Pakistan Economy - News & Updates - Archive

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'Pakistan market not ready for 3G mobile' ​

KARACHI (May 31 2008): Marwan Zawaydeh Chief Executive Officer (CEO) of Warid Telecom has said that presently Pakistani market is not ready for 3G mobile services because the cost of a mobile phone for this service is over Rs 50,000.

In an interview with Business Recorder on Friday, he said that a 3G mobile set is out of buying reach of common men due to which market does not show potential for service providers to make huge investments prematurely.

"3G service is a commodity for very few people. The feasibility of 3G services in Pakistan will depend very much on the license fee as well as network rollout cost," he maintained. He said "therefore, the mobile phone operators ask the government to consider 3G not as a licensing opportunity, rather an allocation of additional spectrum linked with rollout obligations."

However, he said that mobile operators use GPRS and Edge technology, which requires minimum investment and most of the available handsets support it can offer broadband connectivity and high-speed data services.

He pointed out that a lot of geographical locations in Pakistan are currently without basic voice services. However, cellular service providers are investing for providing phone connectivity for remote areas.

Warid Telecom has invested 1.3 billion dollar in Pakistan during the last three years. Its total investments and commitments will reach 1.5 billion dollar by the end of 2008. It will invest additional one billion dollar by the end of 2009, Marwan pointed out.

About the company's expansion plan, he said that Warid started pouring money heavily to double our network capacity and coverage to take our installed cell sites to more than 5,000 by the end of this year. "The latest addition has taken the number to 5000 destinations in Pakistan," he added.

Warid Telecom has signed two contracts with Huawei. They cover purchase and installation of 422 cell sites and will add 137 cities and 27 roads to the Warid Telecom's coverage network before the end of 2008, he said.

"These network expansion plans would be mainly, focusing the rural and the far-flung areas of the country," he added.

Recently, Warid Telecom has awarded a 300 million dollar contract to Sweden's Ericsson to expand its network in Pakistan. The GSM network extension will give additional capacity for five million subscribers and coverage of additional 100 cities before the end of current year, he said.

Warid Telecom has always brought innovations and convenience for its subscribers. Some of them have been launched while many of them are in the process considering the new innovations as an ongoing activity, CEO Warid Telecom said. It has recently revised post-paid tariffs with many new features. Similarly, it is the first operator providing scratch-card payment facility for post-paid subscriber, he said.

Business Recorder [Pakistan's First Financial Daily]

 

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Govt’s receipts on oil, gas decrease by Rs 35.128bn​

ISLAMABAD: Federal government’s receipts from surcharges and royalty from oil and gas sector have witnessed a decrease of Rs 35.128 billion during July-March period of current fiscal year 2007-08 as compared to the same period last year.

Receipts from surcharges and royalty from oil and gas sector amounted to Rs 57.877 billion during first nine months of current fiscal year as compared to Rs 93.005 billion in same period of last year.

Development surcharge on gas decreased from Rs 29.668 billion to Rs 16.878 billion. Similarly, development surcharge on petroleum decreased from Rs 34.888 billion to Rs 12.578 billion in the July-March period of last fiscal year. Royalty on oil and gas also decreased from Rs 28.449 billion to Rs 24.421 billion in July-March period of current fiscal year. Even though the government earned Rs 4 billion from discount retained on crude oil, the overall receipts remained less than the same period of last fiscal year.

The budget deficit of the country has reached at 5 percent of the GDP during July-March period of current fiscal year 2007-08 against the claim of the last government of containing it to just 4 percent of GDP in full fiscal year.

Authorities at the Ministry of Finance are trying to contain budget deficit at 6 percent of the GDP by end of this fiscal year; however, their efforts may fell short due to further increase in oil prices in the international market.

The federal government has suffered a budget deficit of Rs 494.958 billion during first half July-March period of current fiscal year 2007-08 against the annual target of Rs 399 billion during July-June period. “The main reason behind the sudden jump in budget deficit has been due to breach of fiscal discipline and expenditures of Rs 522 billion over and above of the budget due to allowing subsidies on POL prices and power tariff along with other non-development expenditures,” a senior official told.

The federal government has transferred Rs 297.560 billion during first nine months of this fiscal against Rs 290.304 billion in the same period of last fiscal to the four federating units Punjab, Sindh, NWFP and Balochistan as provincial share in federal revenues under interim National Finance Commission (NFC) Award announced by the President of Pakistan.

Total revenues of the government stood at Rs 974.276 billion and the total expenditures amounted to Rs 1.468 trillion during first nine months. The defence expenditures were Rs 196.162 billion during first nine months against annual allocation of Rs 275 billion. According to the official figures of Ministry of Finance, federal revenues during the first nine months were Rs 974.276 billion which include Rs 711.156 billion from tax revenue and non-tax revenues stood at Rs 263.120 billion.

According to the details of the expenditures during July-March period of current fiscal year, the government has spent a total sum of Rs 1.468 trillion that include, Rs 1.142 trillion were the non-development expenditures. The government paid Rs 354.236 billion as interest on local and foreign loans. Total defence expenditures were Rs 196.162 billion, the development expenditure and net lending during the first nine months stood at Rs 329.775 billion.

The budget deficit during the first half July-March stood at Rs 494.958 billion that was financed through borrowing from external resources of Rs 103.714 billion and Rs 390.744 billion were borrowed locally. The federal government has spent Rs 41.428 billion on servicing of foreign debt and Rs 312.808 billion were spent on servicing of domestic debt.

Daily Times - Leading News Resource of Pakistan

 

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Pakistan and India experts to inspect Baglihar, Neelum-Jhelum projects ​

LAHORE (June 01 2008): Pakistan and India have allowed each other's technical experts to inspect the Baglihar dam and Neelum-Jhelum project sites. The decision was taken in the meeting of the Indo-Pak Indus Water Commission held here on Saturday. India has assured Pakistan that Baglihar dam is being constructed in accordance with the suggestions of WB neutral expert.

