billion in last five years.

The increased investment in industry did not translate into increased exports. The increased production in automobiles, television sets, air-conditioners and other home appliances was consumed domestically. The engineering sector exports remained stagnant. The exports increased in textile sector only but not corresponding to the investment made in this sector.

The economic managers adopted the similar policy to sustain growth that was adopted by the highly developed United States after 9/11 that is to contain recession through domestic consumption. They ignored the fact that US economy had the capacity to absorb and tolerate increased pressure on its trade gap while Pakistan cannot sustain this pressure for long. One thing that goes in favour of the US is that its foreign currency inflows are still the highest in the world while FDI in Pakistan is erratic, lopsided and volatile.

Five years back Pakistan’s foreign exchange reserves were sufficient to finance a year’s import bill. Now the available dollars with the central bank can hardly boot its five months import bill. The situation would have gone worst had Pakistan not received huge influx of foreign assistance and remittances during this period. The pressure would now be on the foreign exchange held by the central bank. It would weaken the rupee.

The economic managers of Pakistan compare its economic growth with China and India but they conveniently ignore the fact that these countries have cushioned their currencies against devaluation by amassing foreign exchange reserves equivalent to over a year of their import bill.

Consumer-based growth no more sustainable

 

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LCCI president vows to boost economic growth ​

Tuesday, January 01, 2008

LAHORE: The newly elected LCCI President Muhammad Ali Mian, on Monday unfold his future plans and pledged to work for removing hurdles in the way of economic growth.

“I, with the support of the business community, would make all-out efforts to bring down the cost of doing business in this resource-rich country besides taking measures for early building of new water reservoirs to overcome the shortage of power,” said Mian speaking at LCCI Annual General Meeting (AGM). Newly elected Senior Vice President Mian Muzaffar Ali, Vice President Shafqat Saeed Piracha, outgoing President Shahid Hassan Sheikh, Outgoing Senior Vice President Yaqoob Tahir Izhar, outgoing Vice President Mubasher Sheikh also spoke on the occasion.

Mian said that country was already passing through a crisis-like situation and the assassination of Benazir Bhutto has further aggravated it and to cope with the situation we all collectively would have to play our role. Unfurling his strategy, he said that he would not only prepare Pakistan’s first export directory that would definitely help achieve export target but would ensure establishment of Income Tax, Customs, Sales Tax and Nadra Desks/Kiosk at the Lahore Chamber of Commerce and Industry so that the LCCI members’ problems regarding these departments could be solved expeditiously.

He said that special measures would be adopted to further strengthen public-private relations and to cope with the challenges being faced by the economy of the country. He also called for a solid strategy to solve the issues including shortage of energy, development of infrastructure and creation of employment opportunities.

The newly elected president said that he would ensure dissemination of all trade-related information to the business community so that Pakistani exports could go to the required height. He urged the businessmen to join LCCI Standing Committees and take part in their meetings so their voice could reach the concerned circles. He also demanded of the WAPDA, PTCL, WASA and Sui Northern Gas Pipelines (SNGPL) authorities to announce three-day extension in submission of utility bills as the banking channels remained closed due to the assassination of Bhutto for three days and January 1, was a banking holiday.

He said that due to three-day official mourning observed in connection with PPP chairperson’s assassination, it was not possible for the people to submit their utility bills therefore an extension in the date would help people submit their utility bills within date. The newly elected Senior Vice President Mian Muzaffar Ali said that he had a clear vision about the issues need to be tackled on priority basis and he would take up all the problems with the concerned government departments.

The newly elected Vice President Shafqat Saeed Piracha while appreciating the performance of out-going office-bearers said that no efforts would be spared to maintain the status attained by the Lahore Chamber of Commerce and Industry. He said that he would use all his abilities to serve the business community. The out-going LCCI President Shahid Hassan Sheikh, Senior Vice President Yaqoob Tahir Izhar and Vice President Mubasher Sheikh spoke at length on the projects accomplished during the year. The out-going president also sought the approval of accounts from the participants of the meeting. Earlier, the Returning Officer Nadir Kamal Usman formally announced the results of LCCI polls.

