Pakistan Economy - News & Updates - Archive

[Neo]

Investors play safe as general elections approach​

STOCKS last week failed to extend steadiness as investors were not inclined to take long positions even on the blue chip counters ahead of the general elections, but there was no large selling and only extreme gains were pared off at the inflated levels on some of the high-profile shares.

However, larger fall was averted as both bears and bulls maintained a status quo and did not indulge in large selling on any of the counters and mostly held on their positions as was reflected by falling volumes.

With the elections just a week away, investors played safe and did not indulge in speculative buying or bargain-hunting.

Keep-safe appeared to be the hallmark of the entire trading session as was reflected by the either-way fractional price changes and extremely narrow movements of the KSE 100-share index.

It mostly moved within a narrow range of about 60 points, showing modest fall and gain between 14,000 or 13,990 points and finally ended at 13,938.33, off 36.08 points. But, on the other hand, its junior partner the 30-share index gained 35.29 points at 16,701.32.

As leading investors failed to find cue to the keenly contested election results or the possible winner, no one was inclined to make bigger commitments even at the current lower levels because of risks involved in holding long positions in pre-election sessions.

“The entire trading appears to be a jobbing affair as investors bought at the fall and sold at the rise the same day, without carrying out the backlog”, said a leading broker. “Even some of them bailed themselves out the same day at a loss.”



That perhaps was natural amid suicide attacks, violence in other forms including death of eight high-ranking army officials in a helicopter crash and political tension and uncertainty, he added.

“The cold wave in the city also took a massive toll of the daily volume, which shrank to only 128 million shares as investors preferred to keep themselves warm indoors rather than indulging in business of shares”, a leading stock analyst Hasnain Asghar Ali said. The lowest daily figure is well below 100m shares.

The market’s real trend will be known after the elections and smooth transition of power to the wining party. If there are protests after the elections on the charges of rigging, the market could pass through further recession, most analysts believe.

Selective support was, however, witnessed on selected counters, which in turn had a stabilising impact on the market and forestalled panic buying from any quarter.

Bulk of the support was terribly cautious, reflecting worries about the general elections and law and order, mainly in the backdrop of occasional suicide attacks.

The heating up of political scenario as the deadline of Feb 18 is approaching, in a way also appears to be an inhibiting factor as no one is clear about precise outcome or the election results, analysts said.

“The off-repeated allegations of pre-election rigging, violence during polling and whether or not the contenders of power will accept the verdict of people, are some of the concerns of the investor having toll in the form of daily volumes”, they added. But as far as the corporate scenario is concerned, it is fairly encouraging both in terms of company earnings, payouts and exports despite a short cotton crop, which could keep the market in good shape, some others said.

However, despite more than one irritant, buyers are there in the market. Those who were not inclined to take the risk and wanted to play safe opted for the low-priced issues. But big ones are playing in the blue chips according to their whims.

The volatile performance of the market also reflects this phenomenon, indicating that no one is inclined to take risk at this stage at least until the elections.

Forward counter: Mixed trend was seen on the cleared list as investors played on both sides of the fence but mostly selling at the rise. The MCB, Pakistan Oilfields, and Pakistan Petroleum and some others managed to finish with modest to good gains but on the other hand Arif Habib Bank, Bank of Punjab and Fauji Feriliser Bin Qasim and some others tended lower on profit-selling.—Muhammad Aslam

Investors play safe as general elections approach -DAWN - Business; February 11, 2008

 

[Neo]

Oil, gas E&P companies: FBS seeks 10-year investment data ​

ISLAMABAD (February 11 2008): The Federal Bureau of Statistics (FBS) has sought data of investment in Pakistan in last 10 years by all multinational and domestic oil and gas exploration and production (E&P) companies. Sources said that FBS has circulated a four-page form to multinational and domestic E&P companies, seeking volume and area of investment made in oil and gas sector of Pakistan during the past one decade.

