Pakistan Economy - News & Updates - Archive

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31 NWFP hydel projects in the doldrums due to lack of funds​

PESHAWAR: Around 31 hydel projects in the NWFP are in the doldrums due to disinterest of the federal government and lack of funds with WAPDA and the Sarhad Hydel Development Organisation (SHYDO).

A report released by WAPDA said that these hydroelectricity projects, if completed, will produce 13,584 megawatts of electricity which would not only remove power shortage and provide electricity at cheaper rates but would also bring an industrial revolution in the country.

The power projects that have not been launched for the past several years include 2712-megawatt Dasu hydel project in Kohistan district at river Sindh site, 1500-megawatt Churnala project in Kohistan, 1172-MW project in district Pattan Kohistan, 1043-MW Thakot project, 960-MW project at Tarbela Dam, 74-MW project at Munda near River Swat, 652-MW project at Soki Kinari near River Kunhar in Mansehra district, 500-MW hydel project at Spatgah Dasu in Kohistan, 454-MW project at Kundya Kuram in Kohistan, 410-MW project at Kalaam in Swat district, 334-MW project at Gariat in Chitral, 223 MW-project at Korag Pareet in Chitral, 219-MW project at Naraan in Mansehra, 200-MW project at Spatgah Dasu, 150-MW project at Madyan in Swat, 147-MW project at Kalaam, 133-MW project at Spoor Chitral, 133-MW project Puternad near River Kunhar, 127-MW project at Shagosin in Chitral, 115-MW project at Sharmai in district Dir, 110-MW project at Khazana in district Dir, 105-MW hydel project at Gabral Swat, 80-MW project at Poor in Chitral, 79-MW project at Ankht , 65-MW at Loi, 52-MW at Booni, 52-MW at Kotu in Dir, and 51-MW hydel project at Mojugram in Chitral.

The feasibility report of 13,584-MW projects has been prepared but work on the construction of these projects has yet to be started owing to non-availability of funds. The WAPDA report said the NWFP government would annually earn huge royalty amounting to billions of rupees, in addition to development in the province, if funds are provided for construction work on these projects.

Daily Times - Leading News Resource of Pakistan

 

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Phased tariff cut on 5,921 Malaysian items announced ​

ISLAMABAD (January 01 2008): The Federal Board of Revenue (FBR) has announced phase-wise tariff reduction, from 2008 to2014, on import of 5921 items from Malaysia, including crude oil/RBD palm oil. The FBR on Monday issued SRO 1261(I)/2007 to notify reduction of customs duty on the import of these items from Malaysia under Malaysia-Pakistan Closer Economic Partnership Agreement (MPCEPA) 2008-2014.

The Ministry of Commerce had notified MPCEPA Determination of Origin of Goods Rules, 2007 to facilitate bilateral trade under the agreed framework. Pakistan has reduced customs tariff on 23 percent of current imports from Malaysia. On the other hand, Malaysia will eliminate tariff on 78 percent of imports from Pakistan. The agreement is Pakistan's initiative to secure market access for its exportable products to Malaysia and deepen the economic and trade relations with a key member of the region.

Under the tariff reduction schedule, the FBR will charge customs duty at the rate of Rs 8100 per metric ton (PMT) on import of Malaysian crude oil (PCT heading 1511.1000) from January 1, 2008.

Now, the rate of customs duty on crude oil would be Rs 8100 PMT from January 1, 2009; Rs 7650/MT, January 1, 2010; Rs 7650/MT, January 1, 2011; Rs 7650/MT January 1, 2012; Rs 7650/MT January 1, 2013 and duty at Rs 7650/MT would be charged on the import of this item from January 1, 2014.

The reduction in tariff on palm oil was a major issue in the negotiations as import of palm oil from Malaysia involves substantial import 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 rate of duty on the import of palm stearin would be Rs 8145/MT from January 1, 2008; Rs 8145/MT January 1, 2009; Rs 7692.5/MT January 1, 2010; Rs 7692.5/MT January 1, 2011; Rs 7692.5/MT January 1 2012; Rs 7692.5/MT January 2013 and Rs 7692.5/MT would be charged as duty on the import of this item from January 1, 2014.

The duty rate on the import of RBD palm oil would be Rs 9720/MT from January 1, 2008; Rs 9720/MT January 1, 2009; Rs 9180/MT, January 1, 2010; Rs 9180/MT January 1, 2011; Rs 9180/MT January 2012; Rs 9180 /MT January 2013 and Rs 9180/MT would be charged as duty on the import of this item from January 1, 2014.

Customs duty on the import of margarine, excluding liquid margarine, would be Rs 10260/MT from January 1, 2008; Rs 9720/MT January 1, 2009; Rs 9180 January 1, 2010; Rs 8640/MT January 1, 2011; Rs 8640/MT January 1 2012; Rs 8640/MT January 1, 2013 and duty would be Rs 8640/MT on the import of margarine from January 1, 2014.

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/vegetables, seafood, beverages, confectionery, biscuits, gems/jewellery, cotton yarn, cotton fabric, blankets, bed linen, other home textile products and tents/tarpaulins, medicaments and surgical instruments etc.

Under the FBR notification, in case the rate of customs-duty specified in columns of Table-I and column of Table-II, as the case may be, is higher than the rate of customs-duty specified in the First Schedule of the Customs Act, the lower rate of customs duty shall be applicable. Provided 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.

Sources said that the Pakistan and Malaysia comprehensive Free Trade Agreement (FTA) was signed at Kuala Lumpur. FTA is the first bilateral agreement between the two countries. 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 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 part 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.

Sources said that the agreement also contains a chapter on investment to facilitate entrepreneurs of both countries. The incentives available to both countries will not be available to investors of other countries and the bilateral investment treaty signed by Pakistan will have no impact on the investment provisions under the FTA.

