Pakistan Economy - News & Updates - Archive

[Neo]

to sell $1bn bonds to tide over deficit​

WASHINGTON, April 13: Pakistan plans to sell one billion dollars worth of bonds exchangeable into shares of a state-owned company as the government seeks to finance its budget deficit, says Finance Minister Ishaq Dar.

The minister, who is visiting Washington for the annual spring meetings of the World Bank, told a gathering at the Pakistan Embassy on Saturday evening that the previous government had borrowed Rs422 billion over and above the laid-down limit of Rs80 billion, thus widening the financial deficit.

Later, Ashfaque Khan, director-general of the debt management cell, told Dawn that Pakistan last week hired JP Morgan Chase & Company, Barclays Plc and ABN Amro Holding NV to manage the deal, the first since a 1997 issue.

Pakistan’s bonds will be exchangeable into shares of the state-controlled Oil and Gas Development Corporation. Shares in the Islamabad-based company, 85 per cent of which is owned by the government, have climbed 15 per cent in the past year. The company in February reported an 8 per cent gain in second-quarter profit, spurred by the surge in oil prices.

Pakistani officials are working with the banks on details including the size and terms of the offering, Mr Khan said. The government opted for these exchangeable bonds because they are less expensive than conventional or Islamic debt, he said.

Pakistan’s foreign-currency bonds are rated B+ by Standard & Poor’s and an equivalent B1 by Moody’s Investors Service, the fourth-highest non-investment, or junk, grade.

Meanwhile, the finance minister spoke of the need to expand Pakistan’s capability to produce nuclear energy to meet a serious energy crisis at home.

The United States is negotiating a deal with India to sell civilian nuclear power reactors to the country but has declined to make a similar offer to Pakistan because of the alleged involvement of its scientists in proliferation activities. But Mr Dar raised the issue again in the presence of a number of senior US officials at the embassy, indicating that Islamabad might renew its request to Washington to help it meets its energy needs.

Govt to sell $1bn bonds to tide over deficit -DAWN - Top Stories; April 14, 2008

 

[Neo]

Initiatives for development in Sindh​

After getting a vote of confidence from Sindh Assembly, the Chief Minister-elect, Syed Qaim Ali Shah, unfolded last week an ambitious and a populist programme that includes the setting up of a Sindh Bank.

The PPP also intends to offer 40,000 new jobs, give land to the landless peasants and provide loans to a targeted 0.6 million small farmers. It also plans to launch a training programme for the youth and to improve health and education services.

But the announcement about setting up of a bank has reminded many of the fate of Provincial Co-operative Bank of Sindh--closed down in 1989-- and the scandals pertaining to infamous Mehran Bank that was finally merged into the National Bank of Pakistan..

‘’The State Bank, time and again, has shown reluctance to give permission, to Sindh government for setting up a bank,’’ disclosed a retired bureaucrat who said official efforts were thus frustrated since the year 2002-03. Later the idea of setting up a micro-finance bank to provide credit at grass roots level in rural and urban areas was floated, but with no outcome. Sindh government argues that there is Bank of Punjab in Lahore, Khyber Bank in Peshawar and hence the justification for a provincial bank in Sindh.

An official said, pension, provident, and social security funds provide small amount of loans in cities and villages and therefore we need to have our own bank. The PPP government too would go with same logic in an environment in which it will also be heading the coalition government at the federal level..

Syed Qaim Ali Shah also plans to provide job opportunities to 40,000 persons in the province. At the same time, his government will review appointments made by the caretaker government. But ‘’the caretaker chief minister withdrew government’s discretionary powers to grant promotion and extension to retired employees, ‘’ one of the ministers in the outgoing cabinet disclosed and said this has clipped chief minister’s power to oblige his cronies in the bureaucracy.

He did not deny that many ad hoc appointments were made by the caretaker chief minister but wondered, how would anyone justify the new 40,000 appointments when those appointed by the previous caretaker government are to be screened. Appointments were also made by the previous government headed by Arbab Rahim in the last days of his term of office. Obviously, all these will come under scrutiny but how would one justify recruitment of a new workforce in the government ?

Syed Qaim Ali Shah did say where and how the 40,000 people will be provided jobs. How many would get regular government jobs and how many will be absorbed in the government sponsored new employment schemes. The PPP manifesto provides for labour-intensive Public Works Programme under which guaranteed employment, of at least one year, will be given to one working member of the poorest 25 per cent families. Under the PPP’s scheme for Literacy and Health Corps, employment guarantee of two years has been promised to all youth completing Intermediate, Graduation and Post-Graduation in a given year.

All the successive governments in Sindh have considered government employment a convenient solution for tackling growing unemployment in the province. No wonder in the last decade or so, the number of employees has swollen from about 225,000 in 1990-91 to about 450,000. More than 40 per cent of Sindh’s annual budget is spent on salaries and pensions. About three years ago, the World Bank found the ratio of employees to population highest in Sindh as compared to all other provinces.

Yet, the delivery of services-education, health, water supply, sanitation, irrigation etc-is worst when compared to other provinces. ‘’Adding a new layer of fat over a bulging bureaucratic machinery will only make it more inert and inefficient’’ is a view of a professional manager who suggests that PPP leadership should work out a transparent method of retirement and recruitment and set criteria for promotion and rewards on the basis of performance and skills.

However, the PPP’s programme to offer 0.2 million acres in kutcha area and non-irrigated land to landless peasants is far more practical and relevant. But for this, the government will have to do a lot of preparatory work. In 1992, the Nawaz Sharif government drew up a programme to carry out development in Sindh’s kutcha area by way of clear demarcation, construction of roads, building of schools, police stations and health units.

The army was given the job to carry out necessary survey work. The idea was to allocate subsistence land holdings to the landless peasants with proper documents so that they could have access to bank credit and would get all inputs. But as army started survey, the leaders of the area issued statements against the programme which had to be abandoned.

Professionals now suggest re-organisation and revamping of the Board of Revenue, computerisation of land ownership record with setting up of a back-up arrangement.

