Pakistan Economy - News & Updates - Archive

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Pakistan at 84th position ​

Sunday, July 06, 2008

ISLAMABAD: Pakistan has been ranked 84th among 118 countries in the Global Enabling Trade Report 2008.

East Asian economies, Hong Kong and Singapore, occupy top two positions in the Enabling Trade Index, followed by Sweden and Norway, according to the Global Enabling Trade Report 2008 released by the World Economic Forum. Canada, Denmark, Finland, Germany, Switzerland and New Zealand complete the top 10 list.

Pakistan has been ranked 84th among 118 economies, whereas its neighbours secured slightly better positions, Sri Lanka 70th and India 71st as compared to Bangladesh 110th and Nepal 116th.

The results reflect Hong Kong and Singapore’s openness to international trade and investment as part of their successful economic development strategy. Both countries have put in place customs administrations that are highly efficient in getting goods over borders.

They are also endowed with well-developed transport and telecommunications infrastructure ensuring rapid transit to final destination. These attributes are further supported by the business environment that is conducive to the logistics and transport industry.

Published for the first time and covering 118 economies worldwide, the Global Enabling Trade Report 2008 aims to present a cross-country analysis of a large number of measures facilitating trade. The Enabling Trade Index captures free flow of goods over borders and to destinations.

The index, featured in the report, measures the factors, policies and services facilitating free flow of goods over borders and to destinations. The index breaks the enablers into four areas that are market access, border administration, transport and communications infrastructure and business environment.

Identifying key areas where Pakistan is lagging behind and has shown weaknesses in some of the crucial areas, Competitiveness Support Fund Chief Executive Officer Arthur Bayhan said “Pakistan needs to put immediate attention to facilitating an environment conducive to trade and investment, including a transparent and efficient border administration, well-developed transport infrastructure and highly efficient services.

Bayhan added Pakistan showed its competitive advantage on indicators such as non-tariff barriers, time for import, transshipment connectivity index, which is the type of transshipment connections available to shippers from Pakistan on bilateral routes, quality of rail road infrastructure, road congestions, linear shipping connectivity and ease of hiring and firing labour.

“The index will be particularly useful for policy-makers interested in benefiting from trade. By integrating and benchmarking the full range of factors that affect trade, both at and behind the border, it provides a meaningful guidance on what their priorities should be,” said Professor Robert Z Lawrence, Albert L Williams Professor of Trade and Investment at the John F Kennedy School of Government at Harvard University. Professor Lawrence is also academic adviser and co-editor of the report.

“Over the past year, the World Economic Forum has engaged key industry and thought leaders to carry out an in-depth analysis and assessment of the obstacles hindering trade in economies around the world. The goal is to construct a platform for multi-stakeholder dialogue in the interest of fostering international economic development,” said Professor Klaus Schwab, World Economic Forum Executive Chairman.

The Enabling Trade Index uses a combination of data from publicly available sources, as well as the results of the Executive Opinion Survey, a comprehensive annual survey conducted by the World Economic Forum with its network of partner institutes (leading research institutes and business organisations) in the countries included in the report.

The CSF carried out the Executive Opinion Survey in Pakistan from January to May 2008. The survey provides unique data on many qualitative institutional and business environment issues and the perception of the private sector on various aspects of the economy.

Pakistan at 84th position

 

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Cheap Cotton: Pakistan to export lint to BD, Far East countries​

KARACHI: Pakistan is likely to export around half a million cotton bales during this season on back of export ban by India and lowest price parity in international market, exporters said Saturday.

They said Pakistani lint was still cheaper by around 10 to 12 cents per pound in the international market. Director on Board of Karachi Cotton Association (KCA), exporter, importer and a ginner, Ghulam Rabbani said Bangladesh and Far East are eager for Pakistani produce for more than one reason “In the international market, Pakistani cotton is getting more attraction due to higher quality from the traditional and non-traditional cotton importing countries,” Rabbani said.

During April to June 2008, Pakistan registered an export of 100,000 bales to Bangladesh and Far East countries.

He said the news from India about a temporary ban on export of raw cotton was still facing stunning reactions and every one was inquiring country’s exporters.

He said, “Bids on Pakistani raw cotton have increased from international markets and new inquiries are pouring in from Bangladesh and Far East.” He said a leading Swiss international firm also agreed upon to make deal for Pakistani cotton due to higher quality and international price parity level. Mr Rabbani said shipment of lint from old and fresh crop would be ready after confirmation of orders, as exporters have already completed several shipments of the cotton season 2007-08 some weeks ago.

He said the international lint buyers rate Pakistani cotton as the best in quality, and it is available on competitive rates in the international market. He said our competitors, the Indian cotton merchants, are out from the race and field is declared open for Pakistani exporters to grab the market share.

Daily Times - Leading News Resource of Pakistan

 

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Malaysia, China to invest in power generation ​

KARACHI: The secretary general of Associated Chinese Chambers of Commerce & Industry of Malaysia (ACCCIM) has welcomed the proposals of Tanvir Ahmed Sheikh, President FPCCI, and assured him that the Malaysian-Chinese Investors will work on this potential sector and invest their capital in the Pakistani market to give boost the electric power generation using different sources of energy.

