Pakistan Economy - News & Updates - Archive

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Govt should focus on macroeconomic stability ​

Thursday, April 03, 2008

ABN Amro analysis says in first two years govt should keep populist impulse under check

ISLAMABAD: The coalition government is taking over the reins at a time of severe challenges for Pakistan on external as well domestic fronts of the country’s economy.

According to an analysis by the ABN-Amro Bank, the new administration is left to face the consequences of fiscal profligacy by its predecessor set-up.

“While Pakistan faces multiple challenges on a wide range of fronts, some compounded by inaction and others by flawed policies, we believe that the foremost task facing the incoming government is to arrest the accelerating erosion of macroeconomic stability that has occurred over the past two years,” the analysis said.

While pressure on the coalition government to reduce the economic hardship of the electorate is understandably intense, ABN Amro said it believes that policy response needs to balance the alleviation of palpable hardship in the short term, with the ability to provide sustained benefits over the longer term. In the long run, it is a misconception to view the available choices in purely binary terms, i.e. ‘macroeconomic stability’ is mutually exclusive to ‘pro-poor’ agendas.

Despite its many distractions, the new coalition government will have to concentrate on tackling the difficult fiscal situation as a matter of priority, the analysis said.

While challenging, the situation is not irretrievable. It will, however require that for the first two years in office, the parties in power shun their growth-centric manifestos and strong populist impulse - or their largely under-whelming performance of the 1990s - as they chart their way forward, ABN Amro opined.

The most immediate, as well as pressing, economic challenge facing the incoming administration is to restore fiscal order. “In our view, without macroeconomic stability, the political government will not be able to deliver on its electoral promises in a sustainable manner.”

Among the many issues, which range from high inflation to power deficits and water stress, the most immediate and pressing is the need to restore fiscal order, ABN Amro pointed out.

“Given the sharp constriction in available fiscal space, it is our belief that adopting a policy course in the short run that raises expectations of ‘relief’ may not be wise, in either political or economic terms. (It follows from this that we have reservations about ‘100-day’ programs),” the analysis read.

In essence, the dilemma of delivering short run ‘gains’ that may come at the expense of longer-term interests or health of the economy, distils into an issue at the heart of governance - how to incentivise the elected political governments to think beyond an election cycle, said the bank.

The budget deficit is likely to cross 6 per cent of GDP, even after countervailing measures.

In addition, the external account has posted widening imbalances, with the current account on course to cross $10.5 billion in FY08 (to over 6.6 per cent of GDP).

Forex reserves have been depleting since the start of the fiscal year, with a net haemorrhaging of $3.6 billion from July to 15 March (net foreign assets of the banking system, based on weekly monetary data).

Based on the last available numbers, we estimate unencumbered liquid Forex reserves with the central bank to total $11 billion (net of forward sales/swaps) for the week ending 29 February.

Compared to the corresponding period of FY07, the fiscal deficit has widened 111 per cent for 1HFY08 (July-December 2007).

Expenditure growth has outstripped revenue collection. Current expenditures have ballooned 33 per cent, accelerating a trend recorded over the past several years.

On the back of higher public sector borrowing, a turn in interest rates, and unanticipated lumpy repayments of national savings scheme instruments, debt servicing (interest portion) has recorded a substantial increase, rising 52.6 per cent in 1HFY08 vs 1HFY07. In addition, defence spending has also registered a 14.7 per cent increase.

The other big contributor to the sharp rise in public expenditure is the Public Sector Development Program (PSDP).

PSDP expenditures have risen nearly 53 per cent, making them the second biggest contribution in absolute terms to the increase in the fiscal gap for the first half of FY08 (after interest payments).

The increase in PSDP spending is a continuation of the trend over the past few years.

While the rise in PSDP spending has been touted as an achievement of the Musharraf-Shaukat Aziz era. Apart from the fact that some portion of ‘non-civilian’ spending is parked under this heading (such as construction of ‘strategic’ highways and new cantonments), the PSDP appears to have been used as an instrument of political patronage, in our view, especially in the run up to the national elections. —MH

Govt should focus on macroeconomic stability

 

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Pakistan, Mauritius to form trade body ​

Thursday, April 03, 2008

ISLAMABAD: Pak-Mauritius Joint Working Group has endorsed the establishment of a joint trade committee of officials as well as a joint committee of customs officials in order to facilitate implementation of the Preferential Trade Agreement (PTA).

The Pak-Mauritius Group, in its seventh round of talks which started here on Wednesday, reviewed the progress on implementation of the PTA, signed on July 30, 2007 and became operational on November 30 the same year.

