Pakistan Economy - News & Updates - Archive

[Neo]

ISLAMABAD, May 24: Reduction in major crops’ output and lower than expected industrial performance overshadowed Pakistan’s modest 6.6 per cent gross domestic product (GDP) growth rate during the current year, below the target of seven per cent.

Services sector, with its impressive 8.8 per cent growth, lifted the otherwise faltering economy on the back of massive profits of the banking industry that offered nothing to depositors but earned billions of rupees in interest on depositors’ money. Last year, the GDP had grown by 8.4 per cent.

Official data showed that financial and insurance sectors recorded a monumental 23 per cent growth rate against the year’s target of just 6.7 per cent. The services sector’s performance was the best since 2003-04.

Next year’s targeted growth in GDP and other macroeconomic indicators was finalised at a meeting of the National Accounts Committee, attended by federal and provincial government officials here on Wednesday, sources in the finance ministry told Dawn.

The agriculture sector, with a GDP share of about 23 per cent, grew by a nominal 2.5 per cent against a target of 4.8 per cent for the current year and against 7.5 per cent agricultural growth achieved last year.

Major crops’ output posted a reduction of 2.3 per cent against a target of 6.6 per cent growth fixed for the current year and against 17.5 per cent growth achieved last year.

The depressing performance of industrial sector, with a GDP share of about 18 per cent, was broad-based during the current year.

The industrial sector grew by six per cent during the current fiscal year against a target of 9.5 per cent and last year’s actual growth rate of 10.2 per cent.

The overall manufacturing sector grew by a lowly 8.6 per cent during the current year and much lower than targeted 11 per cent perhaps because of capacity constraints. Last year, the large-scale manufacturing (LSM) had posted a growth of 12.5 per cent.

The LSM posted a growth of just nine per cent during the current year against a target of 13 per cent and last year’s growth of 15.4.

Small-scale and household manufacturing sector grew by an impressive 9.3 per cent in 2006-07 against a target of 7.4 per cent for the year. The performance of the sector was better than last year’s 7.3 per cent.

The construction sector also posted a higher growth rate of 9.2 per cent during the current year against a target of 7.5 per cent and last year’s growth of 6.2 per cent.

The services sector, with a GDP share of 52 per cent, has registered a broad-based growth of 8.8 per cent during the current year, against a target of 6.8 per cent and last year’s increase of 7.9 per cent. Earthquake rehabilitation activities also contributed to the sector’s growth.

The transport and communication sector grew by 7.2 per cent against a target of 5.8 per cent and last year’s growth of 5.6 per cent.

Similarly, the wholesale and retail trade posted a growth of 10 per cent during the year against a budgeted target of 9.3 per cent but lower than last year’s growth of 12 per cent.

 

[Neo]

ISLAMABAD

May 24: Pakistan is the fifth largest milk producing country in the world as it produces 32 billion liters of milk annually, Pakistan's state-run news agency APP reported yesterday.

According to official sources, the dairy sector represents 10.8 per cent of the GDP and 48.6 per cent of the country's agricultural GDP.

The sources further said that whereas Pakistan was ranked the fifth largest milk producing country, only a small proportion of the total production of the milk was marketed and just 2 per cent of the total milk produced in the country was processed at the dairy plants in the country.

They maintained that inadequate chilling facilities, increased energy costs, inefficient processing, costly packing and distribution were the main impediments to growth of the industry.

They added that with the reduction or even elimination of subsidies to the agriculture sector by the West, the prices of milk products in the world are expected to rise and that Pakistan should make best use of the changed environment.

However, for carving out a share in the world market in the milk-based industry, they said, Pakistan should have to follow an integrated approach from the improvements in the productivity per animal up to the domestic and final consumers.

To achieve this objective, they said, the main focus should be on the quality controls, standardization of products, credible certification, and promotion of milk chilling at the village level.

 

[Neo]

WASHINGTON, May 24: Pakistan appears to have failed to benefit from economic benefits offered after the September 11, 2001 terrorist attacks which could have been used to build a solid economic base for the country, experts say.

Pakistan’s strategic location often brings economic assistance for the country but so far no government seems to have benefited from these opportunities, speakers told a seminar in Washington.

One speaker, Manuela Ferro of the World Bank, described this as the ‘boom-to-bust’ pattern and wondered why “there’s no corrective mechanism to prevent the re-emergences” of the imbalances that often push the country from ‘boom to bust.’

