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Friday, September 12, 2008

ISLAMABAD: The government has decided to expedite releasing funds for the development projects in Balochistan.

Owing to the lack of funds the most important projects including the Gawadar connectivity project (N-8, N-85) and roads that connect Punjab province to Pak-Iran border have been delayed.

This decision was taken after the meeting of Balochistan Chief Minister Nawab Aslam Raisani with Prime Minister Syed Youaf Raza Gillani in Islamabad onm Wednesday.However, keeping in view the backwardness of the most marginalized federating unit, the government has also decided no to place cut on development projects in Balochistan, a senior official told The News on Thursday.

PSDP allocation for Balochistan for this fiscal year is Rs42.5 billion. Besides, the Prime Minister has allocated further Rs3 billion for the uplift of the province.Finanace Minister Mr Naveed Qamar had announced to place cut of Rs100 billion on development budget.

Under the directives of Prime Minister the development project in Balochistan were reviewed in a high level meeting at the Planning Commission on Thursday.

Chief Minister Balochistan, Nawab Aslam Raisani along with concerned Members of the Provincial Cabinet met with Deputy Chairman Planning Commission, M. Salman Faruqui and had a detailed discussion on the on going development projects in the province.

Mainly the progress on major highways that connect Balochistan to Sindh, Punjab to Iran border and within Balochistan was reviewed.All the concerned Federal Government representatives and contractors gave an update on the progress so far made on the projects. Faruqui directed the Ministries and contractors to expedite the work for timely completion of the projects and also set deadlines for the completion of some priority projects.

Additional Chief Secretary Balochistan was appointed as the provincial coordinator to facilitate work on the projects.Deputy Chairman assured the Chief Minister of the timely release of funds for the on going projects and apprised him that according to the directions of the Prime Minister, no cut on PSDP allocation for Balochistan would be applied.

The issue of flood damages in the province also came under discussion whereupon the Deputy Chairman Faruqui assured the Chief Minister that Federal Government would release special funds to make up for those damages.

The Chief Minister and his colleagues expressed their full confidence and satisfaction on the steps being taken by the Federal Government to complete the development projects in Balochistan.

Federal Minister for Population Welfare, Finance Minister Balochistan, Secretaries of Planning & Development Division, Finance, Communication, Chief Secretary Balochistan, Chairman NHA, Members of the Planning Commission, Director General FWO, and Commander Engineer NLC attended the meeting.
 

Friday, September 12, 2008

KARACHI: Federal Interior Minister Rehman Malik has announced that a special elite force would be formed for the security of five industrial zones of Karachi with their separate industrial police stations.

He said this at an Iftar dinner hosted by Rauf Siddiqui, Sindh Industry and Commerce Minister at Sindh Governor House on Wednesday. A DIG rank policeman would head this system, and an SP would be positioned in each industrial zone of the city, he explained.

Sindh Governor Dr Ishrat ul Ebad said that business community can play an important role in bringing out Pakistan from current problems. “The government has been involved in taking every step to overcome the difficulties of businessmen and it is heartening to say that the business community has full confidence in our efforts.”
 

Friday, September 12, 2008

KARACHI: The main monetary aggregate grew by 15.35 per cent in the fiscal year ending on June 30, compared with 19.32 per cent growth in the previous year, and there was a small contraction in the first few weeks of July, central bank data showed.

The M2 monetary aggregate contracted by 2.87 per cent from the beginning of the financial year on July 1 to July 26, the State Bank of Pakistan said. That compared with a contraction of 1.84 per cent between July 1 and July 28 last year, according to SBP data released late on Wednesday.

According to analysts, a contraction in the broad money supply in July is a seasonal trend and money supply is likely to expand after August. Broad money (M2) is currency in circulation, plus other deposits with the central bank and total demand and time deposits, including resident’s foreign currency deposits.

The government borrowed a total of Rs58.24 billion ($761million) from July 1 to July 26, out of which Rs30.07 billion ($393 million) was from the SBP and Rs28.17 billion ($368 million) from other banks, according to the data.

