Pakistan Economy - News & Updates - Archive

[Neo]

Remittances rise 21 per cent ​

Tuesday, March 18, 2008

KARACHI: Remittances sent home by overseas Pakistanis continued to show a rising trend as $4,126.16 million was received in the first eight months (July 2007-February 2008) of the current fiscal year, an increase of $709.63m or 20.77 per cent over the same period of the last fiscal year.

The State Bank of Pakistan (SBP) said the total amount included $2.01 million received through encashment and profit earned on Foreign Exchange Bearer Certificates (FEBCs) and Foreign Currency Bearer Certificates (FCBCs).

The monthly average of remittances for the period July-February 2007-08 amounts to $515.77m as compared to $427.07m during the corresponding period of last fiscal year, registering an increase of 20.77pc.

The inflow of remittances in the July-February 2007-08 period from USA, Saudi Arabia, the UAE, GCC countries (including Bahrain, Kuwait, Qatar and Oman), the UK and EU countries amounted to $1,160.39m, $761.84m, $681.88m, $618.83m, $292.87m and $116.12m respectively. These compared to $891.97m, $640.79m, $513.69m, $467.86m, $281.50m and $97.50m respectively in the July-February 2006-07 period.

Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during the first eight months of the current fiscal year amounted to $492.22m against $521.67m in the same period last year.

During the last month (February 2008), Pakistani workers remitted $502.76m, up $45.58m or 9.97 per cent compared to $457.18m sent home in February 2007.The inflow of remittances into Pakistan from almost all countries of the world increased last month compared to February 2007. According to the break-up, remittances from USA, Saudi Arabia, the UAE, GCC countries, the UK and EU countries amounted to $134.68m, $98.17m, $88.31m, $78.95m, $29.99m and $12.94m respectively compared to receipts from the respective countries during February 2007, ie $123.96m, $88.26m, $69.82m, $60.50m, $33.64m and $11.89m.

Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during February 2008 amounted to $59.42 million compared to $68.96m during February 2007.

Remittances rise 21 per cent

 

[Neo]

Hopes high new govt will control food prices ​

Tuesday, March 18, 2008

ISLAMABAD: Taming the inherited high inflation especially of food items seems to be an uphill task for the upcoming political set-up which could either spoil or improve its reputation despite the fact that the public at large have developed great expectations from the coalition partners.

The other challenge for them would be netting big fish involved in the profiteering and hoarding of various food items that could further disturb supply chain and ultimately spawn crises. Containing the mother of all economic and social evils (inflation) must be on one of the top priorities for the new government, by doing so,

The new government could not only win its fame among the masses, but also help boost other economic indicators including augmenting country’s exports, luring investment and fortifying consumption decisions that in turn would help in strengthening Pakistan’s economic growth.

Previously, the political setup despite completing its 5-year tenure had completely failed in keeping the elephant in room (inflation) that irritated million of low and middle income Pakistanis.

After that the caretaker government also did nothing with the high prices and every next week prices went up and up. During February 2008, food inflation stood at 16.05 per cent which jacked up the general inflation to 11.25 per cent from 7.39 per cent recorded in corresponding month of the last fiscal.

Eight months (July-February, 2007-08) inflation has also gone up to 8.90 per cent over the corresponding period of last year (8.04 per cent) which is about 240 basis points above the set target (6.5 per cent) for the current fiscal. Rising inflation is making it difficult for pensioners and low income masses living on their very nominal amount a month in the country. During the period, inflation rose to the unprecedented level which not only disturbed social and economic life of the common man but, on the other hand also benefited some of the influential, pampered businessmen and other officials involved in hoardings and unfair profiteering.

Now, it had become a far cry that why these influential involved in such activities were not brought to justice? Interestingly, during that period, judicial crises also erupted in the country that further exacerbated the situation.

On political side, besides other issues, sky-rocketing inflation was one of the instrumentals due to which the previous government faced the music in the shape of low success ratio in recent elections.

Average inflation during the last seven months (July-January 2007-08) stands at 8.56 per cent as against 8.14 per cent recorded in the corresponding period of the last fiscal which is much more higher than the annual target of 6.5 per cent.

The masses had attached big expectation to the new government, as they were unable to receive any respite during the previous tenure. The other resident danger to the economy is shortage of energy as during last 8-year, the government had not even added a single megawatt to the total energy generation.

Economists fear that in the coming years, there is another row of power shortage expected and coping with the situation would be another cracking challenge for the upcoming government. On economic front, there are various challenges the government had to face in near future including twin deficits (current account and fiscal deficit) which are running above the expectations.

During the last seven months, the country’s current account deficit has jumped to $7.55 billion as against $5.34 billon in the same period of the last fiscal. It also may face hesitation to contain fiscal deficit which has already reached one of the highest level of 1.6 per cent of GDP in the first quarter (July-September) for the last seven years.

