Pakistan Economy - News & Updates - Archive

[Neo]

Budgetary support: multilateral agencies to lend $3 billion: Dar ​

ISLAMABAD (April 27 2008): Pakistan will borrow $3 billion from multilateral sources for budgetary support and to maintain foreign exchange reserves at a reasonable level, which are expected to go down to $10 billion by year-end due to increasing oil and wheat import bill.

Pakistan is eligible for some concessions on borrowing. Given that this must attach with stringent conditions, therefore, need to focus on negotiating in Pakistan interest. Finance Minister Ishaq Dar told the Senate Standing Committee on Finance here on Saturday that he held meetings with multilateral agencies who have agreed to lend $3 billion to the new government while promising Pakistan will not go into IMF programme.

Dar said it was a big challenge for the new government how to pay to oil companies and Wapda, as there is no space with the State Bank of Pakistan. The previous government had borrowed Rs 400 billion from the central bank against the target of Rs 181 billion for the year.

The SBP, he said, has told the Cabinet very clearly that there was no space with it to lend more money to the government that is already with Rs 555 billion budget-overrun. The reason being the under-budgeting by the previous government, he added.

He said the government did not mention Rs 125 billion payment on interest in the budget, which would be Rs 443 billion against Rs 318 billion target for the year. The government should have provided accurate budgetary allocation for interest payment as it knew how much it would have been at the close of year, he added.

There was no allocation of Rs 38 billion in the budget spent on development work, because it was election year, that would also go up to Rs 75 billion at the close of the year besides Rs 43 billion paid for research and development of textile, and subsidy on fertiliser directly by the State Bank.

The subsidy on electricity, he said, has gone up to Rs 123 billion against budgetary allocation of only Rs 52 billion while on oil it may go beyond Rs 153 billion against Rs 13 billion allocated in the budget for the year.

Import of wheat was never expected but Rs 44.9 billion cost the exchequer because of previous government mismanagement that had allowed export at $200 per ton and then imported at $500 per ton.

"I don't want to go into blame game but these are facts every one must know," he said. Freedom of media: The newsmen were surprised when Minister for Finance wanted the journalist to leave the meeting so that he could brief the meeting about development expenditures earmarked for a specific area.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

World Bank may give $6 million for hydropower environment ​

FAISALABAD (April 28 2008): The World Bank is considering providing $6 million for Infrastructure Project Development Facility (IPDF) to develop an enabling environment for hydropower business in Pakistan.

According to WB sources, the component will build the capacity of the Infrastructure Project Development Facility (IPDF), in particular the new water cell tasked with developing financing strategies for water sector programmes and hydropower infrastructure and with providing advice on a variety of financial, fiscal, legal and regulatory issues.

The project will help to review existing institutional, legal and administrative framework for financing water infrastructure and the potential for private sector participation in the development of multipurpose water resources development projects based on international best practices, asset ownership, benefit-sharing alternatives, etc.

The project will also help for development of an enabling framework for licensing and regulating hydropower projects (both run of river and reservoir based projects); for establishing tariffs and a carbon credit mechanism; and for scrutinising existing assets to generate funding for investments in water and hydropower development.

Infrastructure Project Development Facility (IPDF), the WB consultants to review of financial and fiscal regimes for private sector, domestic and foreign involvement in the development of major hydropower projects in the Indus system, and identification of appropriate sources of financing worldwide.

According to update project report, returns to investment in the water sector (irrigation, hydropower, domestic and industrial uses as well as for environment) are very high in Pakistan. Despite large needs for investments in the sector to expand water supplies, to improve water management and control and to upgrade and modernise the century old system, the required investments are not forthcoming, resulting in its continued stagnation and deterioration.

There has to be a shift in the financing strategy for multipurpose storages. So far, the government has only tapped public resources for investments in the water and hydropower systems and currently owns major assets in these sectors. Hydropower generation provides substantial financial flows and could be of great interest to the private sector if these investments are structured properly, WB report added.