In the July 1 to July 28 period last year, the government had borrowed a total of 45.39 billion from other banks and it paid Rs4.07 billion back to the SBP. The government has made a commitment to cut quarterly net borrowing from the central bank to zero, in order to help control inflation running at close to 25 per cent. The government borrowed Rs689 billion from the central bank for budgetary support in the 2007/08 fiscal year while it repaid Rs134 billion to other banks.
 

ISLAMABAD, Sept 11: The services sector export is up by 18.93 per cent during the first month (July) of the current fiscal year over the corresponding month of last year, suggested data of federal bureau of statistics (FBS) here on Thursday.

Higher growth in services export proceeds was recorded mainly because of transportation, communication, construction, business and royalties and license fees.

An official source said that the liberalisation of services sector would help further increasing the exports from the sector during the months ahead.

An agreement on the services sector was also under consideration with the Chinese government to be made part of the operational Free Trade Agreement (FTA).

However, the export of services declined by 13.3 per cent to $3.589 billion in the year 2007-08 as against $4.140 billion of the previous year.

There are four ways or modes of supply of trade in services --mode-1 or cross border, mode-2 or consumption abroad, mode-3 or commercial presence and mode-4 or temporary movement (presence of natural person under the General Agreement on Trade in Services).

On the other hand, Pakistan has opened up its market for foreign services providers, particularly in the banking, insurance, telecommunication, retail and some other sectors, which were flooded by foreign services providers.

Statistics showed that import of services declined by 10.23 per cent to $690.725 million in July 2008 as against $769.442 million over the same month last year. Due to this decline in import of services, the deficit in the services sector has also declined by 22.01 per cent to $427.515 million during the month under review as against $548.134 million over the corresponding month of last year.

The services imports, which declined, include -- transportation, financial services, royalties and personal, culture services during the period under review this year over last year.

Statistics showed that an increase of 19.04 per cent recorded as services imports climbed to $9.892 billion in the year 2007-08 as against $8.310 billion over the previous year.

Due to this increase in imports, the deficit soared by 51.14 per cent to $6.302 billion in the year 2007-08 against $4.169 billion over the previous year.
 

* Venture to cost Rs 139.011 billion with Rs 99.538 bilion FEC​

ISLAMABAD: The Pakistan Atomic Energy Commission (PAEC) is ready to initiate the ‘Chashma Nuclear Power Project Units 3 & 4’ of 300 MW each with financial assistance of China and the Pakistani government.

The total cost of the project that stands at Rs 139.011 billion includes Foreign Exchange Component (FEC) of Rs 99.538 billion and it would be completed within the stipulated period of eight years. The project consists of setting up total of 600 MW installed capacity consisting of two additional units with normal capacity of 300 MW each at the existing Chashma site in district Mianwali. Each unit will comprise of Nuclear Steam Supply System (NSSS), a turbine-generator set and the associated auxiliary equipment and installations, sources told Daily Times here on Friday.

The NSSS consists of a reactor and two coolant loops connected in parallel to the reactor vessel. Each loop consists of a reactor coolant pump and steam generator. Sources further informed that the design of C-3 and C-4 units is essentially same as that of the under-construction C-2. The C-2 design is an improved version of C-1. These improvements are based on feedback from C-1 and safety enhancements to meet the requirements of the Pakistan nuclear Regulatory Authority (PNRA).

The sources further informed that the some site infrastructure was already developed needing only incremental upgrading.

The government has already allocated Rs 200 million as token allocation in the Public Sector Development Programme (PSDP) 2008-09 for the project in review.

About available facilities, the sources said that one nuclear power plant Chashma Nuclear Power Plant (CHASNUPP) unit-1 (C-1) of 300 MW was already operating while another similar unit C-2 was undergoing construction at the Chashma site. The cooling water for the two proposed 2X300 MW units would be obtained from the Chashma-Jhelum (C-J) Link Canal.

The project would help the government to reduce dependence on imported fuels for power generation and diversifying energy sources by enhancing use of nuclear power technology. It will also help in maximising new power generation capacity requirement from indigenous resources i.e. coal, local gas and renewable as well as from nuclear. The project in review will be presented in the CDWP meeting scheduled to be held on 18th of this month.

