Pakistan Economy - News & Updates - Archive

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Pakistan Agrees to Provide 20,000 Labourers to Bahrain Every MonthSuad Hamada ​

10 September 2008

Manama — Pakistan has stepped in to help Bahrain deal with the soaring demand for skilled manpower in the construction sector by agreeing to provide 15,000 to 20,000 workers a month, a diplomat said on Tuesday.

“Six months ago, hardly around 7,000 Pakistani workers arrived every month to Bahrain. However, the situation will soon improve as a result of cooperation between the two countries under which Bahraini employers will give preference to Pakistani workers,” Community Welfare Counsellor at the Pakistani Embassy, Habibur Rehman Gilani, told Khaleej Times yesterday.

Gilani refused to link the increase in demand for workers from his community to employment restrictions imposed by the Indian Embassy on its manpower, including its refusal to allow companies with labour violations record to recruit Indian labourers as well as a plan to implement minimum wage for Indian labourers.

“The demand for our manpower has nothing to do with restrictions on workers from other nationalities as Pakistani workers possessed the required skills to meet the demands of the construction sector, mainly the strength and determination to deal with tough working conditions.”

He said three years ago Pakistan launched a massive training programme for its blue-collar workforce at various training centres to enhance their efficiency. “Pakistani workers are known for their honesty and hard work and are willing to work on reasonable wages that make them the perfect choice for construction companies.”

Gilani said all workers had been briefed about Bahrain’s culture and job requirements before coming here, while they had also been instructed not to not engage in illegal activities and strikes “We have told them to try to solve their work-related disputes through negotiations and approach us for help to protect the reputation of our community.”

Gilani revealed that there are more than 40,000 Pakistanis labourers working in Bahrain while the community comprised around 55,000 individuals and the figure is expected to double soon.

 

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Indonesia wants increased trade with Pakistan ​

Wednesday, September 10, 2008

KARACHI: Consul General of Indonesia, Mustakeem has said that his country wants to expand trade with Pakistan and for this Jakarta would facilitate Pakistani businessmen.

He said this on his visit to the Korangi Association of Trade and Industry (KATI) on Tuesday. He added that Indonesia is a strong economy and Pakistan could benefit from its experiences while Indonesian businessmen are exploring the possibilities of new business avenues, particularly joint ventures in various fields.

In reply to a query of KATI Chairman, he said, “His office is willing to provide full support for visas to Pakistani businessmen who are recommended by KATI.” Sheikh Fazle Jalil, Chairman, KATI said that Pakistan is an agro based country and our produce like rice, wheat, vegetables, fruits, tobacco, and raw cotton would be attractive for Indonesian markets. He suggested that improvement in bilateral trade needs long lasting concrete efforts from both the governments, like exchange of frequent trade delegations and other such steps.

 

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Tuwairqi to build 104-metre high furnace tower ​

Wednesday, September 10, 2008

KARACHI: Tuwairqi Steel Mills Limited (TSML), the upcoming integrated steel-manufacturing project, recently hired a gigantic Crawler Crane of 600-ton capacity to construct a 104-metre high Reduction Furnace Tower.

The furnace employs the world’s most advanced Direct Reduced Iron (DRI) technology of MIDREX Process owned by Kobe Steel of Japan.

The tower, which currently stands 50 metres high, will be making one of the skyscrapers in Pakistan. Tuwairqi Steel Mills is being set up in Pakistan by Al-Tuwairqi Group of Companies, the biggest private steel producer in Saudi Arabia.

The crane (Demag CC 2800) engaged to construct the tower is considered a speedy and reliable tool for lifting heavy structural members globally during a high-rise construction. TSML has obtained this crane from a Turkish company the Sarilar International Transport & Commerce.

 

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Industry sees stability under new president​

KARACHI, Sept 9: Businessmen and industrialists see the election of Asif Ali Zardari as president of Pakistan a major step leading towards economic stability.

They believe that the political turmoil has reached its logical end with completion of the process of the restoration of democracy in the country.

They hoped that the government could now focus on reviving the economic stability.

Acting president Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Zubair Tufail said that the economic stability was not far away after taking over the top post of president by Asif Zardari.

