Pakistan Economy - News & Updates - Archive

[sohailbutt]

Fish farming has become profitable industry

Proactive involvement of private sector, high fish production and soft loans to the farmers has made fish farming a profitable industry in the province. This was stated by Director General Fisheries Punjab Dr Muhammad Ayub while addressing a departmental meeting at Fisheries Research and Training Institute (FRTI).

He observed that due to aquatic pollution, fish production had diminished to a large extent in natural water of the province, however, this shortfall could be bridged through fish farming. Dr Ayub further said that untreated toxic effluents of factories and industrial units thrown into the rivers and canals were hampering fish production in natural waters.

He said besides 14 hatcheries being operated by the Department, 29 nursery units were supplying fish seed to the farmers. More than 70 hatcheries were also functioning in the private sector, he concluded.

Business Recorder [Pakistan's First Financial Daily]

 

[sohailbutt]

Agriculture scientists urged to develop hybrid, bio-technological new varieties

The goal of self-sufficiency and food security can not be achieved without introducing high yielding varieties of agricultural products. It is the moral duty of breeders and agricultural scientists to develop hybrid and bio-technological new verities in order to obtain maximum foreign exchange.

This was stated by Vice Chancellor Professor Iqrar Ahmad Khan while addressing the 33rd meeting of university senate here on Saturday. He urged the scientists to initiate animal genome mechanism for the development of various milking animal's breeds. Dr Iqrar stressed the need for expansion of infrastructure of the university so that community development activities can be flourished. He hoped that by introducing 100 major courses and after completion of mega development project, UAF would be placed at No one university of the country.

Dr Iqrar expressed his concerns over declining trend of agricultural system and said that India has enhanced its cotton production from 10 million bales to 30 million bales within a few years but we were lagging behind with 12 million bales to 10 million bales which, off course, is challenge for agricultural scientists. He proposed that an agricultural council should be established like other organisation, ie Pakistan Engineering Council, and Pakistan Medical Council at national level so that an agricultural scientist could get due recognition.

Highlighting the mega project, Dr Iqrar told that there would be a student service centre at campus to cater more than 500 students at a time at cafeteria. He stressed the need for bridging the gap between agricultural scientists and other stakeholders. He revealed that university would introduce a new cotton verity having great yield potential and resistance against various dangerous pests.

Earlier, while presenting the university budget for the year 2007-08 treasurer Abdul Ghafoor Khan said that the total budget estimate for non-development and development was Rs 1370.692 million. He said that HEC and ministry of Science and Technology will provide 466.155 million for development.

He said that by introducing financial and budgetary reforms, university has reduced the budget deficit and increased its income by utilising own resources. Two members of the university senate Professor Dr Abdul Salam of PBG department and Professor Munir Ahmad Sheikh of Chemistry department were elected unopposed for university syndicate for the period of three years. Chaudhry Muhammad Hussain Registrar acted as secretary senate.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Incentives for manufacturing​

A zero-rated import duty on raw materials has been proposed by the Planning Commission as part of the budget 2008-09 to improve the performance of the faltering manufacturing sectors.

The commission is believed to have forwarded its recommendations to the federal government, aimed at providing incentives to manufacturing sectors which have not performed satisfactorily or at the expected level during the last few years.

Five major sectors -- automobiles, pharmaceuticals, transport, communication and construction — have been identified for the proposed concessions in import duty as well as other incentives.

“In the first place, we have proposed zero-rated import duty on all raw materials and expect the government would approve it in the next budget”, said Dr Shaukat Hameed Khan, Member, Manufacturing in the Planning Commission.

He, however, told Dawn that minor duty might be retained on a couple of raw materials. The current maximum 25 per cent import duty on raw materials, he said, was expected to be brought down to zero to five per cent in the new budget.

The economies of scale in industry particularly in China and India pose a threat to Pakistan’s export-oriented manufacturing by producing cheap products. This, he added, should be an eye- opener for the policy makers, the public and private manufacturing sectors.

Currently, Pakistan’s export earnings are at less than 50 per cent of the imports. As compared to nearly $28 billion worth of imports during July-March fiscal 2008, exports were lower than half at $13.5 billion. There has been generally sluggish growth in exports of traditional items like textiles.

The Planning Commission has stressed the need to focus on value addition to make local products globally competitive.

While import duty concessions may help for a while, independent analysts said, these incentives along with depreciation of the rupee, will sustain industrial inefficiencies. Local products can be made internationally competitive by improving work culture including human skills and improved management practices, to raise productivity. Unfortunately, short-term incentives provided to industries in distress often turn into permanent crutches.

Over the past few years, the level of foreign investment picked up fast but most of it has gone into import-oriented industries like automobiles and telecommunication. Analysts said there is need to encourage investment in export-oriented manufacturing and in modernising agriculture.

Despite problems, Mr Khan was optimistic that the manufacturing sector would continue to grow by 5-6 per cent. The GDP was not all that disappointing and only needed a push and encouragement from the government.

China’s manufacturing sector was growing at 9-10 per cent. “And if we achieve and maintain 6-7 per cent growth rate in the manufacturing sector, it will be good. Hopefully, the new budget will provide some support to this sector to grow further”, the Planning Commission official said.

Responding to a question, Mr Khan said if duty on imported raw material used in the tyre and tube industry was brought down from 25 per cent to zero to five per cent, it would encourage local manufacturing of the products. The main consumption centres of the product, he said, were Karachi, Lahore, Faisalabad, Peshawar and Islamabad which could have better quality of local tyres and tubes after the reduction in their import duty.