During the eight years of the project’s completion, the breakdown of capital cost of the project will be as: Rs 15.381 billion with FEC Rs 12.489 billion in 2008-09, Rs 17.284 billion with Rs 12.729 billion as FEC in 2009-10, Rs 21.382 billion with FEC Rs 15.186 billion in 2010-11, Rs 26.719 billion with FEC Rs 19.122 billion in 2011-12, Rs 21.688 billion with FEC Rs 15.342 billion during 2012-13, Rs 16.363 billion with Rs 11.530 billion as FEC in 2013-14, Rs 12.646 billion with Rs 8.564 billion as FEC in 2014-15 and Rs 7.548 billion with Rs 4.576 billion as FEC in 2015-16.

The sources further informed that the existing power generation capacity is not sufficient to meet the ever-increasing demand of the country. Therefore, there is a dire need to install/commission additional capacity in the power generation system. The power demand projection based on growth rate shows that power demand will increase from 15,183 MW in 2007-08 to about 20,000 MW in 2010-11 in the WAPDA system and severe shortage of power is expected in the next two years. ijaz kakakhel
 

ISLAMABAD: The United States has agreed to provide 50,000 tonnes of wheat to Pakistan under a food-aid programme and shipment is likely in October or November, a Food Ministry official said on Friday. “The agreement for 50,000 tonnes of wheat from the US under the PL-480 scheme has been finalised,” said Shahid Hussain Raja, Additional Secretary at the Food Ministry, adding the agreement is expected to be signed over the next three days. Raja said the US had also agreed in principle to provide wheat worth $100 million on deferred payments, while discussions were in progress with the Canadian Wheat Board, which has made a similar offer for 500,000 tonnes of wheat.
 

TOKYO (September 13 2008): Inflation rather than an economic slowdown is the greatest risk and biggest policy challenge for developing countries in Asia, the head of the Asian Development Bank said on Friday. The Manila-based agency plans to slightly cut its 2008 average growth forecast for developing Asia, which excludes Japan, Australia and New Zealand, while boosting its forecasts for inflation.

"While global growth is rapidly slowing, the slowdown in emerging economies in Asia has been relatively modest. On the other hand, inflation is accelerating rapidly," ADB President Haruhiko Kuroda told Reuters in an interview. Its 2008 average growth forecast for developing Asia will drop slightly from its current projection of 7.6 percent while its 2009 estimate will likely fall to around 7 percent, down from 7.8 percent.

It will revise up its inflation forecast for developing Asia to around 7-7.5 percent this year from 5.1 percent. The ADB will issue updated growth and inflation forecasts on Tuesday. Its current estimates were made in April. Kuroda said he hoped inflation would slow to around 5 percent in 2009 but uncertainty remained over commodity prices and monetary tightening measures in some countries.

"Inflation is the greatest risk in emerging economies in Asia," Kuroda said, adding that while it has peaked in China, South Korea and Thailand, it is accelerating in countries like Vietnam and Pakistan. "Rather than supporting economic growth, the biggest policy challenge is tackling inflation."
 

KARACHI (September 13 2008): The foreign investors withdrew another $4.396 million from the Pakistan equity market during the week ended on September 12. According to the data released by National Clearing Company of Pakistan Limited (NCCPL), the cumulative outflow of this mode of investment increased to $359.633 million in the current year from January 01, 2008 to date.

"The outflow of foreign portfolio investment continued during the week mainly due to the offshore investors concerns over the geo-political situation and weakening economic indicators of the country," analysts believe. A massive outflow of foreign investment was witnessed on the first day of the week as the foreign investor withdrew over $6.498 million on Monday.

The negative trend continued as an outflow of $1.021 million and $2.028 million was recorded on Tuesday and Wednesday respectively. However, a fresh inflow of $5.152 million of portfolio investment was recorded on the remaining two days of the week, as a net inflow of $1.680 million was recorded on Thursday and $3.472 million on Friday.
 

SIALKOT (September 13 2008): The Export Processing Zone Authority (Epza) will set up seven more export processing zones in the country and Azad Kashmir in near future. Official sources told Business Recorder here on Friday that the proposed EPZs would be established at potential sites like Larkana, Multan, Sukkur, Faisalabad, Gwadar, Gilgit and Mirpur (Azad Kashmir) for boosting export-oriented industries of these areas.

