Pakistan Economy - News & Updates - Archive

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‘Pakistanis full of hope but groaning under economic challenges’​

* Experts say post-election change provides opportunity to redress country’s institutional weaknesses
* Another military intervention likely if civilian govt fails to deliver​

By Khalid Hasan

WASHINGTON: Speakers at a discussion on post-election Pakistan were one in stating that while the popular mood in Pakistan was one of optimism, sharply rising prices of essential commodities of daily use had left the new government facing its biggest challenge.

They also agreed that the performance in office of elected politicians will be judged and scrutinised by those who sent them there and disillusionment would be swift if they failed to deliver what was expected of them, namely good government, security, good law and order and basic necessities that could not be done without. If the civilian government let the people down, Pakistan could slide back into the old “musical chairs routine” of civilian/military rule.

The discussion, moderated by Teresita Schaffer at the Centre for Strategic and International Studies (CSIS) featured Rick Barton and Karin von Hippel of the CSIS, Glenn Cowan of Democracy International and Brian Katulis of the Centre for American Progress. All speakers had had the opportunity to pay several visits to Pakistan to study the situation.

Change: In her introductory remarks, Schaffer, who heads the South Asia programme at the CSIS, said the change in Pakistan provides an opportunity to redress institutional weaknesses and effectively deal with both internal and external insurgencies that threaten the life of the nation. She said those elected wished to distance themselves from the United States because they saw the war on terrorism as not their but America’s war. Pakistan’s problems had been made worse by US policy assumptions. She hoped that these challenges would be addressed by both sides successfully.

Cowan said he had found no political will in Pakistan on the part of those in charge to undertake reform. Everything, it was being assumed, was fine till the next elections, when it was not so. He called the Pakistani political parties undemocratic and operating under a system that was feudal. Only candidates who could pay their way were awarded party tickets to run for public office. Campaign spending was uncontrolled and went unreported. The parties could not thus be said to represent the will of the people. He said that only the Muttahida Qaumi Movement (MQM) practised internal party democracy. He was of the view that Pakistan would remain in turmoil unless these shortcomings were addressed.

Katulis, who made three trips to Pakistan in five months, said what Pakistan had today was a “historic window of opportunity”. While there had been irregularities during the February elections, the people wanted to move beyond them. President Pervez Musharraf’s continued presence posed a problem. He felt that what Pakistan has today is a fractured National Assembly and a hung parliament. The national landscape itself is fractured. The politicians appear to have no appetite for electoral reform. The constitutional deviations and imbalances Pakistan has suffered also need to be corrected. President Musharraf’s future poses a major question. There is no accord on the judges’ issue. People feel that Pakistan has been made to pay the price for America’s “so-called war on terror”. The economic difficulties facing the people are huge. Then there is the challenge of dealing with terrorism and extremism. Pakistan also needs to deal with the question of balance of power between the president and the prime minister.

The international community is also expected by the Pakistani people to come to their aid. In short, he concluded, it is a “complicated landscape.”
Intervention: Hyman said there is a feeling of hope in Pakistan today and a sense of optimism. Support for democracy is to be found from one end of the country to another. The question is: Can the government perform and deliver? If the civilians are unable to do so, chances of another military intervention will remain high. The army, he added, is “licking its wounds” and had returned to the barracks. It is now or the politicians, who in the past have “played footsie” with the army to prove their mettle. He said there is support for the chief justice because he stood up for the rule of law.

People also want a system of checks and balances so that the government in power can be held to account. There are serious structural problems, coupled with economic difficulties. On the face of it, there is no obvious set of politicians that shows the ability to take charge and deal with these issues so that the people’s expectations do not go unfulfilled. If the situation remains un-redressed, then it will be back to military rule in three to four years.
Von Happel, who studied the situation in the Federally Administered Tribal Areas (FATA) during her visits to Pakistan, told the meeting that violence in Pakistan was no longer confined to Waziristan. She said there was popular support for negotiating with the Pakistani component of the militants while isolating the “foreigners”, reportedly made up of Arabs and Central Asians. Some issues, such as the establishment of Khilafat, were not negotiable, as far as the Taliban were concerned. The present ceasefire had enabled the FATA militants to slip into Afghanistan.

The Awami National Party was confident that it could deal with the militants, its policy being to come to terms with the locals and flush out the foreigners, something the US was not willing to endorse, but it had taken a “back seat” for the present. She pointed out that no one was actually able to go into Waziristan and other conflict-prone areas, including, the NWFP police chief. There was a good deal of confusion as to the agenda of the militants. It was also known that some of those operating in those areas were criminals. The effort currently was to drive a wedge between different groups.

Daily Times - Leading News Resource of Pakistan

 

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Pakistan and India set to announce IPI gas transit fee​

* Expected to agree on 40 cents per mmbtu​

ISLAMABAD: Pakistan and India are set to announce the gas transit fee within a week for the transmission of gas to India under the billion dollar Iran-Pakistan-India (IPI) gas pipeline project, sources told Daily Times on Wednesday.