“This is how the government can also discourage smuggling of tyres and tubes via Afghan Transit Trade”. He regretted that goods imported for Afghanistan were sent back to Pakistan.

The General Tyres Company was producing 1.7 million tyres every year which included one million for cars, and if import duty on raw materials was drastically cut as was proposed, the production of tyres could be enhanced and people would get tyres and tubes at cheaper rates.

Similarly, he said, the annual production of tyres for buses, which at present is 1,50,000 units, could be enhanced to 400,000 units if import duty was reduced from 25 per cent to five percent or set at zero rate in the next budget.

The Planning Commission official warned that the industrialised nations including Japan were making India the hub of major trade and industrial activities and it should not go unnoticed by the policy makers.

He said the Suzuki Car Company of Japan had set up its $3 billion new plant in India and was asking Pakistan to import zero-duty engines from there. “But we have opposed this move”, he said adding that Japan was hesitating in setting up Suzuki cars’ engine and transmission plant in Pakistan.

“If Pakistan accepts Suzuki company’s offer of importing zero-rate engines, no doubt it will bring down prices of cars in the country, but the net beneficiary will be India and our car industry will be a loser. That is why we have asked the Suzuki car manufacturers to provide engines for their assembling in Pakistan”.

Replying to a question, he said four sub-groups had been set up to promote local pharmaceutical industry which would also be eligible for zero-rated import duty on its raw materials. Similarly, he said, concessions for transport, communication and constructions sectors had also been recommended to be offered in the budget.

Mr Khan said that raising productivity was necessary for economic growth and to remain competitive in the world economy. Pakistan’s manufacturing and industrial sectors were suffering from various structural problems resulting in slow growth rate of output and exports, low levels of investment, high concentration of manufacturing industries, technical inefficiencies in allocations, poor quality of products and low levels of research and development (R&D) activities. All these factors result in slow growth rates of productivity making products uncompetitive in the world market.

The traditional industries such as food and textiles still accounted for an overwhelming share of the manufacturing output. Food industries accounted for 13.8 per cent and textile industries for 24.0 per cent of the total manufacturing value- added, he said.

Mr Khan referred to Vision 2030 of the Planning Commission which says that Pakistan has to make important strategic choices to ensure sustainable growth in the manufacturing sector in a rapidly changing international competitive environment. This requires massive structural changes rather than a marginal change—to a shift in the production paradigm to technology and knowledge based industrialisation, with a focus on the quantitative and qualitative growth of an integrated and competitive industry in the private sector. The inefficiencies of import substitution must give way to an export-led strategy, and to diversification from traditional industries and services.

Incentives for manufacturing -DAWN - Business; May 12, 2008

 

[Neo]

How to make power cost affordable?​

The industry is angry over abrupt and arbitrary decision of the privatised Karachi Electric Supply Company (KESC) for increasing the Fuel Adjustment Surcharge (FAS) by almost 100 per cent from March. Its representatives say that they are approaching the Competition Commission (CC) to look into this ‘’unethical trade practice’’.

The general perception in local business is that it is not only the rising world oil prices that is impacting on production cost but also the government’s growing appetite for revenue that has made imported oil one of the convenient source of taxes. The industry is therefore trying to make a case for reducing taxation on fuel.

Pakistan Hosiery Manufacturers Association (PHMA) has taken the initiative to seek immediate intervention of the Competition Commission to waive ‘’these exorbitant charges and stop KESC from such unethical trade practice in the future’’.

During peak hours, the KESC has increased B-3 tariff on those having a sanctioned load of 11,000 volts to Rs1.29 per unit from Rs0.66 per unit. The manufacturing units with sanctioned load of 400 volts are now paying Rs1.42 per units instead of 0.71 per unit.

During off peak hours, the KESC is asking for Rs1.04 for a unit from industries with sanctioned load of 400 volts as against Rs0.53 per unit. For industries with sanctioned load of 11,000 volts, the KESC is levying Rs0.91 per unit FAS as against Rs 0.40.

PHMA wants that while reviewing electricity tariff, the National Electric and Power Regulatory Authority (NEPRA) should give industry and business an opportunity to present their point of view. “ The rise in electric power tariff needs to be discussed in context of the government’s taxation on import and commissions being given to oil marketing companies and petrol pumps’’, a representative of the SITE Association of Industry asserted.

‘’Our dependence on furnace oil is increasing because of reduction in gas supply’’ the Chief Executive Officer of KESC (retired) General S.M. Amjad had informed this correspondent last month while trying to explain the mounting operational cost and cash flow problems.

Countrywide, 30 per cent of national power generation is based on furnace oil while 48.5 per cent depends on gas-run generators. While Wapda has a mix of power generation sources including about 38 per cent from hydro sources, the power generation cost is much less than that of KESC where bulk of electric power is being generated by furnace oil-fired projects. Fuel cost is pass through and consumers have to bear the impact of rising cost of furnace oil. A senior executive of Hubco disclosed that furnace oil price has gone up by more than ten times since 1997 when the project was commissioned. The furnace oil cost was Rs2,250 a ton in 1997 and is now Rs45,000 a ton. The high cost has impacted upon the cash flow position of Wapda which is not paying Hubco’s bill for supply of power. The Hubco and other IPPs suffered on account of Wapda’s default and failed to pay furnace oil bill of Pakistan State Oil (PSO). In retaliation, the PSO stopped oil supply to Hubco and eventually the federal government had to intervene to restore oil supply to Hubco and other IPPs.

