Pakistan Economy - News & Updates - Archive

[Pk_Thunder]

Export of textile, food items increases ​

ISLAMABAD, Dec 24 (APP): Textile exports during the month of November 2008 witnessed increase of 1.22 percent as compared to exports of October 2008.

Textile exports during November were recorded at $838 million as against exports $828 million registered in October 2008, according to data released by Federal Bureau of Statistics.

However, as compared to the textile exports of the same month of last financial year, exports during November 2008‑09 witnessed decrease of 7.2 percent. Textile exports during November (2007‑08) were recorded at $903 million.

As compared to October 2008, the export of raw cotton during the month under review was increased by 23.15 percent however, cotton yarn witnessed decrease of 11.02 percent while export of cotton cloth witnessed decline of 3.57 percent.

Export of carded cotton was decreased by 56.03 percent, yarn other than cotton yarn by 23.65 percent, towels by 8.77 percent and madeup articles export declined by 8.30 percent.

However, export of readymade garments increased by 21.67 percent, knitwear by 4.63 percent during the month under review as compared to month of October.

Similarly, bed wear export was increased by 4.76 percent, tents, canvas and tarpaulin by 68.24 percent, art silk and synthetic textile by 0.06 percent.

On the other hand, food export from the country was increased by 10.71 percent during the month of November 2008 as compared to month of October.

Among food items, export of rice was increased by 18.17 percent. However, export of basmati rice was decreased by 13.06 percent while the export of other rice items increased by 49.32 percent.

Export of fruits increased by 54.66 percent, vegetables by 86.37 percent, spices by 47.80 percent and oil seeds, nuts and kernels by 231.12 percent.

However, export of fish and fish preparations was declined by 19.35 percent, leguminous vegetables (pulses) by 33.54 percent while meat and meat preparations export declined by 1.26 percent.

 

[Neo]

'Pakistan offers host of economy areas to investors'​

ISLAMABAD (December 24 2008): Senator Waqar Ahmad Khan Minister for Investment has said that Pakistan is open for business and offers host of areas of economy to the local and foreign investors including agriculture and Livestock, oil and gas exploration and energy sector. The Minister said this While talking to ambassador of Bahrain, H E Muhammad Ibrahim Muhammad Abdul Qadir who called on him in his office on Tuesday.

The Minister said that the government is ensuring level playing field to the local and foreign investors and will welcome the investors from Bahrain to benefit from the business friendly atmosphere in Pakistan. He said that the rates of return in business are quite high in Pakistan, whereas in developed countries the profits have been drastically reduced.

He said to materialise the vision of President Asif Ali Zardari, a new Ministry has been created which will act as facilitators/trouble shooter and this Ministry will bridge the gap between investors and various government departments. The Minister while highlighting the various steps taken by the government said that the government is addressing investors concerns regarding security and the creation of Task Force on Security headed by Minister of State for Interior is under process.

He said that the government has decided to establish special business/economic zones for investors with the tax exemption on machinery, equipment as well 100 percent repatriation of the profits to their native countries. The ambassador of Bahrain said that their government and the people highly value their relations with Pakistan and said that they are keen to invest in Pakistan.

 

[Neo]

Growth slowed down, inflation rose during January-June 2008: survey​

ISLAMABAD (December 24 2008): A survey of large business firms and companies of Karachi during January-June 2008 confirmed overall slowdown of economic growth and rise in inflation, reflecting growing inflationary pressure on big firms during the period under review.

The Pakistan Institute of Development Economics (Pide) on Tuesday released 'Business Barometer' to share with people the results of business survey of financial sector covering textile, sugar and allied industries, cement, oil and gas exploration companies, engineering, automobile assemblers, automobile parts and accessories, fertilisers, pharmaceuticals, chemicals, banaspati and allied industries, food/personal care products and glass/ceramics.

The findings of the survey are based on the data collected from 61 selected firms listed at Karachi Stock Exchange (KSE). The survey results showed that there would be further decline in the economic growth during second half of 2008.

Despite sluggishness in business activity during 2008, the PIDE survey results showed increase in production, investment and sales in domestic market. The report shows that during first half of 2008, economic growth declined as compared to the second half of 2007. Majority of firms, 68.3 percent, saw slow economic growth, followed by 18.3 percent firms indicating the same level of growth. However, only 13.3 percent of the respondents indicated a faster growth in economy.

According to majority of the firms, input prices had increased during the study period. The increase in input prices ultimately forced the business firms to raise their own final goods prices. Only 2.1 percent of the respondents reported decrease in the prices of their inputs.

A large number of them, 95.7 percent, indicated that their input prices increased in the first half of 2008 while 2.1 percent reported no change. For the current half of the year 2008, 93.5 percent expect a rise in the prices of their inputs, while 4.3 percent expect it to stay the same. Only 2.2 percent of the firms said they expected a fall in the prices of their inputs.

