Pakistan Economy - News & Updates - Archive

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Italian investors offered to invest in power sector ​

ISLAMABAD (June 12 2008): Minister for Water and Power, Raja Pervaiz Ashraf has offered Italian investors to start investment in coal and hydel power generation projects in Pakistan.

Talking to the Italian delegation, headed by Italian Ambassador, Vincenzo Prati who called on him here, the minister said power sector in Pakistan has great potential and the foreign investment in the coal and hydel power generation will help to meet the country's future requirements.

He informed the envoy that the government has liberal policies to attract foreign investment as the procedural requirements have been simplified and now there are no issues of tariff fixations, he added.

He said that Pakistan was facing severe power crisis and the government was taking all short, medium and long-term measures to combat the menace of the load-shedding and various projects are being offered to the investors, consortium through open bidding.

He said that hydel and coal is now the main focus of the government to generate cheaper electricity. He added an international conference on coal is being organised in Washington next month, where investors from all over the world will be invited to seek their investment in Thar coal for power generation.

Earlier, the Ambassador said that the Italian companies are interested in the power sector and transfer of technology projects in Pakistan. He said that the Italy is also keen to generate power through solid waste and some proposals will be submitted in this regard. He said that investment potential in the hydel and coal power generation will be considered and project details will be submitted to the investors.

Business Recorder [Pakistan's First Financial Daily]

 

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Chashma Nuclear Power Project 2008-09: 2 new power plants worth Rs 129.374bn​

ISLAMABAD: Pakistan has decided to launch two new nuclear power projects at Chashma worth Rs 129.374 billion that would generate 640 MW power to induct into national grid.

These plants include Chashma Nuclear Power Project (c3) and Chashma Nuclear Power Plant (c4) and government has allocated Rs 100 million for these nuclear power projects in the Public Sector Development Programme (PSDP) 2008-09.

Sources said that each nuclear power plant would have the power generation capacity of 320 MW and each project would cost Rs 64.687 billion. Government would arrange Rs 80.36 billion from international donors' institutions and countries.

They further added that these new nuclear power projects are the part of the government's 2030 vision strategy under which over 8,000 MW power by nuclear projects would be generated by 2030.

Pakistan had planned to set up four new nuclear power plants in its strategy for financial year 2008-09 of 1,280 MW power and however two nuclear power projects would be launched in the coming financial year 2008-09. These nuclear power projects are the phase 3 and phase 4 of Chashma Nuclear Power Plants.

The first phase project of Chashma Nuclear Plant was commissioned in September 2000. A Chinese Company is already working on the second phase of Chashma Nuclear Power Plant and in May 2004, Pakistan and China signed a contract to jointly build the second phase project of Chashma Nuclear Power Plant.

Sources said that Pakistan has sought financial and technical help from China for setting up of these two power nuclear power plants of 320 MW each and submitted feasible studies of these projects to China. They said that China has agreed to provide financing and technical assistance for these nuclear power projects.

Sources said that Pakistan would also seek help from other countries and however, major chunk of the financing would come for these power plants would come from China. They said that Chinese companies are already working on mega power projects in Pakistan.

The government had also planned to set up two nuclear power plants at Karachi but the plan had not been shelved due to financing problems for the said projects. They said that the Finance Ministry is also working to seek financing from other countries besides China and would also evolve a strategy to engage the countries in a joint venture to provide financing for the said projects.

Daily Times - Leading News Resource of Pakistan

 

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Editorial: A budget for agriculture​

A budget of Rs 2.1 trillion has been presented at the end of a fiscal year in which most targets were missed, particularly in the sector of agriculture where shortfalls forced the government to import food and contend with problems in the distribution system. The new emphasis will be on the agricultural sector where the farmers will be incentivised to grow the crops that meet the food deficit in the country and even provide surplus for exports. The effort is to enable the economy to resume export led growth as in the past, only this time the agri-sector is expected to do the job.