The main speaker, Mushtaq Khan, set the pattern for the discussion by examining the factors that led to a boom in the Pakistani economy after 9/11 and showed how Pakistan’s economic planners once again failed to sustain this boom.

Mr Khan, Woodrow Wilson Centre’s Pakistan scholar for 2006 and Citibank’s country strategist, urged Pakistan’s economic planners to “start easing off, control things a bit more and let’s just be a little cautious.”

Shahid Javed Burki, a former finance minister and senior World Bank official, said economic policies of the present government made him ‘very nervous.’

Andy Baukol of the US Department of Treasury expressed concern about the quality of spending in the Pakistani budget, “too much going into spending and too little on education.”

Mr Khan began his presentation with some historical details about Pakistan’s ‘checkered relations’ with the IMF and how after the coup the Musharraf government dealt successfully with ‘a very strict’ IMF programme.

“We delivered in a manner that perhaps we have never done before, very strong conditions but very useful,” he said.

Then 9/11 happened, Pakistan received certain benefits in terms of debt scheduling, debt write-off, also some logistical support from the US government.

This, according to Mr Khan, led to ‘a very sharp’ change in monetary policies, which started in November 2002 and continues. “The pace of credit expansion has been very rapid since then and it has not eased,” he said. Explaining the implications of such a policy, he said: “Once you have a lot of spending power in the economy, it leads to growth but there are also implications in terms of external deficit: the more you spend, the more you import — in Pakistan’s case most of the increase in the external deficit is domestically driven.”

The country, he said, was now dealing with another imbalance which is the credit or the liquidity money that has been injected into the system and is seen in places like real estate and stock market. “If you want to take corrective actions now, it will be expensive in terms of financial and economic costs,” he added.

Mr Khan warned that further increase in oil prices could have a very negative impact on the Pakistani economy because adequate arrangements have not been made to protect the economy against external shocks.

He felt that if something happened to increase the price of oil, Pakistan government will not be able to shelter retail consumers. “If that happens then there are issues in terms of consumer demand and purchasing power,” he warned.

Commenting on Mr Khan’s presentation, Mr Baukol of the US Treasury Department agreed that 9/11 brought cash inflow from remittances by affecting the Hundi system and this inflow allowed Pakistan to avoid some of the difficult choices they were facing.

After Pakistan joined the US-led war against terrorism, international monetary institutions like the IMF also softened their attitudes, “requiring less of Pakistan than in the past.”

He, however, pointed out that there were some weaknesses in the Pakistani economic system that did not get resolved. “One of the key issues is the level of credit growth — which is higher than normal GDP growth — since credit growth is very, very rapid, so is the risk, especially if there is an external factor.”

Mr Burki said that he felt ‘a fair amount of nervousness’ about the quality of assets banks in Pakistan have acquired, such as automobiles, houses and credit cards. “The central bank needs to watch the situation very carefully,” he said.

Mr Burki said it was difficult to predict which way the country was heading. “The Pakistani economy takes off when foreign assistance is available but the money is always used for consumption and not for creating assets — this government could have done better but did not — there’s a reasonable probability that we are heading down again.”

He said he was also nervous about the use of privatisation to fill the external gap. “If investment came to the country by selling government assets then this should produce exports otherwise this will be a contingent liability for the government,” he warned. “There’s enough to worry about.”

 

[Neo]

Thursday May 25, 2006

KARACHI : A United Arab Emirates (UAE) based information technology (IT) firm is keen to invest Rs 600 million in the Internet solution project in Sindh province. A statement issued here on Wednesday said that the firm intends to come up with a massive investment in IT sector in Sindh.

It said that in the first phase the company would invest Rs 600 million. The project would enhance the speed of Internet by 50 percent in Pakistan. The Managing Director of 'Eye2Eye' firm of Dubai, Faisal M Saleem, accompanied by company's Director Tahir Qureshi met with the Advisor to Sindh Chief Minister, Muhammad Noman Saigal in the latter's office.


Noman said the government was according priority to promotion of information technology. "That is why many of the investors from the world have shown keen interest to invest in the IT sector in Sindh.

 

[Owais]

Raise in PSDP allocation to create more jobs: Musharraf, Shaukat warn Kabul against accusations

RAWALPINDI (May 26 2006): President General Pervez Musharraf on Thursday underlined the importance of public sector development programmes (PSDP) in setting pace for rapid socio-economic uplift of common man across the country, saying sustained increase in allocations for the PSDP would provide employment to people and improve quality of life.