The business sector noted that the level of growth of economy during first half of 2008 had declined as compared to the growth level during the previous six months. The difference in the assessment of the financial and non-financial sectors of the country diminished for the year 2008. The financial sector had joined non-financial sector in comprehending slower pace of growth for the first half of the year 2008.

The expectations of the business sector, about the pace of growth of the economy in last six months of 2008 were pessimistic. The net balance remained consistently negative, as in the case of previous two assessments. Therefore, decline in the economic growth was expected for the second half of 2008. The overall net balance of the growth was negative, meaning thereby that majority of firms were anticipating lower growth. Even the financial sector, which was initially showing positive net balance, had moved into the negative zone, as its optimism resided.

In the survey, all the firms unanimously experienced higher prices in the first half of 2008. Their expectations were also higher for the second half of 2008. The analysis showed that both financial and non-financial sectors, neither of them experienced nor anticipated any fall in the general price level for the year 2008. With 100 percent respondents reporting higher prices, the net balance remained consistently positive for the general price level.

Moreover, there was increase in input prices, output prices, rate of interest on deposits, interest rate on advances and wages. This upward assessment of business sector was in line with high inflationary expectations. The financial sector was expecting increase in the rate of interest on deposits, interest rate on advances and reserves which would be in line with the tight monetary policy adopted by the State Bank of Pakistan. Its future expectations about its activities were also high. Business sector was expecting the level of investment to be higher in the second half of 2008. The higher investment expectations were driven by the visibly higher expectations of the financial sector.

As far as the other economic variables were concerned, majority of the firms was reporting increase in production, investment and sales in domestic market. This was mainly driven by the higher expectations of the rise in the final product prices. At the same time, the firms' expectations of an increase in the input prices and wage pressure was leading to the piling up of the inventories. The employment levels were reported to be stable as the firms continued to operate at below capacity level. The financial sector optimism about employment indicated that more jobs would be created. The leading constraints affecting firms' production were the regulatory environment and the insufficient demand. The insufficiency of

The crux of the survey was that growth has slowed down and inflation had risen up during Jan-June 2008. Further decline in the gr demand, particularly in the international market, could be attributed to the rising global inflation.

The crux of the survey was that growth had slowed down and inflation had risen up during Jan-June 2008. Further decline in the growth level and rise in the rate of inflation was expected during the second half of the year, thus implying an urgent need of a comprehensive macroeconomic policy framework for the control of inflation by the authorities.

As pointed out in the last edition of 'Business Barometer', the problems of declining expected growth and rising inflationary expectations were demanding co-ordinated efforts by the State Bank and the Federal Government.

About the constraints faced by the non-financial sector of the economy, 50 percent of the firms reported that their production was constrained by different factors. Out of the constrained firms, 50 percent of firms thought that improper regulatory environment was the most important constraint, followed by insufficient demand (ie 38.5 percent) and insufficient skilled workforce (ie 18.8 percent), while 16.7 percent of firms thought that insufficient access to credit created hurdles in business growth while insufficient access to imports and insufficient capital was felt by 9.1 and 7.7 percent of business firms respectively.

Interestingly, 50 percent of the respondents reported increase in their activities (Deposits, Advances, Investments) in the international market during Jan-June 2008, as compared to the second half of 2007; 50 percent reported no significant change.

Regarding future activities, the evidence showed that financial institutions were optimistic about the international market, as 50 percent of the institutions hoped that their activity would increase, and 50 percent expected that there would be no change in the size of their international market activity. None of institutions expected decline in activity.

Looking at the interest rate, 91.7 percent of the respondents said they experienced increase in interest on deposits during the first six months of 2008, while only 8.3 percent respondents reported that interest on deposits remained the same. None of the respondents report that interest was lower in the first half of 2008. For the next six months, only 8.3 percent reported that the interest rate on deposits would stay the same, and 91.7 percent expected that the interest rate would increase, while none expected fall in the rate of interest.

The financial sector was feeling upward pressure on the interest rate on advances due to increase in the deposit rate, wages, and other expenditure, forcing it to raise the prices of their advances. None of the respondents reported decrease in the interest rate on advances, whereas 83.3 percent indicated that interest on advances increased during the first half of 2008 as compared to the second half of 2007.

 

[Neo]

AJK industrial zone: over 20,000 kanal of land reserved for site​

MIRPUR (December 24 2008): Site for a new grand industrial zone over an area of 20,000 kanal of land in Mirpur, Azad Jammu Kashmir has been reserved to promote the industrial development in AJK. Chaudhry Muhammad Yousaf, AJK Minister for Commerce and Industry, disclosed here, official sources said.

The sources close to AJK Department of Commerce and Industry told APP here on Tuesday that the industrial units of various products including marble, electrical appliances, decorative tiles, chemicals, food testing labs, plywood, wood works, mineral water, steel re-rolling and dairy products are proposed to be established in the new mega industrial zone.