Syed Qaim Ali Shah announced that the reach of bank loans will be extended to 0.6 million small farmers but the move will be meaningful only if the amount goes to the right people and is utilised for right purpose and paid back after giving all benefits to the farmer. How will this be done is expected to be spelt out after the government is settled and the relevant people are engaged for this job. Another PPP leader, Syed Murad Ali Shah said despite a very short time available, the PPP government will engage opposition parties, businessmen and civil society in the budget making for the next year. We do have some idea, as for the last four years the PPP had been holding pre-budget reviews regularly. He was convinced that there is trickle down effect of the economic mismanagement at the centre and in all the provinces, and ‘we will have to assess it in our province.

The Sindh planners have drawn up the province’s contribution in the national gross domestic production (GDP) which needs to be reviewed, scrutinised and redrawn by a team of economists and statisticians in the PPP government as there seems to be many discrepancies. According to these planners, the province’s share in the national GDP has come down to 31.2 per cent in 2006-07 from 32.5 per cent in 2005-06. These planners complain they have no access to data and information of some of the sectors and that has made their task difficult. For example, the banks do not give them figures of credit disbursement in Sindh. The tax authorities do not share information about revenue collection in the province. Information collection about industrial production is primitive, irrelevant and outdated.

The Bureau of Sindh Statistics (BSS) does not have enough infrastructure to collect information about agriculture. Its 42 offices in the province used to provide information about various sectors every month. Now all these offices have been merged with the district government offices and the bureau depends entirely on the line departments.

Managers and business executives say that an independent and professional Bureau of Statistics that has economists, statisticians and analysts can play a vital role in the planning, budget making, development monitoring and assessment of social indicators in the province. Sindh needs to go ahead in this direction.

Initiatives for development in Sindh -DAWN - Business; April 14, 2008

 

[Neo]

Another wheat crisis in the making ?​

IT is surprising that in the manifestos of various political parties, not much attention has been paid to the problems and challenges faced by the agriculture sector. In the 24- member of the cabinet, no one was given the portfolio of agriculture. An additional charge has been given to the communications minister who is also the senior minister of the cabinet.

The issues related to development of agriculture need urgent attention of the policy-makers. Pricing policy is one of them. Once the concept of support price for agricultural produce is clear, i.e., if the market price in a good harvest year falls below the announced support price, which generally happens immediately after the harvest, the government is obliged to purchase the produce that is offered to it by the growers.

But, if and when, the market price goes above this level, farmers should be free to sell their produce to anyone at the ruling price. And if the government intends to procure the produce for its own purpose ( which includes the supply to the armed forces, to build up reserve stocks to be used for stabilising the prices when such a need arises, for strategic reserves and to meet the demand of the Northern Areas and Azad Kashmir), the government should buy at the market prices..

When the government finds that the free market price has arisen to a level where the government thinks that the cost of meeting the objectives for which it intends to buy, would be enormous and would involve great subsidies, then it announces what is called the procurement price, which is generally lower than the free market price but higher than the support price. Such a decision would, no doubt, be against the of the farmers, but due to the financial limitations, the government has to take such an unwelcome decision.

The Shaukat Aziz government diluted the working of this system gradually. In fact the government had almost decided to abandon the support price system but the adviser to the Chief Executive/President pleaded against such a decision. So a committee was set up under the chairmanship of the adviser and on its recommendations the system was allowed to continue only for four crops, wheat, cotton, sugarcane and rice.

In practice, the system was made workable for wheat and cotton but for the other two crops it was just nominal; meaning that it was not seriously implemented. Besides other things, one main reason was that there was no political strength behind the system to function in its true sense. The second lesson was that the institution, the APCom set up in 1981 to professionally work out the support prices for recommendations to the government, did not have a professional economist as its chairman for a number of years. There have been quick changes in the position of chairman, so much so that from 1989 to date 13 changes have taken place. The commission, which originally was set up as an autonomous body, has now been made an attached department of the ministry of food & agriculture and renamed as Agriculture Policy Institute in 2006.

It was said then that necessary competent staff would be provided and a board of governors constituted to guide and supervise the work. Almost three years have passed, but no progress had since taken place. A senior officer of the ministry has been given the additional charge of the ‘chairman’ the position, which in fact, does not exist in the changed set-up. Therefore, recommendations of the ‘defunct commission’, now Agriculture Policy Institute (API), are not taken seriously. In the absence of the professional, competent and full time “chairman” and the frustrated staff, one is rather skeptical about the soundness of the recommendations.

Take the case of wheat crop, 2006-07. The ‘commission’ had recommended Rs425 for 40 kg of wheat against the cost of production of Rs433 of an average farmer of Punjab. But the government fixed it at Rs415, irrespective of the recommendations of the commission and its estimates of cost of production. This meant that the farmers would get less than had been incurred by them in its production. Strangely enough, the ‘commission’ (API- does it have a mandate to do it now) did not submit any report for wheat price for 2007-08, as of today. The result was that every body assumed that as no announcement for the support price had been made; the earlier fixed price for the 2006-07 crop of Rs415 per 40 kg would also apply to the 2007-08 crop.

However, as the actual production from the 2006-07 crop fell short of the target and private sector cashed the opportunity by purchasing as much produce as possible at the prevailing market price which was much higher than the support price. Accordingly, the procurement target of five million tons in the public sector could not be achieved either. The government, somehow, remained under the false impression that unprecedented harvest had been achieved, so they hastened to export whatever stuff they could.

Early this year (i.e. the mid-year of the crop) the government realised that any ‘support price’ for 2007-08 crop was not fixed. They then declared that the ‘support price’ would be Rs510 per 40 kg. In true sense, this was not support price; it could at best be termed as procurement price.

After the new government took over, the procurement price has been raised from Rs510 to Rs625 per 40 kg. The cost of production, calculated at the prices prevailing at the time of sowing the crop, has been estimated by two growers at very close to Rs600. The government has a target of procuring about seven million tons. But it would doubtful that the target can be achieved.

First, the crop is going to be much short than being thought of by Minfal for various reasons and second, market price is go. In such a situation, the private sector is likely to procure as much wheat as it can and then earn a profit either through exports or by charging higher price from domestic consumers. If they pay the farmers market-driven price at harvest which, if it is higher than their cost of production, the growers would not be the sufferers. There could thus be another year of wheat crisis.