The President stated this during a meeting with Prime Minister Shaukat Aziz, who called on him and discussed various national and international issues including socio-economic development, and measures to offset price-hike impact on the common man in the forthcoming financial year.

Describing PSDP as a vital factor in terms of transferring benefits of economic growth, President Musharraf said increased allocations for the public sector projects have been possible due to sustained improvement in all areas of the national economy in the last six years.

In this respect, he referred to substantial increase in the annual PSDP allocations and observed that a series of mega projects, commenced since then in water, energy, communication and health sectors, are nearing completion.

These projects are poised to play an important role in maintaining the country's high economic growth by providing employment and reducing poverty, he added. "We have to maintain that upward trend through sustained focus on both mega projects as well as local development schemes - these would accrue benefits at grass roots level and greatly help in developing our human resource potential through better quality of health, education, energy and communication facilities," he said, reiterating his commitment to provision of safe drinking water, electricity and natural gas to the entire populace.

The President and Prime Minister expressed satisfaction at the state of the national economy and said improvement in revenue generation; increase in exports and a record inflow of foreign direct investment speak of continuing momentum of growth.

The President and the Prime Minister also discussed ways to offset inflationary impact on common man and observed that inflation is a result of gap in demand and supply due to high economic growth, soaring international oil prices.

Prime Minister Shaukat Aziz briefed the President about his recently concluded visits to Indonesia, Greece, Morocco, Libya and Egypt, his participation in multilateral forums including D8 conference and World Economic Forum and his bilateral meeting with foreign leaders.

BR CORESPONDENT ADDS: Country's top leadership also warned Kabul against accusing Pakistan of interference in Afghanistan's internal affairs saying the move could negatively impact the co-operative efforts against international terrorism.

The warning came jointly from President Pervez Musharraf and Prime Minister Shaukat Aziz as they met here for in-depth consultations that are said to have covered a number of other issues as well including the forthcoming federal budget.

Pakistan is bitter about Afghan President Hamid Karazai's recent assertion, followed by his ministers' that the Afghan Taleban keep returning to their country after receiving training in camps run by Pakistani agencies.

They also discussed various aspects of the ongoing talks with India and visits here by Iranian leaders.

The two, however, remained focussed most of the time on the forthcoming federal budget, which President Musharraf said should be people-friendly.

The Prime Minister Aziz is said to have informed the president of various proposals including raise in salaries of government servants and lowering of taxes and duties that he said would help a large segment of the middle class.

The president is said to have asked him to fix 20 billion dollars as the target for exports for the next financial year.

 

[Owais]

CED on bank advances likely

ISLAMABAD (May 26 2006): The government is likely to impose central excise duty (CED) on the bank advances, including consumer loans, car and house financing to generate maximum revenue under the head of indirect taxes in the next financial year.

Sources told Business Recorder on Thursday that the Central Board of Revenue (CBR) has directed the Sales Tax Budget Wing to examine the possibility of levying excise duty on 'bank advances'.

Under the on-going exercise, the Board is also analysing the international practice regarding applicability of excise duty in different countries.

When contacted, tax experts said that UK and New Zealand are charging excise duty on the 'bank advances'. The 'bank advances' included working capital loans, term financing, consumer lending, car and house financing and credit cards. The proposal would increase substantial revenue on account of federal excise, as all the banks are now concentrating on personal financing in the shape of home loans, equipment loan, credit cards, car/home finances.

Particularly, the sector of consumer finances is growing at a very fast pace. It is easy for the CBR to administer the documented banking sector as compared to other non-documented sectors.

Experts claimed that if the government agrees with the proposal, the CBR might exempt the export-related financing from the federal excise duty (FED) levy. They were of the view the CBR is empowered to levy FED on services under the Federal Excise Act, 2005 without consulting the provinces.

 

[Owais]

Manufacturers not willing to print rates on cement bags

ISLAMABAD (May 26 2006): The cement manufacturers, who earned all-time high profit during the previous months due to under-invoicing, are hesitant to print ex-factory price on bags, fearing that this step would open the doors for CBR to launch investigation against them.

Sources told Business Recorder that printing of ex-factory price on cement bags was the central point at the meeting between Industries Minister Jahangir Khan Tareen and the All Pakistan Cement Manufacturers Association (Apcma) held on May 18.

The cement manufacturers themselves had manipulated the prices, but shifted blame onto the middleman for high prices and now if they print ex-factory price on bags as was being demanded by the federal government, the CBR would tax them over the printed price, the sources added.