The FPCCI trade delegation is in Malaysia to explore the new avenues of trade, investment, joint ventures and services with the help of new technologies with the counterparts of Malaysia as well as with the D-8 States Representatives, under the leadership of president FPCCI. The FPCCI delegation met with the secretary general, Tan Sri Dato’ Soong Sew Hoong and the members executive council of the Associated Chinese Chambers of Commerce & Industry of Malaysia (ACCCIM) on Saturday. Mr Sheikh briefed them about the Pakistani market, the investment opportunities and possible collaboration especially in the areas of power generation with the help of coal reserves in large areas of Pakistan.

He briefed them Pakistan is the suitable state for this kind of investment and the government of Pakistan has also urging for investment. He invited the Malaysian-Chinese investors to study the pre-feasibilities reports that are being done by the government of Pakistan in electric power generation projects for the suitable investments. Pakistan will focus to use coal as a main source for electric power generation. Before this meeting, the FPCCI Delegation also met with the High Commissioner of Pakistan and discussed the matters of mutual interest and Investment opportunities and possibilities with the Member Countries of D-8.

Daily Times - Leading News Resource of Pakistan

 

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MINFAL meets UNO, FAO, WFP: MINFAL seeks time to overcome food crisis, poverty ​

* 70m people will be in poverty trap by 2012: report​

ISLAMABAD: The Ministry of Food, Agriculture and Livestock (MINFAL) has asked United Nation Organizations (UNO) to give more time to develop consensus among the stakeholders for its offer to assist the matters related to the food security and poverty alleviation across the country.

Reviewing the government’s strategy to overcome the food crises and poverty alleviation programme, the MINFAL officials held separate meetings with the representatives of International Fund for Agriculture Development (IFAD), Food and Agriculture Organisation (FAO) and World Food Programme (WFP).

The MINFAL officials said the UN affiliated organisations and other donors agencies wanted to help the government regarding food security, poverty alleviation and productivity enhancement.

The official told Daily Times that the international organisations have proposed three types of measures including short, medium and long terms for increasing agriculture productivity and to help the government in poverty alleviation in rural areas. The short-term measures have already been completed and the discussion was under way for the remaining two types of measures.

The officials said the short-term measures include Benazir Bachat Card Scheme and other arrangements for a period of one year.

For the remaining two types of measures, discussions were in progress with the government high officials. The medium and long-term measures relate to the investment plan in agriculture sector, policy matters and implementation and monitoring of all such programmes, the officials added.

However, the representatives of the UN organisations hope that the government would take appropriate measures for over coming food crises and would start a comprehensive strategy for poverty alleviation with the collaboration of the IFAD, FAO, and WFP.

The UN organisation presented a presentation during the meeting regarding the small measures for enhancing income of rural population through various schemes. Officials of the UN organizations told this scribe that once targeted people identified through any mechanism, then helping them not difficult for the government.

They admitted that identification of targeted poor section of the society was challenging job but not impossible.

According to an estimate, if the government fails in poverty alleviation programmes, then by the year 2012, more than 70 million people would be living below the poverty line, they warned.

The ministry demanded a week time so that they might complete internal work and plan future line of action and in later stage start cooperation with the organisations and other donor agencies.

The officials maintained that the international prices of basic food commodities have increased manifold for the last two years and more rapidly in recent months as compared to last year. Causes of such higher food prices are insufficient growth in cereal production, massive diversion of food grains for making bio-fuels, provision of land for bio-fuels, global warming, high population growth, changed eating habits, and manipulative role of international financial markets along with reduced role of national government.

Daily Times - Leading News Resource of Pakistan

 

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'Industrial estate to be set up for overseas Pakistanis' ​

ISLAMABAD (July 06 2008): The Overseas Pakistanis Foundation (OPF) is working to set up an industrial estate for overseas Pakistanis at Motorway (M-II) Chakri Interchange Rawalpindi to provide investment opportunities to overseas investors. In this regard, the Foundation had already signed Memorandum of Understanding with the government of Punjab, official told here Saturday.

Giving briefing, he said that the Industrial Estate will spread over 2000 acres on Pakistan Motorway. The Punjab government will acquire land for the project while OPF will develop and provide complete infrastructure facilities, he added.

Official said that Federal government would guarantee the provision of all basic utilities for the scheme like water, gas, electricity and telephone and also ensure similar incentives for this industrial estate as allowed to Chinese specific zone in the country. This estate will be developed on the pattern of Sundar Industrial Estate, Lahore with complete infrastructure facilities, he added.

To a question, he said the allotment of commercial plots in the scheme will be preferable to overseas Pakistanis up to a specified period, mutually agreed to be determined at the final agreement stage. Besides, the Foundation would workout a plan to establish the medical, engineering and IT colleges in the country to meet the basic needs of overseas Pakistanis, who have desired to educate their children in Pakistan.