The Pakistani delegation of technical experts will visit India to inspect the Baglihar dam in September this year. On the conclusion of first day's talks, Indian Commissioner Aranga Nathan and Pakistan Commissioner Jamaat Ali Shah briefed media persons about the day's proceedings.

Shah said that Pakistan was ready to remove Indian concerns about Neelum-Jhelum project. Aranga Nathan said both sides agreed to exchange information on monsoon season and flood forecast. He said that one-year performance report of Indus Water Commission had been endorsed by the two countries and it would be presented to the respective governments on June 1. The three-day talks will conclude on Monday, June 2.

Business Recorder [Pakistan's First Financial Daily]

 

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PSDP 2008-09: NEC likely to approve Rs 127.53bn for dam projects​

ISLAMABAD: For ensuring water availability and to over come power crises the government is likely to allocate in the Public Sector Development Programme, over Rs 127.53 billion for the development of dams and increasing power generation capacity in next fiscal year 2008-09.

The National Economic Council (NEC), schedule to meet on June 2. The NEC can change these allocations for further improvement. These are projects of national importance and it is expected that the government might ensure maximum allocation for them.

As the country is facing severe load shedding and the new government is also claiming to over come the power short fall on emergency basis, it is expected that the NEC in its meeting might ensure provision of more funds for these schemes.

The senior officials of the Planning Commission told Daily Times here Saturday that Water and Power Division has demanded Rs 103.867 billion for new and ongoing water sector various projects including dams. However, the priorities committee and later the Annual Plan Coordination Committee have proposed an amount of Rs62.019 billion for the development of water sector in the next fiscal year 2008-09.

Similarly for power sector, the ministry demanded Rs 105.333 billion for meeting the ongoing severe power crises in the country.

In water sector, total expected allocation for 66 projects is Rs62.019 billion in the Public Sector Development Programme for the year 2008-09. Maximum allocation has been made for these national importance projects for the construction of different major dams.

Some major projects are: Raising of Mangla Dam with allocation Rs 18 billion, Mirani Dam Rs300 million, Resettlement Action Plan – Mirani Dam Rs 50 million, Sabakzai Dam Rs 120 million, Kurram Tangi Dam Rs 500 million, Satpara Multipurpose Dam Rs 100 million, Gomal Zam Dam Rs 2 billion, Greater Thal Canal (Phase-I) Rs 1.5 billion, Kachhi Canal (Phasep-I) Rs 8.5 billion, Rainee Canal (Phase-I) Rs 3 billion, Lower Indus Right Bank Irrigation and Drainage, Sindh Rs 2.5 billion, Balochistan Effluent Disposal in to RBOD (RBOD-III) Rs 1.2 billion, Revamping/rehabilitation of irrigation and drainage system of Sindh Rs 2 billion, and many others.

For power sector, the APCC proposed Rs 65.514 billion for 45 projects and these are mainly related to power generation in the country. Some important major projects among these are; Khan-Khawar Hydro Power project, Shangla, Beshan, NWFP Rs 1.175 billion, Allai Khawar Hydro Power Project, Batagram, Besham NWFP Rs 2.535 billion, Dubir Khawar Hydro Power Project, Kohistan NWFP Rs 3.5 billion, Neelum Jhelum Hydropower Project AJK Rs 7.5 billion, 800MW Guddu Steam Power Project Rs 500 billion, 330MW Combined Cycle Dadu Power Rs 7.5 billion, 500MW Combined Cycle Power Plant at Chich Ki Malian Rs 5 billion, 425MW Combined Cycle Nandipur Power Plant Rs 5 billion, Muzaffargarh-Gatti 500KV T/Line Rs 1 billion and many others. ijaz kakakhel

Daily Times - Leading News Resource of Pakistan

 

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SBP stresses need for policies to increase agriculture productivity ​

KARACHI (June 01 2008): The State Bank of Pakistan (SBP) in its third quarterly report on Saturday said that increased production of agriculture commodities would help reduce the current account deficit.

THE DISAPPOINTING HARVESTS OF KEY CASH CROPS ARE PARTICULARLY TROUBLING FOR PAKISTAN: "The raise in the commodity production would not only raise farm incomes and help reduce poverty but would also help narrow the country's current account deficit through import substitution and higher exports, as well as help contain domestic inflation," the report said.

The SBP said that commodity prices were likely to remain strong. It is imperative that policies are framed to support farmers' ability to raise productivity substantially in the years ahead. Key areas requiring policy intervention remain the transmission of price gains by establishment of future markets, risk mitigation by crop insurance, storage facilities, increasing investment in agri-sector infrastructure, especially in water management, electricity, farm-to-market roads and in value-addition chains through processing.

The report said that earlier it was expected that wheat production would be near about the target and would help to boost the performance of Kharif crop. However it was lower than the target, disappointing the Kharif crop.

The disappointing harvests of key cash crops are particularly troubling for Pakistan. What is worrisome is the fact that domestic producers can not take advantage of the incentive offered by record international prices for many agri-commodities, such as rice and wheat, the SBP said.

Pakistan is a low-cost producer of many such commodities, and could, therefore, have benefited substantially if productivity growth and output had remained strong, the SBP report added.

The report said that delayed announcement of procurement price for wheat, along with rising prices of fertilisers and late sugarcane crushing and extended cotton picking caused reduction in the area under wheat crop. Additionally, anticipated decline in water availability at the time of sowing discouraged farmers to bring more area under wheat cultivation.

The water shortage seen in Rabi FY08 is likely to continue in Kharif FY09, as the carryover water balance for Kharif 2008 from the ending Rabi season was a negligible--0.013 MAF at Tarbela, Mangla and Chashma as on April 1, 2008.