Although both countries have undertaken to reduce/eliminate tariff gradually yet in order 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, sources added.

Business Recorder [Pakistan's First Financial Daily]

 

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30 percent foreign investors quit ​

ISLAMABAD (January 01 2008): The deteriorating law and order situation has negatively impacted foreign investment as the number of foreign investors has gone down by 25-30 percent as compared to last year, and if the trend is not averted the this percentage is likely to increase further as textile exports.

The main foreign exchange spinner, would reduce by 50 percent till July 2008, Dr Shahzad Arshad, Chairman, Pakistan Cotton Fashion Apparel Manufacturers and Exporters' Association told Business Recorder on Monday.

October, November and December are peak months for textile export orders from foreign businessmen, but the deteriorating political conditions in the country, especially after the assassination of Benazir Bhutto, have hurt the economic activities so drastically that the European customers are hesitant to place orders for the year 2008.

In international market, Pakistan is fast losing its business reputation. "Our output is 40 percent less than the neighbouring countries like Sri Lanka and most of our textile exporters are shifting their business to Bangladesh", Shahzad said.

He said that if the situation remained the same, the country night have to face an extreme reduction of 50 percent in the textile exports by July 2008. Pakistan's share in textile exports is more than 60 percent and a reduction of 60-70 percent would be alarming.

This clearly shows how the political unrest in a country affects its economic conditions. Political stability and the economy stability of a country go hand in hand. A political disorder can make the economy meet the disastrous consequences, he added.

Business Recorder [Pakistan's First Financial Daily]

 

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Enhancing exports ​

State Bank introduces new financing facility

Wednesday, January 02, 2008

KARACHI: The State Bank of Pakistan (SBP) is introducing a new long-term financing facility to promote export-led industrial growth in the country. The facility will provide necessary finance to exporters for adopting new technologies and modernising their plant and machinery in line with the international competitive environment.

The SBP in its MFD circular No 7, issued on Tuesday, said exporters (including SMEs) can avail financing under this facility through Participating Financial Institutions (PFIs) for new imported and locally manufactured plant and machinery.

The facility will be available to export-oriented projects with at least 50 per cent of their sales constituting exports or if their annual exports are equivalent to $5 million, whichever is lower. The SBP said that under the new facility financing will be available through commercial banks including Islamic banks and DFIs approved as Participating Financial Institutions (PFIs). The Islamic banks will be eligible to offer LTFF (long-term financing facility) subject to availability of Shariah-compliant products duly approved by the bank’s and SBP’s Shariah Advisor and cleared by SBP’s Shariah Board.

SBP in FY 08 will refinance up to 70 per cent of the facility sanctioned by banks while the remaining amount of 30 per cent or more of LTFF shall be financed by PFIs from their own resources to a borrower.

The loans availed under the facility shall be repayable within a maximum period of 10 years including a maximum grace period of 2 years from availment date. However, where financing facilities have been provided for a period of up to five years maximum grace period shall not exceed one year.

SBP shall allocate an overall yearly limit under the facility which shall be sanctioned to individual PFIs on first come first serve basis in line with the internal criteria developed by the State Bank. For January-June 2008, this amount has been fixed at Rs8 billion. The State Bank will assign this allocation among the individual PFIs.

PFIs are instructed to submit their requests for allocation of sub limit within 15 days from issuance of this circular. Subject to the above, there will be no maximum limit for borrowing by the prospective entrepreneurs under the Facility subject to compliance of the relevant Prudential Regulations.

Refinance under the limit shall be provided to the PFIs on service charge basis, which shall be announced on yearly basis effective from 1st July each year and shall be applicable till end June during the following year.

For the FY 08 the service charges and rates for end users have been fixed as up to 3 years period of finance the rate of Refinance is 6.50 percent, PFI spread is 1.50 percent while end user’s rate is 8 percent, whereas, over 3 years and upto five years the rate of Refinance is 6.50 percent while PFI Spread is 2.50 and End User’s rate is 9 percent.

Similarly over five years and upto 10 years rate of Refinance is 7 percent and PFI spread 3 percent and end user’s rate is 10 percent. Funds provided by the PFIs from their own resources shall be eligible for deduction from the time and demand liabilities determined for the purpose of computation of both Cash Reserve Requirements and Statutory Liquidity Requirements.

SBP noted that lending under the facility shall also be subject to compliance with the Prudential Regulations as prescribed by the State Bank from time to time for different categories of borrowers.

PFIs shall consider financing based on the debt equity ratio as prescribed in applicable Prudential Regulations for each type of the borrower. The financing PFI may however ask for higher contribution of equity from the borrowers keeping in view their individual risk profile. The new scheme shall be effective as from January 1, 2008.

Enhancing exports

 

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KSE recorded 40pc growth in 2007 ​

Benazir’s assassination, emergency rule cause serious setback to share market

Wednesday, January 02, 2008
By Salman Siddiqui

KARACHI: The year that has just ended, proved to be the record making and breaking period at the Karachi bourse where the assassination of Benazir Bhutto and imposition of emergency rule in the country caused serious setbacks to the glorified shares market.

Though the killing of Bhutto on Dec 27, the news year continued to minimise heavy gains on panic selling, but owing to resuming only one session at the KSE after her demise, the losses of 2007 were borne limited in the 100-index. Despite the fact that the past year was declared as the election year that depicted extreme volatility at the KSE and during this year country faced the worst law and order situation amid uncertainty on political front, the leading benchmark 100-index dared to drive up.

Moreover, the lawyers movement which started in the backdrop of deposed Supreme Court Chief Justice Iftikhar Muhammad Chaudhry, who was first sent on forced leave and later reinstated, and President Musharraf’s re-election for the next five year, both badly disturbed the sentiments at the KSE. The KSE 100-share index made a robust raise of 4,035 points or over 40 per cent during the year (January to December, 2007) and finished at 14,076 points on Dec 31 from 10,040.50 points pre-opening level of Jan 3, 2007.