The sources said that Pakistan and India are expected to agree on 40 cents per million British thermal units (MMBTU) as the gas transit fee. If both countries agree to this rate, Pakistan would receive around $148 million per annum from India in transit fee.

If international norms applicable to gas transit fees are adhered to, the transit fee under the IPI deal will amount to $180 million per annum. But the two countries are expected to sign the agreement at the lower rate, the sources said.

India sought Pakistan’s agreement on a transit fee lower than international standards in talks between two sides on April 25 in Islamabad. The Pakistani side had argued for a transit fee corresponding to international norms, but agreed to fixing the transit fee a little lower than international standards for the sake of inking a deal it termed as a ‘peace pipeline’ between Pakistan and India.

Sources also said that India wants Pakistan to fix the transit fee for the lifetime of the project, without any further revisions to the transit fee. However, Pakistan is of the view that the mechanism for determining the transit fee should be linked to the international gas sales price, and that the transit fee should also be open to revision according to variations in the gas price charged by Iran.

The sources said there had never been an agreement anywhere in the world where a transit fee was fixed and did not allow for revisions. International norms require revisions in transit fees as the gas price is revised by gas exporting countries, they added.

The sources also said transportation charges would be determined after the project feasibility report was finalised, and that a company would be set up to implement the project and ensure its security according to a mutually agreed framework.

Meanwhile, Pakistan and Iran have agreed on the draft of the Gas Sales Purchase Agreement (GSPA) for the IPI project, and both sides are ready to sign on it. The Cabinet Economic Co-ordination Committee (ECC) has also received of the copy of the GSPA draft, the sources said.

Daily Times - Leading News Resource of Pakistan

 

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Senate question hour : ‘Govt working on generating 2,200MW on emergency basis’​

* Water and Power minister says govt working on emergency short and long-term strategies to overcome power crisis​

ISLAMABAD: The country is facing a power deficit of more than 3,000MW and the elected government is chalking out short and long-term strategies to overcome the crisis, including arrangements to generate 2,200MW on an emergency basis, Water and Power Minister Raja Pervez Ashraf told the Upper House during the Senate question hour on Wednesday.

Responding to queries from senators on the power crisis, Ashraf said: “The country has been facing a power crisis for the last two years due to the gap in supply and demand. Presently there is an over 3,000MW shortfall in the system. Both short term and long term planning is being done to overcome this crisis.”

Ashraf said arrangements were being made to generate 2,200MW on an emergency basis. He said 500MW power had been generated by enhancing the capacity of various existing units. “Besides this, the government is also working on saving power by controlling pilferages,” he added.

Long-term plans include the private and public sector generating 3,000 megawatts each, and the government is also looking into alternate energy resources to respond to the situation, he said.

To minimise load shedding and ensure continuous power supply, Ashraf said the PEPCO had initiated immediate crisis management, and “a high-level Load Management Commission has been set up to oversee the load management programme”.

About the construction of hydropower projects, Ashraf said the government had allocated over Rs 2.8 billion for the construction of the Kurram Tangi Dam, and Rs 847 million of this amount had been released to WAPDA. “The construction work has not started yet. It will take four years to complete after it starts,” he added.

In a written response to a question from Senator Raza Muhammad Raza, Ashraf informed the House that the contract of the Gomal Zam Dam project had been re-awarded and that 18.6 percent of the work on the dam had been completed so far.

“The Frontier Works Organisation is responsible for the designing and execution of works through their sub-contractors M/s Sino-hydro Corporation for the dam and hydropower component, and M/s Tekser for the Irrigation component,” he elaborated. To a supplementary question, Ashraf said that work on the Gomal Zam Dam had been restarted after a significant delay.

Daily Times - Leading News Resource of Pakistan

 

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Plan to set up thermal power plants rejected ​

ISLAMABAD (May 01 2008): The government on Wednesday rejected water and power ministry's plan for establishing two thermal power plants that is believed to be a serious setback to the ministry's efforts for generating thermal power through public sector funding.

The water and power ministry plan was rejected at the Central Development Working Party (CDWP) meeting held here with Planning Commission Deputy Chairman Dr Akram Sheikh in the chair, said Planning Commission spokesman Muhammad Asif Sheikh.

The ministry had sought a funding of Rs 5.77 billion from the Public Sector Development Programme (PSDP) allocation for establishing combined cycle power plants in Faisalabad district and Dadu district.

The drive of establishing thermal power plants in public sector was launched by the water and power ministry amid signs that private investors are not coming forward to invest heavily in thermal power generation. "We have asked water and power authorities to look for investors from the private sector. The government will not release any fund from the PSDP," said the spokesman.