WB report mentioned that the extent of the investment required demands expanding the range of options to include, for example, non-traditional methods for financing these infrastructure, and involving the domestic and foreign private sector, and perhaps even privatising the existing assets and/or building public private partnerships (PPPs).

WB report mentioned that the main challenge is to structure a water and hydropower investment programme in a manner that would enable the mobilisation of financing from non-traditional sources so that the system investments can keep pace with growing demands in the immediate future.

The water sector issues are enormous and complex, and addressing them would require a series of investments and long-term commitment on the part of the government. The proposed project would help the government to address issues related to water resources management in the main river system, allowing a transparent way for water flow forecasting, availability, distribution and accounting, and thus building trust.

The project will also help to address water policy, technical issues necessary for the investment programme and assist in developing a financing strategy and a strategic social and environmental assessment framework necessary for the large investment programme.

Some support would be provided under the project to provinces to develop better linkages between the federal and provincial systems. The support to provinces is being provided under several ongoing and provincial operations such as the development policy loans (DPLs) to Punjab and Sindh Water Sector Improvement Project (WSIP) and it will be scaled up under Barrage Rehabilitation Programmes in Punjab and Sindh and possibly new operations in Balochistan and North West Frontier Province (NWFP).

It may be recalled that Pakistan government is seeking support from the World Bank for its knowledge, expertise and experience in the sector, in addition to its financing. This is particularly the case for this Project. More specifically, the Bank is expected to play a key role in providing support for: (i) strengthening water resource management institutions at the federal (main system level) and continuation of the measures for institutional strengthening already underway in provinces; (ii) support in developing financing strategies for investment program in water and hydropower sectors; (iii) strengthening project planning, development and management, ensuring appropriate technical designs, implementation and environmental and social features.

Business Recorder [Pakistan's First Financial Daily]

 

[ejaz007]

IPI deal to be clinched soon: India

NEW DELHI: Indicating that the $7.4 billion Iran-Pakistan-India (IPI) gas pipeline deal would be “clinched soon”, Indian Petroleum and Natural Gas Minister Murli Deora said he would notify Indian Prime Minister Manmohan Singh of talks in Pakistan during his recent visit to Islamabad. He said India and Pakistan had almost established a general agreement on the transit fee. Deora said Iranian President Mahmoud Ahmadinejad’s visit to Delhi on Tuesday would be utilised to pave the way for trilateral talks on the deal. “The talks with the Pakistani leadership were very cordial and assuring. I will be updating prime minister on all issues, including IPI pipeline, and also $7.3 billion Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, which India has formally joined this time,” he said. The next round of ministerial talks on the TAPI pipeline are scheduled to be held in October after certification of Turkmenistan’s gas assets. “I am very optimistic about the IPI pipeline as it would go a long way in meeting India’s energy requirements in the long run.” The 2,700-kilometer-long pipeline, due to be completed by 2011, will initially carry 600 million cubic metres of gas per day. ppi

Daily Times - Leading News Resource of Pakistan

 

[ejaz007]

Iran to provide 1100 megawatts of power: IPI project issues resolved

ISLAMABAD (April 29 2008): Pakistan and Iran on Monday resolved all issues regarding the $7.5 billion gas pipeline project, paving way for inking an agreement soon at a mutually agreed date in Tehran. Iran also agreed to provide 1100 MW of electricity to Pakistan to help it overcome the shortage, particularly in areas adjoining Iran.

President Pervez Musharraf and his Iranian counterpart Mahmoud Ahmadinejad in over an hour long talks at the Aiwan-e-Sadr deliberated on their bilateral ties, issues faced by the region and the Islamic world and the trilateral cooperation between Iran, Pakistan and Afghanistan with a view to bringing peace and stability to the region.

The Iranian president who made a brief "official stopover" at Pakistan, while on his way to Sri Lanka, led a high-level delegation including its Foreign and Commerce ministers, besides its minister for Petroleum and head of EXIM Bank of Iran. He is due to arrive in India on Tuesday.