The Epza has already announced highly attractive incentives and concessions for business community for setting up industrial units in the EPZs for further accelerating the pace of export activities aimed at enhancing exports volume of the country.

Incentives offered include 100 percent ownership rights, 100 percent repatriation of capital and profit, no minimum or maximum limit for investment, duty-free import of machinery, equipment and material, no sales tax on input goods including electricity and gas bills, foreign exchange control regulation of Pakistan not applicable, freedom from national import restrictions, EPZ manufacturer would be treated at par with bonded manufacturers in tariff areas for any future incentives to be announced for the exporters, relief from double taxation subject to bilateral agreement, inter-unit transfer of finished goods among exporting units.

Facilities available include: one-window service and simplified procedure, availability of infrastructural facilities like water, electricity, gas and telecommunication and peaceful, secure and environmentally protected pollution free work area has been ensured in export processing zones of the country.

The Sialkot Export Processing Zone (SEPZ) six units are successfully functioning in SEPZ, and Epza is stressing the business community of Sialkot that they should focus their attention on setting up industrial units in Sialkot Export Processing Zone (SEPZ) and enjoy the benefits. The setting up of industrial units in SEPZ would not only help in doubling the export volume but would also generate employment opportunities in the area.

The location of SEPZ is very important because some adjoining small industrial areas like Daska, Hafizabad, Wazirabad, Gujrat and Gujranwala would benefit and promote their units. Besides, Sialkot Dry Port and Sialkot International Airport are also located on the same track, sources added.
 

ISLAMABAD (September 12 2008): Foreign Direct Investment (FDI) in telecom sector has declined from 27 per cent in 2007-08 to 21 per cent in 2007-08, Chairman Pakistan Telecommunication Authority (PTA) Dr Muhammad Yaseen told newsmen here on Thursday at a press briefing.

Talking to newsmen at an Iftar reception hosted by the PTA, Dr Yaseen said that total FDI in telecom sector was $5 billion during last five year but it has declined in 2007-08. He said that PTA would block all the illegal/unverified mobile connections by September 30, adding that so far over 7.1 million unverified connections has been blocked and data of remaining subscribers would be verified by September 30.

Giving details about the revenue contribution, he said that PTA has contributed Rs 47.426 billion in Federal Consolidated Fund (FCF) from 1998-99 to 2007-08, which includes Rs 2.432 billion contribution of 2007-08 to USF and research and development account. The contribution to the FCF was Rs 5 billion during 2007-08, he added.

He said that telecom industry has contributed more than Rs 111 billion to national exchequer in different heads of direct and indirect taxes, including Rs 44.6 billion GST in 2007-08 and Rs 19.2 billion activation tax from mobile companies in 2006-07.

He said that mobile banking is another contribution of telecom sector that will further facilitate the prompt, reliable and accurate banking transactions on the go with minimum costs 24 hours 7 days of the week. The telecom sector, he said has contributed positively to the employment by providing over I million direct and indirect jobs and that was the result of market liberalisation.

After liberalisation, he said telecom sector has shown tremendous growth with overall teledensity going beyond 59.8 1 per cent at the end of July 2008 as compared to mere 2.3 per cent in 1999-00 and surpassed all the regional neighbours.

He claimed that coverage of cellular mobile services has reached to 91 per cent population and revenues of cellular companies grew by 22 per cent in 2007-08 and reached at Rs 182 billion. He said that PTA was striving to convince the leading manufactures of the world to establish their facilities in Pakistan so that impact of telecom sector import, $1.3 billion in 2007-08, could be minimised on Pakistan economy.
 

ARTICLE (September 13 2008): The mountainous Northern Areas have also been struck by the regular loadshedding, as other regions of the country, adversely affecting the normal life and trade in its main towns. According to recent reports, trade activities at Sust, the busiest town and trade hub near Pak-China border, as well as various offices in the Gojal valley are facing power shortages and outages.