Now it has become clear that fiscal deficit target of 4.0 of GDP would be breached by a fair margin and there are chances that current account deficit target would not be achieved as well. The government could not be able to shelve its mega-development projects and it has to finance fraction of the oil imports bill.

The other challenge would be passing through higher international oil prices to the consumer and which would be hard for the new government in their initial months, thus the government has to take the hit for unanticipated rise in the crude oil prices.

One manifestation of the rising twin deficits is the addition of $2.54 billion to the stock of the external debt and Rs280.53 billion in domestic debt in the first half (July-December) of FY08. During the last fiscal 2006-07, the country has added $2.9 billion to the external debt which is record in addition to external debt in one decade. Interestingly, the government has always talked about debt burden. It has also witnessed tremendous rise in the last fiscal year.

For instance, external debt and liabilities as per cent of foreign exchange earnings are regarded as most reliable indicator of debt burden. According to State Bank of Pakistan (SBP) annual report, this indicator has witnessed deterioration from 120 per cent in FY06 to 124.8 per cent in FY 07. Another indicator of debt carrying capacity reserves to total external debt and liabilities has deteriorated from 28.9 per cent in FY06 to 33.2 per cent in FY 07.

Rising debt-servicing burden has raised serious questions of sustainability of the debt. Public debt is deteriorating both in terms of absolute amount and debt burden.

Hopes high new govt will control food prices

 

[Neo]

Number of cellphone users cross 80.30 million​

KARACHI: The number of cellular subscribers in Pakistan touched 80 million mark with a cellular mobile density of 50.76. Approximately 4 million subscribers were added during the two months of this year, which shows the rapid use of cellular phone in the country.

Latest figures released by the PTA show cellular phone connections reached 80.30 million mark by February 2008.

The figures gathered by the telecom watchdog show that by February 2008 Mobilink led the market with 31.36 million subscribers followed by Ufone, which was serving 16.84 million people across the country. Telenor Pakistan holds the third position with 16.01 million subscribers and Warid is at the fourth with 13.60 million subscribers. Meanwhile, the aggressively marketed Paktel has managed to grab 2.14 million subscribers.

Industry analysts are predicting that the market share in coming two months may change. Competition for the second and third place is growing fast. There is a very close tie between Ufone and Telenor. Telenor Pakistan is at 3rd place with a difference of only 833,640 subscribers. Telecom industry is booming throughout the country as two million mobile subscribers were added every month throughout the last year. Previous year the sector grew by 80 percent while average growth rate in last four years has been more than 100 percent.

Mobilink continues to remain the leading operator in the sector with maximum market share both in terms of subscribers and revenues. Among all the new entrants, Telenor has shown its strength by capturing a good market share and has left behind its closest competitor, Warid, within one month’s time to claim the second position.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

Industrial output falls 4.12pc in December: Growth target in jeopardy​

ISLAMABAD, March 17: Industrial output declined by 4.12 per cent in December 2007, compared to the same month last year, according to data issued by the Federal Bureau of Statistics on Monday.

The decrease raised fears that the target of annual industrial growth may not be achieved.Energy crisis and reduced working days, owing to strikes in the wake of assassination of former prime minister Benazir Bhutto, have been attributed as major factors for this slump in production.

Analysts said that negative growth in industrial production has dampened chances of a reversal in the industrial growth in the months ahead, to achieve a 10.5 per cent growth target.

Industrial growth, as measured by quantum index numbers, showed that all major sectors, like manufacturing, mining and electricity, registered a slide in production growth.

This also resulted in the further widening of a gulf between demand and supply issue.

The growth in the industrial production has steadily been on the decline for the last three years as it declined to 8.8 per cent in 2006-07 from 19.9 per cent in 2004-05 owing to capacity constraints and closure of many units as a result of high cost of doing businesses in the country.

An official in the finance ministry, requesting not to be named, said the negative growth was only due to lesser working days in December.

He ruled out the impression that energy shortages led to a drastic cut in the industrial growth.

The industrial production grew by a paltry 4.46 per cent in the first half of the current fiscal year over last year (July-December).

This reduction in industrial output would also affect country’s exports which are now unlikely to reach the target of $19.2 billion.

According to the FBS figures, the production of cigarettes decreased by 11.25 per cent, while cotton yarn output grew by 3.55 per cent and cotton cloth production 2.73 per cent in December 2007 this year over last year.

In the food sector, vegetable ghee production declined by 10.94 per cent, cooking oil production by 4.81 per cent and starch and its products by 5.24 per cent.

However, wheat production grew by 0.10 per cent, beverages 19.82 per cent.

Among the electrical items, refrigerators recorded a negative growth of 5.18 per cent, deep freezers 23.89 per cent, electric bulb 5.56 per cent, electric tubes 0.60 per cent, electric motors 8.8 per cent, electric meters 56.96 per cent and transformers 42.89 per cent.