Carryover water balance was 1.5 MAF during the beginning of the corresponding Kharif period. The water shortage is likely to impede sowing of the two major Kharif crops--rice and cotton. On the other hand, agriculture credit disbursement continued apace with its positive trend. The total agri disbursements, amounting to Rs 157.6 billion, were achieved during July-April FY08, depicting an increase of 34.9 percent.

Business Recorder [Pakistan's First Financial Daily]

 

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LSM posts dismal growth, declines by 4.2%: SBP ​

KARACHI: The Large Scale Manufacturing (LSM) sector posted a dismal growth of 4.8 percent in the first nine months of financial year 2008 compared with 9 percent in the same period last year, depicting 4.2 percent decline according to State Bank of Pakistan’s third quarterly report revealed Saturday. Initial prospects of achieving a reasonable growth in LSM sector during financial year 2008 were clouded by aggravating energy crisis coupled with high international commodity prices and political unrest through most of the year, the report commented.

It pointed out the operational constraints caused by energy shortages had a broad-based impact on manufacturing activities. However the impact was pronounced on metal sub-sector which also remained under the brunt of high international steel prices. Activities in textiles and chemicals (especially caustic soda) sub-sectors were also affected by frequent energy disruptions as well as rising input cost. An important contribution to the July-Mar financial year 2008 growth is from the sharp rise in sugar production (though decelerated relative to Jul-Jan financial year 2008). Excluding this sub-sector, Sugar industry registered a phenomenal growth despite financial problems and stalemate with government and farmers (on start of crushing season and price of sugarcane). The record high growth in sugar production is primarily owed to record bumper crop during financial year 2008. It is important to mention here that the LSM showed some recovery in January 2008, after incurring huge economic losses in December 2007. However, the recovery proved short-lived for a number of reasons: Availability of cotton remained constrained in the domestic market with high average prices during the period.

More importantly, slowdown in US and Euro area would put further pressures on the performance of textile sector. The activities in edible oil/ghee industry could not gather pace during Feb-Mar financial year 2008 reflecting ease in demand for the products due to rising prices. In addition, anecdotal evidence suggests that substitution of formal sector products with the informal sector products, particularly by small commercial users is a major contributory factor for slowdown in oil/ghee industry. Temporary suspension of palm oil supply from Karachi to the upcountry due to a row between ghee industry and truck owners for more than a week in April 2008, also hit the industry. Similarly, the production of fertilizers remained weak during Feb-Mar due to the closure of DAP plant for BMR up-gradation.

Furthermore, the recovery in remaining months of financial year 2008 also appears remote. High key commodity prices and steady depreciation of Rupee March 2008 onwards, further increased manufacturing. The LSM sector grew by 7.8 percent compared with 5.4 percent and 4.2 percent in Jan 2007 and Jan 2006 respectively. The quantum import of raw cotton during Feb-Mar financial year 2008 registered a growth of 76.4 percent over same period last year. In Feb-Mar financial year 2008, average cotton prices were 25.9 percent higher than same period last year and 6.9 percent higher than second quarter 2008. Unfortunately, the crisis-like situation in domestic energy sector as well as in international commodity market does not appear to be settling down in the near future. Thus, the LSM sector is likely to remain under pressure in the short-term.

However, the relative easing of a few commodity prices in international market (especially industrial metal including aluminum, copper, zinc, lead, etc) April 2008 onwards, if continued, may ease cost pressures from domestic manufacturers. Furthermore, presence of a still-strong demand in the economy may trigger a recovery in LSM. Specifically, aggregate demand has not yet weakened very substantially as: The worsening fiscal and current account deficits throughout the first nine months of financial year 2008 are reflective of a strong (though moderated) domestic demand.

Daily Times - Leading News Resource of Pakistan

 

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Economy showing increasing signs of stress ​

ARTICLE (June 01 2008): Recent information points to an increased risk of a decline in aggregate value-addition by important major crops in FY08 relative to the previous year. It was hoped that a wheat harvest close to the annual target would offset much of the drag from the disappointing aggregate performance of the FY08 kharif harvest.

But some reports suggest that wheat production in FY08 may also turn out to be substantially below the target. If these concerns prove correct then a weak performance by major crops would drag the annual growth substantially below the annual target.

ALONGSIDE IS THE EXECUTIVE SUMMARY OF STATE BANK OF PAKISTAN'S THIRD QUARTERLY REPORT FOR 2007-08, ISSUED ON SATURDAY. REAL SECTOR AGRICULTURE: Given that commodity prices are likely to remain strong, it is imperative that policies be framed to support farmers' ability to raise productivity substantially in the years ahead.

Key areas requiring policy intervention remain the transmission of price gains (establishment of futures markets), risk mitigation (crop insurance, storage facilities), increasing investment in agri-sector infrastructure (water management, electricity, farm-to-market roads, etc) and in value-addition chains (eg through processing).

The agriculture credit disbursement continued apace with its positive trends. The total agri disbursements amounting to Rs 157.6 billion during July-April FY08 - an increase of 34.9 percent YoY. The water shortage seen in rabi FY08 are likely to continue in first phase of kha rif FY09, while improved water availability is anticipated from better monsoon rains during the second phase of kharif FY09 (June-September). Fertilisers off-take increased by 9.2 percent during July-March FY08.

LARGE SCALE MANUFACTURING Initial prospects of achieving a reasonable growth in LSM sector during FY08 were clouded by aggravating energy crisis coupled with high international commodity prices and political unrest through most of the year. As a result, the LSM sector posted a dismal growth of 4.8 percent in the first nine months of FY08 compared with 9.0 percent in the same period of FY07.

It appears that energy shortages had a broad-based impact on manufacturing activities. The impact was more pronounced on metal sub-sector which also faced a steep increase in international steel prices. Activities in textiles and chemicals (especially caustic soda) industries were also affected by frequent energy disruptions as well as rising input cost.

