Pakistan Economy - News & Updates - Archive

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PSEB aims for $200m venture capital funds ​

Pakistan’s Internet penetration at 7.5pc and India’s at 4.5pc​

Friday, February 08, 2008

KARACHI: The Pakistan Software Export Board (PSEB) is targeting venture capital funds of around US$200 million by 2011 and intends to launch an entrepreneurship development programme which will assist IT companies in assessing overseas venture capitalists, building boards of advisers and directors and undertaking initial public offering, a PSEB spokesman said in a statement.

The recent example of two leading US-based venture capital (VC) firms, ePlanet Ventures and Draper Fisher Jurvetson (DFJ), providing funds to Naseeb Networks, speaks volumes of the trust placed in the potential of Pakistan’s IT Industry by foreign investors. Naseeb Networks is a leading provider of online recruitment social networking and related services in Pakistan.

The spokesman further stated that the funding will be used by Naseeb Networks to accelerate the growth and leadership position in target markets by investing in sales’ force and marketing expansion.

Another example is of a leading Pakistani IT company LMKR, which received an infusion of private equity from a leading UK-based private equity fund Actis. These investments demonstrate confidence in Pakistan’s IT industry by international financiers. As Naseeb Networks is focused on the local market rather than export market, the investment also shows confidence in the economy of Pakistan, Internet penetration trends and online usage.

Pakistan’s current Internet penetration is around 7.5 per cent as compared to India’s 4.5 per cent. With over $500 million recently invested in the country’s broadband and WiMAX infrastructure, the Internet penetration will increase up to 16 per cent over the next three years, the spokesman added.

Several Pakistan-based IT companies like Scrybe, Ultimus, Mobile Complete, Pixsense, and Renaissance 2.0 have already obtained foreign financing from international VC firms and other investors.

Just like firms in other industries, IT firms also require funding for growth; however traditional financiers like banks the world over do not prefer lending to smaller IT firms. The prime reason for this reluctance is that the only collateral/asset that small IT firms have is intellectual property, which banks find hard to attach a value to. This is why venture capital is so essential to the IT industry.

In addition, venture capital, also referred to as “smart” money, is suitable for small IT firms which are usually run by engineers with limited financial and marketing expertise. Venture capitalists bridge this gap by providing mentorship and a network of international business contacts.

PSEB aims for $200m venture capital funds

 

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Aviation sector enters new era of growth ​

Friday, February 08, 2008

KARACHI: After remaining in air for over a decade, Aero Asia met its impending fate. It was grounded by Civil Aviation Authority (CAA) last year. Its tumultuous landing was a recurrence of what happened to the private airlines in Pakistan.

Aero Asia was forced to shut operations after it failed to meet flight schedules and started defaulting on CAA’s dues for using country’s airspace. Liberalisation of Pakistani airspace in 1993 paved way for private airlines like Bhoja, Hajveri, Raji and Aero Asia to start operations. That marked a turning point in the monopolized aviation history of the country. But it was to be short-lived.

Weak regulation allowed these airlines to borrow aircraft and crew from other carriers. Large airplanes were hired and all of them started to compete for bigger chunk of the market. Some of them were even allowed to start operations with a single aircraft.

These airlines were started by people who had limited or no aviation-related experience. And allowing them to run service on wet-leased airplanes meant there was no need for them to create own fleet or human resource in the home country.

But a wet lease, which is a leasing arrangement whereby one airline provides an aircraft, complete crew, maintenance, and insurance to another, is a stopgap measure used by established carriers only in dire circumstances.

Soon the airlines ran into trouble with their aircraft lessors and as the financial liabilities mounted one by one these carriers went off air, closing the chapter of open skies policy. In August, 2006, when Farooq Rehmatullah, the incumbent Director General CAA, took charge he immediately recognized that regulations were amiss. In the following year, he was able to introduce Draft National Aviation Policy 2007. Deregulation, privatisation, competition and stringent regulations are the hallmarks of this policy.

Learning from the past mistakes, paid-up capital for start-up airline has been increased to encourage only genuine investors, permanent induction of aircraft on wet lease has been restricted, fleet registration in Pakistan has been made mandatory and minimum requirement of 3 aircraft for starting domestic operations imposed.

When the policy is enforced completely, after Cabinet’s approval, it has the potential to usher in a new aviation era. From privatisation of airports to construction of private airstrips and permission to use small aircraft for connecting remote areas with rest of the country, the policy contains a lot of progressive aspects.

But the year 2007 will be remembered for a lot of other reasons as well. It was the year when Pakistan International Airlines (PIA) descended into a quagmire of financial losses following a restriction on its aircraft from flying to Europe.