The two leaders held an exclusive meeting. Later, they were joined by their respective delegations. Foreign minister Shah Mahmood Qureshi later told reporters that the talks were positive and covered all aspects of their wide ranging relationship. "The two leaders said the IPI project will promote peace and friendship," Qureshi said and added that the two foreign ministers had been tasked to agree on a mutually convenient date for signing the agreement.

He said the two leaders expressed satisfaction over the resolution of all issues that had delayed a final agreement and hoped the project would help meet future energy needs of Pakistan. Iran also gave a positive response about the Pakistani proposal for allowing a gas pipeline through its territory to provide gas to China, along the historic Karakoram Highway, to help it meet its growing industrial needs, Qureshi said.

"And they recognised that all outstanding issues have been resolved and Iranian president will soon invite Pakistani president to visit Tehran where an agreement will be signed."

If all goes well, construction could start next year and the pipeline, linking the world's second largest gas reserves to the fast growing South Asian economies, could be completed by 2012. It would initially transport 60 million cubic metres of gas (2.2 billion cubic feet) daily to Pakistan and India, half for each country, but capacity would be raised later to 150 million cubic metres.

Talks on the 2,600-kilometre (1,615-mile) Iran-Pakistan-India pipeline began in 1994 but have been stalled by tensions between India and Pakistan and disagreements over transit fees.

The Iranian president said his country would provide 1100 MW of electricity to Pakistan to help it meet its needs, particularly in Gwadar and adjoining areas. Currently Iran is providing 35 MW for areas adjoining the Pak-Iran border. The two leaders also discussed the situation in Afghanistan and stressed that peace and stability was vital for the region.

President Musharraf and President Nejad reviewed their economic relations and said that they needed to be further upgraded to bring these at par with their political and diplomatic ties.

Foreign Minister Shah Mahmood Qureshi said the two countries already had a Preferential Trade Agreement and a Joint Investment Company and hoped the trade would soon touch the US one billion dollar mark. About Pakistan's stance on Iran's nuclear issue, he said, "we support Iran's use of nuclear energy for peaceful purposes, under the IAEA guidelines."

During the talks President Musharraf was assisted by Foreign Minister Makhdoom Shah Mahmood Qureshi, Minister for Water and Power Raja Pervez Ashraf and senior officials. The Iranian delegation including Ministers for Foreign Affairs and Commerce, the Vice President and Chairman of Archaeology and Tourism Department and Deputy Ministers for Water and Power and Petroleum assisted President Ahmedinejad.

Earlier, the Iranian President upon arrival at the Aiwan-e-Sadr was received by President Pervez Musharraf and Prime Minister Syed Yousuf Raza Gilani. A red carpet was rolled out for President Ahmedinejad as he arrived at the Aiwan-e-Sadr.

A smartly turned-out contingent of the armed forces presented him salute. Iranian President reviewed the guard of honour. National anthems of the two countries were played. President Musharraf introduced the Iranian President with members of the federal cabinet and other senior officials. Ahmadinejad later held talks with new prime minister Yousaf Raza Gilani, his first meeting with an official from a new government that took power last month after defeating Musharraf's allies in elections.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

China offers Pakistan joint ventures in Halal Food ​

BEIJING: China invited Pakistan for joint ventures in Halal Food for the common benefit of the people and to promote Muslim commodities in Europe and various Islamic countries.

The Vice Governor of Ningxia Hui Autonomous Region Li Rui said while replying to a question at a press conference held here at the Great Hall of the People Monday to brief the media on upcoming International Halal Food and Muslim Commodities Festival and Ningxia Investment and Trade Fair.

The annual Fair will be held from September 10-13 in Yinchuan, the capital city of Ningxia on the occasion of celebrations of the 50th anniversary of the founding of Ningxia Hui Autonomous Region. Mr Li invited the Pakistani enterprises to visit the upcoming exhibition and hold negotiations with Chinese counterparts to establish joint ventures and enter business agreement to meet the need of Halal food products, specially beef, chicken, meat of Pakistan.