They said that data on investment would give the exact size of investment in Pakistan's oil and gas company and enable the authorities to frame policies for the future. The Federal Board of Revenue (FBR) is also working parallel to FBS for seeking fresh data from different sectors for evaluating their taxation potential and actual taxes paid by the taxpayers. The availability of data will make it possible for the authorities to work out an effective strategy for plugging taxes evasion.

Reliable data is a serious problem in Pakistan. One can hardly find any sector which possesses reliable data. This issue is not only confusing the officials to know the exact picture of any sector, but also plaguing Pakistan's economic progress and potential. The officials concede that non-availability of reliable data was making the policy work difficult, besides creating unfavourable environment for those sectors which are comparatively performing well.

The seriousness of the issue has been noted at the highest level following a number of meetings held during the last one-and-a-half years. President Pervez Musharraf took serious notice of contradictory data of different departments, particularly the State Bank of Pakistan (SBP) and Customs, on exports and other several key areas in a meeting held here some time back and directed the FBS to come up with the latest technology and computerised system to compile reliable data. He showed annoyance over poor performance of FBS in collecting the fresh data from the government departments.

A senior official of Science and Technology spoke on data collection and dissemination for information at a roundtable conference here. He shared with the participants the importance of reliable data and its timely dissemination for information of other government departments. He said Pakistan's data collection and dissemination system was not up to the mark but efforts were being made to change the entire system and get reliable statistics as mush as possible.

The data on investment will enable the concerned authorities to come up with a clear picture as to what was the actual volume of investment in Pakistan during the last one decade.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Businessmen urged to invest in food processing sector ​

LAHORE (February 11 2008): The Provincial Minister for Livestock and Dairy Development, Mumtaz Khan Mainas, has urged the business community to make investment in food processing industry as it has huge export potential. He was addressing the members of the LCCI where the President, LCCI, Mohammad Ali Mian, Senior Vice President, Mian Muzzaffar Ali and Vice President, Shafqat Saeed Piracha were among the noted speakers.

The minister pointed out that Pakistan is the third largest milk producer and is producing 38-billion litre milk annually, but only 3% of the total production are being processed. He called for mechanised and modern dairy farming, slaughterhouses and butcheries. "China and India are our major competitors in livestock sector", he said.

Further, the minister said that more than 4 million animals were being annually slaughtered during Hajj and these animals are being imported from New Zealand, Australia and some least developed countries like Somalia and Yemen. With such a huge number of live heads available in the country, Pakistan should also capture its share and urged to develop indigenous breed.

The President, LCCI said Pakistan is predominantly an agrarian economy with a vibrant livestock sector and the third largest milk producing country, but has not been able to fully exploit its potentials. He said the government should equip the livestock and dairy sector with modern technology so that Pakistan, after attaining self-sufficiency in milk and meat, could be able to earn much needed foreign exchange by exporting these products.

Business Recorder [Pakistan's First Financial Daily]

 

[Introvert]

Pakistan's housing sector to attract huge foreign investment
Submitted by Mudassir Rizwan on Mon, 02/11/2008 - 11:49.

Islamabad : The housing sector would attract a huge foreign investment of $1.5 billion to address the acute housing problems in Pakistan, said Caretaker Minister for Housing and Works Nisar Muhammad Khan.

“For the first time, such a huge foreign investment will come to the housing sector in Pakistan," he told the reporters.

The minister said a Memorandum of Understanding (MoU) in this regard would be signed very soon.

Khan said their non-implementation of the national housing policies prepared in 1992 and 2001 complicated the housing situation in Pakistan. He said he would soon meet President Pervez Musharraf and discuss the issue.

About the launching of new housing sectors in Islamabad, the minister said unfortunately this should have been done as a top priority and up to the required level.

He said 500,000 housing units should be built per annum to meet the growing needs and clear the backlog.