Airblue, the brainchild of longtime aviation man Shahid Khaqan Abbasi, marked a watershed in country’s aviation history by becoming the first private airline to land in England. Historically, private carriers have focused on the Middle Eastern region and Airblue’s maiden flight in June was a departure from that trend. Shaheen Airways become the second private airline to fly to UK on February 7.

Pakistan also witnessed a rising interest of foreign carriers last year following liberalization of the country’s airspace to facilitate the increasing passenger traffic. According to CAA’s provisional statistics, number of passengers who used Pakistani airports increased to more than 14 million in fiscal 2006-07 from 13.5 million in 2004-05.

UK International Airline and Air Arabia of United Arab Emirates started operations to Pakistan last year. British Airways, Malaysian Airlines and Etihad Airways increased their number of flights while German carrier Lufthansa, Oman Air and Singapore Airlines recommenced their operations.

Astreaus, European Air charter, Virgin Atlantic, British Midland, UAE’s Ras-al-Khaima, Air Italy, Al-Jazeera, the second carrier of Kuwait and Bangladesh’s GMG are all poised to come here. While this much of activity is encouraging, it is yet to be seen if strong annual passenger traffic growth of 8 percent is enough for these foreign airlines to ignore the deteriorating law and order situation.

Aviation sector enters new era of growth

 

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Pakistan, Iran to sign GSP pact in Tehran next week​

ISLAMABAD: Pakistan and Iran may sign the Gas Sales Purchase Agreement (GSPA) in Tehran in last week of the current month on Iran-Pakistan-India (IPI) gas pipeline project, sources told Daily Times here on Thursday.

Sources said that Iran has proposed February 24 to sign GSPA on IPI gas pipeline project in Tehran after the general elections in Pakistan. Earlier, Pakistan had proposed January 25 to sign GSPA on IPI in Abu Dhabi but Tehran declined to sign it in Abu Dhabi. Tehran told Pakistan that it wanted to sign agreement in Tehran with the new Pakistani elected government.

Sources said that draft of GSPA on IPI is ready to be signed by both Pakistan and Iran as Pakistani law ministry has vetted the draft of the agreement. Sources added that India was playing tactics with Pakistan to delay the signing of GSPA on IPI between Pakistan and Iran. Pakistan has been inviting India to hold the talks for settling the issue of transit fee for gas transportation but the latter has never responded in better advancement.

Sources further said that Indian Petroleum Minister Murli Deora was scheduled to reach on February 7 in Islamabad to sort out issues relating to Iran-Pakistan-India gas pipeline project especially transit fee. Pakistan had offered India to talk on transit fee on February 7 here in Islamabad but India neither declined Pakistani’s offer to discuss on transit fee neither India officially confirmed the arrival of Indian Petroleum Minister till February 6 to Pakistani concerned authorities.

Daily Times - Leading News Resource of Pakistan

 

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Pakistan's foreign exchange reserves dip to the lowest level ​

KARACHI (February 08 2008): The country's foreign exchange reserves have dipped to the lowest level of current fiscal year, $14.77 billion, by recording 10 percent decline during the last three months.

High import bill of oil and slow privatisation processes is putting negative impact on the country's foreign exchange reserves, which have shrunk by $296.4 million in the last week and some $1.59 billion during the last three months.

"The surging oil prices in the world market, besides rising import bill of Pakistan, have compelled to spend huge foreign exchange for the oil payments," an economist said. The declining foreign exchange reserves is another threat to country's economy, which is already facing various challenges including increasing trade and current account deficits, inflation and a slow-downed exports and privatisation process, he added.

The country's foreign exchange reserves have been declining consistently and State Bank of Pakistan's (SBP) statistics show that country's foreign reserves have further plunged by some $296.4 million during the last week. Country's foreign exchange reserves have declined from the level of over $15.074 billion to $14.7779 billion during the week ended on February 2, 2008.

The level of $14.77 billion is the lowest level of current fiscal as it was stood at 15.6137 billion dollar on the beginning of current fiscal year, 2007-08. During the last week foreign exchange reserves held by SBP have declined by $285.8 million to 12.5293 billion dollar during a week. Moreover, reserves held by banks also show a decline of $106 million to $2.2486 million during the week ended on February 2, 2008.

The major decline in the foreign exchange reserves has witnessed after the imposition of state of emergency in the country, which shows an average decline of some $0.53 billion monthly during the last three months. During the last 12 weeks, overall foreign exchange reserves have shrunk by some 10 percent or $1.59 billion to $14.7779 billion from $16.3725 billion.

A major decline has been witnessed in the SBP-held reserves, which dipped by 11.5 percent or $1.636 billion to $12.5293 billion after the imposition of emergency rule in the country. On November 3, 2008, the reserves were stood at $14.1661 billion.