Business Recorder [Pakistan's First Financial Daily]

 

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Musharraf vows to take Pakistan out of turmoil ​

KARACHI (July 06 2008): President Pervez Musharraf on Saturday vowed to take Pakistan out of various turmoil - the political turmoil, terrorism and extremism. "Pakistan has come to live and will, Inshallah, survive", he said while speaking as chief guest at the balloting of some 9,000 plots in Hawkesbay Scheme-42 of Lyari Development Authority (LDA) held at Governor's House here.

Sindh Governor Ishrat-ul-Ibad Khan, Provincial Ministers, Karachi Nazim Syed Mustafa Kamal, Naib Nazim Nasreen Jalil, besides LDA Director General Agha Maqsood Abbas were present on the occasion. The President said: "We have to pull the country out of turmoil and face the challenges of terrorism and extremism if Pakistan is to survive and keep moving forward.

"Pakistan has come to live and survive", he said, adding that Almighty Allah had created Pakistan for the Muslims of South Asia and it would live forever. Referring to balloting of plots, the President said the mission always before him had been to work for poorest of the poor and it was for the fourth time that he was performing the balloting of plots.

Besides the balloting of some 120,000 plots, the President announced that additional 100,000 plots would be provided in Taisar Town with the emphasis on small-size plots for the poor. He said there were people, who had been living in nullahs, slums and in dilapidated conditions and they have to have a place in the world to live.

The President said once he had the opportunity of flying over Lyari river and Lyari Expressway and saw people living in the riverbed with sewerage water around. He said these people were given land and money to construct their houses and now they had decent living conditions.

In a city like Karachi, he opined, it was more essentials to have more plots of small size - say 80 square yards on which well designed three-room houses could be constructed to meet the living requirements of poor. He appreciated the dynamism of Governor Dr Ishrat-ul-Ibad Khan and City Nazim Syed Mustafa Kamal for thinking on right lines, and said their efforts for providing shelter to the poor was commendable.

The President referred to speedy development in Karachi in various sectors like housing besides construction of bridges, flyovers, underpasses and quality roads, laying of improved sewerage system, water projects like K-III etc, and described the same as a good effort of the Sindh Governor and the City Nazim. On the recreational side also, he said, a lot had been done, and cited the examples of Bagh Ibn-e-Qasim, Quaid-e-Azam Park and Beach Park.

Commending the efforts of the Governor and the Nazim, the President told them to keep on doing this. Earlier, the President performed the balloting of 9000 plots - 5,000 of 240 square yards and 4,000 of 400 square yards in Hawkesbay Scheme-42 by pushing the computer button.

In his speech, Governor Dr Ishrat-ul-Ibad Khan said that providing shelter to the poor was envisioned by President Pervez Musharraf in the year 2000, which was being implemented. So far, he said, more than 100,000 plots had been given in Taiser Town housing scheme, which remained in pending for 30 years.

He pointed out that this balloting was to be done six months back, but it could not take place. The Governor spoke about harmonious relationship with Sindh Local Government Minister Agha Siraj Durrani in carrying out the mission of providing relief to the poor.

The coalition in Sindh, he said, had the understanding that "we have to maintain peace and harmony and work for the progress and prosperity of poor masses." He assured the President of continuing to work as per his vision for providing relief to the poor.

In his welcome address, City Nazim Syed Mustafa Kamal said these 9,000 plots were being provided in a scheme, which remained in abeyance for three decades. He said the scheme could see revival because of the personal interest taken by the Governor and today the dream of people, who applied for a plot in this scheme, had come true.

Mustafa Kamal said personal interest of the Governor for revival of this scheme could be judged from the fact that he visited the scheme several times and it was because of this that the area had roads and electricity, while sewerage and water supply facilities too would be provided soon.

He pointed out that over 31,000 applications had been received from people in various categories, including general public, civil servants, retired employees, widows/ orphans and overseas Pakistanis for 9,000 plots about nine month back and an error-free system of National Database Registration Authority (Nadra) adopted for allotment purposes - which is the system and culture we are cultivating to maintain transparency.

He said it was for the first time that "we are working hard to serve the people and credit for this goes to Mohajir Qaumi Movement (MQM) chief Altaf Hussain, who brought middle class to the fore. Mustafa Kamal said till to-date, the city government had given 125,000 plots for which credit went to the whole team and its leader.

Business Recorder [Pakistan's First Financial Daily]

 

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Revival of industries and cosmetic measures ​

ARTICLE (July 06 2008): A recent report has shown that Pakistan's manufacturing sector recorded the weakest growth in a decade during the outgoing fiscal year 2007-08 due to several unfavorable conditions. The growth target had been lowered twice and overall manufacturing posted a growth of 5.4 percent during the first nine months of the fiscal year 2007-08 against the target of 10.9 percent and 8.1 percent of last year.

The report further said that the large-scale manufacturing, accounting for 69.5 percent of overall manufacturing, registered a growth of 4.8 percent in the current fiscal year 2007-08 against the target of 12.5 percent and last year's achievement of 8.6 percent.

Prior to budget announcement, some observers were expecting that the government would announce a comprehensive package for the revival of the industry and businesses which were under tremendous pressure owing to multiple reasons, including inflation and energy shortage and heightened political tension, deteriorating law and order situation as well.