The sources continued that besides the local investors, foreign investors will be given all possible facilities and incentives for encouraging the establishment of maximum industrial units in the new zone. "It would lead to the investment of billions of rupees in the industrial sector in Mirpur alone strengthening the economy of the area to a greater extent," the sources said.

They said that a grand international investment conference will soon be held in Mirpur to invite maximum investment, both from home and abroad, in the industrial sector in AJK where the most conducive atmosphere coupled with required infrastructure was already available. The sources said that the government was already extending required facilities including attractive incentives in the form of tax holidays for five years period in small industrial estate Mirpur and industrial estate in Kotli, AJK.

 

[Neo]

'Pakistan vigorously pursuing IPI gas pipeline project'​

ISLAMABAD (December 24 2008): Advisor to Prime Minister on petroleum and natural resources, Dr Asim Hussain, has highlighted that Pakistan is vigorously pursuing Iran-Pakistan-India (IPI) gas pipeline project to meet the growing energy demands and possibility of increasing import of crude and petroleum products. Pakistan's delegation, led by Dr Asim will visit Tehran on December 29 to sort out the issue of price revision for the signing of GSPA of the IPI project, he said.

He was talking to Mashallah Shakari, Iranian Ambassador in Pakistan, who called on him in his office here on Tuesday. They expressed satisfaction with the progress in IPI gas pipeline project and desired that its early implementation would also serve to strengthening and expanding the economic and trade relations among the regional countries. The advisor told the envoy that IPI is an important component of Pakistan's long-term energy plan, "and we are fully committed to its early completion.

Asim said that oil and gas co-operation between the two countries would open up new vistas for their mutual advantage. He invited Iranian investors to avail the investment opportunities existing in Pakistan's oil and gas sector. Pakistan imports 10,000 bpd Iranian light crude and is working on crude oil import arrangements from Iran on deferred payment, the advisor said. The meeting was also attended by Petroleum Secretary Mahmood Saleem Mahmood and other officers of the ministry.

 

[Neo]

ADB study underlines: new development strategy paradigm imperative for agriculture growth​

FAISALABAD (December 24 2008): Asian Development Bank (ADB) emphasised the need for a new development strategy paradigm for sustainable growth of agriculture in Pakistan, which will have to be based on moving into higher technological orbits, reformation of marketing systems, and moving towards value addition through processing and branding of agri-based products for export viability.

This was disclosed by a study of Asian Development Bank's consultants and experts. According to ADB study, the sources of agriculture growth in the past were mainly due to area expansion, extensive use of water resources, and technological improvements.

Growth through area expansion and extensive use of water has reached its point of diminishing marginal returns. Relying on expansion of these physical resources as drivers of growth will not be a technically viable option in the future.

With a growing population, limited land use intensive based technologies that are being developed, increasing areas of degraded land, and a skewed land ownership structure, there is hardly any cultivable land that would be available for agriculture.

While there is about 8 million has of culturable wasteland or farm area that at present are unfit for cultivation, a huge investment will be required to turn these into productive farmland.

Further, current agronomic practices and other factors, which are discussed in the next chapter impede the prevention of existing quality land from deteriorating and from investing in the conversion of culturable wasteland into usable land base.

ADB report pointed out that depending on extensive extraction of water resources as a means to improve or maintain production levels is also not a viable route in the future. Both ground and freshwater are becoming a scarce commodity, as demand for this resource to satisfy competing uses continue to intensify. Like land, water has been allocated irrationally and inefficiently, resulting to the lowering of water levels and deterioration of its quality.

Studies have shown that even under a low demand scenario and with an assumption of increasing water use efficiency by the year 2024/25, there would be a shortfall of around 23% under the existing supply scenario. Clearly, overall water availability will be a serious constraint on future agriculture crop growth.

ADB study mentioned that the increased cropping intensity through intensive use of land and water resources was another growth source factor until the 1980s, after which the growth of multiple cropping levelled off.

It said that water shortage and land degradation are the basic factors for the variation in cropping intensities. Extrapolations based on the past cropping intensity trends do not reflect much potential for the cropping intensity to increase markedly in the future, it added.

This may change with the development of relevant technologies but as discussed in the next chapter, the present approach to research and extension coupled with the limited access to credit, appropriate market infrastructure, and markets, if continued, will not ensure sustained production and dissemination of appropriate technologies for improved crop productivity, ADB study revealed.

ADB study said that the use of green revolution technologies and the appropriate agronomic practices served as the major impetus for yield growth especially for the major crops. With limited technological breakthroughs (particularly for the potential minor crops) and unchanging technical practices, growth from yield improvements has also stagnated.

ADB experts observed that the productivity growth from genetic breakthroughs combined with appropriate agronomic practices will not be available nor will these be easily accessible especially to the major smallholders unless major reforms are taken in research and extension, and rural finance, it added.

ADB study said a confluence of factors will be needed to expand the production frontiers of the crop sub-sector; the major bottlenecks impeding the growth potentials of the sector are identified and discussed in the next chapter.

