Pakistan Economy - News & Updates - Archive

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ISLAMABAD (June 04 2006): Assuring full protection and facilitation to international investment, President Pervez Musharraf on Saturday said high growth and friendly policies make Pakistan an ideal destination for world entrepreneurs and stressed that the country's economic reality is far better than "distorted perceptions."

In a keynote address to OPEN Silicon Valley's annual business moot in California through video conference, President Musharraf said that the country is shaping up through construction of Gwadar Port and a network of infrastructure to serve as trade and energy corridor for landlocked Central Asia, South Asia, the Gulf region and China.

"Pakistan today is in an altogether different league economically - it has been put firmly on the path of high economic growth with its GDP having more than doubled to US dollars 135 billion and all macro economic indicators including exports, revenue collection, foreign investment, forex reserves staying positive," he said.

He rejected negative travel advisories issued against Pakistan and added that these did not reflect prevailing ground realities.

"I think we suffer from distorted perceptions - but in reality we are much better as evident from the fact that none of the foreign companies doing business in Pakistan has ever been harmed due to policies or internal situation," he emphasised to a gathering of American and Pakistani entrepreneurs at OPEN 2006 moot.

President Musharraf said the government is striving to improve the image of Pakistan but also urged the Pakistani expatriates to contribute to these efforts through personal example and effective countering of misperceptions about the country.

In the widely applauded address, the President referred to an international report that described Information Technology progress as Pakistan's best kept secret and said the country offered a host of opportunities in fast-developing sectors.

"We have put in place an elaborate IT infrastructure, connected cities and towns to the Internet and three submarine cables are to further enrich the IT scenario - on top of it, we have talented English speaking graduates, which are an asset for the country and international investors."

President Musharraf informed the appreciative gathering of Pakistani and American entrepreneurs and top professionals that the country is synergising education with expanding demands of industrial development. "We are establishing nine high-tech engineering and science and technology universities of international standards with the help of advanced countries - these will produce professionals of high calibre to push industrial development on fast-track basis," he said.

The President also spoke about the National Vocational and Technical Education Commission and said it would set up an infrastructure for equipping the young people with skills commensurate with technical and industrial advancement.

"We are creating synergy between education and rapid industrial growth," he said, adding that the budget for higher education has been increased from Rs 0.6 billion about five years to Rs 22 billion this year.

On meeting Pakistan's growing energy requirements, the President said the government is working on import of natural gas from Iran and Turkmenistan and electricity from Central Asia.

He said the country has been able to reduce dependence on costly oil and is constructing large dams and canals to produce cost-effective hydro power.

President Musharraf asked the Pakistani expatriates to live as peaceful and useful citizens of their adopted countries, foster unity in their ranks and not be divided along political lines.

 

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ISLAMABAD (June 04 2006): As previous Surveys have declared the tax machinery corrupt and inefficient, the Central Board of Revenue (CBR) will shortly launch a 'perception survey' in collaboration with Gallop Pakistan to obtain the viewpoint of taxpayers and government departments about the integrity of CBR employees.

According to a CBR report issued on Saturday, a survey was conducted in 1999 to obtain the taxpayers' opinion on the country's taxation system. The questionnaire was mailed to 128,000 taxpayers, tax advisors/accountants, randomly selected from the CBR database. Of this, 126,000 letters were sent to taxpayers with varying tax payments and 2000 to tax advisors/accountants.

Surprisingly, only 6000 taxpayers responded highlighting that taxation system fell short of their expectations. The survey results showed that laws were complicated; rules and regulations were stringent; the staff (tax machinery) was inefficient and corrupt; and the tax administration was non-responsive to dynamics of fiscal and commercial environment. Level of courtesy was low and connivance between the taxpayers and the tax collectors was high.

The report pointed out that another survey was conducted by the Task Force on Tax Administration. The results showed that all respondents including taxpayers, tax collectors, and representatives of civil society were equally worried about corruption.

The respondents believed that corruption was not simply restricted to CBR alone, rather many other government departments were also engaged in such unhealthy practices.

In fact, when they were asked to rank government departments according to the perceived level of corruption, many of these departments were ranked higher than CBR. The problem of 'speed money' in the case of customs clearance, and seeking refund payments was also calculated and highlighted in the report.

Now a new survey would be conducted to update the tax officials about the level of taxpayers' facilitation, change in attitude of tax officials and improving the overall fiscal environment.

The report stated that different categories of stakeholders are identified including income and corporate taxpayers, salaried individuals; non-salaried cases, wholesale/retail traders, exporters, turnover Taxpayers, manufacturers, service providers and importers. Other stakeholders included CBR employees, employees of other government agencies with specific interests in CBR activities, courts and prosecutors and officials of the Ministry of Finance.

Coverage and Sample Selection: In view of the high cost and time involved in recording responses from the entire population of the identified stakeholders, selection of a representative sample is the preferred option. Careful selection of the sample will ensure the validity of the findings of any research.

Thus, a representative sample, both in terms of type of respondents and regional spread will be drawn. In certain cases 'biases' might have to be introduced in sample selection to capture marginalised groups, the report added.