LCCI president vows to boost economic growth

 

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Questions about health of economy in 2008​

KARACHI, Dec 31: What the year 2008 has in store for Pakistan’s business and economy? This question begs for an answer from the economic managers, as on the last day of the year 2007, Karachi Stock Exchange, once proclaimed to be the best performers in Asia, dipped down by as many as about 700 points. The rupee exchange value touched bottom lowest in last six years at Rs61.95 for a dollar at one time. It was salvaged only by the central bank’s intervention.

Wild fluctuations in share values in stock exchange, according to a market analyst, help a set of brokers, and there are reasons to believe that quite a few of them are set to make a few more billions from Monday trading.

So is the case in rupee exchange value fluctuation. “Pakistan is one country where rich, powerful with right connections make money from swing of pendulum, whichever way it is,’’ the analyst remarked.

But Pakistan has now taken a plunge in a deep political uncertainty that has engulfed entire business and economic activities in the country.

A well-known leader from Jodia Bazar, the biggest commodity market in South Asia, has said investors of commodity trade are fast moving out of the business.

“Existing contracts are being scrapped and no new contract for supply and purchase of commodities is not being made,” he said.

Food inflation was already in double digit; much before the present uncertainty has set in. It is now more pronounced and consumers complained on Monday of not being able to get provisions.

Wheat flour was not available in many parts of the city. It was priced at Rs24 to Rs26 a kg where it was available in “ration”. Sugar, edible oil, pulses, rice, milk and eggs are already costly and there is a fear of prices of many of these items going further up as political situation becomes murkier in the coming days.

Two of three kharif crops—cotton and rice—did not give projected production this autumn.

Sugarcane production was more than the target. But the unending battle between the millers and growers has made sugar a bitter commodity for the consumers.

About three million bales of cotton is expected to be imported. It would on the one hand push up import bill and on the other increase production cost. Rice production is below target and is already being sold at a much higher price.

There is already a lot of confusion about wheat production and supply next spring. The government has fixed a production target of 24 million tons. But market watchers doubt of achieving this target as government’s tentative approach in drawing up a policy has put growers in confusion. In the current season, the government messed up wheat marketing and in the face of official claim of 23.5 million tons production, the price of wheat flour in August and September was Rs18 and Rs19 a kg.

The lingering political uncertainty is bound to cripple the business and economic activities that may bring down further industrial production which in turn may further retard export growth.

A slowdown in industrial and agricultural production may cause spur in import demand for goods and import bill at the end of June 2008 may touch $36 to 37 billion. The trade deficit by June next may swell over $15 billion and there are businessmen who apprehend it may touch $16 and even 17 billion.

Pakistani rupee is already under severe strain, and the State Bank of Pakistan is intervening on many occasions to keep the Rs61.50 per dollar.

Monday’s steep fall in rupee exchange parity with dollar was a manifestation of mounting pressure on rupee in the inter-bank and in open market. Bankers doubt State Bank’s capacity for intervening on all occasions.

While the State Bank of Pakistan was warned in 2006-07 of economy coming under impact of a double edge sword (rising trade imbalance and mounting current account deficit and a bulging budget deficit), it is becoming a reality in 2007-08 and may show its fall in next six months of 2008.

There is already a talk of reviewing the 2007-08 budget in the context of new developments—rising oil prices, mounting pressure of subsidies that is forcing government to borrow from the banking sector. But then there is no political leadership to take hard decisions on these issues.

A caretaker setup is incapable—morally and legally—to take economic decisions with long-term implications. There is a big question mark on country’s politics even after the elections are held on schedule on Jan 8 or if elections are put off to a next date?