The “protest” factor was foretold. Angry rejection of the budget is a permanent fixture in third world economies, but in the case of Pakistan the protest is being heard from sectors affected by the drastic changes in the global economy and a measure of neglect by the managers of the national economy in the past. The industrial sector remains under pressure and its export side will remain under pressure because of the “cost factors”. Most of the export sector was increasingly non-competitive even when the increase in the global prices of their inputs were not passed on. It will come under more pressure now when these prices are passed on to decrease the fiscal deficit.

The industrial sector has been assured a steady supply of electricity. But the government will be sorely tested on this since the sector is concentrated in Karachi and the Karachi power supply is not under the WAPDA system. If this pledge alone is fulfilled the sector should consider itself lucky. The problem of cost will remain the one big problem and the sector is expected to suffer as the government fails to offer it subsidised loans and raw material. What it can do is lower duties, but it might not help the exporters in coming out of their uncompetitive trough. The industrial sector says it was not consulted on the budget, which is understandable given the political situation in the country after the February 18 elections.

The State Bank has already tightened the economy through its monetary policy. This “contraction” will have to be sustained. The trade gap, the largest in the country’s history, will have to be managed through stinginess and discouragement of certain imports that are considered luxury items. High duty on such imports will give the economy the income to offset the gap, but the demand by some industrial quarters that this income be used to subsidise certain raw materials will be problematic. Duties can be lowered on crucial raw materials but subsidies will simply deepen the gap.

The lagging industrial sector may actually cause more unemployment in the cities as investments become difficult under high rates of credit and the rough global market for exporters. But the crisis experienced in the past few months has concentrated the Pakistani mind on agriculture. The economy also hopes to benefit from the higher official prices set for crops in the coming seasons. The subsidy part of the budget will be focused on fertilisers and insecticides which were allowed to float in the past, taking the farmers’ inputs out of his reach. The challenge will now be of two kinds: the first will come from nature and shortage of water and the second will come from the government’s ability to keep domestic prices low for the farmers and prevent the output from being “exported” through smuggling and kept out of the market through hoarding.

The challenges will be enormous. The “poverty package” offered through cash handouts to five million households is good but it will be followed by the removal of subsidy on electricity and oil which will offset the poor’s gain. The hardship will increase and the TV channels will paint a dismal picture of the Pakistani street saying that this government too is neglectful and incompetent and that it is doing more for the army than for the people. The increase in the military budget is a belt-tightening one given the new cost of mobilisation on petrol that Pakistan can hardly afford at over $130 a barrel. No matter how good the concessional “package” finalised by Saudi Arabia, the army will be under pressure in these times of emergency, and Pakistan will have to remain a part of the global war on terror in order to finance the current levels of spending on troops mobilisation.

Unfortunately, national politics is not suited to the kind of emergency we are facing. Many problems unrelated to the economy and in some cases harmful to the sentiment that helps investment have cropped up. There is an increasing level of disagreement on issues that could be amicably solved, and that goes against the national effort at economic recovery. These “movements” when considered together with the Taliban “movement” will make the government’s task more difficult than it looks now.

Daily Times - Leading News Resource of Pakistan

 

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PGCL to set up mega complex at Islamabad​

ISLAMABAD: Pak Gulf Construction (Pvt) Ltd has deposited Rs 336 million with the Capital Development Authority as its scheduled installment against the plot in Islamabad where the company is constructing a mega complex ‘The Centaurus’.

According to the spokesman of the company, the plot situated between the two main avenues - Jinnah and Faisal - was purchased with biggest bid ever in March 2005 and PGCL was paying all installments according to schedule.

Aiming to be the most futuristic and iconic development of the country, PGCL has brought together the best of the bests to join hands in making this dream a reality. Reiterating their commitment to combining the best people in the business for the Centaurus, the spokesman said already leading strength to PGCL on other fronts are: Atkins, the design team of the Centaurus, most well known for the design of the Burj-ul-Arab, China State Construction Engineering Corporation; the main contractors for the Centaurus who have completed over 3,000 projects in over a 100 different countries and regions and CONRAD; the luxury brand of Hilton International for the seven star hotel in the Centaurus and Projacs International of Kuwait as project management partners is in continuation to our efforts of combining the best.