However, production of air-conditioners went up by 47.76 per cent, electric fans by 31.51 per cent, switch-gears by 58.02 per cent, TV sets 43.43 per cent and bicycles 0.80 per cent.

Production of paper and board also dropped by 1.81 per cent, petroleum products by 26.62 per cent and cement by 4.94 per cent in December 2007 over last year.

Production of glass-sheets declined by 13.47 per cent, billets by 6.57 per cent and HR sheets by 50.56 per cent during the period under review over last year. However, steel products witnessed a growth of 32.13 per cent in December 2007 over last year.

Industrial output falls 4.12pc in December: Growth target in jeopardy -DAWN - Business; March 18, 2008

 

[Neo]

Three-pronged strategy to boost exports​

LAHORE, March 17: Lahore Chamber of Commerce and Industry President Mohammad Ali Mian has proposed a three-pronged strategy to promote country’s exports and improve the perception of the country abroad.

Talking to commercial counsellors-designate for Hong Kong, Geneva, Bangladesh, Italy, Nigeria and South Korea here on Monday, Mr Mohammad Ali said they should maintain a close liaison with potential businessmen and trade bodies, do aggressive marketing of Pakistani products and collect basic trade-related data for its dissemination to all the chambers back home.

He said that the role of the diplomats had always been crucial for promotion of business activity and for economic turnaround of any country.

They were considered to be the special ones who had enough knowledge to pave the way for foreign investment.

The harmony developed between the public and private sectors during the last couple of years was reflected in the economic indicators of the country, he said, adding Pakistan was now among the fastest growing economies in the region that included China, India and Vietnam.

He said that Pakistan is destined to become the logistics, trade, tourism, energy and manufacturing hub after the completion of work on $5 billion North-South trade corridor project, with the participation of World Bank, Asian Development Bank and the private sector.

He said that the government had adopted a liberal investment policy to attract maximum foreign investment where foreign investors could hold 100 per cent equity.

There was no restriction on repatriation of the principal, dividends, profits and royalties, he pointed out.

Three-pronged strategy to boost exports -DAWN - Business; March 18, 2008

 

[Neo]

Oil, gas production up​

KARACHI, March 17: The oil and gas production in Pakistan has increased by 8.4 per cent and 2.9 per cent to 72,487 barrels a day and 3.974 billion cubic feet per day, respectively during July-December 2007.

According to Pakistan Petroleum Information Service (PPIS), Oil and Gas development Company Limited (OGDCL) and Pakistan Petroleum Limited (PPL) observed a 10.6 per cent and 76.3 per cent increase in oil production to 439,000 bpd and 41,000 bpd respectively, whereas, Pakistan Oil Fields Limited (POL) witnessed an 8.8 per cent decline to 57,000 bpd.

On the gas front, all companies saw an increase in production during the period under review over that in the first half of the financial year, with that of OGDCL’s increase of seven per cent reaching 978 mcfd, while PPL and POL registered 2.7 per cent and 1.2 per cent rise to 991 mcfd and 47 mcfd, respectively.

Total production of the industry grew at a rate of 3.4 per cent to 746,342 barrels of oil equivalent per day (BOEPD) compared to 721,671 BOEPD in the same period last year.

Oil production in Dec 2007 was down by 5.8 per cent over Nov 2007, while gas production in the same period was up by 5.26 per cent.

The production of liquefied petroleum gas (LPG) has also recorded an increase of 2.20 per cent to 1,547 tons per day.—APP

Oil, gas production up -DAWN - Business; March 18, 2008

 

[Neo]

World's top banks ask GoP to go for exchangeable bonds ​

ISLAMABAD (March 18 2008): The world's top banks and financial institutions are said to have advised the government to go for exchangeable bonds rather than opting for conventional bonds whose prices, according to them, would be too high due to political uncertainty and confrontational politics in the country.

The banks include Morgan Stanley, ABN-Amro Bank, HSBC, Barclays, Citibank, KASB/Merrill Lynch, Goldman Sachs/BMA Capital, Standard Chartered Bank, BNP Paribas, J.P. Morgan, Deutsche Bank, Dubai Islamic Bank and UBS/Global Securities:

International banks and financial institutions who are closely watching political developments have dispatched their teams to Islamabad to give detailed presentations to the officials concerned on the most feasible options for floating bonds.

The banks include Morgan Stanley, ABN-Amro Bank, HSBC, Barclays, Citibank, KASB/Merrill Lynch, Goldman Sachs/BMA Capital, Standard Chartered Bank, BNP Paribas, J.P. Morgan, Deutsche Bank, Dubai Islamic Bank and UBS/Global Securities, sources in the banking sector told Business Recorder.

"As the spread is not coming down due to uncertainty and confrontational politics, international banks say that if Pakistan goes for conventional bonds in the international market, it has to pay very high cost," the sources added. International banks are of the view that Pakistan should opt for an alternative route, which according to them, was exchangeable bonds.