It's true that the manufacturing sector in the country still revolves around the traditional low value added industries, whose share in world trade is continuously declining but there are other factors that are responsible for this decline.

However, the industry was expecting relief as the cost of doing business was increasing with every passing day as a result of the depreciating rupee against the dollar and high energy cost, including electricity, gas and petrol and cumulative impact of monetary tightening are responsible for poor showing of manufacturing in 2007-08.

We have witnessed that the investment in upgrading technology is low and diversifying into emerging markets, products and processes is either slow or nearly constant and an efficient international quality supply chain which is essential for local industry to flourish, is missing.

Here it should have been a point to ponder for the government that banking and financial sector should have been activated to rescue the ailing industrial sector but no such thing has happened and as the industries lacks the cash-flow they were still unable to revamp themselves. Hence they were not able to compete in international market in a tough WTO regime.

The private sector also needs to adjust with new realities but primarily it's the duty of government to sensitize the industry regarding emerging trends in global market. Moreover, government is also expected to provide enabling environment to its local industries, especially those sector that cannot survive without a certain level of protection from the government.

The share of knowledge and technology intensive engineering, electronics, pharmaceutical, chemical and non-metallic mineral products, should be strengthened and enabled through fiscal and tariff means as well as building of alliances with international partners.

Observers are of the opinion that the announcements made by the government in the federal budget 2008-09 can be ascribed as cosmetic measures. These circles say that the sectors and products with comparative advantage such as textiles, food and agro-processing should be fostered and the sectors like computer industry needed special care as the growth of the industry is vital for all economic sectors. Ironically government could not reach at a rational policy in this regard.

The government officials claim that the restructuring of the duty mechanism would benefit local industry. Duty rates on dairy products, fruit, chewing gum, chocolate, processed food, fruit juices, aerated waters, ceramic products, air-conditioners/refrigerators, electric fans, toasters, microwave ovens, televisions, including liquid crystal display, other, black and white or other monochrome, furniture and lighting equipment etc has been increased from 25 percent to 35 percent.

Yes, government may collect some extra revenue but the measure would not benefit local industry till its being enabled to get compatible both in terms of quality and price. As the industry is on the verge of collapse, it was being expected that the government would rationalize Sales Tax on various Industries.

Keeping in view the fact that industry is struggling for its very existence, the government should have curtailed the rate of sales tax from the existing 15 per cent to 10 per cent, as it had already been proved through various experiences that a cut in tax rate earns more revenue for the government.

Moreover, the industries that need to be encouraged and promoted yet, the exemption of sales tax for a particular time period would have been a great help to restore the confidence of both the industry and investor. On the contrary, the government has increased the sales tax instead of reducing it and this measure would result in more horrible consequences both for the consumers as well as the industry.

The government has claimed that due to revenue crunch, the rates of sales tax and FED have been increased but the industrial sector is not able to see any good resulting from this measure. Instead it would affect the revenue collection as it would prove another fatal blow for the industry.

(The writer is senior vice president of Islamabad Chamber of Commerce and Industry (ICCI) and the president of Pakistan Computer Association (PCA))

Business Recorder [Pakistan's First Financial Daily]

 

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Centre turns down Punjab’s request for 2.5mT of wheat ​

Tuesday, July 08, 2008

ISLAMABAD: The federal government has rejected Punjab’s request to the Ministry of Food, Agriculture and Livestock (MINFAL), to allocate 2.5 million tonnes of wheat from its stocks to carry out winter operations, foreseeing another flour crisis in the country, The News has learnt.

After MINFAL’s reluctance to entertain Punjab’s request, the Punjab chief minister took up the issue with the prime minister in a meeting the other day at the Prime Minister House and was assured that Punjab would be supplied beyond its consumption of 3.2 million tonnes if its releases exceed the average releases of over 3 million tonnes, an official privy to the development told this correspondent.

The Punjab government has procured 2.5 million tonnes of wheat during the current season against the target of 3 million tonnes and average releases during the winter operation stand above 3 million tonnes.

However, the prime minister has assured the Punjab chief minister that the province would be allocated one million tonnes for coming winter operations and if its demand exceeded, then more allocations would be made from imported stocks, they said. “The provinces are free to import on their own to meet demand but they have to bear the extra price and subsidies,” said another official who declined to be named.

Centre turns down Punjab’s request for 2.5mT of wheat

 

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Musharraf for accelerating industrialisation, job creation ​

Tuesday, July 08, 2008

KARACHI: President Pervez Musharraf has called on industrialists to help spur the process of industrialisation, investment and job creation in the country. He was talking to a delegation of leading industrialists and chairmen of industrial estates, which called on him at the Governor House here on Monday.

Sindh Governor Dr Ishratul Ebad Khan was also present on the occasion. Later, the President’s spokesman Maj Gen (Retd) Rashid Qureshi informed the media that members of the delegation briefed the President about the country’s economy as well as the environment in which the businesses are being carried out and the problems faced by them. The members of the delegation also came up with the recommendations as to how the improvements could be brought about.