Although a large number of industries (10 out of 15) delivered a weak performance; for some industries this was largely an outcome of sort-term developments including poor FY08 cotton harvest (hurting textile and allied industries), political unrest through most of period (especially the economic losses in the aftermath of 27th December 2007), temporary closures of certain industrial units for maintenance and/or up-gradation (eg, polyester fiber, paper and fertiliser), as well as power shortages (eg, metal industries and manufacturers of caustic soda, among others).

SERVICES: Information for the first nine months of FY08 suggests that the services sector is poised to achieve the annual targeted growth. The main contributors to this performance are wholesale & retail trade, transport storage and communication as well as public administration and defence sub-sectors.

In addition, social & personal services seem well placed to contribute positively towards upbeat annual growth in services sector. However, growth in finance & insurance sub-sector appears to slow due to weaker profitability of the commercial banks, nonetheless remain strong in FY08.

PRICES The impact of strong global inflationary pressures on domestic inflation has also been compounded by the adjustments of administered prices of key fuels and wheat.

All price indices have moved up significantly so far in FY08 and are significantly higher than the annual averages for the preceding five years. Consumer Price Index (CPI) inflation accelerated to 17.2 percent YoY during April, 2008 contributed by both food and non-food sub-groups. In particular, CPI food inflation reached to 25.5 percent in April, 2008.

The desired impact of tight monetary stance of SBP has been neutralised by huge government borrowings. Core inflation, measured by 20 percent trimmed mean, accelerated to double digits (14.1 percent - record high level) in April 2008. Persistence of inflationary pressures is also evident from non-food non-energy (NFNE) based core inflation that increased to 10.8 percent in April 2008.

MONEY AND BANKING The conduct of monetary policy has become increasingly challenging for SBP as the fiscal year has progressed, and inflationary pressures are gaining further strength.

The inflationary pressures have gained momentum, due to a number of factors, including supply shocks and continuing strong demand. The former include a sustained increase in global commodity prices (including unprecedented hikes in food and energy prices). The demand pressures, on the other hand, were mostly reflected in a sharp rise in the fiscal deficit that was largely monazite through a record increase in government borrowings from the central bank.

The pass through of high global commodity prices to domestic inflation is significant, and has increased in recent years as (a) the economy has become more open in recent years, and (b) the government began to gradually pass-on the rise in cost of key fuel (petrol and diesel), which was earlier frozen, to the domestic consumers.

Since the current higher prices in international markets are forecast to persist well above their historical averages in the foreseeable future, it is anticipated that the resulting inflationary expectations will be more lasting. There is also evidence that the erosion in purchasing power and squeeze in profit margins due to sustained increase in food and commodity prices is contributing to second round of inflationary pressures. Without continued monetary tightening, the inflationary pressures may turn into a wage-price spiral.

At the same time, the already high fiscal deficit is not only limiting the scope for containing the pass through of global inflation through subsidies and tariff reduction, challenges for monetary policy have been compounded as the government is relying more on borrowings from the central bank which is the most inflationary source of financing. Moreover, the liquidity injections from unpredictable government borrowings have weakened the transmission of policy interest rates to retail rates. In order to meet the above challenges, SBP is maintaining a tight monetary policy stance. However, this stance needs to be supported by fiscal prudence.

The overall credit demand is also strong despite a significant slowdown in credit growth to consumers, energy shortages and operational bottlenecks in major industries. This was mainly attributed to (1) rise in working capital requirements due to higher input costs; (2) the need for bridge financing to settle price differential claims of OMCs and IPPs; as well as (3) the higher fixed investment (visible in a few sectors, eg textile, refineries and power) in the month of March 2008.

FISCAL DEVELOPMENTS: Although official statistics on public finance for July-March FY08 are not yet available, SBP forecast suggests that the budget deficit for July-March FY08 (as a percentage of the estimated FY08 GDP) is likely to be significantly higher than the full-year FY07 figure.

The growth in government revenues in Q3-FY08 is expected to recover from the low of 1.8 percent seen during H1-FY08 as: (1) FBR tax receipts, which contribute the bulk of government revenues, have increased by 31 .3 percent in Q3-FY08 compared to 6.0 percent during H1-FY08, and (2) non-tax revenues have been bolstered with the disbursement of budgetary support grants of US $281.7 million and US $300 million from USA and Saudi Arabia respectively.

Government domestic borrowing during July-March FY08 grew strongly, reflecting a strong year-on-year increase in the deficit, and little change in external financing from FY07. Thus, with net retirements of borrowings from commercial banks and only Rs 1.7 billion in privatisation proceeds (against Rs 75 billion budgeted for FY08), the government borrowings from the central bank continued to rise sharply.

Indeed, incremental government borrowings from SBP as of May 10, 2008 have reached Rs 551.0 billion, pushing the outstanding stock of treasury bills with SBP to Rs 940.6 billion. This development has significantly augmented inflationary pressures in the economy, and raised risks to macroeconomic stability.

After a sharp rise of 6.4 percent in second quarter, the growth in the domestic debt moderated to 5.5 percent in Q3-FY08. Although, government availed substantial financing from SBP in this quarter, growth in floating debt decelerated due to significant retirements by the commercial banks, resulting in a moderation in debt growth during Q3-FY08.

EXTERNAL SECTOR BALANCE OF PAYMENTS The deterioration in Pakistan's overall balance of payment accelerated during Jul-April FY08. On the one hand, the current account deficit continued to expand while on the other, financial and capital account surplus shrank. Consequently, the country's foreign exchange reserves fell to US $11.5 billion and the rupee depreciated by 13.4 percent against US dollar by 22nd May 2008.

A large part of the deterioration in current account deficit emanated November 2007 onwards on account of substantial increase in import bill. The rise in import bill, in turn, was driven by both high prices and demand factors, with former having the greater role. The rise in import bill was accompanied with rising freight charges which together overshadowed improvement in export growth and impressive increase in current transfers in the period under review.