Business Recorder [Pakistan's First Financial Daily]

 

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Textile sector to provide 200 megawatts of power if KESC pays for fuel ​

ISLAMABAD (May 01 2008): The textile sector having own captive power plants has shown willingness to provide 150-200MW to Karachi city if KESC pays for fuel. It was decided in a meeting recently held in Karachi headed by the Chief Secretary of Sindh, Fazul-ur Rehman, which was attended by the textile industrialists and the KESC representatives.

Sources disclosed that the textile sector was already supplying 200MW to Punjab through Wapda grid. "The sector has 400MW surplus self-generated electricity whereas KESC is suffering from a shortfall of 500MW," sources said.

"So, it has been decided to supply electricity to KESC with a condition that fuel will be paid by it. KESC will have to pay at the rate of Rs 1.40 per unit and the gas charges will be paid by KESC itself," they confirmed it to this scribe.

The textile industries have their own captive power plants dependent on furnace oil or gas as input. "A single power plant has a capacity to generate 50MW. Sources said that basically this proposal was floated by the former prime minister Shaukat Aziz who had given the textile industrialists the idea of selling extra electricity produced through captive power plants.

Business Recorder [Pakistan's First Financial Daily]

 

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Chinese urged to relocate industries to Pakistan ​

Friday, May 02, 2008

LAHORE: Globalisation has provided Chinese investors with a golden opportunity to relocate their large-scale industries to Pakistan to reap the benefits of its most conducive business policies as compared to other regional countries.

This was the gist of speeches made by Provincial Food Minister Malik Nadeem Kamran and Lahore Chamber of Commerce and Industry President Mohammad Ali Mian to a 14-member Chinese delegation, led by Shenzen Chamber of International Commerce President He Xuewen.

The Chinese team comprised representatives of real estate developers, construction companies, computer hardware trading, investment consultants as well as high-ranking government officers.

In his speech, Shenzen Chamber President He Xuewen said the delegation was visiting Pakistan for having first-hand knowledge about available business opportunities and hoped in the coming days the trade between Pakistan and China would touch new heights.

He said Shenzen being the fourth best-performing economy with a 15 per cent annual growth rate had a huge business potential for Pakistani entrepreneurs, adding Shenzen had 300,000 business entities that were busy in all types of businesses and “this makes a very strong point for the LCCI to arrange a visit to Shenzen.”

The provincial minister, who was representing both Pakistan Muslim League (N) President Shahbaz Sharif and Punjab Chief Minister Sardar Dost Mohammad Khosa, said the government would extend maximum facilitation to Chinese investors for setting up industries in Punjab.

He said the Punjab government was ready to develop a consultancy exchange programme with Shenzen for the development of industrial infrastructure, hi-tech agricultural parks, logistics and transport, branding strategies and promotion of IT industry. LCCI President Mohammad Ali Mian informed the delegation that the February 18 elections and the consequent formation of democratic governments at the federal and provincial levels had sent strong positive signals to the outer world and a large number of foreign investors “are now planning to shift their businesses to Pakistan.”

He said Pakistan is strategically located providing the shortest route for China to the Middle East, Africa and Europe. As per available figures, he said, 10,000 industries were relocating per annum in China and Pakistan could be a lucrative location for many of these industries.

He said the trade between Pakistan and China through proper channel increased from US$1,489 million in 2004-05 to $2,956 million in 2006-07, a rise of around 100 per cent over a period of three years. The volume of trade is expected to jump to $15 billion over the next five years as a result of a free trade agreement between the two sides.

Chinese urged to relocate industries to Pakistan

 

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Phenomenal decline of computer industry in Pakistan ​

Friday, May 02, 2008

The computer industry has assumed unprecedented importance in the global economic arena and it is regarded as the fourth pillar of economy. In Pakistan, the private sector has been contributing as the main driver for growth in this industry from the last so many years. It’s a fact that the importance of the industry has always been acknowledged at the official level and the government(s) has also expressed a strong resolve to take steps for the promotion of the industry but the ground realities are depicting the picture otherwise. One of the harsh ground realities is that the Personal Computer density in Pakistan is 1.5, which compares unfavourably with other countries of the Asia-Pacific region. We often talk about how to compete with these countries and what needs to be done to enhance computer density as the computer density co-relates to several other parameters of development it is necessary that steps be taken to improve the PC penetration and thereby bridge the digital divide.

A recent report is quite alarming in regard with Pakistan’s PC/server market as it shows that the market has experienced a slowdown in 2007 with its annual growth rate declining to 9.6 per cent from 16.4 per cent recorded during the previous year. The latest data in this regard released by Springboard Research, a leading innovator in the IT market industry, says that Pakistan registered 629,836 unit shipments of PCs and servers in 2007. For the last reported period, Q4 2007, the market grew 11 per cent YTY with 148,613 PC and server unit shipments.

