Pakistan Economy - News & Updates - Archive

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Resolution inked: Casarem project no substitute for IPI gas plan, says minister ​

ISLAMABAD (August 05 2008): The ministers of four countries on Monday inked a resolution to proceed further with the Central Asia/South Asia Regional Electricity Market (Casarem) project envisaging transmission of 1,300 MW from Tajikistan and Kyrgyzstan to Afghanistan and Pakistan; but further commitment to the project will be linked to the availability of financing.

"It's a resolution not any agreement or Memorandum of Understanding," said one of the participants of an internal meeting. Most of the participants including Water and Power Secretary Ismail Qureshi were of the view that it was a difficult project and the concerned governments needed to proactively take it to the next stage.

The participating countries will have to negotiate commercial term sheets by the end of November as they have committed to go forward with the project subject to the bids received being consistent with the agreed cost estimates.

Though the writ of the Afghan government is reportedly limited to Kabul, yet the minister representing Afghanistan guaranteed security of the proposed transmission line, which continues to remain a serious cause of concern. The Central Asia-South Asia (Casa) 1,000 Project is anticipated to be commissioned by 2013. The project would go a long way in overcoming power shortages in Pakistan (1,000MW) as well as Afghanistan (300 MW).

The two-day Inter-Governmental Council (IGC) meeting of Casarem was held on 3-4 August 2008, in Islamabad, which was attended by ministers and delegates from Afghanistan, Kyrgyz Republic, Pakistan and Tajikistan along with the International Financial Institutions (IFIs), ie Asian Development Bank, Islamic Development Bank and World Bank, besides a project consultant.

The Inter-Governmental Agreement was extensively debated and after incorporating the changes/modifications agreed upon, it was signed by Water and Power Minister Raja Pervez Ashraf, from the Pakistan side, Alhaj Mohammad Ismail Khan, Minister for Energy and Water, Afghanistan, Saparbek Balkibekov, Minister for Industry, Energy and Fuel Resources, Kyrgyz Republic and Farrukh Hamraliev, Chairman, State Committee for Investments and State Property Management, Republic of Tajikistan.

Raja Pervez Ashraf dispelled the impression that Casarem was a substitute for the Iran-Pakistan-India (IPI) gas pipeline by categorically stating that talks on IPI were proceeding separately.

The Casa 1000 MW power transmission project comprises developing, designing, procuring, financing, constructing and operating electricity transmission lines and related facilities to enable the trade of electricity among the four countries.

"1300 MW of electricity will be imported from Kyrgyz Republic and Tajikistan of which 300 MW will be for Afghanistan and remaining 1000 MW for Pakistan," said the Water and Power Minister in reply to a question after the signing of agreed minutes.

The transmission line will consist of 477-km of 500 kV AC line from Kyrgyz Republic to Tajikistan and 750-km of 500 kV high voltages DC between Tajikistan and Pakistan via Kabul," said an official statement.

IGC Secretariat will be established at Kabul and hopefully would become operational with immediate effect. The meeting also approved the appointment of Qazi Naeemuddin of Pakistan as the first Executive Director of IGC Secretariat.

The success of the project is extremely important, as it will set a new era of mutual co-operation on electricity trade amongst Casa countries, Pervez Ashraf concluded.

Business Recorder [Pakistan's First Financial Daily]

 

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Pakistani tractors attract African countries ​

Wednesday, August 06, 2008

ISLAMABAD: South Africa and surrounding countries are interested in importing Pakistani tractors and their parts as the Pakistani Trade Office there is receiving several queries in this regard on a daily basis.

This was revealed in a meeting of the sub-committee on fiscal issuesñindigenisation formed under the Auto Industry Development Programme (AIDP) by the Engineering Development Board (EDB) which met here on Tuesday.

A representative of a major motorcycle manufacturing company in the country informed that they were about to make a breakthrough in the African market with the signing of an agreement regarding the exports of motorcycles. However, the committee felt that the progress on the export front was very slow and the industry should take remedial measures to increase it in order to offset the trade deficit, said a news statement issued here. It requested its sister committee on exports to thoroughly analyse the situation and recommend measures.

The auto industry expressed concern over the new tax measures introduced in the current budget and described them as detrimental to their growth. The industry is preparing a working paper on the adverse affects of the current budget, which will be submitted to the EDB shortly.

The industry will involve representatives of the Ministry of Industries and Production in its preparation. It was felt that the EDB needed to play an active role in reducing the communication gap between the industry and the government for effective policy implementation.