The federal government is paying subsidies of about Rs275 billion to Wapda, KESC and IPPs to reduce the impact of rising oil prices. But businessmen wonder as to why the government should pay such a huge subsidy and also collect 15 per cent sales tax plus development surcharge, excise and other levies. The convenient way would be to reduce or rationalise tax on oil. The impact of 15 per cent sales tax on oil, when international price was $60 a barrel and now when it is $120 a barrel, is much different and more significant. Similarly, the impact of 15 per cent tax and margins for oil marketing companies and for petrol pumps increases sharply as international oil prices soar. The business now wants a rationalisation of tax on oil.

As Wapda and KESC suffer from power shortages, the textile sector has come forward to offer its surplus power from the captive power plants installed in factory premises. “A dormant capacity of approximately 325 megawatt can be brought on line immediately’’ a leader of All Pakistan Textile Mills Association (APTMA) disclosed. In Punjab, agreements for supply of about 75 megawatt power from oil run captive power plants have been reached with Wapda.

In Karachi, the KESC’s chief executive is being blamed by the textile industry for putting one condition after the other rather than going for a quick increase in power supply, though in smaller quantity, from captive power plants. There have been a few round of negotiations between KESC and the representatives of APTMA and SITE Association. This team has been talking to Hyderabad Electric Supply and Distribution Company (HESCO) which is said to be far more responsive and accommodative than KESC.

The operators of captive power plants now want the same level of subsidy from government as is given to Wapda, KESC and IPPs. ‘’The captive power operators are purchasing furnace oil at fast escalating prices that is rendering them uncompetitive and driving them to bankruptcy,’’ an APTMA leader remarked.

While the local industry seeks support from government to generate and supply electricity to KESC and Wapda systems, there is a rising demand for exploring alternate sources of energy. On Wednesday, a delegation of All Pakistan Hosiery Manufacturers Association met Sindh Environmental and Alternate Energy Minister Mr Askari Taqvi to explore government’s co-operation in installing wind or solar energy units in their factories.

The installation of wind and solar energy units involve heavy capital investment but recurring cost is insignificant and is free of any environmental hazards. For the last several decades, the government has been exploring possibilities of alternate energy. Now that the world oil prices are over $120 per barrel and rising, the cost of alternative energy is becoming competitive. The need for alternative energy is also being felt now more than ever before.

How to make power cost affordable? -DAWN - Business; May 12, 2008

 

[Neo]

Stagnant crop yield​

FOR the last over four years, the country has not been able to add even an acre to its existing cultivable land area, and the entire agricultural activities remain limited to 55.5 million acres.

The limiting factor is the shortage of water which restricts the country to bring more land under cultivation.

Since the commissioning of Tarbella Dam some 30 years ago, there has been no increase in water storage capacity. According to a survey of dams, the country instead has lost 28 per cent capacity (around four million acre feet) of existing dams.

According to the post-Tarbella planning, the country should have increased reservoir capacity at seven per cent per year, or around one million acre feet a year. An additional reservoir capacity of around 30maf should have been built in the country, whereas, it has lost 4maf of its original capacity – a loss of 34maf in a country where the total availability is 80maf to 110maf only, depending on the hydrological conditions.

The water supply situation can affect the final yield of any crop up to 50 per cent. And the yield of almost every crop, except a few, is on the decline. For example, the production of wheat per hectare was 2,667kg in 1999-00, which, in 2007 dropped to 2,500kg. With the increasing population at a rate of around 3.5 million per annum, the causes of present food crunch is not difficult to decipher.

The staple food picture becomes grimmer when taken in the context of experts’ view on the potential of the current seed variety (Inqalab-91) and the yield our farmers are getting from it. Experts say that Inqalab-91 has the potential to yield 70 maunds per acre, despite being 17-year-old and prone to diseases and losing vitality. Our common farmer is getting 25 maunds and a progressive farmer, who may be next door neighbour, around 45 maunds per acre. The difference between the potential yield, yields procured by a common farmer and a progressive farmer also explains the food crisis.

Similar is the case with rice production. The ‘super variety’ of rice has a potential to produce 45 maunds per acre. The common farmer gets only 25 maunds whereas the progressive farmer gets up to 35 maunds. The other cash crop, cotton, suffers from the same malady; the seed yield potential is 45 maunds against common farmers’ production of 17 maunds and progressive farmers’ output of 23 maunds.

If the existing gap between the lowest and the highest yield is bridged, Pakistan would not only come out of food crisis, but also have surplus for export.

Take the case of wheat, if the current national average of wheat can be increased by five maunds per acre, the total production (from current sowing on 20 million acres) would go up by almost two million tons, which, at the current price factor, would add Rs65 billion – or $1 billion to the economy. Similarly, if rice production goes up by five maunds per acre, the national and rural economies would get a benefit of around 30 billion from its currently crop sown on six million acres. A similar increase in cotton can pump Rs35 billion in the economy.

One can imagine the effect of $2 billion being added to the economy with a minimal effort on three crops only.

Agriculture experts reckon that it is achievable within next eight to 10 years provided the government makes a concerted effort in this direction. Simply what is needed is formulation of a sound policy with regard to provision of water, fertiliser, insecticides, certified seeds and technical and professional training to the farmers.

According to them, water plays 50 per cent role in agriculture, fertiliser 35 per cent, seed 25 per cent, and insecticide 25 per cent and cultural practices contribute 25 per cent. If the policy-makers can ensure that farmer gets required water, applies balanced fertiliser, uses certified seeds, applies weedicide and pesticides properly and timely and his cultural practices are in tune with the times, Pakistan would come out of the current food crisis.