Similar is the situation in Gilgit city, the headquarters of the Northern Areas. One of the major issues facing the government is that of raising the quality of life of the people of the Northern Areas who are currently deprived of even the basic amenities like electricity. Shockingly, Pakistan is ranked one of the lowest, 152 among 208 countries of the world, in terms of per capita consumption of electricity.

The latest global data of 2007 shows 453 kWh per capita annual consumption in Pakistan, that is even lower than Bolivia and Mozambique. Compared to this figure, per capita yearly consumption of electricity in the Northern Areas is just 44 kWh, the lowest in any part of the country. The federally administered Northern Areas, populated by about one million, are spread over 72,496-sq. km.

There are about 650 towns and villages, widely scattered, with population density of 10 persons per sq. km. Primarily, the electricity is used here for lighting of households, schools and dispensaries etc. Still, only 45% of the population has access to electricity, which, unfortunately, is not even available to some of the valleys at all.

Nonetheless, the demand is increasing at a fast rate, as tourism, trade and the SMEs develop in major towns. The national grid is at a distance of 350 km from Gilgit and its extension to the Northern Areas is neither practical nor justifiable. The electricity network here is, therefore, being operated in isolation, and in many remote areas even the transmission lines and grid stations do not exist.

Today, total installed capacity for power generation in the Northern Areas is around 102 MW. Major source of power generation is hydroelectric, of cumulative capacity of 95 MW, whereas thermal power generation is to the level of over 7 MW only. These diesel generators were installed, mostly in Gilgit city, to meet the peak demand of power, and are of great help to reduce the present loadshedding in the surrounding areas.

Due to logistic and financial factors involved in transportation of diesel, further increase in thermal power generation capacity is not feasible. The Northern Areas present enormous hydropower potential from River Indus and its various tributaries with steep gradients. A network of small, mini and micro hydropower stations, generally in the wide range of 50 kW to 4 MW, has been constructed.

There are more than 400 mini and micro hydropower stations operating in remote localities. In addition, there are many small hydropower stations, up to a maximum capacity of about 11 MW installed in Gilgit. Indeed, it is a tremendous job to provide electricity to the Northern Areas as it is a region of high mountains and narrow valleys where infrastructure is practically non-existent.

Furthermore, the widely varying topography, geology and hydrology, coupled with extreme weather conditions, make the construction of power stations difficult. The stability and reliability of power supply is also impacted in the wake of frequent floods and landslides.

Thus the available power supply is optimal during summer, but the season covers three months only. During the remaining 9 months of the year the net electric supply is reduced to almost half of the installed capacity due to non-availability of water for power generation.

Administratively, the Northern Areas consist of six districts namely Gilgit (including Hunza and Nagar valleys), Skardu (including Shigar and Khaplu valleys), Diamer (Chilas valley), Ghanche (Baltistan), Ghizer and Astore. There are 35 hydroelectric power stations of cumulative installed capacity of 34.76 MW in Gilgit district.

Thermal power generation is limited to 4.3 MW installed capacity. Power demand at present is estimated to be net 30 MW, which would further increase to 54 MW by the year 2010. To narrow the gap in supply and demand, three hydel power stations, Naltar IV of 18 MW, Pari of 1 MW and Cane of 3 MW installed capacity, are under construction at present.

The projects under construction include a 1-MW hydropower station at Sermik (Skardu), a 2-MW station at Talu-Rondu (Baltistan) and a 1-MW station at Tolti (Shigar). Other approved projects, currently in various stages of implementation, are 1-MW power station at Shumayal (Skardu), 1-MW at Kindas (Ghanche), 2-MW at Thalley (Ghanche), 1-MW at Hassanabad (Ghanche), 2-MW at Gultari (Skardu), 1-MW at Kindrik (Skardu) and 2-MW capacity at Bordas (Balgher).

To cater for increasing demand of electricity, a broad-based plan for the development of small hydropower generation is being implemented. Many potential hydel sites, up to 50 MW capacity projects, have been identified and techno-economic feasibility studies prepared.