Pakistan's housing sector to attract huge foreign investment | Indian Muslims

 

[Neo]

‘Competitiveness only way to benefit from globalisation’ ​

Tuesday, February 12, 2008

LAHORE: US Consulate’s Principal Officer in Lahore Brian Hunt has said the US and Pakistan share bilateral information and they can learn not just from each other but also from all stakeholders that the Competitiveness Support Fund was bringing together.

Speaking during a roundtable on the State of Pakistan’s Competitiveness Report 2008, he said the report would give a roadmap on Pakistan’s economy to the government, which was endorsed by the US government.

Brian Hunt said globalisation was a reality that countries could no longer escape and competitiveness was the only way to benefit from globalisation and not become a victim of it.The second State of Pakistan’s Competitiveness Report 2008 will provide a snapshot of the strengths and weaknesses along with key positive and negative trends in the economy, as well as regional competitiveness trend in each of the provinces.

The report will include recommendations on how to leverage Punjab’s strengths and weaknesses in global and domestic markets, through sustainable growth engines tied to investment in human capital.

The preliminary finding highlights Punjab’s potential to create world-class manufacturing clusters (geographical agglomeration of firms and related entities), and its sophisticated factor advantages (educational institutions and a relatively well-educated labour force).

However, Punjab’s economic sectors are highly vulnerable to international competition. Its products, ranging from agricultural commodities to manufactured goods, are based on easily imitable advantages such as cheap labour with insufficient product differentiation.

Some of the recommended directions for Punjab’s firms include investing in sophisticated products through better customer research, exploring forward integration possibilities, understanding the province’s relative position and improving inter-firm cooperation.

The roundtable was jointly organised by the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and the Competitiveness Support Fund (CSF). It was attended by leading representatives of the business, public as well as private sector and academia.

Competitiveness Support Fund Chief Executive Officer Arthur Bayhan told the conference participants that the competitiveness report would be an important policy tool for Pakistan’s economic growth agenda and for private sector investment. The report will also include an action plan and timetable to improve key industries that will boost economic growth of the country.

‘Competitiveness only way to benefit from globalisation’

 

[Neo]

CMC to establish 375MW coal power plant at Thatta​

KARACHI: A Chinese coal-power producing company, China National Machinery Import and Export Corporation (CMC) is seeking 10 cents per unit to generate electricity in a semi-urban Sonda-Jherruk, Thatta, sources told Daily Times.

The company has dispatched its first tariff proposals to the government’s concern department asking to sale electricity at the cost of 10 cents per unit, sources in Sindh Mines and Mineral Department told.

The CMC has obtained license from the Sindh government for 56.7 square kilometer area at Sonda-Jherruk, Thatta District recently and it has planned to generate 375 mega watts electricity The company has already completed feasibility work of coal mining project.

Currently, it is conducting thorough project feasibility for coal power plant and it would submit it to Private Power Infrastructure Board (PPIB) for tariff approval at the end of this month, the sources said.

In its another feasibility report, the CMC has identified that coal mining capacity of deposit at Sonda-Jherruk was calculated around 1.2 million tonnes per year, which is considered as a sufficient stock for power plants in next many years.

The CMC is a China’s state-own company having sound technical expertise in producing electricity from coal-based power plants. It was previously considering 9 cents per unit but following increasing in cost, the company now demanded 10 cents. The sources said that if the power purchase agreement is finalised with the government authorities then the national grid would get additional 375MW electricity in one and half years.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

Indian minister seeks FDI from Pakistan​

NEW DELHI: The Indian Commerce Ministry has asked the government to allow foreign direct investment (FDI) from Pakistan – currently the only country that is not allowed to do so.

In a letter to External Affairs Minister Pranab Mukherjee, Minister of State for Commerce Jairam Ramesh said that there was no justification to continue with a blanket ban on the FDI from Pakistan when India had lifted such a ban from Bangladesh and other countries.