In essence, ADB report stated that the lesson learned from the past experience is that doing "more of the same" to unleash the growth potentials of the agriculture/farm sector will not likely yield as much results. A new development strategy paradigm is required for sustainable growth.

The new Agriculture Strategy will have to be based on moving into higher technological orbits, reformation of marketing systems, and moving towards value addition through processing and branding of agri-based products for export viability.

 

[Pk_Thunder]

'Pakistan needs more technical institutes'​

RECORDER REPORT
KARACHI (December 25 2008): Speakers at a seminar on Wednesday observed that there is an acute dearth of technical institutes in the country which is putting negative impact on the small and medium industrial growth.

SME sector is providing over 70 percent employment as a non-agriculture sector in the country, they said at the seminar on "SMEs under the era of globalisation" organised jointly by Japan External Trade Organisation (JETRO), FPCCI and KCCI at a local hotel.

Speaking on the occasion, JETRO expert at FPCCI, Haruki Shimzu, highlighted the Pak-Japan trade, saying that in 2005 Japan's exports to Pakistan were $1.5 billion and imports from it were $140 million, a trade balance of $1.3 billion tilting in Japan's favour.

In 2006, imports from Pakistan increased to $210 million and exports to it exceeded $1.7 billion, with a trade balance of 1.5 billion again in favour of Japan, he said, adding that during the same period, Foreign Direct Investment from Japan was 57 million and 47 million respectively. Japan exported transport machines and general machinery and metal and metal products, and imported textiles, mineral fuels and raw materials from Pakistan.

In the context of employment through SMEs in both the countries, he said that employment in Pakistan is 78 percent and in Japan it is 70 percent. The number of enterprises is 90 percent in Pakistan and 99.7 percent in Japan. Contribution to Gross Domestic Product in Pakistan is 30 percent and 51 percent in Japan. He observed that SMEs create new business and jobs, promote entrepreneurship and it is the primary mover of the economy. However, there is a need for further consultation for its development.

He said at present Japan is facing problems in its recovery. He said that more manufacturing units have moved to other countries along with technologies and management expertise. Similarly, jobs also moved with them. There is less difference of Japan's manufacturing with the overseas factories as the common technologies have already been exported.

The new generation has less interest in working at the manufacturing sector, resulting in discontinuation of technical skills. While closure-rate is higher than the start-up rate, that needs improvement, Haruki Shimzu pointed out. Zubair Tufail, Vice President of FPCCI and President of KCCI Anjum Nisar also spoke on the occasion.

 

[Pk_Thunder]

181 percent surge in cotton export​

RIZWAN BHATTI
KARACHI (December 25 2008): The country's cotton exports registered a healthy growth of 181 percent during the five months of the current fiscal year mainly due to better quality and low prices, market sources said. They said that exporters are getting export orders of huge quantities on the back of on-time availability of cotton, low prices, slow demand by millers and expected better cotton crop as compared to last year.

Following international market rates, cotton prices in the country have also reduced by some 35 percent during last few months and at present average quality cotton prices stand at around Rs 3,100 per maund as compared to Rs 4,200 per maund in August.

As per crop assessment committee projection, the country is likely to get a cotton crop of over 12 million bales during current fiscal year as compared to 11.6 million bales in last fiscal year. Official statistics show that cotton export has increased by 181.32 percent during the July-November period of current fiscal year, exporters said.

During July-November of current fiscal year, the country has exported cotton worth $48.943 million as compared to $17.404 million during the same period of 2007-08, depicting an increase of 31.539 million dollars during the first five months of the current fiscal 2008.

Month on month basis, cotton export increased by some 94 percent during the last month. With current surge cotton export has reached 12.8 million dollars November 2008 as against the exports of some 6.594 million dollars during November 2007, depicting an increase of 6.206 million dollar in single month.

"We are offering better quality cotton at low price of 48-54 cents per pound, which is lowest in the international market," exporters said, adding that same quality cotton is being offered for 60-65 cents per pound by Indian traders.

At present Pakistani exporters and traders are market leader by offering lowest cotton price in the region and getting huge export orders from Brazil, Malaysia, India and other countries, they said. Exporters said that local textile miller are reluctant to procure huge quantity of cotton due to declining trend in the textile export and liquidity shortage, which is also a major reason of decline in the cotton price in the local market.

 

[Pk_Thunder]

Government won't allow shipment of imported wheat after February 15​

MUSHTAQ GHUMMAN
ISLAMABAD (December 25 2008): The federal government has decided not to allow shipment of imported wheat after February 15 because any further delay would hurt farmers, well-informed sources told Business Recorder.

The Economic Co-ordination Committee (ECC) of the Cabinet, in its meeting on December 2, 2008, presided over by the Prime Minister's Advisor on Finance, Shaukat Tarin, had decided to import additional 0.75 million tons red wheat with better specifications.

