Pakistan Economy - News & Updates - Archive

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Pakistan and Iran make significant progress on gas pipeline​

NEW YORK: Significant progress had been made on the Iran-Pakistan gas pipeline and the foreign ministers of the two countries will meet in early October to flesh things out, Information Minister Sherry Rehman told a press conference on Tuesday.

She said Iran and Pakistan would set up a joint company with Iran providing the required ‘sovereign guarantee’. Five ‘deputy ministers’ from each side will meet to co-ordinate their efforts towards the establishment of the pipeline project.

Sherry described the meeting between President Asif Zardari and Iranian President Mahmoud Ahmedinejad as ‘very good’.

She also spoke about the meeting between Zardari and French President Nicolas Sarkozy, while informing the press that the French leader had accepted an invitation extended to him by President Zardari to visit Pakistan.
Sherry said Foreign Minister Shah Mahmood Qureshi would be staying back for a meeting on the US-Pakistan strategic relationship to be held on September 28 in Washington.

The Friends of Pakistan conference, which comprises G-8 countries, China and Saudi Arabia, will take place this week and ‘more people’ are expected to join in, she said.

The minister gave the media a glowing account of the Bush-Zardari meeting, saying that the ‘chemistry’ between the two leaders was ‘strong’.

The US president had expressed praise for the courage of President Zardari and the forbearance with which he had handled personal tragedy. Bush also condemned the terrorist attack in Islamabad and expressed sympathy for the families of those who had lost their lives. Sherry said Zardari had briefed Bush on Pakistan’s priorities, which were economic development and the fight against terrorism. The minister said Bush was appreciative of the role Pakistan is playing in the war against terrorism. She said Bush had reaffirmed that he was alive to Pakistan’s concerns over its sovereignty.

The minister was asked if Bush had extended any assurance to Zardari that there will be no more American ‘boots on the ground’ as had happened last month when US commandos had landed in Pakistan and carried out a deadly operation. She refrained from giving a positive answer, referring instead to Pakistan’s earlier demand that under no circumstances should its sovereignty be violated. She reiterated what has been said several times before, namely that any ‘actionable intelligence’ that the United States has should be passed on to Pakistan for necessary action. She said Zardari had also stated this in his meeting with Bush.

Sherry said among other things discussed at the Bush-Zardari meeting was a ‘democracy divided’ and the two counties strategic relationship. No longer is this going to be a military to military relationship.

 

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IMF asks Islamabad to downgrade growth to 4.5pc ​

Wednesday, September 24, 2008

ISLAMABAD: The International Monetary Fund (IMF) on Tuesday handed over ad memorandum to Islamabad’s authorities, asking them to revise downward real GDP growth target to around 4.5 per cent from 5.5 per cent.

They have also asked to jack up inflation target to 20 per cent from envisaged target of 11 per cent and reduce fiscal deficit to 4.3 per cent from set target of 4.7 per cent for the current fiscal year.

Pakistan and the visiting technical mission of the IMF concluded its talks on Tuesday as the Fund is set for giving advice to Islamabad on its envisaged macroeconomic stabilisation program before Eid-Ul-Fitr.

Four members of the IMF’s technical mission had already flown back in the aftermath of deadly suicide attack at Marriott Hotel on Saturday night and the visiting mission’s head Juan Carlos Di Tata left Islamabad on Tuesday after handing over Ad Memorandum to Islamabad’s authorities on which they would submit their comments within this ongoing month.

After obtaining copy of ad memorandum from the IMF, Finance Ministry high-ups sent SOS to Finance Minister, Syed Naveed Qamar, and Secretary Finance, Dr Waqar Masood, who are currently in USA along with President Zardari’s visit for attending UN General Assembly session in order to give them all relevant details for incorporating it in the draft document of the IMF before making it public.

“We have sent ad memorandum to Finance Minister and Finance Secretary, who are currently in USA, for giving policy input, which will help the IMF to come up with its findings to give advice to Islamabad for stabilizing the macroeconomic situation on immediate basis,” said the sources.

When a high-level official in finance ministry was contacted, who is also part of negotiating team with the IMF technical mission, said that the fiscal deficit would remain in the range of Rs582 billion in nominal terms for the current fiscal year. When he was asked whether the fiscal deficit would remain in the range of 4.7 per cent of the real GDP terms, he said that it would certainly come down from 4.7 per cent of the GDP to around 4.3 per cent for the current fiscal as the fund is asking to further tighten the belt by reducing expenditures and mobilising revenue generations.