He suggested permitting FDI from Pakistan on case-to-case basis. Dismissing the impression that FDI from Pakistan could cause security concerns, Ramesh recommended to use the Foreign Investment Promotion Board (FIPB) route to vet any security concerns.

He said the case for pushing the Indian FDI into Pakistan would be strengthened if India removed the ban on investment from Pakistan.

He said such a move would also substantially address Pakistani fears of a huge trade deficit with India, adding that similar concerns seemed to exist in the Indian government on trade with China. Trade bodies and analysts say that such a move would create mutual trust and confidence between India and Pakistan.

Bangladesh was the second last country on the FDI negative list. After its removal from the negative list, Indian corporate giant Tata group has proposed a $3 billion investment plan for Bangladesh in the power, steel and fertiliser sectors.

The Tata investment, if done, would be almost equal to the total FDI in Bangladesh since 1971.

Sources said that currently the Indian government was reviewing around 744 trade items that were on the negative list of imports from South Asian Association of Regional Corporation countries, adding that the list is likely to be shortened.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

Budgetary deficit could widen: Dr Ashfaque ​

KARACHI (February 12 2008): Pakistan has got some $9.3 billion assistance from United State during the last six and a half years, while it has not received a single penny for reimbursement during the current fiscal year which could raise the budgetary deficit.

Talking to newsmen after a seminar was held at the Management Association of Pakistan (MAP) on Monday, Finance Special Secretary and General Debt Office Director Dr Ashfaque Hasan Khan said that although US has given huge amount, the actually cash amount is not more than $1.5 billion.

About the US assistance, he said some $5 billion the country has received for reimbursement, which has already been spent on the provision of services to US. In line with the Camp David Agreement, US is to provide to Pakistan with $600 million annually, including $300 million for military assistance and $300 million for economy.

However, thrice some $297 million has been paid during the last three-year in the context of military assistance while the remaining amount would be adjusted for purchasing various equipment, he said. In addition, Pakistan has received $600 million for the economy during the last three-year and some 100 million annually through USAID, while it will receive $300 million in the next two-year through USAID, Dr Ashfaque told the newsmen.

He said that US debt on Pakistan was $3 billion of which some $1.5 million was also adjusted under the same package and overall $1.4 billion was received for military assistance "We are still spending on US services during the current fiscal year, however, not a single penny has received from the US for reimbursement, which may push the budgetary deficit upward in the fiscal 2008," he said.

Presenting the performance outlook of economy, he said that during the current fiscal year, the oil import bill would surpass $10 billion mark following soaring oil prices in the international market. Dr Ashfaque said that high oil prices, food inflation, rising import bill, change in commodity prices, pressure on current account deficit, and budget are the key challenges for the economic growth.

The rising import bill has also put a negative impact on the current account and also pushed the commodity prices upward globally, however, the current account deficit is still lower than 5 percent of GDP, he added.

Dr Ashfaque said that few days back Pakistan was taking dictation from IMF and country's all economic policies depended on the IMF policies, however, at present, the situation has been changed and Pakistan has their own economic policies.

He criticised the media, saying that the media is not playing its role on right way but misguiding the masses as well as foreigners. During the current fiscal year, country's tax collection would be approximately $17 billion, while development expenditure has reached $8.8 billion, Ashfaque added. He said that this perception is wrong that country's debts are increasing, adding that debts have been 55.2 percent of GDP, while law allowed 60 percent debts.

The first half of current fiscal year, all economic indicators have performed well, as LSM, tax collection, exports, imports and forex have significantly gone up, he said. He said at present, the government is paying billions of rupees subsidy to stable the prices of oil and commodities. "If the government could not pay subsidy on the imported wheat then wheat flour would be sold at Rs 45 per kg in the local market," said Dr Ashfaque. On the occasion Farooq Hasan and Aftab Ahmed Khan also spoke.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Raising $250 million from global market: SCB made lead manager for PIA Sukuk bond ​

ISLAMABAD (February 12 2008): The government has appointed Standard Chartered Bank as lead manager for PIA Sukuk bond to raise $250 million from the international market, besides picking- up Mezan Bank-led consortium of the local banks for raising Rs 13.7 billion from the local market.