While we make comparison with the growth of the IT and computer industry in other countries of the region, a serious question arises that why we are not on a par with them when the private sector is striving hard to promote this vital sector of the economy and the government has also declared the promotion of the sector one of its top-most priority. To answer this question we need to have a comparative look at the state of affairs and the actual role and incentives provided by governments concerned to their IT industry. Turkey has exempted its computer industry from GST, import duty and corporate income tax while it has allowed personal income tax for 10 years. Vietnam has given the industry exemption from GST and import duty besides 4 years’ exemption from corporate income tax and relaxation in personal income tax ranging from 3 to 35 per cent. Thailand and Malaysia have also offered a similar sort of incentives to their industry which is being translated into steady growth of this sector in the above-mentioned countries.

Despite the poor computer density in Pakistan, the private sector has made huge efforts to streamline the sector which is the backbone of the national economy as well all other sectors of the economy.

As a result of this hard work Pakistan has achieved a certain level of success over the years, but the sudden slowdown has created a panic in the market which needs to be addressed without further delay and the government ought to come forward and rescue this ailing sector and to reinitiate the progress and growth of the sector.

The Competitiveness Support Fund (CSF), a partner institute of the World Economic Forum (WEF) in Pakistan, has recently issued “WEF Global Information Technology Report 2007-2008”, which ranks Pakistan 89th out of 127 countries in terms of nation’s preparedness to effectively promote business, improve investment climate and develop infrastructure. Pakistan was ranked 84 in the previous year and report shows a five-point decline just in one year. The report also suggested that a coherent government vision on information and communication technologies, coupled with an early focus on education are keys to spur network readiness and to lay the foundations for sustainable growth. The contents of the report ought to be an eye-opener for the decision-makers, especially with regard to policies related to IT and computer industry.

While revisiting to the report of Springboard Research, we find some interesting comments regarding the computer industry of Pakistan. The reports says that Pakistan’s IT market is in between a “growth” and “decline” stage, where the country’s political stability will play a major role in overall market performance. The report also says that before the imposition of the 15 per cent GST in June 2006, Pakistan’s PC/server market was a “diamond in the rough”, but since then, a downward trend in the IT market has been noticed. The government’s recent decision not to withdraw or reduce the GST has weakened the growing IT market in the country, as well as decreased the confidence of the private investor.

The reports and data available suggest that the introduction of the 15 per cent sales tax in the financial year 2006-07 increased the price of computers which increased the cost of doing business. The average price of PC reported by local assemblers and retailers increased up to 20 per cent. This is one of the factors which have negatively impacted the growth of the IT sector as evident by export figures for the first six months of the financial year 2007-08. If the value of exports for the first six months is extrapolated to the full year it would be 149.37 million, which is a growth of 28.7 per cent over the previous year. This is well below the growth registered in previous years.

Though the previous governments could not comprehend the effects of a slowdown of the computer industry in Pakistan, it is heartening to note that the Economic Coordination Committee of the Cabinet considered the Ministry of Information Technology Summary sent in February last that recommends that certain relief steps ought to be taken to save the computer industry of the country. It is worth mentioning here that in the IT policy approved by the Cabinet in the year 2000 comprised various incentives to promote the IT sector of the country. Initially these steps made a positive impact on the domestic growth as well as IT exports, but the derailing and reversing of the policy has resulted in huge damage for the industry as well as the interests of the computer-literate community in the country, which needs to be strengthened instead of discouragement. The computer industry is still optimistic that sanity will finally prevail at the decision-making level and Pakistan will again be on the path of growth and progress of this vital sector.

The writer is the founding president of the Pakistan Computer Association, a representative body of the computer industry in Pakistan. e-mail: info@pakcomputerassociation.com

Phenomenal decline of computer industry in Pakistan

 

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$4bn peace plan for NWFP​

PESHAWAR, May 1: Chief Minister of NWFP Ameer Haider Khan Hoti will unveil a $4 billion peace plan that envisages a 30 per cent reduction in militancy within three years, retrieval of the areas lost to militants and improvement in the writ of the state, according to a document obtained by Dawn.

The plan, put together by a task force of the Awami National Party, envisions a peace jirga comprising provincial ministers and legislators.

The government has set up a peace committee for Malakand to restore peace in Swat but the plan proposes a larger jirga with its terms of reference outlined.

Sources said the chief minister would unveil the plan in the NWFP assembly, to be convened soon.

The speech will outline the objectives of the plan – reducing the level of insurgency in the province by 30 per cent within three years, including attacks on security forces and suicide and roadside bombings, reclaiming areas lost to militants and strengthening the writ of the state.

It envisages an increase in the number of police personnel by 8,000 men and Frontier Constabulary by 6,000.

It seeks reforms in police, revival of executive magistracy, support for the recently-established regional coordinating officers and 10 Regional Peace Conferences of Ulema.

A member of the task force said a donors’ conference would be convened to finance the peace plan.

He said some countries had already shown interest in financing the plan.

“There is a great deal of interest. The Saudis, Americans, European Union, Scandinavians and Chinese have all shown interest in the peace plan,” said Khalid Aziz who played a key role in drafting the plan.