The committee also expressed its dissatisfaction on the speed of indigenisation in the industry and advised the EDB to collect data in order to judge whether or not the Tariff Based System (TBS) has given impetus to indigenisation programme. It also underlined the need of planning a substitute system which could replace TBS after 2012.

Pakistani tractors attract African countries

 

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World oil consumption: Pakistan ranks 38th​

KARACHI, Aug 5: Pakistan ranked 38th in world oil consumption with 324,000 barrels per day while the United States held the number one position with a consumption of 20,730,000 bbl/day.

According to CIA World Factbook as of June 14, 2007, China, which came second after the US, consumes 6,534,000 bbl/day, while Japan’s consumption stood at 5,578,000 bbl/day.

One of the interesting facts is that that the US and Canada consume 28 per cent of world oil production, while their combined population is only five per cent of the world. Canada’s oil consumption is 2,294,000 bbl/day.

China consumes one third the oil consumption of America, but its population is more than four times that country.

India consumes one-ninth the oil of US, but its population is nearly 3.5 times of the super power.

World oil consumption: Pakistan ranks 38th -DAWN - Business; August 06, 2008

 

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Rental power plants : Government fixes power generation requirement​

* Plants producing power less than 40 percent of their capacity to be penalised​

ISLAMABAD: The government has decided that power generation by rental power plants must be at least 40 percent of their capacity and the plants generating less than that would be penalised, sources in Ministry of Water and Power told Daily Times on Tuesday.

Sources said that under the plan government has set a target of generating 1200MW through rental power plants to end the power shortfall in the country.

Government received financial biddings from three parties for setting up 500MW rental power plants in Karachi. Cavelier Energy and Defence System Group located at Port Qasim has sought power tariff of 15.22cents/kwh, Karkey, Karadeniz Holdings located near Karachi sought 18.6288 cents /kwh for 200MW, and Walters Power International proposed at Korangi sought 200MW rental power plant at tariff of 17.43cents /kwh for five years each.

The sources said that contrary to the claim of the bidders these plants would be working only for three years. They said that these plants are old and would not be able to work for five years. These are medium term solutions that government is opting for to rid the country of load shedding, they maintained.

The tariff for rental power plants is higher than sought by Independent Power Plants (IPPs) because rental power plants consume more fuel.

The government will issue letter of awards to bidders on August 15 after approval by the Economic Coordination Committee (ECC) of the cabinet.

Besides rental power plants, the government has opened bids for 1000MW IPPs and will issue letter of support to these bidders on August 15 also. They said that Private Power Infrastructure Board (PPIB) is processing 51 power projects worth $12.4 billion that would be commissioned by 2016.

Government has planned to add 16,000MW power to the current national power grid through many resources including power import from Tajikistan and Iran that would cost $30 billion. They said that government attract private sector to make investment of $ 20 billion and public sector would arrange $ 10 billion for the said power addition programme.

Construction of Basha dam is also included in the said programme that would start next year. Government would need $8.4 billion to materialise the project, which will generate 4500MW per day. “The financing would be arranged through Public-Private Partnership,” sources added.

According to the power projects under process by PPIB, the focus is being laid on the hydel-power generation and as many as twenty hydel power projects would be operational generating 4478MW by 2016. PPIB is processing 14 oil based power projects, which would generate 2919MW power by 2016. The country will have five power projects generating 1050MW electricity. These projects would be operational on dual fuel (oil and gas). Government is encouraging the utilisation of coal-based power plants and six coal based power projects of 3550MW would be operational by 2014.

Daily Times - Leading News Resource of Pakistan

 

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Pakistan’s power potential stymied by political infighting​

* CSIS analysis shows agricultural reform lags behind improvements in other sectors of economy in India, Pakistan
* Dissatisfaction with economy adding to govt’s unpopularity​

WASHINGTON: Pakistan has substantial potential for hydroelectric power and irrigation, but inter-provincial disputes have prevented its exploitation, which is compounded by outdated farming methods, inefficient price distortions, and problems with water availability. According to an analysis by the Centre for Strategic and International Studies (CSIS), the growth of the declining agricultural sector in Pakistan will be far lower than the rest of the economy. The rising cost of fuel affects the cost of fertiliser and electricity and consequently shows up in the price of basic food, such as grains and wheat. Increases in food prices also reflect systemic problems in the agricultural sector. In both India and Pakistan, agricultural reform has sorely lagged behind improvements in other sectors of the economy, the study points out.