The IMF also insists upon authorities to jack up tax revenue target from Rs1250 billion keeping in view higher inflation and depreciation of rupee by 24 per cent against dollar as revenue mobilisation will help Pakistan to curb its yawning budget deficit beyond its limits.

The IMF, the sources said, also pressed upon the authorities for taking steps to lure private sector investments which will help Islamabad to remove its existing difficulties on long term and sustained basis. “Instead of getting easy solution, Pakistan should focus upon long terms solution such as attracting private sector investment to restore higher growth trajectory,” the sources quoted IMF high-ups as saying during their meeting with Pakistani authorities.

The nominal growth, the sources said, is likely to remain on higher side mainly because of unprecedented inflationary pressures, which never witnessed history of this country. But the real GDP growth will remain on much lower side compared to the initial estimates made by the government of Pakistan, the IMF assessment showed.

Pakistan has envisaged real GDP growth target of 5.5 per cent for the current fiscal year but the IMF is asking to revise it downward to 4 to 4.5 per cent keeping in view bad performance of agriculture sector as well as manufacturing sector in the wake of severe load shedding and hike in interest rates. The GDP growth target should be kept in mind keeping in view the ground realities said the IMF high-ups.

On inflationary target, the IMF assessment shows that it will remain in the range of 20 per cent against earlier envisaged target of 11 per cent for the current fiscal year. Another Finance Ministry official, when contacted, said that the IMF mission would give advice within this ongoing month but it would not be binding on Pakistan because Islamabad was no more in the Fund program.

“We will listen to their advice carefully but it will not be binding on us to accept their viewpoint totally,” the official concluded. —MH

 

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Gawadar Export Processing Zone not approved ​

Wednesday, September 24, 2008

ISLAMABAD: The government has refused to accord approval to Gawadar Export Processing Zone (GEPZ) seeking huge incentives including 20 years tax holiday, saying that the government wants to end the tax exemption culture from the country.

“The decision to refuse the Gawadar Export Processing Zone (GEPZ) with huge incentives came in a meeting of the Economic Coordination Committee (ECC) held here on Tuesday with Prime Minister Syed Yousaf Raza Gillani,” a senior official who attended the meeting told The News.

He said, “The Ministry of Industries and Production had submitted a summary to the ECC for approval of a lucrative package of incentives to attract investment for the GEPZ. In the meeting, Governor State Bank of Pakistan Dr Shamshad Akhtar and Chairman FBR Waqar Ahmad strongly opposed the proposal seeking huge tax exemptions, arguing that if it goes on with the same exemptions, then who will pay the tax. They said that there is a dire need to expand the taxation base in the country.”

In the summary, Ministry of Industries also sought the permission for export of production from the zone to tariff area of the country up to 80 per cent on the payment of normal duties. The package also included zero-rated sales tax on supply of construction materials to the GEPZ investors or development of zone infrastructure. It also included exemption from stamp duty and exemption from import policy orders issued from time to time.

The official said that the ECC also did not subscribe the view of the Ministry of Industries, rather the meeting constituted a committee comprising Advisor to Industry, Deputy Chairman Planning Commission and top officials of the Ministry of Finance and FBR. The committee would look into the demand and furnish its own recommendations in this regard, which would be taken up in the next meeting of the ECC.

In addition to this, ECC also gave a green signal to Fatima fertilisers for 75 mmcf per day gas for its plant that is to be operational on November 2009. The official said that Fatima Fertilisers also sought 35 mmcf per day gas to run its plant on full capacity to produce 1.58 million tonnes of fertiliser, as under the existing allocation it can only produce 1.068 million tonnes of fertiliser.

However, the officials from Ministry of Water and Power sought the allocation of the same amount of gas for 100MW of power plant installed by the same Fatima fertiliser company near Okara. On this, the ECC meeting again constituted a committee consisting of Advisor to Industries, Deputy Chairman Planning Commission, and Ministry of Water and Power to look into the matter and come up with a feasible solution.

 

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Punjab evolves plan to promote SMEs ​

Wednesday, September 24, 2008

LAHORE: Chairman Chief Minister Task Force Industries Development and SME’s Yawar Irfan Khan has said that Punjab government has evolved comprehensive strategy for promoting small and medium size industries which will result in generating of new job opportunities as well as alleviating poverty.

This was stated by him during a meeting with a delegation of industrialists at his office here Tuesday.