The first half gains in this index stands at 37 per cent where the second half remained sluggish and posted only three per cent gains in the 100-index. Therefore, investors injected more funds worth of Rs1,558.8 billion or over 56 per cent in the overall market capitalisation that surged to Rs4,329.9 billion on Dec 31 from Rs2,771.1 billion on Jan 3, 2007. Amid the average daily turnover of the year stands at 258 million shares in the ready market, Tahir of KASB Securities calculated.

During the year, market resumed as many as 244 trading sessions at KSE floors out of which 153 sessions closed on positive note against 91 sessions concluded on negative note. Therefore, the killing of Bhutto was followed by the worst ever law and order situation in the country, thus, breaking all previous records in 100-index at the KSE.

The Dec 31 trading session ñ the sunset session of year 2007 ñ witnessed the worst ever crash of 696.25 points in a single session. The session broke the early record of single day biggest slump of 636 points recorded on Nov 5, also in the year 2007. The chief reason behind the second biggest fall in KSE history (ie of Nov 05, 2007 session) was said to be the imposition of emergency rule in the country, which lasted for 43 days and was lifted back on Dec 15. The-then Chief of Army Staff Gen Musharraf proclaimed PCO and held 1973 Constitution in abeyance on Nov 3 that hurt the weak positive sentiments of the market very badly.

The black Monday (ie Nov 5) breached the early record of registering a single day maximum decrease of 547.93 points in the 100-index, which was recorded on June 14, 2006.

The year 2007, on the other hand, also created new history by making so many new records in the positive column. The persistent amid cautious buying in the fundamentally strong stocks placed 100-index to all-time high at 14,815 points on Dec 26, where the second and third tier stocks played very critical role in making this new record. This time the accumulation was mostly made in banking stocks on the hope of receiving higher payouts than of the last year, it was learnt.

Earlier, investors gave amazing welcome to Benazir Bhutto on Oct 18 and set index to (previous) all-time high at 14,755 points. Despite the two bombs blasts in her welcome rally in the city, the index moved up in the very next session on strong assumptions that political uncertainty would calm down after Bhutto’s safe arrival and assumptions that she would become the next premier of Pakistan.

The sharp fluctuation in the international oil prices, which almost doubled and reached near US$100 per barrel during 2007 on the US oil reserves concerns and tension in the region, also played a key role in inviting new funds in the relevant stocks at the KSE. However, the FTSE Group (Financial Times Stock Exchange Group) removed Pakistan from its Global Index owing to a number of unresolved issues with Pakistan.

However, the KSE broke through series of records and became the 6th best performer among the emerging markets, as defined by MSCI Emerging Market Index, by gaining more than 40 per cent in the year, Ovais Siddiqui of JS Research added. “Unlike previous years, 2007 was marked by outburst of foreign funds’ interest in Pakistan market, thanks to improved fundamentals of the market and substantial liquidity flows into Asian emerging markets. Similarly, owing to handsome performance and listing of two major banks, ie Habib Bank and Standard Chartered Bank, banking sector took over E&P as the largest sector on the KSE”, he added.

Banks, cement dominate the show in contrast to the past banks mainly drove the market with 41 per cent returns in 2007, backed by cement sector with 47 per cent returns. On the other hand, fertiliser and OMCs underperformed the market with 38 per cent and 23 per cent returns in the year, respectively. Similarly, E&P sector disappointed investors with a return of just seven per cent.

Coupled with relatively unimpressive earnings growth in FY07, the tremendous increase in the free float, as a result of off-loading of 10 per cent stake in OGDC by the government through GDR, contributed to this bad show of the sector, JS Research added.

Records Made in KSE-100 During 2007

RECORDS FIGURES DATES

Index Year Opening Level 10,040.50 points January-03

Index Year Closing Level 14,075.83 points December-31

Index Year Highest Level 14,814.85 points December-26

Index Year Lowest Level 10,147.36 points January-05

Maximum Increase (Single Day) 385.68 points October-01

Maximum Decrease (Single Day) 696.25 points December-31

Minimum Increase (Single Day) 0.60 point January-19

Minimum Decrease (Single Day) 0.55 point January-23

Maximum Turnover (Single Day) 525 million shares July-13

Minimum Turnover (Single Day) 59 million shares April-02

Yearly Movements in Blue Chips

Symbols Open on Close on Difference

Jan-03 (Rs.) Dec-31 (Rs.) (Rs.)

DGKC 62.95 94.70 31.75

ENGRO 169 265.75 96.75

FFBL 28.50 42.05 13.55

LUCK 59.90 116.50 56.6

MCB 246.10 399.95 153.15

NBP 224.25 232.15 7.9

OGDCL 114.70 119.45 4.75

POL 349.75 334.40 -15.35

PPL 232 245.05 13.05

PTCL 44.30 42.05 -2.25

KSE recorded 40pc growth in 2007

 

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FBR faces revenue loss of Rs35bn due to disturbances ​

Wednesday, January 02, 2008

Islamabad: The Federal Board of Revenue (FBR) has collected an estimated Rs430 billion in the first half of the current fiscal year against the projected revenue collection in the period reflecting a revenue loss of Rs35 billion.

The shortfall of Rs35 billion is primarily owing to recent tragic developments on the political front and ensuing disturbances in the country, which put the economy on a standstill, said FBR Chairman Abdullah Yusuf in an exclusive panel interview with APP here on Tuesday.

Responding to a query, the FBR chairman said that the month of December is of immense importance with regard to revenue collection in the first half of financial year which, however, proved to be unfortunate in the wake of recent events in the country.

Notwithstanding a major setback of Rs35 billion, Yusuf expressed the confidence that the Board was expected to rope in Rs one trillion revenue collection against the actual target of Rs1.025 trillion.