If such distorted situation continues, the country would continue facing shortages in future. The result would be that farmers would divert wheat areas to other more remunerative crops, deepening wheat shortages.

Agriculture is the backbone of the economy. It is, therefore, warranted that the government reviews the performance of the agriculture sector in its entirety and sets a policy which promotes its development and does not transfer resources from poor farmers to other sectors and urbanites.

The poverty trend can only be reduced if the farmers get remunerative prices for their produce – may it be wheat, cotton, sugarcane, rice or any other crop. If the agriculture sector improves, it would also improve the health of the economy through its many forward and backward linkages.

The Agriculture Policy Institute should be made independent and provided with adequate resources and above all competent leadership to provide in-depth analysis of the emerging challenges and issues for policy formulation. The method of estimation of crops, and their demand projections also need to be reviewed by competent people.

The writer is the former adviser to the Chief Executive of Pakistan on Food & Agricultur.)

Another wheat crisis in the making ? -DAWN - Business; April 14, 2008

 

[Neo]

Surging rice price, domestic consumers and exports​

RICE prices continue to rise with non-basmati varieties witnessing the highest increase. The situation makes the task of the new government extremely difficult in controlling food inflation. As the common man continues to be burdened by high fuel to food costs, curbs on rice export may be seen as the easiest option to improve supply and control the prices.

But, on the other hand, the poor farmers from the rice-growing belts, would be the worst affected by any rice export curb or ban. Any such step might bring short-term relief but will hurt the long-term growth prospects of the agriculture sector.

Moreover, it will be resented by 70 per cent of the rural population which is directly or indirectly depends on its livelihood to agriculture. Farmers already are frustrated by low procurement price of wheat, now fixed at Rs625 per 40kg. The farmers’ associations across Punjab and Sindh have disapproved the latest procurement price which is far below the international market rates, while prices of inputs (DAP and urea) are closely linked with global prices.

With the wheat price standoff with farmers, curb on rice exports would simply add insult to injury as prices paid to farmers for rice paddy will definitely fall.Further, it can be argued that the rural population is not affected by rising food prices as it keeps part of the produce for its their own yearly consumption..

But still, what is the solution for the high food bill of the urbanites? Is there any possibility of stabilising food prices especially prices of rice? The answer lies in a multi-faceted approach of short-term, medium-term and long-term measures that will assure stability of rice prices and growth in foreign exchange earnings through rice export.

Short-term measures: Like wheat, a lot of our rice finds its way to Afghanistan through our porous borders. This rice smuggled across the border through semi-barter trading goes undocumented and does not bring any foreign exchange or any income tax earnings. The first priority of the government should be to ensure that rice is not smuggled into Afghanistan; instead it is exported via official channels.

The table shows that rice production dipped by only two per cent last year. But because of increased prices, our volume of exports fell by 15.2 per cent. Somehow, our local consumption increased by a staggering 24.2 per cent. These large swings in local consumption are not increases in domestic consumption but represent cross-border smuggling. The notion that local prices of rice have increased due to increased exports is not right. If smuggling is effectively checked, the domestic availability will increase and local prices will stabilise.

Financing offered to industries/businesses other than rice is mis-used for speculative rice buying.. Many businesses that had nothing to do with rice, for instance textiles and fertiliser dealers, were buying rice with banking facilities extended to them for other purposes. The State Bank should ensure that bank credit was not directed towards speculative trading.

Within the rice value chain, the SBP should implement specific lending policies for rice huskers, rice brokers, and rice middle-men that ensure a smooth rice trade without any hoarding/price manipulation by middlemen. For this purpose, margin for pledge should be increased and it should be required that banking facilities are revolved/settled within 90 days by rice huskers and middlemen.

Medium-term measures: According to International Rice Research Institute (IRRI): “Post-harvest grain losses across all Asian countries have been estimated at 10–15 per cent and, when combined with the loss of quality, the potential loss in value is between 25–50 per cent”. The same is the case in Pakistan as a significant portion of the rice crop is destroyed and wasted due to improper handling and lack of storage facilities and logistics.

If this wastage is reduced, the rice production will increase and prices stabilised. The widespread use of automatic harvesters makes the process of paddy harvesting quicker, but at the same time the moisture content is much higher than in the past. Paddy with moisture levels of over 20 – 25 per cent is very likely to develop fungus and aflatoxin if not dried quickly and properly.

Unfortunately rice dryers (a common sight in most rice-growing nations) are rarely seen in Pakistan as most husking units employ the traditional sun-drying method which leaves rice at the mercy of rain and fog during the period of harvest.

Additionally, after paddy is dried, it is stacked in jute bags out in the open due to limited warehousing instead of being stored in grain silos. If the government assists rice farmers in acquiring husking units, it will improve rice handling infra-structure on favourable terms, and will go a long way in reducing wastage and stabilising prices in the medium-term.

Long-term measures: As part of the overall agricultural strategy, the future of rice cultivation should also be carefully chalked out. Like other agricultural produce, yield of rice per hectare is also below that of regional countries -- India, Thailand, Vietnam and China. Effort needs to be made through rice research institutions to introduce high-yielding varieties. There is also need to bring more land under cultivation by improving water and irrigation management systems. And finally there is need to increase research and technical expertise of farmers with reference to rice cultivation.

With a broad picture in mind, the government may be successful in stabilising rice prices and increasing foreign exchange earnings instead of a knee-jerk reaction of curbing rice exports. To quote experts: “Banning exports does nothing to encourage farmers to increase supply or improve productivity”. A ban only exacerbates the price spiral problems. It does not solve it.

The writer is Director of Matco Rice Processing (Pvt) Limited

Surging rice price, domestic consumers and exports -DAWN - Business; April 14, 2008

 

[Neo]

Streamlining domestic commerce​

Economists have long been pleading for unleashing the potential of domestic commerce – which includes retail and wholesale trade, entertainment, construction, transport, storage, warehousing, communication, real estate, financial and personal services, etc – for sustainable economic growth.

Yet little has so far been done to fix this under-developed sector as it remains the most neglected area owing to the skewed official policies, the successive governments’ obsession with production for foreign markets and over- regulation of the national markets.