Yawar Irfan Khan said that cluster development centres and business support centres are being set up in various cities of the province where training will be imparted to the needy people on modern machinery. He said that industrialists should also submit concrete proposals for the promotion of small and medium industries. He said that the promotion of cottage industry is very vital for generation of job opportunities. He said that survey of small, medium and cottage industry in urban and rural areas has been completed.

 

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Sino Coal, Engro Pakistan to work on Thar coal project​

ISLAMABAD: Sino Coal, a Chinese company and Engro Pakistan Limited have agreed to work jointly for exploiting the Thar coal reserves for power generation, a senior official told Daily Times on Tuesday.

He said that during the visit of Pervez Musharraf to China, Sino Coal expressed interest for investing in Thar coal reserves for power generation. Now, during the upcoming visit of president Asif Ali Zardari to China next month the issue of investment by Chinese company in Thar coal reserves would be finalised. Amidst the energy crisis in Pakistan the current government is pursuing the policy to exploit Thar coal reserves that could help generate cheaper power as compared to thermal and hydle power generation.

He said that the current government had allocated Rs 500 million in the current financial year 2008-09 Public Sector Development Programme for Thar coal infrastructure development. Federal government has directed the Thar Coal authority to complete the bankable feasibility study within six months time that would help mining of the coal reserves and determining the tariff of coal based power plants. He said that the said bankable feasibility study would cost $15 million that would be generated from financial institutions like World Bank and Asian Development Bank.

In this regard, Thar Coal Task Force was formed in 2001, headed by former President Musharraf to carry out a Thar mining bankable feasibility study. The fate of this report on which upfront tariff for coal-based power generation was to be based, remains a mystery. Official said that without a credible bankable feasibility, no international investor of merit would show interest in the project.

Chinese Company, Shenhua was ready to build the integrated mining and power generation complex at a guaranteed power tariff of 5.75cents per unit but NEPRA refused to pay more than 5.34 cents. The Chinese company packed its operations in Pakistan and went back to China leaving no good sign for the investors interested in coal based power plants.

The row between Sindh and NEPRA still persists, as NEPRA has allowed indicative tariff of 7.5 cents per unit that was earlier not ready to grant 5.75 cents per unit. However government has abolished the Sindh Coal Authority to end the row over the tariff issue and now government has formed Thar Coal Authority over which Sindh government has shown serious concern. Thar Coal Authority has been formed to attract investment for coal mining and coal gasification at Thar and other areas in the Sindh for power generation. Chief Minister Sindh is the Chairman of the authority while Vice Chairman is Federal Minister for Water and Power and Deputy Chairman Planning Commission is its deputy Chairman.

 

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‘Cotton production to fall short by 2.5m bales in 2008-09’​

KARACHI: Pakistan’s cotton production for 2008-09 is expected to remain below the level of 11.5 million bales, around 2.5 million lower than the government’s target of 14.1 million bales.

According to Pakistan Cotton Ginners association (PCGA) Monday the country achieved 11.7 million bales of cotton during 2007-08 production year, which was lower than 2.4 million bales to the initial target of 14.1 million bales set by the government. In 2007-08 the country had failed to meet the cotton production target set by the government.

The higher cotton prices would put further pressure on the gross margins of textile manufacturers, and at the same time, the 23 percent rupee depreciation (year to date) is expected to translate a significant revenue increase impact for export oriented ventures, which would ultimately help them to more than mitigate the pressure on margins.

“The textile and spinning sector will have to bear additional burden around $1.20 billion on the import of lint to keep their wheels running”, said Ghulam Rabbani a senior trader, director on Board of Karachi Cotton Association (KCA), ginner and exporter.

The US Department of Agriculture’s World Agricultural Supply and Demand Estimates for September 2008 also indicate lower world cotton production on the back of reduced contribution from India, Australia, Pakistan, African Franc Zone and Turkey.

Pakistan would not able to achieve next cotton crop target in 2008-09 unless production of quality seeds, supply of quality inputs and water availability is not assured, said Ghulam Rabbani a senior trader, director on Board of Karachi Cotton Association (KCA), ginner and exporter.

During August 2008, average domestic cotton price reached an all-time high level of Rs 4,235 per maund, he added. He said though, with the initial arrival of new crop in the market during September 2008, domestic prices receded to the level of Rs 4,050 per maund. He said lint price was still 46 percent higher than last year’s average price level of Rs 2,840 per maund during the same month.

The cotton prices are likely to remain at soaring levels with lower production and comparatively higher consumption. He said lack of expertise in fighting cotton virus and minimising crop from heavy rainfall, around 20 percent crop in the Punjab and interior Sindh has been affected.