The ECC was informed that the existing wheat stocks were sufficient enough and could run up to February 15, 2008 but these stocks need to be jacked up. The Ministry of Food, Agriculture and Livestock (Minfal) had suggested that it should be allowed to import one million tons of additional red wheat with better specifications.

The sources said the Minfal had been authorised to import 3.5 million tons wheat, out of which import of 1.76 million tons was completed by the TCP before December 2, 2008. According to sources, the ministries of Finance and Minfal have imposed restrictions on import of wheat in containers, which effectively would bar small investors from participating in wheat import.

This decision was read by Shaukat Tarin at the Daily Economic Monitoring Committee meeting from a chit, given to him, despite opposition by some of the stakeholders present in the meeting. "The new decision will encourage big parties who always want to keep the small importers out of competition," commented one of the federal government officials on condition of anonymity.

Minfal, which submitted the summary to the ECC, however, did not consult Pakistan Flour Mills Association for the changes made in imported wheat specifications. "We have to grind the imported wheat and the government must consult us before taking any decision for change in specifications," said one of the millers.

The sources said the ECC had allowed import of additional red wheat with better specification, besides instructing the Minfal that after finalisation of negotiations with the US for 0.05 million tons of white wheat, matter must be resubmitted to the ECC for review.

On December 18, USA and GOP signed an agreement, according to which the US will provide 200,000 to 300,000 tons of wheat at a cost of $48 million to Pakistan on deferred payment. Trading Corporation of Pakistan has floated a tender to import US wheat.

According to reports, the government has already exempted the US wheat from pre-shipment inspection without providing justification after Washington opposed any such condition. Minfal had approached the Economic Affairs Division (EAD) to obtain No Objection Certificate for the deal with the US. According to the prescribed procedure, inspection of wheat before shipment is necessary for the safety of Pakistan's own wheat produce. But in this case, the government has requested an exemption.

Agriculture experts fear that transportation of the US wheat to upcountry might cause spread of kernel bunt, which could harm Pakistan's wheat seed, which, in turn, would negatively impact wheat yield. One of the experts proposed that the US wheat should not only be shipped to Gwadar Port but its grinding arrangements also be made near Gwadar. The government, however, is of the view that the US wheat would be stored in Karachi and after grinding, the flour would be transported to other parts of the country.

 

[Pk_Thunder]

Big entities/groups may have separate sales tax number for each unit​

SOHAIL SARFRAZ
ISLAMABAD (December 25 2008): The Federal Board of Revenue (FBR) has decided to allow big entities/groups, engaged in multiple business activities, to obtain separate sales tax registration numbers for their manufacturing units located in jurisdiction of different collectorates or regional tax offices (RTOs).

This is subject to the condition that the Board would have the powers to allow or reject applications for obtaining multiple sales tax registration numbers. If the FBR deems appropriate, only then multiple sales tax registration would be permitted to any big business group.

The board on Wednesday amended Sales Tax Rules 2006 through SRO 1289(I)/2008 to resolve this major problem of the taxpayers. The decision might facilitate top hotel chains and army organisations engaged in different business activities.

According to the new amendment, the board may, subject to such conditions as it may deem appropriate, allow or allocate a person separate registration for manufacturing units located in different collectorates or the RTOs.

Sources said that the amendment would allow leading companies, engaged in multiple business activities, to apply to the board for obtaining different sales tax registration numbers for separate manufacturing units. If the board feels satisfied that the business group is facing genuine problem due to single registration number, it might issue multiple numbers for different units.

In the 2008-09 budget, rule 10 of the Sales Tax Rules, 2006 was substituted by SRO 530(I)/2008 of June 11, 2008. Under the rule (Cancellation of multiple registrations), in case a person holds multiple sales tax registrations, he shall retain only one registration and surrender all other registrations under intimation to central registration office (CRO). Alternatively, such registered persons shall file only one return for the tax period July 2008, and onwards, against the registration number they wish to retain and all other registration numbers shall be cancelled by CRO.

The tax liabilities against the registrations cancelled in the aforesaid manner shall be transferred against the registration retained and in case of such registrations being in different Collectorates, the Collector having jurisdiction over cancelled registrations shall ensure that tax arrear files are transferred to the Collectorate having jurisdiction over the registration so retained, the rule added.

Subsequently, a number of business groups had approached the board for retention of multiple sales tax registration numbers. To resolve the genuine problems of taxpayers, the FBR has amended the Sales Tax Rules to introduce a provision for allowing multiple sales tax registration numbers.

 

[Pk_Thunder]

NIT ordered to intervene in bourse activity from Monday​

RECORDER REPORT
KARACHI (December 25 2008): The Advisor on Finance to the Prime Minister Shaukat Tarin has asked both the finances and financiers to resolve the Rs 9.8 billion of transactions conducted under the Continuous Funding System (CFS) or 'Badla' in an amicable manner and ordered the National Investment Trust (NIT) to intervene in the bourse activity from Monday December 29, 2008.