The global Sukuk bond will mature in five years and maturity period for the local Sukuk will be eight years. The profit on both bonds will be equal and its percentage will be worked out in next few weeks.

Sources said the Standard Chartered Bank and the Mezan Bank-led banks' consortium will study the local and international markets and suggest the government the time and exact size of the issue. The PIA and other concerned departments hope that the lead manager will complete the entire process of studying the global and local market. Holding of road shows in the international market for the bond issue and other formalities by the end of March and this will be followed by formal launching of the Sukuk bond.

Three international giants - Standard Chartered Bank, Citi Bank, and Bank of Shanghai - were in the race for getting the job of lead manager for facilitating global Sukuk issue. Similarly, the consortiums of more than three local banks had given presentation to the government economic managers in Islamabad and showed their strong commitment to raising desired money for PIA from the local and international markets.

In a meeting held last week, the authorities of the Ministry of Finance (MoF), two PIA and other departments officials had discussed the detailed presentations of the contestants and finally decided to give the job for global Sukuk to the Standard Chartered Bank and for the local Sukuk to the Mezan Bank-led consortium.

The Sukuk bond floating is a part of PIA's restructuring plan to make this national flag carrier financially strong and take a big leap forward to gain more international market.

The government had approved a restructuring plan for PIA sometimes back. Market analysts are of the view that since the Sukuk bond will be interest-free on sale-purchase principle, the PIA issue is going to get good response from the local as well as international market. They also believe that PIA will be in much comfortable position in terms of financial requirements after raising money through Sukuk.

Business Recorder [Pakistan's First Financial Daily]

 

[mujahideen]

Rupee price of dollar at six years' peak

KARACHI: The rupee price of dollar jumped to Rs62.94 – highest in the past six years- at the close of inter bank market on Tuesday.

The rate of dollar stood at Rs62.93 on June 13, 2001.

Higher payments of import bills are responsible for increase in demand and resulting rise the rate of dollar, dealers said.

Rupee price of dollar at six years' peak

 

[Neo]

5.5m animal sacrifices on Eid may boost leather exports​

* Buyers from European Union and Far East prefer skin and hides of Pakistani animals​

KARACHI: Around 5.5 million sacrificial animals were slaughtered in three days of the Eid ul Azha in the country, former chief of Pakistan Tanneries Association said here on Monday.

“Around 20 percent of the skin and hides are damaged due to mishandling by novices resulting in loss of millions of dollars to the national exchequer,” Gulzar Feroze said while talking to Daily Times.

He said some two million cows and calves, more than 3.5 million goats besides nearly one million sheep were sacrificed this year.

International buyers prefer to buy the finished leather especially made from skins and hides of sacrificial animals, as they have much stretching quality, healthy and fresh material, he said adding that European buyers give premium to Pakistani exporters.

He said the buyers of European Union and Far East prefer skin and hides of Pakistan animals besides leather garments.

“PTA rejects the allegations of some quarters that Pakistan is exporting vet leather, which is denting the export potential of the finished goods,” he said adding that there is 20 percent duty on vet leather export whose export is only 5 percent.”

Former PTA President said the leather garment share is around 65 percent in our total exports and it is the second largest export of the country after textiles, which stand around $1,125 million during 2005-06. “We had some 24 percent decline in our exports during 2006-07 due to various reasons including low grade raw material and demand and supply mechanism.”

He said our material meets international standards at par excellence but there is need to bring mechanised slaughtering to boost our exports. “Once our exports were in a billion dollar club but due to lack of concentration from the industry as well as government we see a decline,” he added.