Two areas are the most crucial to realise the goal of food autarky --. research and extension wings of the government. Research alone can make a lot of difference in the final yield through developing new high-yielding varieties of seeds and improving cultural practices. The agriculture planners will have to redefine their concept of research; it also includes management practices with developing new seeds. Research can also play a decisive role in increasing the yield and solving food shortage.

The extension service, which is supposed to take results of research to a common farmer, can also make over 60 per cent difference in yield by educating farmers on balanced use of fertiliser, weedicide and pesticides.

The government on its part should develop water resources so that farmers get water on time. No private sector would ever invest in the farm infrastructure without ensuring windfall profits, which Pakistan’s agriculture can hardly afford. Similar is the case of research. There is also need to re-energise extension services to educate, train and keep farmers informed about the latest technologies and practices.

The future of the farm economy depends on how we respond to the situation; take it as a doomsday scenario or an opportunity to rise to the occasion.

Stagnant crop yield -DAWN - Business; May 12, 2008

 

[Neo]

Small dams, big gains​

PRIME Minister Yousaf Raza Gilani has committed, as part of his short-term national agenda of March 29, to build more small water storage dams countrywide on a fast track basis.The Central Development Working Party (CDWP) on April 30 approved construction of three such dams in Balochistan at Gwadar, Pasni and Shadi Kaur at an estimated cost of Rs2.63 billion.

Though a water-rich country, Pakistan is currently amongst the most water-stressed nations of the world, as its huge water resources remain under-developed. It is estimated that half of the country’s irrigation water is wasted due to poorly managed irrigation system and inadequate water infrastructure. In this context, construction of small storage dams can play a key role in promotion of agriculture, placing maximum area under cultivation, and thus bringing in a “green revolution” within a short span of time.

Developing small dams had never been the priority of successive governments. Since 1996, there had been no significant addition to small dams though a number of schemes were planned. The successive governments failed to focus on small dams’ construction, in spite of much scope in all the provinces. Though considerable experience in planning, design and construction of small dams is available locally since the 60s, it has not been utilised effectively. In every province, Small Dams Organisation continues to function, with supporting technical staff as an arm of irrigation department.

But the planners’ focus has always been on developing large and mega water projects, which are too costly and require long lead-time, bear negative impacts on large-scale population dislocation, other social and environmental concerns and have political dimensions too. These projects, costing multi-million dollars and requiring at least 10 to 12 years for completion, often run into snags and are delayed. The cost of two options may be visualised from the fact that 12 small dams in the Potohar region were completed in 1996 at a cost of $35.4 million, whereas Diamer-Basha dam is estimated to cost $8.5 billion.

Construction of large dams, which is feasible only in far-flung and isolated areas, faces communication and logistic problems and limitations of availability of labour. The development of infrastructure for large dams is consequently an expensive proposition, besides being totally dependent on foreign sources for dam construction.

Thus, local community-based small dams provide a simple, cheaper, reliable and manageable solution to water storage issues. Typical examples are cited of four small dams, Rawal, Simli, Misriot and Tanaza, which meet effectively water requirements of Rawalpindi, Islamabad and surrounding areas.

Nevertheless, small dams are not an alternative to large dams and mega multi-purpose water projects and can be considered of supplementary or complimentary nature. However, small dams are equally important to store and conserve water for increasing irrigation and drinking water sources and improving socio-economic conditions of the area. Also, small dams may not result in sustainable development of agriculture, in contrast to large dams, but its impact on groundwater development is positive.

Pakistan has constructed in all 58 small dams so far. According to reliable estimates, it has the potential to build another 750 small dams to meet water requirements of growing local and regional population. The trend in favour of small dams is being pursued in the developing countries. Sri Lanka has constructed some 12,000 small dams and Nepal more than 2,000. In India, which is considered a leading dam builder, 19,134 small dams have been developed and 52 small dams would shortly be constructed on Chenab and other rivers originating from Kashmir.

Punjab has constructed 32 small dams and the NWFP 15 small dams. Feasibility studies for constructing a large number of small dams in the country have confirmed economic viability, whereas studies are being undertaken for many others. Hundreds of potential sites for developing small dams countrywide include 20 small dams in the NWFP.

Plans are under way to construct another 20 small dams in Balochistan where many other potential sites have been identified. But no physical work has been initiated on any of these schemes as yet. Similarly, schemes for constructing another six small dams in the capital territory, for which economic viability was confirmed, have been shelved recently by the Capital Development Authority.

A special feature of small dams, where reasonable water head is available, is the generation of hydroelectric power, almost as a by-product. Small power stations can be established at such locations, based on proven technology, to generate electricity at the least cost and with low operation and maintenance charges. In present times, most of the dams are hydropower dams. These power stations will cater to the electrification of remote areas without any requirement to be connected with national grid.

Such small power stations of cumulative capacity of 242 MW are already in operation countrywide. Water and Power Development Authority (Wapda) operates eight small hydropower plants at Dargai, Jabban, Rasul, Chichoki Mallian, Shadiwal, Nandipur, Kurram Garhi and Renala. There are about 300 small hydropower stations in the Northern Areas generating 94 MW, providing electricity to the isolated network. There are another 11 small power stations in the NWFP generating five MW, which are operated in public and private sectors. Likewise, the government of the Azad Jammu and Kashmir successfully operates numerous hydropower stations including Jagran of 30 MW, Kundal Shahi, Leepa and Kathai, all of two MW capacity each.