The financial and capital account surplus declined during July-April FY08, mainly due to substantial fall in foreign portfolio investment, which resulted due to: (a) outflow from stock market, and (b) due to delay in floatation of Global Depository Receipts (GDRs) and (c) delay in issuance of euro bonds.

TRADE ACCOUNT Pakistan's merchandise trade deficit widened to a record high of US $16.8 billion during July-April FY08, which is 37.8 percent higher than the annual trade deficit target. The deficit was fuelled by a very strong surge in imports as well as below -target export growth.

While the 10.2 percent YoY export growth during the July-April FY08 was an improvement over the previous year, it was nonetheless significantly lower than the 12.4 percent growth targeted for the period. The surge in imports was caused by both higher aggregate demand and rising international commodity prices. Growth in exports on the other hand was led by non-textiles, while textile exports registered a fall in the period under review.

Business Recorder [Pakistan's First Financial Daily]

 

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'150 megawatts power plant to be operational by September' ​

FAISALABAD (May 31 2008): A 150 megawatts private power plant at Samundri Road, which has been hired by Fesco, will become operational by September or October 2008, said Ahmad Saeed Akhtar Chief Executive, Faisalabad Electric Supply Company (Fesco).

Addressing members of Faisalabad Chamber of Commerce and Industry (FCCI) during a meeting here at Fesco Headquarter, he said that the utility was taking elaborated measures to provide maximum relief to consumers besides resolving their electricity-related problems.

FESCO is purchasing transformer-mounted trolleys to meet any emergency in the summer, he said and added that these trolleys would help in immediate replacement of brunt or defective transformer. He said Load Management Schedule had been prepared in consultation with business, trade and industrial communities and would be implemented soon.

FCCI Vice President Muzammal Sultan, Chairman Fesco Standing Committee Niaz Ahmad Sheikh, Vice Chairman Shahid Ahmad Sheikh, members Waheed Khaliq Ramey, Mian Shabbir Ahmad and others were also present on the occasion.

Business Recorder [Pakistan's First Financial Daily]

 

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ADB gives $75 million loan for Potohar irrigation water project ​

FAISALABAD (June 01 2008): Water availability during the second phase of Kharif FY09 (June-September) would largely depend on monsoon rains in the catchment areas and conducive high temperatures in the glacial belt, enough to precipitate the melting process, official sources said.

At present, water shortage for the full kharif season has been estimated at 3.7 percent relative to normal requirements for the season, and 1.6 percent lower compared with water availability during the preceding kharif season, they said.

The Indus River System Authority (Irsa) has estimated 7 percent shortage for the first phase of Kharif FY09, with the minimum daily average of only 5,100 cusecs available for Punjab and 3,500 cusecs for Sindh. Water shortages at the sowing time may lead to delay in sowing and shortfall in area under cultivation relative to target. Sources said that delayed sowing results in lower yield.

The water shortage seen in Rabi FY08 is likely to continue in Kharif FY09. The carryover water balance for Kharif 2008 from the ending Rabi season was a negligible 0.013 MAF at Tarbela, Mangla and Chashma as on April 1, 2008. Carryover water balance was 1.5 MAF during the beginning of the corresponding Kharif period. The water shortage is likely to impede sowing of the two major Kharif crops--rice and cotton.

In contrast to predictable water availability in a canal-fed area, water availability in barani areas is entirely dependent on rains. Therefore, yields of various crops are also based on the volume and timings of the rains in these areas.

Meanwhile, farmers are expected to bring more area under kharif crops, implement quality inputs in appropriate quantity with extra efforts to reap the benefits of prevailing higher prices of most of the agri produce. In addition, improved nominal farm income during FY08 will also help boost the confidence and optimism of the farmers. Importantly, area under cotton crop, which has almost stagnated over a decade, is expected to increase amid rising cotton prices.

While water shortages are estimated to continue during kharif FY09, rains during April would have also likely to support the optimism among the farmers. In addition, availability of certified seed, certified Bt cotton seeds, and effective pesticides are crucial factors to improve yield. Similarly, production of other two major kharif crops sugarcane and rice will also largely depend on sufficient monsoon rains, availability of irrigation water as well as efficient use of inputs. Meanwhile, Asian Development Bank (ADB) has extended a loan to improve irrigation and drinking water facilities across the Potohar Plateau, near Islamabad.

Under this project, which will be launched within the next month, Pakistan is to build multipurpose dams, irrigation canals, and drinking water supplies across the Potohar Plateau with $75 million loan provided by the Asian Development Bank (ADB).

The project will improve the livelihood of about 22,000 farming households by bringing irrigation to 11,500 hectares of agricultural land that used to rely on irregular and unpredictable rainfall, and improving the existing irrigation networks across another 10,000 hectares. The project will also increase supplies of water for domestic use to rural communities and small towns in districts of Attock, Rawalpindi, Jhelum, and Chakwal.

ADB rural development specialists believe that without secure water sources farming in rain-fed 'barani' areas usually have low productivity and carry high risk because crops often fail when there is drought. Farming is the traditional source of livelihood across Potohar, but crop yields in the 'barani' areas have been typically less than half of those in areas with river-fed irrigation. The traditional crops in barani areas are wheat and gram in winter and sorghum, millet, groundnuts or maize in summer when rainfall is sufficient.

This project will give farmers a reliable water supply, which will increase crop and livestock productivity and therefore increase people's incomes. At the same time, it will increase households' access to cleaner water, therefore reducing sickness and mortality rates caused by waterborne diseases. The construction of dams across the Potohar Plateau started as early as the 1960s.

But they were not as beneficial as had been hoped because local communities rarely participated in their development, farmers did not get the financial and technical support necessary to switch from rainfed agriculture to irrigated farming, and there was no watershed management resulting in a high reservoir sedimentation rate.

In this new project, a more holistic approach is being used that is simultaneously looking at upstream watershed management and downstream irrigated area development. It will also involve local communities to ensure that the project is demand-driven. Out of the total loan package, $20 million will be concessional and will carry low interest rates, while the balance of $55 million will be provided from ordinary capital resources under ADB's London interbank offered rate-based lending facility.