Exchangeable bond is a bond issued by a company or a sovereign which can be exchanged at the investors option at any time throughout the life of the bond into a fixed number of ordinary shares of another company, the sources said, adding that this bond would be attractive for investors.

The sources said that some of the banks were also proposing the government to go for International Islamic Sukuk, which they would help GoP launch successfully. "International banks are advising us to adopt cautious approach towards conventional bonds for the time being and mulling over a better option for Pakistan," an official told this scribe.

The logic of the international banks is that in the recent months Pakistan's equity market was least co-related with the global equity markets as most of the markets tumbled but Pakistan's market remained bullish.

"Banks are also of the opinion that they will watch how the coalition government can function in a stable way and what will be their future policies," the sources added. Relationship between President Pervez Musharraf and the coalition government would also be the focal point for the international banks, said a political analyst.

"Our spread will not come down until we successfully formulate a stable government, give unambiguous economic policies and see better relationship between the President and the coalition government," said another political economist. Analysts are of the view that in any other case it will be a useless exercise to move for the international market to raise money.

The sources said that the international banks have also advised the Finance Ministry that when the political situation improves, economic managers headed by the Finance Minister should arrange a tour to some of the financial capitals, hold meetings with investors and take them into confidence as 'non-deal roadshow' for which banks were ready to extend all possible assistance.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Over 200 PSDP projects put on hold ​

ISLAMABAD (March 18 2008): As a part of the money-saving campaign, over 200 new development projects/schemes under Public Sector Development Programme (PSDP) 2007-08 have been put on hold, for 2008-09, and their Rs 40-45 billion allocations would be diverted for plugging budgetary deficit.

Sources said although all ministries/divisions will share the hit of the government's money-saving exercise as in majority of the cases their new projects/schemes would not have funds in the remaining months of the current fiscal year, but the Ministries of Water and Power, Finance, Food and Agriculture, Industries and Production, Petroleum and Natural Resources, Environment, Health, Population, Higher Education Commission (HEC) and Social Welfare and Special Education Division have taken bigger hit.

The Finance Ministry's Khushhal Pakistan Programme (KPP) would be the biggest loser due to the government's changed strategy. Its over 100 new projects/schemes have been deferred for next fiscal year. It was a Rs 34 billion programme, and almost half of its allocations were spent on the on-going special projects/schemes in the first half of the current year and the rest half, around Rs 17 billion, has been diverted for budgetary support.

The 'Oil City' project, which is part of developing an oil network to be established in Balochistan, comes next in money-saving schemes. Its entire Rs 5 billion allocation has been diverted for reducing pressure on the economy. The Balochistan government has been asked to carry on doing basic work on the 'Oil City'. However, major work will be done on this project from PSDP allocation next year--on top priority.

Likewise, the funds allocated for acquiring land for the Ministry of Water and Power Diamere and Basha dams have been held back and these projects would be given funds next year, on priority basis.

HEC's initiative of setting up 8 universities has also got a dent. Its four universities will be funded in 2007-08 and the rest four would be taken up for allocations in next PSDP.

Other projects/schemes, which have been deferred include 'child protection centre' in Turbat, Balochistan; construction of hostel building for 100 persons in NTB complex, Islamabad; capacity building of the officers of Overseas Pakistan Division, Islamabad; aquaculture and shrimp farming; Derry Pakistan horizons; construction of barracks accommodation at Gwadar Airport; expansion in existing hostels for working women in Islamabad; Faisalabad 'Garmet City'; Implementation of Export Plan; Karachi Garment City; Upgradation of Cotton Fibre Testing Laboratories; and providing and laying dedicated 48-inch diameter mild steel water main for Textile City Karachi.

The Finance Ministry will be free to utilise funds of the deferred projects for making the money available for different subsidies in the next three months of the current fiscal year.

The government is under severe fiscal pressure due to huge volume of subsidising it picked up for different edible and non-edible items, particularly oil, wheat and fertiliser. It started looking for squeezing the volume of subsidies, besides finding other unconventional means to save whatever money it could. PSDP funds was one of the options.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Microsoft launches Windows Server, other products in Pakistan ​

KARACHI (March 18 2008): Microsoft on Monday launched its three products including Windows Server 2008, SQL Server 2008 and Visual Studio 2008 in Pakistan. This was announced by Kamal Ahmed, country manager of Microsoft Pakistan and Sherif Siddik, regional director North Africa, East Mediterranean and Pakistan in a joint press conference held at a local hotel.

They hoped that the introduction of these products would help Pakistan grow in the field of information technology. Products will also help the country strengthen its IT economy, they added. They maintained that media would also be one of the major beneficiaries of these products to complete their assignment in a better way. The theme of the launch of products in Pakistan is "Heroes happen here," has been chosen as an indication to the potentiality of Pakistani youth in the IT field, the added.