Questions about health of economy in 2008 -DAWN - Business; January 01, 2008

 

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Businesses expect ’08 to be more productive​

KARACHI, Dec 31: Discounting the direct impact on the industry of the current crisis, the business expects Calendar 08 more productive for trade and industry than the year 07 that closed at a sad note as Karachi Stock Exchange lost 700 points in response to a political rumour that led to nervous selling.

The current political and law and order situation in the country, however, failed to knock the positive sentiments completely out of the business community. The businessmen of Karachi, however, were comparatively skeptical.

Iqbal Ebrahim, Chairman, All Pakistan Textile Mills Association, (Aptma), who assumed office of the most powerful association of business in Pakistan on Monday, was upbeat about the year ahead.

“We have to look at the positive side of the picture to move on. The prospects in certain segments of textile industry (home textile) are good where overseas customers are looking back to Pakistan as preferred destination after trying out our competitors,” he said.

“Much will depend on the government and the private sector’s ability to reposition itself to compete with confidence in a challenging global business environment,” said another tycoon from Lahore.

“The industry and the government will have to work closely to readjust structurally to achieve the critical mass in industry to perform well,” Shafqat Illahi, the outgoing chairman of Aptma, commented.

“The government will have to facilitate the consolidation process to minimise the pain to business who call it a day and opt to exit and help others to become bigger to be able to compete internationally,” he said.

Illahi was pointing to the need of putting bankruptcy laws and other necessary legal structures in place.

“There is a huge demand for Pakistani cement, food products, home textiles, etc., if we get ready to respond in time,” said another tycoon from Islamabad.

“There are indications that the construction industry is going to pick up in a big way as many Middle East and Far-East investors are waiting for the next government to settle before making a move and if conditions allowed them to enter Pakistan, at least 36 allied industries will be lifted creating immense opportunities for a score of people,” he said.

The President of Federation of Pakistan Chamber of Commerce and Industry was not available for his comments, some leading businessmen contacted in Karachi were not as optimistic.

“The first six months of 08 should be written off as the situation cannot normalise immediately. What happens next will depend on what it takes to settle in the first half of the year,” Majyd Aziz, ex-president Karachi Chamber of Commerce and Industry, said.

“The peace is absolutely necessary for the wheel of the economy to move. Uncertainty discourages investment. The must move and move now to pacify the situation and prove its commitment to development or the business would assume that the government does not cares.”

Despite a murky outlook for the economy, prices of most consumer items, including food, are seen settling at elevated levels, spelling more pain for consumers and gains to unscrupulous hoarders and traders.

“People at the beginning of the year 07 would never have dreamt that prices would reach such levels. The benefit, however, was reaped by overseas suppliers as the locals failed to adjust swiftly to increased demand for many items,” another business leader told Dawn.

Hopefully in an election year, the government would be more diligent in sifting corrupt greedy elements to check maneuvered price increases and let the environment be more attractive for the genuine business in Pakistan.

“Dec 27 incident will cast its shadow over the business activities in the year 08 and it would be a difficult year for business in Pakistan,” Zubair Motiwala said from Karachi.

Businesses expect ’08 to be more productive -DAWN - Business; January 01, 2008

 

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Textile industry: Thousands of cotton bales set on fire​

KARACHI: At least four textile mills and more than 2,500 bales of cotton were set ablaze in Sindh during violence after assassination of former Prime Minister Benazir Bhutto, inflicting losses of millions of rupees to the country, traders and spinners said on Monday.

“Apparently it is beyond any doubt that nearly four textile mills in Kotri were set on fire resulting in more than 600 cotton bales turned to ashes besides heavy damage to textile machinery and building structures,” Ghulam Rabbani, a senior trader said. He said on the National Highway near Ghotki and Pano Aqil in Sindh, around seven trailers laden with nearly 2,000 cotton bales, coming from Punjab were set on fire by the miscreants. “Each trailer was carrying about 600 cotton bales, of which half of the stuff was of fine quality.”