He said it would be easy for the government to announce some incentives and package as both the president and the prime minister belong to the PPP. There will be understanding between them on various issues, he added.

“The new president is aware of the economic crisis and now the road appears clear for him to revive business activities,” he said.

Zubair said that a delegation of the apex trade body would meet the president next week to submit proposals for the resolution of economic issues being faced by the country.

The acting FPCCI president said that consumers were hoping to get relief in oil prices as crude prices had settled at $101 per barrel from $147 two months back.

Similarly, the palm oil prices have fallen to $850 per ton from $1,200 few months back. Due to bumper rice crop, its prices have already started falling in the markets, he added.

President Karachi Chamber of Commerce and Industry (KCCI) Shamim Ahmed Shamsi predicted the revival of economic activity after the election of Asif Ali Zardari for the country’s top post.

“I think that the government will now definitely focus its attention on economic stability after the improvement in the political scenario,” he said adding: “Time has come for the Pakistan People’s Party (PPP) government to deliver on its promise to improve economic indicators.”

Mentioning some short-term challenges, he said that the government should reduce the interest rates to encourage capital flow and take measures to enhance exports as the Christmas season and winter buying by the European buyers will get underway very shortly.

Chairman Korangi Association of Trade and Industry (Kati) Shaikh Fazl-e-Jalil said economic prosperity should come after the end of political instability to some extent.

Industry now pins hope for some policy direction after the appointment of Zardari as president.

He recalled that the PPP-led coalition government had not given any solid economic policy since February.

However, he said that economic stability would come when the government appoints full time ministers of various economic portfolios.

Chairman North Association of Trade and Industry (Nkati), Noor Ahmad Khan said that economic revival now seemed imminent after the settlement of a big political issue.

 

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Securitisation of $700m remittances planned​

KARACHI, Sept 9: The government has planned securitisation of $700 million remittances being sent by overseas Pakistanis to ease pressure on the rupee.

Sources said the plan was being finalised and a few top foreign banks were engaged, which means early encashment of future receivables.

Pakistan had received record remittances of about $6.5 billion during the last fiscal year. The remittances have been witnessing a rising trend for the last five years. In the first month of the current fiscal year remittances maintained this trend.

During the last fiscal year, the country had to face record current account deficit and half of which was met by the remittances.

As imbalances have created a serious threat and have made multiple impacts, the country is in dire need of foreign exchange.

The shortage of dollar has already increased pressure on the rupee which lost one-fifth value against the dollar, trade and current account imbalances are haunting economic managers of the country and fast depleting reserves may lead the country to a default.

Sources said that the re-entry of the IMF is also expected as lender of the last resort.

Moreover, the government has started removing all kinds of subsidies which were being provided for oil and food sector.

The removal of subsidies suddenly resulted in increasing prices of food and petroleum products, which engulfed the entire economy and inflation touched over 24 per cent.

Bankers were of the view that Pakistan had strong position over remittances which were rising.An analyst said if securitisation of $700 million plan was completed, it would be a temporary respite for the country as the problem could not be handled with this ‘meagre’ step.

The country’s reserves slid to below $9 billion while the oil import bill alone could be over $12 billion, even after fall of oil prices in the international market.

Currency dealers said the possible inflow of $700 million through securitisation would give hope for better performance of the local currency.

 

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Govt borrowing swells to Rs58.2bn ​

Thursday, September 11, 2008

ISLAMABAD: Due to Pakistan economy’s burgeoning income-expenditure gap, the government’s borrowing for budgetary support increased to Rs58.24 billion during the first month of fiscal year 2008-09, depicting an increase of 40.95 per cent compared to borrowing of Rs41.32 billion in the corresponding month of the last fiscal.

During July 1 to July 26, government’s borrowing from the State Bank of Pakistan stood at Rs30.07 billion and from scheduled banks Rs28.17 billion, while in corresponding month of the last fiscal borrowing from the central bank stood at Rs41.32 billion however Rs4.07 billion were retired of scheduled banks. Economists believe that expansionary government fiscal policy is also considered as a source of diluting effects of the SBP tight monetary policy formulated for capping high inflation.