"Cement manufacturers were very touchy on the issue of printing price on bags, which they fear can open a new chapter of confrontation with the CBR," the sources maintained.

Apcma, however, had agreed to convey agreeable sale price to the industries ministry after consultations with other member factories, but till Thursday, they did not approach in this regard, the sources said.

Sources said the cement manufacturers were practically crying in the meeting over a timely action by one of the importers, who booked the order on telephone and intercepted a ship near Karachi, carrying cement for another country and got unloaded a substantial amount of the commodity.

They said there was a division among the Apcma ranks over price fixation as some of the members were willing to print price on bags while other differ with the suggestion.

Meanwhile, the industries ministry has formally included a clause in the Price Control Act, empowering provincial and district governments to check hoarding in their respective areas. According to the Act, the sources said, the hoarders would have to face three years imprisonment or Rs 100,000 fine in case of violating the law.

The government would not resume rebate on cement export to Afghanistan until cement manufacturers fix their price between Rs 285.00 and Rs 295.00 per bag in written on sustained basis, the sources added. When contacted for comments, the spokesman for the industries ministry, Tariq Bajwa, said that prices in different parts of the country have come to about Rs 300 per bag except, Karachi where construction activities were in full swing.

He, however, hoped that price in Karachi would further come down, as two ships, carrying imported cement have already berthed. Asked, why Apcma did not convey the agreed price to the industries ministry so far, the spokesman said the government's main purpose was to bring down prices below Rs 300 per bag which has been achieved through subsidised import and withdrawal of rebate on export.

Replying to another question, Tariq Bajwa confirmed that Apcma had expressed reservations over printing of price on bags fearing that it would create tax problems with the CBR. The price of cement in the twin cities of Rawalpindi and Islamabad was Rs 300 per bag on Thursday.

 

[Owais]

Pakistan Steel privatisation completely transparent, PC submits before Supreme Court

ISLAMABAD (May 26 2006): The Privatisation Commission (PC) has submitted before the Supreme Court that the process of privatisation of Pakistan Steel Mills Corporation (PSMC) has been completely transparent and in accordance with the Ordinance and Rules framed in this regard and to the satisfaction of PSMC employees.

In a concise statement filed with the court by Syed Sharifuddin Pirzada, Senior Advocate, Supreme Court, the PC said that Pakistan Steel engaged in the manufacture of standard grades of steel and meets less than 25 percent of the domestic demand. The machinery installed at the plant is outdated and is operating at 50 percent of the design capacity and requires US $100 million injection for balancing, modernisation and replacement.

PRE-QUALIFICATION: The four parties who were disqualified did not meet the criteria in the Request for Statement of Qualification. These parties were given an opportunity to address the deficiencies in their SOQs. However despite the additional time given to them, they failed to comply with the requirements and hence were disqualified, say the respondents.

The PC claims to have followed a rigorous valuation process. It engaged an international investment bank, Citigroup Global Market Limited as the Financial Advisor (FA). The FA together with other advisors, that included a firm of chartered accountants A.F. Fergusons & Co an affiliate firm of PriceWaterhouseCoopers (accounting and tax consultants), Orr Dignam & Co (legal consultants) and Corns Consulting Ltd (technical consultants), carried out a detailed due diligence of PSMC. The due diligence findings were used to develop a comprehensive financial and valuation model.

"VALUATION APPROACH: Valuation of Pakistan Steel Mills Corporation (Pvt) Limited (PSMC) was conducted using the following valuation methodologies:

-- Discounted cash flow, using technical assumptions provided by consultants and discussions with PSMC management

-- Relative multiples valuation estimates, comparable company analysis

-- Precedent transaction analysis for steel sector companies on a global basis.

The above three are the standard and globally recognised methodologies to value businesses and companies as going concerns. Going concern essentially means that that a company will continue to operate indefinitely, and will not go out of business and liquidate its assets.

For this to happen, the company must be able to generate and/or raise enough resources to stay operational. The going concern has been the basis principle for valuing PSMC in line with international best practices and precedent privatisations in Pakistan.

Hence, the break-up value of PSMC's assets has not been used to determine the reference price. Valuing assets (such as land) on an individual basis to arrive at a consolidated value is relevant only if the intention is to break up PSMC and liquidate its assets. If the objective of privatising PSMC is to shut down PSMC, dismantle the plant and undertake an asset sale, then yes possibly valuation approach needs to be altered.

Only in such a situation would it be pertinent to look at the value of land and other assets separately. If such an approach is adopted, then one would also need to take into account all its direct and contingent liabilities and obligations as well.