According to studies conducted, potential exists to generate additional 2,166 MW hydroelectric power utilising proposed small dams. These schemes, which are power projects of capacity varying widely from 0.014 MW (14 KW) to 40 MW, can contribute effectively to the future power needs. Punjab plans to develop small low head projects on canals/barrages and streams/rivers. It has identified 306 sites on various canals and barrages, which can generate hydropower of cumulative capacity of 350 MW. However, no headway has been reported so far on its plans to set up small hydro-power plants under the Punjab Power Generation Policy announced about five years ago.

Likewise, five potential sites with low and medium head at canals in Sindh have the potential to generate 98 MW additionally. In the NWFP, 85 schemes of small hydro-power have been prepared of 570 MW cumulative capacities. Studies on 27 sites in the AJK verify potential of 230 MW power through small hydro-power projects. Northern Area, known for its rich water resources, has the potential of producing 885 MW at 139 identified sites for small dams.

Indeed, serious initiatives need to be taken by the government to implement small dams’ development programme, without further delay, utilising its own financial resources or seeking funds from the international donor agencies. The World Bank and the Asian Development Bank have already shown interest to finance small dams, as they did in the past.

(The contributor is currently on the Board of Directors of NESPAK)

Small dams, big gains -DAWN - Business; May 12, 2008

 

[Neo]

Is it a good option?​

Pakistan water sector is going through a crisis. Like energy, water demand is growing far more than available supply. Past efforts have focused more on enhancing supply through engineering solutions such as Indus basin development and other large scale investments.

To follow the same policy options in developing viable large projects seems to be the casualty of political impasse, high cost of developing additional cubic meter of water and may be due to much debated negative externality of not allocating enough water for preserving downstream environment.

Water demand management is still low on the agenda, as trade off’s have not been studied well enough in spite of large planned investment. The medium to long- term policy options to enhance supply are being worked out with a bias towards small dams. Is it a good option? I would like to share international experience by highlighting briefly two examples from countries where water scarcity is worst than Pakistan.

Yemen is one country where large scale investment in small dams has taken place. In a recent document, “Managing Water for Development Towards a Joint Vision for Water Resources and Agriculture”, Dr Gerhard Lichtenthäler, reports that farmers in a rural community pinned great hope in small dams, but when project was completed after two years, their access to water was not enhanced to the extent hoped for and only notable beneficiaries were few well owners from other villages indicating that a drop in groundwater levels has slowed.

Farmers in the dam vicinity still depend on their wells for reliable supply of water. The most notable aspect is its economics. Following the 2006 summer rainy season, the dam (measuring 120 x 60 x 3 meters deep) contained approximately 20,000 cubic meters. In comparison to this volume of water a single pump in the same basin can pump approximately three times as much groundwater per year, or approximately 60,000 cubic meters (based on facts that well yield of six litres per second, pumping 12 hours a day and a total of 240 days per year during growing seasons). With estimated irrigation efficiency of 30 per cent or more, according to report, the same amount of water that was stored in the dam could be saved annually by a single pump, which usually irrigates up to five hectares of land. A total of 1,500 wells in plain and 2,600 wells in the basin’s catchment exist in the region where small dam was constructed. It reveals that the cost of modern irrigation pump is estimated at approximately $7,000-10,000, the dam cost YR 89.5 million, or nearly half a million dollars, thus saving 50 times the amount of water the dam had stored.

There are lessons for Pakistan as it has huge inventory of wells but lacks the modern technology at farm levels to enhance water productivity and save water. However, some spadework needs to be done, based on identifying water management zones where modern technology (water harvesting, canal lining, and pressurised irrigation ) results in real water saving instead of so-called “paper water saving”), meaning, my gain can be someone else loss.

Oman, with condition similar to Balochistan also carry good experience on developing small dams. A very recent study by FAO also provided interesting policy options. The ministry of environments and water resources (MEWR) estimated the cost trade-offs of developing water or saving (paisa/cm) with policy options of supply enhancement (re-charge dams and storage dams) versus demand management (water pricing and more crop per drop and more jobs per drop ).

The study indicated that the cost for the first option ranged from 275 to 300 paisa’s per cm (1000 paisa equal one OR and .384 OR equal one dollar) and for later range from less than 10 paisa for improving surface irrigation, to over 100 phases for progressive domestic tariff. Clearly, demand management options are more cost effective. With rising cost of developing new supplies here and elsewhere, the demand management option needs to be explored based on sound policy studies, which in my view, are lacking in our decision-making process.

Two aspects in the future water policy cannot be ignored in managing water resource development. First, in the medium to long-term agriculture has to produce more with less water (more crops per drop) and second the available water will also compete for preserving environment.

Under this changing policy scenario, one must be sure that planned investment in small dams yields attractive returns as it may crowd out funds for other feasible options. Small dams option be based on rigorous analysis that investment is technically feasible, economically viable, socially acceptable and environmentally sound.

Pakistan has huge groundwater reserves (can be termed as dams provided by nature) which need to be managed with prudent demand management policies like sustainable resources use, adopting modern water saving technologies, reallocating water to high value crops and complimenting it with promoting conservation agriculture. If groundwater is properly managed, it can be also be one of the best hedge against drought management, and also of great importance to the agricultural economy.

Is it a good option? -DAWN - Business; May 12, 2008

 

[Neo]

Thermal power plant contract​

On April 16, a local engineering company was awarded the EPC (engineering, procurement and construction) contract — the first-ever to a Pakistani company — of an IPP (independent power producer) thermal power plant.