It is feared that running a loose fiscal policy may crowd out private investment in the country. Currently, inflation is touching a record high which is not only affecting the macro economic indicators but also severely disturbing social life of million of poor Pakistanis.

Besides, the loose policy had also crowded-out private investment in the country. Though public spending help in developing right infrastructure for encouraging private investment, however if surge in the government spending is not accompanied by increase in government revenue and proportionate hike in real GDP, it creates public debt and inflation respectively. The higher public spending may put upward pressure on the interest rates and thus discourage private investors to invest. It is worth-mentioning that during fiscal year 2007-08, fiscal deficit stood at Rs777 billion or 7.4 per cent of GDP against Rs398.8 billion (4 per cent of GDP) targeted for the fiscal under review.

In order to bring back the budget on a sustainable track, fiscal deficit for 2008-09 is proposed at 4.7 per cent of GDP i.e. Rs582.3 billion. During July-June 2007-08, the government borrowed Rs461.28 billion from banks (scheduled and central bank), which is about 469 per cent or Rs380.28 billion more than the actual target of Rs81 billion for fiscal year 2007-08, while Rs359.26 billion (or 352 per cent) more than, it borrowed in corresponding period of the last fiscal 2006-07 (Rs102.015 billion). More worrisome was that the government borrowing from the SBP increased to alarming Rs633.17 billion as against Rs58.57 billion it retired last year.

Of scheduled banks, it retired Rs171.89 billion against Rs160.59 billion it borrowed in corresponding period of the last fiscal. It is also feared that if the government was unable to attract external inflows as a result of low remittances, slow down of privatization proceeds, the borrowing volume could balloon to unbearable level that could further affect the government’s efforts to rein in the inflationary pressure and bring down the poverty level in the country.

The State Bank since last year has time and again advised the government to reduce its dependence on bank borrowing especially, on SBP in order to control inflation and support the monetary policy.

According to the bank, the excessive borrowing from the SBP spur the inflationary pressure in economy due to excessive money circulation in economy. Resultantly, it becomes a source of demand pull inflation, a scenario when too much money chases too few goods. Few months back, the central bank also asked the government that the fiscal deficit be contained in years ahead to reduce the risk of crowding out of the private investment.

Besides, it should also retire borrowing from the banking system particularly from the SBP.

 

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Trade deficit widens to $1.87bn in August ​

Thursday, September 11, 2008

ISLAMABAD: Pakistan’s trade deficit widened to $1.87 billion in August compared with $1.64 billion in July and $1.28 billion in August last year, the statistics bureau said on Wednesday.

Exports stood at $1.58 billion in August this year, against $1.46 billion in the same month last year. Imports were worth $3.46 billion compared with $2.74 billion in August last year.

An analyst said a strike of more than a week by lorry drivers at the main port of Karachi in late August disrupted exports worth millions of dollars.

“Export numbers are likely to improve in September partially due to the backlog,” said Asif Qureshi, head of research at Invisor Securities Ltd. Qureshi said it was encouraging that imports showed a sign of decelerating in August, declining 2.48 per cent compared with $3.54 billion in July.

The trade deficit swelled by 52.95 per cent to $20.74 billion in the 2007-08 (July-June) fiscal year, as against $13.56 billion in the 2006-07 year, mainly on account of a heavy import bill for crude oil and food.

The import bill for crude oil and petroleum products rose more than 66 per cent to $11.35 billion in 2007-08, compared with $7.33 billion the previous year, as world fuel prices surged. The food import bill was up nearly 54 per cent to $4.20 billion in 2007-08, compared with $2.74 billion in 2006-07.

The rising import bill has contributed to a fall in foreign reserves which slipped to $8.89 billion in the week that ended on Sept 3 from an all-time high of $16.5 billion in October last year.

The current account deficit widened to $14.016 billion in 2007-08, while in July it expanded 24 per cent to $1.01 billion from July last year. The government last month imposed duties up to 50 per cent on 379 “luxury goods” to help cut the import bill.

 

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Gas load-shedding to lead to Rs22bn ​

Thursday, September 11, 2008

ISLAMABAD: Urea manufacturers have clearly conveyed to the Ministry of Food, Agriculture and Livestock (MINFAL) that with minimum gas loadshedding of 30 days during peak hours in winter, the government will require Rs22 billion ($306 million) for importing urea.