The growth of domestic commerce and trade remains as distorted as ever in spite of the recent years of economic expansion and consumption boom. While the previous government – particularly its former commerce minister Humayun Akhtar Khan – showed interest in the development of domestic commerce, the momentum generated seems to have died down.

Recognising the critical importance of domestic commerce – which employs some 35 to 40 per cent of the country’s total labour force and contributes above 50 per cent to the GDP, the trade policy for 2007-08 promised to undertake projects and put in place policies to improve this vital sector.

The commerce ministry also undertook a review of the sector and commissioned several studies on the state of domestic commerce covering sub-sectors like competitiveness, protection, subsidies, market regulations, wholesale and retail markets, storage and warehousing, transport and real estate.

The findings of these studies brought to light numerous factors constraining growth of domestic commerce and gave specific recommendations for removal of impediments hampering its smooth functioning. A Domestic Commerce Wing was also created within the commerce ministry and the minister announced in the trade policy to enhance its scope to engage additional core experts and consultants to prepare specific action plans.

The trade policy describes a ‘vibrant domestic commerce as a pre-requisite for innovation, entrepreneurship, quality assurance and product development. It stimulates private sector led growth and positions countries to effectively tap international markets.’

But its growth and development continues to be stunted by a number of factors – poor physical infrastructure, high land prices and rentals, insecure and unclean land titles, costly utilities, over regulation of the markets, absence of efficient transport, lack of space for commercial activities even in major cities, missing links in the distribution chains of agriculture and industrial products, deteriorating law and order conditions, weak contract enforcement, paucity of warehousing and storage facilities, a visible official bias in favour of industry against trading activity, lack of access to formal finance, inequitable and cumbersome taxation, etc.

“Domestic commerce can be used for poverty alleviation, job generation and overcome crisis caused by food shortages like the one experienced by the entire country last winter. No pro-poor growth strategy can afford to ignore the state of domestic commerce,” says Dr Sohail Jehangir Malik, an economist and one of the authors of the studies on the subject. He is of the view that the government could obtain one to two per cent growth every year by creating enabling conditions for domestic trade.

In addition, the development of domestic retail markets could also help build up brands and later shore up value added exports.

Commerce ministry officials privately admit that the focus on the development of domestic commercial and trade activity had been lost in the recent months because of a number of factors – political as well as economic. “It is true that we could not sustain the momentum generated before and after the announcement of the trade policy. The political situation obtaining before and after the Feb 18 election was the primary reason for the ministry to lose its focus on domestic commerce,” a senior commerce ministry official, who does not want to be identified, says.

Besides, political reasons, the official says, there were a number of other issues involved that had and would continue to obstruct the implementation of actions recommended for the removal of snags in the growth of domestic commercial and trade sector.

The official further observed: “Most of the recommendations made by the consultants in the studies relate to several other federal divisions and provincial ministries, city and district governments, and the central bank. Unless all these federal and provincial agencies and departments evolve some mechanism for co-ordinating with one another on the issues and snags identified in the studies on various aspects of domestic commerce, it would be presumptuous to expect a change.”

“And before agreeing to coordinate and work with each other, all these departments and agencies would have to agree on the importance of domestic commercial and trade sectors.”

“It is now for the new government to look into and examine the issues obstructing the development of domestic commerce and decide its priorities.”

. But the new government is not expected to focus its attention on the issues facing domestic commerce in the immediate future as it is more likely to remain engaged in fixing the deteriorating fiscal imbalances for quite some time.

Streamlining domestic commerce -DAWN - Business; April 14, 2008

 

[Neo]

Incentives for ‘agriculture manufacturing’​

Confronted with slow growth in revenue generation and exports, not enough to manage fiscal and current account deficits, the newly elected government plans to focus on ‘agriculture manufacturing’ for which private sector will be provided fiscal stimulus. It also intends to step up mechanisation of farms to increase the existing low agricultural productivity. “ Our major focus would be on agriculture manufacturing and in this behalf, we would soon be assigning a special task to the Planning Commission to come up with viable recommendations”, Minister for Finance, Senator Ishaq Dar told Dawn.

The incentives will be given to the private sector to go into the agriculture manufacturing so that there is no shortage of food and the surplus commodities are exported.

“We have to go back to agriculture and that demands formulation of a new agriculture policy”, he said, adding that the new policy will be finalised and approved shortly by the federal cabinet.

The minister observed: agricultural resources are required to be developed sensibly. The farm surpluses for exports required competitive prices and efficient development and utilisation of existing resources.

While the new fiscal policy was being framed, efforts were also being made to strengthen the agriculture sector. “We have asked our planners to take into account the need for promoting agriculture manufacturing and we know that it is not possible without offering certain incentives”, the minister said.

Member, Food and Agriculture of the Planning Commission, Dr Abdullah Kausar Malik when approached, said: all commodities needed value addition and this was not possible unless there was a policy shift towards the agriculture manufacturing. As soon as broad policy objectives are given to the Planning Commission by the higher authorities, work would start for preparing recommendations over the issue.

New technology was required to manufacture quality plants and machinery to improve the overall agriculture productivity aimed at increasing its exports. Horticulture should receive more emphasis and patronage. Dr Abdullah regretted that the export of citrus fruits could not be adequately increased over the years and that the issue needed the attention of the new government.

The demand for tractors has outstripped local production. Time lag in delivery is reported to be 11 months. The supply-demand gap of 20,000-25,000 tractors per annum has been observed against the existing production capacity of manufacturing units. In order to meet the demand, the government had recently allowed import of new and used tractors in CBU at zero tariff. The use of laser land levellers, ridge and broad-bed farming is also being encouraged.

A senior official of the Board of Investment (BoI) when contacted said that the United States Agency for International Development has agreed to offer financial assistance to help improve the competitiveness of the horticulture sector for exports. For this, the Competitiveness Support Fund (CSF), has proposed an action plan. The government’s resources are not being used efficiently and there was also duplication of work, the official said requesting anonymity.

The CSF has identified harvest losses up to 25-40 per cent. The industry exports only about five per cent of the total harvest at relatively low export price because of great difficulties in maintaining quality at the destinations. Other problems are high air transport cost as compared to low profit margins, inadequate international market information, lack of research and training opportunities.