The textile units included Ireland Textile Mills Limited, Standard Textile Mills Limited, Hafiz Textile Mills Limited besides many other small textile units in Kotri industrial area faced the wrath of the miscreants. “Cotton bales worth million of rupees have been turned into ashes at these mills while in Landhi Karachi, cotton bales warehouses were also set on fire,” he said.

Mr Rabbani expressed the apprehensions about the future state of affairs in the country, which is apparently turned into the worst ever because of the unfortunate incident of Rawalpindi.

He said that trade, business and industry was suffering heavily after the violence, making it hard for the industry and trade to function properly for the time being. A senior member of Pakistan Cotton Ginners Association (PCGA) and president of PCGA Sanghar cotton belt region, Rana Abdul Sattar said the country is already facing shortfall of more than 3.5 million bales during this season.

“The recent violence after assassination of PPP chairperson Benazir Bhutto, the owners of the cotton warehouses and ginners in interior Sindh faced losses of millions of rupees as miscreants also set on fire the premises of the industries”, he added.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

Import of food items increases by 3% in July-Nov 2007-08​

* The import of soybean oil during July-November 2007 increased by 102.60 percent

ISLAMABAD: Despite having agrarian economy, country’s food imports for selected items registered about 3 percent increase in July-November 2007 as compared to the imports in the same period of the last year.

Total imports of selected food items in the first five months of the current fiscal years stood at $1.342 billion and the imports of the same commodities last year in July-November 2006 was $1.313 billion. Total food import increased by $29.940 million in current fiscal year as compared to last year, according officials figures obtained by Daily Times from the ministry of commerce here on Monday.

In total 10 food items, the import of six commodities registered upward trend and four items imports declined. Food items whose imports registered upward trend were milk, cream and milk food for infants, wheat un-milled, tea, soybean oil, palm oil, and all other food items.

The imports of milk, cream and milk food for infants registered 17.91 percent increase and the current five months imports amounted to $32.928 million against last year’s $27.927 million. The imports of dry fruits and nuts also increased by 36.04 percent with import of $32.399 million in five months of current year against last year’s amount of $23.815 million.

The spices import also registered an increase by 2.89 percent. Total spices import in the current five months remained as $1.579 million while last year it was $25.322 million. Total $23.743 spices import increased over the same period last year.

The import of soybean oil during July-November 2007 increased by 102.60 percent as its import remained at $31.843 million against import of $15.657 million during the same period of last year .

Palm oil import increased by 47.64 percent in first five months of the current year as compared to the same period of last year. Total import of palm oil amounted to $572.129 million in July-November 2007-08 while last year it was $387.505 million during the same period.

The import of all other food items also registered an increase of 32.79 percent in current fiscal year’s five months as compared to the same period of last year. In current five month total import amounted to $463.740 million while last year in July-November it was $349.232 million, showing a net increase of $114.508 million.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

Pak-Malaysia FTA to be operational from today​

* Customs duty reduced on import of 5,921 items

ISLAMABAD: Pakistan and Malaysia are set to enter into a free trade arrangement (FTA) from New Year today under Malaysia-Pakistan Closer Economic Partnership Agreement (MPCEPA) 2008-2014.

In this regard, Federal Board of Revenue (FBR) on Monday announced customs duty reduction on import of 5,921 items under tariff reduction schedule spanned 2008-2014 agreed between the two countries. The ministry of commerce, in this regard, has notified MPCEPA Determination of Origin of Goods Rules, 2007 to facilitate bilateral trade under the agreed framework.

For trade in goods Pakistan has eliminated tariff on 23 percent of the current imports from Malaysia. On the other hand Malaysia will eliminate tariff on 78 percent of imports from Pakistan.

The agreement is an initiative by the government of Pakistan to secure market for its export products in Malaysia and deepen the economic and trade relationship with an important member of the region.

Pakistan has decided to reduce tariff on palm oil by 10 percent MOP on January 01, 2008. The prices of palm oil in the international market have witnessed an unprecedented increase. During the last one year its price has increased from $400 to $900 PMT. It is likely to reach $1,000 by the end of this year. There will, however, be no reduction on the rates of sales tax/federal excise duty levied at 15 percent and withholding tax charged at 2 percent on the imported palm oil.