‘The Centaurus’ project has the requisite resources in place and it will be completed on schedule.

Daily Times - Leading News Resource of Pakistan

 

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‘Pakistan risks losing investor confidence’ ​

Saturday, June 14, 2008

ISLAMABAD: Moody’s Investors Service said in a report on Pakistan on Friday that weak governance, political tensions and flaws in the legal system will undermine institutions and policy-makers, and heighten risks of sudden shifts in private investor confidence.

The credit rating agency, however, went on to justify maintaining a stable outlook on Pakistan’s rating as the structure of government debt largely consists of long-term credits from official bilateral and multilateral lenders, “which adds stability and reduces rollover risks.”

Last month, Moody’s and Standard & Poor’s both cut Pakistan’s credit ratings to five levels below investment-grade. S&P, however, opted for a negative outlook.

There is concern over the size of the fiscal and current account deficits, under pressure from soaring import costs, and worry that the political uncertainty hanging over Pakistan’s 2-ž month old coalition government could undermine policy making and implementation.

Moody’s said “renewed political discord is unlikely to provide the stable and orthodox policy framework necessary for quickly limiting these macroeconomic imbalances.”

The statement came two days after the government announced budget proposals for 2008/09 (July/June), setting a target to cut the fiscal deficit to 4.7 per cent of gross domestic product and the current account deficit to 6 per cent.

The government said the fiscal deficit is expected to be 7 for fiscal year of 2007/08, and the central bank has forecast the current account deficit at between 7.3 and 7.8 per cent for the year ending June 30.

The government announced in the budget they would gradually withdraw food and oil subsidies from the current 405 billion rupees to 293 billion rupees.

Slashing subsidies would further increase inflation and data released earlier this week showed consumer prices rose 19.27 per cent year-on-year in May, the highest in over three decades.

The government has set a 12 per cent target for inflation in 2008/09. Analysts say it will be almost impossible to achieve if subsidies on oil and food are withdrawn.

A day earlier, ratings agency Standard & Poor’s said the budget would have no impact on ratings and was in line with expectations, adding the rating would be lowered if fiscal and current account deficits do not improve.

Analysts were unsurprised by the rating agencies’ stance.

“This was more or less expected,” said Asif Qureshi, head of research at Invisor Securities Ltd.

“The government needs to take actions immediately to build its credibility among multilateral and rating agencies.”

The country’s stock market and the rupee remained largely unaffected by the statements released by the ratings agencies as dealers said this came as no surprise and foreign interest has been lacking since last month due to mounting political and economic uncertainty.

The Karachi Stock Exchange (KSE) is down 8.1 per cent since the start of the year, while the rupee has depreciated 8 per cent.

‘Pakistan risks losing investor confidence’

 

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Budget deficit estimated at Rs 661 billion​

By Sajid Chaudhry

ISLAMABAD: Budget deficit of the federal government has been estimated at Rs 661 billion while Rs 79 billion surplus of provinces would help bring consolidated budget deficit down to Rs 582.3 billion in the upcoming fiscal year 2008-09.

The government has plans to borrow Rs 557.6 billion from internal and external sources to finance the budget deficit in the upcoming fiscal year 2008-09, a senior official at Ministry of Finance told Daily Times Thursday.

The government would borrow Rs 165.2 billion from external sources, non-bank borrowing of the federal government would be Rs 242.9 billion and Rs 149.5 billion is to be borrowed from banking sector, explained the official.

Apart from the internal and external borrowing options, privatisation proceeds to the tune of Rs 25 billion would also help bridge the income expenditure gap and meet the overall consolidated budget deficit of Rs 582.3 billion.