In India, lack of investment in new agricultural technology and irrigation projects has held down growth, and today, a meagre 40 percent of India’s farmland is irrigated. Additionally, price distortions and inadequate transport provisions are to be cited as reasons for lagging agricultural performance. Food price increases are felt heavily in the low-income sectors of India. In comparison, in the United States only 6 percent of the household budget goes to food.

In Pakistan, the recent surge in food prices has forced it back into the import column with purchases of about $800 million worth of wheat in 2008. Pakistan’s spending on food imports has grown by 25 percent in the past year. In the past year consumer prices rose at an annual rate of about 20 percent, with food prices rising by about 28 percent. Although this year’s monsoon came early to the major grain-producing areas in India and Pakistan, the monsoon season has been hugely disappointing overall. Recent data show that as of late July, rainfall has been 33 percent below normal. If the monsoon season ends badly, it will ensure that food prices remain high until the end of the fiscal year. However, even in the best-case scenario, both countries face increasing demand. This makes overall strengthening of the agricultural sector an essential part of the solution.

Unpopularity: The CSIS study says India and Pakistan have responded to the food crisis by banning certain food exports in the last few months. In Pakistan, economic discontent was a factor in the decisive rejection of the ruling party in the February 18 elections. Continued dissatisfaction with the economy is already adding to the unpopularity and fragility of the newly elected government. With the government distracted by political infighting and mitigating terrorism in the northwest, Karachi has been beset by transport strikes. Despite some cut in food and fuel subsidies, they still account for more than a third of the government’s deficit.

Daily Times - Leading News Resource of Pakistan

 

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PTA critical of economic decisions taken by present government​

MULTAN (August 06 2008): The Pakistan Traders Alliance (PTA), Chairman Khawaja Muhammad Shafiq on Tuesday said that the month of July had become very hard for the people of Pakistan as pointless trade and monetary policies had brought the economy on the verge of collapse."Trade, commerce, industry and stock exchange as well as masses' conditions deteriorating owing to the questionable economic decisions of the present government," he said this while speaking at a meeting of local traders.

He said that the rupee's slide in July was worst in 19 years while demands for Pakistani products had also been declined considerably. "The forex stocks have also been receded to a record level low," he added.

Khawaja Shafiq said that the economic managers of the country took economic decisions while keeping personal interests and political considerations in mind and the result was that the whole nation was facing the turmoil." The government seems more interested in foreign tours and has made Dubai as unofficial capital. Our trade policy becomes India-centric while New Delhi is trying best to destabilise Pakistan," he added.

He said the future of textile industry has been put on stake by allowing cotton exports to India. This decision has been taken to support influential farmers and to please India. He said that the rupee saw it worst decline in the last eight years just on the next day of the monetary policy announcement. He said that Minister for Water and Power Raja Pervaiz Ashraf seems more interested in raising slogans while Karachi, the financial and industrial hub of country, plunged into darkness for about 12 hours daily.

Business Recorder [Pakistan's First Financial Daily]

 

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Auto industry: PAMA suggests steps to encourage investment​

KARACHI (August 06 2008): Local and foreign stakeholders have expressed concern over the viability of further investment in local auto manufacturing sector following the announcement of additional levies and taxes in the 2008-09 federal budget. A spokesman of Pakistan Automotive Manufacturers Association (PAMA) told Business Recorder here on Tuesday that imposition of 5 percent federal excise duty (FED) on cars with engine capacity higher than 850 cc was a bad decision.

The situation further aggravated by the renewed implementation and shifting of the 2.5 percent withholding tax at the registration stage, which has led to an increase in car prices. These levies and taxes are likely to dampen the demand further.

The auto industry also believes that the provision of valid driving licence of the country of origin would help deter illegal imports of used cars under the Transfer of Residence (TOR) scheme.

Dilating on the challenges facing the auto industry in Pakistan, the spokesman said that Pakistan's local auto assembling sector accounts for 91 percent of total cars and light commercial vehicles (LCVs) sold in the country. Domestic production of passenger cars and LCVs has increased fourfold--from 49,000 units in 2001-02 to nearly 190,000 units by 2007-08. This has made Pakistan's auto industry one of the highest potential sectors of the country's economy.

However, he said, the growth of auto sector was hampered in the fiscal year ending June 2008 as a result of a combination of factors including political uncertainty, economic instability, deviations from the agreed auto policy, rising interest rates, foreign currency appreciation, increases in the prices of oil, steel and other inputs and the negative impact of used cars imports.