The PML(N) manifesto has pledged to “ turn agriculture into a fully viable industry by changing the policy framework” in favour of farming; convert Pakistan into a large net exporter of food and move towards self-sufficiency in oil seeds; initiate schemes for crop insurance through private insurance companies to protect farmers against the vagaries of nature.

Incentives for ‘agriculture manufacturing’ -DAWN - Business; April 14, 2008

 

[Neo]

China assures help for development projects ​

BEIJING (April 14 2008): China on Sunday assured full support in financing of various ongoing and planned infrastructure development programs in Pakistan as it believed that an economically strong Pakistan would bring prosperity to its people and strengthen the region.

Governor China Development Bank Chen Yuan who called on President Pervez Musharraf here, evinced keen interest of his bank in providing funding for several development projects in Pakistan.

He said the CDB could provide support for Bhasha-Diamer Dam, the proposed rail link along the Karakoram Highway that may also have an oil and gas pipeline, besides development of additional facilities at the Gwadar Port.

President Pervez Musharraf said the Pakistan-China joint infrastructure development ventures would not only strengthen ties between the two countries, but also help bring stability and prosperity to the region, by enhancing transit trade and greater interaction among the regional countries.

Over the past decade, CDB has issued an accumulated total of 1.6 trillion RMB in loans to more than 4,000 projects involving key fields of infrastructure, and basic and pillar industries, mostly in China.

The Joint Investment Company between Pakistan and China was established in November 2006 to implement the joint economic cooperation plan. The company is working as a window of the China Development Bank for evaluation of joint ventures between the two countries.

Minister for Defence Chaudhry Ahmed Mukhtar, Minister for Foreign Affairs Shah Mahmood Qureshi also attended the talks. Later, Chairman CPPCC Jia Qinglin hosted a banquet in honour of President Pervez Musharraf and his delegation.

Pakistan and China have made substantial progress towards entering a Transit Trade Agreement, expanding the scope of Free Trade Agreement, besides identifying new areas of cooperation to further strengthen their multi-faceted ties.

The President who is on a six-day visit to China to hold wide-ranging talks with its leaders made significant headway on a host of issues during the several rounds of talks with the Chinese leaders including President Hu Jintao and Premier Wen Jiabao.

President Pervez Musharraf who arrived here in China's capital after attending the annual Boao Forum for Asia and holding talks with President Hu Jintao at Sanya, in Hainan Island met Premier Wen Jiabao at the Prime Minister Office - Zhong Nanhai. The two leaders reaffirmed their resolve to further strengthen their ties in all spheres.

President Pervez Musharraf said he was here in China to see its progress and rapid development. "We rejoice the success, achievements and progress of China that remains our time-tested and all-weather friend," President Musharraf said. Premier Wen Jiabao said the visit of the President would further promote the friendly ties between the two countries.

He said the two leaders have had several meetings over the past several years that signified the excellent relations the two countries had. Foreign Minister Shah Mahmood Qureshi told APP that in several rounds of talks the two sides also discussed the need for adopting "corrective mechanism" to offset their trade imbalance.

He said the two countries have agreed on a five-year trade and economic development plan, and the projects falling in this category will get concessional credit.

Both the countries also identified several new areas, where they can extend cooperation through the already existing mechanism. Pakistan and China signed a free trade pact in 2006 that covers goods and investments and are looking at ways to add the segment of Trade and Services besides raising the two-way trade to US 15 billion dollars much before the stipulated time.

Bilateral trade between the two countries is around US 7 billion dollars. The two countries also inked three more agreements on cooperation between the Ministries of Finance, town planning and construction and Pakistan Television Corporation and the China Central Television (CCTV) for enhanced exchanges and television joint productions.

The agreement on finance aims at bringing the banking sectors of the two countries closer in policy making, information exchange, planning and co-ordinating while dealing with international financial institutions.

Another agreement between the Capital Development Authority and the Chinese Academy for Architecture and Design will assist the body in construction and assisting in building designs, landscaping and town planning.

The agreement between the two state-owned television channels aims at increasing joint-productions, exchange of technical expertise. Pakistan and China earlier inked three agreements at Sanya on Friday following two rounds of formal talks between President Pervez Musharraf and President Hu Jintao. These included an MoU between the Ministries of Water and Power of the two countries to extend cooperation in managing water resources and hydel power, another on cooperation in sports and culture and the third for cooperation in the area of engineering, sciences and technology.

Under the agreement a consortium of Chinese universities will help set-up a modern international level university in Islamabad. During the talks the two sides also discussed in detail the possibility of materialising the proposal made by President Pervez Musharraf of building a rail link along the Karakoram Highway for linking the Gwadar port with China. A Chinese firm has already conducted the feasibility study and has submitted its report to President Hu Jintao.

President Musharraf in his talks with the Chinese leaders said that when completed the project could claim to be the ninth wonder of the world and would go a long way in further boosting trade and commerce ties between the two countries. The feasibility of having a fibre cable connectivity between the two countries for enhanced data, voice and video traffic also came under discussion. The two countries also reviewed the prospects of building an oil and gas pipeline along the KKH to meet the future energy needs of the two countries.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

New government will unveil energy policy soon: Dar ​

WASHINGTON (April 14 2008): The coalition government will strive for growth in agriculture and manufacturing sectors for sustainable economic progress, Finance Minister Ishaq Dar said on Saturday evening, while also pledging to facilitate foreign investment and use all available resources to meet fast-expanding energy requirements.

He told a gathering of Pakistani Americans and US officials at the Pakistani embassy that the new government would soon unveil its energy policy and endeavour to bring fiscal and monetary discipline to improve the overall state of the national economy.

Dar, who is in Washington for World Bank-IMF annual spring meetings, also affirmed commitment to autonomy for the State Bank of Pakistan. He felt it is essential to convert the Federal Bureau of Statistics into an autonomous body to enhance its credibility.

"We have to be open and transparent and the government will be ready to listen to independent economists about how they view the economy and what corrective steps need to be taken." "We are working to reduce fiscal deficit, reduce government borrowing from the central bank and correct other macro economic indicators. We have already started damage controlling the situation including curbing the inflation and want to achieve maximum targets before the closing of this financial year."