Mr Aziz, a former chief secretary and head of the Regional Institute of Policy Research and Training, is a member of the task force co-chaired by ANP’s Afrasiab Khattak and another retired civil servant, Humayoun Khan.

It includes MNA Bushra Gohar, academician Ijaz Khan, Mohammad Raza Khan, Bacha Khan Education Trust chief Zubaida Khatoon and Ijaz Anwar, a chartered accountant.

The plan provides for creation of a permanent Provincial Peace Board to oversee, review, discuss, analyse and recommend actions to restore peace.

The eight-page document calls for setting up a board to help implement a media strategy in communities and social circles and work towards improving the monitoring and communication network.

It includes the setting up of 1,000 community FM radio stations.

It also provides for creation of a board for legal and institutional changes to suggest reforms to address the larger issue of delivery of justice not only through institutional reforms but also by developing an alternative dispute resolution system.

It includes a plan for the capacity building of police and Frontier Constabulary and training and raising their strength.

A social, economic and psychological rehabilitation programme for 12,000 militants is also planned.

The plan proposes a Provincial Livelihood Programme to develop income-generation strategy.

It calls for introduction of social sector reforms, including syllabus reforms and a health insurance scheme.

It provides for generation of employment through a labour-intensive infrastructure development programme, setting up corporations in fruit, vegetables, agriculture and livestock sectors and re-establishment of the Industrial Investment and Revival Corporation.

It includes a Rs600 million Rural Mobilisation Endowment Fund, formation of 5,000 village peace committees, micro-credit schemes at the community level and skill development projects in 500 seminaries.

The peace plan envisages creation of 7,000 jobs annually for the three-year period and 10,000 daily-wage jobs annually through public works.

It calls for closer coordination and a mechanism for institutional support among various state organs involved in security cover, including the military, Frontier Corps, Frontier Constabulary and police.

Mr Aziz , however, acknowledged that the NWFP did not have the capacity to implement such an all-encompassing plan.

At present, the province has the capacity to spend and utilise up to $800 million, according to available record.

“The government will have to hire people from private sector to increase its capacity and spend the money through communities to achieve the desired results,” said Mr Aziz.

He underlined the need for taking a holistic view of the situation in the NWFP in terms of the situation in Afghanistan and the tribal region.

“You cannot view the situation in the NWFP in isolation,” he said, adding that the success of the plan would also depend on the overall political and economic reform package for the Federally Administered Tribal Areas and the revival, strengthening and integration of the Pakistan-Afghan Peace Jirga.

Commenting on the peace plan, Chief Minister Hoti told Dawn: “The international community needs to understand that instead of firing a multi-million dollar missile that causes collateral damage it is better to invest that money to improve the lives of the people. They need to send out a powerful message to the people that this whole war on terror is not just about killing, it’s also about changing their lives for the better.”He was optimistic that international donors would respond to his call for contributing to the plan.

He said he had told the British foreign minister that the international community needed to invest in education, health and drinking water projects to improve the lives of the people.

“I was told by a western diplomat that the bureaucracy in their country was like a slow-moving elephant and I told them that the elephant needs to run a bit faster now. We need help and its urgent.”

$4bn peace plan for NWFP -DAWN - Top Stories; May 02, 2008

 

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Power shortage rises to 3,000MW​

LAHORE, May 1: Power shortage in the country increased to 3,000 megawatts on Thursday as supply dropped to about 11,500MW against a demand of 14,500MW.

Officials of the Pakistan Electric Power Company (Pepco) attributed the shortage to a substantial drop in hydel generation. They said the hydel source last year had contributed over 5,000MW for 20 hours a day. Its contribution declined to 3,500MW on Thursday and that too only for five hours, they added.

“Pepco is surviving on independent power producers (IPPs) and its own thermal generation for almost 20 hours and concentrating all hydel generation during the peak hours -- 6pm to 10pm,” the officials said.

Giving details about Thursday’s generation, Tahir Basharat Cheema, director general of Pepco for energy conservation, said IPPs generated 4,800MW, company’s own thermal units a record 3,130MW, hydel source 3,500MW and rental units 130MW. The total generation was 11,560MW against the demand of 14,560MW.

The water level in Tarbela Dam is around 60 feet below last year’s level. For power generation, the height counts more than the quantity of water.

The drop in water height had cost Pepco dearly, bringing the generation from 5,000MW for 20 hours to 3,500 for five hours, Mr Cheema said.

“These are 24-hour average figures,” said an official of the power wing of Wapda. The situation kept both improving and worsening, he said, adding that the fluctuation generated conflicting reports in the media.

“The media picture depends on a particular point of time which forms the benchmark; at one point of time during the peak hours, the deficit may go up to 3,500MW or even more for a few minutes before returning to normal shortage.

“If one takes that peak as a reference point, the picture may change drastically. Otherwise, the entire generation and distribution is computerised and could be calculated to the last units,” he said.