Demand also decreased due to the rising trend in inflation and food prices as well as lost work time due to power outages resulting from energy shortages in the country. All this contributed towards a decline in industry sales by eight percent in FY08--from 204,000 in 2006-07 to 187,000 in 2007-08.

The increase in discount rate, initiated by the State Bank of Pakistan, though commendable as a step to reduce inflation, spells trouble for the local Original Equipment Manufacturers (OEMs) as it would work to discourage auto financing. Financial institutions have played an integral role in the growth of Pakistan's auto sector by facilitating motorization through easy availability of car loans and debt servicing.

Auto financing has also faced a crunch due to falling demand and increasing bad debts, and SBP's latest decision is bound to cause uncertainty in the already unstable market. This would further add to OMEs' cost of doing business, as financial borrowing would become all the more expensive.

The PAMA spokesman further said that in the previous fiscal year, the Government of Pakistan had taken the initiative to provide momentum to the local industry in the shape of Auto Industry Development Plan (AIDP), officially sanctioned in November 2007, to promote development of the automobile sector. It provided the assemblers a structure to base their expansion plans and the much-needed stability in policies. However, many aspects of the AIDP have yet to be implemented. There has been, in fact, a deviation of policies during last year.

The impact is being felt on investment which, in the auto sector, has risen to Rs 98 billion and is expected to reach Rs 225 billion by 2012, according to AIDP. The industry contributed Rs 63 billion to the government exchequer, which is projected to reach Rs 190 billion by 2012. The auto industry, he said, currently provides employment in addition to investment in technology transfer, localisation of parts and human resource development in numbers, the direct impact of the auto industry on Pakistan's engineering industry business for 400 vendors and direct employment opportunities to about 192,000 people.

Although the Government of Pakistan has asserted its belief in the importance of its growth and development of auto industry as a key driver for economic growth, technology transfer and a creator of jobs, following steps are necessary at this crucial and highly volatile juncture to ensure survival and sustained growth of the auto sector.

-- Withdrawal of 5 percent FED imposed on cars with engine capacity higher than 850 cc.

-- Restrictions on used car imports as follows: reduction of depreciation limit from 2 percent per month to 1 percent per month subject to a maximum of 25 percent, reduction of imported used vehicle life from 3 years to 2 years, registration of used imported vehicle in the name of returning Pakistani for at least one year, and requirement of driving license for the TOR scheme.

-- Removal of royalty and technical fee at the rate of 10 percent of remittance.

-- Relaxation of SBP monetary measures to make interest rate and auto financing affordable.

-- Removal of 35 percent LC margins on imports.

-- Consultation of industry on free trade agreements/regional trade agreements.

-- Sales tax to be brought down to the earlier 15 percent.

-- The government announced auto-related tariff for the next five years in respect of cars/LCVs should be made a part of the Finance Act 2008 and a clear-cut action plan be developed for the implementation of various components of the AIDP.

Business Recorder [Pakistan's First Financial Daily]

 

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200 dams to be built in Balochistan​

ISLAMABAD (August 06 2008): In Balochistan, two hundred small dams will be constructed to increase water supply and improve irrigation system on modern lines in the next ten years. The Balochistan government has decided to construct these dams at various places in the interior sites of the province, Radio Pakistan reported.

Work is in progress to level Merani dam command area for agriculture and gardening purposes. Five thousand and two hundred acres of land has so far been levelled, and is ready for cultivation.

Fifty water courses have been completed, out of one hundred ninety one. The project will be completed within one year period as the provincial government has decided to fund the project with one hundred fifty million rupees, report added.

Business Recorder [Pakistan's First Financial Daily]

 

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Reserves left only for 45 days import requirement ​

Govt to float Workers Remittances Securitisation Bonds worth $800m

Thursday, August 07, 2008

ISLAMABAD: Pakistan’s fast depleting foreign exchange reserves are left only for two and a half months import requirement, which is why, the economic managers of the country are seriously considering floating bonds amounting to $800 million in the international markets, a senior government official told The News.

When the new government took the charge, there was a proposal to float various bonds worth $2 billion including floating of GDRs (Global Depository Receipts) of some banks in the international market keeping in view the transparent, free and fair elections. But the government missed the bus as during that certain period of time the credit rating of Pakistan in the international market was quit reasonable.