Mr Feroz suggested resuscitating two slaughterhouses (abattoirs) at Cattle Colony Landhi, which were lying closed for over 25 years. The slaughterers are forced to sacrifice animals in a makeshift slaughterhouse, which has also been damaging the quality of skins and hides.

At present, the building structure of the abattoir, spread over one-acre is in an acceptable condition and needs little renovation work, however, the rust has almost destroyed the costly machinery imported from Yugoslavia in the past.

The highest increase of 115 percent was recorded in export of leather gloves ($152 million) sub sector during 2004-2005 by 64 percent increase in leather goods export ($22 million), 22 percent increase in leather footwear ($96 million) and 18 percent increase in leather export ($296 million) over the corresponding period of 2003-2004.

“Export of leather products could jump to one billion dollars again as it is a time to improve our leather products so that we could achieve certain targets and share in the international market,” Mr Feroz added.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

Govt prepares contingency plan to create Rs60bn fund ​

It will allow banks to make speedy payments of PDC to oil companies​

Wednesday, February 13, 2008

ISLAMABAD: The government has prepared a ‘contingency plan’ by allowing banks to create a fund to the tune of Rs60 billion for ensuring speedy payments of Price Differential Claims (PDC) to the oil marketing companies, enabling them to improve their stocks up to the required minimum level of 21 days.

Improving cash inflows of major oil marketing companies, the oil reserves have improved from six days to 11 days in the recent few weeks. “We want to improve the petroleum oil lubricants(POL) stocks up to the required minimum level of 21 days and efforts are under way to ensure speedy payments related to PDC to the oil marketing companies such as PSO, Shell, etc,” a high-level official in the caretaker government told The News here on Tuesday.

The finance ministry has been pursuing all commercial banks through state-owned National Bank of Pakistan (NBP) for arranging required financing for meeting the growing expenditure side especially related to the payment to major oil marketing companies.

The banks want a smooth mechanism in order to avoid delays and the federal government is working on this plan for speedy payments in the remaining months of the current fiscal year. The finance ministry in consultation with other stakeholders including Ministry of Law and Justice, State Bank of Pakistan and commercial banks are contemplating upon various options for placing a ‘contingency plan’.

The decision to freeze the POL prices at the existing level would hit the national exchequer by Rs135 billion during the current fiscal year. The Shaukat Aziz government had allocated Rs25 billion subsidy for POL products in the current fiscal year’s budget so the economic managers are running from the pillar to the post for arranging the remaining required amount of Rs110 billion.

“So far the government has made payments to the oil marketing companies to the tune of Rs50 billion in the current fiscal year,” said the sources and added that the government was working to place a mechanism by creating maximum ceiling up to Rs60 billion by establishing a consortium of commercial banks in order to avoid delays in payments to the oil marketing companies in shape of PDC.

The POL stocks decreased to the minimum level of 6 days in after the December 27 violence mainly because of delayed payments to the oil marketing companies. Neither the independent power producers (IPPs) nor the oil marketing companies have maintained the minimum level of oil stocks owing to which the energy crisis worsened in the recent past few weeks. The payments to the oil marketing companies delayed in the recent past because of prolonged procedures required to get vetting from the Ministry of Law for making payments.

The scarcity of resources and growing expenditures have left the government with no other option but to pursue the commercial banks for providing the credit-line for financing the fiscal deficit during the ongoing financial year.

The government is likely to miss its envisaged fiscal deficit target of 4 per cent of the GDP in the current fiscal year which means that the government will have to arrange financing of around Rs400 billion to Rs450 billion in the current financial year.

Govt prepares contingency plan to create Rs60bn fund

 

[Neo]

SBP chief rules out devaluation of rupee​

KARACHI, Feb 12: State Bank of Pakistan Governor Dr Shamshad Akhtar has firmly ruled out any possibility of devaluation of Pakistani currency and declared in categorical terms that “we will continue with the current system of exchange rate.’’