At a meeting held at his residence in Karachi, the Advisor asked the Financiers (lenders) to accept to partly adjust and carry forward the transactions to avoid sale of shares held in CFS so that market does not come under more pressure on Friday. He formed a committee under the Chairmanship of Mutual Funds Association of Pakistan Najam Ali.

The finances agreed to meet later in the night and come up with a formula acceptable to the Finances (borrowers) ie the brokers giving relief from additional margins to leverage investors. According to reliable sources, the formula under discussion was to give a waiver of 30 percent to borrowers of up to Rs 50 million; 20 percent for borrowing up to Rs 100 million; 10 percent and five percent for borrowing limit of Rs 250 million and Rs 500 million and above respectively.

The Advisor on Finance had to intervene after the Securities and Exchange Commission of Pakistan (SECP) could not resolve the issue of CFS funding. While the borrowers were in favour of another forced roll over directive and SECP did propose two options based on this premise - the lenders rejected the proposal feeling it was too one-sided.

Even in yesterday's meeting the Chairman SECP Razi-ur-Rahman Khan and the President of Abamco, Najam Ali exchanged hot words and blamed each other for the fiasco at the KSE and in the Sindh High Court.

The Advisor had to intervene due to the looming systemic risk since the removal of floor on December 15th, 2008 the whole universe of equity based investment is in suspended animation and there is still no price discovery at the stock market.

The major eight public sector scrips have declined by nearly 25 percent on the ready board and by 40 percent in off-market transactions. Even in illiquid stocks (called side items) there has been some side activity, however, in all major liquid stocks values have declined without any buying or on buying 100 shares per scrip.

CFS settlement has further aggravated the problem. Around 140 brokers were being affected. 54 brokers were issued notices by NCCPL upon removal of the stay order by the SHC. Now around 14 brokers are in suspension against claim of Rs 4 billion. Only two brokerage firms (having common ownership) reportedly account for Rs 1.4 billion in CFS borrowing.

The banking sector lending against shares is four times the outstanding CFS amount. Due to decline in market values banks are also inclined to sell in the market to meet margin requirements. The banks are forced to sell as borrowers are short of money or liquidity.

Second, the properties held by banks as collateral cannot be sold as there are no buyers in the property market. Since there are reports of rising non-performing loans eroding the profitability of banks - banking scrips which along with oil are market leaders and revenue spinners - and inventory losses of OMCs is adding to selling pressure.

Various sectors including automobile and cement are also adding to the selling pressure. Since corporate sector profits are declining and liquidity is still short in satisfying the appetite of trade and industry, the banks are not allowing borrowing against approved limits thereby creating a risk for the financial sector.

The Advisor on Finance Shaukat Tarin after proper evaluation reportedly asked National Bank, EOBI, State Life and a consortium of banks to provide a fund of Rs 20 billion - against a guarantee of the Government to purchase eight eligible PSE stocks from both CFS system held by banks towards financing against shares. These scrips bought at cut-throat values will be sold to overseas Pakistanis as a package to hold on for 24 months and earn both dividend and capital gains.

 

[Pk_Thunder]

Eight-member task force on maritime industry constituted​

RECORDER REPORT
ISLAMABAD (December 25 2008): The Planning commission has constituted an eight-member task force on maritime industry and it has been entrusted to propose appropriate amendments to the Merchant Shipping Ordinance-2001 and other relevant legislation. According to a notification, issued by the Planning Commission here on Wednesday, Deputy Chairman of Planning Commission Sardar Aseff Ahmad Ali has constituted a task force on maritime industry, headed by Naeem Sarfraz.

The task force has been entrusted with the tasks to propose appropriate amendments in the Merchant Shipping Ordinance 2001 and any other relevant legislation to make it suitable for the future maritime industry. It would make recommendations on procurement of ships in the private sector to substantially reduce foreign exchange freight bill, said the notification.

It also aims to build capacity of all sectors, supporting ship activities in ports, deepen navigable channels, develop private terminals, ship-building, ship repair, manufacture and repair of container, survey facilities, etc at all ports in Pakistan.

THE TERMS OF REFERENCE OF THE TASK FORCE ARE AS UNDER:

-- To propose appropriate amendments to the Merchant Shipping Ordinance 2001 and any other relevant legislation to make it suitable for the 21st century maritime industry. The draft bill should be prepared within 90 days for putting up to Parliament.

-- Procure ships in the private sector, which will substantially reduce foreign exchange freight bill by approximately four billion dollars annually.

-- Deepen navigable channels in all ports to 16.5 metres or more to handle modern vessels.

-- Build capacity of all sectors supporting ship activities in ports, including navigational aids, tugs, dredgers, shore cranes, bunkers, water, power, manpower, customs, immigration, security, environment issues etc.

-- Develop private terminals, shipbuilding, ship repair, container manufacture and repair, survey facilities, etc in all three ports.

-- Create an enabling environment in Gwadar for handling transhipment and transit cargos to realise the full potential of this national asset.