According Finance Ministry sources, the government would soon float Workers Remittances Securitisation Bond worth $800 million to provide cushion to worsening foreign reverses situation. “The government, however, with the improvement of credit rating of the country would also come up with new proposal for floating more bonds in the international market,” said the sources in Finance Ministry

“Pakistan reserves at present stand at $10.487 billion out of which Commercial Banks have $3 billion meaning by that State Bank of Pakistan has only $7 billion with forward liability of $1.2 billion. Foreign reserves are depleting by $250 million to $300 million a week,” the official said.

“The dismal foreign reserves situation has prompted the government to tow the line of previous regime of floating bonds in the international market to arrange financial support to maintain foreign reserves at reasonable level.

“We are also going to introduce some duties on import of non-essential items to curtail import bill. The official said that some officials of Moody’s -an international credit rating agency are currently visiting Pakistan. They are meeting with Pakistan’s new economic managers and giving some tips to ameliorate the economy.

The new government took some bold steps of passing on massive increases in oil prices in the wake of hike in international market to end consumers and shown its resolve to reduce subsidy on POL products by December this year. The government also took bold steps to reduce OMCs margin and dealers’ commission and deemed duty on petroleum products in a bid to provide reduce the budgetary deficit.

The official said that government is still extending Rs21 per litre subsidy on High Speed Diesel, which the government wants to erase completely.

The government is very much on way to taking economic corrective measures and has decided to expedite and finalize the sell-off process of some government entities in next two months that include Global Depository Receipts (GDR) of Kot Addu Power Company (KAPCO), privatisation of SME Bank, sale of 90% shares of Hazara Phosphate Fertilizers Limited (HPFL) and Heavy Electrical Complex (HEC).

Reserves left only for 45 days import requirement

 

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Ministry concerned over project delay ​

Thursday, August 07, 2008

ISLAMABAD: The Ministry of Industries on Wednesday expressed dissatisfaction over the slow pace of work on the delayed Clean Drinking Water for All (CDWA) project and directed its officials to implement the scheme sooner than latter.

Adviser to Prime Minister on Industries and Production Mian Manzoor Ahmad Wattoo while chairing the fifth National Steering Committee of CDWA urged all stakeholders to work for implementation of the project as a mission as the project is for benefit of the general public.

The project for provisioning of safe drinking water to people is a sub-programme of Kushhal Pakistan Programme under medium term development framework (MTDF 2005ñ10).

It is worth-mentioning that previously the project implementation and executing rights were shipped from one to another ministry time and again and the project was procrastinated. Ministry of Environment prepared the CDWA project at a cost of Rs7.87 billion cleared by executive committee of the national economic council (ECNEC) on April 22, 2006. It was then transferred from Environment ministry to industrial ministry on October 12, 2006. Revised cost of the project had inflated to Rs16.66 billion more than double of its original cost.

Besides, in the fiscal year 2008-09 the public sector development programme (PSDP0), the government has allocated about Rs2 billion but still the project completion looks a far cry. Wattoo however emphasized that no further delay will be accepted and all necessary measures will be taken for an early implementation of the project.

Hindrance in reaching of inventory shipment to the provinces was the common complaint from all provinces which according to them delayed project implementation.

In the meeting, it was decided that firms would ensure that their shipments reach well on time and reach the provinces as per the schedule. Payments to the firms will be linked with the physical delivery of inventories to the provinces.

Project director Brig (Retd) Javed Sikander was asked to monitor the timely delivery of inventories to the provinces. It was also decided that MOIP will approach WAPDA to ensure that electricity connections are timely provided at filtration plants in the provinces.

Wattoo expatiated he himself will start visiting the provinces during the current month and hold meetings with the chief ministers so that any impediments at the provincial level are removed. The federal government has already committed to bear the operation and maintenance cost of the filtration plants for three years besides total funding of the project is also being provided by it.

It is therefore impetrative that provincial governments should extend all-out cooperation and support so that the benefit is given to the people as early as possible as the filtration plants will ultimately be owned and run by provincial governments.

Secretary Industries and Production (MOIP) Shahab Khawaja, other senior officials of the ministry, officials of National Engineering Services of Pakistan (NESPAK), Ministry of Science and Technology and representatives of provincial governments also attended the meeting.

Ministry concerned over project delay

 

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Economic thinking deficit​

PAKISTAN’S economic managers and policy gurus realise the importance of the growing services sector in the country. Through trade policy announcements they have repeatedly extolled the virtues of promoting trade in services.