 

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KARACHI (June 04 2006): The movements in Special Convertible Rupee Accounts (SCRAs), an instrument used for portfolio investment in Pakistan, remained largely range-bound, oscillating between $350 million and $360 million during the period from April 19 ($359 million) to Mat 22 ($359 million).

On May 18, these were $352 million. On May 25, the balances in SCRAs crossed the $360 million mark for the first time during the last about 5 weeks to reach $365 million but the level retreated to $362 million the following day. These were still $358 million and $354 million on May 30 and 31, respectively, but suddenly dipped to $324 million, indicating a massive withdrawal of about $30 million in the first two days of June. The entire withdrawal occurred on June 1 as there was a net inflow of $0 14 million on June 2.

Further details showed that as on June 2, the single largest withdrawal of about $33 million took place in the case of investors from USA, reducing their cumulative net flow during the year up to June 2 to $253.7 million.

Compared to February 28, when the balances in USA accounts touched the record high at $364 million, the cumulative withdrawals so far have amounted to $111 million. A minor withdrawal also took place in the case of Singapore whose cumulative net flow stood at $2.3 million as on June 2. The contraction impact of these withdrawals was partially offset by inflows of $1 million from UK, $1.3 million from Switzerland and $0.5 million from Hong Kong between May 31 and June 2, raising their cumulative net flows during the year so far to $33.8 million, (-) $9 million and $28.2 million, respectively.

Relatively smaller inflows were also observed in the case of Liberia and UAE. Among other countries BV Island, Bahamas, Bahrain, France, Germany, Guernsey, Japan, Kuwait, Luxembourg, Netherlands, Oman, Philippines, Qatar, Sri Lanka and Saudi Arabia neither withdrew any amount nor brought in any fresh funds during June so far.

It may be of interest to note that by May-end, not only KSE 100 Index failed to maintain the 11,000 baffler but also failed to maintain the 10,000 points barrier, with the Index closing at 9,801 level on May 31, down 318 points from the previous day closing of 10,119. It was clearly a disappointing signal for SCRA holders.

 

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KARACHI (June 04 2006): Pakistan rice export, for the first time in the country's history, has crossed $1.1 billion mark as over 2.8 million tonnes of rice has been exported to different countries up to June 3.

According to figures available here the formal export of Basmati rice, setting a new record, has reached to 802,511 metric tonnes during this period while the land rout trade of Basmati via Balochistan and Peshawar was 0.1 million tonnes. The formal and informal border trade of Irri-6 variety of rice has crossed 1.9 million metric tonnes up to June 03, 2006.

Haji Abdul Majeed, Chairman Rice Exporters Association of Pakistan (REAP) while talking to Business Recorder here on Saturday said that the value of both varieties exported up to June 03, 2006 was $1.100 billion.

He said that it is expected that the export of Basmati rice would reach 0.9 million and the total rice export would cross $1.2 billion target, set by the REAP, by the end of this month.

He said that due to a bumper crop, value addition and exploration of new markets for Pakistani rice by the rice exporters, the export of this commodity crossed the $1 billion mark this year.

He added that this is a tremendous achievement of the rice exporters who made it possible. The positive economic policies of the present government and hard work by the ministry of commerce and the commerce minister are some other reasons to increase the country's exports. He also lauded the co-operation of the Export Promotion Bureau and other concerned government departments for their co-operation with the exporters.

Pakistan's total rice export was recorded at $933 million during the last fiscal year of 2004-05. The total rice production was over 5.5 million tonnes in the country in the current crop season, out of which around 2.7 million tonnes was Irri-6 variety while the same quantity of Basmati variety of rice was produced in the country.

 

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QUETTA (June 04 2006): Balochistan Chief Minister Jam Mohammad Yousaf on Saturday said that operational management at Gwadar port has been given to a UAE company, Dubai Port World. Talking to reporters in his chamber at the Balochistan Assembly session here, he said five border points have been opened with Iran to promote trade via Gwadar port.

He said the port would take time to start generating revenue and denied a statement by the provincial finance minister that the Balochistan government had sent a proposal to the federal government regarding fixation of a specific percentage in the revenue for the province.

Jam Yousaf said the province has to bear a loss of Rs 1.5 billion under the head of gas royalty due to sabotage activities by miscreants and damage to gas pipelines. He said efforts were being made to ensure security of the gas pipelines stretching over 100 miles.

Referring to boycott of the provincial assembly session by coalition partner, MMA, the chief minister said that most of the points on which the MMA has expressed its concern and reservations are related to the federal government. The MMA leadership are, however, engaged in talks in Islamabad with the government regarding their grievances, he added.

About MMA allegation of non-release of funds to its provincial legislators, Jam Yousuf said the position of funds was well-known and the provincial PSDP is in the hands of the MMA. "We have no grievances against our coalition partner. If the MMA has any, it should resolve it through negotiations", he said.

To a question about the issue of the Madressah Sanad, the chief minister said that talks between the MMA and the federal government were in progress in this connection. Jam Yousaf expressed his satisfaction at the present NFC Award and said that Balochistan would get considerable share in coming years.