Other factors attributing behind lower production are less area under cultivation due to shift towards sunflower and sugarcane etc, severe weather conditions and crop diseases like Cotton Leaf Curl Virus (CLCV) and mealy bug.

In recent report of September 2008, the International Cotton Advisory Committee (ICAC) has cut its world cotton production estimates at 114 million bales for 2008-09, almost 900,000 bales lower than that of August 2008.

Mr Rabbani said ICAC has revised its production target by almost 8 percent or 10 million bales during the period April to August 2008.

The lower world production of lint is attributed to lower cultivated area in USA, Brazil and Turkey etc and increasing competition from the alternative crops.

On the consumption side, ICAC projects 1 percent yearly decline in world cotton consumption during 2008-09 due to slowdown in global economic growth and relatively higher cotton-polyester price ratio.

The recent rains and virus attack in many cotton growing areas in Punjab damaged around 50 percent crop on more than 200,000 acre of land, Fazal Ahmad, a trader at KCA said.

“Around 25 percent of crop in Multan and Vehari has totally been damaged after mealy bug attack while 26 percent crop in Multan, Vehari, Mazzafar Garh, Sahiwal, Pakpattan and adjoining areas was affected,” he said.

He said mealy bug and CLCV damaged about 26 percent crop in Punjab growing areas while 18 percent crop was damaged by CLCV attack in these areas.

 

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Pakistan improves ranking to become 46th most corrupt country​

KARACHI: Pakistan improved slightly its ranking on Transparency International’s Corruption Perceptions Index (CPI) released on Tuesday, and is now the 46th most corrupt country in the world.

“Pakistan has improved its ranking jumping from 138th of 180 countries to 134th, but the government still needs to save the country from a disaster,” Transparency International Chairman Adil Gillani said during a press conference at the Karachi Press Club. The CPI measures perceived levels of public sector corruption in a country and is a composite index based on surveys among experts and businessmen. The 2008 CPI scored 180 countries on a scale from zero (highly corrupt) to ten (highly clean). For the second year running, Somalia, Myanmar and Iraq received the poorest marks, with Somalia scoring 1.0 and Myanmar and Iraq scoring 1.3 each.

Denmark retained its ranking as the world’s least corrupt nation, alongside Sweden and New Zealand. All scored 9.3. “An analysis of Pakistan and India’s CPIs for the last 10 years shows a strongly inverse relationship between perceived corruption levels and the economy,” Gillani added. “In 1998, Pakistan and India’s reserves were at $1.6 billion and $26 billion respectively and in 2008 they are at $9.1 billion and $237 billion respectively,” Gillani said, adding that besides an increase in the gap of foreign reserves of Pakistan and India, Pakistan’s trade deficit has also increased manifold.

Gillani said that despite ratifying the UN Convention Against Corruption (UNCAC) on August 9, 2007, Pakistan has not initiated any reform to ease out the regulatory burden of doing business in the last one year. “The country needs immediate enforcement of good governance and a transparent administration to counter the acute problems of terrorism, hyperinflation, reduction of the KSE-100 index, the 20-percent devaluation in currency and the increase in the dollar’s value from Rs 64 to Rs 77 due to the bad governance during the last 10 years,” he said.

 

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Debt servicing crossed $3 billion mark in fiscal year 2008 ​

KARACHI (September 24 2008): The country's payment under debt servicing is gradually increasing and crossed 3 billion dollars mark during last fiscal year (2007-08), compelling the central bank to utilise foreign reserves for foreign debt payment, while about 1.2 billion-dollars worth debts have also been rescheduled in fiscal year 2008 due to the huge burden of debt servicing.

Economists say that major reason behind this surge is the amount of rising foreign loans. Therefore, payments under debt servicing are also on the rise. They say that rising payment of debt servicing is on an alarming position and due to the high payment the country's foreign reserves are already on downward track.

The central bank on Tuesday said that payment under debt servicing had gone up by 6.18 percent to 3.161 billion dollars in last fiscal year 2008 as compared to 2.977 billion dollars in fiscal year 2007, depicting an increase of 184 million dollars. However, the principal amount in overall payments of debt servicing stood at 61 percent, while 39 percent had been paid on account of interest.

During the last fiscal year, 1.931 billion dollars was paid as principal amount of foreign loans and 1.23 billion dollars on account of loans' interest. Economist said that huge payment under debt servicing has put a negative impact on rupee and foreign exchange reserves, besides compelling the central bank to make payments from its own reserves.