Commerce Secretary Syed Asif Shah, during his meeting with International Trade and Foreign Affairs Secretary of the Republic of Mauritius Anund Priyay Neewoor, said the people of Pakistan felt honoured when Mauritius retained the name of a street in Port Louis as Quaid-e-Azam Muhammad Ali Jinnah.

The commerce secretary termed the Preferential Trade Agreement a big achievement, which would give new impetus to existing strong relations between the two countries.

Neewoor, who was leading a 10-member delegation, expressed the view that bonds of friendship between the people of both countries were strong, which was evident from the fact that 70 per cent of Mauritius population traced its roots in the subcontinent. The Pakistani side comprised Ashraf Hayat, Additional Secretary Commerce and other officials. Both sides discussed issues relating to cooperation in various fields of mutual interest.

Pakistan, Mauritius to form trade body

 

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MOL signs $119m project ​

Thursday, April 03, 2008

LAHORE: MOL Pakistan Oil and Gas Company along with its joint venture partners (OGDCL, PPL, POL and GHPL) has signed a $119 million project with leading EPC contractor Presson Descon International Ltd (PDIL) along with its consortium partners, Enerflex Systems Ltd and Descon Engineering Ltd (Pakistan), for the Manzalai Field Development Surface Facilities Project in NWFP.

After completion, this enormous project shall produce 300 mmscfd of processed natural gas and 2,900 barrels of condensate per day and is to be completed on a fast track basis.

The contract was awarded to PDIL in November 2007 through competitive bidding and project activities have already commenced successfully. Previously, the PDIL had successfully completed the Gurguri Field Development project for MOL Pakistan in 2005.

MOL signs $119m project

 

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Experts urge govt to go for quality growth ​

Thursday, April 03, 2008

LAHORE: The government would have to aim for quality growth in the medium term that might be slower than the accelerated consumption-based growth of recent years, which has created vast income disparities.

Economic experts have advised the new government to go for an export-led growth strategy that would create job opportunities. The experience in Pakistan has proved that high growth is not necessarily inclusive. They said the government should rather aim at higher revenue growth to at least 15 per cent of the GDP, which would resolve all problems without going for a higher growth trajectory.

They said that after five years of high growth, the real picture of the economy after completion of the third quarter of this fiscal year is even worse than the assessment of the economy done by the central bank on the six-month performance of the past government.

The economic experts evaluate that if the economic performance of the third quarter of this fiscal year is factored in, the GDP growth would be even less than the lower growth rate predicted by the State Bank of Pakistan.

Elaborating their point, they stated that the unusual gas shortage did not occur in the first half of this fiscal year. They said that the large industries were either forced to curtail their production by 50 per cent, or close down for a period ranging from 30 to 45 days in Punjab and NWFP. Many small industries have not been able recover from the long closures due to suspension of gas supplies. This they added would impact growth.

They said electricity load shedding was at its worst in the history of Pakistan in the third quarter of this fiscal. The industries in Karachi they added, have been devastated by the long power surges. The industries in Punjab and NWFP are also facing a power cut of four hours daily. They said the planners while providing growth targets, did not take into account aspects that impede growth.

Experts said that the global crude oil and edible oil scenario was also at its worst in the third quarter. Edible oil rates reached their historic peak during this period, though they are on the decline now. Crude oil prices crossed the $110 per barrel barrier during the third quarter.

The Atta shortage and its subsequent price hike also occurred in the period. The law and order situation was also at its worst during the third quarter of this fiscal that has definitely impacted the economic and industrial growth.

They pointed out that all the major crops registered a decline in production or the production remained stagnant. They said even the wheat crop that is at the harvesting stage would be lower by 10-15 per cent than the crop harvested last year. Stating that agricultural production last year was a major contributor in high growth achieved by the country. This support to economy, they added would not be available this year.

They said the petrol, gas and electricity rates were increased in the third quarter of this fiscal. These increases are also expected to increase the inflation by over three per cent. The real impact of these increases would be visible in the fourth quarter of this financial year.

The economists said that a consolation point for the new economic managers is that high GDP growth of the past has failed to benefit the common man. They said that the economic managers would find the electorate more responsive at lower growth rates if they are included in the economic cycle.

They said the new federal cabinet took oath at the start of the fourth quarter of this fiscal as the central bank reduced growth prospects on the basis of half year performance of the past government. The performance of the not yet reported third quarter would be even worse than they predicted. And the growth in the fourth quarter would follow the same pattern, until the government comes out with its own economic strategy in the next budget.