More importantly, this approach would require that the social, economic and other financial costs associated with closing down the steel mill (displacement of 13,000 workers, loss of domestic production and increased reliance on imports for finished goods, closure of the only metallurgical institute in the country, cost of dismantling the plant, environmental clean-up etc) are also factored in.

PC is privatising PSMC on a going concern basis and therefore there is a need to value the worth of the business, which is essentially measured by its profitability. Therefore, valuing the land or assets separately is not appropriate.

Concerns that the new owner of PSMC would misuse the land and sell it as real estate are misplaced. First of all, the successful bidder comprises of companies such as Magnitogorsk Iron & Steel Works of Russia and Al-Tuwairiq Group of Saudi Arabia, who are both international steel companies. Hence, the sale of PSMC has been to strategic investors.

It is important to note that all non-core/excess land has been unbundled and 100 percent of retained land is in use by PSMC. In fact, bidders during the pre-bid meeting had highlighted that the land been retained within PSMC is not adequate to allow for an expansion.

It was decided that additional land required by PSMC for expansion would be considered at the appropriate time. Also, the Successful Bidder in the Share Purchase Agreement has committed to continue to operate PSMC's facilities and ensure that PSMC's facilities and operations are brought in line with prudent practices in the steel industry."

"DISCOUNTED CASH FLOWS ("DCF"): This is the most widely used valuation methodology particularly relevant when detailed technical/operational assumptions are available to derive cash flows.

The FA conducted valuation using Free Cash Flows to Firm ("FCFF"). Arriving at the FCFF estimates entailed forecasting the future profitability and cash generation capability of the company. The FCFF forecasts for FY2006 to FY2015 were discounted at the Weighted Average Cost of Capital ("WACC").

The FA developed a detailed financial model, which had an explicit forecast horizon of 10 years. For this 10-year period the FA developed a Profit and Loss account, Balance Sheet and a Cashflow statement.

In developing the forecast the FA took into account the following key inputs:

-- A global steel price forecast (sourced from reputable third parties including Corns Consulting and World Steel Dynamics) was used to develop the domestic Pakistani steel price forecast.

-- Forecasted international input prices of all PSMC raw materials (including iron ore and coal) were provided Corns Consulting and also sourced from World Steel Dynamics and other internationally recognised research. This international price set was then adjusted to reflect import incidentals cost and PSMC's shipping contracts after taking into account efficiencies that may be brought about by the new buyers.

-- The forecast also includes any major capital expenditure that is required over the forecast horizon to maintain the plant operations at design capacity. In case of PSMC it requires a minimum immediate capital investment of around US $100m for critical repairs.

This capital investment is estimated by Corns Consulting. It is important to highlight that PSMC's Coke Oven Batteries Plant (COBP) has broken down due to which the PSMC has operated at below 50 percent of its design capacity in the first six months of FY2006. These investments are necessary if the plant is to operate at full capacity on a sustainable basis.

-- Based on these investments, Corns Consulting have forecasted future operations/production which reflects the efficiencies PSMC would be able to enjoy in the future.

The FA valuation reflects that PSMC will be able to operate at 100 percent capacity in the future (something that PSMC has never been able to achieve) once it undertakes necessary capital repairs and that its product mix will improve further in favour of flat products (vs. long products).

-- The FA's forecast also takes into account the impact of repayment of GOP guaranteed and extended loans (totalling Rs 8.5 billion). PSMC has been over the years supported by the GOP as GOP has guaranteed its debt obligations, picked up its debt servicing costs and extended interest-free loans. The FA model reflects the repayment of these loans ahead of the privatisation through PSMC's existing cash balances.

-- Impact of the incentive package offered to PSMC employees is also factored in. As per the incentive package, there will be a one time, upfront cost of around Rs 2 billion on PSMC, with possibly an annual recurring cost of Rs 200 million.

The DCF valuation takes into account the profitability and cash flow generation into perpetuity. With an explicit forecast horizon of 10 years, the FA DCF valuation also reflected the terminal value, which is the value of the company from year 11 into perpetuity.

Based on DCF valuation, the FA arrived at a value range of US $407 to 464 million for a 100 percent equity stake in PSMC. This implies a US $305 to 348 million value range for a 75 percent equity stake in PSMC (Rs 14.20 to 16.17 per share)."

"COMPARABLE COMPANY ANALYSIS: This methodology uses the public market valuations (stock market valuations) of similar companies to draw estimated range of valuation for the target company. For PSMC the FA analysed a broad group of steel manufacturers to select comparable companies as a valuation reference.