Federal tax collection target has been set at Rs 1.250 trillion and non-tax revenue receipts have been estimated at Rs 427 billion in the upcoming fiscal year 2008-09.

All these projections are based on assumptions that revenue generation efforts of the government in the next fiscal year would yield the required results. In case the tax revenue and non-tax revenue generation efforts lag behind the projected required limits the budget deficit would definitely go up.

In this scenario, any increase in budget deficit would require the government to increase its borrowing from internal resources i.e. bank borrowing and non-bank borrowing.

According to the official, the government would try to contain its budget deficit to Rs 582.3 billion against the budget deficit estimates of Rs 737.8 billion in outgoing fiscal year through passing on to the consumers the impact of increase in oil prices and electricity tariff.

The government has already reduced the size of the subsidies from Rs 407.485 billion in outgoing fiscal year 2007-08 to Rs 295.204 billion in 2008-09 to keep its budget deficit in sustainable limits.

Daily Times - Leading News Resource of Pakistan

 

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Agriculture growth dips to 1.5pc in spite of Rs 39.5bn subsidy​

ISLAMABAD: A Subsidy of Rs 39.5 billion from national kitty on providing cheap fertilizers to the farming community have been drained, as the agriculture sector's growth dipped from 5 percent in 2006-07 to just 1.5 percent of the Gross Domestic Product (GDP) during outgoing fiscal year 2007-08.

Dr Ashfaque Hassan Khan, Special Secretary Finance and author of the Economic Survey 2007-08, has raised a question in his survey report that the extra-ordinary increase in the import of fertilizer was surprising at a time when the prices of fertilizers in international market were up by almost 50 percent.

As against the import of 1 million tonne fertilizer in the 2006-07, the country imported almost 2 million tonnes fertilizer in first ten months (July-April) period of outgoing fiscal year 2007-08, registering a growth of 97 percent. Why such large quantities of fertilizer was imported when its off-take within the country did not grew compared to last year, is not clear, Dr Khan added in the report.

Economic Survey 2007-08 highlights that the country spent $823.3 million on the import of fertilizers during July-April period of 2007-08 as compared to $280.9 million in the last fiscal year 2006-07, projecting an increase in import value of $542.3 million.

Nevertheless, the country had to pay an additional amount of $542.4 million (Rs 33.62 billion) in import of fertilizer which can not be explained by looking at the performance of outgoing fiscal year's agriculture crops, the Author of the Economic Survey pointed out.

On the other hand, the government has a subsidy to the tune of 29.5 billion on fertilizers to provide relief to the farming community against the rising prices of fertilizers within the country as well as in the international market.

The government has provided subsidy to the tune of Rs 20 billion on the import of phosphatic and pottasic fertilizers, Rs 5.5 billion subsidies on DAP fertilizer and Rs 4 billion subsidy on import of urea fertilizer in the outgoing fiscal year 2007-08. In the last fiscal year 2006-7, the volume of subsidies on fertilizers was Rs 13.5 billion.

For the outgoing year, the agriculture growth declined to 1.5 percent against the target of 4.8 percent. Major agriculture crops growth remained negative 3 percent against the target of 4.5 percent, livestock growth witnessed 3.8 percent against the target of 5.7 percent and forestry growth during the year 2007-08 remained negative 8.5 percent against the target of 3.5 percent. The major factor responsible for the decline in agriculture output is lower production level both in wheat and cotton. According to the provisional estimates, output of wheat is estimated to be 21.8 million tonnes, which is 6.3 percent lower compared with last year level of 23.3 million tonnes.

Daily Times - Leading News Resource of Pakistan

 

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Attractive opportunities for investment in oil marketing: PM ​

ISLAMABAD: Prime Minister, Syed Yousuf Raza Gilani Friday said Pakistan offers attractive opportunities for establishment of new oil marketing in view of its growing market for petroleum products.

"In order to attract investment the import of fuel oil has already been deregulated and import of high speed diesel has been outsourced to oil marketing companies to attract investment in oil sector," he said.