There was no denying that the country was facing its worst energy crisis, but the company could hardly cheat on figures beyond a point, he added.

Power shortage rises to 3,000MW -DAWN - Top Stories; May 02, 2008

 

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Shortages boost food inflation to 10.3pc: ADB​

ISLAMABAD, May 1: The Asian Development Bank (ADB) has said that Pakistan’s imports are increasing in 2007-08 because of higher international oil prices and rising demand for raw material for industrial use.

With the expectation of a moderate expansion in global trade and a slowdown in US economy, export growth is expected to remain contained in the face of an increased competition in global textile markets and a continued lack of diversification of both export commodities and markets, it further stated.

FY2008 is thus likely to see the trade deficit deteriorate to 7.1pc of the GDP, and the current account deficit would remain high at 5.5pc of the GDP, says bank’s South Asian economic report also made available to Dawn.

It also said that continuation of tight monetary policy, high international oil prices, and slow export growth are expected to curb GDP growth to 6.5pc in 2007-08.

It said expansionary fiscal policy is expected to continue during the current financial year, with a large increase in spending on development and relief measures announced in the federal budget.

Public sector development expenditures, including expenditure on rehabilitation of earthquake affected areas, are projected to increase by 19.9pc from the FY2007 level.

After a slight reduction in the pace of expansion in FY2006, Pakistan’s economy posted a robust and broad-based growth in FY2007, expanding 7.0pc.

The momentum of growth is expected to continue into FY2008 in the wake of budgetary measures aimed at supporting productivity in the agriculture sector and boosting investment in the manufacturing sector.

Strong aggregate demand in recent years has catalysed growth in Pakistan, but has also generated inflationary pressures.

Inflation peaked at 9.3pc during FY2005, but declined only marginally to 7.8pc in FY2007 from 7.9pc in FY2006.

Measures taken by the central bank during the first half of FY2007 (tightening monetary conditions) led to control of overall core inflation. However, shortages of some essential food items, such as rice, edible oil, meat, pulses, milk and fresh vegetables — notwithstanding the overall strong recovery of the agriculture sector — boosted inflation of food to 10.3pc in FY2007.

Food prices increased further to 10.7pc in October 2007. Overall inflation, however, continued a gradual decline to 7.5pc due mainly to reduced inflation for non-food items and maintenance of tight monetary conditions.

Notwithstanding the tight monetary policy, fiscal policy continued to be expansionary.

Total public expenditure in FY2007, at Rs1,675bn, was 19.5pc higher than the previous year.

Actual development expenditure in FY2007, at Rs434bn, also was higher (18.9pc) than development expenditure the previous year.

Despite strong revenue performance, the fiscal deficit as a percentage of GDP rose to 4.3pc in FY2007.

The remarkable increase (around 20pc) in revenue collection the same year did not prevent tax revenue as percentage of the GDP from falling slightly to 10.5pc in FY2007 from 10.6pc in FY2006.

Import growth decelerated sharply to 7.9pc in FY2007 from 33.3pc the preceding year, a result of the reduced demand for consumer goods and industrial inputs, as well as softening of international oil prices during the first half of the fiscal year.

Shortages boost food inflation to 10.3pc: ADB -DAWN - Business; May 02, 2008

 

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‘Structural reforms needed to hedge against inflation’​

KARACHI: The inflationary trends in the prices of essential commodities are set to rise further, thanks to the latest increase in domestic oil prices; however, economists underlined the need for bringing in major structural changes in the economy to safeguard the common man from the salvo of rising inflation.

Though, they admit that domestic price hike is linked with soaring prices of crude petroleum in the global market, they believed that some ‘way out’ has to be found as a safety valve against the imported component of inflation.

Stressing for continuing with the subsidies on oil products to domestic consumers, economists called for exploring avenues to finance these subsidies, which otherwise, are causing a whooping budget deficit.

The latest increase in local oil prices was the fourth raise since March 15, when caretaker government raised the prices following a cap on domestic oil products for more than one year despite surging world oil prices. The March CPI rose by 14.12 percent because of high inflation, which registered 20 percent growth because of higher food and oil prices. This was the highest CPI rise country has witnessed in the last thirteen years.

Though, electricity and petroleum products have a weight of 6.4 percent in the CPI basket, analysts said that it has a spiraling impact on the prices of transport, leading to food inflation.

Economists painted further gloomy picture as far as the April inflation data is concerned because it would be having the impact the upward revision in the oil prices in March, which could not be seen in inflation of that month.

Dr Kaisar Bangali, a well-known economist, thinks that government should come up with a short-term relief strategy for the common man, however a long-term policy is needed to cope with the pressing challenges to economy.

Advocating the subsidy on domestic oil prices to provide relief to masses, he however stated that avenues should be explored to finance these subsidies. “The parameters on which economy was run in the past need changes and a whole range of structural reforms are required to sustain the economic growth as well as to bring about a real change in quality of life of the common man”, he emphasised.