Foreign inflows are already on decline for the last one year on the back of slow privatisation process. Therefore, during the last fiscal year the central bank had spent about 5.78 billion dollars reserves to make sure foreign payments on time, they said. "We are expecting that 'Friends of Pakistan' meeting, scheduled to be held on September 26 in New York, would capture millions of dollars funding and loans, which would put positive impact on the rupee and reserves," they said.

However, they said, after the meeting and funding, economy would need long-term policies to back the economy on fast growth track and if bold step for economy would not be taken then positive results of 'Friends' would not be witnessed.

Major payments under the debt servicing had been made on account of public and publicly granted loans, in which some 2.129 billion dollars (including 1.187 billion dollars principal amount and 942 million dollars interest) had been paid for debt servicing.

Payments of debt servicing under private non-guaranteed loans stood at 603 million dollars in fiscal year 2008 as compared to 549 million dollars in fiscal year 2007. Payment to Paris Club stood at 629 million dollars including 244 million dollars principal amount.

Pakistan paid 191 million dollars, including 173 million dollars principal amount and 18 million dollars on account of interest to IMF in last fiscal year, which earlier stood at 144 million dollars in fiscal year 2007.

During the last fiscal year, the country had also availed the opportunity of rescheduling in the wake of high debt servicing payment, and rescheduled some 1.2 billion dollars worth of loans to deferred payments for a specific time period. Although the rescheduling of loans is some 100 million dollars less than last fiscal year. However, it is still a large figure, which requires to be further minimised in the future.

 

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'Shahbaz focusing on agriculture, industrial sectors growth' ​

LAHORE (September 24 2008): The Punjab government is trying to exploit its huge industrial and agriculture potential to steer the country out of present economic crisis in a professional way and the days are not very far when the people will witness revolution in industrial and agriculture sectors.

This was observed by Lahore Chamber of Commerce and Industry (LCCI) President Mohammad Ali Mian while talking to a delegation of Lahore Township Industrial Association (LTIA), led by its Chairman Amjad Ali Jawa, who called on him here on Tuesday.

He told the delegation that Chief Minister Mian Shahbaz Sharif was focusing on agriculture and industrial sectors with a team of highly professional people and through co-ordinated planning that was bound to yield results in both the areas that had been suffering for the last many years.

He said that this was for the first time that a provincial government was working on the agriculture sector with such a dedication and sparing no efforts to increase per acre yield.

The agriculture was the largest sector, contributing about 22 percent of gross domestic product (GDP) and employed around 45 per cent of labour force, while more than 70 percent of the cropped area of the Indus River basin was situated in Punjab, he said, and added that a little attention by the government could do the miracles. He said that the province had no dearth of resources in the shape of fertile land, water and livestock, but were going waste only for want of good governance.

About the worsening law and order situation in the country that has eroded the confidence of the business community, the LCCI President said that the provincial government was in touch with all the stakeholders so that they could be able to continue their respective businesses with peace of mind. Mian said that Punjab was the most industrialised province of the country.

The Punjab manufacturing industries produced textiles, sports goods, machinery, electrical appliances, surgical instruments, metals, bicycles and rickshaws, floor coverings, and processed foods, but the high cost of doing business, exorbitant mark-up rates and law and order situation were pushing it to the wall.

 

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Marriott blast destroyed 90 percent of country's IT industry: PCA ​

ISLAMABAD (September 24 2008): About 90 per cent of IT industry of Pakistan has been completely destroyed at the Evacuee Trust Building following suicide bombing at Hotel Marriott, reflecting total collapse of the computer industry.

Pakistan Computer Association (PCA) on Tuesday disclosed that the most of the leading computer companies and software houses were operating at the Evacuee Trust Building, which has been declared as dangerous. Resultantly, not a single company was saved from the deadly bomb blast in Islamabad.

The PCA has expresses deep grief over the loss of precious human lives as a result of cowardly act of suicide bombing. The association has also expressed its solidarity with the aggrieved families of several IT professionals, who lost their lives while working in their offices located in adjacent Evacuee Trust Building.

President PCA, Munawar Iqbal opined that many of the IT professionals have lost their lives and every single IT-related set up in the building has been destroyed completely. He urged the government to immediately help out the industry so that the hapless effectees of the incident may be able to revive their businesses.