In this connection, he pointed out that China is ready to establish business contacts with the Pakistani counterparts. He said by establishing contacts the enterprises of both the countries would be able to share their experiences.

“This year, Ningxia is striving to make the festival and trade fair a brand with local characteristics by further broadening its scale, raising its level, making close contacts with Muslim regions and countries, thus making Ningxia to hold China’s front position open to Muslim countries”, he observed. He pointed out that Malaysia is the top most importers of Halal Food products, followed by Thailand, Kuwait, Bahrain, UAE, etc. app

Daily Times - Leading News Resource of Pakistan

 

[Neo]

‘Pakistan’s recent growth rate unsustainable’​

* Institute of Public Policy chairman says domestic savings have to be improved to maintain growth rate

Washington: Noted economist Shahid Javed Burki has faulted Pakistan’s major political parties for not paying much attention to the economic conditions in the country when campaigning for office, while expressing doubts about the country’s ability to sustain its impressive growth rate of recent years.

Burki, chairman of the Institute of Public Policy, told the Centre for Strategic and International Security (CSIS) in a speech recently that economic factors turned out to be pivotal in influencing election results since the common man was more concerned with economic challenges than domestic political infighting. He said the election results reflect the ongoing disconnect between the leaders and the led. He said Pakistan will not be able to sustain the 7 percent growth rate it has enjoyed in the last seven years, given the current investment ratio of only 18 percent. He credited President Pervez Musharraf with providing a stable environment where policy changes were not arbitrary, and which resulted in a significant portion of “pent-up” growth being released in the economy. The weather was also kind to Pakistan and there was considerable investment by the Pakistani diaspora. However, no economy’s growth can rely solely on foreign investments or good weather.

Burki noted that the US has brought down its investment in Pakistan and is now only the third largest source of Pakistan’s foreign direct investment (FDI) income. He said Pakistan’s impressive growth in the recent past has not benefited the poor. Privatisation was placed at the top of the economic agenda, but that could not be sufficient by itself since Pakistan’s regulatory sector remains very weak. The government has not placed sufficient constraints on the expansion of the private sector and has not regulated the emergence of monopolies. As a result, Pakistan has experienced a sharp increase in prices. This is especially true of telecommunications, real estate, and construction. He pointed out that there has been no long-term creation of jobs for the poor and uneducated rural population. He noted that Pakistan’s trade deficit is now between $12 - $13 billion. The government has failed to manage the agricultural sector properly and failed to invest in the power sector. The poor management of the agricultural sector is compounded by the smuggling of wheat into Afghanistan. No serious analysis of the impact of economic growth on energy has been undertaken.

Improve domestic savings: Burki, a former vice president of the World Bank, said that Pakistan could not maintain a strong economic growth rate without considerable improvement in domestic savings, which can be encouraged by implementing programme loans and adopting institutional reforms.

He pointed out that Pakistan has one of the youngest populations in the world, so there needs to be focused investment in education, particularly at the primary and secondary school level and in technical schools. He also called for decentralisation of economic decision-making. Punjab could sustain a 10 percent growth rate. He also proposed that Pakistan should be opened up as a transit route for the region, thereby creating an opportunity for FDI. He suggested that the government should address shortages that occur in certain economic sectors, such as natural gas and cement, when any given economy begins to grow.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

Country utilised over $4 billion liquid foreign exchange reserves ​

KARACHI (April 29 2008): The country has utilised over four billion dollars liquid foreign reserves to meet its continuously rising current account deficit as inflows of foreign direct investment were insufficient during current fiscal year, sources in banking industry told Business Recorder on Monday.

They said that political uncertainty and law and order situation pre and post election have badly hit the foreign investment, which depicts a decline of 26 percent during the current fiscal year as against all time high foreign investment during the last fiscal year.