Regarding Microsoft's partnership in Pakistan, they said that it is doing work here along with Zindagi Trust to impart IT education besides its engagements with Pakistan Software Export Board. To a question, they replied that Microsoft irrespective of regional perspectives is committed to every market where it has base and Pakistan is one of them.

Later, talking to Business Recorder, Kamal Ahmed said that Microsoft is facing the issues like intellectual property rights in Pakistan, as even most of the government departments do not have licenses of its products.

Earlier, Dr Abdullah Riaz caretaker federal minister for information technology in his inaugural speech urged on the software manufacturers to reduce the cost of products so that challenges like piracy of products and intellectual property rights could be met successfully.

He also called upon the new government to complete his left assignment of revoking the 15 percent sales tax on PCs with a view to encourage the computer utilisation across the country. Linking the piracy of IT products and violation of intellectual property right in Pakistan with the high costs of these products, he said these factors are giving rise to this kind of issues. Dr Abdullah also urged that youth-driven products should be introduced in the country, which will also help grow the IT sector in the country.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Mangla dam raising project in full swing ​

MIRPUR (March 18 2008): Construction work of over Rs 100 billion for raising of the country's second biggest Mangla Dam is in full swing and so far over 54 percent of the construction work on the mega project has been completed, official sources said.

Besides, over 67 percent practical work for rehabilitation of about 50,000 victims of the project has also been completed hitherto, AJK-govt controlled Mangla dam resettlement organisation of AJK government told APP here on Monday. Development works at huge residential schemes including new Mirpur garden city and four towns at different locations in the district exclusively for resettlement of the raising project victims is also underway with full pace.

Official sources said that with the completion of the project, the dam would have the storage capacity of an additional 2.88 million acre feet of water and more than 25,000 acre of land will be irrigated. It would also have the capacity to produce 645 mega watt additional electricity thus raising the existing power generation capacity to 12 percent more.

As a result of completion of this gigantic project, not only the economy of the country will boost but it would also open new avenues for investment in the area.

Since the government has allocated required sufficient funds in the federal budget for the construction of the Mangla Dam Raising Project, over Rs One hundred billion project will usher in the new era of speedy progress and prosperity by bringing about green revolution in the country since the project will augment supply of irrigation water in various parts of the country particularly in Punjab and Sindh provinces at a time when country is in dire need, said the official sources.

Highlighting the salient features of the project, the sources said that there will be additional power generation and further flood alleviation as a result of raising by 30 feet of the dam from the existing 1210 feet level. The conservation level of the dam will be raised by 40 feet from existing 1202 feet conservation level.

On the average, annual water availability for irrigation releases for various parts of the country including both Sindh and Punjab would increase by 2.9 million acre feet (MAF).

The quantity of water shall drastically increase which will enhance the agriculture productions in Punjab and Sindh to greater extent. Resultantly more large-scale area shall come under irrigation opening new avenues of employment to the rural population of both the provinces. In addition to that due to additional storage of water in Mangla dam reservoir and availability of constant head the generation of inexpensive hydel electricity shall increase which will reduce the additional burden of expensive thermal energy from IPPs (Independent Power Projects).

Punjab and Sindh will also enjoy the maximum availability of water through canals and subordinate water channels to irrigate more large-scale areas. Azad Jammu Kashmir will also highly benefit from the dam raising project as the down stream areas on thousands of acres of lands in Mirpur and Bhimbher districts shall be brought under irrigation after having water from the dam in the light of the commitment by the government.

Water from the dam could also be utilised for drinking purposes in Mirpur and the adjoining hamlets on the periphery of the Mangla lake through execution of the greater water supply schemes in Mirpur and the adjoining areas.

Since the completion in 1967, the gross storage capacity of Mangla reservoir has reduced by about 20 percent due to sediments deposition. Compensating for the capacity lost to sedimentation was in mind and a provision for raising of the dam was kept in the original design and construction of the dam.

Raising of the dam has now gained importance on account of the ever increasing shortage of irrigation due to sedimentation of the country's two major storage reservoirs at Tarbela and Mangla. Raising of the Mangla Dam will help to regain the reservoir capacity lost to sediment deposition and make provision for future sedimentation.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

E-commerce: barriers to its growth in Pakistan ​

ARTICLE (March 18 2008): Among the wonderful inventions of twentieth century, Internet has come to wield immense influence on our lives. From reading newspapers to monitoring the performance of companies on stock exchange, from learning the first aid techniques when in emergency to learning the recipe of making a cake when guests visit, and from listening to music to keeping abreast of the latest cricket scores, our lives have got increasing intertwined with internet.

Doing business online is yet another application of internet, which is changing the way business is done. The term electronic commerce or E-commerce may loosely be defined as doing business over the internet, selling goods and services which are delivered offline as well as products which can be "digitised" and delivered online such as computer software, videos, and music.