“We will not like exchange rate to be destabilised,” the governor warned currency speculators while speaking to members of the All-Pakistan Textile Mills Association (Aptma) on Tuesday in which members from Lahore and Peshawar also participated besides those present in the Karachi office.

“Rupee has depreciated in value against dollar,” she asserted, while making it clear that it was not a devaluation when someone pointed out that rupee-dollar parity was somewhere Rs62.80 recently.

She recalled that for almost two years, the rupee-dollar parity showed consistency, but from November 2007 when oil import bill went up to 915 million dollars, trade deficit increased and expanded the current account deficit.

In December, the oil import bill claimed another 920 million dollars, she pointed out and warned of this trend showing no respite in future also because “we now consume much more oil than previously.” Hence, payments on account of oil imports are also higher and its resultant impact was on exchange value.

Coupled with the rising oil bill was the market sentiment because of promulgation of state of emergency on Nov 3 which gave some room to speculators to play their game.

Responding to a suggestion that business be given facility of foreign exchange borrowing, the State Bank governor disclosed that it was on Tuesday morning that she approved one such case after making full assessment.

“We can consider such requests on case-to-case basis and if found competitive and viable, there is no reason to deny this facility.”

Mr Qasim Nawaz, a director of the SBP, informed Aptma members that a sum of Rs3.2 billion had already been reimbursed to textile mills against approved amount of Rs6 billion under the long-term financing arrangement.

“The international environment is getting worrisome,” Dr Shamshad Akhtar remarked, while speaking about the sub-prime mortgage crisis in the US which was now impacting Europe also and had started affecting countries, like China, Malaysia, Philippines and Indonesia that depend heavily on US market for their electronic goods export.

“Thank God, Pakistan and a few other countries are so far insulated from the affect of this crisis,’’ she said, but wondered as to “how long’’.

She said that a large sector can fight the situation and meet challenges. “You try to realise the privileges you enjoy,’’ the governor reminded them of incentives and subsidies.

Aptma chairman Iqbal Ibrahim held government’s excessive borrowings mainly responsible for mounting inflationary pressures.

SBP chief rules out devaluation of rupee -DAWN - Business; February 13, 2008

 

[Neo]

New govt to face tough economic challenges​

KARACHI, Feb 12: Whoever wins the February 18 election can be sure of one thing -- there will be no economic honeymoon.

With annual inflation at its highest in over a decade, the rupee at 6-year lows against the dollar, a hefty trade deficit, pressure from high international oil and food prices and domestic energy shortages, there are pressures on all fronts.

“There are numerous challenges ahead. There is heaps of trouble,” said Asad Sayeed, director of private analysis group, the Collective for Social Science Research.

“They (the previous government) have left a monumental mess, virtually on every front.”

Compounding matters, whoever comes to power in what will mark a long-awaited transition from military to civilian-led rule, will also face the tug of populist expectations of a mainly rural electorate struggling in the face of high food prices.

Consumer prices in January rose 11.86 per cent from a year earlier, their highest level in 10- years, which analysts attribute to food shortages they say are due to a weaker agricultural crop and government mismanagement.

The caretaker government blames wheat smuggling to neighbouring Afghanistan and hoarding by shopkeepers for the shortfall.

“Inflation is high and it’s accelerating, the government’s borrowing is out of control,” said Sakib Sherani, chief economist for ABN Amro Pakistan.

“The government’s interest burden has gone up over the last few months. Its debt servicing burden has gone up, foreign exchange reserves are ... declining,” he added. “So all in all, it’s actually going to be a fairly challenging scenario for the next government.”

The State Bank of Pakistan last month revised down its economic growth forecast for 2007-08 to 6.6-7 per cent, citing a weak farm sector that has been one of the engines of growth averaging about 7 per cent a year since 2002.

Pakistan’s trade deficit widened sharply to $2.05 billion in January, double the previous month’s gap, which analysts attributed in part to factory shutdowns in the wake of the assassination of Benazir Bhutto on December 27.