Business Recorder [Pakistan's First Financial Daily]

 

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Karachi-Europe direct container service launched ​

KARACHI (June 02 2008): The United Marine Agencies (UMA) on Saturday launched a new direct container service with cooperation of 'Hamburg Sud' between Karachi Port and Europe to cater to the ever-increasing demand of the growing trade volume between the two destinations. This was stated by Sohail Shams, Chief Executive Officer (CEO) of UMA at the launch ceremony of the service at a local hotel on Saturday evening.

KPT Chairman Vice Admiral Ahmad Hayat attended the ceremony as his last program as KPT chief before handing over the charge to Vice Admiral Asad Qureshi, Director-General, Ports and Shipping, from June 1, 2008. Other participants beside Vice Admiral Asad Qureshi, were Consul-General of Germany in Karachi Hans-Joachim Kiderien, guest of honour, Deputy Director Mediterranean Services Annelie Schulmeister and representatives of social and business circles.

Shams said that UMA had taken the step after realising the growing need of a direct and fast container service to and from Karachi Port and Europe and to fulfil a decade-long demand of the traders from the two trading partners. The re-structured service of HS from Pakistan International Container Terminal (PICT) would not only facilitate the Pak-Europe trade but would also provide an opportunity to boost cost-effective sea transportation from Pakistan, he said.

He said the new EPIC services would provide direct maritime connection between Karachi and Europe, link northern Europe and Mediterranean with Karachi Port in the shortest transit time, link all key ports of western and eastern Mediterranean via the central hub, Gioia Tauro, and provide a wider route to larger vessels of 4,200-TEUs capacity in Europe.

On the route the shipping line would move in, the CEO UMA said, would be Hamburg-Tilbury-Amtwerp-Gioia Tauro-Jabl-e-Ali-Karachi-Mundra-Nhava Sheva-Gioia Tauro and Hamburg.

Terming Europe a highly potential market for Pakistan's value-added goods like textiles, garments, hosiery, towels, bed sheets, fabrics, etc, Shams said that timely delivery of goods to the European destinations was of vital significance.

The new EPIC service, which would ensure direct shipping of commodities within the shortest possible transit time to European markets, would not only be advantageous to the European customers but would also enhance efficiency of Pakistan's exporters in terms of timely deliveries, he added.

KPT Chairman Ahmed Hayat lauded Sohail Shams for pushing the KPT to make arrangements for accommodating deep draught vessels by conducting dredging at of the port within a short span of time.

Underlining various in and outside port developmental projects Hayat said that construction of Karachi deep water container port would give boost to exports from Pakistan. "The number of vessels bringing cargo in our country now will be taking cargo from Pakistan," he said.

He praised the Karachi International Container Terminal (KICT), the PICT, the stevedoring companies and all other port users for their concerted efforts for making the Karachi Port user-friendly. "I compliment all port users for giving us new challenges," he said. He assured HS of full support from KPT. "We would extend each and every facility we can to facilitate you," Hayat told the shipping line.

German Consul-General y in Karachi, Hans-Joachim Kiderien, and Deputy Director Mediterranean Services Annelie Schulmeister hailed KPT for an impressive infrastructure development at Karachi Port.

Business Recorder [Pakistan's First Financial Daily]

 

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NEC approves Rs541bn PSDP for FY 08-09 ​

ISLAMABAD: June 02, 2008: The National Economic Council (NEC) which met here Monday under the chairmanship of Prime Minister Syed Yousuf Raza Gilani approved Rs541 billion for the Public Sector Development Programme 2008-09 more than 11 percent of the last fiscal year and also set a GDP growth target of 5.5 percent for the financial year 2008-09.

Later, Deputy Chairman Planning Commission, Salman Faruqi briefed the newsmen at a press conference, about the decisions of the NEC, the country's highest financial forum, which approves the economic outlay and reviews the macro-economic performance of the country.

He said that the total size of the PSDP for the financial year 2008-09 is Rs541 billion in which the share of federal PSDP is Rs371 billion, which is 11.5 percent of the PSDP. The provincial PSDP is Rs170 billion while the allocation for the Earthquake Reconstruction and Rehabilitation Authority (ERRA) is Rs27 billion which is over and above the PSDP 2008-09 of Rs541 billion.

Secretary Information Akram Shahedi, Principal Information Officer (PIO) Ghulam Huzur Bajwa were also present in the meeting.

Salman Faruqi said that the NEC was attended among others by provincial governors, chief ministers, federal and provincial ministers, federal and provincial secretaries and governor State Bank of Pakistan.

He added that the NEC has set a GDP target of 5.5 percent which is realistic and achievable and it could be even grow higher depending upon the economic situation of the country.

He regretted that in the past including the outgoing financial year the Public Sector Development Programs were not properly implemented against the allocations announced in the budgets but also did not release them.

"We fear the prices specially the prices of oil and food are increasing worldwide while an international economist has termed it as a 'Silent Tsunami' while another economist has written it as 'Inflation is back.'

He further said that this increase in the prices can also impact our economy badly and added that government is providing Rs380 billion annually only in terms of subsidy for our people.

Faruqi said that it means that government is providing subsidy of Rs150 million on daily basis due to increase in the prices of food and oil.

NEC approves Rs541bn PSDP for FY 08-09 : Business Recorder | LATEST NEWS

 

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NEC may approve 20 percent raise in government employees salaries: revenue collection target to be set at Rs 1.25 trillion ​

ISLAMABAD (June 02 2008): The National Economic Council (NEC) is going to approve 20 percent increase in the government employees' salaries, besides setting an ambitious revenue collection target of Rs 1.25 trillion for 2008-09, against revised figure of Rs 990 billion for the Federal Bureau of Revenue (FBR) in its meeting scheduled here for Monday(today).