While, the reserves held by the banks have up by $422 million to $2.2486 million during the week ended on February 2, 2008 as compared to $2.2064 billion in first week of November.

Economists are terming the declining exchange reserves as another setback for the economy, apprehending that the reserve would further dip if new privatisation transaction are not done in the near future. The post-emergency outflows from the SCRA account and high payments on account of oil import bills are the main reasons behind this decline, they added.

It may be mentioned here that at the end of the last fiscal year, 2006-07, country's foreign exchange reserves witnessed an increase of around 19 percent to 15.6137 billion dollar's benchmark as compared to 13.1369 billion dollar during fiscal year of 2005-06.

Business Recorder [Pakistan's First Financial Daily]

 

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Three million tons surplus rice to be exported ​

ISLAMABAD (February 08 2008): Pakistan will export 3 million tons surplus rice as the production during 2007-08 has been estimated at 5.5 million tons against consumption of about 2.5 million tons. This was discussed in the third meeting of Rice Advisory Board (RAB) chaired by Federal Minister for Food, Agriculture and Livestock (Minfal) Prince Muhammad Esa Jan Baloch here on Thursday.

The meeting was also attended by Minfal Secretary Ziaur Rehman, Reap chairman and other high-ranking officials of federal and provincial governments, growers and exporters of rice.

The meeting also discussed issues concerning rice production and problems millers and exporters are confronted with. The members of the board suggested strengthening of rice research institutions and called for modernisation of post-harvest operation as well as BMR of rice mills in Sindh.

Aflatoxin and Khapra Beetle problem was thoroughly discussed and it was agreed that practical steps would be taken at the provincial level to handle such problems. The board also decided to increase the number of members to make the body more constructive.

Business Recorder [Pakistan's First Financial Daily]

 

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Pakistan's foreign exchange reserves dip to the lowest level ​

KARACHI (February 08 2008): The country's foreign exchange reserves have dipped to the lowest level of current fiscal year, $14.77 billion, by recording 10 percent decline during the last three months.

High import bill of oil and slow privatisation processes is putting negative impact on the country's foreign exchange reserves, which have shrunk by $296.4 million in the last week and some $1.59 billion during the last three months.

"The surging oil prices in the world market, besides rising import bill of Pakistan, have compelled to spend huge foreign exchange for the oil payments," an economist said. The declining foreign exchange reserves is another threat to country's economy, which is already facing various challenges including increasing trade and current account deficits, inflation and a slow-downed exports and privatisation process, he added.

The country's foreign exchange reserves have been declining consistently and State Bank of Pakistan's (SBP) statistics show that country's foreign reserves have further plunged by some $296.4 million during the last week. Country's foreign exchange reserves have declined from the level of over $15.074 billion to $14.7779 billion during the week ended on February 2, 2008.

The level of $14.77 billion is the lowest level of current fiscal as it was stood at 15.6137 billion dollar on the beginning of current fiscal year, 2007-08. During the last week foreign exchange reserves held by SBP have declined by $285.8 million to 12.5293 billion dollar during a week. Moreover, reserves held by banks also show a decline of $106 million to $2.2486 million during the week ended on February 2, 2008.

The major decline in the foreign exchange reserves has witnessed after the imposition of state of emergency in the country, which shows an average decline of some $0.53 billion monthly during the last three months. During the last 12 weeks, overall foreign exchange reserves have shrunk by some 10 percent or $1.59 billion to $14.7779 billion from $16.3725 billion.

A major decline has been witnessed in the SBP-held reserves, which dipped by 11.5 percent or $1.636 billion to $12.5293 billion after the imposition of emergency rule in the country. On November 3, 2008, the reserves were stood at $14.1661 billion.

While, the reserves held by the banks have up by $422 million to $2.2486 million during the week ended on February 2, 2008 as compared to $2.2064 billion in first week of November.

Economists are terming the declining exchange reserves as another setback for the economy, apprehending that the reserve would further dip if new privatisation transaction are not done in the near future. The post-emergency outflows from the SCRA account and high payments on account of oil import bills are the main reasons behind this decline, they added.

It may be mentioned here that at the end of the last fiscal year, 2006-07, country's foreign exchange reserves witnessed an increase of around 19 percent to 15.6137 billion dollar's benchmark as compared to 13.1369 billion dollar during fiscal year of 2005-06.

Business Recorder [Pakistan's First Financial Daily]

 

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Fiscal deficit has gone up to 2.5 percent of GDP: Salman ​

ISLAMABAD (February 08 2008): The fiscal deficit has gone up to 2.5 percent of the GDP, which is well above the current financial year's target of 1.7 percent, and the next government will bridge the gap by increasing the energy prices, said caretaker finance minister Dr Salman Shah.