Giving the break-up of the setback, he said direct taxes suffered a loss of Rs23 billion, sales tax Rs10 billion, federal excise duty Rs One billion and customs duty Rs one billion. In the first five months ( July-Nov) of current fiscal year, tax growth was 14.8 per cent over the same period of last financial year. However, in September there was a slight decrease of Rs five to six billion which could have been made up, had there been no such tragic developments causing economic stagnation, he maintained.

In reply to a question, the FBR chief said certain chunk of Rs20 to 25 billion loss would remain irretrievable even in the rest of the fiscal calendar. During the first five months, Rs340 billion revenue was collected as opposed to Rs296 billion in the corresponding period of last fiscal year depicting an increase of Rs44 billion.

However in the first six months (July-Dec), revenue collection was to the tune of an estimated Rs430 billion against the collection of Rs410 billion in the same period of last fiscal year, showing an increase of Rs20 billion.

The Board is poised to mop up Rs one trillion, provided the economic momentum continues in the second half with other things remaining the same, he said. Around 2.04 million tax returns were filed till December 2007 against 1.52 million returns in the same period of last fiscal year, he added.

FBR faces revenue loss of Rs35bn due to disturbances

 

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Govt taking steps to provide employment opportunities: PM ​

Wednesday, January 02, 2008

ISLAMABAD: Caretaker Prime Minister Mohammadmian Soomro on Tuesday said the government has been taking steps to provide better employment opportunities to the people of Balochistan

Talking to former Senator Fasih Iqbal here at the PM’s Secretariat, the prime minister said the federal government would continue taking more steps to provide better employment opportunities to the people of Balochistan. Soomro said the government would ensure that the people from Balochistan are given their due share at all tiers of federal services.

The prime minister said the federal government has attached high priority to the development of Balochistan. He said a strong communication network is being built which is essential for realizing the full economic potential of the province. The prime minister said Balochistan has immense potential in tourism, fisheries, livestock, agriculture, oil and gas, and minerals and the federal government has allocated huge funds to develop and exploit these sectors for the betterment of the people of the province.

Soomro said the government has already launched numerous mega projects which would help provide employment opportunities to the youth of Balochistan. He said the quota of Balochistan in the federal services has already been increased to six per cent to ensure better representation in federal government jobs.

The prime minister appreciated the role played by the media, particularly the regional media of Balochistan, in the development of the province as well as the unity and integrity of the country. Fasih Iqbal thanked the prime minister for the steps taken by the federal government to bring Balochistan on a par with other parts of the country.

Govt taking steps to provide employment opportunities: PM

 

[Neo]

Bad signals for economy if uncertainty prolongs​

ISLAMABAD, Jan 1: Pakistan’s exports, investor confidence, credit rating and debt payment capacity could suffer greatly if the current political uncertainty and law and order situation, particularly in Sindh, prolongs, senior government officials said.

In background discussions, these officials suggest that Pakistan’s image abroad has been the worst victim on last week’s Liaquat Bagh tragedy that killed 22 people, including former Prime Minister Benazir Bhutto, and subsequent 53 deaths and colossal loss to public and private property in violent protests since then.

They said Karachi was the country’s industrial and business capital as well as a port city where violence ad closure of business can cause nervousness among foreign investors.

They said the government was finding it difficult to get enough tanker lorries to shift oil products from port to the pipeline system or to move petroleum products through rail. That means that business and industrial activity is getting affected across the country.

A senior official said Pakistan’s exports were already showing signs of stagnation and a further dent would mean that financing of current account deficit would become difficult.

He said the imports may also be affected but that should not be a cause of concern in the short run. He said almost 1,100 points plunge in the stock market was a clear sign of nervousness in the ranks of domestic and foreign investors.

He agreed that uncertainty surrounding the election date was a major cause of concern.

An economist at the planning commission, requesting anonymity, said a series of events taking place in quick successions have exposed government’s claims of booming economy and it was time for the president and other institutions to ask Shaukat Aziz where the strength of economic fundamentals has gone.

He said the much talked about foreign exchange reserves are on the decline and inflows have also been affected in the recent weeks.

Most of the economists were already worried about the country’s political situation since March this year and followed by ad hocism in dealing with the crucial economic issues, like rising inflation, food shortages and increasing trend in fiscal and current account deficits ahead of Jan 8 general elections, nothing could have been worst than Liaquat Bagh tragedy.

“My worry is that Pakistan’s capacity to repay foreign debts and service its sovereign bonds would become fragile if the current situations goes out of hand even in the short run,” said an economist at a foreign bank.

“The first victim of such a situation is always the investment climate that takes a long effort to improve,” he said, adding that investors even from the friendly countries, like the Gulf would adopt a “wait and see approach” even if they don’t “rethink their investment strategy” towards Pakistan.

Economists believe that the situation could lead to slowdown in foreign inflows both in the shape of remittances and foreign investment.

Last year, foreign investment into Pakistan went beyond $7 billion that coupled with substantial remittances from overseas Pakistanis met current account deficit. The current account deficit has again reached almost $5 billion in the first five months of the current year, almost 15 per cent higher than last year. Any reduction in remittances or the foreign investment could be really problematic.

They said the risks to national economy posed by inflation, food shortages, higher fiscal and current account deficit were real even before the government announced a date for general elections, but “the killing (of Benazir Bhutto) is an extraordinary event which has the potential to cause extraordinary harm to the economy,” a government official said, and added maturity would need to be shown by all the stakeholders.

Dr Ashfaq Hassan Khan, economic adviser to the finance ministry, said it was really a great national tragedy but economy could only be affected when production activity comes to a halt, factories are closed, imports and exports come to a standstill and tax collection becomes difficult.

“If all these things happen on a sustained basis, it is going to be a problem, but I don’t foresee such a scenario on a large scale.” At the moment, it is too early to say about the impact on credit rating and debt repayment capacity, he said, adding the political leadership, particularly those heading the PPP, would never like that to happen with the national economy.