“Total import requirements with or without gas loadshedding will be 549,000 tonnes for Rabi season 2008-09,” reveals a calculation prepared by one of the urea manufacturers and sent to MINFAL for discussion in the Fertiliser Review Committee meeting on Thursday.

The government will require $439 million and if the Saudi facility worth $133 million extended in July is deducted, the balance foreign exchange requirement will be Rs22 billion ($306 million), as stated in the calculation.

Urea price in the international market is $800 per tonne while its price in the domestic market is $180 per tonne, thus the government is paying $620 per tonne extra on imported urea.

All the four main urea manufacturing companies in Pakistan with daily urea production of 4,863 tonnes will not be able to produce 72,945 tonnes if remained closed for 15 days and 145,890 tonnes if plants remain closed for a maximum 30 days. The financial impact of the closure of fertiliser units for 15 days would come to $58 million and for 30 days $117 million.

Pakarab Multan, Dawood Lahore, Pakamerican Daudkhel are connected with Sui Northern Gas Pipelines Ltd (SNGPL) while Fauji Fertiliser Bin Qasim is linked with the Sui Southern Gas Company (SSGC) and FFC and Engro with Mari Gas. The daily production of Pakarab is 333 tones, Dawood Hercules Lahore 1530 tonnes, Pakamerican Daud Khel of 1065 tonnes and Fauji Fertiliser Bin Qasim 1935 tonnes.

MINFAL in a summary sent to the Prime Minister has anticipated a shortage of half a million tonnes of urea for the Rabi season and submitted a plan for importing the commodity from friendly countries on credit.

The retail price of urea in the open market is over Rs900 per 50kg bag against the official price of urea, which is Rs650 per 50kg.

 

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$500m ADB tranche likely this month: IMF issues Letter of Comfort​

LAHORE, Sept 10: The government expects to get the first tranche of $500 million of $1.3 billion Asian Development Bank (ADB) loan before the end of this month as the hitch of a clearance by the IMF has finally been removed.

A senior official in the federal finance ministry, who did not want to identify himself, claimed while talking to Dawn from Islamabad on Wednesday that the International Monetary Fund had “issued” the Letter of Comfort (LoC) to pave the way for the release of the ADB programme loan to Pakistan.

The loan, part of the financial sector reforms programme, will be used by the government to support its budget.

The tranche will also help the government slightly shore up its dwindling stocks of foreign exchange reserves, which have already dropped below $9 billion on the back of rising oil, food and other import payments from a record high of $16.4 billion in October last year.

The current account gap too expanded to above eight per cent of the gross domestic product (GDP) to above $20 billion during the last fiscal as trade deficit rose to over $14 billion. The current account deficit had grown 24 per cent to more than $1 billion in July this year from same period last fiscal.

The government direly needs foreign capital inflows in the form of multilateral and bilateral loans, aid, grants, foreign direct investment and private transfers in order to improve its forex reserves.

The official said the government also planned to float sovereign bonds in the international financial markets to raise funds. But he did not give any idea of the size of the loan the government intended to raise from the global financial markets.

“No one can give the idea of the size of the funds we are going to rake up from the global financial markets. It will be known only when we enter the market. We don’t yet know what would be the response of the international investors to our offer,” the official said.

He said the bonds would be floated at an “appropriate time” in order to keep down the spread on the sovereign paper. “That’s why I cannot tell you the exact date or month when the bond would be floated,” he said in answer to a question.

He said Islamabad had asked the Saudi government to extend it the oil on deferred payment for next two to three years to ease the pressure on its resources.

Pakistan buys 110,000 barrels of oil per day from Saudi Arabia and the extension of the facility would automatically help it’s the government plug bleeding of meagre foreign exchange reserves.

He, however, expressed his ignorance about the negotiations with Riyadh for an economic package for Pakistan to bail it out of the current economic crisis. “I’m not aware of any such development,” he said when he was told that the finance minister was reported to have stated that the Saudi government was putting together such a programme for Pakistan.