He said that the tragic incident has marred the possibilities of streamlining national economy and the government ought to deal with situation by helping out business community. He said that 90 per cent of local IT industry was based in Evacuee Trust Building, which has been destroyed completely and the collapse of industry would damage further the other sectors.

He reiterated that government should not only help the families of those, who have been martyred in the incident but also help the IT community to the extent that they might be able to restart their businesses without any delay as the sector is providing thousand of IT professionals who are confronting with the menace of joblessness as result of tragic suicide bomb-blast.

 

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Work on first IT Park at SSUET starts ​

KARACHI (September 24 2008): Work has started on the setting up of Pakistan's first Information Technology Park to be constructed on 200 acres of land by Sir Syed University of Engineering and Technology (SSUET) in the Education City, where land has also been allotted to reputed institutions like Aga Khan University, ZABIST, Sindh Madressah, Shaukat Khanum Hospital etc.

The progress of the gigantic project was reviewed in detail at a meeting held under the chairmanship of SSUET Chancellor Z.A. Nizami here on Tuesday. Yahya Waliullah, a former Provincial Secretary IT and Planning and Development has been appointed as Project Director for IT Park project. The meeting was informed that feasibility of the project has been completed and now the costing involved was is being revised.

Chancellor Z.A. Nizami made it clear that he wanted a proper feasibility based on international standards, as the quality of entire work would depend on it. He directed that feasibility, inter alia, must envisage the resources for funding besides outlining technical collaboration with International Organisations involved in such projects.

He advised the Technical Committee members to establish direct contacts with relevant IT organisations in Manglore and Hyderabad. He called for preparation of PC-I of the project for submission to government and said that it was time for quick action. Nizami said that while preparing feasibility study, previous studies made for the project should also be taken into consideration.

SSSUET Chancellor told newsmen that development work on 200 acres of land for IT park in Education City was in full swing and Master Plan being prepared. He said that under-ground sweet water had been explored at a depth of 560 feet while tree plantation is being carried out at a fast pace. He informed that necessary allocation for the project for fiscal 2008-09 has been made in the budget.

 

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Another jolt to the economy ​

EDITORIAL (September 24 2008): Troubles never come alone is a well known proverb. Together with a series of adverse economic developments comes the news that Pakistan's cotton output during 2008-09 is likely to be less than 12 million bales, falling substantially short of the target of 14.1 million bales.

Although no firm estimates are available for the new crop, this pessimistic scenario is confirmed by the officials of Food and Agriculture Ministry, farmers' representatives and other stakeholders. A fall in the area under cotton, pest attacks and shortage of fertilisers were the major factors that hit production in the 2008-09 crop year, which runs from April to March.

Ibrahim Mughal, Chairman of the Agri-Forum, a farmers' association, was of the view that rising production costs, because of higher prices of power, fuel and fertilisers, were also discouraging farmers from growing more cotton. The area under cotton cultivation was almost 500,000 acres less than the target of 8 million acres and mealy bug and cotton leaf curl virus continued to damage the crop.

It may be mentioned that Pakistan had achieved record cotton production of 14.6 million bales in 2004-05 but the output has been falling since then, meaning that the country had to import cotton every year to meet the requirements of its textile mills. As is well known, Pakistan's domestic consumption fluctuates between 14 million and 16 million bales a year and the country had to import nearly 4.7 million bales during 2007-08 after production fell to 11.6 million bales against the target of 14.14 million bales.

Missing the cotton crop target by more than 15 percent during 2008-09 would undoubtedly have serious consequences for the economy. Cotton is the most important non-food cash crop of the country and a significant source of foreign exchange earnings. It accounts for 7.5 percent of the value added in agriculture and about 1.6 percent of GDP and contributes 60 percent, directly and indirectly, to the country's exports.

Another important contribution of cotton is its potential in generating employment and promoting overall economic activity, both in the rural and urban areas of the country, due to backward and forward linkages of the textile sector. Also to be noted is the fact that crop shortfall has occurred at a time when it would be very hard for the country to import large quantities of cotton to meet its requirements due to paucity of foreign exchange.

Current account deficit of the country continues to be at an alarmingly high level, the rupee is depreciating fast and foreign exchange reserves of the country are touching dangerously low levels. Added pressure on the external sector is thus coming at a time when it is least able to bear it.

Obviously, there is nothing much that could be done for the present year, but keeping in view the crucial importance of the cotton crop in the economy of Pakistan, continuous shortfall in cotton production over the years is a phenomenon which needs to be seriously investigated with a view to creating an environment for better productivity in future.