The 225-MW capacity gas- and oil-based dual-fired power plant is being constructed at Bhikki in Punjab. The local company will be responsible for engineering, procurement and construction activities related to the project, which has been sponsored by an overseas investor based in the UK. The initiative taken by the investor will go a long way in promoting domestic engineering industry in power sector. This will result in achieving self-reliance, technology transfer and import substitution in this field.

At a same time, local investors are not even prepared to procure indigenous machinery for power plant projects. Almost a dozen thermal power projects of varied capacity have achieved financial close recently for which all the EPC contracts have been finalised by the Pakistani sponsors with foreign companies.

Local industry is ignored to the extent that not a single item of machinery is being procured locally for these projects, in spite of existing capacity, capability and references for the same. These leading businessmen have even obtained duty concessions and exemptions to import the machinery items that otherwise are being produced locally as notified by the Federal Board of Revenue.

The Economic Coordination Committee (ECC) of the Cabinet has allowed on April 13 these IPPs to import heat-recovery steam generators (boilers), feed water pumps and cooling towers etc at five per cent custom duty. Otherwise, as per rules and regulations in vogue, 20 per cent statutory duty is applicable on import of these items that are manufactured locally, of comparable quality and at lower price.

Thermal power plant contract -DAWN - Business; May 12, 2008

 

[Neo]

Dubai's Abraaj interested in Pakistan agriculture​

DUBAI, May 12 - Dubai-based private equity firm Abraaj Capital said it is looking at investing in agriculture in Pakistan, but declined to comment on a London Financial Times report that it had bought farmland for the United Arab Emirates.

The FT reported on Monday that Abraaj, whose Chief Executive Officer Arif Naqvi is a Pakistani national, is working with the UAE government on agribusiness investments in Pakistan to increase food security and damp domestic inflation.. The UAE government in Abu Dhabi has been holding talks with Islamabad about a framework for investment in its agricultural sector as it seeks to secure cheaper, long-term supplies of staples such as wheat and rice, the FT reported.

"No comment on that article, but it is a sector we are looking at," Abraaj Managing Director Mustafa Abdelwadood told Reuters on Monday.

In March, Abraaj said it bought into Pakistani energy firm Bosicor to tap growing demand for petroleum products in the world's sixth most-populous nation.

Dubai's Abraaj interested in Pakistan agriculture - Yahoo! Singapore News

 

[Neo]

4,000 corporate entities show Rs0.1m income only ​

Tuesday, May 13, 2008

ISLAMABAD: Tax authorities have found that 4,000 corporate sector returns showed an income of only Rs100,000 during the current fiscal year, indicating massive tax evasion with the ‘tax facilitation exercise’ being carried out by the FBR for the last few years.

This startling fact was shared with business tycoons by FBR’s Member Fiscal Research Dr Aather Maqsood during his presentation at a pre-budget seminar jointly organised by the FBR and Federation of Pakistan Chambers of Commerce and Industry here on Monday.

In his analysis on corporate sector returns during tax years 2006 and 2007, Dr Maqsood said out of total received returns of the corporate sector, 23 per cent in 2006 and 17.5 per cent in 2007 declared their income around Rs100,000.

There were 25 per cent return filers in 2006 and 29.6 per cent in 2007 who declared their income in the range of Rs100,000 to Rs500,000, he added. Total registered corporate sector giants were 37,188, he said, out of which the FBR received over 16,000 returns in tax year 2006 and the compliance rate came to 44.2 per cent.

Out of total received returns in 2006, he said only 34pc showed their business as earning profits, 24pc showed losses and 42pc showed zero income. In tax year 2007, out of total received returns, 26.7pc showed their business as earning profits against 34pc in 2006, a 7pc decrease in companies which were making profits.

There were 16pc returns which showed losses and 58pc showed no income. Further analysis done by Dr Aather Maqsood revealed that there were only 299 companies in 2007, which had made losses in 2006, earned profits in the next year (2007). There were 860 companies, which had shown income in 2006, showed nil income in tax year 2007.

Sharing the future vision of the FBR, he said the government had envisaged a rise in the tax-to-GDP ratio of 5 per cent in the next 10 years as “the existing level is just over 10pc and the FBR wants to raise it up to 15pc.”

He asked the incumbent regime to show political will for bringing agriculture income, services sector, transportation and communications under the tax net in order to achieve an increase in the tax-to-GDP ratio.

He criticised the existing National Finance Commission (NFC) mechanism for distributing financial resources among the federating units, saying the provinces were used to get easy money without making any efforts to enhance their capacity for generating revenues and there was a need to discourage the trend. He also proposed the government to do away with the existing tax exemptions in the next budget.

Maqsood said the net 80pc revenue collection generated from indirect taxes originated from 18 commodities. He said people recommended unviable options to the government by asking to waive taxes on petroleum products and they did not know that about 50pc tax collection was generated from five major sectors including petroleum, telecoms, automobile and others.

The major contributors to direct taxes were oil and gas, telecommunications and banking sectors, he added. The business tycoons, while giving their input on the budget proposals for 2008-09, severely criticised the rampant increase in smuggling, under-invoicing, over-invoicing and serious flaws in CARE (customs administrative reforms) system.

A businessman pointed out that petroleum-related chemicals were cleared at the Karachi port at the rate of $600 but these were continuously being cleared at $100 at Quetta. Despite the introduction of CARE system at Karachi, the businessman alleged, corrupt practices were still going on and by getting Rs50,000 per container, customs authorities were clearing the containers.

4,000 corporate entities show Rs0.1m income only

 

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Wheat import target raised to 2.5m tonnes ​

Tuesday, May 13, 2008

ISLAMABAD: Pakistan has raised its wheat import target to 2.5 million tonnes this year from 1.5 million tonnes to build strategic reserves, the prime minister’s office said in a statement on Monday.