Last year the commerce minister observed: “The services sector is important for our economy because it generates employment, contributes to … GDP and is a significant driver of economic growth. Trade in services accounts for over 20 per cent of world trade and is therefore of critical importance for us.”

The services sector has indeed emerged as the main driver of economic growth in Pakistan — as also in the rest of the world. As noted by the Pakistan Economic Survey 2008, this sector has provided much-needed support for sustaining a relatively high economic growth rate. Exceptional performance of the financial sector has helped the economy remain close to a high growth trajectory.

The Survey proudly notes: “The services sector surpassed the growth target of 7.1 per cent and grew by 8.2 per cent in 2007-08 as against actual achievement of 7.6 per cent in 2006-07. The services sector has made a contribution of 74 per cent to … GDP growth. The services sector has been an important contributor to Pakistan’s economic growth over the past five years growing at an average of 7.3 per cent annually since 2003-04. The continuing buoyant trend, even while growth in the Agriculture and Manufacturing Sectors [sic] has been slowing, implies that the services sector in Pakistan has remained relatively insulated from the challenges faced by the rest of the economy and has been better able to cope with them.”

An important feature of the services sector is a notable rise in its share in foreign direct investment in recent years. In particular, liberalisation and privatisation policies helped the finance and communication sub-sectors fetch a major part of the rising foreign direct investment inflows in the country. According to the State Bank of Pakistan, the share of foreign direct investment in the services sector has exceeded that in non-service sectors consistently for the last three years. The contribution of the services sector to GDP growth has also exceeded that of agriculture and industry for the last three years.

However, despite the phenomenal growth of the services sector, the Pakistan Economic Survey indicates that the country’s current account deficit widened to $11.6bn during July-April FY08 against $6.6bn in the comparable period of FY07, showing an increase of 75.6 per cent. Even when compared to the size of the economy, the current account deficit was substantially higher at 6.9 per cent of GDP during July-April FY08 as against 4.6 per cent for the same period FY07.

The deterioration in the current account deficit mainly emanated from the sharply rising trade deficit along with increase in net outflows from the services and income account. The services account deficit widened by 44.2 per cent during July-April FY08 to reach US$5.6bn. Relatively high import growth and a decline in export of services contributed to this deterioration. However, the strong growth in current transfers on the back of impressive growth in remittances almost entirely offset the deficit in the services and income account thereby leaving the trade deficit as the fundamental source of expansion in the current account deficit.

An analysis of the result of development of trade in services in Pakistan through the perspective of various government agencies indicates an incongruity between the economic growth generated by the services sector and the foreign exchange decline caused by the services account deficit. This is symptomatic of the economic mismanagement prevalent in the country.

Pakistani economic managers remain primarily focused on foreign investment as an instrument of growth and, other than paying lip service to the process of indigenisation, have done little to spur the engine of domestic growth. Inasmuch as their policy regarding the development of the manufacturing sector was flawed, their policy in respect of the growth of the services sector is equally unsound.

The policy of privatisation, liberalisation and deregulation has been adopted and implemented mindlessly by the government at the behest of international financial institutions. The opening up of the financial sector through conditionalities imposed by international financial institutions is a case in point. By doing so, Pakistan has lost out on its ability to negotiate mutually advantageous trading terms and is now left to seek credit for its ‘autonomous liberalisation’.

International trade in services is sought to be promoted through the General Agreement on Trade in Services (GATS), which provides for ‘progressive liberalisation’ and not just liberalisation. Members of the World Trade Organisation are required to enter into successive rounds of negotiations with a view to achieving a progressively higher level of liberalisation. The process of progressive liberalisation is required to be advanced in each such round through bilateral, plurilateral or multilateral negotiations directed towards increasing the general level of specific commitments undertaken by the members under GATS. There is flexibility for individual developing country members to open fewer sectors, liberalise fewer types of transactions and progressively extend market access in line with their development situation.

This is the strategy that should have been followed by Pakistan. But Pakistan chose to go through the process rapidly and that too in the more strategic sectors such as finance.

By not only liberalising and deregulating the financial sector but also privatising and selling major banks to foreign entities, the government has certainly achieved enhanced growth in the financial sector. The resulting conducive environment has enabled the foreign owners of banks and other financial institutions to recover their investments in Pakistan through huge spreads in interest rates and uncontrolled consumer financing to the detriment of local depositors and consumers.