-- Expand the capacity of Karachi and Port Qasim in keeping with national economic goals of the 21st century.

-- Develop three pilot projects of inland waterways in co-operation with the provincial governments.

-- Encourage direct foreign investment (FDI), private-public partnership and commercial financing instead of enhancing foreign loans.

-- Propose a Federal Maritime Commission for sustained development of the sector.

-- Promote the tapping of natural resources along the coast and in Pakistan's maritime exclusive economic zone. The task force may induct additional members, as it considers appropriate, and keep the Planning Commission on the progress of its deliberations. The Planning Commission would be the Secretariat of the task force.

The task force comprises Naeem Sarfraz: Chairman; and former Justice Shaiq Usmani, Dr Zia Rizvi, Mohammed A Rajpar, Captain Changez Khan Niazi and Rear Admiral Arshad Munir: members; and ex officious are Secretary, Ministry of Ports and Shipping and Chief of Transport and Communications of Planning Commission.

 

[Pk_Thunder]

Iran agrees to provide oil on deferred payment​

ZAFAR BHUTTA
ISLAMABAD (December 25 2008): Iran has agreed to provide either furnace or light crude oil on deferred payment to Pakistan for a two-year period and a Memorandum of Understanding (MoU) in this regard is likely to be signed between the two countries by end of current month in Tehran.

Well-informed sources revealed to Business Recorder that it would depend on Pakistan to get either furnace oil or light crude oil on deferred payment for two-year period from Iran. Sources said that a delegation to be led by Advisor to Prime Minister on Petroleum and Natural Resources Dr Asim will visit Teheran from December 29-30 to finalise the technical modalities of MoU regarding the provision of Iranian oil.

They said government is considering whether to opt for the facility of crude or furnace oil on deferred payment for two years. As Pakistan consumes more crude oil relative to furnace oil and opting for the former will reduce the oil import bill.

The total requirement of Iranian Light Crude Oil for processing in Pakistan refineries is about 67,000 barrels per day and Pakistan Refinery Limited (PRL) is importing 10,000 barrel crude oil per day from Iran under contract on 30-day credit basis. However, Iran has revised the contract to provide 30,000 barrels crude oil per day on 90-day deferred payment effective from January 1, 2009.

Pakistan had requested 50,000 barrels crude oil per day for PRL on deferred payment, however, Iran agreed to provide 30,000 barrels per day, sources said.

Sources further said that Pakistan would negotiate the modalities for the provision of 67,000 barrel per day light crude oil on deferred payment for two years period.

Pakistan crude oil requirement is around 202,000 barrel per day (BPD). Pak Arab Refinery Limited (Parco) and National Refinery Limited (NRL) import 110,000 barrels per day (Arab Light) from Saudi Arabia. Parco and NRL import 52,000 barrels per day oil from Abu Dhabi, 10,000 barrels per day by PRL from Iran and 30,000 barrels per day by Biscor under Terms contract agreements with refineries on commercial basis.

Total consumption of high speed diesel (HSD) was 8.25 million tons during the financial year 2007-08.The country requirement was met by locally refined 3.56 million tons HSD whereas 4.51 million tons HSD was imported. The country total consumption of gasoline was 1.34 million tons and local oil refineries produced 2.33 million tons gasoline. The surplus naphtha of 0.94 million tons was exported. The Iranian oil facility on deferred payment would help continue smooth supply of fuel in Pakistan.

 

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Pak-India conflict to add to ranks of poor ​

Already half of world’s poor live in South Asia​

Thursday, December 25, 2008

KARACHI: The escalating tension between India and Pakistan over Mumbai attacks is likely to compound miseries of poor, increasing their number in a region already having half of the world’s hungry people, analysts say.

Commenting on South Asian politics, the World Bank in a recent report said corruption, confrontational politics and conflict threatened to derail the process of economic development.

The News talked to a number of analysts with expertise in South Asian affairs to get their views on the current tension. They said an increase in defence budget and cut in development expenditure would lead to a rise in poverty.

“Due to the conflict in NWFP, the defence budget was increased by 4 per cent to 28 per cent compared to 24pc announced earlier,” said Syed Qasim Ali Shah, an independent analyst monitoring development and poverty in South Asia.

Tension between the two countries would further push up defence spending at the cost of development budget, and in case of a war, the development budget would be slashed by 30 to 40 per cent.

Shah said ongoing war of words would affect many development programmes and donor agencies would ask for return of their loans.

South Asia, with a combined population of 1.4 billion, is home to more than 400 million poor. This accounts for around half of the world’s hungry people.

“Pakistan and India have the largest community of hungry people in the world,” said Aftab Alam Khan, Head of Trade Policy, Action Aid International.

A cut in development budget and increase in defence expenditure would create armies on two fronts; a combat army and an army of poor.