Experts urge govt to go for quality growth

 

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‘New govt inherited sound economy’​

LAHORE, April 2: Dr Salman Shah, former adviser on finance to prime minister Shaukat Aziz, says the new coalition government has inherited a sound economy from its predecessors to build on further and achieve a higher growth next fiscal year.

Talking to Dawn on Wednesday, Dr Shah, who was the finance minister in the outgoing caretaker government, rejected the suggestion that the State Bank of Pakistan’s second quarterly report accused the previous government of having lied by understating the growing fiscal deficit. “I find the report a very positive commentary on the economic performance during this year,” Dr Shah said.

“The central bank says the economy will grow at six to 6.5 per cent this year. The Asian Development Bank (ADB), too, has forecast 6.5 per cent growth. This is going to happen despite political uncertainty overshadowed the economy throughout these past years and we had to suffer worst kind of terrorism in which Benazir Bhutto was assassinated. So if the country attains that kind of growth despite all these negative factors, it means our economy is quite resilient and has sound foundations to build on further,” he argued.

He said 5 to 5.5 per cent fiscal deficit did not matter much in view of the record high global crude prices and the massive subsidy offered by the previous government on domestic oil prices and food. “In India, for example, they are experiencing as high a fiscal deficit as 8 per cent,” said Dr Shah.

He said, the expected tax revenue collection of Rs1,000 billion against the Rs1,025 billion target for the current financial year, strong foreign exchange reserves of $14 billion and other growth numbers signify that the economy was in good shape.

“If the new government managed to attract foreign investment by improving the current policies, it could achieve 7 to 7.5 per cent growth next year,” he said.

‘New govt inherited sound economy’ -DAWN - Business; April 03, 2008

 

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Qatar to invest in Pakistan​

KARACHI, April 2: Sheikh Ali Bin Abdullah Al-Thani, a member of Qatar Royal Family and chairman Board of Directors of Pak-Qatar Family Takaful and Pak-Qatar General Takaful, has said that his country would further invest millions of dollars in different projects in Pakistan.

While chairing the annual general meetings of these companies in Doha recently, he pointed out that Pakistan offers tremendous returns on investment.

According to a statement issued here on Wednesday, the meetings were attended by a large number of shareholders.

These companies, incorporated in Pakistan, are sponsored by Qatar National Bank, Qatar Islamic Bank, Qatar International Islamic Bank, Qatar Islamic Insurance Company, Masraf Al-Rayan and Amwal QSC.-—APP

Qatar to invest in Pakistan -DAWN - Business; April 03, 2008

 

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Economic relief package before budget unlikely​

ISLAMABAD, April 2: The coalition government is finding it difficult to offer any immediate economic relief to the people because of what is being described as precarious financial position. The matter of relief has now been left for the next budget.

Sources told Dawn on Tuesday that the government had been informed by the finance ministry that 2007-8 would be a challenging year for national economy.

The year has witnessed heightened political activity, a disturbed law and order situation, rising food inflation, an extraordinary increase in global oil prices and the spillover from the United States sub-prime issues and credit crunch.

“This year will also witness a new government taking charge of the affairs of the state. Maintaining financial discipline in such an extraordinary environment will indeed be a difficult task for the government,” says the ministry’s report.

At the same time, there is no alternative to financial discipline for sustaining the current growth momentum. There was need for decisions to achieve key fiscal targets and the government should not hesitate in sustaining growth momentum in a stable macroeconomic environment, the ministry advised.

It said a sound fiscal policy was essential for preventing macroeconomic imbalances and realising full growth potential. Every effort should be made to continue improving the fiscal balance, notwithstanding the pressure generated by the extraordinary increase in the international price of oil.

“Going forward, Pakistan will have to allocate substantially large resources for strengthening the country’s physical and human infrastructure to sustain growth momentum,” it said.

The challenge would be to significantly enhance the tax-to-GDP ratio to generate the resources required to finance the development of both human and physical infrastructure, it said.

The ministry said the government would have to make efforts to extend the tax base to untaxed and under-taxed sectors. The broadening of the tax base would enable the government to reduce marginal tax rates which would help stimulate investment and production and promote voluntary tax compliance. It would also ensure fair distribution of the tax burden among various sectors of the economy.

“The overall services sector, including wholesale and retail trade, as well as agriculture are potential candidates for broadening the tax base,” the report said.

The government last month withdrew Rs50 billion from the current Rs335 billion federal Public Sector Development Programme (PSDP) to manage its day-to-day affairs.