E-commerce in its wider sense encompasses all transactions involving business organisations, governments, or consumers that are done online through internet. However, the narrower view of E-commerce focuses only on transactions between Business and Consumers (Business to Consumer E-commerce or B-to-C E-commerce) and among two or more businesses (Business to Business E-commerce or B-to-B E-commerce).

Banking, entertainment, telecommunications, and manufacturing industries globally have already started using E-commerce business models, and have been reaping the benefits in terms of greater revenues and lesser costs.

Within these industries, Internet is used for four major tasks with respect to E-commerce: Firstly, attracting new customers through online marketing and advertising; secondly, serving existing customers via customer service and support function; thirdly, developing new markets and distribution channels for existing products; lastly, developing new information-based "digitised" products, which are then transmitted online.

Like every new technology, the potential uses of E-commerce were at first over-hyped, leading to the Dot Com Boom of 1996-2000, which was briefly followed by a crash that kicked many companies out of business; thereby, temporarily tarnishing the promising role of internet as an effective and state-of-the-art medium of business. However, with the survivors of the crash and the new comers doing well these days, the quantum of business online is expanding with rapid pace.

In Pakistan the size of E-commerce is small and uncertain at the moment. Yet as in most developed countries of the world, it is expected that with the realisation of full potential of this new mode of commerce in future, it is bound to gain a sizable chunk of business in Pakistan as well, due to the several potent advantages that E-commerce enjoys over the conventional mode of commerce like its open structure that surpasses all geographical barriers, low costs of transactions, low barriers to entry and improved access to information, besides more efficient management of supply and distribution.

However, currently the growth of E-commerce in Pakistan is hampered by a number of factors, which are discussed below. These barriers must first be removed for E-commerce to grow in the country.

1. MISCONCEPTIONS ABOUT E-COMMERCE IN PAKISTAN Most people in Pakistan have developed wrong conception of E-commerce. They take a very limited view of E-commerce, restricting it to only those products which may be "digitised" and transmitted online through internet and the payments for which is also made online through credit cards.

This narrow view excludes the other three main functions of E-commerce outlined above ie attracting new customers, serving existing customers, and developing new markets and distribution channels for existing products. This misconception is among the main reasons that have held most Pakistani entrepreneurs with existing conventional business back from entry into the 'cyberspace'.

2. MISTRUST: Among the most important impediments to the growth of E-commerce in Pakistan is the issue of trust. Counterfeiting and distribution of below par products in the face-to-face transactions is a common problem in the country. How can people be expected to trust the sellers whom they do not know, and who would deliver goods online/offline after the payment is made.

The issue of trust is further aggravated by the lack of confidence people have with respect to the security and privacy of their personal information like credit cards, home addresses, phone numbers etc. The emergence of trustworthy web-based companies, with support/guarantees from Government or trustworthy multinational companies, in the county is required to dispel these fears of the consumers.

3. TRADITIONALIST NATURE OF PAKISTANI SOCIETY: A large number of people in Pakistan will take a long time to come round to the idea that they can order goods and make payments through internet from their homes without physically going out. This is due to the fact that on-site commerce has a socialising effect, which is altogether absent from E-commerce. In a strongly relationship-oriented society like Pakistan, people tend to form individual relationships and long term associations with the businessmen and vendors.

These relationships are maintained over the years and may not be easily replaced by the anonymity of the E-commerce transactions. Moreover, most of the retail business in Pakistan is conducted through small local enterprises rather than chains of departmental stores. These small local businesses are run by relatively less educated entrepreneurs who are least eager to embrace the new technology.

4. LOW LITERACY RATE The literacy rate of the country, according to official figures, is around 54 percent. Out of these 54 percent literate people at least 50 percent are computer illiterate. Thus, with around 75 percent of the population without computer literacy, the growth of E-commerce in the country cannot be expected to progress at any faster pace.

5. ACCESS TO TECHNOLOGY: In order to undertake E-commerce transactions, one must be connected to the World Wide Web, for which possession of a personal computer (PC) or a laptop is a basic requirement. Although the prices of computer hardware have declined in the past few years, yet a personal computer is still not affordable by vast majority of the people of the country. Besides a personal computer, a telephone line or cable line are also required for a user to get connected to the World Wide Web. Thus, high costs of computer hardware are proving to be a bottleneck to the growth of the E-commerce in the country.

6. ACCESS TO INTERNET SERVICES: It is true that in the past few years there has been a significant increase in the number of internet users in Pakistan, with some observers claiming that in Pakistan the internet access is now available to 800+ cities, towns and villages covering almost 97 per cent of the population.

Even if this, seemingly exaggerated, estimate is accepted, the per hour cost of internet use in Pakistan, along with the common problems of low speeds and getting disconnected frequently, render this wide accessibility of internet useless. For e-commerce to flourish we need high speed, cheap and reliable internet connections available to the vast majority of the population.