He, however, conceded that such events shy away foreign investment although violent public sentiment at the loss of a national leader was quite a natural element.

“This effects adversely the sentiments of foreign investors who will definitely feel nervous towards Pakistan,” he said.

Analysts suggest the growing agitation following the death of former prime minister apparently meant stronger hostility towards President Musharraf that could increase the risk of default on country’s $2.7 billion sovereign international bonds.

Bad signals for economy if uncertainty prolongs -DAWN - Business; January 02, 2008

 

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Subsidised lending scheme for exporters​

KARACHI, Jan 1: Another subsidised lending scheme for the export-oriented industry has been launched while the State Bank will provide 70 per cent money for these lending at a rate significantly lower than the market.

The new scheme is specially designed for import of latest machines for export-oriented sector carrying major attraction of long-term loans for up to 10 years while grace period of two years is also available.

The main sectors which will benefit from the new scheme are textile and garments (fabrics, garments, made-ups, towels, art silk and synthetic textiles), rice processing, leather and leather products, sports goods, carpets and wool, surgical instruments.Funds provided by the PFIs (Participating Financial institutions) from their own resources will be eligible for deduction from the time and demand liabilities determined for the purpose of computation of both Cash Reserve Requirements and Statutory Liquidity Requirements.

The scheme is effective from the very first day of the year 2008 and all LCs established after announcement of the scheme will be eligible for financing.

The facility will provide necessary finance to exporters for adoption of new technologies and modernising their plant and machinery in line with the international competitive environment.

The SBP introduced the new long-term financing facility to promote export-led industrial growth in the country.

The rising import and slow export growth has been threatening for the country for at least four years and the widening trade deficit is feared to wash out the hard-earned foreign exchange reserves.

The State Bank said the facility will be available to the export- oriented projects with at least 50pc of their sales constituting exports or if their annual exports are equivalent to US$ 5 million, whichever is lower.

Exporters (including SMEs) can avail financing under this facility through Participating Financing Institutions (PFIs) for new imported and locally manufactured plant and machinery.

The loans availed under the facility will be repayable within a maximum period of 10 years, including a maximum grace period of two years from availing date. However, where financing facilities have been provided for a period of up to five years, maximum grace period will not exceed one year.

The mark-up on a loan for three years will be eight per cent, including 1.5 per cent spread of banks while for five-year loan carries mark-up of nine per cent, including 2.5 per cent bank spread.

For the 10-year financing, the total mark is 10 per cent, including three per cent bank spread. The SBP in FY 08 will refinance up to 70pc of the facility sanctioned by banks while the remaining amount of 30pc or more of LTFF will be financed by PFIs from their own resources to a borrower.

The SBP will allocate an overall yearly limit under the facility which will be sanctioned to individual PFIs on first-come-first served basis in line with the internal criteria developed by the State Bank. For January-June 2008, this amount has been fixed at Rs8 billion. Under the new facility, financing will be available through commercial banks, including Islamic Banks and DFIs approved as PFIs.

Islamic Banks will be eligible for offering LTFF subject to availability of Shariah compliant compatible product under the facility duly approved by the banks and SBP’s Shariah Advisor and cleared by SBP’s Shariah Board.

Period of financing: There will be no maximum limit for borrowing by the prospective entrepreneurs under this facility. However, in case of larger financing requirements, i.e. over Rs300 million, PFIs are encouraged to provide finance under consortium arrangements, said the SBP.

Other sectors which may benefit from the new scheme included fisheries, poultry and meat, fruits and vegetable and processing, cereals, I.T. – software and services, marble and granite, gems and jewellery and engineering goods.

Subsidised lending scheme for exporters -DAWN - Business; January 02, 2008

 

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Govt plans to hire foreign consultants​

ISLAMABAD, Jan 1: The government plans to hire foreign consultants to help find out non-traditional international markets for increasing country’s exports.

Official sources told Dawn on Tuesday that initially major attention will be given to surgical instruments, medical devices and appliances industry for their enhanced exports in Middle East, Japan, Africa and South America.

Foreign consultants of different fields will be hired on short-term assignments to also train Pakistani engineers and introduce process efficiencies by upgrading skills and technologies.

This industry of three important export items is currently contributing around $200 million to exports and providing direct employment to 50,000 workers.

In addition to exports, diversification towards the development of allied products for plastic disposables, hospital textiles, hospital furniture, non-steel medical devices and electro-medical appliances will also be explored through foreign consultants.However, sources said there was a dire need to improve the performance of commercial attaches based in Middle East, Japan, Africa and South America for arresting the decline in Pakistani exports.

This industry can be transformed into a modern medical devices and appliances industry by developing and integrating multiple technologies.

The government has been proposed to have a clear vision to move the industry to a high technology orbit through product diversification. Value-addition in disposable instruments category was also proposed.

In the second phase, the country could enter into the surging export market with quality improvement and standardisation.

In this regard, the government was proposed by official planners that incentives should be given to the local development and manufacturing of power generation equipment, especially in collaboration with the Wapda,

Concerted efforts for standardisation of equipment, such as small and medium sized thermal and hydel turbines, etc. up to 50 MW) were required to be made.

Incentives for building plants of electrical appliances according to the domestic potential and proper attention and incentives should be given to the local UPS and generator manufacturing industry due to the growing demand.

The manufacturing of gas, petrol and diesel generators may fill the domestic, industry and commercial electricity deficit.

About the electric fan industry, the official planners called for diversifying and broadening the product range towards plastic and decorative fans. Also, aggressive marketing of the products to penetrate in the American, European, Middle Eastern, Latin American and African markets was proposed. Recommendations were also made about the ceramics industry which contributes about $46 million to the GDP and provides direct employment to around 20,000 workers.