Except for strategically important development projects, including Mangla Dam raising and Chashma-2 nuclear power plant, no funding will be available for other projects during the remaining three months of the financial year.

Economic relief package before budget unlikely -DAWN - Top Stories; April 03, 2008

 

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Basha Diamer Dam Project: Setting up of 4 hydropower stations recommended​

ISLAMABAD: Bhasha consultant, the German Company Lemhyer has recommended the government to set up four hydropower stations of 1,150MW under Bhasha Diamer Dam Project for the royalty to North West Frontier Province (NWFP) and Northern Areas, sources told Daily Times on Wednesday.

The German Company Lemhyer has recently completed the draft of detailed engineering design of Bhasha Dam Project. The draft has been circulated to concerned departments and ministries. However, the final engineering design would formally be issued by June 30. Bhasha dam is one of the five major reservoirs that President Pervez Musharraf announced in 2005.

In the detailed draft engineering design circulated to different concerned departments, sources said, the company has recommended to keep flow rate of water at the level to fill the dam in four years.

According to the initial design, it was recommended to fill the dam in two years. The company has also recommended storing 60 percent water in the dam from the water inflows and release 40 percent water from dam to generate power and irrigation, sources said.

The official informed that German Company has also recommended to the government to maintain outflow of 35,000 cusecs water from the dam every month. In the draft, the company has asked to keep 1,160-meter height of the dam instead of 1,170 meters height set earlier. The company has said that this change in height will help to store the water at the time of sudden melting of glaciers.

The company will give the presentation to the Water and Power Development Authority (WAPDA) on April 7 on the resettlement action plan in which recommendations have been made to resettle the affected population followed by the construction of Bhasha dam.

They said the company in the draft had indicated that 27,000 families would be affected by the construction of the Bhasha dam. The company has recommended setting up nine model villages near Gilgit to accommodate these affected families. The company has also recommended allotting five Marlas for residence per family and six canals to one family for agriculture purpose.

“The company will brief the WAPDA on April 30 about the environmental impact of the dam’s construction and all stakeholders will hold meeting to review the environmental impact of the dam construction in the third week in Gilgat,” sources said. Diamer Bhasha consultants in the detailed engineering design have indicated cost of $8.505 billion at present against the earlier projected cost of $6.5 billion in year 2005.

Government had allocated Rs 2 billion for the land acquisition of the Bhasha dam under Public Sector Development Programme (PSDP) 2007-08 that has not been released to acquire land, an official added. Government will also generate funds from foreign financial institutions to carry out the project.

“We are waiting from the call of North West Frontier Province (NWFP) government and will provide money whenever NWFP government calls for it, official said adding that the work on the land acquisition of Bhasha dam has not been started so far.

Official said that the work on a Karakuram Highway to link Bhasha dam was in progress but no progress on land acquisition has been made because not a single penny had been spent in this regard so far. Karakuram Highway for Bhasha dam project would be upgraded at cost of Rs 11.578 billion to link Karakuram Highway with Bhasha dam, official said.

Daily Times - Leading News Resource of Pakistan

 

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FPCCI budget proposals: Development and investment should be promoted​

KARACHI: Federation of Pakistan Chambers of Commerce & Industry (FPCCI) has emphasised sustainable development and investment promotions in the new budget.

In its proposals for budget 2008-09, FPCCI has given special importance to inflation controlling and investment enhancement strategies in the budgetary proposals. The budget proposals have investment oriented and have long-term implications strategy.

About taxation side in different sectors, FPCCI proposed that capital gains should be taxed. Incentive should be given to new industrial sectors so that we earn from exports.

Taxes on engineering sector either be eliminated or reduced to improve the inflow of foreign investment. Dyes and chemicals for textile industry should be exempted from duty to avoid crises in the revenue-generating sector of the economy, it proposed. Textile is the major contributor in GDP, apex trade body said and in order to reduce down factor cost captive power Generator accessories and essential parts for weaving should be exempt from custom duty. It will support production and will increase export, hence foreign inflow of capital.

FPCCI stated that surgical industry has developed image in the international market. “The surgical raw material such as steel wires, sheet, rod be exempted from custom duty, which will support export of surgical goods”, it said.

It also stressed to focus on export of textile, leather garments, sport goods; these sectors of economy have potential to earn from abroad. FPCCI said that though proposals may effect revenue collection and feasibility negatively but ultimately revenue will increase because of high investment and production activities which are the ultimately consequence of the budgetary proposals.