Talking to reporters here after attending a workshop organised by Infrastructure Project Development Facility (IPDF), in collaboration with the Infrastructure Management Unit (IMU) and Planning Commission (PC), he said that various proposals were being considered to increase the sales tax, but no decision has been taken so far, said the minister without giving any further details.

The minister said that government would also curtail recurring expenditure to keep the fiscal deficit within manageable limits during the second half of the current fiscal.

The minister said that the government was finalising a package to provide some financial assistance to the people living below poverty line in urban areas, which will be finalised soon, he added.

He admitted that the government could not decrease the ghee and oil prices as the palm oil price had touched $900 per ton from $400 per ton. This is a huge increase and the government is in no position to subsidise these two kitchen items, he said.

He said that government was earmarking the areas to be provided water from Mirani and Sabakzai dams, especially for cultivation of oilseed producing crops like sunflower and soyabean etc.

Earlier, addressing the IPDF workshop, Salman Shah said that Pakistan direly needs more infrastructural development projects through private public partnership to accelerate development process.

He said Pakistan needs at least 10 percent GDP allocation for development budget, ranging between 16 to 20 billion US dollars a year. "The budget does not have the flexibility for making such allocations," he said.

The prime purpose of organising this workshop, was to give the senior federal and provincial government officials an introduction and broad-based overview of Public Private Partnership.

Lead Infrastructure Specialist of the World Bank, Clive Harris, President of Americas, Castalia, Alfonso Guzman, and Barrister Ejaz Ishaq Khan from AQLAAL Associates (Legal Consultant IPDF) also gave detailed presentations on international experience of annuity based Public Private Partnerships and the Standardised Public Private Partnership Contractual Provisions.

IPDF's Chief Executive Officer, Aijaz Ahmed gave a comprehensive introduction to the Annuity Based Public Private Partnerships (PPP) and also presented an overview of the recently announced Public Private Partnerships Policy of Pakistan.

He said that under annuity based Public Private Partnership instead of the public sector procuring a capital asset and providing a public service; the private sector creates the asset through a dedicated stand alone business and then delivers the service to the consumers recovering cost from the public sector institution linked to the project.

The PPP modality of developing infrastructure and then delivering services to the consumers permits the public sector to reduce its capital expenditure and convert the infrastructure development costs into affordable operating expenditure spread over time, he added.

Member Implementation & Monitoring, PC and Executive Director of Infrastructure Management Unit Lieutenant General Muhammad Zubair (Retd) said that a decline in public sector investment in infrastructure, as a percentage of GDP, in the 1990s, has resulted in creating a huge backlog and high maintenance costs of the infrastructure.

Efforts to attract private investment, in particular, in power and telecom sector, have shown that these investments can be realised and can contribute to meet funding gaps in infrastructure development, he added.

Business Recorder [Pakistan's First Financial Daily]

 

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World Bank to lend $600 million to fund process: all set to privatise KDLB, says minister ​

KARACHI (February 08 2008): The federal government is all set to privatise Karachi Dock Labour Board within next six months and in this regard has finalised negotiations with the World Bank for $600 million soft loan to finance the process.

"The KDLB is going to have new boss from private sector and the World Bank is loaning 600 million dollars to Karachi Port Trust at a nominal interest rate. It can be termed a loan-cum-grant," Ports and Shipping Minister Dr Fahim-ud-Din Ansari told Business Recorder on Thursday.

The minister said, "yes the Board was being wound up. When reminded that private companies would own the dockers, he said, it was a kind of 'privatisation'. "Activity of the KDLB would be outsourced to the private sector through an open bidding," he said.

KPT would use the $600 million loan for meeting the expenses required for completing the privatisation process, the minister added. "Under the concept of a landlord port we are planning to outsource the KDLB which is a source of smuggling, drug trafficking... it has become a nuisance," the minister said.

When asked if the new development was likely to make a large number of labourers devoid of their livelihood, Dr Fahim said, "They are not being rendered jobless. We will give them alternative jobs as they will have private firms as a new boss," he added.

Previously, the stevedoring companies had to consult with the Board for employing the dockers but after sell-off of the KDLB they would need to contact the private firms, said the federal minister.

To a query on transfer of money, the minister said the bank would make payment to the KPT after general elections in the country. "Political uncertainty in the country delayed the loaning process and the bank will make the payment after elections," he added. He said the bank was in direct contacts with the KPT and had determined a long payback time for the loan. "The loaning process will also include the ministries of commerce and ports and shipping as a formal procedure," said the minister.

When asked why the KDLB, which was constituted under Clause-4 of the Dock Workers (Regulation of Employment) Scheme to ensure greater regularity of employment for dockers and speedy transit of goods through the port in 1973, was being privatised, Ansari claimed the Board had outdated and become a "mafia".