Pakistan expects wheat output of 21.8 million tonnes this year, below a target of 24 million tonnes, and 1 million tones less than domestic requirements. Last month, the government said it will import 1.5 million tonnes of wheat to meet the needs.

“Prime Minister Yusuf Raza Gilani asked the Ministry of Food and Agriculture to import 2.5 million tonnes of wheat, including the 1.5 million tonnes already approved ... to build strategic reserves,” the office said in a statement.

Prime Minister Yusuf Raza also directed provincial governments and law enforcement agencies to take measures against smuggling and hoarding of wheat besides cracking down on profiteers.

High food prices lifted Pakistan’s consumer price inflation to 17.2 per cent year-on-year in April. Regarding a 5 million tonne domestic wheat procurement target set by the government last month, a senior Food and Agriculture Ministry official, Qadir Bukhsh Baloch, said that 3 million tonnes of wheat had been bought from farmers.

Procurement would continue next month, he said. In March, the government raised the price it pays to farmers for wheat by nearly 23 per cent after failing to tempt producers to sell the grain for strategic stocks. The UN World Food Programme has said nearly half of Pakistan’s 160 million people risk going short of food because of a surge in prices.

Wheat import target raised to 2.5m tonnes

 

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How economy will perform as PML-N quits coalition ​

Tuesday, May 13, 2008

KARACHI: The decision of Pakistan Muslim League-Nawaz (PML-N) to opt out of the government has left independent economists and analysts thinking what would support an already dwindling economy.

Break-up of the coalition government, led by the Pakistan People’s Party (PPP), has come at a time when the country needed rulers with strong political will to take some tough decisions. With PML-N’s exit, a number of important portfolios will be vacant. Among them the finance ministry led by Ishaq Dar, commerce ministry headed by Shahid Khaqan Abbasi and petroleum ministry commanded by Khwaja Asif will be the worst sufferers.

In the next three days, the government is supposed to announce petroleum product prices for the next fortnight. The level of subsidies on oil has already mounted to the point where the national exchequer can bear no more burden. If passed on to the consumers like last month, who will be blamed?

“If not more, the economy is important as the judicial issue for the common people,” said Kaiser Bengali, a well-known economist. “Government cannot afford to lose even a day,” he said referring to macro-economic imbalances, which have assumed alarming proportions.

A trade deficit of more than $16 billion, power shortfall that has increased to 4,000 megawatts, inflation which is at 13-year high and investor sentiment battered by terrorist attacks are some of the pending issues needing immediate attention.

According to Saad bin Ahmed, a research analyst, in the short term the PPP will face administrative hitches as most of the important ministries like finance were held by PML-N leaders. “But I don’t see any major shift in policies, which have already been established like that for continuing privatisation.”

A number of working professionals, who spoke to The News, regretted the decision of PML-N. They said the problems facing a layman were too severe than the issue of reinstating judges. Moreover, in less than two month’s time, a new budget has to be prepared. Estimations for subsidies on oil, food and power have to be finalised. Sources for funding the fiscal deficit, which is expected to be huge, are to be arranged. New avenue for raising taxes were to be decided.

But now with PML-N out of cabinet, how far the existing government will go in taking the difficult decision of taxing the rich remains to be seen. “One time meal is more important for a daily wager than any judicial issue,” said Sabeen Khan, a banker. “Improvement in economy could help address social ills automatically. With increase in income, people won’t commit suicide and young man won’t resort to crime. That is where the immediate focus should be.” —SH

How economy will perform as PML-N quits coalition

 

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Economy is strong, has potential to grow: Dhedhi​

* AKD chairman says government should handle situation positively
* Capital market has potential to grow further​

LAHORE: The state of the economy is very strong and the government should go for investor friendly measures rather than issuing negative statements, said AKD Securities Chairman, Aqeel Karim Dhedhi, while talking to Daily Times.

“There is a great potential in Pakistan’s economy and it has the quality to grow rapidly in the coming years,” he said adding, “the capital market would remain positive if Pakistan Muslim League-Nawaz (PML-N) separates itself from the cabinet.”

He said, “the Prime Minister and the Finance Minister should be from the same party.” It happened in recent past that the Prime Minister gave a statement and the finance minister contradicted it, Dhedhi said. Pakistan’s capital market is still attractive and cheaper than other markets, he added.

“Only optimistic attitude, positive approach and encouraging statements are the need of the hour,” Dhedhi said. He was of the view the government should consult with the capital market stakeholders before imposing capital gain tax. He said that there is a huge potential in oil, gas, steel, energy and textile sector and the investors should go for it.

The government should facilitate the poor on petroleum products.

To a question, he said that imposition of Capital Gain Tax would affect the capital markets and disturb the flow of FDI in the real estate sector. “If the government and Federal Board of Revenue think that they will collect Rs 3 to 4 billion from capital gain tax then they should do it”, he said adding that it would not be possible in an any way.

Currently, there is zero capital gain tax while the government has been receiving almost Rs 4 billion from Capital Value Tax (CVT) only from capital market. Zero rate capital gain tax will expire by June 2008.

Dhedhi said that there was around $40 billion valuation in Pakistani capital market and rather to impose the capital gain tax the government should focus on the proper marketing options to increase the foreign investment in Pakistani capital market. He said that there were many areas where billion of dollars foreign investment could be brought. “Around US $4 billion can be obtained through Global Depository Receipts (GDRs) and launching global road show,” Dhedhi said adding that the US dollar rate would come down in the coming days but, however, the government minister should refrain from giving negative statements. “These statements do not help the economy rather it creates negative impacts and impressions of the country,” he said.