In order to compete in the world market, we have to provide raw materials to our major industries at competitive price, hence it is recommended that raw material not locally manufactured or produced be zero rated customs duty, Tax credit and fiscal benefits be offered to encourage those industries which provided import substitution and or help us to ease power crisis in the country.

It also suggested to reduce sales tax on local manufacturing and imports to 10 percent instead of 15 percent, this proposal will not reduce the final revenue of sales tax as compared to last or current year, because prices of majority raw materials (iron and steel, fertilizer, chemicals, petroleum products, edible oil, paper etc) increased by more than 100 percent in last one year.

Unfortunately last five years all FDI came in the services sectors (banking, telecom & oil/gas) and no major investment in the field of manufacturing was observed, thus creating high unemployment and law & order situation in the urban areas. “Situation requires war like action to address the above issues without making committees and deciding issues across the table”, it added. About the other economic indicators, it pointed out that inflation has become very important and burning issue for the government, which has also its social and political consequences. The higher inflation ultimately leads to enhance the level of poverty. It said that the budget demonstrates the government’s emphasis on attempting to improve the socio-economic condition of the masses through higher outlays on welfare.

Daily Times - Leading News Resource of Pakistan

 

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Property sector’s input in GNP should be increased: Taseer​

KARACHI: The real estate sector should contribute handsomely in the country’s Gross National Product (GNP) with rapid growth in an organised and transparent manner, former caretaker Minister of Industries, Production and Special Incentives Salmaan Taseer said.

He was speaking at closing of Rs 2 billion Sukuk for Pace Pakistan Limited (PPL) here on Wednesday. Pak Brunei Investment Company Limited and BankIslami Pakistan Limited were the Lead Advisors and Arrangers for the transaction.

Taseer stressed the real estate sector should adopt advance construction technology and proper management system to deal and to ensure investors and other stakeholders in this lucrative market.

“We have introduced state-of-art developments, transparent governance and professionalism in real estate throughout the country, aiming to attract big investors in the most secure and growing market, the Chairman and CEO of the First Capital/Worldcall group said. He further said that PPL paid-up capital has raised to $200 million in six-year and it has planned to expand it up to $900 million through its 10 billion square feet land.

Taseer, who is also Chief Executive Officer Pace Pakistan Limited said that he has planned to launch real estate projects in the coming future like seven star hotels, commerce centres, shopping plazas, apartments, high rise and middle cost housing societies in the country.

“Pace Pakistan Limited has set a new trend in the real estate market particularly standards and formula of construction and financial advisory and transparency in the functions,” he further said. PPL CEO noted the real estate cost is lowest in comparison of other countries of the region and expressed his confident over the growth and values of real estate sector of the country.

“We have been working with a little group of venture capitalists who invest in our projects to get handsome returns in shortest time period,” Taseer added.

He said the Pace Pakistan Limited is analyzing the features of Real Estate Investment Trusts (RIETs), likewise all the financial institutions and it will finalize its involvement in the next six months

CEO BankIslami Hasan Bilgrami said that Bank will issue five Sukuk bonds of worth Rs 13 to Rs 14 billion in the future and it also considers joining RIETs.

MD Pak-Brunei Investment Company Aysha Aziz also expressed interest to be a part of RIETs in the future.

Daily Times - Leading News Resource of Pakistan

 

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ADB lowers Pakistan’s GDP growth forecast​

ISLAMABAD: Asian Development Outlook 2008 (ADO 2008) has further lowered Pakistan’s GDP growth prospects from earlier 6.5 percent to 6.3 percent as against the target of 7.2 percent for the current fiscal year.

Political uncertainty and the security environment in the lead up to the recent general elections and the subsequent formation of a new government have impacted on capital inflows, and may curtail investment, dragging down economic performance. Revenue shortfalls produced by slowing economic activity and expenditure overruns may limit fiscal space and reduce public investment, which in turn may affect private investment and growth. In addition, continued tight monetary policy conditions in view of persistent inflation could serve to dampen demand and limit any expansion.

ADB’s flagship annual publication, released on Wednesday highlighted that GDP growth is expected to be moderate at 6.3 percent in financial year 2008 and then pick up slightly to 6.5 percent in financial year 2009, underpinned by consumption expenditures. These forecasts are lower than the average 7 percent growth rate of recent years, as the ongoing power and gas shortages caused by an aging energy infrastructure, chronic under investment in expansion and maintenance, and unsustainable pricing regimes slow production and constrain domestic and foreign investment.