7. LACK OF E-TRANSACTION SUPPORT IN PAKISTAN: Online payment systems are an essential part of e-commerce, which require, inter alia, possession of personal credit cards by consumers. However, few people in Pakistan have personal credit cards. Among the various reasons people avoid getting credit cards from banks include possibility of unnecessarily getting into the debt trap.

The unpopularity of personal credit cards in Pakistan is responsible for the weak e-support infrastructure, forcing the use of old mechanism of money transfer like, cash payments, cheques, and postal orders which may work as viable substitutes to credit card for a short term to accommodate limited existing commerce of the country but cannot be relied upon for long.

8. POOR TRANSPORTATION/DISTRIBUTION CHANNELS An essential part of e-commerce is establishment of cheap, quick and reliable transportation channels for the physical distribution of those products which cannot be digitised and distributed online. In Pakistan, the Pakistan Postal Service, despite its extensive network and large number of employees is inefficient, to say the least; hence, unreliable. The private courier services, on the other hand, are expensive.

In the absence of any reliable and economical distribution channel, the web-based companies in Pakistan will be faced with the challenge of delivering their products at the doorsteps to their consumers without adding to price of the product.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

NBP GDR to be floated this fiscal ​

May generate $300 million​

Wednesday, March 19, 2008

ISLAMABAD: The government has decided to float Global Depository Receipts (GDRs) of National Bank of Pakistan on the London Stock Exchange to generate around $300 million during the current fiscal year, The News has learnt.

It is also the desire of the Privatisation Commission to float GDRs of Habib Bank Limited (HBL) and Kot Addu Power Company (KAPCO) as well, in the current fiscal 2007-08, in order to achieve the $1 billion mark for meeting the current account deficit currently being faced by the country.

The Privatisation Commission, the sources said, had prepared a brief for the upcoming government in order to apprise it of the proposed list of units going to be privatised, and the possibility to float GDRs in the months ahead.

“It will depend on the upcoming economic managers how much they want to accelerate the privatisation and liberalisation policy,” said an official and added the Heavy Electrical Complex, Pakistan Tourism and Development Co and other units were ready to be sold to the private sector.

The turbulence on the political front in the aftermath of March 9, 2007 action by the President to oust judges, imposition of emergency, assassination of Benazir Bhutto and existing confrontational politics had forced the economic managers to delay GDRs of NBP, HBP and KAPCO. Earlier, it was planned by the government to float GDR of NBP by October 2007 but the authorities remained unable to move with this idea.

“We are going to arrange roadshows by next month in world capitals including USA, Middle East and Europe to attract potential investors,” a high-level official in the government told The News on Tuesday.

The official said that although HBL and KAPCO were in the pipeline of the GDRs, it seemed that they would not be floated within the current fiscal year. “It is the estimate of the government that by floating GDRs of NBP, HBL and KAPCO, around $1 billion can be generated,” the official said.

The government has attracted foreign direct investment (FDI) to the tune of $2.26 billion during the first seven months of the current fiscal year against $2.09 billion in the same period of last financial year. The portfolio investment stood at $697.4 million in the first seven months of the last fiscal.

Contrary to this trend, there is withdrawal of portfolio investment of $21 million in the first seven months of the current fiscal, painting a worrisome picture for the economic managers. The revised forecast for the external current account is likely to be around 6 per cent of the GDP by touching around $10 billion mark, up from an earlier estimate of US$ 6.5-7.0 billion (approx. 4.3 per cent of GDP).

The revision mainly reflects a higher oil price assumption, touching up to more than $111 per barrel, as well as a moderately lower GDP base. The current forecast for the overall balance of payments in FY08 is for a net contraction by year-end of approximately less than one billion dollars. In such circumstances, there is a dire need to take steps aiming to support external current account deficit in the current fiscal year.

NBP GDR to be floated this fiscal

 

[Neo]

WB to help promote clean industrial production ​

Wednesday, March 19, 2008

LAHORE: The leader of Industrial Environmental Management Policy Mission of the World Bank, currently on a visit to Pakistan, has said the industrial environment in Pakistan needs to be addressed properly.

WB mission leader Ernesto Sanshez-Triana made the remark during a meeting with Small and Medium Enterprise Development Authority chief Shahid Rashid at SMEDA’s head office here on Tuesday.

He said the World Bank was evaluating the scope of its assistance to help Pakistan promote clean production in the country. The mission, he said, had also held discussions with the leaders of the Federation of Pakistan Chambers of Commerce and Industry on the issue.

The WB mission included Kulsum Ahmed, lead environment specialist, Dan Biller, lead economist and Javaid Afzal, local environment consultant of the World Bank. The mission members expressed keen interest in the role performed by SMEDA for development of small and medium enterprises in Pakistan.

Replying to questions, Shahid Rashid said the SMEDA had completed 10 years of its existence, and was glad if some independent agency like the World Bank conducted an impact analysis of the services rendered by the authority during the last decade.