A similar phenomenon exists in respect of the telecommunications sector with the ensuing detrimental effect on the foreign exchange reserves of Pakistan because of enormous dividend payouts. The stock exchanges have also been vying for and receiving their share of foreign portfolio investment despite the attendant risk of enhanced volatility in the country’s already unstable capital market.

According to the Statistics Division, the total export of services was $2,123,706 against the total import of services amounting to $6,347,072 at the start of this year. Despite the long-term vision (Vision 2030), a medium-term development programme, the annual budgetary process including periodic economic surveys, a plethora of policies framed by multiple finance, investment, trade and planning ministries as well as legislative recommendations and oversight, the economic managers have landed Pakistan in an economic mess.

Under the circumstances, one cannot but conclude that the services account deficit is not only an indication of the financial deficit but is also representative of the deficit in economic thinking in the country.

The writer, a former chairman of the Securities and Exchange Commission of Pakistan, is a lawyer based in Islamabad.

DAWN - Editorial; August 07, 2008

 

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Kazakhstan to sell oil, gas to Pakistan ​

ISLAMABAD: Deputy head of mission/incharge d’ affairs, Kazakhstan embassy, Aidar Gundubayev Wednesday said Pakistan could import oil and gas products from Kazakhstan at cheaper rates. He said Kazakhstan was interested in importing rice, sugar and meat products, and equipment and technology from Pakistan. Talking to members of Islamabad Chamber of Commerce and Industry (ICCI), Gundubayev said National Bank of Pakistan has a branch in Almati (Kazakhstan), which showed the importance of close relations between the two countries. He said during 2007, mutual trade between the two countries was around $ 27 million, which was rising fast.

Daily Times - Leading News Resource of Pakistan

 

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Islamabad yields to Sindh's pressure: notification on Thar Coal Authority Withdrawn ​

ISLAMABAD (August 07 2008): Federal government has withdrawn its notification for establishment of Thar Coal Authority (TCA), approved by Prime Minister Syed Yousuf Raza Gilani, due to continuous resistance of Sindh government, well-placed sources in PPIB told Business Recorder on Thursday.

The Cabinet Division on July 8 constituted a seven-member TCA with Sindh Chief Minister as its chairman until the appointment of a professional of eminence by the provincial assembly. The Minister for Water and Power was notified as Vice-Chairman of the TCA, while Deputy Chairman of Planning Commission, one provincial minister, to be nominated by the Chief Minister, Sindh Chief Secretary and TCA Managing Director as its members.

The much talked about TCA, the sources said, had been constituted after prior consultation with the provincial government. The authority came into being after the abolition of the Sindh Coal Authority (SCA) and Thar Coal Mining Company (TCMC), a joint venture of the Federal and provincial government.

The sources said that the main purpose of the government was to take Thar coal project back from the PPIB, which never supported it whole-heartedly. The Federal government notification had proposed that "all agencies, organisations, entities in whatever form or name, including the TCMC and SCA that are especially created for Thar development shall be abolished by the concerned authorities.

All other agencies, which are not Thar-specific but are also working on Thar coal development shall have their mandate truncated to the extent of Thar coal. They, shall, however, continue doing their other normal business." The sources said, abolition of SCA and TCMC was one of the major reasons, which irritated the provincial government.

After the issuance of notification by the Federal government, provincial leadership protested at the highest level over what they said the "most controversial notification," the sources continued. On July 22, the provincial government issued two notifications to establish Thar Coal and Energy Board (TCED) and enhance the strength of the board's members, setting aside the notification of the Federal government.

"We accept that coal exploration is the right of the respective province, but power generation is the Federal subject," said one of the officials of the Ministry of Water and Power. The ministry, which had earlier made its utmost effort to establish the authority's office in the PPIB, is of the view that principal seat of the board would be at Karachi. The Sindh government has included two provincial ministers and Asad Ali Shah, as nominee of Sindh government on the board.

Business Recorder [Pakistan's First Financial Daily]

 

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Sindh eyes $12 billion foreign investment ​

KARACHI (August 07 2008): Sindh government is expecting $12 billion foreign investment from Germany, Poland, Australia and US in the Thar coal power project, the work on which would be started within the next 2-3 months.

Sindh Chief Minister Qaim Ali Shah stated this while addressing a press conference at Chief Minster House on Wednesday, flanked by Home Minister Dr Zulfiqar Mirza, Information Minister Shazia Marri, Revenue Minister Murad Ali Shah, Power and Irrigation Minister Saifullah Dharejo, Local Government Mazharul Haq, Member of Thar Coal and Energy Board (TCEB) Asad Ali Shah, Adviser on Mines and Minerals Khattu Mal Jewan, Nafees Siddiqui, Rashid Rabbani, Waqar Mehdi, Faisal Raza Abidi, Ali Nawaz Shah and other PPP leaders.