Agriculture: The growth of agriculture will be lower than earlier expected because of pest attacks and floods. Accompanying the resulting shortfall in cotton production, moderating textile manufacturing sector growth and an overall slowdown in large-scale manufacturing in the first half of financial year 2008.

Inflation: Despite tight monetary conditions and moderating growth, inflation is expected to overshoot SBP’s target of 6.5 percent and reach 8.0 percent, reflecting continued pressure on food prices and the passing on of some higher global oil prices. Recognising that continued monetary policy tightening will have only a limited impact on controlling food inflation, the Government has announced various administrative measures, such as banning export of wheat and allowing its import, cracking down on hoarding, expanding the network of utility stores that provide subsidised food items, and most recently raising the procurement price of wheat to improve the supply response.

Fiscal Deficit: The fiscal deficit will likely exceed the Government’s target of 4 percent of GDP mainly on higher interest payments and a rise in development expenditures. In an election year, the Government deferred the pass-through of the higher international oil prices to consumers until 1 March. But as this was small relative to the international oil price rise, the subsidy expanded to estimated Rs 60 billion (0.6 percent of GDP) in the first half of current fiscal year.

Revenues: On the revenue side, as a result of slowing economic activity, tax collection by the Federal Board of Revenue stayed below the target for the first half of the fiscal year. Direct tax collection fell relative to the same period of previous fiscal year.

Bank Borrowing: With the fiscal deficit widening, and external inflows remaining subdued, the Government’s borrowings from SBP in current financial year had risen more than threefold by 19 percent in January 2008 relative to the same period last year.

Current Account Deficit: The current account deficit in the first 7 months of financial year 2008 worsened by 47 percent compared with the same period in financial year 2007, and is likely to widen to 6.3 percent of GDP for the full year. The current account deficit is under pressure because of a higher oil import bill and deteriorating income and services accounts, despite moderate growth in exports and continued strong receipts of workers’ remittances. The financing of the current account deficit remains a key issue given the deterioration in the financial account caused by the halt in foreign portfolio investment in the first 7 months of financial year 2008. Difficulties in global financial markets could further affect capital inflows. In addition, planned issues of global depository receipts may not materialise. The declaration of emergency on 3 November 2007 and the downgrading of Pakistan’s credit rating outlook resulted in a net outflow of $243 million from special convertible Pakistan rupee accounts held by foreigners during the month.

Trade Gap: The trade gap widened by over 25 percent in the first 7 months of this fiscal year. Textile exports remained, and will continue to be, weak, on expected lower cotton production and increased regional competition as the effect is felt of the ending of safeguard measures imposed on clothing exports from the People’s Republic of China by the European Union and the United States. Higher shipping costs following the increase in oil prices will affect the services account further, which had already widened by almost 52 percent in the first 7 months of financial year 2008.

External Debt: The income account may also feel the strain of larger external borrowings by the Government to finance the deficits, the increased cost of commercial borrowing resulting from the downgrading of Pakistan’s credit rating outlook from stable to negative in early November 2007, and the start of payments in 2008 on the debt rescheduled by the Paris Club. Altogether, net foreign investment tumbled by 34.9 percent in the first 7 months of financial year 20008 relative to the same period in last year, caused by a slowdown in FDI growth and virtually no portfolio investment as foreign investors shied away from the stock markets—a demonstration of the high level of volatility of such inflows. External debt rose by another $2.5 billion in the first half of financial year 2008 as a consequence of the rising current account and fiscal deficits. The position needs to be closely monitored.

Daily Times - Leading News Resource of Pakistan

 

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7.5 percent surge in KSE-100 index in January-March ​

KARACHI (April 03 2008): The Karachi share market continued its upward move and the KSE-100 index surged by 7.5 percent in the first quarter of 2008 (January-March) to close at 15,125.29 points level on March 31, 2008.

"Despite unrest on political front and turbulence in world stock markets due to the sub-prime crisis in the US, Pakistan's stock market stood as star performer in the first quarter of 2008", Atif Malik, senior analyst at JS Global Capital, said.

"It seems that KSE-100 will see another positive year in terms of growth in the index--a seventh in succession", Jawad Haleem at Atlas Capital Markets said. "For the nine months period ended on March 31, 2008, the market rose by 9.8 percent to close at 15,125, around 150 points short of its all-time high of 15,275 recorded on March 27", he added.

During the same period last year, the index rose by 12.8 percent. The higher index level was also complemented with higher volumes which averaged 256 million shares as against an average turnover of 181 million shares recorded previously, an increase of 41 percent.