"We are hopeful that we will reverse the negative trend and have a year of consolidation next year," he said while briefly touching on negative indicators, which he ascribed partly to external shocks in the form of soaring oil prices and mismanagement by the previous government during the last year.

On fulfilling energy requirements, he said, the government will try to make use of all sources including water and coal and go for energy conservation as well. "We will encourage private sector to invest in energy projects," he said. The Finance Minister favoured looking into the possibility of setting up another nuclear power plant.

He described the coalition government as the best possible political dispensation for the country and was confident that democratic government would bring much-needed political stability.

"The coalition government of the two mainstream and other parties will work very well and you can expect political stability in the years to come," he said. Pakistan, he said, needs a very strong parliamentary system.

Dar assured the foreign entrepreneurs that their investment would be protected and the government would continue the foreign direct investment policies which it had introduced in the 1990s and which were also sustained by the last government. "There will be no reversals, no derailment we will go for consistency and improvement."

He said the growth path followed by the former regime was not sustainable but observed the baseline of the economy is resilient. "We've to work hard in line with international trends and focus on maximising agricultural output through introduction of proper incentives, provision of credit and in-time announcement of support prices to attain self-sufficiency in food and head off any wheat crisis in future." Dar, who is the first minister of the new coalition government to visit Washington after its inception last month, said the international financial institutions have expressed their solidarity with the government as it moves ahead to achieve economic targets.

Deputy Chief of Mission, Muhammad Aslam Khan welcomed the Finance Minister and introduced members of his delegation including State Bank Governor, Finance Secretary and Special Secretary to the Finance Ministry.

Earlier, he met with Executive Vice President of International Finance Corporation, Lars Thunell at the World Bank and on the sidelines of the moot met with finance ministers of China, Afghanistan, Iran and development minister of Germany and discussed economic relations.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Development process accelerates in Tank ​

TANK (April 14 2008): To give further impetus to development process in Tank district, the government is spending a fabulous amount of Rs 1014.405 million on various ongoing uplift projects in remote southern district of NWFP.

To accelerate the pace of development in Tank, the government has taken momentous steps by started scores of gigantic schemes in the rural and urban areas of the district to improve the socio-economic conditions of marginalised and down trodden masses.

Talking to APP, Deputy Director Works & Services Department Tank, Engr Abdur Rashid Khan said that special focus are being given on infrastructure improvement in under developed areas of the province. The government in fiscal year 2005-06 and 2006-07, he said executed dozens of developmental projects in education, health, communication, agriculture, sanitation and other social sectors that showing positive results. In communication sector, he said Rs 355.34 millions are being spent on major schemes like repair and widening of 24-kms black topped Tajori road via Daud Khel, Umar Adda, Kiri Haider, Chesan Kach, construction of remaining portion of Tank-Pezu road besides Waren Bridge on Tank Wana road, up-gradation of Tank Chowk square and dualisation of black topped road leading to Jandola and D I Khan (7.03 kilometer).

Special focus are being made on education sector, he said adding that schemes worth millions of rupees include construction of three additional classrooms, up-gradation of primary schools to middle level in NWFP with phase-II GGPS Tajori (Sharif Abbad), provision of basic facilities including construction of wash rooms, boundary walls, sitting up of GGPS in Mohallah Mahsudan Tank City-II and GPS Urdu Kalay Dabarah will help improve infrastructure, standard of education and increase students enrolment.

"The provincial government is mulling to upgrade 108 middle schools to high level in NWFP whereas in Tank's share is up gradation of GGMS Pai and GGMS No 1 Amakhel." In another package of basic facilities to primary schools scheme phase IV, the provincial government has allocated a special fund of Rs 9.590 million, he added.

Under NWFP Phase-III Project, three primary schools in Pehlwan Koruna, Kahu and Rashmen Kach were being set up in addition to GGPS at Jalalkot, Mohallah Barkiabad, Imam Din Koruna, Din Muhammad Koruna, and boys primary schools at Muhammad Jan Pir Kach, Yar Muham mad Nar Naurang and Rehmat Shah Tank.

Up-gradation of GGPS Yar Muhammad Koruna Pathankot to middle level and establishment of seven new primary schools bother for girls and boys were being built under various ADP schemes. Referring to developmental works in secondary education, Rashid Khan informed that Rs 157.863 million are being spent on 11 schemes whereas three of them had already been completed. Apart from reconstruction of compact building of Government Centennial Model High School No 1 Tank, up-gradation of GMS Maghzai and GGMS Shahbaz, construction/repair of GGHSs and GHHS No 2 Tank City, GGHS Gul Imam and construction of additional class rooms in GGPS Chesan Kach, GGPS Mohallah Mahsudan, Tank City and GGPS Raghza, Govt High School Amakhel mega schemes will help increase the children enrolment.

Under various ADP schemes, he said that new classrooms in primary, middle and high schools would be constructed besides up-gradating middle and high schools.

Likewise, he said that government has given special focus on the promotion of health sector to mitigate suffering of ailing humanity. Likewise Rs 321.645 million will be utilised on improvement and standardisation of District Headquarter Hospital Tank, up gradation of RHC Amakhel to Category-D hospital, rehabilitation/repair of health outlets and establishment of BHUs etc in Tank. The official said that PC-I for the construction of new building for Patwar Khana and Muhafiz Khana had been sent to the Chief Engineer Works and Services Peshawar for approval. Pakistan is a agriculture country, he said adding that green revolution will come only by giving top priority to this sector.

Construction work on new blocks in veterinary dispensary Seri Naurang and Mian Bagh was in progress and would be completed with an estimated cost of Rs 3.994 million. He said that Technical and Vocational Center (for Women) will also be set up in Tank. Engineer Rashid Khan hoped that all the ongoing projects would be completed before the schedule time. Now it is hoped that after the formation of NWFP government, the development would further accelerated in Tank.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Industries facing severe crisis ​

MULTAN (April 14 2008): Mango, cotton and power looms industries are facing severe crisis in absence of facilities par to international standard, industry sources said. These industries are threatened with cloudy future due to surge in imports and fall in the export orders.

Sources maintained that the trade balance between the imports and exports has been risen up to 100 percent. The export target set for the year 2007-08 was about US $20.2 billion that has to be reduced at a later stage and a continuos decrease in export volume has aggravated the country's economy.