These include 18-MW project at Hanzel (Gilgit), 3-MW at Juglot-Sai (Gilgit), 2-MW at Misgar (Hunza), 2-MW at Pissan-Minapin (Nagar) and 1.3-MW project at Cane-Kargah. Other approved projects are 2-MW at Nolti, Bathrez (Ghizer), 4-MW at Pakora Gudai (Astore), 2-MW at Darmadar (Ghizer), whereas three projects are to be constructed in Diamer district, namely Darel-Chilas III of 1.5 MW, Khanbary of 2 MW and Botogah-Chilas of 1 MW capacity.

The government has recently approved Naltar III and Naltar V hydropower projects of 16 MW and 14 MW capacity, respectively, to be installed near Gilgit city, for which financial resources to the tune of Rs 3 billion have been committed. Wapda is also actively involved in contributing towards addition of power generation capacity in the Northern Areas.

WAPDA is constructing Satpara dam and hydropower station of 13 MW in Skardu, in three phases, whereas design and engineering is in hand for Basho project of 28 MW capacity, which will be connected to Skardu and other upstream valleys through 66 kV transmission line.

Likewise, Harpo hydropower projects of phase I of 15 MW and phase II of 33 MW capacity are to be developed in Skardu district. Also, planning work is being done by Wapda for developing a power station on Phunder Lake, Ghizer.

Development of hydropower projects in the Northern Areas will be accelerated if Pakistan can build the capacity to manufacture and install small power stations of above 5 MW. The same is lacking at present though various items of electrical and mechanical equipment and related materials are being produced locally, and the infrastructure for implementing small hydel schemes is available.

The requisite advanced technology is essentially required for achieving the purpose of creating indigenous capability for design, engineering and manufacturing of equipment for power plants. The government, therefore, needs to take initiative in this direction, pursuant to its policies of developing far-flung areas and promotion of renewable energy.

(The writer, former Chairman of State Engineering Corporation, is currently on the Board of Directors of National Engineering Services Pakistan Pvt Ltd--NESPAK, a company of the Ministry of Water and Power)
 

ISLAMABAD (September 13 2008): The government is in process of introducing technologies to judiciously utilise and manage the water resources in Southern Indus Plain through conducting pilot projects and disseminating research findings to the farmers at their fields.

Under a project, a study on refinement of skimming well technology was carried out by installing wells in the lower reaches of lower Indus basin and data were collected for fresh and saline interface movement. It was suggested that continuous pumping of less than five hours will have not any threatening effect on up-conning of under lying saline layer.

According to an official at Ministry of Science and Technology here on Friday, a survey of private tubewells in the districts Hyderabad, Badin, Mirpurkhas and Nawabshah revealed majority of tubewells were operated for 7-12 hours (50-56 percent) and with excessive discharge (65-83 percent).

Similarly, the official said a survey of Indus Delta from Thatta to Keti Bunder was carried out by installing observation wells and collecting and analysing water samples for probable sea water intrusion in the coastal and agricultural lands.

He said research was also conducted on the use of saline groundwater after making it marginal by mixing fresh groundwater and canal water in different ratios, for better crop yield.

The official said different water conservation technologies and practices such as bed and furrow irrigation, zero tillage, laser land levelling, growing low delta crops and irrigation scheduling are also being evaluated at the farmers' fields, with their participation and the results of these studies showed better crop yield with maximum water use efficiency. The research study on evaluation, monitoring, and management of municipal wastewater, for crop production is also in progress, he added.
 

EDITORIAL (September 13 2008): There seems to be no end to the negative developments in the external sector. According to the data released by the Federal Bureau of Statistics (FBS) on 10th September, 2008, with imports outstripping the pace of export growth by a wide margin, the country's trade deficit ballooned to an unprecedented level of $3.522 billion during the first two months (July-August) of the current fiscal year, up by a whopping 47.67 percent from $2.385 billion over the corresponding period of 2007-08.

The import bill reached $7.011 billion in July-August, 2008 as against $5.321 billion in the same months last year, indicating a sharp increase of 31.77 percent. Export proceeds, on the other hand, recorded a lower increase of 18.85 percent to stand at $3.489 billion as against $2.936 billion in the same period of the previous year.

On monthly basis, export growth was considerably lower at 8.16 percent while imports showed a growth of 26 percent during August, 2008 over the corresponding month of last year. Another notable feature of the trade data was a decline of 16.86 percent in exports, down from $1.905 billion in July, 2008 to $1.584 billion during August, 2008.