"Internationally the concept of doing business has changed and in the new doctrine of ports and shipping there is no room for any institution like KDLB," maintained the federal minister.

The minister said global economy in the future would be greatly dependent on ports and shipping. Meanwhile, Haji Mohammad Hilal, Senior Vice President Collective Bargaining Agent (CBA) warned of a strong resistance if the government went on with sell-off of the KDLB. "We do not know about any such planning and would fully resist if the government did that," Hilal warned.

The CBA official, however, said a few days back a WB team had visited the port and KDLB and KPT offices and invited the CBA for meeting but the labour representative body had refused to meet them. "The World Bank has never been our well wisher, so why should we meet them. We are also busy in preparations for CBA referendum," Hilal added.

The CBA official outrightly rejected the impression that KDLB was a 'mafia' and involved in drug trafficking or smuggling. "No, not at all. This is a baseless allegation. The dockers have nothing to do with the nature of cargo inside a container," he argued. Duty of the dockers was not more than loading and discharging the cargo without knowing that what sort of commodity was being imported or exported, he said.

Business Recorder [Pakistan's First Financial Daily]

 

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ADB to provide $220 million for Power Transmission Enhancement Investment plan ​

FAISALABAD (February 08 2008): Asian Development Bank (ADB) agreed to provide second tranche of $220 million under Multi-tranche Financing Facility (MFF) to Pakistan for Power Transmission Enhancement Investment Program, while a follow-up mission of ADB will visit during the first quarter of 2008 to review implementation of proposed project management remedial measures.

According to ADB sources, Tranche-1 of MFF between the Asian Development Bank (ADB) and the National Transmission and Dispatch Company (NTDC) for the Power Transmission Enhancement Investment Program (the Program) comprises Loan 2289-PAK for $226 million and Loan 2290-PAK for $10 million. Loan 2289-PAK supports investment in new transmission assets. Loan 2290-PAK supports the preparation and monitoring of financing tranches and capacity strengthening of NTDC.

The investment project comprises 19 sub projects covering new substations and additions to existing substations, the installation of compensation equipment, and a new overhead line. Planned completion dates are staggered from mid-2007 to mid-2009.

ADB sources mentioned that the Program is closely linked to Pakistan's long-term power sector strategy and is an integral part of the power transmission development program. The Program will enhance the efficiency of the overall power transmission system and provide adequate and reliable transmission of power supply to a greater number of industrial, commercial, and residential consumers.

The sources pointed out that the sub projects under the Program will improve power transmission infrastructure through the rehabilitation, augmentation, and expansion of the primary (above 220 kilovolt) transmission network and relieve transmission bottlenecks in the power system. Specifically, (i) NTDC will adhere to its transmission license conditions and comply with the grid security code, (ii) about 10.5 gigawatt-hours of additional power will be supplied through the national grid annually, (iii) the system will be capable of meeting peak demand, with electricity outages significantly reduced by 30% in 2011, and (iv) grid-connected customers will increased to 70% of the population in 2011.

The ongoing Program has two components. First, it will finance subprojects that are part of NTDC's investment plan. Second, it will finance a program support component. The total cost of NTDC's 2006-2016 investment plan is $3.9 billion equivalent to be financed 20 percent by ADB, 30 percent by NTDC and 50 percent by other financiers.

The total cost of Tranche-1 is $292 million of which $282 million is for financing of the subprojects and $10 million is for program support. ADB agreed to finance 80percent of the subprojects and 100% of the program support. NTDC will finance the remaining 20 percent of the subprojects.

The total cost of Tranche-2 is $276 million. ADB has agreed to finance 80 percent of this amount while NTDC will finance the remaining 20 percent. ADB report stated that Loan 2289-PAK covers the addition of 5,965 megavolt-amperes of new transformation capacity.

The Program is broken into 19 subprojects: (i) three new 220 kV transformer and switching substations, (ii) transformer additions in five existing 500 kV and nine existing 220 kV substations, (iii) the installation of static var compensation equipment, and (iv) 50 kilometers of 220 kV overhead line. Completion dates are staggered from mid-2007 to mid-2009, with the total cost estimated at $282 million.

Business Recorder [Pakistan's First Financial Daily]

 

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Industries brace for looming power crisis in summer ​

Cut in subsidy on diesel and furnace oil to increase cost of captive power generation​

Saturday, February 09, 2008

KARACHI: Industrial units depending on their own resources for power generation would be greatly affected in coming months when the government starts reducing subsidy on petroleum products and pass on the burden of higher prices to consumers.