The President lauded the efforts of the industrialists towards improving the economy of the country, for the provision of employment opportunities which would lead to poverty alleviation and improving the income of the people. He said that the big industrialists should speed up their efforts in this very direction to help implement the government’s plan for tackling the problem of poverty as well as the provision of job opportunities.

The President also assured the delegation that their recommendations towards improvements in the business environment, employment generation and industrial expansion, would be conveyed to the government.

Musharraf for accelerating industrialisation, job creation

 

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Afghanistan diesel imports from Pakistan increase ​

Tuesday, July 08, 2008

SINGAPORE: Pakistan is exporting more diesel a month to Afghanistan to 100,000 tonnes from June to September versus the usual monthly volumes to help in reconstruction works, an industry source said on Monday.

Pakistan normally moves 50,000-70,000 tonnes of diesel each month to geographically challenging Afghanistan. During June to September last year, such cross-border flows were 60,000-70,000 tonnes a month, the source who is familiar with the flows said.

“Afghanistan is importing more gas oil for construction works. The country is rebuilding,” said the Karachi-based source, who asked not to be named. But Pakistan has suspended jet fuel exports to Afghanistan since June 25.

“The suspension is indefinite. Afghanistan is drawing jet fuel supplies from Iran,” he added. Pakistan used to send 10,000 tonnes of jet fuel to Afghanistan every month. Part of such diesel intake is for military consumption in Afghanistan, the source said.

The United States has some 32,000 troops in Afghanistan, around 14,000 in the NATO-led force and some 18,000 performing missions from counter-terrorism to training Afghan forces. Pakistan, itself short on gas oil, typically buys the fuel used for transportation and power, via tender apart from term supplies from Kuwait. Pakistan last bought at least 300,000 tonnes of gas oil for June to October delivery at premiums of $7.60 to $9.30 a barrel to Middle East.

Afghanistan diesel imports from Pakistan increase

 

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Gwadar port to be linked with Iran by year-end​

ISLAMABAD, July 7: A Senate committee was informed on Monday that Gwadar Port would be made fully operational and connected to Iran by the end of the year.

Federal Minister for Ports and Shipping Qamar Zaman Kaira informed the committee on ports and shipping that the government was taking measures to hold the next meeting of the Economic Coordination Committee (ECC) in Gwadar to take up all outstanding issues on the spot.

The committee which met under the chairpersonship of Senator Mrs Gulshan Saeed reviewed the ongoing projects of the National Highway Authority, Wapda, Civil Aviation Authority and Pakistan Railways and the plans being envisaged by the Ministry of Ports and Shipping to make the Gwadar Port fully operational.

Secretary Ministry of Ports and Shipping informed the committee that the port had been completed and was operational. He said that in order to boost the operational activities, it had been decided in the last ECC meeting that all wheat import for Balochistan would be routed through Gwadar. The committee was informed that the master plan of the port had not been finalised so far.

Regarding sweet drinking water, the committee was informed that a desalination plant of 100,000 gallon per day capacity would be operational in two months. It was suggested that efforts be made to get water from nearby dams, like Shadi Kol and Basole.

Gwadar port to be linked with Iran by year-end -DAWN - Top Stories; July 08, 2008

 

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Bio-diesel research begins in Pakistan​

KARACHI, July 7: The Pakistan State Oil (PSO) has initiated research and development work on its bio-diesel project to meet government’s deadline of blending five per cent bio-diesel with conventional diesel by 2015 and 10 per cent by 2025.

The Economic Coordination Committee (ECC) had taken a decision on the issue in its meeting on Feb 15 in Islamabad.

Bio-diesel would be extensively tested in the auto industry of Pakistan, and depending upon its favorable results, scope of its supply would be extended throughout the country as a standard practice.

At PSO, after the production of bio-diesel from Jatropha oil, an in-house testing has already begun on one vehicle. However, results would be known later.

A PSO official involved in the project told Dawn that it would take some time to produce bio-diesel in Pakistan on such a large scale because it needs mass cultivation of Jatropha and other non-edible seeds for which commitment/concerted efforts of the government is required.

He said a separate department, alternative energy and new projects, has been established within the company to identify and take initiatives in terms of cheaper renewable and alternative energy projects and to address the country’s energy crisis and lessen the fuel import bill which would result in saving of precious foreign exchange.

PSO has selected only non-edible plants/seeds species, such as castor (Arind), Pongame (Sukh Chain), Jojoba, Jatropa (Karanga), etc., for production of bio-diesel. However, the company is currently focusing on Jatropha plant/seed for its better qualities as a substitute of petroleum diesel.

The officials added that many countries in Europe, US, Brazil, Malaysia, and India are using Jatropha as well as other edible and non-edible plants/seeds for production of bio-diesel.

The official said that out of these plants, Jatropha can be grown on marginal land, thus its plantation would not compete directly with other food crops, such as wheat, corn, sugarcane, rice and cotton besides helping in poverty alleviation and improving land utilisation.

Pakistan consumes approximately eight million tons of diesel per annum; of which around three million tons is imported.

There will definitely be incentives for consumers with regards to bio-diesel pricing, its effect on the environment and the vehicle performance, he said.