"Many companies from Germany, Poland, Australia and US have shown their willingness to invest in the Thar coal project. We expect around 10 to 12 billion dollars investment," he said.

Terming as historical the recent international roundtable in the US, jointly organised by the Government of Pakistan and World Bank, he said that unexpectedly 150 investors from 32 countries had participated in the two-day conference. He said some developed countries, like Germany, Poland and US, which are generating 50 percent electricity from coal, had also assured Pakistan of their full co-operation in the coal-based power sector.

The CM said that according to an estimate, within the next 10-12 years, 100,000 megawatt electricity could be generated from 175 billion tons coal reserves in Thar, which is spread over 9,000 square km area. "But this can not be done by a single company, as it requires billions of dollars investment," he added.

The project, he said, would not only help Pakistan overcome the power shortage but would also create direct and indirect employment opportunities for lakhs of people. Terming coal a cheaper and sustainable energy source, he said that road, electricity, water and other facilities had already been provided at the work sites in Thar. He said railway network and air route would also be established to the underdeveloped area, which would subsequently be linked with Keti Bandar.

He said his government had almost completed groundwork at six identified sites in Thar and was expecting to generate 1000MW of electricity from each of those sites. The chief minister reiterated that huge coal reserves in Thar belonged to the people of Sindh and no one could occupy or take the energy-rich natural resource away from it. "As per 1973 Constitution the federal cabinet had once-and-for-all decided that coal is a provincial subject," said the chief minister.

The federal government as a goodwill gesture had not only authorised the Sindh government to explore coal in Thar, but also to undertake power generation projects, which is basically a federal subject, in the province, he said. "The federal government would only support us and participate in all deals to be signed in this respect," he said.

He said the TCEB, which would provide one-window facility to investors, was also constituted by the Sindh government with majority of its members representing the province.

"Earlier, a notification had confused the people, but all misunderstandings should now be removed as it is my clear message to people of Pakistan that Sindh government is undertaking this project with the support of federal government," he said. When asked if he was supportive of the claims of his coalition partners in Sindh government on 'Talibanisation' of the province, the chief minister replied: "Our partners should be satisfied with Wednesday's press conference of the Home Minister, and if they have some proof they should share with us."

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Domestic debt increases by Rs608bn ​

Friday, August 08, 2008

ISLAMABAD: The country’s total outstanding domestic debt rose by a worrisome Rs608 billion or $9.5 billion during a year to Rs3.21 trillion (about $50 billion) by the end of June 2008 from Rs2.6 trillion ($41 billion) recorded at the end of fiscal year 2006-07, the State Bank of Pakistan (SBP) on Thursday reported.

Interesting feature of the provisional data released by the bank was that the increase in domestic debt during 12 months (July-June 2007-08) was mostly due to a rise in the stocks of floating debt.

The unfunded and permanent debts have also jacked up the total debt to a sizeable amount. During the fiscal year 2007-08, the floating debt went up by Rs482 billion, permanent debt by Rs55.3 billion and un-funded debt increased by Rs70.9 billion. The permanent domestic debt comprising medium and long-term market loans, federal government loans, special government loans, federal instruments and prize bonds, stands at Rs608.3 billion, which totalled Rs553 billion at the end of the fiscal year 2006-07.

The floating domestic debt, mainly comprising short-term debt instruments and market treasury bills, maintained a rising trend and was recorded at Rs1.108 trillion at the end of June 2007.

While during the following 12 months, it went up to Rs1.59 trillion. Un-funded domestic debt comprising National Saving Schemes (NSS) at the end of the last fiscal year stood at Rs1.01 trillion, which at the end of the fiscal 2007 was at Rs940 billion. Data reveals that net mobilization under all instruments of the NSS were on the rise during the period under review, against the corresponding period of the last fiscal year.

The reason for this is the attractive interest rate extended by the government on these instruments. Saving instruments such as Bahbood Saving Certificates, Pensioners Benefit Accounts, Special Saving Accounts and Special Saving Certificates increased, while deposits in Defence Saving Certificates, Regular Income Certificates, Mahana Amadani Accounts and GP fund accounts declined.

Domestic debt increases by Rs608bn