Besides offering various services to individual SMEs at the micro level, the SMEDA had been performing valuable services to upgrade potential SME clusters in the country, he said, adding development strategies designed by the authority in collaboration with industrial stakeholders were being implemented successfully.

WB to help promote clean industrial production

 

[Neo]

Real estate sector still faces tough time: experts ​

Wednesday, March 19, 2008

KARACHI: Real estate experts said that their sector is still suffering a recessionary period and have denied any claims that the properties and housing as well as construction sector is on a path of revival adding that these are all rumours to misguide the public.

Real estate agents in Karachi and Lahore informed The News that there had been no change in the real estate and building sector and their businesses continue to suffer though in certain cases, property holders are demanding high prices for their projects which had sparked rumours of property revival.

House Building Finance Corporation Chairman Zaigham Rizvi informed The News that all over the world, the real estate sector does not only mean empty plots but instead real estates as in buildings, housing and construction. He said that this was one of the most contributing sectors to the economy and in Pakistan the slump was witnessed as movements within the sector were not up to the mark.

He added that the new government had a challenge in its hand and should work to revive the sector and “we would only come out of this recession of real estate if the government offers stability.” The chairman said that it is too soon to predict when this sector would finally experience a comeback and there were several factors that had to be analyzed before the matter could be commented on.

Chapal Builders Rauf Chapal was of the opinion that revival of the real estate sector should not be considered at least for another six months. He was critical when he said that he believed this because he doubted that the government would be able to stabilize themselves before that time.

He said that the matters are already seriously out of the hands of the government and cited “the suppressed are speaking out now but adversely by spawning riots and hence no one is poised to invest or venture into property buying or even expansions as they don’t trust the government.” Azam Khilji, Manager Sales of Canadian City, Gwadar, said that some dealers ruminate that they are the best and the “ruling kings of this sector” and therefore demand exorbitant prices for their properties but the truth is that no one at this stance can afford them and “no individual is ready to go and throw in that amount of money.”

Real estate agents in Karachi were of the view that these rumours started after some commercial and residential projects within the city began to lease themselves out while several other project builders announced new plans through advertisements. They said that these were only words of some hopeful investors trying to cash in on their properties but in practice the sector remained as cold as ever.

Real estate sector still faces tough time: experts

 

[Neo]

Industries suffer heavy losses due to transport strike​

KARACHI: Industrial sector registered considerable production losses on Tuesday because of thin attendance of labour force due to strike of public transport in metropolis against recent increase in prices of domestic petroleum products.

Already feeling the pinch of prolonged power shortage and recent hike in oil prices, the industry received another blow in the shape of production losses because majority of workforce remained absent from duties due to non-availability of public transport, representatives of industrial associations of city lamented.

They put the production losses ranging between 40-50 percent as well as failure to meet the export commitments by the industry because of inability of labour to reach their workplace.

“The industrial sector’s problems are multiplying with each passing day and there seems no end to string of difficulties,” a leader of business community, who was enraged and dejected over the mounting burden on the industry complained.

About the public transport strike in the city, the businessmen said that though, small part of industrial sector had prepared contingency plans to cope with the situation, which averted major losses to some extent, however, these plans failed to completely secure the industry from the effects of strike.

Chairman, SITE Association of Industry Nisar Shaikhani estimated that industries in the SITE area suffered around 40 percent losses in production because of thin attendance of workers.

He said that although large industrial units had made the arrangements to bring their employees from their residence to factories, the small and medium size industry experienced the adverse impact of this strike.

Shaikhani, complaining about the power outage, high oil prices and other related issues, adversely hampering the industry feared that if the situation persisted in the coming days, 25-30 percent industries would not be able to sustain the losses, subsequently closing down their operations.

Because of such a disastrous situation, he pointed out that the industry people are opting for making investment in real estate and stocks as well as shifting their capital to foreign destinations, which offer promising prospects on their investment.

Chairman, F.B. Area Association of Trade and Industry Idris Gigi put the production losses at around 30 percent, which were lower in comparison with other industrial estates because of the location of various labour colonies in close vicinity of his industrial area.

Cap. Moeez, Patron-in-Chief of North Karachi Association of Trade & Industry estimated the production losses due to low attendance of workers at 35-40 percent, which he said has further added to financial woes of the industry, caused by power deficit and rising cost of production because of high oil prices.

Fazal-e-Jalil, Chairman Korangi Association of Trade & Industry estimated 50 percent production losses due to lower attendance of workers and criticised apathy of the government in coming to rescue of the industry, which is crippled under the burden of energy deficit and other problems.

Public transport, he said, is the basic source of mobility of the industrial workforce and if vehicles go on strike, the industry is bound to suffer whatever contingency plans are prepared to cope with the situation.

Daily Times - Leading News Resource of Pakistan