Further, sources said that earlier, during last few years, Pakistan happened to be among the countries that export cotton but now from the last couple of years it is importing cotton to meet the national requirement.

Pakistan exports mangoes of about US $1 billion but a continuous decline in its export volume have been recorded from the last couple of years. Similarly, Power looms industry has failed to achieve export targets during last few years, sources added.

Business Recorder [Pakistan's First Financial Daily]

 

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Exports to China and Malaysia to touch $5b figure

ISLAMABAD (APP) - Exports from Pakistan to China under Free Trade Agreement (FTA) would reach to $3 billion in next three years, Head of World Trade Organisation (WTO) Cell, Trade Development Authority of Pakistan (TDAP), Mujeeb Ahmed Khan said here on Monday.
The Exports from Pakistan to Malaysia, which were just $ 84.2 million in 2006 are expected to touch the figure of $1.8 by 2015.
Mujeeb Khan was speaking at a day-long trade seminar to explore Pakistan’s export potential in China and Malaysia in the context of the Free Trade Agreement (FTA).
The seminar was organized by Trade Development Authority of Pakistan (TDAP) in collaboration with Foreign Trade Institute of Pakistan (FTIP) and Islamabad Chamber of Commerce and Industry (ICCI). Main objectives of the seminar were to disseminate information about the existing and indicative potential of export products to China and Malaysia besides highlighting the issues of the tariffs, non tariff barriers and the administrative procedures under the perspective FTAs.
Presenting statistics of Pak-China bilateral trade, Khan said that an encouraging growth of about 25 per cent per annum during the last four years had been witnessed.
However, the balance of trade remains in favour of China, which reached $3.23bn in 2006.
Mujeeb Khan said that China was the third largest import marked of worth US$791 billion, providing an excellent opportunity for export products. However, he lamented that Pakistan’s share in this whole import market was very nominal.
Giving analysis of top-20 products exported to China, he said that these items constitute 85 per cent of Pakistan’s total export to China, adding that cotton yarn has been identified as the single largest export item, which constituted 47 per cent share in the total exports from Pakistan to China.
He said that Pakistan was largest trade partner of China in cotton yarn, however, China has put one item of it (cotton not carder of comber) in the no concession list despite the fact that it was the biggest importer of this particular item in the world by importing it to the tune of $ 3 billion. He said that Pakistan and China were the world’s top exporter and importer of plain weave cotton fabrics and terry toweling respectively, however Pakistan’s share in Chinese imports in this commodity was just 1 per cent.
He said that Chinese imports of core products of cotton year, cotton cloth, cotton waste, cotton, not carder or combed, cotton carded or comber and others was about $10.3 billion and Pakistan’s share in it was just $36 million.
About Malaysian market, Mujeeb said that it was one of the potential import markets with $131.13 import capacity however, Pakistan’s share in this market was just 84 million in 2006 which is just 0.045 percent.
He said that Pakistan was the leading supplying country of the about 9 items in Malaysia which included textile products. These items constituted only $7.385 million, which is 12.5 per cent of the total imports form Pakistan to Malaysia.
The indicative potential of top-20 export items has been estimated at $414 million. It is expected that the concessions given under FTA will help tap the indicative potential with greater pace. The total indicative potential for Pakistan’s export products in Malaysian market has been estimated at $1.17bn against the present level of only $54 million.
It may be recalled that Pakistan signed bilateral FTA with China on November 24, 2006 which became effective from July 1,2007. Similarly FTA between Pakistan and Malaysia was signed on November 8, 2007.
Khan said that WTO cell has been organizing series of such seminars to get feedback from the stakeholders for formulating better trade policies to enhance country’s exports. Similar kind of seminar was held in Karachi in the last week of March.
The Nation

 

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Cement exports to Middle East and African countries rise by 80%

By Muhammad Yasir

KARACHI: High demand of Pakistan’s cement in the Middle East and African countries has enhanced significantly country’s exports by 80 percent in the three quarters of the current fiscal year to stand at 2.632 million tonnes.

According to the All Pakistan Cement Manufacturer Association (APCMA), the cement exports have registered 139 percent growth to reach at 5.1 million tonnes so far in the fiscal year with the rising construction boom in Middle East, African countries, and India.

The cement exports to Middle East and African countries were recorded 1.463 million tonnes in three quarters of previous fiscal year.

However, exports to Afghanistan have registered 34.7 percent growth with 2.067 million tonnes in the three quarters of the current fiscal year as compared to 1.72 million tonnes during same period of last fiscal year.

Pakistani cement exports have surged to United Arab Emirates (UAE) after its government removed 5 percent custom duty on cement to help the fast moving construction sector in Dubai, it is learnt.

As far as prices of foreign countries are concerned, the increasing regional cement price is benefiting Pakistani cement companies who are able to export cement at a price premium. Initially, cement was being exported to UAE at FOB price of $60 to $65 per tones, which has now jumped to $70 to $75 per tonne.

Cement demand has been rising as the construction season began in a full swing locally and in the exporting countries in March.

Daily Times - Leading News Resource of Pakistan

 

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Pakistan to approach friendly countries ​

Tuesday, April 15, 2008

ISLAMABAD: Pakistan has decided to approach friendly countries such as China, Saudi Arabia and others to generate $500 million to $1 billion in the current fiscal year, in a bid to mitigate financial woes owing to rising petroleum, wheat and palm oil prices.

The finance ministry has projected to generate additional $2.5 billion till June 30, in order to control the dwindling foreign currency reserves that have already fallen to around $13 billion. The foreign currency reserves of various banks are around $2.5 billion and the remaining precious reserves are with the central bank.

“Islamabad is going to launch convertible bonds by offering OGDC shares in the international market to generate approximately $1 billion, as well as issuing GDRs of National Bank of Pakistan to generate $500 million before June 30, 2008,” official sources in the finance ministry confirmed while talking to The News here on Monday.

To bridge the remaining gap of $1 billion out of the total projected additional inflows of $2.5 billion, sources said that the coalition government is set to approach China, Saudi Arabia and other friendly states to achieve its desired objective in the remaining two and a half months.