Dr Asad Sayeed, renowned economist, said that high petroleum prices’ burden is either being borne by government or masses, however the oil marketing companies are making the windfall profits in this situation. “These companies are enjoying high profit margins, which needs to be reviewed in order to provide relief to the people”, he said.

When asked how the people could be hedged from high inflation, Dr Sayeed said that it would definitely be done through raise in the salaries and wages. “Government already increased minimum wage and must come with more such measures so that the people, especially poor strata of the society could be safeguarded against these shocks”, he contended.

Daily Times - Leading News Resource of Pakistan

 

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Pakistan to import 3m lint bales amid low production ​

KARACHI: An expected shortfall in cotton production is likely to fuel jump in imports from India, USA and other prime cotton producing countries this year.

”We expect to import around 3 million bales of various qualities amounting to $46.5 billion till end this year” Director on Board of Karachi Cotton Association (KCA), exporter, importer and ginner, Ghulam Rabbani said on Thursday.

He said country’s demand for raw cotton has gone up to around 15 million bales (of 175 kg each), while the production this year, due to short supply of water and pesticides besides use of un-certified seed is expected to be 12 million bales.

Rabbani said, “in last crop season 2007-08, the country achieved only 11.8 million bales against a target of 14.14 million cotton bales.” Textile and spinning sector has to bear load of the imports.

We are expecting a shortfall of more than three million bales, unlike Pakistan, India is expecting a better cotton crop led in part by an increase in cultivation of genetically modified cotton and a rise in the acreage.

He said among the leading producers of cotton, India is seen as an emerging force in the global market as production continues to outpace domestic demand.

A lot of cotton is already being imported from USA as it is of good quality. At current price levels, importing Indian and US cotton is not a viable proposition.

Currently, US lint is available around 82 cents per pound while Indian cotton is available for about 79 cents per pound.

Daily Times - Leading News Resource of Pakistan

 

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Sugar and textile mills can produce 2,500MW electricity​

LAHORE: The country can overcome electricity shortfall by getting 2,500MW from the sugar and textile mills, which they are ready to provide to the power supplying companies, the industry sources said.

An industrialist said, “the sugar and textile mills can produce at least 2,500MW of electricity.” “The current shortfall is estimated at around 3,000MW, and if both sectors provide electricity then the shortfall would be narrowed.

The source told Daily Times here on Tuesday that the government has evolved a policy for the sugar mills to produce electricity and currently it is receiving 22MW from two sugar mills. If the tariff issue is resolved and the sugar millers are facilitated then around 2,000MW can be produced in one to two years.

Textile sector has also shown willingness for providing around 200MW to Karachi Electricity Supply Company (KESC) if it pays for fuel.

The source said, “though the policy for buying electricity from sugar mills has been established but yet it needs implementation.”

The sugar millers have to replace their ordinary boilers with pressure boilers. In sugar industry, electricity would be produced adding bagasse (sugarcane waist) with coal.

Pakistan Sugar Mills Association (PSMA) Vice Chairman, Iskandar M Khan, said that the government made policy of buying electricity from PSMA and now only tariff issue is impeding the electricity production. He said that sugar mills are self sufficient in electricity generation and “If the government provides us with sufficient finance then the current power shortage would end in one year,” There are around 84 sugar mills in the country and at least 74 are in operation. “Each mill can produce around 20 to 25MW of electricity,” he added.

Faisalabad Electricity Supply Corporation (FESCO) and Peshawar Electricity Supply Corporation (PESCO) signed agreements with two sugar mills for providing electricity.

FESCO is taking 7MW from Skaharganj Sugar Mill at the rate of Rs 5.14 per Kilowatt- hour. PESCO signed agreement with Almoiz Sugam Mills and would buy 15MW at the rate of Rs 4.88.

Reportedly, PEPCO Managing Director, Munawar Baseer, has said that the country would follow suit with other Asian developing countries where bagasee-based generation already contributes to five to six percent of their energy resources.

India has a vision of approaching 9,000MW of power generation through baggase by the year 2017.

The textile industry sources said that the mills are already providing around 200MW and still they have a capacity of producing 400MW. They claimed that the cost of the electricity production by the textile mills would be less than that of Independent Power Producers.

Daily Times - Leading News Resource of Pakistan

 

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Pakistan one of top favourable economies: World Bank ​

ISLAMABAD (May 02 2008): Pakistan has been ranked as one of the top favourable economies in the world in terms of economic performance states "Doing Business 2008", a recent report released by the World Bank said.

According to the report, Pakistan is at the second place compared to other South Asian countries based on certain economic indicators such as; ease of doing business, dealing with licenses, and protecting investors as identified by the analysts. The other countries include Sri Lanka, Bangladesh and Nepal. Pakistan has comparatively better business environment in terms of paying taxes and registration of assets, the report added.