 

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Pakistan slips to 77th slot in business index: No reforms initiated in 2007-08​

ISLAMABAD, Sept 10: Pakistan did not introduce any reforms in 2007-08 to reduce regulatory burden on doing business as it ranked 77th among 181 world economies in providing an environment conducive to investment.

This is part of findings of the World Bank’s global report on Doing Business 2009 released here on Wednesday.

“No reforms were recorded in Pakistan this year,” the report said, adding the country occupied 74th position last year and slid three slots since then.

Karim O. Belayachi, co-author of the report, in a videoconference from Washington said the best thing for Pakistan would be to lower cost to formally register business. Doing Business ranks economies on the basis of 10 indicators of business regulation that track the time and cost to meet government requirements in starting and operating business, trading across borders, paying taxes and closing a business.

Pakistan is placed at 93rd position on dealing with construction permits due to high number of days involved in the procedure. A businessman has to spend more than seven months or 223 days to get a construction permit. To transfer property from one business entity to another, as many as 50 days are required that consumes precious time, says the report.

Overall, Pakistan grabbed 97th place on registering property indicator.

On a question, one of the authors of the report said by reducing administrative cost of doing business, the countries that are facing problem of high electricity cost could reduce at least one barricade to the business. The report coincided with about 40 per cent increase in power tariff for industrial consumers and would be accounted for in the next report.

Karim O Belayachi said past five years experience showed that the governments brought more reforms when they were under pressure, especially under financial difficulties.

“The government commitment is most important in both, home grown or donor-assisted reforms,” he said and added, reforms in doing business were straightforward and could easily be applicable anywhere.

Sri Lanka was the best reformer among the South Asia region. Singapore, New Zealand and the United States, in that order, are the three top performers among 181 countries.

Pakistan got the highest position in South Asia on protecting investors, scoring 24th position.

“Pakistan has done tremendous job in protecting investors,” said Karim Belayachi.

Pakistan was the worst performer in enforcing contracts where it stood at 154th number. It takes 32 months or 976 days in contracts’ enforcement. Employing workers was the second worst and paying taxes was the third worst indicator for Pakistan. A businessman needs 47 days or 560 hours to pay his taxes in a calendar year. The report says total tax rate, as percentage of profit in Pakistan is 28.9 per cent.

The country performed moderately on getting credit indicator and scored 59th position. Trading across the borders indicator won 71st place for Pakistan. On the last indicator, closing a business, Pakistan is placed at 53rd position. It takes about three years to shut a running business. The recovery rate in Pakistan is measured at 39.2 cents per dollar.

 

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TSML to construct furnace tower​

KARACHI: Tuwairqi Steel Mills Limited (TSML), the incoming state-of-the-art integrated steel-manufacturing project, has recently hired a gigantic Crawler Crane of 600 tonnes capacity to construct a 104-meter high Reduction Furnace Tower.

The furnace employs the world’s most advanced Direct Reduced Iron (DRI) technology of the MIDREX Process owned by KOBR Steel of Japan. The tower, which currently stands at a height of 50 meters, will be making one of the skyscrapers in Pakistan.

Tuwairqi Steel Mills Limited is being set up in Pakistan by Al-Tuwairqi Group of Companies, one of the leading business concerns in the Kingdom of Saudi Arabia and the largest private sector steel producer.

The crane (Demag CC 2800) engaged to construct the tower is considered a speedy and reliable tool for lifting heavy structural materials globally during a high-rise construction. TSML has obtained this crane from a Turkish company, namely, SARILAR International Transport and Commerce. Prior to operating at TSML site, it was working at ARAMCO Rabigh Site in the Kingdom of Saudi Arabia.

The DRI Plant of 1.28 million per annum capacity constitutes the first phase of the project and it is expected to be completed in the first quarter of 2009. Along with the construction of the DRI plant, an Intermediary Phase is also being executed, which includes the setting up of a chain of Induction Furnace to produce 0.3 million tonnes of billets per annum.

The Intermediary Phase would be completed close to the completion of DRI Plant. Phase-II of the project consists of an Electric Arc Furnace and a Constitute Caster to produce 1.28 million tonnes of high quality billets. As background integration, a Pelletisation Plant of 2.4 million tonnes capacity shall also be set up. The project spreads over an area of 220 acres at Port Qasim.