Currently total exports are meager $6 million. Tiles and sanitary industry at present has 83 per cent share in the domestic market.

This sector, planners said, can be promoted by introducing process efficiencies leading to technological up-gradation and enhancement of competitive advantage.

Similarly, sanitary wares industry can gradually increase its export performance through improved product quality by adopting efficient production processes.

The government was urged to conduct a detailed study to improve the performance and growth prospects, as well as employment generation in the ceramics industry.

Machine tools, moulds and dies industry is quite small in size and contributing around $10 million in GDP besides providing job opportunities to around 15,000 workers.

Cost competitive and dynamic machine tools, molds and dyes would go a long way in making this engineering sector competitive in the world market. This would only be possible by integrating new technologies and keeping pace with the technological advancements in line with the global manufacturing trends.

About the electronics industry, it was proposed that core competencies in electronics, including highly qualified manpower and R&D capabilities, should be developed.

Presently some manufacturers are producing small electronics gadgetry, including security systems, pay phones, electronic signboards, stabilisers, UPS, inverters, radio and cassette-players and dish receivers. The existing industry is fragmented and lacks critical mass. Further, there is no domestic supply chain for electronics manufacturing.

Strengthening the capability in assembly and testing of electronics components, and support and development of indigenous supply chain was also proposed.

Govt plans to hire foreign consultants -DAWN - Business; January 02, 2008

 

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Pakistani raw cotton continues to make a mark​

KARACHI: Pakistan stands at the fourth slot in the raw cotton-producing sector of the world and has shown significant improvement since it came into being in 1947.

Pakistan is also the third biggest consumer of raw cotton in the world.

Most of the Pakistani cotton is saw ginned cotton, there are roller gins, which still exists but most of cotton is produced by saw gins.

An interesting fact is that the year Pakistan came into being (1947), it exported almost all of the cotton produced that year and that amazing figure was 1.1 million bales and this practice kept on going. Pakistan improved the quantity, quality, consumption, export and the import of cotton as well. Cotton export from Pakistan has shown a rise around 47 percent in 2007 as compared to the same period last year.

In the international market, Pakistani cotton was getting more attraction due to higher quality from the traditional and non-traditional cotton importing countries.

During January-December 2007 Pakistan registered an export figure of 96,872 bales.

A senior trader Ghulam Rabbani said shipment of around 30,000 bales to Bangladesh and Far East countries in documentation stage at Trade Development Authority of Pakistan (TDAP) is in the pipeline.

He said the international lint buyers consider Pakistan cotton number one in quality as well as on competitive rates in the international market besides it is the only new harvest in the international market available.

Pakistan exported 3.8 million bales in the crop year 1985-6, 3.9 million bales again in the next crop year 1986-7, 3.2 million bales in the crop year 1987-8, and 4.5 million bales in the year 1988-9.

This year Pakistan has a space to export about 1.5 million bales of best quality cotton, of which 1 million is still available while the rest is already disposed to Bangladesh, Far East and China. He said our nearest competitor, the Indian cotton merchants are offering a bit higher price while their quality does not conform to the demand of international buyers.

He said still the rates in domestic market are cheaper in the world cotton for the same specification as Indian type J-34 offered at 65-66 cents per pound which accumulated to around Rs 3,225 per maund. He said, “A sizeable export will not affect the domestic market’s requirements as the country’s import of PIMA grade (US) and other qualities cotton are still a regular feature, as we are already facing a shortfall of around 3 million bales.” To fulfill the need and thirst of local textile industry for producing different types of yarns and fabric, Pakistan has to import millions of bales every year for specific production of yarn and fabric.

The millers, spinning and private sector commercial companies imported around 158,255 tonnes cotton, equivalent to 791,275 bales mainly from USA, India, Brazil and central Asian countries during January-December 2007.

The country imported around Rs 30 billion worth cotton bales during the same period from the foreign buyers.

The country’s production is expected around 12 million cotton bales this crop season while the demand by textile sector stood around 15.5 million bales. The shortfall was being met by the imports. Keeping the past experience, the economic managers of the country on repeated calls by the Ministry of Textile Industry (MINTEX) and local textile industry allowed import of cotton through land route from neighbouring countries including India to reduce the cost of production and cost of import.

Ministry of Commerce in May 2007 allowed import of long staple cotton through land route from India and Uzbekistan. The import of long staple cotton through land route from India reduced the cost of import and helped local textile industry to enhance its production and its value addition for increase in textile exports.

Long staple cotton will be importable through land route as well. Earlier government has allowed the import of cotton and cotton yarn from India through seas or air. Cotton imported through these means was expensive for the local industry. The lint imported from India and United States dominated the cotton market’s volumes during this period.

“This is not an end to import and we must be ready for a good quantity still to arrive in the country, around 45,000 cotton bales kept arriving,” he added.

Mr Rabbani said the federal government fixed the cotton production target at 14.14 million bales for the crop 2007-08.

He said the federal government fixed sowing target at 8.031 million acres, 6.326 million acres for Punjab and 1.581 million acres for Sindh. NWFP and Balochistan share stood 0.14 million area for cotton production.

He said Punjab was likely to produce 11 million bales while Sindh to produce three million bales. Despite the government’s target for the crop season, there would be a shortfall of around 3.4 million bales.

More than half of the production is of grade II (Pakistani type 1467), 1-1/16 plus, 72 Rd, less then 8 +b, 28 GPT strength and almost free from contaminations.

According to the figures and reports, in this crop year not even a single bale of Afzal and lower, or lower than 1-1/16 staple has yet been produced in Pakistan. Pakistani cotton has improved its quality a great deal in last five years in result of certain serious and practical arrangements by the government to improve the cotton production and quality in order to take good share in the international trading.

Newly produced seeds are in production and a major part of the crop is a result of BT (Bacillus Thuringiensis).