The FA selected a sample of steel manufacturers with sizeable operations in the emerging markets, as well as several comparable steel manufacturers in the developed countries.

Based on this approach, FA arrived at an average range of USS 307 to 406 million for a 100 percent equity stake or USS 230 to 305 million for a 75 percent stake (Rs 10.70 to 14.15 per share)."

"PRECEDENT TRANSACTION ANALYSIS: This methodology involves looking at recent global transactions of similar assets. Based on the price paid relative to the profitability of the company and price paid per tonne of capacity in relevant transactions, the precedent transaction valuation range was US $389 to 501 million for a 100 percent stake, which equates to US $292 to 376 million for a 75 percent stake (Rs 13.55 to 17.47 per share)."

 

[Owais]

"REFERENCE PRICE: The CCOP considered all valuation ranges based on all three valuation methodologies used by the FA. The Comparable Companies Analysis and the Precedent Transactions Analysis is used primarily for scoping purposes and is not recommended as the preferred valuation methodology since it is difficult to find truly comparable companies and transactions.

CCOP recognising that DCF is the most robust valuation methodology (since it captures the peculiarities associated with this particular asset better than any other methodology) fixed the Reference Price as US $348 million for 75 percent equity stake (or Rs 16.6 per share), which was the high end of the FA's DCF range.

In view of the above submission the petition is liable to be dismissed, say the respondents in their prayer before the Supreme Court.

 

[Neo]

ISLAMABAD (May 26 2006): The International Finance Corporation (IFC), a private sector arm of the World Bank Group, has signed a $25 million financing package for Rally Energy Corp to support upstream oil and gas projects in Pakistan and Egypt. With its investment, IFC will help strengthen energy production to meet increasing domestic demand.

"Companies like Rally are important participants in the hydrocarbon sectors of developing countries as they help develop domestic resources to satisfy growing demand. Importantly, they also bring revenues to governments and create employment as well as opportunities for local suppliers of goods and services," said Somit Varma, IFC's Associate Director for Oil and Gas.

In Pakistan, Rally's joint venture will strengthen domestic natural gas supplies in a market where increasing demand may lead to a shortfall in domestic supply and to potential gas imports.

The firm has a 22.5 percent non-operating interest in the Safed Koh block in Punjab, which is operated by its partner Dewan Petroleum Pvt Ltd. The block includes the Salsabil gas and condensate field that will be developed as a part of the project.

Rally and its partners will also explore prospects for additional gas reserves in the block. Natural gas from the project will strengthen fuel supplies to industrial and urban markets in the region.

"We welcome Rally's participation in the energy sectors of Egypt and Pakistan. It is IFC's strategic priority to support vital economic sectors in the region and help address increasing energy demand," said a press release of IFC, quoting Michael Essex, IFC's Director for the Middle East and North Africa region.

In Egypt, the mining and hydrocarbon sector plays a significant role in the country's economy, generating about 15 percent of GDP, 37 percent of export earnings, and the bulk of foreign investment. However, oil exports from Egypt have been under pressure as production at mature oil fields has fallen and domestic consumption has increased.

Rally's project in Egypt's Ras Issaran concession area helps to address this decline. Through a wholly owned subsidiary, Scimitar Production Egypt Ltd, Rally has 100 percent working interest in a heavy oil development petroleum services agreement related to the Ras Issaran concession area on the western shore of the Gulf of Suez. The area is estimated to have significant heavy oil reserves.

Scimitar Egypt is currently implementing a three-year development programme there that aims to step up oil recovery rates by employing a range of established oil recovery techniques.

The IFC's financing consists of revolving credit facilities of $20 million in two tranches, and a $5 million term loan with attached equity share warrants, the press release said, adding that IFC investment would support Rally's three-year capital expenditure plan and working capital needs for its projects in Egypt and Pakistan.

Abby Badwi, President and Chief Executive Officer of Rally Energy Corp, in his remarks said that the IFC credit facility has been put in place to give Rally maximum flexibility to supplement expected cash flow from its planned 2006 and 2007 work programmes, and to enable us to accelerate the thermal development project in the Issaran Field in Egypt.

In addition, this strategic long-term investment by the IFC, as lender and potential equity partner, will provide Rally with continued access to competitive and sustainable financing arrangements to fund planned and future growth opportunities in both countries.