Decline in foreign investment inflows and rapidly increasing current account deficit made the policy-makers borrow fresh loans from international financial institutions or utilise foreign reserves. However, policy makers prefer to utilise liquid foreign reserves, which stood at 16.0789 billion dollars on July 31, 2007.

Although, the rising home remittances helped to fulfil foreign payments, however the inflow of foreign investments were not sufficient to fulfil the complete requirement of current account. Therefore, the country has spent 4.1 billion dollars from liquid foreign reserves to meet the current account deficit of all time high level of 9.85 billion dollars during the first nine months of current fiscal year.

Whereas during the same period of last fiscal year the country's foreign reserves were up by some 427 million-dollars. Foreign reserves held by State Bank of Pakistan declined to 11.51 billion dollars at the end of March 2008, which earlier stood at 15.022 billion dollars on July 1, 2007, due to huge utilisation.

Despite the country's foreign reserves' gradual decline, the economists believe that the spent reserves will be recouped by the end of June this year, as government is expecting huge inflows during the next two months from different countries. Decline in foreign reserves also put pressure on Pak rupee over US dollar, as it has declined by around 4.5 percent to Rs 64.20 per dollar in the interbank.

Economists said that recently the State Bank of Pakistan moved to strengthen the Pak rupee by allowing exchange companies to get 250,000 dollars at Rs 64.50. This also shows that a lot of inflows are in pipeline. "We are expecting that in the next few months over two billion dollars inflows will be witnessed, which will help SBP to maintain its liquid reserves," they added.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

US investors show confidence in new government ​

LAHORE (April 29 2008): United States Principal Officer Bryan Hunt has said US investors have confidence in the new government and they are willing to further invest in the country. He said this while talking to newsmen at the inaugural ceremony of a three-day Pakistan Banking Expo here on Monday, which was organised by the Pakistan Guarantee Export Corporation Limited (PGECL).

Punjab Excise and Taxation Minister Mujtaba Shuja-ur-Rahman was the chief guest and PGECL Chairman Mian Mahmoood was also present on the occasion. He also said with the installation of new government, confidence of American entrepreneurs has restored.

The Punjab Excise Minister told reporters that the exhibition on banking, finance and information technology would provide an opportunity to general pubic to attain first hand information about banking, and it would also create awareness among the masses about financial institutions.

At the Expo, stalls were set by National Bank of Pakistan, Habib Bank Limited, MCB Bank Limited, Askari Bank Limited, Altas Bank Limited, The First Microfinance Bank Limited, National Investment Trust, National Savings, Adamjee Insurance, SME Business Support Fund, Pakistan Post, PTCL, IBM Pakistan, IT Absolute and National Data Consultants.

Business Recorder [Pakistan's First Financial Daily]

 

[Contrarian]

Pakistan seems to be going back to the 90's...

 

[khanz]

Engineering exports to hit $1bn in 2 years ​

LAHORE: Engineering Development Board (EDB) Chief Executive Officer Almas Hyder has said Pakistan’s engineering industry is now progressing by leaps and bounds.

“Our electric fan exports, which were zero about five years ago, have now reached $50 million. The engineering sector exports touched $850 million and are expected to hit $1 billion during the next two years,” he said.

Talking to reporters at a pre-departure training workshop on effective participation in Hanover trade fair, he said that the engineering sector constituted 55 per cent of the world trade, but the country had a negligible share in the world market.

“The engineering sector is very vast and its exports have become vital for us to get out of the trade deficit. We should reduce our export reliance on the textile sector,” he said. He said Pakistan Steel Mills had now started consumption of local raw material from Chagi and the EDB is well aware of the rising demand for steel and taking appropriate measures in this regard.

Earlier speakers said that because of continuous participation in the Hanover trade fairs, Pakistani industry people learned how to improve the quality of products, presentable packaging, and pricing of products, which considerably raise the standard of our exportable goods. The exports were 300-400 million dollars about three-four years back and as a result, the exports have been increased to $850 million.