Prime Minister Syed Yusuf Raza Gilani will chair the meeting. The Finance Ministry has suggested 15 percent increase in salaries for all grades of the government employees. However, this percentage was raised to 20 percent in a meeting held at the Prime Minister Secretariat on Saturday last. The retired government employees will also get 10 percent increase in pension in the next budget.

The meeting also firmed up revenue figures for the next fiscal year, showing 20 percent increase over 2007-08. The budget-makers are of the view that substantial increase in revenue target was necessary to cope with the issue of rising budgetary deficit in 2008-09.

This will also take the overall size of the next budget to slightly over 2.2 trillion against Rs 1.874 trillion of 2007-08. The Rs 540 billion Public Sector Development Programme (PSDP) inclusive of Rs 370 billion of the federal and Rs 170 billion provinces' share would be presented before the NEC. It also includes Rs 55 billion of the corporations in total PSDP.

The budget-makers will inform the NEC that the government would introduce the new concept of the public-private partnership to finance a number of important projects out of the programme to supplement the government efforts for sustainable economic growth.

An official part of the government team told Business Recorder on Sunday that a number of projects relating to infrastructure, water reservoirs, mass transit system in major cities and construction of housing colonies for low income group will be left out of PSDP for financing through public-private partnership.

He said the budget 2008-09 was given final shape for NEC clearance at a meeting held at the Prime Minister Secretariat on Saturday.

The government had allocated Rs 520 billion for PSDP in 2007-08, but it did not work as over 450 schemes some of them very important for development were dropped in the second half of the outgoing fiscal year for sparing allocated funds for subsidies on wheat, oil and fertilisers.

Since the fiscal crunch is yet taking the new shape and the government may not be able to finance even some of important projects from the next year PSDP. This forced the budget-makers to introduce the public-private partnership concept.

Business Recorder [Pakistan's First Financial Daily]

 

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Tumbling growth, surging inflation​

Signals emanating from the economy lend weightage to cries from some quarters that the country has already arrived in a worrisome and difficult zone called stagflation by the economists. It is a state when the economic growth becomes stagnant and high inflation more stubborn.

While the economic growth has declined from the targeted 7.2 per cent to close to 5.8 per cent, the unabated double-digit inflation continues to haunt the policy makers. Critics say that the tightening of the monetary policy may not tame inflation in the short-term but may retard economic growth.

The business sentiments about investment prospects seem to be creating a negative effect in the economy. The high cost of doing business and depressed demand in export markets are not Pakistan-specific. However, Asian economies including those of China and India driven by better growth models have so far not shown signs of any major dent in their growth momentum.

Over the last five years, the economy despite all its severe problems like weak institutional and physical infrastructure and growing imbalances has also been posting six to seven per cent growth. The share of agriculture in GDP has declined and manufacturing growth has been slower as compared to the expansion in the services sector.

There are two questions that need to be asked before moving on towards a strategy to break out of this situation of slowing economic growth and high inflation. One: what has exactly changed for the engine of growth that has been services sector? Two: is the business sentiment all-pervasive or limited to big business, multinationals or big mercantile groups?

“Nothing worth mentioning has changed for the services sector. The situation has become more challenging for the manufacturing amidst growing uncertainty and rising costs” Khawaja Shahab, federal secretary ministry of industries told Dawn over phone from Islamabad. The secretary agreed that the political government should consider out of box options to deal with the challenges on the economic front.

“In my view, the suggestion to evolve a business-led team comprising the nominees of coalition partners for full five-year term should be considered seriously. This is very much possible and could lend stability and revive investor’s confidence in the economy. All you need is a political will to address the challenges without politicising the economic decision-making process”, he said.

An analyst, however, saw nervousness engineered by principal beneficiaries of the last regime who have yet to develop dependable links in the new set-up. “Everyone knows that the government needs to generate more resources. They are creating noises to pressurise the government to design the budget in a way that does not hurt them in any way”, he said on promise of anonymity.

“Big business is weary of expanding scope of military enterprise but because of its dominant positioning it co-opted in a working relationship with it. The announcement by the government that it is considering to increase duties on certain luxury items has infuriated the trading lobby that might not be able to sell same volumes of imports at increased rates in the domestic market when the level of value of disposable income is shrinking,” he said.

A report on the economy produced by reputable economists, many of them with a World Bank background, did not get the attention it deserved.

The report-a publication of the Institute of Public Policy- ‘State of economy: challenges and opportunities’, in a systematic manner reflects in the words of its chairman Shahid Javed Burki, “all three sets of issues: sustainability and inclusiveness of growth; institutional development; decentralisation; short-run macroeconomic adjustment to bring down inflation; and the twin budget and current account deficits”.

The main contributors of the report include; Sartaj Aziz, Shahid Javed Burki, Aisha Ghaus Pasha, Pervez Hasan, Akmal Hussain and Hafiz Pasha.

“Things are still in the making”, Farrukh Qayum, federal secretary finance told Dawn when his opinion about the reason of the government weak response to the economic challenge was solicited.

He hoped that the growth rate will be six per cent for the current year despite the problems that the country confronted over the last one year. “We are hoping to settle all outstanding liabilities and start the next fiscal afresh”, he told Dawn.

The finance secretary further observed: “The flow of remittances is good. There are favourable symptoms of fresh flow of foreign direct investment in a number of sectors. So the situation is not as bad as some rent seeking elements made it out to be. Let the stability return and private investor will hopefully step in to capitalise on huge business opportunities”.

All said, the biggest challenge is to divert the liquidity towards productive avenues so as to fight recessionary and inflationary trends.

Tumbling growth, surging inflation -DAWN - Business; June 02, 2008

 

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Combined water/power projects to be prioritised ​

ISLAMABAD (June 02 2008): The government has decided to prioritise the development projects which would simultaneously store water and generate power, and the Prime Minister has directed the Planning Commission (PC) to do the necessary ground work in this regard, sources told Business Recorder on Sunday.