“President Musharraf is currently visiting China where he discussed the possibility of bilateral loan on soft terms and conditions with Beijing authorities,” the sources said. Musharraf’s six-day visit to China ending April 15 is his first trip abroad since a new government packed with opponents was sworn in last month.

China’s foreign currency reserves are over $1500 billion and Beijing is among the capital exporting countries. China may provide $500 million in loans to Islamabad in order to remove the financial woes due to higher POL and commodities prices.

“Pakistan’s oil import bill has surged by $3 billion so far against its budgetary estimates, and wheat import also burdened the economy by $1 billion,” sources maintained.

Sources added that Finance Minister Ishaq Dar would give final touches to the proposed strategy for seeking financial assistance. Assistance from Saudi Arabia would come in the shape of deferred oil payment and in various forms from other friendly countries in the next two months, to accomplish the required homework before the scheduling of any high-level visit of leaders.

The sources also said that Pakistan Development Forum (PDF) is likely to be held in May 2008. Representatives of bilateral and multilateral donors will participate in this upcoming event to be held in Islamabad, to give a detailed input to creditors for generating the desired amount in a short span of time.

Answering a query about the Finance Ministry’s expected inflows from the multilateral creditors in the remaining months of the current fiscal year, sources said that Islamabad would get assistance from the World Bank and Asian Development Bank as per schedule. However, additional funding on immediate basis could not be arranged from multilateral creditors.

Although, the official said that there is a possibility to arrange commodities related financing from the Islamic Development Bank (IDB). “We will present all the proposals before the Finance Minister Ishaq Dar, who will give his final approval about the future course of action for generating $2.5 billion additional financing,” a high-level official in the Economic Affairs Division (EAD) said. He added that the finance minister would decide this crucial issue after his return from attending the WB, IMF annual spring meeting currently underway in Washington, USA.

Pakistan to approach friendly countries

 

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FBR expects to collect Rs990bn revenue ​

Tuesday, April 15, 2008

HYDERABAD: The Federal Board of Revenue (FBR) would likely miss the revenue collection target of Rs1,025 billion for the current fiscal 2007-08 owing to economic and law and order reasons, and the board is expected to collect Rs990 billion.

“As the country is facing an energy crisis and because of the law and order problems, we are expecting that the target of Rs1,025 billion will not be achieved by the end of the fiscal year,” FBR Chairman Abdullah Yousuf revealed here on Monday.

Speaking to a group of newsmen at the Regional Tax Office before addressing a workshop, he said that under the present circumstances the board would be able to collect Rs990 billion, adding that the power and gas shortages and the law and order situation affects the overall economy and hence, naturally decreases the targeted collection.

To a question about the next fiscal year’s target, he said that it is premature to comment on the coming fiscal target since the budget exercise would start shortly and proposals have already been invited from the chambers of commerce and trade bodies of the country.

He was of the view that the FBR is undergoing a major reform process with an objective to improve tax administration and facilitate the taxpayers to retain their confidence.

He said that the introduction of self assessment in income tax would further enhance the confidence of taxpayers on FBR, adding that the pilot projects have been introduced at three terminals in Karachi in customs, to improve efficiency as well as transparency.

Yusuf further said that reforms are also being introduced in the tax policy and new systems are being brought in to fill the gaps and loopholes in the existing system.To another question, he said that the board would work further to improve operations under the guidelines and policies of the new government.

During his address to the employee’s workshop, he made announcements for the welfare of the employees of the FBR and called upon the employees to work efficiently and transparently.He said that all the taxes are now being collected under one roof and this would also help in storing the data of tax collection and added that the general perception of corruption is also being minimized.

He was of the view that growth in revenue collection is essential for the progress of the country and informed that the salaries and facilities of FBR employees have been enhanced and doubled to meet the challenges.

He said that the budget of the FBR is Rs7.5 billion in the current year, and would be increased to RS10 billion in the coming fiscal year. He was of the view that the numbers of taxpayers should be increased from two million.

FBR officials including Munir Qureshi, Khawer Khursheed Butt and Khalid Siddiqui also spoke at the occasion.Later, the chairman visited Hyderabad Chamber of Commerce and Industry (HCCI) and discussed various matters with the members of the business community.

FBR expects to collect Rs990bn revenue

 

[Neo]

Salman defends economic strategy of past govt ​

Tuesday, April 15, 2008

LAHORE: Former federal finance minister Dr Salman Shah has defended the overall economic strategy of the past government, stating that undue pressure created by high oil and commodity rates did put temporary pressures.

He was speaking at a discussion arranged by SAFMA on the State of Pakistan’s economy.Defending the increase in petroleum rates by the interim government, he said that budget deficit would have gone out of hand had these raises not been made. He said the new government in fact should announce similar increases in petroleum rates before the end of the current fiscal.

He said even then the government would be burdened with subsidies on petroleum products. He advised the government to eliminate all subsidies on petrol by the end of next year.He said the government promoted use of locally produced natural gas that has kept the petroleum demand to almost the same level as in 1999. He said now that entire available gas production is being utilized the import of petroleum products is on rise. He said Pakistan would pay $11.5 billion for the same amount of oil it imported in 1999-2000 for $3.1 billion.

He said global wheat rates were at almost the same level as in Pakistan only 16 months back. Today he added even after increasing the wheat support price to Rs625 per maund the international wheat rates are double the local rates.

He said that there is no overshooting of expenses. He said Rs400 billion budget deficit amounts to four per cent of GDP. It would be higher this year due to high oil and commodity rates that burdened the national exchequer.

He claimed that the growth, inflation and debit indicators have improved vastly during past eight years. The GDP he added has shot up from $65 billion to $160 billion. Tax revenues he continued have shot-up from Rs300 billion in 1999 to around one trillion rupees now. He said these increased revenues in fact facilitated the government in accelerating growth and development work.

He said it was wrong to assume that 9/11 facilitated the transformation in economy. He claimed that Ghazi-Brotha hydropower project completed in 2004 added over 1400 MW power in the system. He said the electricity consumption however increased by higher percentage than envisaged by the planners. He added that there was a lapse on the part of the government to neglect further addition in electricity production. However he clarified that 3000MW power projects were initiated by the previous regime that would be operational in 16 months.

Salman defends economic strategy of past govt