Out of 14,000, Gujranwala with 9,000 engineering industrial units has strong base for producing of engineering goods, they said. They stressed the need for collaboration with the institutions concerned for improving technical skills and capacity building of the workforce. They said that out of the total cost of Rs900,000, the EDB was providing Rs850,000 to each of 55 exhibitors, while every one has to bear the cost of only Rs50,000 for attending the trade fair.

Hyder urged the participants to take care of the public money being provided to them for the trade fair so that desired results could be achieved.

 

[Neo]

15pc of inward remittances to be sold in interbank market ​

Wednesday, April 30, 2008

KARACHI: State Bank of Pakistan (SBP) has amended rule and regulations for exchange companies.

For the out bound remittances made on account of imports the central bank in its FE circular No 02 issued Tuesday directed that exchange companies would be required to bring a minimum of 25 per cent of foreign currencies exported by them in their FCY Accounts maintained with banks in Pakistan on an ongoing basis. Out of the amounts so brought in, exchange companies would be required to sell at least 10 per cent in the Interbank Market, whereas balance amount should be withdrawn in cash US dollars from FCY Accounts maintained with banks in Pakistan.

Regarding inward remittances on account of home remittances, export earnings etc the SBP said, “A minimum of 15 percent, instead of earlier 10 percent of foreign currencies received by the exchange companies on account of inward home remittance, in equivalent US dollar, must invariably be sold in the Interbank Market on an ongoing basis.”

Every exchange company would have to submit a report on every Monday to SBP’s relevant department giving aggregate FCY amounts mobilized under these two categories and amounts sold in the Interbank Market along with the name of the counter parties & relevant dates.

The exchange companies would have to report all transactions of $5000 or above (or equivalent thereof) made by the exchange company on account of i) sale/purchase over the counter and ii) outward remittances with all related particulars on daily basis.

SBP directed that the daily data in excel sheet should reach Exchange Policy Department on the SBP’s prescribed format at ec.epd@sbp.org.pk by 7:00 pm.

Earlier as per SBP regulations exchange companies were required to ensure that a minimum of 10 percent of foreign currencies exported by them and a minimum of 10pc of foreign exchange received by them on account of inward home remittances, in equivalent US dollars, must invariably be sold in the Interbank Market on an ongoing basis.

15pc of inward remittances to be sold in interbank market

 

[Neo]

German consulate contributes to IRC under micro-project scheme ​

Wednesday, April 30, 2008

ISLAMABAD: The Federal Republic of Germany’s Consul-General Hans-Joachim Kiderlen and Executive Director of Indus Resource Centre (IRC), Sadiqa Salahuddin the other day signed an understanding for a financial contribution of Rs400,000 for the up-gradation of a vocational training-cum-work centre at Khairpur.

This project is being funded by the German Consulate under its Micro-Project-Scheme.

Established in the year 1999, the IRC is a non-profit, non-governmental organisation working with marginalised communities of rural Sindh. IRC’s goal is to create a society in which all citizens, irrespective of their gender, class, religion or creed can learn, work and become full members in the participatory governance of their areas.

In this regard the German Consulate in Karachi is to support this initiative and has, therefore, signed an understanding to up-grade the centre by providing for purchases of sewing machines, wood processing tools and other related equipments.

German consulate contributes to IRC under micro-project scheme

 

[Neo]

Agreement inked: Kyrgyzstan to help Pakistan control power shortfall​

ISLAMABAD: Kyrgystan is keen to help Pakistan in power shortfall as country has surplus electricity of one billion kilo watt, Ambassador of Kyrgyzstan, Dr Nurlan Aitmurzaev said on Tuesday.

Kyrgystan has inked an agreement to export it to Central Asian and South Asian Region of Electricity Market (CASAREM) including four countries, Tajikistan, Kyrgystan, Afghanistan and Pakistan.