The PC is likely to inform the Prime Minister about the strategy to this end in the National Economic Council (NEC) meeting on Monday, June 2. The meeting is also likely to give approval to the overall Public Sector Development Programme (PSDP), which has been proposed at Rs 541 billion by the PC, with operational shortfall of Rs 45 billion.

The proposed allocation has been made for morale boosting, as the actual allocation will remain Rs 496 billion. The Finance Ministry has been pressing for total allocation of Rs 437 billion for 2008-09 PSDP. Sources said that final decision on all economic indicators would be taken by the NEC. The projected targets, proposed by the Annual Plan Coordination Committee (APCC), will come up for the consideration of the NEC.

The PC, according to sources, will inform the Prime Minister about the possible small and medium size dams which could be taken up under the PSDP in the next fiscal year. In the past eight years, or so, the Water and Power Development Authority (Wapda) had failed to take any practical steps for the construction of multi-purpose water projects, due to which the power generation capacity, especially hydel power generation, remained almost the same.

Sources said that in the past Wapda unilaterally scrapped the provisions of power generation in some development projects like Mirani dam. The same was being done with the Sabakzai dam.

In the PC-1 of Mirani dam, the provision of hydel power was there, but Wapda scrapped this provision, without taking other stakeholders, including PC, into confidence. Wapda also failed to initiate several projects in upper NWFP that could have the potential of storing water and generate electricity.

Sources said that Wapda should pick up speed in construction of Sheikh Haider project, Draban dam, Tank Zam and some other proposed sites for multipurpose projects. They said that detailed engineering study of Tank Zam dam has recently been submitted to the federal government. The work on Munda dam detailed feasibility study is also very slow. This is a very good project for the benefit of the people.

Sources said that the government must give clear instructions to Wapda that its unilateral decision to scrap the provision of hydel power generation being given in the PC-I would not be acceptable. This is the only solution to take the country out of its current energy crisis. They said that around Rs 12 billion is being allocated for multi-purpose water and power projects. The provinces have already submitted details about the potential sites for small and medium size dams to the federal government.

Business Recorder [Pakistan's First Financial Daily]

 

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Package for industrial revival​

On the eve of the federal budget 2009, the business and industry have appraised the government about its the various problems and submitted suggestions to minimise the emerging threats to the industry. It is time for the new government to enable it to play its due role in the growth of national economy.

The government needs to announce a package for the industrial revival and for businesses which are under tremendous pressure owing to multiple reasons including high oil prices, inflation and energy shortage. The cost of doing business is increasing with every passing day as a result of the depreciating rupee and the high energy cost including electricity, gas and petrol. Under the circumstances, the limit of minimum exemption of Rs100,000 for income tax requires upward revision.The minimum exemption limit for individuals in business needs to be increased to Rs200, 000.

And the issues related to general sales tax also demand a careful review. The industry has suggested recently that the tax refund policy should be revised. Presently, only cash invoice exceeding Rs25,000 is eligible for claiming Input Tax Refund, which is too low and must be enhanced to at least Rs.100,000 per cash invoice.

A retailer whose value of supplies or turnover in any period during last 12 months preceding the fiscal year exceeds Rs5 million, an importer, a wholesaler including dealer or distributor are also subject to compulsory registration under the Sales Tax Act. This threshold should be raised to Rs10 million. On late submission of monthly/quarterly sales tax return, a heavy penalty of Rs25000 is imposed. It is harsh and demands a rational revision. A fairly sufficient period say 45 days should be allowed for submission of returns.

The industry faces tiresome procedures in filing tax returns which result in wastage of precious time, energy and resources. One such case is the submission of NIL Return where statement of sales/purchase is required to be submitted along with it. This condition is unjustified and to ad salt to injury, even late or non-submission of such a statement is subject to penalty of Rs25000. Such a penalty should be withdrawn. When NIL return is submitted, there is no use of submitting nil purchase/sales statement.

Industry representatives have suggested that penalties on account of various delinquencies or defaults should be in line with the Income Tax Law. Also the Sales Tax Return is too complicated and lengthy. A common trader/ person finds it difficult to fill the return.

To be eligible to get refund of Input Tax, it is necessary that the seller should also report the sale to the department and its record should be available in the sales tax computer duly registered. The problem gets aggravated when due to any reason, e.g. the data is not available, the seller is not registered under the Sales Tax Act or transaction has not been recorded by the department, no refund /adjustment of Input Tax is admissible. The industry has proposed that the submission of purchase invoice should be considered sufficient proof of Sales Input Tax paid by the purchaser for input adjustment.

In case of dispute, appeals are made to the Custom and Sales Tax Tribunals, which make the process too lengthy. To facilitate the industry, all the appeals relating to sales tax disputes should be dealt by the RTOs /Income Tax Tribunals only. Moreover, since there is lot of delay at the Appellate Tribunal level, taxpayers are facing serious problems of recovery on the basis of order-in-original/order-in-appeal. Hence, the issue should be resolved amicably by correcting the flaws in this regard.

The government needs to ponder over the ratio of sales tax on various industries as well as its rationality. It should curtail the rate of sales tax from the existing 15 to 10 per cent, as it had already been proved through experience that a cut in tax rate gets more revenues for the government. The exemption of sales tax for specified period would also be a great help to those industries that need to encouraged. As the budget for the year 2008-09 would impact on industry as well as national economy, the government needs to apply an “out-of-box”, approach to ensure a better economic future. To quicken the industrial growth, government should also consider allowing all raw materials not produced domestically at zero duty, while the duties on finished products should be enhanced to protect the local industries.

The industry needs a favorable environment to grow. It is industry that provides employment and self-reliance.

The writer is senior vice-president of Islamabad Chamber of Commerce & Industry (ICCI).

Package for industrial revival -DAWN - Business; June 02, 2008