 

[Neo]

ISLAMABAD (May 26 2006): Pakistan has achieved economic stability and progress despite devastating earthquake of October 8 last year, Advisor to Finance Ministry Dr Ashfaque Hasan Khan said on Thursday. He said "the economic achievements of Pakistan has been acknowledged by every international organisation".

He expressed the confidence that despite the devastation caused by the earthquake Pakistan is posed to achieve the economic growth of 6 to 7 percent.

He added that 5.56 million jobs had been created since the financial year 2003-04.

Pakistan has also succeeded in reducing poverty from 32.1 percent in 2000-01 to 25.4 percent in 2004-05. "We have reduced our budget deficit as well as debt burden", Dr Ashfaque remarked. He added that public debt burden has declined from 100 percent of GDP to 57 percent of the GDP of the country.

Both exports and imports are growing at double-digit level and the Central Board of Revenue (CBR) is collecting taxes from more than the targets, he remarked.

About inflation, he said, the inflation which reached as high 11 percent in April 2005 has come down to 6.2 percent in April 2006.

The advisor Finance Ministry said that Pakistan has for the first time of its history launched sovereign bonds of 10 year and 30 year in the international capital market.

 

[Neo]

LAHORE (May 26 2006): Asian Development Bank (ADB) has given a dollars 42 million worth loan to Pakistan to help improve the living conditions of the people in Pakistan's Federally Administered Tribal Areas (Fata) by promoting sustainable and productive use of the areas' natural resources.

According to sources here on Thursday, the project would be undertaken in three of the northern districts of Bajaur, Khyber and Mohmand, where dry and rocky land is mostly not suitable for farming, and the poorest families used to earn their living as sharecroppers or through agricultural labour. The project is projected to increase the productivity of about 52,500 hectares of rain-fed lands and benefit about 37,500 households.

They said that ADB's loan, from its concessional Asian Development Fund, carries a 32-year term, a grace period of eight years, and interest @ 01 percent per annum during the grace period and 1.5 percent thereafter. "The Pakistani government would contribute dollars 15.4 million towards the project's total estimated cost of dollars 60.4 million, while the beneficiaries would shoulder the balance of dollars three million. The Ministry of States and Frontier Regions is the executing agency for the project, which is due for completion in June 2011," they added.

"To address these issues, the project would promote integrated resource management to improve productivity and arrest the degradation of the environment in the tribal areas. It would help improve farming and livestock rearing practices by selecting appropriate technologies and would promote effective forestry and range management.

 

[Neo]

ISLAMABAD (May 26 2006): Addressing a meeting of the Board of the Privatisation Commission here on Thursday Zahid Hamid Federal Minister for Privatisation and Investment said that privatisation proceeds had reached an all time high during the current financial year.

Up till April 2006, nine transactions had been completed for total sale price of Rs 218 billion, out of which a sum of Rs 118 billion had already been realised. Last year, 2004-05, eleven transactions were completed for a total sum of Rs 43 billion, he stated.

Zahid Hamid said that Pakistan State Oil (PSO) and National Investment Trust Limited (NITL) were also likely to be privatised before June 30, 2006, which would increase the proceeds further. All these proceeds would of course be utilised for poverty alleviation and debt retirement in accordance with law, he added.

The minister further stated that all prescribed rules, regulations and formalities would be observed and nothing would be sold in undue haste in order to ensure open, fair and transparent transactions and to maximise sale proceeds for our national assets.Zahid Hamid said that the economic reforms introduced in Pakistan by Shaukat Aziz as Finance Minister and continued by him as Prime Minister under the guidance of President Pervez Musharraf, which comprised three main pillars of Deregulation, Liberalisation and Privatisation were appreciated the world over and were cited as role models for the region at the World Economic Forum held on May 20-21 at Sharm-el-Shaikh, Egypt.

He said that the economic reforms had been institutionalised by The government through the Fiscal Responsibility and Debt Limitation Act 2005.

The minister said that the fiscal debt, which averaged nearly seven percent of GDP in the 1990s, had declined to only 3.3 percent in 2004-05. Moreover, public debt to GDP ratio had reduced from disastrous 90 to 100 percent approximately in the 1990s to 61.7 percent in 2004-05 and was expected to further reduce to under 60 percent this year, he stated.

The PC board approved the recommendations of the pre-qualification committees relating to pre-qualification of parties for the privatisation of National Investment Trust Limited (NITL), Faisalabad Electric Supply Company (FESCO) and National Power Construction Company (NPCC).

The meeting also reviewed the progress of the privatisation process of Lyallpur Chemical and Fertilisers Ltd, and Lasbella Textile Mills.