Pakistan has given market access to Malaysia on basic raw materials, intermediate goods and machinery. Pakistan has obtained market access for its core export products like fruits and vegetables, seafood, beverages, confectionary, biscuits, gems and jewellery, cotton yarn, cotton fabric, blankets, bed linen, other home textile products and tents and tarpaulins, medicaments and surgical instruments etc.

Under the tariff reduction schedule import duty on crude oil from January 1, 2008 to be reduced to Rs 8,100 per MT and from January 2014 Rs 7,650 per MT. Palm stearin from January 1, 2008 Rs 8,145 per MT and from January 1, 2014 onwards Rs 7,692.5 per MT. Import duty on import of RBD palm oil from January 1, 2008 Rs 9,720 per MT and from January 2014 Rs 9,180 per MT. Palm olein’s import duty from January 1, 2008 and from January 2014 Rs 7,692.5 per MT. Margarine, excluding liquid margarine from January 1, 2008 Rs 1,0260 per MT and from January 2014 onwards Rs 8,640 per MT.

The issued notification SRO 1261 (I)/2007 stated that in case the rate of customs-duty specified in columns of Table-I and specified in columns of Table-II, as the case may be, is higher than the rate of customs-duty specified in the first schedule to the said act, the lower rate of customs-duty shall be applicable: Provided further that the goods shall be imported in conformity with the ‘MPCEPA Determination of Origin of Goods Rules, 2007’ notified by the ministry of commerce vide notification SRO 1205(I)/2007 read with the Import Policy Order as notified by the ministry of commerce, from time to time.

Pakistan and Malaysia Comprehensive Free Trade Agreement (FTA) was signed at Kuala Lumpur Malaysia. FTA is the first bilateral FTA between two Muslim Countries - members of OIC. This agreement is Pakistan’s first comprehensive FTA incorporating trade in goods, trade in services, investment and economic co-operation and Malaysia’s first bilateral FTA with any south Asian country. This agreement shall provide a strong foothold to Pakistan in the ASEAN region and help Pakistan achieve summit level partnership with ASEAN.

Exports from Pakistan were being subjected to higher tariff in Malaysia as compared to similar goods exported from ASEAN member countries. Resultantly, Pakistan was losing market in Malaysia for its core export product. This agreement would provide a level playing field to Pakistani products in Malaysian market.

In trade in services, both countries have provided WTO plus market accesses to each other. In the field of computer and IT related services, Islamic Banking, Islamic Insurance (Takaful) Pakistan has secured 100 percent equity in Malaysia. Market access in services provided by both countries will impact positively on investment and trade in goods. Mutual recognition arrangements are also apart of the FTA. These arrangements will provide a framework for accreditation of education institution and academic programme and facilitate the effective and efficient delivery of services. The agreement also contains a chapter on investment to facilitate entrepreneurs of both countries.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

Quick question New, what do you think the effect of Bhutto's assassination will be on our economic front? Seems like industrial work has halted and investors are pulling out, how long do you think it will continue?

Its worse than I thought!

Pak suffers loss of Rs 300bn after Benazir’s killing​

ISLAMABAD: A cabinet meeting was told on Monday that the country had suffered a total loss of Rs 300 billion of which banks suffered an estimated loss of Rs 100 billion, Online reported.

The meeting was told that the country had suffered colossal losses in rioting that erupted after the killing of Benazir Bhutto with a damage of about Rs 12.38 billion to the railways alone, according to staff report.

“Manufacturing, revenue, exports have all suffered badly,” the cabinet was told.

The railway system was hard hit with 22 locomotives and 140 coaches completely burnt and the railway telecommunications and signalling systems damaged, it was told.

The meeting was told that the supply of fuel and food to all parts of the country had been hit by the trouble. staff report/online

Daily Times - Leading News Resource of Pakistan