Talking to Martin McCarthy, the chief executive officer, Total-Parco Pakistan Limited, who called on him at the PM House, Gilani said the government would soon bring about further reforms in the downstream oil sector with a thrust on privatisation, liberalisation and complete deregulation of oil the industry.

He appreciated the efforts of Total-Parco in making the oil marketing business in Pakistan and said, "We expect it to expand its business especially in rural areas of the country." McCarthy informed the Prime Minister that Total-Parco has so far invested over $22 million in the oil marketing business in Pakistan. "We will continue our investment programme in Pakistan as Total-Parco has an excellent experience of working in Pakistan which we see as a very good market," he added.

Daily Times - Leading News Resource of Pakistan

 

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Microsoft trains govt school teachers ​

Saturday, June 14, 2008

KARACHI: A certificate distribution ceremony for the first batch of government school teachers, who successfully completed their training at the Microsoft IT Academy, was held at SMB Fatima Jinnah School, Karachi, stated a press release.

The Microsoft IT Academy was established by Microsoft and Zindagi Trust at SMB Fatima Jinnah School in March this year.

The event was attended by Sindh Education Secretary Rizwan Mammon, who supports the vision of Microsoft and Zindagi Trust for the development of IT education in Pakistan.

“Microsoft is committed to helping Pakistan realise its potential by working with the Education Departments of the federal and provincial governments. It aims to collaborate with local organisations like Zindagi Trust to develop, improve and enhance the standard of IT education in the country.

“It is a great pleasure that the first batch of teachers has successfully completed its training in latest Microsoft technologies and is being awarded Microsoft training certificates,” said Microsoft Pakistan Country Manager Kamal Ahmed.

Microsoft trains govt school teachers

 

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Thermal power plants unable to run at full capacity: Pepco ​

ISLAMABAD (June 14 2008): The Pakistan Electric Power Company (Pepco) has conveyed to the federal government that Kot Adu (Kapco) and Guddu thermal power plants can not be operated on full utilisation until the required quantity of fuel is made available to them, sources in Petroleum Ministry told Business Recorder.

They said total present generation capacity of Genco-III power plants is 1530 mw, which they are not contributing to their role in Pepco's generation system due to lack of fuel.

With regard to TPS Muzaffargarh, sources said that average daily gas requirement of the 130 mw plant was 200 mmcfd but SNGPL was supplying 150 mmcfd gas round the year to the power station in 2003-04 which has decreased gradually and at present only 15 mmcfd gas was being supplied by the gas company.

All the 6 units of the power station could operate on dual fuel ie gas and furnace oil but due to very nominal gas supplies by SNGPL coupled with financial constraints faced by Pepco, furnace oil stocks at the power station were low and at times were almost completely depleted.

Presently, 2 out of 6 units were under forced shutdown due to non-availability of fuel. Maximum generation from the power station remained only 675 mw and the management was left with 9000 metric tons furnace oil stocks as of June, 2008.

Average daily furnace oil requirement of the power station is 6000 metric tons. In the present circumstances, neither of the oil marketing companies (OMCs) could supply the requisite quantities to the power station nor can the said quantities be handled (decanted) due to limitations of fuel decantation station, sources added.

For complete restoration of power generation capacity of the power station, 100 mmcfd gas would therefore essentially be required, sources said. They said that machines of GTPS Faisalabad were gas-based. Hence, furnace oil could be used. Units of SPS Faisalabad are on dual fuel ie gas and furnace oil. As per Gas Sale Agreement (GSA), gas allocation for GTPS and SFS Faisalabad was 26 mmcfd and 5 mmcfd respectively.

However, SNGPL was not delivering the committed volumes. Machines of GTPS Faisalabad having generation capacity of 210 MW remain mostly idle due to non-supply of gas by SNGPL. On the other hand, machines of SPS Faisalabad were operated on costlier furnace oil, burning of which also results in increased maintenance of boilers and allied equipment.