 

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‘Hopes for economic revival high as president takes oath’ ​

ISLAMABAD: Hopes for economic revival are high as one of the most powerful civilian ruler has taken over as President of Pakistan. Now Asif Ali Zardari should ensure political and economic stability as country is paralysed since eighteen months due to power struggles, said Pakistan Economy Watch on Tuesday.

A press release issued here on Tuesday revealed that the cancellation of holiday in Sindh has not only saved billions but also assured that Asif Zardari is very serious about economy. His soft and compromising stance during the press conference says volumes about his plans. He is expected to find solution to energy crisis with the help of China and contain lawlessness and unemployment.

A number of issues have been cropped up during last eighteen months that must be tackled at the same time; country cannot afford the luxury of resolving issues one after another, said Dr Murtaza Mughal, President, Pakistan Economy Watch.

The power struggle among Pakistan People’s Party, PML-Nawaz, former President Musharraf; issue of restoration of deposed judges coupled with deteriorating law and order situation has resulted in Asia’s highest interest rates, record borrowings, riskiest financial obligations, the weakest currency, dwindling forex reserves and a stock market depressed by almost 50 percent in last five months.

Political instability and failed attempts to shore up the market has spurred an exodus of investors. Steps like curbs on stock trading are neither positive, nor sustainable and should be avoided in future.

Asif Ali Zardari has taken oath today and he should immediately appoint fulltime finance and commerce ministers as the economy has braved three finance ministers in last six months. “Three finance ministers with different views have served Pakistan in the current year including Salman Shah, Ishaq Dar and Naveed Qamar,” said Murtaza.

Subsidies, fiscal slippages and other unnecessary spending have widened the budget deficit to a 10-year high and the fiscal issues are the weakest link in the policy mix.

 

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‘Pakistani products gaining ground in Italian markets’​

PESHAWAR: Pakistan’s ambassador to Italy, Tasneem Aslam has said that demand for Pakistani products increased in the Italian markets due to strong and ever-growing friendly ties between Pakistan and Italy. Farman Ali Niazi, hailing from District Swabi, led a traders’ delegation to Italy and held a detailed meeting with Tasneem Aslam in Rome. Mr. Niazi in statement here said that the Pak envoy in her talks with the delegation said that there was great scope for the Pakistani products in Italy, which needed to be explored. She said that Pak Embassy in Rome was struggling to help settle problems of the expatriate Pakistanis. She said Italian government has made lot of investment in Pakistan in various sectors. Tasneem Aslam also stressed on the Pakistanis community living in Italy to play their due role in promoting their culture.

 

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Govt prepares $5.2 billion power distribution road map​

ISLAMABAD: The government has prepared a power distribution road map spanning 9 years, from 2008 to 2017, and approved a corresponding $5.2 billion investment plan for distribution companies (DISCOS) of WAPDA in order to support the power distribution sector expansion.

The total investment requirement for the DISCOs for 2008–2017 is estimated at $5.2 billion. The investments consist of improvements to the secondary transmission grid (STG), distribution of power (DOP), energy loss reduction (ELR), capacitors, and other required investments to the distribution system.

These investments have been estimated at $262 million in FY2008, $315 million in FY2009, $367 million in FY2010, $472 million in FY 2011, $577 million in FY 2012, $682 in FY 2013, $786 million during FY 2014, $891million in FY 2015, $577 million during FY 2016 and $315 million in fiscal year 2017.

The distribution systems are heavily loaded and in parts already overloaded, with high

losses and poor reliability levels. If recent increases in demand continue, power shortages and the already frequent customer disconnections or load shedding will become much more regular unless all elements of the power sector are significantly improved urgently. Significant investment requirements remain on the distribution systems of the eight DISCOs to enable the power to be effectively, reliably, and safely delivered to satisfy the demands of existing and new customers, observing the necessary environmental and social safeguard requirements. There is also the need to address compliance with regulatory requirements. To date, these have not been priority issues for the DISCOs—they are generally aware of the regulatory requirements but will not be able to achieve compliance at this stage.