The official said that spiraling effect of fossil fuel prices world over continues to adversely affect economies of many countries.

This has provided incentives to search for alternative fuels derived from vegetable and non-vegetable oils, i.e. ‘bio diesel’, which offers several distinct advantages as an alternative fuel for diesel engines.

Economically it reduces imports and would afford improved security of energy supplies.

Bio-diesel research begins in Pakistan -DAWN - Business; July 08, 2008

 

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Aid & Pakistan’s development​

THERE is a belief among economists — a belief I happen to share — that the peaks and troughs one notices in the trajectory of growth followed by Pakistan since its birth in 1947 were induced by large flows of foreign assistance.

Up until recently, a significant share of the total amount of external capital that flowed into Pakistan came from the United States’ budget and from the institutions over which Washington had considerable influence.

The international financial institutions that supported Pakistan’s development — the World Bank and the Asian Development Bank — seemed to open their coffers to use by Pakistan during the periods when America was also being generous. The American generosity was linked with Pakistan’s willingness to advance Washington’s strategic interests in various parts of the world.

Thus in the early 1960s, when President Ayub Khan aligned Pakistan with the United States in order to help the latter contain the spread of communism in Asia, the Americans provided large amounts of military and economic assistance to Islamabad. The flow of assistance declined significantly after Pakistan’s war with India in September 1965 and also when the reins of power passed into the hands of Zulfikar Ali Bhutto who sought to detach Pakistan from America.

The Russian invasion of Afghanistan and its occupation of that country for a decade — during most of the 1980s — brought Pakistan into an alliance with the United States and Saudi Arabia. Pakistan was prepared to use its territory to train warriors to fight the Soviets in Afghanistan. In return it asked for and received both military and economic support from America and its western allies as well as from Saudi Arabia.

The third period of close American — Pakistani association began right after 9/11 when Islamabad responded to Washington’s pressure and became a partner in the ‘war on terror’. This partnership also came with support to the economy and the military. The latest estimate for the total amount of American support during the 2002-08 period is $12bn, or $2bn a year.

Each of these three periods of close donor association with Pakistan — the 1960s, the 1980s, and the early 2000s — profoundly affected the country’s economy. The most important impact was on the rate of GDP growth. Averaged over the three periods, the economy grew by more than six per cent a year, a rate of growth 50 per cent higher than the one Pakistan could have sustained on its own.

During the 1960s, this high rate of growth in GDP meant an increase of 3.5 per cent per annum in income per head of the population; in the 1980s, income per head increased at the rate of 3.8 per cent. The highest increase in per capita income occurred in the more recent period when the GDP growth averaged seven per cent and income per capita increased by 5.2 per cent a year, a record for the country.

The less apparent impact of the large amounts of donor money coming into Pakistan was to postpone some of the structural problems that have adversely affected the economy. The first was a persistent low domestic savings rate. With very low domestic savings, Pakistan could afford a rate of GDP growth not significantly higher than the rate of population increase. This meant that the problem of poverty could not be addressed.

Evidence compiled from the experience of high growth developing economies by development institutions such as the World Bank suggests that the rate of GDP growth has to be two to three times the rate of increase in population for a palpable difference to be made to poverty levels. To ensure such rates of growth overtime, Pakistan needed to increase domestic savings. Or it could rely on external flows. Since the latter often became available in large amounts, policy-makers set aside the difficult decisions they would have had to take to increase domestic savings. The most important of these was the restructuring of the tax and public expenditure systems.

The second structural problem, policy-makers have failed to address, concerns the development of the country’s large human resource. Since 1947, the year of the country’s birth, Pakistan has witnessed a profound demographic change. The size of the population has increased five-fold from 30 million in 1947 to an estimated 165 million in 2008. The number of people living in the urban areas has increased 12-fold, from five million to 60 million.

The median age of the population has declined continuously. Today it is only 17 years which means that nearly 83 million Pakistanis are below the age of 17 years. Such a population can either become a large burden for the country or it could become a major economic asset. What will make the difference is the interest the state takes in education and skill development and in providing basic health care.

The Pakistani state has done poorly in these three areas. Public sector expenditure on education in the early 2000s was less than 2.5 per cent of GDP. The expenditure for healthcare was even less than that. Even compared to the countries at its level of development, Pakistan spends a very small part of its GDP on research and development.

As the Indian experience has shown, a well educated and trained workforce can become not only a major asset for the economy. It can also bring about significant social changes that contribute to the modernisation of the economy and the society and their better integration into the fast changing global system. Pakistan’s large and very young population can move in either of the two directions: opt for a greater play in the development and modernisation of the economy or drift towards Islamic radicalism and isolationism.

The third structural change that did not happen was the integration of the economy in the rapidly evolving global system, particularly through increased exports. No developing country has developed without emphasising the development of the export sector. Pakistan, on the other hand, has allowed its share in global trade to decline. The World Bank’s latest World Development Indicators, shows that Pakistan had a share of 2.4 per cent in global population, 0.23 per cent in global output but only 0.15 per cent in global exports.