Of course, lower cotton output could partly be attributable to the overall neglect of agricultural sector in the country, but there are certain other factors which have been equally responsible for poor yield of the crop and one fails to understand the callous attitude of the authorities to do something about them.

For instance, availability of adequate and insect specific pesticides, particularly for mealy bug and white fly, is not ensured throughout the growth and development period of the crop. Substandard or fake pesticides are still available in the market to compound the miseries of the farmers.

Provincial Agriculture Departments and extension services are not too effective to make a substantial difference. Availability of certified seeds of approved cotton varieties is often inadequate. In our view, no stone should be left unturned to redress the problems of cotton growers and ensure optimal yield of cotton crop in order to sustain the economy and improve the living conditions of the people.

 

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Pakistan has a strong case for FTA ​

EDITORIAL (September 24 2008): In his meeting on Tuesday with Jack Straw, Britain's Law and Justice Secretary, who is more familiar with the problems facing Pakistan from his previous stint as foreign secretary, Prime Minister Yousuf Raza Gilani sought London's help for his government's efforts to acquire greater access to the EU market, especially its quest for a free trade agreement (FTA).

Our request for FTA, in fact, has been pending with the EU for a while. The officials concerned seem to be in no hurry, as they should have been in view of Pakistan's peculiar situation, to give it due attention. Meanwhile, Pakistan being a frontline state in the West's war against terrorism, the country's economy has suffered immensely on account of a violent blow-back from Afghanistan.

Investments, both local and foreign, have gone down to a significant extent. An unprecedented increase in the international price of oil has made a bad situation worse, severely impacting our balance of payments. As Pakistan has been telling the Western nations since long what it needs is trade rather than aid to strengthen its economy on a long-term basis.

But EU trade policies seem to favour Pakistan's trading competitors. The Generalised System of Preferences (GSP) extended to it for a while has been withdrawn; and our exports face both tariff and non-tariff barriers. Representatives of our badly hit textile sector have reason to complain that whereas our bed linen exports are subjected to a 5.8 percent anti-dumping duty and 9.6 percent customs duty on all textile exports, our competitors from India and China get preferential treatment as well as free market access.

Then our exporters have to deal with non-tariff barriers such as security situation related travel advisories for importers and travel restrictions for exporters together with certain other conditions. Other regional competitors comprising Bangladesh, Nepal, Sri Lanka, Bhutan and the Maldives are entitled to duty-free access to EU as Least Developed Countries (LDCs).

Pakistan is fortunate enough not be included in the LDC category. Yet it needs some sort of encouragement. After the withdrawal of GSP, it expected to be given GSP Plus status that would have placed it in a better position to deal with its regional rivals, but that move was blocked in the WTO on a member's appeal.

It is obvious enough from these details that Pakistan faces serious difficulties in the EU market, which happens to be its largest trading block. Considering that certain security interests of its Western friends too are tied to its political and economic stability, EU needs to facilitate this country's trade, and bring down the barriers in its way.

Pakistan has already fulfilled almost all of the 27 ratification and promulgation conventions necessary for it to qualify for FTA. It is about time its friends like Britain used their clout within the EU to help Pakistan secure the much-needed FTA.

 

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Marriott blast hits aviation, tourist industry ​

Thursday, September 25, 2008

KARACHI: The deadly suicide attack at a hotel in Islamabad has started to take its toll on aviation and tourist industries, while experts fear deteriorating law and order could scare off foreign carriers and travelers.

First signs of repercussions came on Tuesday when British Airways announced suspending flights to the capital in wake of the blast there last Saturday that killed 60 people and gutted the five-star Marriott hotel.

“Some airlines have stopped crew layovers here,” said a senior official of the Civil Aviation Authority (CAA), talking about the intermittent stay of pilots and airhostesses. “After some of its staff was injured at Marriott, Saudi Airlines has shifted its crew to Muscat.”

He said normally poor security is of paramount concern for European airlines and insisted that Middle East-based carriers have not given any indication of seizing operations. Nevertheless, he cautioned, the government must curb the suicide bombings at the earliest.

“No good carrier would want to come to Pakistan now,” lamented Haider Jalal, Chief Operating Officer, Gerrys, a travel management company. “Even if security is beefed up, there are labor unions which forbid crew from traveling to unsafe places.” He said improving foreigners’ perception should be the top most priority of the authorities.

Deliberating on the situation, Tariq Bin Yousuf, General Manager of Destinations of the World, a travel agency, said some countries have stopped insuring passengers coming to Pakistan. “Negative travel advisories and reluctance to come here will continue to affect the tourist industry.”