The KSE-100 Index rose by 7.5 percent in the first quarter of 2008, far better than Asian emerging markets as defined by MSCI EM Index and MSCI Asia ex Japan indices which during the same period declined by 11.3 percent and 14.7 percent, respectively. "Interestingly, this drop in MSCI's measure of Asian stocks outside Japan in 1Q2008 was its worst quarter in over 5 years ie since the quarter ended in September 2002", Atif said.

Moreover, besides out-performance, Pakistan stock market was among the only two indices in MSCI Asian emerging markets which showed positive movement in 1Q2008, the other being Taiwan's SETI index with a meagre 0.8 percent increase. In 1Q2008, China 's SSEA index stood as the worst performer since it fell by a massive 35 percent.

Although net foreign selling of $78.5 million, as measured by the National Clearing Company of Pakistan Limited (NCCPL) data, was witnessed in the local bourses during the quarter under review, the impact of this was minimised from the strong support by local investors. Investors all around the world pulled out their investments in stock markets. However, the impact of this was not gravely felt in Pakistan's market since foreigners hold only 6.7 percent of the total market capitalisation (24 percent of the available free float).

"There is also no direct effect likely of the sub-prime crisis in the US on our economy since none of our banks has a direct exposure in that market", Atif added. Defying the general financial concept of 'higher-the risk-high-the potential returns', the KSE-100 index in 1Q2008 posted the highest average daily return of 0.1 percent, amongst the other regional indices, with the lowest volatility of 1.2 percent.

Business Recorder [Pakistan's First Financial Daily]

 

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'Master Plan ready for execution in southern Punjab' ​

MULTAN (April 03 2008): Smeda Chief Executive Officer Shahid Rashid has said that Mater Plan for southern Punjab is ready for execution. However, we have to set the priorities to demand sufficient funds from the government to bring this neglected area at par with developed areas of the country.

In this connection, a meeting of chambers of commerce and industry of southern Punjab would be convened soon. Delivering his speech at the Multan Chamber of Commerce and Industry (MCCI) chaired by its President Khawaja Muhammad Jalaluddin Roomi while FPCCI President was the chief guest, Shahid Rashid said the government had introduced a support fund for small and medium enterprises and financial assistance of Rs 1.8 million would be given under matching grant scheme for expanding business, consultancy. However, this grant cannot be spent on civil works, and purchasing machinery.

The Smeda CEO said that work on the project of Agro-Food Processing Plant had begun and it would be completed by June 2008 and the civil work and machinery installation would be completed by May 2008. He said that mango pulp, grading, and processing of fruits like mangoes, kinnos and vegetables would be carried out in this centre. It would serve under the control of a board of management.

Shahid hailed the offer of Khawaja Jalaluddin Roomi for provision of land/space for a Women Exhibition Centre in Multan like Lahore and said that this centre would be established on top priority basis to facilitate the women entrepreneurs of southern Punjab. He stressed the need for encouraging the "Ahan" (Aik Hunar Aik Nagar) programme as there was a big scope of hand-knitted garments, handloom products, silver jewellery, blue pottery, hand-knotted carpets.

He said this project is initiated with the help of the All Pakistan Handloom Association in the surrounding area of Multan called Samejabad. Initially, five following product have been selected for the interventions: floor rugs, table mats/accessories, cushion covers, bed covers, and chic fabric Multan handloom manufacturers and running its operations nearly 90 percent for exports, having 100 percent in-house facilities from weaving to dyeing and bleaching will be involved in this activity.

The Multan Chamber of Commerce and Industry has urged Smeda to ensure project feasibility-based lending to SMEs besides strengthening banks-academia-SMEs linkage for the promotion of small and medium enterprises in the country.

MCCI President Khawaja Muhammad Jalaluddin Roomi informed the Smeda CEO that the SMEs are suffering from a number of weaknesses, which hamper their ability to take full advantage of the opening of economy and increasingly accessible world markets. Major areas responsible for the low performance are identified as labour, taxation, trade capacity, finance and credit availability.

The MCCI chief said that lending money to SMEs is still a problem and SME policy cannot be successful without ensuring guarantee free loans to small and medium enterprises. He said that lending to the SMEs should be based on the feasibility of the projects instead of collateral-based lending as the collateral-based lending is also coming in the way of promotion of SMEs.

Jalaluddin Roomi stressed the need for a strong financial institutions-academia-SMEs linkage to achieve the desired results. He said that Lahore Chamber of Commerce and Industry being the premier chamber of the country has always emphasised an elaborated role of SMEs in economic development.