What lies in Pakistan’s future? Now that the United States is developing some misgivings about Pakistan’s contribution to the ‘war on terrorism’ there is the possibility that American aid may decline once again. Should that happen, what would be the impact on the Pakistani economy?

DAWN - Editorial; July 08, 2008

 

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Edu sector to get $90m from USAID​

* 79 percent of Pakistani children between the ages of 10 and 16 are out of school, while nearly half the adult population is illiterate with approximately 42 percent of Pakistani women unable to read
* Edu in Sindh lacks a backbone: Pir Mazhar​

KARACHI: The Sindh Minister for Education and Literacy, Pir Mazharul Haq, said on Monday that Sindh lacks a backbone when it comes to education and half of the non-functioning schools in Pakistan are located here.
He has said this while speaking at a Memorandum of Understanding (MoU) signing ceremony between USAID and the Sindh education department at a local hotel.

The United States Agency for International Development (USAID) and the Government of Sindh Department of Education and Literacy signed the MoU to expand USAID’s nationwide $90 million ED-LINKS program in Sindh, increasing the province’s share of aid to US$30 million. The US Consul-General in Karachi, Kay Anske, was also present on the occasion.

Haq said that the people of Sindh, who have been ignored in the past, will welcome the USAID’s generous donation and benefit greatly from it. Education in Sindh has hit rock bottom and the PPP government wants to improve it with the help of friendly nations, he added.

“This program promises great rewards for Sindh,” USAID Pakistan Mission Director Anne Arnes said while speaking at the ceremony. “ED-LINKS projects will improve the teaching skills of more than 30,000 teachers in the targeted districts, provide effective models for school management, and improve the learning environment for more than 500,000 students.”

The ED-LINKS program will be implemented in 3,000 middle and secondary schools in Sukkur, Khairpur, Jacobabad, Kashmore, Dadu, Jamshoro, Tharparkar, Mirpur Khas, Sanghar, Nawabshah, and Shikarpur.

Provincial Director ED-Links Sindh Fawad Shams noted that approximately 79 percent of Pakistani children between the ages of 10 and 16 are out of school, while nearly half the adult population is illiterate with approximately 42 percent of Pakistani women unable to read.

Ppi/nni add: Earlier in the day, ED-LINKS launched its activities in Sindh with a 10-week leadership and management program for 125 head teachers of the Aga Khan University, while in Islamabad, USAID Pakistan Acting Deputy Director Robert Wuertz launched a 10-day workshop on standards in education.

The workshop, being conducted under the auspices of the Federal Ministry of Education Curriculum Wing, brings together leading authors, textbook writers, subject specialists, and teacher trainers. They will work together to develop strategies to raise curriculum standards in schools across the nation.
Since 2002, the U.S. Government has provided more than $2 billion to Pakistan to improve economic growth, education, health, governance and to reconstruct areas affected by the October 2005 earthquake.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

PKR loses 178 paisa against USD in one day: nearly 5.5 percent erosion of value since July 2 2008 ​

KARACHI (July 08 2008): On Monday, Pak rupee lost 178 paisa or nearly 2.5 percent against US dollar by the closing of day's second trading session on interbank foreign exchange market. Since July 02, the Pak rupee currency has lost 5.5 percent to hit a new all-time low of Rs 71.92 against one dollar. Last fiscal year's closing of rupee was Rs 68.3970 against one dollar.

The absence of State Bank of Pakistan from the interbank Foreign Exchange market clearly points towards a strong greenback demand with weak inflows. On the first day of the week, interbank opened at Rs 71.15 to a dollar on bleak political and economic outlook. By afternoon 13:30 hours, the rupee had weakened to Rs 70.95-71.00 buy/sell to a dollar.

Since the start of the month the central bank has injected $150 million in the market to satisfy pent-up demand for the greenback. The demand for dollar emerged soon after lifting of 35% cash reserve imposed on certain goods by the SBP through interim measures the central bank had taken in the last week of May 2008.

Rising oil prices in the international market, shortage of essential food items due to poor agriculture growth and low FDIs are some of the major factors putting immense pressure on exchange rate. Unfortunately, however, our exports numbers are not sufficient to provide the required support. The oil bill has already reached an alarming level and at current price, $1.6 billion are required to meet the monthly oil bill.

Monday's demand was mainly caused by oil payment, capital import payment by some telecom and gas distribution companies and remittance by corporates in power and fertiliser sector. Estimated amount ranges around $100-125 million.

Last week, Sate Bank of Pakistan invited Treasury heads of eight leading banks of the country. The central bank warned them against unnecessary interbank FX activity. Banks were told not to quote wide prices to arrest volatility, as a twenty-pip Rs/Dlr quote means that if the offered side was hit then the next quote is up by another twenty paisa, ie if the price is quoted 69.50-70, then next offered price would certainly be above 69.70, possibly 69.70-90, for a two-way quote.

Banks throughout the day were scurrying to cover the underlying import demand. Importers were ready to pay premium for forward purchases: 60 paisas for one month; Rs 1.25 per two months; Rs 2.05 for three months; Rs 2.80 for four months; Rs 3.43 for five months; Rs 4.00 for six months; and Rs 7.50 to 8.00 for 12 months to dollar.