He said the federal government has already allocated 35 percent of its PSDP to Balochistan, which is a unique precedent. "Balochistan will also get a considerable share from unemployment project, worked out by the federal government, would be implemented shortly in the country at a cost of Rs 20 billion," he said.

Jam Yousaf termed the waiving of Rs 5 billion loans of Balochistan growers and fishermen a great benefaction of the President, saying it would help the growers and fishermen a lot to improve their economic condition.

Referring to law and order situation in the province, the chief minister expressed his satisfaction and said that police and other law-enforcement agencies are performing their duties diligently.

He said police have recovered a big cache of arms and ammunition and also arrested an alleged sectarian killer from Quetta during the last two days, which shows their good performance.

"I have also directed the provincial Police chief to adopt effective measures to check kidnapping of children from the provincial capital and destroy the network of the elements involved in this heinous crime," he said, and added that a high-level meeting would also be called soon in this regard.

About the committee formed by the provincial assembly to play a role in resolving issues, Jam Yousaf said it could not make progress as elders of some parties refused to accept the committee.

 

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ISLAMABAD (June 04 2006): As Pakistan's economy showed second-fastest growth in the world after China in 2005, the pace of privatisation has picked up from a jog to a sprint in the country under Prime Minister Shaukat Aziz, says an in-depth television and online feature in the BBC.

"The Prime Minister is the chief architect of privatisation and is widely respected among foreign investors," the report said. The report quoted Prime Minister Aziz as saying that well-run companies were being packaged and offered to investors from around the world.

"Pakistan has had the most broad-based structural reforms of any country in Asia. Last year, we were the second-fastest growing economy in the world after China. We grew at 6.4 percent," said the Prime Minister in the BBC feature, adding that he estimated privatisation would bring in more than dollars three billion in foreign investment this year, the highest in the country's history.

The BBC feature also focused on the latest company to be sold off to foreign bidders: Pakistan Steel, the country's only steel company which had been bought by a Russian-led consortium backed by a Saudi Arabia steel mill and a Pakistani brokerage company.

The report said Pakistan Steel achieved record production levels, sales and profits in 2005, after years of under-performing, sending steel prices soaring which, in turn, created more demand and led to higher prices, enabling the company to invest more and reduce debt, lowering interest payments to banks.

According to the report, the current Chairman of Pakistan Steel Lieutenant General Abdul Qayyum was credited with helping transform its fortunes during his two-and-a-half year tenure.

 

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Sunday, June 04, 2006

ISLAMABAD: The country is to miss the exports target of $17 billion by around $500 million at the end of outgoing fiscal year 2005-06, a commerce ministry official told the Daily Times on Saturday.

After the downward revised projections that were developed after taking into account all the factors, the exports are projected at $16.5 billion by June 30, the official added.

To meet the annual export target of $17 billion the country requires exports of $3.477 billion in the remaining two months of May and June with an average of $1.738 billion a month.

The exports trend shows that the per month exports were $1.352 billion during July-April period of current fiscal year 2005-06 and the exports required to meet the annual target are $1.738 billion.

This task is difficult and will lead to a shortfall in the country’s exports by around $500 million by end of current fiscal year.

Elaborating the factors that contributed in less exports in the last 10 months were less availability of export surpluses for exports due to a decrease in the industrial production.

The local industries were unable even to meet the national requirements that also contributed to higher imports in the said period as compared with the last fiscal year when the share of local industries in exports was more in terms of quantity and earnings.

Non-availability of workers at ports and industries due to continuous strikes after Nishter Park incident at Karachi and the impact of rising oil prices in the international markets resulted in increasing the cost of production in the country, the official said.

The country has exported goods worth $13.523 billion during July-April period of current fiscal year as compared with the exports of $11.480 billion in the same period of last fiscal year.

The exports in April 2006 stood at $1.450 billion against the exports of $1.297 billion in April 2005.

The area of concern is that the exports made in April 2006 witnessed a decrease and these exports remained at $1.450 billion in April 2006 as compared with the exports of $1.521 billion in March 2006.

The official said that the decrease in the exports against the annual target would contribute further to trade deficit of the country that stands at $9.427 billion in July-April period.

The deficit is now to move ahead of the already projected figure of $12 billion and may touch $13 billion by end-June.

 

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Sunday, June 04, 2006

CBR to launch national perception survey

ISLAMABAD: The Central Board of Revenue will undertake a perception survey across the country to know to what degree it (CBR) has achieved its objectives, particularly those concerning taxpayers facilitation, change in attitudes and improving the overall fiscal environment.

The survey is to be launched shortly in collaboration with Gallup, Pakistan. The CBR also wishes to have a feedback from the taxpayers and the general public at large on integrity of the employees of CBR. A brief description of this ambitions undertaking is presented below:

The perception survey will seek views of stakeholders on each tax. Sample size and content will reflect the taxpayer profile of each tax and a decision will be made at the outset as to the frequency of data collection.

Four categories of stakeholders are identified: Income and Corporate Taxpayers, Salaried Individuals, Non-Salaried Cases, Sales Tax, Federal Excise and Customs Duty Payers, Wholesalers and Retail Traders, Exporters, Turnover Taxpayers, Manufacturers, Service Providers, and Importers, Employees of CBR and its Field Offices, Employees of other Government Agencies with specific interest in CBR activities, Courts and Prosecutors, Officials of the Ministry of Finance.