He said electricity would be exported to these countries with the financial assistance of World Bank and Asian Development Bank.

It will establish a secretariat in Afghanistan and Kyrgyzstan is building two new Hydel energy plants and invites Pakistani businessmen to invest in these projects.

He expressed these views during a meeting with president, Islamabad Chamber of Commerce and Industry (ICCI), Mohammad Ijaz Abbasi.

He said Pakistan is a very important country for Kyrgyzstan and was the most suitable route of trade. He said Kyrgyzstan prefers brotherly countries for investment and invited Pakistani companies to invest in Kyrgyzstan.

Dr Nurlan promised to give a briefing on trade potentials and investment opportunities of Kyrgyzstan at the ICCI to the business community. He further said the two countries should cooperate with each other to improve trade and economic relations.

He said Pakistani businessmen were participating in Kyrgyzstan’s business activities and invited the ICCI to bring a group of businessmen for visit to Kyrgyzstan and seek possibilities for trade and investment.

Speaking on the occasion President ICCI Muhammad Ijaz Abbasi said, “Pakistan and Kyrgyzstan have to work for strengthening trade and economic relations.”

Ambassador of Kyrgyzstan visited ICCI along with Almazbek Idiriov, Third Secretary and said that total trade of Kyrgyzstan with Pakistan was extremely low and needs to be enhanced aggressively. He said that Kyrgyzstan was a growing economy and its major export was electricity, electrical products, semi-conductors and etc.

Abbasi said the trade volume between Pakistan and Kyrgyzstan is very low and suggested for its enhancement through joint ventures in various fields.

He said that Pakistan was short of energy and could benefit from Kyrgyzstan to meet Pakistan’s energy requirements. He said both countries could also cooperate in information technology, agriculture, textile and tourism sectors to explore more opportunities for investment.

The ICCI chief said there exists good scope for exports of ready-made garments, cotton products, engineering goods, consumer goods, pharmaceutical, rice, textile fabrics, sports good, surgical instruments and tents from Pakistan and import of electricity, electrical products from Kyrgyzstan.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

1st Emaar plan completion by December-end​

ISLAMABAD: First batch of 96 Mirador Villas in Emaar’s Canyon View would be ready for handing over to its owners by the end of December 2008.

According to a press release on Tuesday, Canyon View is one of the major housing projects of Emaar Pakistan, the country subsidiary of Emaar Properties PJSC.

Emaar has introduced the newly introduced Tunnel form System, which is considered to be an innovation in construction, for the first time in Pakistan. It is helping Emaar to meet its commitment to providing quality residences.

Canyon View is the first of the three Emaar Pakistan projects being developed at the cost of Rs 145 billion ($2.4 billion). Canyon View will serve as benchmark in developing master-planned communities in Pakistan.

To give a unique identity to the vast neighborhood, Canyon View will have separate community districts that derive individuality through varying architectural styles of constructions. The villas will be of Mediterranean, Tuscan, Mughal, Arab or Spanish style with distinctive arches, gateways and frills to lend character.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

Experts advocate increase in PDL on gas production ​

KARACHI (April 30 2008): With sharp increases in international price of oil, staggered fortnightly domestic price increases will neither fully address the problem of circular debt in the energy sector nor will these help reduce the growing fiscal deficit. The only option is to raise the Petroleum Development Levy (PDL) on domestic natural gas production, according to oil industry experts and analysts requesting anonymity.

At a meeting of the Oil Companies Advisory Committee (OCAC) held in Karachi, the oil experts pointed out that Pakistan is expected to import natural gas from Iran at $8 MMCF while the local price is under $3 MMCF. The government, therefore, has a cushion available in this differential to raise the PDL to not only clear the existing outstanding amount to oil industry of around Rs 76 billion but also continue to absorb/subsidise both diesel and kerosene.