The prices of petroleum products including diesel are subsidised in Pakistan and the government has indicated that it might not be able to sustain that due to rising fiscal deficit. Industrialists already concerned about the gas shortfall are now worried about electricity breakdowns that would hit the peak in summer.

Over the years industrialists have stopped relying on Karachi Electric Supply Company (KESC) and depend on their captive power plants, which mostly run on gas and furnace oil. Only large industrial units can afford to install the captive power plants (CPPs), which are very expensive. Smaller units depend on KESC network their only refuge from power load shedding lies in diesel-fired power generators.

Almost 70 per cent units have CPPS in the Port Qasim Industrial Zone - the latest industrial area that has developed in post power crisis situation - and the rest use diesel powered generators or rely on the unreliable KESC power supply.

CPPs run on heavy furnace oil and their power cost is not much expensive if compared to KESC electricity rates. “The unavailability of economical electricity in the industrial area is an impediment in bringing new industrial projects and investors in the area,” said Naeem Ilyas Khanani, Chairman of Port Qasim Association of Trade and Industry (PQATI).

Laege units use CPPs in Port Qasim industrial area while medium and small factories depend on KESC or diesel generators but, “Electricity from diesel generators costs 2.5 times more than KESC rates,” said Khanani.

Medium and small size units have to finance the power supply from KESC main to their factories. The cost of KESC connection including copper cables, fittings, and substation may run up to 10 million rupees which is not feasible in any case, Khanani explained.

Summer is the time when orders for Christmas and New Year sales season are being prepared in factories. Ironically, power supply is worst in summer. Landhi Association of Trade and Industry Vice Chairman Dawood Usman Jakhura says, “We wonder what would be the level of power shortage in summer.”

Running CPPs on gas is very expensive if compared to KESC rates. “The rising international furnace oil rates compelled captive power producers to move on gas,” said Zubair Motiwala, Managing Director of Diamond Textile (Pvt) Ltd.

According to Korangi Association of Trade and Industry Chairman Skeikh Fazl-e-Jalil: “Around 10 per cent units in Korangi Industrial Area (KIA) have captive power plants and rest are using KESC connections.” Though, more units have stand-by generators the power crisis is still there, he said.

“We are failing in our export targets due to inadequate power supply. The unannounced power breakdowns in KIA are disappointing,” he said. Chairman KATI suggested KESC to change the present formula of load shedding saying it is far better to shut down units for the whole day instead of unannounced load shedding for hours. In this way workers and owners would be at ease and work according to planned load shedding. “We would convince our industrialist to shut down their units for the whole day if authorities make announced break downs,” said Fazl-e-Jalil.

Industries brace for looming power crisis in summer

 

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Cotton crop estimated at 11.6m bales ​

Saturday, February 09, 2008

ISLAMABAD: Federal Food, Agriculture and Livestock Minister Muhammad Isa Jan Baloch has stressed the need of applying modern techniques in order to get maximum yield of cotton.

Chairing a meeting of the Cotton Crop Assessment Committee (CCAC) here on Friday, he said latest technology should be used in processing and packing of cotton for export to meet the challenges of the international market, an official statement said.

The meeting reviewed the current situation of cotton crop and its size and noted that 866 ginning factories were operating currently as compared to 612 factories that were active at the same time last year. On the basis of feedback provided by provincial crop reporting services and other stakeholders, the committee maintained its earlier cotton production estimate of 11.6 million bales (Punjab 8.9m bales, Sindh 2.6m bales and NWFP and Balochistan 0.1m bales) on ex-farm basis.

The meeting was attended by Shahid Hussain Raja, Additional Secretary of MINFAL, Agricultural Development Commissioner of MINFAL, Dr Kausar Abdullah Malik, member Planning Commission, director general of Federal Seed Certification & Registration Department, VC of Pakistan Central Cotton Committee and senior officers of the provincial departments and PCCC. The private sector was represented by the Karachi Cotton Association chairman and growers from Punjab and Sindh.

Cotton crop estimated at 11.6m bales

 

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Mills’ demand for sugarcane price cut rejected​

Saturday, February 09, 2008

LAHORE: Despite an improvement of sugar content in current crop, the Pakistan Sugar Mills Association (PSMA) Punjab chapter has been putting pressure on the provincial government to reduce the sugarcane procurement price by Rs9 to Rs51 per 40 kg, The News has learnt.

“The sugar content has increased by 0.27 per cent in this year’s sugarcane crop and was recorded at 8.43 per cent compared to last year’s crop of 8.16 per cent,” a source said. On the other hand, due to ongoing severe cold wave and mist, sugarcane has lost some weight, causing losses to the framers. Previously, sugarcane growers have been selling leaves of cane as fodder and getting Rs70 per 40 kg but the mist has destroyed the leaves, sources commented.