Coverage and Sample Selection: In view of the excessive cost and time involvement in recording responses from the entire population of the identified stakeholders, selection of a representative sample is the preferred option. Careful selection of the sample will ensure the validity of the findings of any research. Thus a representative sample, both in terms of type of respondents and regional spread, will be drawn. In certain cases “biases” might have to be introduced in sample selection to capture marginalized groups.

Conclusion: The CBR has learned the hard lesson that an inward looking policy has failed miserably. Rather than pursuing the hiding-behind-the-desk approach, a new approach of openness has been adopted where stakeholders’ participation in decision-making takes the central position. This new policy of the CBR has significantly improved the image of the organization in the eyes of the taxpayers, the general public and CBR employees. The comprehensive nationwide survey will be another milestone towards a collaborative effort to design future strategies for the organization. The perception survey has been outsourced with the objective to get fair and free opinion of the stakeholders so that the reform initiatives are evaluated in a transparent manner.

The CBR would be in a better position to take corrective action for any deficiencies that might be detected through the survey findings. Since the sincerity of the purpose is quite clear, the CBR has high expectations from the taxpayers, employees, general public and the opinion leaders to cooperate in this effort by providing candid and fair opinion about the organization and its operations.

 

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KARACHI: Internet service providers and telecom operators are expecting a major cut in Internet bandwidth rates by the Pakistan Telecommunication Company Ltd next week in line with the regulator’s directives to support broadband service proliferation.

A senior official said on Saturday the Pakistan Telecommunication Authority (PTA) had called a consultative meeting of all telecom operators on June 6, which was likely to end up with a major cut in bandwidth rates.

“The meeting will review overall broadband services across the country,” PTA Chairman Major General (Retd) Shahzada Alam Malik told a group of journalists on the sidelines of C-Future Telecom Exhibition.

“Currently, these services are not meeting standards and June 6 talks will consider reasons including bandwidth prices, hindering the broadband growth.”

He said the meeting was expected to suggest cut in bandwidth prices to the recently-privatised PTCL, but it was too early to give the size of such an incentive. However, the chairman said, the watchdog would definitely play its role in bringing bandwidth rates down.

Broadband technology entered the country a few years ago with a bang but later failed to thrive due to higher cost and poor service quality. DSL (digital subscriber line) based broadband is a modern technology that converts existing twisted pair of telephone lines into access path for high-speed communication of various sorts. By using the technology, regular telephone lines can be converted into a high-speed broadband digital link.

DSL is faster than both ISDN (integrated services digital network) and leased line, yet it is more cost-effective. With DSL, Internet connection is ‘always on’, and the users have unlimited access to the Internet. The downloading speed can be ten times higher compared to regular downloading speed of an analogue modem. In addition, with one line users can be connected to both telephone and the Internet.

The government announced broadband Internet policy in 2004 but the services have not witnessed any growth as the operators claim bandwidth prices charged by the PTCL remain the main hurdle.

The telecom giant is the only Internet backbone provider across the country.

“The PTCL announced the price of $1,600 a month for two megabit bandwidth for the operators,” said a broadband operator who was due to attend June 6 meeting. “Similarly, for 34 megabit it has fixed $19,200 per month and for 155 megabit $60,000. We are expecting 50 per cent cut in these rates.”

He said though the deregulation of telecom broke over five-decade monopoly of the PTCL, practically there was no such competitor to offer Internet bandwidth across the country, which allowed the company to regulate the industry as it wanted.

“The only problem in the way of proliferation of broadband services is prices,” he said. “If the authorities really want to give a push to broadband services, they would have to bring the prices to lower level.”

The PTA chief agreed with the claims to some extent, saying the telecom watchdog “is there to create a level-playing field for industry players, which is the only way to increase Internet growth at affordable prices.”

“For that matter, we are playing our role to reduce bandwidth prices and June 6 meeting with the operators would make a comprehensive strategy to put the country among the best broadband services operators,” said Malik.

He said the PTA had already conducted a detailed study to assess demand, potential and market dynamics of broadband Internet and wireless local loop services in the country and received a positive feedback.

 

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KARACHI: Ishaq Khakwani, State Minister for IT and Telecom said on Saturday three IT Towers would be established in mega cities of the country in an attempt to facilitate the IT companies and accelerate the pace of growth of IT-enabled services.

“IT towers will facilitate the IT companies in the rapid growth of their business and IT-related products through which more job opportunities will be created in this sector,” he told Telecom Excellence Awards ceremony.

He lauded the efforts of Pakistan Telecommunication Company and hoped new management of the company would also provide latest technologies to its customer in a much befitting manner.

Chairman Pakistan Telecommunication Authority Shahzada Alam Malik, speaking at the occasion said the telecom watchdog would introduce the MNP (Mobile Number Portability) by October this year and for this purpose initial work had been completed.