Abdul Karim Palijo, a resident of Gharo, Thatta, stole bread (naan) from a tandoor this Monday. He was caught, beaten and held at a police station for eight hours. He did not know he was not alone. More than 850 million people go hungry every night, according to a World Bank report, and some 1.2 billion people around the world live on less than one dollar a day.

The World Bank data shows that 47 per cent children are underweight and 71 million live under constant threat of violence. Nearly 1.6 billion people of the world have no access to electricity, of which 45 per cent live in South Asia alone.

Stories of auctioning some children to feed the rest of family got prime spaces and time in Pakistani newspapers and satellite channels a few months ago. One such person succeeded in selling two children in Khairpur while several others failed.

Handover of more than a dozen children to the Edhi Centre, a charity organisation, in Karachi was another example of absolute poverty.

In India, home to around 400 million poor farmers, during nine years from 1997 to 2005, more than 150,000 poor peasants committed suicide.

According to the World Bank, growth in South Asia eased to 6.3 per cent in 2008 from 8.4 per cent in 2007 and is expected to slip to 5.4 per cent in 2009. High food and fuel prices, tighter credit conditions and weaker foreign demand have led to worsening external accounts and slower investment growth. The downturn is more apparent in India and Pakistan, where industrial production has fallen sharply.

In its annual report, the World Bank observed that economic growth had been accompanied by rising inequality and the region was continuously suffering from worst levels of human deprivation in the world.

Aftab Alam, Action Aid’s Head of Trade Policy, said if war broke out, it would damage development infrastructure, affect market, damage financial resources and increase poverty.

In food production, Pakistan is not self-sufficient. “Around 80 per cent of its urban districts are food insecure,” said Alam, and around 62 per cent of rural districts were food insecure.

He said the conflict between the two countries would further aggravate the situation, leading to food hoarding.

India and Pakistan could be forced into a vicious circle of poverty and both would lose their micro and macro economic development. The important thing, he said, was that Pakistan and India should start a peace process and deal with the Mumbai attack issue through bilateral talks.

Syed Qasim Ali Shah said, “India and Pakistan both can’t afford (the conflict),” adding its after-effects would also be felt in Bangladesh, Sri Lanka and Nepal.

Dr Abid Qayum Suleri, an expert on South Asian affairs and Executive Director of Sustainable Policy Development Institute, said before the tension arose an environment was developing for a cut in the defence budget, but “now it will be affected.”

He said foreign direct investment (FDI) would slow down which would raise poverty level in the two countries.

 

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FMFB ranked 7th among top 100 MFIs of world ​

Thursday, December 25, 2008

KARACHI: The First Micro Finance Bank Limited (FMFB) has been ranked 7th in the 2008 MIX Global 100 Composite Rankings of Microfinance Institutions (MFIs).

An announcement to this effect was made in a statement of the bank issued here on Wednesday. It said that the rankings issued by the Microfinance Information Exchange, Inc highlighted the performance of well rounded; leading MFIs that boost outreach and lower costs to serve clients in a transparent manner.

The statement further said that according to the report made available on the mix website MIX ? Microfinance Information Exchange, Inc. on December 22, FMFB with the 7th position was the only MFI from Pakistan to make it to the top 25 MFIs of the world.

It said that the Aga Khan Agency for Microfinance as a global network was represented twice in the list of top 100 MFIs with FMFB, Tajikistan ranking in the top 100.

Based on data from MIX Market, the world’s most comprehensive public database on MFIs, the MIX Global highlights the leading performers in each of seven categories within outreach, scale, profitability, efficiency, productivity and portfolio quality.

The 2008 MIX Global surveyed 971 institutions for FY 2007, an increase of over 20 per cent over last year. And leading performers were drawn from a diverse sample of MFIs that served over 67 million borrowers with over $35 billion in loans and held $15 billion in deposits from 65 million micro-finance clients from all regions of the globe.

Overall, FMFB - Pakistan scored 80.58 per cent while the number one ranked MFI, MBK Ventura of Indonesia scored 87.18 per cent.

FMFB’s outreach was ranked relatively higher at 80.20 per cent with an exponential growth in borrowers of about 93.8 per cent as compared to the averaged borrower growth rates of 56 per cent by the leading 100 MFIs.

FMFB attained a 100 per cent score on transparency, meaning that it maintained at least three years of standard performance results on MIX market, with the last two verified by audit reports.

The statement further pointed out that the FMFB scored a 61.55 per cent as against the industry average of 56.42 per cent on efficiency, which was highlighted as a challenge for the overall industry.

The First Micro Finance Bank, a part of the Aga Khan Development Network, has played an instrumental role in reaching out to the poor segments of society by enabling individuals to strengthen their entrepreneurial base and build financial, physical and human capital for a sound and secure future.

The bank strives to alleviate poverty through sustainable economic development by offering credit, savings and life insurance services along with an efficient and low cost funds transfer service to its target populations.

With over 89 automated branches all over Pakistan and access to 4,000 Pakistan Post outlets, FMFB has disbursed over 380,000 loans in a short span of six years.