As a result, banks were buying dollars on ready market and placing them in their NOSTRO account. The State Bank did intervene, but sensing strong demand from jittery importers soon pulled back and allowed the market value to prevail. As a result, in late afternoon, trading Pak rupee went on a steep downward slope to hit the low of Rs 71.95 to a dollar on tomorrow (Tuesday) value.

The SBP asked banks to utilise its Foreign Exchange Exposure Limit (FEEL), which is USD 320 Million. This means that 36 banks are authorised to expose itself by either carrying a long dollar positions or a short dollar position, with a market limit of USD 320 million. Historically, in Pakistan, banks never sit on short dollar positions as rupee has a long history of weaknesses due to current account deficit and negative balance of payment.

Between 1948 and 1954, one dollar could be obtained for Rs 3.3085. Until December 1971, one USD was equivalent to Rs 4.7679. In 1981, one dollar would fetch Rs 9.90. By the end of 1991, a dollar was worth Rs 24.20. On December 31, 1995 one dollar was equivalent to Rs 31.20, in 1998, a dollar was for Rs 46.10. In 2000, a dollar would fetch Rs 58 and in 2001 60.55.

In 2002, rupee gained some strength to close the year at 58.41 and it remained stable until December 2007 and during this 5-year period it lost only 5 percent of its value against the US dollar to close 61.21. On January 02, 2008 one USD was worth 61.85 and as of now rupee has lost 16 percent of its value against the US dollar to close at 71.92.

There were two views on the market with regard to SBP exchange rate policy. Some forex experts believe SBP should not allow the base rate to go up so sharply in one day. "Once an L/C is opened, it is then a customer's liability and also the bank as well as of SBP's.

Therefore, SBP can buy ready dollars from banks lying in then NOSTRO accounts, and then sell the same in forward back to the bank to smoothen the volatility prevailing on the interbank market," they emphasise.

While others feel that SBP should recognise the ground reality and put the brakes on non-essential imports, making them prohibitively expensive by allowing the overnight rates to shoot up. And also, raise interest rates substantially to attract rupee deposits in order to curb the outflows of dollar.

The sharp falling rupee has negative connotations on foreign portfolio investment. While local stocks have become very attractive at seven time multiples with dividend yields of 11 to 12 percent, the one percent lower lock has turned the KSE into a one-way street ie coming in with no easy exit. This is also making the foreign portfolio managers uneasy.

Meanwhile, exchange companies had closed shops Monday, awaiting a higher rate on Tuesday based on interbank Tuesday value. But one could remit through telegraphic transfers at, ie, lower than interbank rate Rs 71.50 to dollar. UAE dirham was available at Rs 19.00 in exchange companies and Rs 19.40/19.45 with Hundi/Hawala dealers.

The supply and demand for dollar is widening and it is becoming difficult for the central bank to control. SBP's own forex reserves are not so large to be effectively used to arrest the slide.

SBP HAS TWO OPTIONS: It could provide regular dollars to meet the daily needs, and it would require the injection of a billion dollar on weekly basis for a couple of weeks to stabilise the market. And, subsequently the injection of USD 600,000 for every week until the central bank reserves are sufficient to cover at least 12 weeks' imports.

The other option is to give a bitter pill to the nation by sharply hiking the CRR & SLR rates, and, simultaneously making the lending rates so high that rupee becomes more dearer, ie, the choice is either to go for more demand management measures and let the economic wheel move at a slower pace or to spend the reserves to keep growth at comparatively higher level and risk going into an IMF programme.

In the later course, the Fund itself would force much sharper rise in lending rates and force an even more deeper slide of rupee against the dollar. It would therefore be more prudent to allow SBP to balance its act not on the basis of any mathematical model but undertake its own value judgement. But this means giving SPB a free hand with full political and fiscal support.

LAHORE: The rupee lost 80 paisa against dollar on the buying at Rs 70.50 and Re 1 on the selling side at Rs 71.00 at Lahore currency market on Monday. The dollar kept moving up throughout the day's trading following persistent demand and moved up and closed higher at Rs 70.50 and Rs 71.00 against Rs 69.70 and Rs 70.00. Moneychangers accounted the dollar's increasing demand for its appreciation.

The rupee also faced pressure and significantly declined against pound sterling at Rs 137.10 and Rs 138.10 on the buying and selling counters as compared to the last week closing of Rs 136.50 and Rs 137.00.

ISLAMABAD: The dollar and showed an extraordinary increase of Rs 1.40 at the currency markets of Islamabad and Rawalpindi on Monday. The dollar resumed trading at Rs 71 (buying) and Rs 71.50 (selling) against last rate of Rs 69.60 (buying) and Rs 69.70 (selling). It did not observe further change in the evening session and closed at Rs 71 (buying) and Rs 71.50 (selling).

Pound sterling opened at Rs 148 (buying) and Rs 149 (selling) against last rate of Rs 136.25 (buying) and Rs 136.75 (selling). It did not observe further change in the second session and closed at Rs 148 (buying) and Rs 149 (selling).

Business Recorder [Pakistan's First Financial Daily]