Under the approved pricing formula, domestic sale prices are linked with international (Arabian Gulf) market product prices. They are determined and fixed by Oil and Gas Regulatory Authority (OGRA) on fortnightly basis. Since February 1999, crude oil prices have continuously escalated from $10 per barrel to almost $120 per barrel this month.

Since May 2004, the government has most of the time capped the domestic price and refrained from passing the international price rise to the consumers. In fact, between March last year and until late February this year, there had been a total freeze. Between May 2004 and mid-April 2008, Arabian Light crude price on average went up from $32.96/bbl to $99.73 ie by $66.77 or a 213 percent increase.

As a consequence, the ex-depot sale price of POL products in international market has gone up by over 200 percent. HSD in May 2004 was at the rate of $40.46/bbl. As of April 18 HSD abroad rose to $129.42 per bbl - up by $91.87 or 245 percent. Whereas in Pakistan, during the corresponding period, HSD price soared from Rs 24.37 per litre to Rs 47.13 per litre ie by Rs 22.46 or 93 percent only.

In order to shield the consumers from price hikes government has been absorbing this additional burden through reduction in collection of PDL and with cross product subsidies through price differential claims (PDCs) mechanism evolved with oil marketing companies (OMCs) and refineries.

According to industry estimates, PDCs collected by end of April would amount to Rs 175.5 billion. Out of which government has so far refunded Rs 99.619 billion based on audit claims of the industry. The outstanding PDCs still payable to oil industry is around Rs 76 billion.

The current PDC/subsidy rates (April 18 to 30th) on HSD, kerosene and LDO are: Rs 20.46, Rs 22.54 and Rs 17.36 per litre respectively. On current prices fortnightly PDC collection is said to be Rs 13.7 billion.

Besides enhancing the PDL on natural gas, government also needs to address the lopsided consumption of various POL products due to price distortions, says the oil industry.

Motor spirit (Petrol) consumption had come down due to people's strong preference for CNG and diesel on account of lower price. As a result, Pakistan now has surplus production of MS and has to export it at a loss because of highly subsidised rates of both diesel and CNG at the pumps.

Petrol is being sold at Rs 65 per litre while Diesel is sold at Rs 18 less ie Rs 47 per litre. Whereas CNG being consumed by car is sold at a 40 percent less price than petrol consumed by two wheelers - a vehicle mainly used by people from middle and lower classes.

Due to this price distortion the consumption ratio of diesel to petrol is 7:1. It is also leading to smuggling of diesel from Pakistan into Afghanistan. As a result, diesel consumption has gone up by 14 percent. Plugging of oil smuggling from Iran has helped somewhat in checking the falling consumption of petrol. Its sale has gone up by 30 percent.

On account of huge outstanding of PDCs, oil industry is suffering from severe financial constraints with some MNCs threatening to close down operations by end June. PDC payment outstanding to PSO is Rs 42 billion. The government has hurriedly arranged Rs 15 billion payment against sovereign guarantee from banks - yet to be disbursed - as the local oil giant faces default to meet its obligations against existing L/Cs due by May 8th.

Besides PDCs outstandings, Wapda owes Rs 12 billion to furnace oil supplies received from PSO. Pakistan International Airlines owes Rs 2 billion against sale of JP1 Aviation fuel. And, Hubco owes Rs 3 billion to PSO on account of furnace oil supplies.

Shell is said to have Rs 13 billion in receivables from the government against PDCs claim. OMCs point out that those complaining that OMCs are getting high margins in Pakistan also need to take into account the financial cost incurred due to inordinate delays building up to such huge receivables from the government.

OMCs are willing to have their margin capped if existing outstandings are cleared and timely PDC payments received. Defending the deemed duty payment to refineries the industry representatives point out that they were under obligation to incur $100 to 150 million in capital cost to reduce the sulphur content in their products from one to 0.5 percent. Engineering, design and procurement in this regard is already underway and PARCO the largest refinery, is said to be executing the sulphur content reduction plan in the next three months.

Business Recorder [Pakistan's First Financial Daily]