Foreign investment in the first six months of the fiscal year fell 32 per cent to $2.17 billion from a year earlier, with foreign portfolio investment down 92 per cent, central bank data shows.

New govt to face tough economic challenges -DAWN - Business; February 13, 2008

 

[Neo]

Afghan equation in Pakistani economy ​

KARACHI (February 13 2008): Traditionally, Afghanistan, a land-locked country with no access to the open sea, has depended on Pakistan for its imports and exports. The most important single item that goes to Kabul via Peshawar is POL (petroleum oil & lubricants). Edibles particularly wheat flour, textiles and other merchandise form the rest.

Much of the goods (including POL) going to Kabul or Qandahar originate in Pakistan. The reverse is also true. Afghan goods (mainly fresh or dried fruits) end up in Pakistani markets.

However, there is sinister element at work in this trade. Goods in transit to Afghanistan do not incur any customs duty or other taxes in Pakistan. But, the porous border with Afghanistan affords an opportunity for some of the goods, (once having crossed the border to enter Afghan territory) to be routed back by unscrupulous operators, into Pakistan.

DUTY FREE: The distortions in market prices created by these phenomena, can be readily imagined. Conversely, some food items and other essentials meant for domestic consumption here, are smuggled to Afghanistan, creating local shortages and a hike in prices locally.

Pakistan's attempts to seal the border by putting up barbed wire fences even on some selected points of the Pak-Afghan frontier are decried by the same people, who accuse Pakistan of harbouring terrorists. Then there are immigrants or refugees from Afghanistan, who have settled in various localities of Pakistan, established businesses and raised families over a period.

Most of them display no intention of moving back to their homeland, under any circumstances. Some have acquired property, or Pakistani nationality even, and masquerade around the world, holding the green passport.

The cumulative disastrous effect of the foregoing on Pakistan's economy in particular is tremendous, and cannot be counted in terms of money alone. Bound as they are by cultural, lingual and family ties, people in both the countries have to learn to live together and find a 'modus vivendi', to exist without hurting each other, financially or otherwise. After all, we are brotherly countries and neighbours.

There is no reason why, we cannot be friends and solve mutual problems to every one's satisfaction. There is a saying that "you can choose friends, but you cannot choose your neighbours." Nevertheless, there is nothing to prevent good neighbours also becoming good friends and learn to live together, in amity.

Absence of hostilities and establishment of good relations can pave the way for a very prosperous future for both countries. Afghanistan happens to be in the middle of the fabulous 'Silk Road', and a favoured transit route for travellers and merchandise between Europe, Central Asia, Middle East, the sub-continent and the Far East.

This strategic situation is slated to grow in importance even further, following the globalisation of trade under WTO. A further impetus is to be provided by the opportunities of energy supplies from Central Asian Republics (former USSR territories) overland to Eastern power-hungry and fast developing or fully developed economies - like China, India, Japan, South Korea, Sri Lanka, Bangladesh etc.

These supplies can be effected by road or rail transport, or through pipelines, all the way through to the ultimate destinations. The other and far cheaper alternative is by land routes via Pakistan (to Karachi and Gwadar ports) and onwards by sea. In fact, Karachi now, and Gwadar in near future, possess a great potential as hubs for global 2-way trade and commerce between the land-locked states in Central Asia and rest of the world.

Given peace and security, the opening up of these routes for trade and tourism will have an enormous impact on the economies of both Afghanistan and Pakistan as the transit stage-ports for the world.

Further, the so far an almost untouched domain of tourism attractions in the two countries (as also some neighbours in the region) both in the historic and natural beauty sense, can attract visitors equal in numbers to those visiting, Egypt, Greece, Spain or Switzerland. Business travellers can also spend some time in such spots, if necessary facilities are put in place, by the respective administrations.

Business Recorder [Pakistan's First Financial Daily]