The report evaluates business activities based on regulations affecting the 10 stages of a business's life; starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. It is pertinent to note that in the overall global rating of 178 countries, Pakistan is rated at 76th as compared to India rated at 120th.

With its fast paced IT industry, Pakistan is emerging as a powerhouse in the South Asian region due to the government's friendly policies. These include 100 percent foreign equity ownership, 100 percent repatriation of profits for foreign investors and tax exemption for the sector till 2013.

The availability of a large pool of English-proficient skilled professionals, affordable connectivity rates and competitive infrastructure and operational costs are some of the other benefits that Pakistan enjoys. Due to the same factors, an increased number of foreign IT companies prefer Pakistan for their outsourcing operations and setting up development centers.

'Doing Business 2008' is the fifth in a series of annual reports that evaluates the regulations that directly impact economic growth provides objective measures of business regulations and their enforcement. The data is collected across 178 countries and selected cities at the sub-national and regional level.

Business Recorder [Pakistan's First Financial Daily]

 

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IRO-2002 repealed, minimum wage fixed at Rs 6,000 ​

ISLAMABAD (May 02 2008): A special incentive package was prepared for the labourers welfare, fixing minimum wage at Rs 6,000, announced by Labour, Manpower and Overseas Pakistanis Minister Syed Khurshid Shah on the occasion of May Day at the Convention Centre here on Thursday.

The previously minimum wage was Rs 4,600, which was not even sufficient to buy two times meal. The package also contains 33 percent increase in workers pension. Khurshid Shah said that 80,000 new housing units would be constructed for the labour class, adding the Punjab government will give ownership rights to the low-paid employees living in government quarters.

Trade unions leaders of industrial units especially those privatised by the successive governments in the past demanded of the government that some workers were terminated without golden handshake as their cases were not processed properly depriving them of their rights.

After listening to the grievances of trade unions leaders, Prime Minister Syed Yousuf Raza Gilani had formed a Committee comprising Labour Minister Syed Khurshid Shah, Leader of the House in Senate Raza Rabbani and former MNA Chaudhry Manzoor Hussain. The Committee drafted the package taking into account the genuine grievances of the workers on case to case basis and submitted its recommendations to the Prime Minister.

The Prime Minister after detailed review approved the package on April 30 as a gift to labourers, who had been facing hardships for such a long time. The package will also help in rehabilitating workers laid off from industrial units without proper service benefits.

Khurshid Shah said that Services Special Powers Ordinance, 2002, would also be repealed, which gives unlimited powers to the owners to hire or fire any employee without mentioning specific offence committed by him. The package also encompasses rehabilitation of workers, who were handicapped in performance of their duties and will help in modifying old-age benefit scheme.

APP ADDS: Announcing more attractive packages for labour class, the minister said that government has decided to repeal IRO-2002 Ordinance and would restore the relevant clauses of IRO-1969 to create conformity for friendly industrial relations.

"It is not just an announcement, but a reality to modify all Labour Laws according to the ratified International Labour Organisation conventions to safeguard the interests of workers," Shah said.

Minister for Information and Broadcasting Sherry Rehman, Senator Dr Akbar Khawaja, Secretary Labour and Manpower Malik Asif Hayat and PPP leaders Nayyer Hussain Bukhari, Manzoor Hussain, Dr Israr Ahmed, Qazi Sultan Mehmood and a large number of union leaders and workers were also present.

The government wants to eliminate discrepancies among regular and contractual workers, the minister said adding that PPP government was against "contractual employment".

The minister also announced to increase minimum pension from Rs1,500 to Rs2,000. Under Workers Welfare Fund (WWF), he said the marriage grant for workers' children, would be given now without holding any `lucky draw' to facilitating every one. Earlier the grant was given only to the winner of lucky draws. He said that workers profit funds of Rs18,400 paid previously to a worker in a year has been enhanced to Rs24,000.

Khurshid Shah said the government would set up hospitals in every city for providing medical facilities to the industrial workers. Besides, schools would also be established in those districts where large number of workers are living.

However, he said that all high schools being run under the worker welfare fund would be upgraded to the level of higher secondary schools.

The minister said that the government is also actively working to repeal the section 27/2-B under which a ban on banking unions was imposed. A special committee has already been formed in this regard, he added.

He paid rich tribute to the leadership qualities of the two former prime ministers Shaheed Zulfiqar Ali Bhutto and his daughter Shaheed Mohtarama Benazir Bhutto.

Zulfiqar Ali Bhutto was the first who announced to celebrate May 1 with work force, he added. "I am among one of you and as a worker of PPP and citizen of Pakistan, it is my promise that I would live and die with you," he said.

Earlier, the Minister also attended another seminar at Aabpara Community Centre and criticised the previous government for the ongoing wheat and power crisis. The Minister said that use of cell phones by a large number of people does not mean that the country was on the path of development. "We are committed to overcome these crises, but we need some time and the people have to cooperate with us," he said.

Business Recorder [Pakistan's First Financial Daily]