SMEs constitute 99% of 3.2 million business enterprises in Pakistan, employ nearly 78 per cent of the non-agriculture labour force. It also contributes over 30% to the GDP, Rs 140 billion in exports and account 25% of the exports of manufactured goods besides sharing 35% in value added manufacturing. Despite all these figures our SME sector has not been able to realise its full potential. He also called for establishment of Business Information Centers in collaboration with Chambers in the country so that the process on Marketing Intelligence could be strengthened.

The MCCI chief said that inter-linking of different institutions like Smeda, Business Support Fund, Competitive Support Fund, Small Industries Corporation, SME Bank and chambers of commerce and industry is also of utmost importance for the promotion of small and medium enterprises.

Nine universities are working under Small & Medium Enterprises and Regional Innovation (a government agency) and Japan Chamber of Commerce and Industry to provide management support, financial support and taxation related support to the local SMEs.

He informed the meeting that Foundry Service Center, which has been approved, would soon start working in collaboration with University of Engineering and Technology for the people attached with steel sector. Earlier, prayers were offered for the departed soul of renowned industrialist Mian.

TPFC INAUGURATED: Meanwhile, Smeda CEO Shahid Rashid inaugurated a "Third Party Facilitation Centre (TPFC) which was established in collaboration with Smeda and the Multan Chamber of Commerce and Industry (MCCI) to provide legal advice to the MCCI members in their legal issues but not limited to taxation, labour, customs, company incorporation, IPRs, environment, banking, regulation relating to local government and Utilities, etc. Utilising Network, of legal service providers for practical assistance to SMEs before courts, tribunals, and authorities, etc.

Business Recorder [Pakistan's First Financial Daily]

 

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Metro Cash and Carry Int’l plans to invest Rs 20bn

ISLAMABAD: Prime Minister, Syed Yousaf Raza Gillani, while appreciating the initiative taken by the Metro Group in launching a whole sale business in Pakistan in the name of “Cash and Carry Pakistan” said that this would encourage other foreign investors to invest in Pakistan.

The Prime Minister was talking to a delegation of Metro Cash & Carry International headed by its Chief Executive Officer, Frans W. H. Muller, who called on him here at the Prime Minister’s House.

The Prime Minister said that Metro Cash & Carry would be a good addition in food and general merchandise sector which would help in enhancing more economic activity, generating job opportunities, ensuring availability of fresh products and facilitating the whole sale business in the country. He said that the proposed investment by the Metro Cash & Carry reflects the company’s confidence on the demographic dividend of Pakistan, comprising 160 million people.

The Prime Minister while appreciating their efforts for establishing facilities for storage and packaging of perishable products like mangoes and kinos said that this would help in increasing the export of perishable items and make these products competitive in the international market. staff report

Daily Times - Leading News Resource of Pakistan

 

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Pakistan’s sugar exports seen at 250,000 T in 07-08 ​

Friday, April 04, 2008

MUMBAI: Pakistan, which entered the world sugar market in January after a gap of five years, plans to export about 250,000 tonnes in the current crop year to September, a leading producer said on Thursday.

An importer of sugar in recent years, Pakistan struck its first deal to export the sweetener in early 2008 by selling 1,000 tonnes of whites to Sri Lanka and has been ramping up overseas sales since then.

“Mills have so far contracted to export 150,000-200,000 tonnes of sugar from the new season,” Ahmed Ebrahim Hasham, a director at Mehran Sugar Mills Ltd, told Reuters on the sidelines of a sugar conference in Mumbai.

“Out of the total contracts for exports this season, some have already been shipped to Bangladesh, Sri Lanka and Yemen,” he said.

Sugarcane crushing season in Pakistan runs from October to September.

Mills in the country plan to export 50,000 tonnes sugar more and they would like to tap markets in the Middle East and Bangladesh, he said.

Pakistan, which consumes around 4.2 million tonnes of sugar annually, is expected to produce between 4.6 million tonnes to 4.8 million tonnes this year, up from 3.5 million tonnes last year, Hasham said.

“Production is expected to be slightly lower next year as farmers have not been paid well for their cane this time due to low sugar prices in the country. While production is expected to fall slightly next year, and consumption has started rising by about 5 percent annually,” he said.

The country was not likely to import sugar next year despite expected drop in output as last year’s carryover stocks would help meet domestic demand, Hasham said.

Pakistan imported around one million tonnes of sugar in the year to September 2007, including 700,000-800,000 tonnes from India.

Pakistan’s sugar exports seen at 250,000 T in 07-08