He said during 2004-05, foreign direct investment inflow of $494.4 million was registered in telecom sector, which was almost one third of the total FDI in the country during the period. “This trend is continued and during July 2005 to February 2006, $398 million FDI inflows came in the telecom and by March 2006 this figure crossed the mark of $1 billion,” he added.

Saalim Ali Al-Akbari, Senior Executive Vice President PTCL said Etisalat had taken over the control of PTCL and customer need was prime focus of the new management.

“We believe the company with new management will usher into new era of telecom revolution,” he said. “The PTCL customers would continuously receive the flawless telecom services in Pakistan.”

 

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Sunday, June 04, 2006

ISLAMABAD: President General Pervez Musharraf said on Saturday that high growth and friendly policies had made Pakistan an ideal destination for world entrepreneurs.

He said that the country’s economic reality was far better than “distorted perceptions”. In a keynote address to OPEN Silicon Valley’s annual business moot in California through videoconference, Musharraf said the country was shaping up through the construction of Gwadar Port. He said that a network of infrastructure was in place to serve as trade and energy corridor for the landlocked Central Asia, South Asia, the Gulf region and China.

“Pakistan today is in an altogether different league economically. It has been put firmly on path of high economic growth with its GDP having more than doubled to $135 billion and all macro-economic indicators including exports, revenue collection, foreign investment, forex reserves staying positive,” he said.

The president rejected negative travel advisories issued against Pakistan and added that these did not reflect prevailing ground realities. “I think we suffer from distorted perceptions but in reality we are much better as evident from the fact that none of the foreign companies doing business in Pakistan has ever been harmed due to policies or internal situation,” he told a gathering of American and Pakistani entrepreneurs at the OPEN 2006 moot.

Musharraf said the government was working hard to improve Pakistan’s image. He urged Pakistani expatriates to contribute to these efforts through personal example and effective countering of misperceptions about the country.

In the widely applauded address, the president referred to an international report that described information technology progress as Pakistan’s best kept secret and said the country offered a host of opportunities in fast-developing sectors. “We have put in place an elaborate IT infrastructure, connected cities and towns to the Internet and three submarine cables are to further enrich the IT scenario. On top of it, we have talented English speaking graduates, which are an asset for the country and international investors.”

He said that Pakistan was setting up nine high-tech engineering and science and technology universities of international standard with the help of advanced countries that would produce professionals of high calibre to push industrial development on fast-track basis.

The president also spoke about the National Vocational and Technical Education Commission and said it would set up an infrastructure for equipping the young people with skills commensurate with technical and industrial advancement. He said the government was working on the import of natural gas from Iran and Turkmenistan and electricity from Central Asia.

 

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Islamabad: The US will extend financial and technical assistance to Pakistan to import electricity from Central Asia, a media report said Wednesday.

The visiting US under-secretary of state for economic, business and agricultural affairs, Josette Sheeran Shiner, said the US had decided to help Pakistan overcome its energy problems, the Dawn newspaper reported.

She said Pakistan and the US have launched a strategic dialogue to reinforce cooperation in the fields of trade and investment.

A decision has been taken to extend maximum support to Pakistan for further improving its economy, meeting its energy requirements and creating more investment opportunities in Pakistan, the US official added.

Pakistan, which plans to produce at least 8,800 MW of electricity through nuclear energy, has already decided to intensify cooperation with China in peaceful uses of such energy especially after Washington refused to cooperate with Islamabad in the area.

The US, which signed a nuclear deal with India early this year, has already refused to enter into similar arrangement with Pakistan.

US President George W. Bush said during his visit to Pakistan last March that India and Pakistan were two different countries with different histories and requirements.

China helped Pakistan develop a 300 MW nuclear power plant, known as CHASHNUPP-1 at Chashma town, 280 km southwest of Islamabad. A second plant of comparable capacity is also being built at the site.

Shiner said special efforts were being made to develop links in energy, communications and transport sectors between Pakistan and the Central Asia.

"Some companies have also shown interest to invest in projects coming through Central Asia in Pakistan," she said.

The US is spending $40 million to build a road between Tajikistan and Afghanistan, which she said would help Pakistan import energy from Central Asia.

 

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Growth target missed due to shortfall in farm, LSM sectors: Economic Survey shows 14.1 percent rise in per capita income

MUSHTAQ GHUMMAN

ISLAMABAD (June 05 2006): Although Pakistan's economy grew at an average rate of almost 7.5 percent per annum during the past three years, it missed its 7 percent growth target set for the current fiscal year, growing only by 6.6 percent.

According to the 'Economic Survey 2005-06', released here on Sunday, two of the major components of GDP--agriculture and large-scale manufacturing (LSM)--remained below the target while other sectors, which included construction, industry, services, and investment performed, as per government expectation, above the estimates.

The country's per capita income also increased by 14.1 percent during the current year from $742 to $847 per annum. However, during the past four years, overall growth in per capita income registered at 13.9 percent per annum.

The sector-wise details are as follows;

GROWTH AND INVESTMENT: The real GDP grew by 6.6 percent in 2005-06 as against 8.6 percent of last year and fell short of the target of 7.0 percent. With economic growth at 6.6 percent in 2005-06, Pakistan's economy grew at an average rate of almost 7.0 percent per annum during the last four years, and over 7.5 percent in the last three years, thus enabling it to join the 'exclusive club' of the fastest growing economies of the Asian region, the government claims.