CAA, which drives most of its aeronautical revenues from airlines using Pakistan’s airspace, has been endeavoring for last few years to increase passenger traffic. It almost succeeded in doing so as new airlines like UAE’s Air Arabia started operations while British Airways, Malaysian Airlines and Etihad Airways increased number of flights.

German carrier Lufthansa, Oman Air and Singapore Airlines have also recommenced their operations before the law and order deteriorated rapidly since late last year. Lufthansa recently stopped flights after only a few months into operation. Some other airlines which were planning to start operations to the country will be closely monitoring measures that the government will take to counter terrorism, industry officials say.

Astreaus, Virgin Atlantic, British Midland, UAE’s Ras-al-Khaima, Air Italy, Al-Jazeera, the second carrier of Kuwait and Bangladesh’s GMG were all supposed to commence operations. But despite all the odds, Jalal says, the growing number of Pakistani passengers would lure foreign carriers. “Fares have skyrocketed but passengers are still traveling. This is an indication that traffic has not reduced.”

Yousuf also believes that these difficult times offer an opportunity. “The government must revisit its policies with neighbors,” he said. “We should target the nearest market in India and put in place a tourist visa arrangement.”

 

[Neo]

Trading on Karachi bourse shrinks to 10-year ​

Thursday, September 25, 2008

KARACHI: The equity market saw record low turnover of last 10-years and also reduced number of active stocks on Wednesday ahead of floor review meeting.

KSE 100-share Index posted anther decline of 8.76 points or 0.10 per cent and closed at 9,190.75 points. Its junior partner the 30-Index also shed 0.42 point and ended the day business at 10.064.44 points.

Amid the day turnover in ready market shrank further to 2.792 million shares, which is a new record low in the last 10-yeas period. The day turnover is the lowest one since Pakistan tested its nuclear missiles in 1998.

In the absence of any investment-friendly news, the market sentiment is worsening every passing day at the local bourse since May 2008.

This is evident with the situation that the sellers are there to offload their holding at the day minimum possible rates, but buyers are reluctant to enter into the deal for two reasons. One for the reason that participants are short of money, and secondly those who are having hard cash to do the business they foresee further fall in market ahead of removal of floor mechanism sometime in early October.

Therefore, Board of Directors of KSE is meeting tomorrow, Sep 25, to review the market situation. They are most likely to announce a date for removing floor price mechanism, which is there since Aug 27.

The number of active stocks on board shrank to mere 86 out of total 654 companies listed at KSE. Usually 300 companies are used to active on board. Therefore, out of total actives, 58 companies ended the day business with no change in their share prices, 19 stocks fell in red while remaining nine stocks closed on positive note.

Analysts said that the downgrading of Pakistani bond by the international rating agency Moody’s is also having potential to jot the market, but floor again prevented occurring losses.

The chief 100-Index moved by as many as 9.80 points either side of the fence between 9,200.55 points intra-day high and 9,190.75 points intra-day low. Market was opened on positive note, but failed to maintain there in green for the reason of thin attendance of market participants.

The future market turnover, however, surged to 6.635 million shares as compared to 3.994 million shares - showing an increase of over 66 per cent on day-to-day basis. Dealers said that banning of balk-selling in future market tried to restore investors’ confidence that resulted in enhancing future market turnover.

The overall market capitalisation declined by another Rs2.2 billion and stands at Rs2.849 trillion.

Hasnain Asghar Ali said “Actions speak louder than words,” even the magic words of assurances on economic issues by the US president failed to infuse confidence in the local equity markets, as the participants seems to have decided not to react on verbal commitments rather wait for action. Adding to the pressure is yet another issue of rising rates in the CFSMKII, which surged to three year high at 24 per cent in this session. The product was running without a ceiling, exploitation will no doubt give birth to yet another crisis. The trades which came under the sword of forced release i.e. 25 working days find a high rate to be refinanced thereby leaving no option for the buyer, but to either arrange funds in the desert or opt for financing at sky rocketing rates, he added.

Highest volumes were witnessed in Engro Chemical at 1.060 million closing at Rs180.44 with a loss of 23 paisa, followed by Siddiqsons Tin at 0.262 million closing pegged at Rs14.50, Jah. Sidd.(R) Spot at 0.218 million closing at five paisa with a loss of four paisa, Eye Television Net at 0.188 million closing pegged at Rs42.20 and Telecard at 0.129 million closing pegged at Rs3.70.