They said that 60 mmcfd gas for GTPS Faisalabad machines and 25 mmcfd gas for mixed FO and gas firing in the boilers of SPS Faisalabad machines was necessarily required so that the power station may operate at maximum load. Total gas requirement of the power station is 85 mmcfd.

They said that present generation capacity of NGPS Multan was 60 MW. The machines of NGPS Multan could be operated on dual fuel. As per terms and conditions of the GSA, SNGPL has to supply 17 mmcfd gas to the power plant. However, 2 -3 mmcfd average gas was being supplied by the gas company in the current fiscal year.

Resultantly, machines were operated on expensive furnace oil which has also increased maintenance of the power plant. The power plant needs to be supplied average quantity of 10 mmcfd gas.

Four machines of GTPS Shahdara are open cycle gas turbines with present generation capacity of 30 mw. These units are gas based. Due to non-availability of gas by SNGPL, the power plant has mostly remained inoperative in the current fiscal year. At least 5 mmcfd gas is required to keep the machines in generation circuit.

For Kapco complex, costly imported LSFO was being consumed for generation. Besides, two units--3 and 4--can run only on gas or alternatively on HSD which is very expensive fuel. Hence, SNGPL should use its best endeavours to supply maximum gas to the power complex. However, minimum 70 mmcfd is essentially required for Kapco. Sources said that the gas company has been asked to provide gas to the power generating units on priority basis.

Business Recorder [Pakistan's First Financial Daily]

 

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PKR likely to depreciate to 78 against US$ in two years ​

KARACHI (June 14 2008): Moody's Investors Service has forecast that Pakistan currency is strongly expected to depreciate to Rs 78 against one US dollar over the next two years. According to the rating agency's analytical report released on Friday, the parity gap between the two countries is expected to widen to Rs 75.4/1$ in FY2009-10 from Rs 70/1$ in FY2008-09.

The Pak currency may be as low as Rs 78 against one US dollar by FY2010-11. The rating agency believes that Pakistan's overall balance of payments position will remain weak for he foreseeable future. Pressure on foreign currency reserves and PKR will remain high.

"Emergency assistance from key external allies (such as in the form of Saudi oil concessions), and possibly, accelerated disbursements of multilateral assistance may provide some financing respite, and stabilise sentiment, by bringing in $2billion to $3billion," the Moody's says and adds: "Nonetheless much stronger demand-management policies by monetary and fiscal authorities backed by institutional rules to limit (if not reverse) deficit magnetisation maybe needed to restrain domestic demand and reduce import growth."

While expressing optimism over country's overall external financial needs which, according to it, are still manageable, the rating agency notes that Pakistan's external credit fundamentals benefit from a debt composition that is predominantly long tenor and owed to bilateral and multilateral creditors on concessional terms.

As a result, the Moody's says, overall amortisations coming due amount to only $2billion to $3billion and are manageable in size even amidst the growing strains on the country's external liquidity profile.

"In the event of substantial PKR depreciation, debt ratios will undoubtedly worsen. But, even then, the marginally higher debt service payments are not expected to lead to unmanageable pressures on Pakistan's foreign exchange reserves. As a result, we are comfortable with a 'stable' outlook on the B2rating," the Moody's says.

Moody's believes that the key risk to the outlook is a failure of demand-management policies and exchange rate adjustments to rein in the size of Pakistan's external deficits. The rating agency has warned that if such adverse trends to be accompanied by further supply-side shocks or a worsening of fiscal credibility, the pressures on Pakistan's external liquidity and debt servicing ability could intensify much more than currently projected.

Business Recorder [Pakistan's First Financial Daily]

 

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Duty-free import of $50 million new plant machinery allowed ​

ISLAMABAD (June 14 2008): The Federal Board of Revenue (FBR) has allowed investors to import duty-free plant, machinery, equipment and capital goods, whether locally manufactured or not, (worth $50 million) for setting up of new industrial projects.