The immediate priority for investment in the distribution systems is to address the capacity shortfalls that currently result in regular system outages and supply interruptions to customers. There is a degree of urgency on this work to avoid rapid deterioration of power transformers caused by overloading, which can result in failures with lengthy return to service times. The identified priorities begin with the addition of circuit and transformer capacity at the sub-transmission level to enable the already overloaded systems to deliver present demand reliably and meet the expected load growth.

A second priority is loss reduction. The primary and secondary distribution system suffers from high technical and commercial losses, outdated design, and poor performance. Improvements to system reliability and further downstream loss reduction are required on the lower voltage systems of all DISCOs alongside system extensions to un-served villages.

The power sector entities, specifically the DISCOs, do not have the required level and mix of skills or support systems necessary to operate as independent entities covering the whole range of electricity business requirements.

In the short and medium term, Asian Development Bank would prioritise assistance for economic infrastructure projects that address critical gaps and constraints in the overstressed transmission and distribution systems and rehabilitate and modernise the power infrastructure. However, investment in additional generation is only justifiable if the transmission and distribution system can handle the additional load. ADB’s assistance to the energy sector also prioritises power sector reform, energy efficiency and renewable energy development.

 

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Pakistan debates sale of assets to support economy ​

LAHORE: Pakistan plans to sell valuable energy assets, beginning with a major gas field, as it tries to reap billions of dollars from deals with investors in industries like banking and farming, a report in New York times said on Tuesday. Because of a hefty oil bill and a slowing economy, Pakistan is struggling under its biggest budget deficit in a decade, $21 billion; inflation that hit a 30-year high, 24.3 percent, in July; and fast-rising unemployment projected to reach 6.6 percent in 2009, government leaders are eager to raise quick money, the report said.

“The government is going through all its funding options,” a banker advising the Pakistani government said. Financial advisers to the government spoke on the condition of anonymity. According to the report, the Qadirpur gas field in Pakistan, a natural gas reserve of 2.9 trillion cubic feet in the Indus river flood plain, may be one of the first big-ticket sales. The field, the second largest in the country, is valued at about $3 billion.

Bids for the field, about 260 miles northeast of Karachi, may be submitted in the next week or so, bankers say. Likely bidders include foreign companies already involved in Pakistan’s energy industry, like Kuwaiti state corporations and OMV, a private Austrian energy company. “They’re testing the market with an auction,” said an energy banker who asked to remain anonymous. The selling of the Qadirpur field could be controversial because it is considered a strategic asset. Pakistan imports more than three-quarters of its petroleum and is struggling to become less dependent on imports. But a person close to the deal said there were no guarantees that the field would be sold. He characterised the bid solicitation as an informal process.

The report cited that some investors were questioning the wisdom of Pakistan’s selling valuable assets and wondering if the sales would be conducted transparently and fairly. But there is no question that the country needs to raise money, analysts said. Pakistan’s economic situation is “a result of rising commodity and food prices, exacerbated by a lot of pre-election spending by the previous government,” said Gareth Price, head of the Asia Program at Chatham House, a research centre in London. In an effort to win votes, the previous government, led by General (r) Pervez Musharraf, kept subsidies high on food, electricity and oil, helping drive up the budget deficit.

The sale of the Qadirpur field is part of a full-scale review of the biggest energy company in Pakistan, Oil and Gas Development, which owns 75 percent of Qadirpur. Merrill Lynch is leading the review. Pakistan’s privatisation commission said in late August that it also planned to offer stakes in Kot Addu Power on international stock exchanges this year and to privatise Hazara Phosphate Fertilizers. It invited bidders for 51 percent of Jamshoro Power, a long-discussed privatisation deal. Salt and coalmines are also scheduled to be privatised.

The list of state assets for sale may not necessarily be followed by deals, analysts warned. “Talk of investing huge sums of money doesn’t always materialise, because people are put off by the political machinations” in Pakistan, Price said. Pakistan’s “economic curse” is that the ruling elite — civil servants, politicians and the military — have worked in their own interest, not that of the wider population, limiting how much capital the country can raise, he said. One possible source of new investment is the Middle East, the report said. “There is a cultural and long-term affinity between the two regions,” said Youssef Nasr, the chief executive of HSBC in the Middle East. Saudi Arabia and Abu Dhabi in particular have been strong supporters of Pakistan. daily times monitor