While higher imports of luxury goods, including mobile phones, vehicles and the bulging oil bill continued to impact the total bill during the year, export growth slowed down because of steady decline in sales of textiles and clothing, which are the main export commodities of the country.

An increase of over 47 percent in trade deficit during the first two months of the current fiscal year, is indeed disturbing. If the present trend continues, Pakistan could end up with a trade deficit of over $21 billion during 2008-09 which would be impossible to cover through normal inflows of home remittances, foreign investment, etc with the result that the country may have to face the consequences of further deterioration in its current account.

It may be mentioned that the government had fixed an export target of $22.10 billion for 2008-09 while imports, for which no target was prescribed, are increasing at a much faster rate and making things difficult for the policy makers.

In order to restrict the level of imports, the government has recently imposed additional customs duty on more than 370 items and the State Bank was quick to enhance LC margin to 100 percent on luxury items. Steep depreciation of the rupee in the recent months could also decrease the demand for imports.

Decreasing trend in oil prices in the international market may reduce the oil import bill which had crossed $11 billion mark last year, the highest in the country's history. However, certain items like fertilisers and wheat have to be imported in greater quantities to cope with domestic shortages.

Although it is too early to project the impact of the relevant factors on the trade balance, the situation needs to be closely watched in order to narrow the gap in the external sector to sustainable limits in the remaining part of the current fiscal year.

This may entail still harsher measures like further depreciation of the rupee and tightening of monetary and fiscal policies which could curb import demand. In our view, the country cannot afford to enjoy the luxury of importing commodities which are more than double the value of its exports, especially at a time when its foreign exchange reserves are also depleting fast and could touch dangerously low levels in a few weeks.

Securitisation of remittances, privatisation proceeds and loans and assistance from IFIs are one-off or at best temporary measures to tide over a precarious situation. These are, by no means, a substitute for a long-term strategy needed to be urgently put in place to keep the country solvent by restoring a proper balance in its external accounts.
 

Saturday, September 13, 2008

KARCHI: After four years of mergers and acquisitions, consolidation activities in the domestic banking sector has remained stagnant in 2008, though a fresh wave of mergers and acquisitions is likely to be initiated from the year 2009-10, financial analysts believe.

“Almost all banks have fulfilled the minimum paid-up capital requirement of Rs6 billion set by the State Bank of Pakistan (SBP) by the end 2009, which is the major reason of slow activity in the consolidation of financial sector this year, said the analysts while spelling the rationale.

“According to the State Bank of Pakistan’s (SBP) 10-year Strategic Plan, there is a possibility that the paid-up capital requirement may be increased to $300 million. However, we were assuming a timeline lasting till 2017 for the implementation of the said rule,” Mohammad Imran of First Capital Equity Limited said.

However, he said it is quite surprising that the SBP provided timeline requires banks to raise their paid-up capital by almost four times to Rs23 billion by 2013, approximately Rs4 billion a year from 2009.

“By looking at the current profit generation capabilities of banks coupled with lower economic growth possibilities, we feel this requirement is quite a hard task for banks to meet,” he said.

He said that as per their calculation, only large banks are on the safe side.

He said on the basis of tier 1 capital, among top 8 listed banks, Standard Chartered Bank Pakistan (SCBP) and NIB have already fulfilled the requirement of Minimum Capital Requirement (MCR) and assuming their CAMELS-S rating of 1&2, these banks are adequately capitalized. NIB issued TFC of Rs4billion in Feb 2008 therefore seems on the safer side.

CAMELS is an international bank-rating system where bank supervisory authorities rate institutions according to six factors. The six factors are represented by the acronym “CAMELS.”

The six factors examined are: C - Capital adequacy, A - Asset quality, M - Management quality, E - Earnings, L - Liquidity and S - Sensitivity to Market Risk.

Bank supervisory authorities assign each bank a score on a scale of one (best) to five (worst) for each factor. If a bank has an average score less than two it is considered to be a high-quality institution, while banks with scores greater than three are considered to be less-than-satisfactory establishments. The system helps the supervisory authority identify banks that are in need of attention.