Through SRO 554(I)/2008, any machinery and equipment worth $50 million or more being imported for new industrial project has been de-linked from the local manufacturing condition. This will help in curtailing the discretionary powers of the administrative authorities for providing hassle-free investment environment.

According to SRO.554, there is a condition to claim concessionary rate of customs duty that the imported goods are not listed in the locally manufactured items, notified through a Customs General Order from time to time or, as the case may be, certified by the Engineering Development Board (EDB).

This condition shall, however, not be applicable on such machinery, equipment and other capital goods imported as plant for setting up of a new industrial units, provided the import is made against a valid contract or an irrevocable letter of credit for a minimum cost and freight (C&F) value of $50 million.

Details show that the existing tariff regime allows an industrial undertaking to import plant and machinery at a reduced rate of 5 percent customs duty provided that is not manufactured locally. Items being manufactured locally are determined by EDB and subsequently notified by the FBR.

The list so notified is neither exhaustive nor free of disputes. Complete plants obviously consist of numerous machines, components, accessories etc, which are mostly not imported in one go. Partial shipments of plants and machinery therefore remain vulnerable to administrative and classification hiccups with reference to their local manufacture or otherwise.

These types of petty issues discourage the investments. The FBR proposes that any plant, machinery, equipment and capital goods which is worth $50 million (C&F) or more and being imported for setting up of new industrial project may be de-linked from the local manufacturing clause.

Business Recorder [Pakistan's First Financial Daily]

 

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Investment avenues in agriculture sector: Saudi Arabia in talks with Pakistan ​

ISLAMABAD (June 14 2008): A delegation of Saudi Ministry of Agriculture is likely to visit Pakistan some time next week to explore investment opportunities in agriculture sector, it is learnt. The Saudi delegation would hold talks with their Pakistani counterparts to finalise modalities about land and other issues.

Minister for Food, Agriculture and Livestock had held talks with Saudi counterpart during the recent visit of Prime Minister Yousuf Raza Gillani to Saudi Arabia. The Saudi delegation's visit to Pakistan is follow-up of the discussion with Pakistani delegation in Saudi Arabia to increase cooperation in agriculture sector.

Sources said that Pakistan has offered Saudi Arabia to make investment in corporate farming for which it could be leased out 45 farms across the county for enhancing agriculture output. The Saudi investment in Pakistan agriculture sector could be export-oriented that would also help Saudi Arabia meet its agricultural needs.

The potential areas for investment, sources said, could be dairy sector, large scale cattle, fisheries, fertiliser and also different crops as Saudi Arabia is keen to import about a million tons rice from Pakistan. The main thrust of Prime Minister's visit to Saudi Arabia was to build on long-term strategic relationship between the two countries to enhance bilateral trade and evolving a joint strategy against global food crisis, sources said.

"We want Saudi Arabia to invest for corporate farming in 45 big farms" the Saudi Arabia delegation said, and added that it could also help Pakistan in meeting export standard, particularly fruits, to Unites Sates and European countries.

"They could help us by setting up food irradiation plants to meet quality standard for export of orange, citrus and mangoes to the US" sources said, and added that Saudi Arabia is keen to import rice from Pakistan and might also invest in fertiliser sector.

They said that Prime Minister had also held meeting with Saudi agriculture minister on the sideline of World Economic Forum (WEF) at Sharm El Sheikh where Saudi minister had indicated his country's interest to invest in Pakistan agriculture sector.

Apart from agriculture, prospect areas of cooperation between the two counties are oil and gas sector, manpower and bilateral trade. The sources pointed out that it was only on last Wednesday that finance minister Syed Naveed Qamar in his budget speech formally announced that foreign investment will be encouraged to increase country's productivity and develop cultivable areas.