They said in a meeting held here in the committee room of the Agriculture Department on Friday, Punjab Agriculture Minister Khurshid Zaman Qureshi refused to accept the demand of PSMA Punjab for reduction in the price of sugarcane.

“There is no justification in reducing the sugarcane support price as demanded by PSMA Punjab,” it was told in the meeting. The meeting discussed that Sindh government has reduced the price of sugarcane by only Rs4 per 40 kilogram on the basis of low sugar contents while in Punjab the situation is different as increase in sugar contents recovery have recorded this year.

However, the minister has directed to launch a special campaign to educate growers about cultivation of approved varieties of sugarcane. The sugarcane crushing season 2007-08 was reviewed in the meeting. It agreed that sugar mills will accept sugarcane variety SPF-238 this year but its cultivation will be discouraged as this variety has already been banned.

It was attended by Fayyaz Bashir Secretary Agriculture, Ahmad Yar Khan, Secretary Food, Sugarcane Commissioner, Agricultural experts, representatives of Punjab Sugar Mills Association (PSMA), and around 22 sugarcane growers and representatives of farmers’ association.

The minister urged the representatives of PSMA to ensure timely payments to cane growers within 15 days and in case of delay 11 per cent mark-up should be paid to farmers according to Sugarcane Control Act.

The millers have also activated some of their private buyers of sugarcane outsides the mills who are paying less money to the growers as compared to fixed rates. On the demand of the growers the minister had directed the cane commissioner to check malpractice of less measuring.

However, the proposal for purchase of 500,000 tonnes of sugar through Trading Corporation of Pakistan (TCP) given by representatives of PSMA was endorsed in the meeting. The minister has also suggested to the PSMA and farmers’ associations to hold a joint meeting to consider option of contract farming for sugarcane cultivation in the interest of growers as well as the industry.

Sugar content in cane increases

 

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Saturday, February 09, 2008​

KARACHI: An economic analyst believes that CPI inflation numbers will highlight serious concerns facing the overall macroeconomic stability as it is expected that the Consumer Price Index in January 2008 will stay around 11 to 12 per cent year-on-year.

The Federal Bureau of Statistics (FBS) is expected to release shortly the January CPI inflation numbers. A massive jump in prices of essential food commodities such as wheat, rice, vegetables, etc was witnessed in the immediate aftermath of Benazir Bhutto’s assassination. Though the government’s drive to ease the skyrocketing food prices made a significant headway as inflation measured by the weekly Sensitive Price Indicator (SPI) showed a steep decline in the last few weeks, the damage had already been done.

With the impact of rising international oil prices still to be felt at the retail level, the CPI target for the whole fiscal year 2007-08 is likely to be missed by a wide margin once again. Accordingly, it is expected that full year FY08 CPI will end up in a range of 8.3 to 8.5 per cent against the government target of 6.5 per cent, said Farhan Rizvi, an analyst at JS Global Capital.

Inflationary pressures, in recent times, have been widely dictated by rising food prices, which has been a global phenomenon. The surge in CPI during FY08 has been driven largely by rising indices in the food and beverages segment, which rose by an average 11.6 per cent year-on-year in the first half of FY08. This is alarming given the fact that food and beverages constitute around 40 per cent of the overall CPI basket.

Farhan Rizvi said the trend continued in January with added momentum provided by acute food supply shortages in the immediate aftermath of Benazir’s assassination. In particular, prices of flour, ghee, tomatoes, etc witnessed a substantial hike in the month.

Another important factor to consider is the low base effect of January 2007 when CPI depicted a month-on-month decline of 0.88 per cent. This is likely to provide additional thrust to inflationary pressures in January 2008. “As a result, we expect CPI to post a month-on-month increase in the range of 1.1 to 2 per cent, translating into CPI in the range of 11 to 12 per cent year-on-year,” the analyst said.

The double-digit CPI level was likely to be one-off though, as the government’s drive to bring down the skyrocketing wheat and other food commodity prices had made a significant headway and would help to bring the index to single digit in Feb 2008, he said.

A major concern with the current inflationary situation is the fact that while headline inflation has already reached peak levels, a second round of inflationary pressure in the form of increased domestic oil prices is still in the pipeline. This is very alarming given the fact that CPI in the first half of FY08 was recorded at 8 per cent year to date, way above the government’s target of 6.5 per cent.

While fuel and lighting has a weight of only 7 per cent in the overall CPI basket, it is the indirect impact that the oil price increase has on other items which could magnify the inflationary impact of the expected increase in petroleum product prices after the Feb 18 elections.