Taking on the value addition and dividend, he said that unfortunately, some companies of capital market are not going for value addition in their product and also not paying dividend to their shareholders and just making inter company investment, which should be discouraged.

He said that the oil import bill in the coming days would be lowered, as huge reserves of oil and gas have been explored in the country. He said that the power, fertilizer, telecom and E&P sectors were rapidly growing and would further grow in the near future so the government and investors should focus for the development of these sectors.

He was of the view that at least 150,000 direct employment would be generated from the mineral sector while it also serves the energy demand of the country. Responding to a question, he rejected that the growth of agriculture and industry had declined. He argued that the cotton, wheat and rice production had been increased during the last few years. He further said that the demand of fertilizer had been increasing, telecom and auto sectors are expanding. “The economy have witnessed a dip due to rapid increase in world crude oil prices” he said adding that all the world economies had been paying huge subsidy to their people in food items. “Despite the judiciary crisis, operations in Wana and Waziristan the economy have grown with 6 per cent growth rate which is not a disappointing trend”, he opined.

Daily Times - Leading News Resource of Pakistan

 

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Orascom posts strong set of Q1 results​

KARACHI: Orascom Telecom has posted Q1 results sustaining its business growth in the Asia region due to sustainable performance by Mobilink in a challenging business environment.

According to a press release on Monday, The Egyptian telecom company, a leading player in the Middle East, Africa, Pakistan and Bangladesh regions, posted a strong set of Q1 results with its top line growing 22 percent reaching $1,295 million. At the EBITDA level, the Orascom growth was even more positive with margins reaching 45.1 percent.

Zouhair A Khaliq, president and CEO, Mobilink while appreciating the commitment of Orascom Telecom to Pakistan Telecommunication sector said, “Our uninterrupted growth, a strong business revenue model and market sustainability, coupled with ongoing investment in excess of $2.5 billion in technology and infrastructure has catapulted us to the 9th position in Asia-Pacific.”

“Orascom Telecom is one of the most dynamic and fastest growing conglomerates in the world, the company has shown impressive results throughout the year; and the Q1 result of a strong and impressive growth is attributable to the leadership and foresightedness of Naguib Sawiris, chairman of Orascom Telecom.

Daily Times - Leading News Resource of Pakistan

 

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State of the economy: challenges and opportunities : Pakistan’s economy at critical juncture again: report​

ISLAMABAD: The Institute of Public Policy of the Beaconhouse National University Monday launched its First Annual Report titled ‘State of the economy: Challenges and opportunities.’

A team of eminent economists including former finance minister Sartaj Azia, Chairman of the Institute of Public Policy Shahid Javed Burki, Dr Hafiz A Pasha, Dr Parvez Hassan, Dr Akmal Hussain and Dr Aisha Ghaus-Pasha prepared the report. According to the report, Pakistan’s economy is once again at a critical juncture. After a period of strong economic expansion, relative macroeconomic stability, and increased foreign investor confidence, over the years 2003-2006, the country is now facing very serious economic strains and social challenge across a broad front.

The report says macroeconomic balances have deteriorated very sharply. Inflation has touched record levels this year on the back of three previous years of high single-digit inflation. The burden of high prices, especially of basic food items, has become intolerable for poor households. Poverty is consequently on the rise again and whatever decline was achieved in poverty appears to have been wiped out. Also, structural problems impeding growth have come dramatically to the forefront with major power shortfall and load shedding. On top of this, the report says the erosion of competitiveness of the country’s main exports, textile and clothing, and an upsurge in imports, especially due to high oil prices have led to a large increase in the trade imbalance. This has led to a continuing decline in the level of foreign exchange reserves and in the value of rupee.

In attempting to ***** the present position, the Report analyses the short term causes of economic unravelling as well as underlying longer term factors that continue to impede our economic and social progress.

The main objective of the Report is to outline a comprehensive economic and governance strategy that will facilitate the tackling of the above-mentioned challenges that require the urgent attention of the new leadership. The main message of the Report is that growth, equity, and financial soundness must be pursued simultaneously.

The report recommended that a radical macroeconomic adjustment must be made through a sharp cutback and restructuring of public spending that has grown sharply during the last five years. A determined effort should be made to mobilize tax revenue from segments of society whose contribution to tax revenues has come down sharply and those who escape the tax net and incentives should be given for savings.

Expanding the safety net for the poor by allocating at least Rs 50 billion to minimise the impact of rise in food prices. The report also recommended of making expansion and diversification of exports a central plan of growth revival strategy with special focus on agriculture and promising labour-intensive manufactured exports, based on geographical comparative advantage.

The report stressed that required macroeconomic adjustments must fully safeguard the livelihood of low-income families.

Finance Minister, Ishaque Dar was chief gust on the occasion. Addressing the participants he said that it was the first time the private sector had created an institution to do policy research and analysis, thus enabling government to receive independent and objective advice on public policy in critical areas.

“The policymaking circles in the country would look forward to the publication of such report since they would highlight contemporary issues of public policy,” he added

He regretted that inflation had spiralled and macro economic imbalances had reached unsustainable levels. The current account deficit has skyrocketed to 7.5 percent of the GDP while the fiscal deficit is projected at 9.5 percent of GDP. This was the consequence not only of policy inaction but also of wrong policies of the previous government.

In the last few weeks, the minister said the government had taken concrete measures to stabilize the situation.

Daily Times - Leading News Resource of Pakistan