POVERTY AND UNEMPLOYMENT: The strong economic growth created employment opportunities and therefore reduced unemployment.

According to Labour Force Survey 2005 (First two quarters), since 2003-04 and until the first half of 2005-06, 5.82 million new jobs were created as against an average job creation of 1.0-1.2 million per annum. Consequently, unemployment rate, which stood at 8.3 percent in 2001-02, declined to 7.7 percent in 2003-04 and stood at 6.5 percent during July-December 2005. The rising pace of job creation is bound to increase the income levels of the people. The IT sector alone has created 114,737 new jobs in 2005-06.

The government spent Rs 1332 billion during the last five years on poverty-related and social sector program to cater to the needs of poor and vulnerable sections of the society.

The government is of the view that percentage of population living below the poverty line has fallen from 34.46 percent in 2000-01 to 23.9 percent in 2004-05, a decline of 10.6 percentage points. The percentage of population living below the poverty line in rural areas has declined from 39.26 percent to 28.10 percent while in urban areas it has declined from 22.69 percent 14.9 percent in this period.

AGRICULTURE: Agriculture and particularly its crop sector could not perform up to the expectations, especially major crops registered a negative growth of 3.6 percent. Livestock with 8.0 percent growth, a major component of agriculture, exhibited strong showing and pulled the overall growth in agriculture to 2.5 percent as against the target of 4.2 percent. Livestock has been the only saving grace sector as far as the performance of agriculture is concerned this year.

MANUFACTURING: Overall manufacturing, accounting for 18.2 percent of GDP, registered a robust growth of 8.6 percent against the target of 11.0 percent and last year's achievement of 12.6 percent.

LARGER SCALE MANUFACTURING (LSM): According to the survey, LSM grew weaker-than-the expected at 9.0 percent as against 15.6 percent of last year and 14.5 percent target for the year, exhibiting signs of moderation on account of higher capacity utilisation, on the one hand, and strong base effect along with several other factors, on the other hand.

CONSTRUCTION: Construction continued its strong showing, partly helped by activity in private housing market, spending on physical infrastructure, and reconstruction activities in earthquake affected areas. The construction sector is estimated to grow by 9.2 percent in 2005-06 as against extraordinary growth of 18.6 percent last year.

PER CAPITA INCOME: Pakistan's per capita real GDP has risen at a faster pace during the last three years (5.6 percent per annum on average in rupee terms) leading to a rise in average income of the people. Such increases in real per capita income have led to a sharp increase in consumer spending during the last three years. Per capita income, defined as Gross National Product at market price in dollar term divided by the country's population, grew by an average rate of 13.9 percent per annum during the last four years - rising from $579 in 2002-03 to $847 in 2005-06. Per capita income in dollar term registered an increase of 14.1 percent in 2005-06 over last year, rising from $742 to $847.

PRIVATE CONSUMPTION EXPENDITURE: The survey further shows that as opposed to an average annual increase of 1.4 percent during 2000-03, real private consumption expenditure grew by 13.1 percent in 2004-05 and further by 8.1 percent in 2005-06.

INVESTMENT: During the fiscal year 2005-06, gross fixed capital formation or domestic fixed investment grew by 30.7 percent as against a rise of 28.6 percent last year.

The survey says that the private sector investment grew by 31.6 percent this year as against last year's growth of 29.1 percent. Public sector investment on the other hand registered massive growth of 46.7 percent as against a 32.9 percent increase last year.

Total investment increased from 18.1 percent of GDP last year to 20.0 percent of GDP in 2005-06 - highest in the last 12 years. Fixed investment as percentage of GDP is estimated at 18.4 percent as against 16.5 percent last year. Both public sector investment and private sector investment as percentage of GDP have increased to 4.8 percent and 13.6 percent, respectively, up from 4.4 percent and 12.1 percent of last year.

Almost 2.0 percentage points jump in investment is consistent with the rise in credit to private sector this year. This also reflects the confidence of the private sector on the improving macroeconomic conditions in the country.

MONETARY POLICY: Large expansion of private sector credit was Rs 345 billion in 10 months of the current fiscal year and the extremely buoyant attitude of the private sector can be viewed from the fact that the cumulative borrowing by this sector during the last three years amounted to over Rs 1100 billion as against the cumulative borrowing by this of Rs 921 billion in the previous 19 years (1984-2003). More importantly, credit to private sector as percentage of GDP surged from almost 20 percent in 1999-2000 to over 26 percent in 2005-06 - almost 6 percentage points increase in the last six years.

INFLATION: Inflation during the first ten months (July-April) of the current fiscal year was estimated at 8.0 percent as against 9.3 percent in the same period last year. Food inflation was estimated at 7.0 percent as against 12.8 percent in the same period last year whereas non-food inflation, at 8.8 percent, was on higher side compared with 6.9 percent in the same period of last year.

The core inflation, which excludes food and energy costs from the headline CPI, moved up and was estimated at 7.7 percent as against 7.0 percent in the same period last year.