The State Bank of Pakistan (SBP) last week announced a 50-basis-point hike in the discount rate in an effort to curb surging money supply growth, which rose by 19.2 per cent on an annualised basis during July 1, 2007 to January 19, 2008.

CPI likely to rise 11-12pc in Jan

 

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Shortage of trained manpower​

THE country is facing an acute shortage of skilled manpower at a time when a construction boom has created a demand for mid-level technical workers. This problem has been identified by the ministry of labour in a report, ‘Pakistan Employment Trends’. It is paradoxical that on the one hand we have a high unemployment rate while on the other there are unfilled vacancies in the construction sector. The fact is that of the 25 million youth in the country only 1.7 per cent can be provided technical education and training. Given the unplanned expansion of education in the country and the failure to link it to the employment sector, the government has not set up an adequate number of vocational institutions and polytechnics. With only 540 institutions to provide mid-level technical education, the country’s capacity to train skilled people is very limited indeed. All the resources appear to be channelled into higher education and technical universities.

This is just the quantitative aspect of the problem. The quality of the training provided by vocational schools and polytechnics is not too satisfactory either. Most of these institutions are ill-equipped to impart even basic training in some areas of expertise. With no vocational guidance provided to students, the enrolment in various disciplines is quite lopsided. Consequently, as pointed out by experts, the demand for a trained workforce in certain sectors continues to be met through the traditional shagirdi system. Qualified engineers in charge of construction projects are forced to hire raw manpower to do the work which should have been done by a trained technical hand. The shagird (apprentice) learns the skills on the job through trial and error. But this indigenous solution to fill the gap between supply and demand of mid-level technical skill has failed to keep abreast of modern technology that has made rapid strides. It is time the government addressed this problem and actually did something about it. There has been a lot of talk but little action. Thus last year, President Musharraf had suggested the opening of technical training centres at union council level but nothing was done. In July 2007, the Sindh governor issued an ordinance to establish the Sindh Technical Education and Vocational Training Authority to formulate policies for technical education in the province. This has also proved to be a non-starter.

DAWN - Editorial; February 09, 2008

 

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Rs60bn needed to tide over water, power crisis: WB​

ISLAMABAD, Feb 8: Pakistan’s water infrastructure is in poor condition and needs Rs60 billion ($1 billion) annual investment in reservoirs and related projects over the next five years, says a World Bank study.

“In the energy sector, the country will face severe power shortage of around 6,000 megawatts by 2010,” according to the bank’s latest study – Pakistan Infrastructure Implementation Capacity.

The bank has urged Pakistan to strengthen its capacity to undertake major infrastructure projects needed to boost economic growth and wipe out poverty.

“The country suffers from a dearth of infrastructure in the water, irrigation, power, and transport sectors.”

The bank believes that Pakistan is one of the most water stressed countries in the world, and its water resources are depleting rapidly.

Similarly, inefficiencies in the transport sector cost the economy between 4-5 per cent of the GDP each year.

To overcome these constraints, the government of Pakistan is tripling its annual infrastructure investment from an average of Rs150 billion ($2.5 billion) to Rs440 billion ($7.3 billion).

However, the report pointed out that mega projects in the past have experienced frequent delays and cost overruns, illustrating a lack of capacity in the industry to plan, programme and execute large projects.

“Lack of adequate irrigation, power, and transport infrastructure hinders growth and is affecting all sectors of the economy,” said Yusupha Crookes, the World Bank’s Country Director for Pakistan. “It is, therefore, critical to address the core challenges – scarcity of skilled workers and inefficient business processes – to enable the government’s very ambitious infrastructure plan to move forward.”

In the current environment, the report concludes that the construction industry does not have the capacity to deliver the government’s planned infrastructure programme. Its analysis found that contractors keep getting work even though they lack the capacity to perform.

The business environment has delivery constraints, planned projects often take longer to complete, and even longer to achieve a financial close. Issues such as poor project planning, insufficient programming, and weak implementation are common.

Shortage of adequately skilled workers, the report said, is particularly affecting the ability of the construction industry to deliver mega infrastructure. Over half the workers produced each year in civil, electrical, and mechanical engineering fields find employment overseas. The report calls for a development strategy to build up the existing human resources pool and upgrading the skill sets through urgent measures to enhance training capacity and to reverse the brain-drain.

“A long term industry overhaul and immediate innovative approaches for mega infrastructure delivery are needed”, said Amer Durrani, senior transport specialist and lead author of the report.

“A construction industry development organisation should be set up to anchor the development effort and provide an institutional mechanism for reform. In addition, a national construction industry development policy should be prepared and implemented for all stakeholders with immediate actions on procurement with ensured transparency and improved cost estimation,” he said.

Rs60bn needed to tide over water, power crisis: WB -DAWN - Top Stories; February 09, 2008