National Bank is the safest among all banks with Capital Adequacy Ratio (CAR) of 20.1 percent and tier 1 capital of Rs72billion. Allied bank and BAFL rank as the least capitalized with CAR of 9.3 percent and 9.9 percent. Analysts viewed that a combination of right shares and bonus will meet this shortfall for these banks without compromising loan book growth.

In order to meet the requirement, a fresh wave of mergers and acquisitions by the domestic banks is likely to be initiated from the year 2009-10.

Apart from top 8 banks, all banks may opt for the consolidation. Though, there is a possibility that the banks having strong overseas investors (like RBS, SAMBA and GE Corporation) could inject further equity in these banks.

Moreover, financial analysts said that looking at the sectors’ profitability profile, it is evident that the return on fresh equity will be substantially lower than last 4 years average return. From shareholders’ point of view, it also reflects that now the premium on acquisition is not high as it used to be in last 2 to 3 years (on average PBV of 4.8 percent).

They said that from advances growth point of view, the bank which has higher CAMELS-S rating will require to reduce its risky exposures in addition to increase its capital base, which will definitely hurt its advances growth.

“Our initial calculations in this regard indicate that our long-term (next 10-year) advances growth assumption of 15 percent carries a downward revision risk,” analysts said.
 

Saturday, September 13, 2008

ISLAMABAD: The Federal Bureau of Statistics (FBS) on Friday reported that weekly inflation measured by Sensitive Price Indicator (SPI) year-on-year of 53 daily use kitchen items for week ending on September 11, 2008 has increased by 29.38 per cent as compared to the corresponding week of the last fiscal.

The bulletin revealed that inflationary pressure during the week under review was higher on lowest income group earning below Rs3,000 per month. For them, SPI registered an increase of 30.71 per cent. Income group Rs3,001 to Rs5,000, it stood at 29.55 per cent, for Rs5,000 to Rs12,000 it was at 29.32pc and for income earners of more than Rs12,000, it stood at 29.76 per cent as compared to the same week of the fiscal year 2007.

According to the SPI bulletin, year-on-year the rise in the prices of some necessities and kitchen items was exorbitant. These items were bananas, onions, chicken, potatoes, LPG, tomatoes, potatoes, gur, firewood, firewood, eggs, beef, fresh milk, rice, wheat flour, ghee, wheat, petrol, diesel and all type of pulses.

The bulletin on SPI, based on data collected for about 53 items from 17 centers, showed that 16 items registered increase whereas 15 items showed decline while prices of 22 items remained unchanged. In a span of one week, prices of gur up by 3.45 per cent to Rs36.86 per kilogram, LPG by 2.39 per cent to Rs975.53†per 11 kg cylinder, wheat 2.34 per cent Rs21.89 per kg, sugar 0.65 per cent to Rs32.36 per kg, beef 0.61 per cent to Rs136.44 per kg, wheat flour 0.25 per cent to Rs23.78 per kilogram as compared to previous week.

Further analysis of the data revealed that year-on-year basis; some items are dearer by double digits. These include; LPG which was costlier by 64 per cent, mustard oil 59 per cent, wheat 57 per cent, wheat flour 47 per cent, washing soap 42 per cent, bath soap 40 per cent, firewood 23 per cent and beef price up by 13 per cent over corresponding week of the last fiscal.

Prices of 15 items decreased, yet compared to the prices of corresponding week of last year, items which showed increase in their prices were; masoor pulse dearer by 120 per cent, rice IRRI-6 dearer 93 per cent, kerosene 81 per cent, Bananas 74 per cent, rice basmati (broken) 64 per cent, gram pulse 57 per cent, vegetable ghee loose 49 per cent, potatoes 44 per cent, egg 27 per cent, onions 19 per cent and chicken farm by 16 per cent over corresponding week of the last fiscal.

Though the price of 22 items remained unchanged yet the prices of some items as compared to corresponding week of the last week are still dearer by double digit. These items include diesel which was costlier by 71 per cent, petrol 62 per cent, tea packet 45 per cent, vegetable ghee (tin) 43 per cent, plain bread 34 per cent, curd 23 per cent, fresh milk 21pc and powder milk prices up by 11pc.
 
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