House rent index also played an important role in building inflationary pressure this year. With second largest weight in the CPI (23.4 percent) after food (40.3percent), the house rent component of the CPI registered a decline to 10.3 percent as against 11.1 percent in the same period last year.

When viewed in the context of year-on-year performance of inflation, the current fiscal year exhibits significant abatement of price pressure and declaration in overall inflation as well as its sub-indices. The current fiscal year started with an inflation rate of 9.0 percent in July 2005, but continued to decelerate, reaching 23-month low at 6.2 percent in April 2006. Food inflation was close to 9.7 percent at the beginning of the current fiscal year but decelerated sharply to 3.6 percent in April 2006-the lowest in the last 31 months.

In order to keep the prices of essential commodities under control, the government has been taking various measures throughout the year. These measures included a liberal import regime for food items including zero rating of the imports of these commodities.

 

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FISCAL POLICY: The overall fiscal deficit, that averaged nearly 7.0 percent of the GDP in the 1990s, had reduced to 2.3 percent in 2003-04 but increased to 3.4 percent in 2005-06 as against the target of 3.8 percent of GDP, mainly on account of better than expected revenue performance. The fiscal deficit, including earthquake spending, is estimated at 4.2 percent of GDP in the current fiscal year.

The Central Board of Revenue (CBR) is targeted to collect Rs 690 billion but it is likely to collect Rs710 billion - Rs 20 billion more than the target and 20.6 percent more than last year.

Public Debt Burden: Public debt burden continued to decline rather sharply over the last six years with significant improvement in fiscal situation.

The public debt-to-GDP ratio, which stood at 85 percent in 1999-2000, has declined sharply to 54.7 percent in 2005-06 - almost 30 percentage points reduction in debt burden in just six years is one of the significant achievements of the government.

The public debt as percentage of GDP declined from 61.4 percent to 54.7 percent - a 6.7 percentage decline in one year is other stellar occurrences of the current year.

Since public debt is a charge on the budget, its burden must be viewed in relation to government revenue. Public debt was 448.9 percent of total revenue last year but declined to 414.9 percent this year - a decline of 34 percentage points is not a mean achievement.

The 'Survey' says that exports were targeted to grow by 18.1 percent in 2005-06 - rising from $14.4 billion last year to $17.0 billion this year.

During the first nine months of the current fiscal year exports were up by 18.6 percent, rising to $12.1 billion from $10.2 billion in the same period last year. Given the performance of the first nine months, exports are likely to touch $17 billion mark by the end of this fiscal year.

The imports were targeted to grow by 26.0 percent in the current fiscal year - rising from $14.4 billion to $20.7 billion. During the first nine months were up by 43.2 percent in the first nine months of the current fiscal year - rising from $14.4 billion to $20.7 billion, showing an increase of almost $6.0 billion this year.

Major contributions to this year's additional import bill have come from machinery, chemical and petroleum groups. Over one-half of the increases have come from machinery and petroleum group and over 22.3 percent has come from petroleum group.

In particular, import of machinery, raw material and consumer durable groups are up by 30.8 percent, 36.1 percent and 41.8 percent, respectively as domestic investment has come back to life owing to stronger domestic and external demand.

TRADE BALANCE: During the first nine months of current fiscal, trade deficit amounted to $8620.3 million and was up sharply from $4263.3 million in the same period last year (During the first ten months (July-April) of the current fiscal year, trade deficit stood at $9427.1 million as against $4868.0 million in the same period last year). the major contribution to trade deficit came from petroleum group (41.5 percent), machinery group (21.5 percent), iron and steel scrap (11.9 percent) and consumer durables (9.2 percent).

WORKERS REMITTANCES: The government had fixed $4 billion target for workers remittances but total $3.63 billion has been received during the first ten months (July - April) of the current fiscal year, as against $3.4 billion in the same period last year, showing an increase of 5.2 percent. However, the prevalent trend shows that remittances may touch $4.4 billion by the end of the fiscal year.

CURRENT ACCOUNT BALANCE: The current account deficit, excluding official transfers, stood at $4696 million (3.7 percent of GDP) during July-March, 2005-06 as against a deficit of $1181 million in the same period last year.

FFOREIGN DIRECT INVESTMENT: Pakistan has succeeded in attracting $3020.2 million in FDI during July-April, 2005-06 -the highest ever in the country's history, as against $891.5 million in the same period last year, showing an increase of 238.7 percent. By the end of the current fiscal year, FDI is expected to reach $3.5 billion mark, or close to 3.0 percent of GDP.

Over 90 percent of FDI has come to power sector, telecom sector, chemicals, pharmaceutical and fertiliser, oil and gas, and banking and finance. Almost 75 percent of FDI has come from USA, UK, Switzerland, Japan, UAE and Netherlands.

EXTERNAL DEBT: The 'Survey' says that a few years ago, Pakistan was facing serious difficulties in meeting its external debt obligations. Following a credible strategy of debt reduction, Pakistan has succeeded in reducing the rising trend in external debt and foreign exchange liabilities.