Daily Times - Leading News Resource of Pakistan

 

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Pakistan regarded as fastest-growing cellular market​

KARACHI: The government is taking Pakistan’s telecom future seriously and has deregulated the sector. As a result, scores of new private entrants are gearing up to provide service, and since October 2007 cellular subscriptions have shot up to 71.5 million making Pakistan one of the fastest-growing cellular markets with a cellular mobile density of 44.51.

The Indian press reported the results of a survey in which Pakistan is ahead of India in telecom progress. Though the Indian telecom sector surges ahead with six million new mobile connections every month, its penetration among the lowest strata of society, especially in rural areas, is much less than in Pakistan and Sri Lanka, a recent survey has shown. Bangladesh has sought Pakistani cooperation to introduce reforms in the telecommunication sector of their country, while lauding the telecom policies of Pakistan, their effective implementation and the exponential growth shown by the sector during recent years. The deregulation of the country’s telecom industry is fast gaining momentum with dozens of more communication companies and millions of customers entering both the fixed-line and mobile telephone markets.

The sector is currently contributing 2 percent in GDP directly and indirect contribution in other sector of the economy takes this share to about 5 percent. Total revenues of telecom sector in 2006-07 reached Rs 236 billion whereas total investment was $4,108 million. Telecom companies have invested over $8 billion during the last four years in Pakistan particularly the mobile sector whose investment share accounts for 73 percent. In 2006-07, cellular mobile sector has invested over $2.7 billion, which becomes about 66 percent of total investment by the sector. Local loop segment of the industry is also taking off and in 2006-07 about $7.8 million were invested by this sector. LDI operators have invested about $603 million in 2006-7, which is about 15 percent of the total investment by the sector. romail kenneth

Daily Times - Leading News Resource of Pakistan

 

[Neo]

Despite turmoil Pakistani stock markets shine in 2007 ​

* This was the 6th consecutive year of bull-run, 40 percent gain in 2007, lower than previous 5-years' (2002-05) average of 55 percent

KARACHI: Bull-run ruled the Karachi Stock Exchange (KSE) mostly during 2007 with equities posting impressive 40 percent gains despite being one of the most turbulent and violent year in history of the country.

Though 2007 remained an exciting year for the capital market, it would be remembered for the worst law and order situation particularly after the assassination of former Prime Minister Benzair Bhutto at the fag end of 2007, which jolted the entire nation and the world.

Nonetheless, the entire year was marred by the country-wide protests since March 09, when the Supreme Court Chief Justice Iftikhar Chaudhry was removed from the office along with the unprecedented number of suicide attacks, country's stock market well absorbed these shocks and continued its upward journey by breaching a number of psychological barriers and setting new records.

Though, it reacted to some of the negative developments during the year, it again turned to upward march. But first on the occasion of imposition of emergency and then assassination of Benzari Bhutto pushed the market to crash like situation and the market continue to feel pinch of the former incident, which is still being felt by the market.

This was the 6th consecutive year of bull run, 40 percent gain in 2007 was, however, lower than previous 5-years' (2002-05) average of 55 percent. Out of 52 weeks in 2007, market closed in the positive territory 35 times on weekly closing basis translating into the bulls to bears ratio at 7:3.

In 2007, the market recorded its all time high gain at 14,815 points on December 26, 2007. The gain posted by the market during the first half (January-June 2007) was significantly higher than that of its 2nd half (July-December 2007) as against a return of 37 percent recorded in first half 2007, only three percent gain was observed in scond half. "The subdued performance in the second half of 2007 could be linked to the political instability in the country due to proclamation of emergency and assassination of Ms. Bhutto", analysts said.

Also, calendar year 2007 was one of the better years in terms of stock offerings. Unlike previous calendar year 2006, when only five companies floated their shares through stock exchange, there were eleven IPOs in 2007.

The total amount offered through IPOs in 2007 stood at Rs 15.7 billion versus just Rs 1.9bn previously. The hefty jump in IPO size during 2007 was due to reappearance of the government offerings like mega issue of Habib Bank Limited (HBL) worth Rs12.2 billion inclusive of green-shoe.

In contrast to the past, banks mainly drove the market with 41 percent return in 2007 backed by cement sector with 47 percent return. On the other hand, fertiliser and oil marketing companies (OMCs) underperformed the market with 38 percent and 23 percent return in the year respectively. Similarly, E&P sector had disappaointed performance with a return of just 7 percent.

During the year 2007, aggressive buying by foreign investors was also at the peak as improved fundamentals of the market and substantial liqutidity flows into Asian market directed major foreign funds into the stock market. Aggressive entry of foreign funds into Pakistan market, especially in banking sector, led the market to record highs in first half of 2007.

Analysts said that despite all the polticial upheavals on the domestic political front, the economic fundamentals remained strong which helped keep the busllish run at the market to new heights. Also, the average retunrs on investment in the local bourses were attractive compared to regional market, which brought more and more foreign equity into the local market.

However, they said that now a lot depends at how the political situation after assassination of Ms. Bhutto shapes up the events of coming days and to see how the stability restores and its impact on the capital market.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

Banks face challenge of sustaining earnings growth momentum​

KARACHI: After earning strong profits in 2005 and 2006 on the back of a favourable interest rate environment and rapid loan cycle growth, the banking sector now faces the medium-term challenge of sustaining earnings growth momentum, banking analysts said here Monday.

The banking industry has experienced slower loan growth in recent past due to sluggish demand in interest-rate sensitive consumer financing as well as a high-base effect. Deposit mobilization has been faster as banks attract long-term deposits to match long-term project financing needs.

In this situation, larger banks are likely to be the winners because they have a solid deposit base and the ability to participate in big-ticket project financing deals, analysts say. Banks with adequate credit quality procedures in the still nascent consumer-financing segment also stand to benefit, they add.