The minister also announced that large tracts of land will be made available to foreign investors to induct capital and technology in our local farming sector. Meanwhile, a leading financial daily claimed on Friday that the kingdom is in talks with five countries and Pakistan is one of them. According to the newspaper, Saudi Arabia has revealed that Riyadh is in discussions with Ukraine, Pakistan, Sudan, Turkey and Egypt.

"Abdullah al-Obaid, the deputy agriculture minister, told the Financial Times the government was planning to set up projects of at least 100,000 hectares in several countries to grow crops such as wheat, corn, rice, soyabeans and alfalfa, a feed for livestock," the Financial Times says.

The move which, according to the newspaper, is also aimed at building up strategic reserves, comes as food prices have doubled over the past two years and a series of trade restrictions by exporting countries have limited the oil-rich kingdom's ability to secure supplies.

Business Recorder [Pakistan's First Financial Daily]

 

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Commonwealth games projects: Delhi state wants to use Pakistani cement for construction ​

NEW DELHI (June 14 2008): The government of Delhi state has planned to construct all projects related to Commonwealth Games 2010 using Pakistani cement. Chief Minister of Delhi state Sheila Dikshit said on Friday that her government had written a letter to the Centre for permission to import cheap cement from Pakistan for construction of Commonwealth Games projects as prices of local cement have risen.

Pakistani cement is of similar quality as being presently used in the projects and her government is waiting for approval from the Union government. There is cost escalation of projects due to rise in prices of local construction material and projects relating to the games are delayed.

Media reports said state government is finding difficulty in constructing infra-structural projects such as flyovers, stadium and low cost houses for the games being held here in 2010.

Business Recorder [Pakistan's First Financial Daily]

 

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'Oil import bill can touch $22 billion' ​

KARACHI (June 15 2008): Country representative, Hatton National Bank, AB Shahid has cautioned that Pakistan's oil import bill could reach $22 billion in 2008-09 if international crude price touches $150 a barrel. He was delivering his speech on "the impact of budget on banking sector," at a "budget breakfast forum," organised by the Institute of Bankers Pakistan (IBP) here on Saturday.

He said that this year, the economy suffered because oil import nearing $11 billion. What would be the consequences when it touches $22 billion and doubles the trade deficit as a result thereof, he questioned. It implies cutting oil consumption and consciously desisting from imports of peripheral economic value to contain the trade and current account deficits and the weakening of the Pak rupee.

"There is no alternative, and bankers could play the key role in achieving this aim. Conversely, we all stand to lose far more than what we have lost thus far," he observed.

He pointed out that in the context of resource mobilisation, the notable developments are the 2 percent rise in profit rates paid on National Saving Certificates, quarterly revision of these rates to continually align them with market rates, flotation of short-tenor commercial paper for investment by the public, and shifting the deposits of government offices and state-owned enterprises to the State Bank of Pakistan to limit public sector borrowings up to the net resource shortfall. He said that rise in NSS rates and proposal to float short-term commercial paper could attract banks' short as well long-term depositors.

"Banks therefore must revisit their lending ratios and hasten the process or developing innovative deposit products to hold on to their deposit base," he suggested. Shahid noted that banks won't be able to avail the benefit of extension in the Capital Gains Tax till 2010. Banks will continue to pay CGT at 35 percent on shares sold within 12 months of their purchase and at 10 percent on those sold after 12 months of their acquisition.

He was of the opinion that this restriction limits the chances of increasing bank profit from share-trading activities requiring banks to rethink their business strategies. Another area, in which banks will have to be more careful is their foreign exchange trading activities. As per new rules, besides cancellation of operating licenses of banking companies on their violation of the Foreign Exchange Regulations Act, the SBP is now being empowered to levy sizeable monetary penalties.

As one of the key tax collecting agents of the state, the bank shave to collect increased higher taxes on the services they offer to their customers. This will increase their customers' cost of doing business. On the other hand, the budget proposals also offer banks much needed relief. The beneficiaries are amalgamated banks, foreign banks and banks dealing in mortgage financing.

Business Recorder [Pakistan's First Financial Daily]