Pakistan's external debt and liabilities have declined by $2.3 billion - down from $38.9 billion by end June 1999 to $36.6 billion by end-March, 2006.

The country's debt burden, defined as a ratio of external debt and liabilities to GDP, stood at around 52 percent in end-June 2000, declined to 32.3 percent in end-June 2005 and further to 28.3 percent by end-March 2006.

The country's debt burden, also defined as 'external debt and liabilities as percentage of foreign exchange earnings', was 297 percent in 1999-2000, declined to 134.3 percent in 2004-05 and further to 127.6 percent by end-March 2006.

It may also be pointed out that Pakistan's external debt and liabilities were 22 times of its foreign exchange reserves in 1998-99 but declined sharply to 2.9 times in just six years. These statistics suggest that Pakistan's external debt burden has declined at a much faster pace than anticipated and that it is now on a solid downward footing.

On March 23, 2006, Pakistan successfully issued $500 million new 10-year Eurobond and US $300 million new 30-year Bonds in the international debt capital markets lead managed by J. P Morgan, Citi Group and Deutsche Bank. This transaction, which represented the first international 144A bond issued by Pakistan since 1999, raised significant interest amongst US QIBs and international Institutional investors.

The 10-year notes were priced with a coupon of 7.125 percent to yield 7.125 percent, framing a spread of 240 bps over the relevant 10-year US Treasury benchmark. The 30-year bonds were priced with a coupon of 7.875 percent to yield 7.875 percent, framing a spread of 302 bps over the relevant 30-year US Treasury benchmark.

Pakistan was able to achieve spreads on both the new 10- and 30-year bonds that were tighter than its previous 5-year issues. By issuing 10- and 30-year bonds, Pakistan completed its primary objective of establishing a full Pakistani international yield curve in record time.

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KARACHI (June 05 2006): The country's textile and its made-ups have failed to actualise its exports target of 32 percent market share in the post-quota regime and had hardly bagged 21 percent, depicting a decline of 11 percent, industry sources said.

The official statistics show that albeit the country's exports had increased in terms of its worth, the number of dispatched units or items had shrunk due to the increased input costs during the last one year and less access in the world's markets, mainly in the European region.

The statistics up to April (10 months of FY06) show that the country's aggregate exports stood at $13.52 billion as against $11.48 billion, illustrating a surge of $2.04 billion or around 18 percent.

Similarly, the textile exports from country during the 10 months were recorded at $8.022 billion as compared to $6.747 billion during the same corresponding period of last year, an increase of 19 percent.

This figure of $8.022 billion should have been $8.163 billion, because the current figure shows 19 percent increase in exports, but also explain that the rise in exports figures is basically high cost of doing business, which has interestingly increased to 19 percent as well, a textile miller commented.

Citing the example of a cotton bale, an exporter said that the industry last year had procured cotton at an average rate of Rs 1900 per maund, which has now increased to Rs 2300 per maund, showing Rs 400 per maund or 19 percent rise.

The rising costs are passed on to the foreign buyers, he said, adding that this practice had made the domestic industry price incompetitive in the international front.

Kingpins of textile industry said that Bangladesh and China had explored a number of avenues in the world market as both are price-competitive and are following aggressive international marketing strategy for promotion of their textile goods.

"India has set up Textile Upgradation Fund (TUFS) with Rs 370 billion to boost its exports," said an office-bearer of All Pakistan Textile Mills Association (Aptma), adding that the Indian government also intends to inject Rs 1400 billion by 2010 into the TUFS to compete with its regional and emerging giants in the markets of Europe and United States.

He pointed out that during a few years Bangladesh has installed 5 million spindles as compared to Pakistan which now has 10 million spindles.

Source termed the situation as 'alarming' for the country's exports as they expressed fear that the country could also not succeeded in exploring new avenues and markets in the next fiscal year FY07.

The country at present possesses 3 percent of total international textile trade of $300 billion. However, the gurus of textile industry believe that the country would face complexities and hardships in getting the $32 billion trade share by 2014.

"Our capacity utilisation stands at 50 percent, which must be 100 percent besides setting up of new units," another Aptma member said, adding that if the government wished to get boost to exports and bring it to $32 billion by 2014, it must give level playing field to the investors besides luring $2 billion fresh investments every year into the textile sector.

When asked to explain the rising cost of doing business in the country, a kin-pin of the textile industry remarked, "Other than gas, power, raw material, machinery and its spare parts, there are some hidden costs as well which are not yet recognised, like social security, EOBI, Export Development Fund (EDF), workers participation fund at the rate of 5 percent of the profits and workers welfare fund at the rate of 2 percent of taxable income."

"The taxes alone work out to 43 percent, against the misconception of 35 percent."

The country's textile industry employs 38 percent of the workforce and contributes 11 percent towards GDP. It is not only paying a number of taxes and hidden costs, but is facing an acute shortage of skilled workers, human resource and infrastructure further intensifies the situation.

Aptma, while drawing attention of the government towards emerging regional giants including India, Bangladesh, Sri Lanka and China, sought help from the government to cut rising input costs and taxes besides allocation of huge funds for the upgradation and modernisation of the industry so that a colossal growth be witnessed in the exports in the coming years.