A combination of factors is behind slower loan growth including the tighter monetary policy adopted by the central bank and higher rates have moderated credit demand, which is in line with the central bank’s aim to curb inflationary pressures.

The impact of higher rates has been clearly felt in consumer financing and growth has temporarily moderated in this segment. Secondly, corporate credit demand has also decreased as recent industrial expansion cycle stands completed.

However, the banks have been able to attract deposits at a fast pace in the recent past, as banks have made efforts to mobilize long-term fixed deposits and the proportion of fixed deposits is gradually increasing.

The drive for attracting longer-term deposits comes on the back of zero-rating of deposits of tenure greater than one-year for CRR purposes.

“With the industrial expansion cycle kicking off in power and fertilizer sectors, banks are quietly building up deposit base to gear up themselves for future long-term lending projects,” said Raza Jafri and Naveed Vakil, analysts at AKD Securities. “Project-financing deals will drive the bulk of credit demand,” they said in a report.

On the consumer-financing front, analysts believe, higher rates are likely to continue moderating growth in the near term although immense potential remains in this area.

With the banking sector having come full circle following the privatisation drive, banks now look to build on their base and expand into relatively under-tapped segments to deliver growth, analysts say.

On the face of it, the withdrawal of FSV benefit appears to penalize the banking sector. But the fact is that with the recent burst of growth exhibited by banks, the SBP is now keen to maintain the quality of this growth so as to deliver long-term benefits, add analysts.

Analysts say they are strongly of the view that the new stricter prudential requirement essentially serves to further strengthen the sector.

In fact, fundamentals are slated to show improvement, as banks are likely to accelerate recovery procedure to minimize the impact of the policy change, they say.

Mergers and Acquisition: Rising income levels coupled with a newfound inclination for taking on leverage are factors that are fuelling growth in the banking sector and are primary motivations behind continued interest from foreign banks, banking analysts said.

“Several small and medium size banks appear appealing candidates for future mergers and acquisition interest,” said a banking analyst. “While we cannot disregard the potential for mergers and acquisitions in second-tier banks, third-tier banks offer enough to register on M&A radars.”

Profitability: “We believe that future reversals, resulting from the sale of illiquid collateral and the likely speedup in recovery procedures will dilute the downward EPS impact, to some extent. It must also be kept in mind that the fundamental position of banks essentially remains intact,” said analysts.

“If the proposed policy change is implemented from CY08 under a two-phase implementation, we believe that the major impact will be on CY08 results while in CY09 the impact is not so significant,” they said.

They said they believed that banks are likely to accelerate recovery procedures to minimize the impact of the proposed policy change. Although some earnings volatility is expected in the short run the overall impact will stand the banking sector in good stead in the long term as further balance sheet strengthening takes place, they added. As the fundamentals remain intact, the proposed policy change is actually a positive move for the sector over the long-term horizon, given that the acceleration in NPL recovery is a feasible outcome, they said.

Monthly Advance Deposit Ratio slid to 71 percent in August and September 2007 (lowest in 3 years) from 80 percent in January 2007, which shows the risk averse lending by banking sector in general and realization of the fact that one of the key sectors, i.e. textile, is off track.

“We expect ADR to stabilize in the range of 72 to 75 percent during 2008,” said Saad Bin Ahmad, head of research at Capital One Equities in his report on the banking sector.

He said the banking sector is witnessing a trend change in Advance Deposit Ratio. Growth in advances and deposits of the banking sector is also showing a trend change from the last three years with total banking deposits showing an upward trend.

“We expect limited growth in advances during CY08, with particular emphasis by banks on real estate, construction, power generation, agriculture and engineering sectors,” he said.

Commercial banks’ credit concentration has shifted its focus, initially from textile sector to consumer financing (real estate and automobile loans) and now to power generation and real estate, he said. “We believe lesser options for asset allocation would result in increasing portfolio investment by banks in CY08,” he said.

Total non-performing loans have increased by 7 percent (quarter-on-quarter as of September 2007). Net NPLs/Net loans have also increased by 50 bps over the quarter. Banks, in the wake of rising NPLs, have recently modified their credit policies in consumer financing sector. “We have observed decline in demand for automobile as a result of this decision. We believe that the declining trend in appetite for loans and consequent liquidity are directing towards a slide in interest rates, which will contain growth in banking sector profitability,” he said.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

156 megawatts Morgah power project to start in October ​

ISLAMABAD (January 02 2008): Construction of five thermal power projects of 1200 MW power capacity, already approved by PPIB will be completed in 2008-2009. Attock General Limited of 156 MW is one of these plants, which is scheduled to be commissioned in October 2008 and other four plants will be commissioned during last three months of 2008.

These observations were made by caretaker Federal Minister for Water and Power, Tariq Hamid during a visit of the site of the under construction plant of Attock General Limited on Tuesday.

The minister expressed the hope that after 15th January 2008, the situation would become better as water to Punjab and Sindh would be released and gas supply to the power plant, would be increased which would indeed generate more electricity enabling Wapda to avert the load management in the country.

Minister for water and power along with representatives of PPIB visited 156 MW Attock General project at Morgah, Rawalpindi. He appreciated the efforts made by Attock General Limited in developing project in private sector, which is scheduled to be commissioned in October 2008.

Adil Khattak, Chief Executive, Attock General Limited along with his team received the minister at the project site. Khattak informed the minister that company would try to ensure timely completion of the project to meet the power shortage.

Chief Executive Attock Refinery Limited (ARL) made a brief presentation, highlighting the salient features of the project. The project has a capacity of 156 MW for which all agreements have been concluded. The project will cost 148.6 million dollars.

The chief executive apprised the minister that the project will get uninterrupted fuel supply from Attock Refinery through a dedicated pipeline. It is the first IPP in north of Lahore and it will increase the reliability in Iesco area, he added.

Business Recorder [Pakistan's First Financial Daily]