The meeting also formulated its recommendations for the Cabinet Committee on Privatisation (CCOP) regarding various ongoing entities. Shaikh Ikramullah Secretary Privatisation Commission, Members of the board of the Privatisation Commission, senior officials of the respective ministries and departments attended the meeting.

 

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LAHORE (May 26 2006): The UK High Commission has launched Students Support Programme (SSP) for Pakistani students so that they could attain quality education with maximum ease. Alex Pond, Director UK Visa, announced this while addressing the LCCI members, here on Thursday.

LCCI President Mian Shafqat Ali, Senior Vice-President Abdul Basit, Vice-President Aftab Ahmad Vohra and former senior vice-president Sohail Lashari were also present on the occasion.

Alex Pond asked the Pakistani students to avail the opportunity available in the Britain which has the best educational system in the world. The British High Commission has already softened its policy of granting visas to the students. She said that the United Kingdom is home to the Pakistanis more than the people of any other nationality are thus they would find easy to adjust there. "The High Commission is now offering round the clock services that would help the students in getting visa in the quickest possible time," she added.

Speaking on the occasion, the LCCI president said that the Pakistani immigrants in United Kingdom have played their role in the economic development of the country. "However, the post July 7 London bombings scenario had raised some concerns with respect to the Pakistani immigrants and the business community that visit frequently to the UK. We appreciate the UK's policy to address these concerns in the most benefiting manner. Pak-UK bilateral relations have grown over the years," he added.

According to him, the exchange of business delegations plays an important role to introduce and explore new markets of exportable products in the world. Exhibitions are also now recognised as a powerful marketing tool and are no longer positioned outside the marketing mix but are rather an integral part of any company's business decision making.

 

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SIALKOT (May 26 2006): Over 55.8 million footballs, amounting to more than Rs 8.5 billion, have so far been exported on the eve of FIFA Football World Cup 2006. The local exporters and manufacturers are utilising all channels to fulfil the demand of their foreign buyers and speedy and timely delivery of the football consignments.

About 85 percent of total production of soccer balls of the world comes from Sialkot, while all international brands are sourcing their supply of footballs from this export-oriented city and nucleus of cottage industry of the country.

Pakistan enjoys a unique position in the global trade with reference to sports goods and its main forte is hand-stitched inflatable balls and such masterpieces are being produced and exported for around 100 years from now.

Over 40 million balls, worth 210 million dollars, were produced annually by highly skilled workers of Sialkot. These balls are produced by a workforce of more than 60,000 and exported to the world market by 1,000-plus entrepreneurs, while the industry had totally been purged from the menace of child labour.

Currently, the soccer ball manufacturers and exporters are facing challenge in the form of "thermo bonded," which is not similar to its previous versions, threatening the future of hand-stitched balls.

The international competitors have been making strenuous efforts for over a decade to produce a soccer ball, which has the "playability" properties of hand-stitched ball and can be manufactured on machines.

In 2002, a leading international brand claimed that it had produced and tested such balls in UEFA EURO-2004. This new ball threatened the local industry with the same fate as happened to wooden rackets some 30 years back.

Anyhow, the local soccer ball manufacturers and exporters are utilising their century-old manufacturing techniques in producing hand-stitched balls to compete in the global market, besides they are making hectic efforts to obtain the techniques of machine-made soccer balls.

The business activity is at its peak in and around city while great rush of cargo agents has also been witnessed at Sialkot Dry port for clearing and dispatching the exportable soccer ball consignments well before the commencement of Football World Cup. The Collectorate of Customs, Sambrial, has extended the working hours of export section and PRAL to facilitate the exporter community.

The Sialkot Dry Port has also made adequate arrangements for transportation of soccer ball consignments promptly.

The success story of Sialkot-based industries can be attributed to unmatched skill of local workers and their craftsmanship. The world trotters have introduced Sialkot as total export-oriented city of Pakistan. Since this place possesses century-old industrial heritage and it has developed as an incredible export culture over the period and contributing 800 million dollars to the national exchequer annually.

Still, the exporters community is trying its utmost for doubling the export volume despite of tough competition in the world market for fetching valuable foreign exchange for the country. The development of cottage industries in Sialkot has assumed a model status for the developing world.

The city is sprinkled with thousands of small and medium enterprises, which are engaged in honouring their global commitments for the export of value-added quality goods such as sports goods, surgical instruments, leather goods, gloves, badges and musical instruments etc.