Pakistan Economy - News & Updates - Archive

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Pakistan announces five percent tariff cut for Saarc nations on 4,803 items​

RECORDER REPORT
ISLAMABAD (January 01 2009): Pakistan has announced 5 percent tariff reduction in the existing customs duty on import of around 4803 items from Saarc member countries--Sri Lanka, Bangladesh, Bhutan, Nepal and Maldives under Trade Liberalisation Programme (TLP) agreed in South Asia Free Trade Area (Safta) agreement.

The Federal Board of Revenue (FBR) has issued SRO 1297(I) 2008 here on Wednesday which would be effective from December 31, 2008. Pakistan has not accorded 'Most Favoured Nation' status to India till date; despite signing Safta agreement. The trade with India is governed under the Positive List of the Import Policy Order. Under this arrangement, Safta customs tariff reduction benefits to India would be available on import of 1926 items.

The benefits of Safta would only be available on items allowed under the Positive List of Pakistan. The FBR has also issued tariff reduction road map from December 2008 to December 31, 2011 under the notification for the benefit of trade and industry of the Saarc member countries.

Under Article 7 of the Agreement, tariff reduction modality is defined as TLP which started from July 1, 2006 under which non-LDCs countries of Safta, including Pakistan, India, Sri Lanka, shall reduce tariff to 0-5 percent for LDCs (Bangladesh, Bhutan, Nepal, Maldives) within three years or by end of 2009.

According to the tariff reduction modalities agreed under Safta, tariff reduction by Pakistan, India, Sri Lanka being non-least developed countries (non-LDCs) for Least Developed Countries (LDCs) including Bangladesh, Bhutan, Maldives and Nepal being LDCs to be completed in two phases.

Under Phase-I (2006-08), the existing tariff rates above 20 percent is to be reduced to 20 percent within two years and import tariff below 20 percent to be reduced on margin of preference basis of 10 percent per year. As agreed, Phase-II (2008-13) tariff is to be reduced to 0-5 percent within 5 years.

Tariff reduction by least developed countries (LDCs), including Bangladesh, Bhutan, Maldives and Nepal is to be completed in two phases for all Saarc members. Under Phase-I (2006-08), existing tariff rates above 30 percent is to be reduced to 30 percent within two years and import tariff below 30 percent is to be reduced on margin of preference basis of 5 percent per year. According to the agreed Phase-II (2008-16), the imports tariff is to be reduced to 0-5 percent within 8 years. All members have maintained sensitive lists and they have decided not to offer any tariff reduction on items in the Sensitive List.

 

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Pakistan to receive $500 million each from China and World Bank: Tarin​

AHMED MUKHTAR
ISLAMABAD (January 01 2009): Pakistan will receive $500 million from China by January 4 or 5, and would also avail $500 million tranche during this quarter (January-March), says Advisor to PM on Finance Shaukat Tarin. He said that the government stock market fund would start buying in market from next week.

Talking to media after addressing National Assembly standing committee on finance and rushing to Presidency, he confessed that economy this year would take a nose-dive, at 3-3.5 percent GDP growth, aiming to a roaring recovery next year.

Balance of payments is improving, CPI inflation is likely to dip a bit as SPI data of last four weeks is down indicating a supportive omen for December data. These things show that by the end of this fiscal year the country would be heading towards a better performing year ahead, Tarin said. This fall in inflation would also close the doors for further tightening of monetary policy.

He defended the banks, saying that some big banks were not paying better returns, but others were offering 15-17 percent return which leaves no room for any criticism on them. Spread for banking cost is 2.5 percent, 1.5 percent is credit cost, and remaining is paid for the 15-17percent, he said.

"That is the only sector which is performing in most difficult conditions and hopes to improve in recovery too", he added. He censured previous policies of pursuing growth in high inflation scenario which led to hyper-inflation, as happened in Turkey, Brazil, Mexico and somewhat in Philippines.

Tarin said that Pakistan's market is out of Morgan Stanley Capital International Emerging Market Index because of this floor, restricting free market operations. "Previously, a few brokers earned. When they did, nothing was shared with anyone, and now they are down and are asking for government's SOS. No one in the world had rescued any broker", he remarked on criticism of government's lacklustre role over market fall. "Do not ask me to deleverage anyone; I am watching reprimand from brokers on various media. They are behind all such protest. They are blaming me", he asserted.

He said that the market has agreed to get rid of 12.5 percent discount, which would end soon, as the market was earlier falling 5 percent and now at 2 and 2.5 percent, it would have a soft landing soon. Tarin called for removing CFS from the market. "There are a few instruments in our market which are misused and cause speculation. I have asked SECP chief to eliminate CFS from the market after this discount issue is resolved", he said.

 

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Rs20bn stock market bailout fund launched​

Friday, January 02, 2009
By Salman Siddiqui

KARACHI: The much-awaited Rs20 billion equity fund, which would be injected into local bourses with a view to preventing excessive losses, was formally launched here on Thursday.

However, the fund’s launch came with much delay which was evident from over 63 per cent fall in the leading 100-share index of the Karachi Stock Exchange from an all-time high reached in April last year.

National Investment Trust (NIT), the manager of the fund, announced its launch at a press conference here. The fund called NIT-State Enterprises Fund (NIT-SEF) will be used for purchase of only eight state-owned securities including (1) Oil & Gas Development Company (OGDC); (2) Pakistan State Oil (PSO); (3) Pak Petroleum Ltd (PPL); (4) Sui Northern Gas Pipelines Ltd (SNGPL); (5) Sui Southern Gas Company (SSGC); (6) Kot Addu Power Company (KAPCO); (7) National Bank of Pakistan (NBP); and (8) Pakistan Telecommunication Company Ltd (PTCL).

When asked at what time the fund would start buying above securities, NIT Chairman Tariq Iqbal Khan kept his words reserved. But when a journalist shared the information that the adviser to PM on finance has said the fund would be activated next week, he replied: “Whatever the adviser has said will be implemented.”

The government has provided sovereign guarantee to the moneylenders in NIT-SEF, as if the Trust fails to return the received amount of Rs20 billion to the lenders at the completion of a three-year term then it (the government) will compensate the lenders, said the NIT chairman. Lenders have provided Rs20 billion at KIBOR plus one per cent rate.

Accordingly, National Bank of Pakistan (NBP) has provided Rs7 billion; Employees Old Age Benefits Institution (EOBI) Rs5 billion; State Life Insurance Corporation (SLIC) Rs2.5 billion and the rest Rs5.5 billion in a syndicate of eight to 10 banks. Lenders cannot ask NIT-SEF to pay back their amount before the agreed three-year period, but NIT has the right to pay off the debt at any time during the said period, Khan said.

Lenders will have nothing to do with the ‘profit and/or loss accounts’ of NIT-SEF, as whatever will be the result of the fund injection into the market it will be of NIT-SEF and its unit holders, he said.

“This fund intends to sell units to non-resident Pakistanis after initial operation and after the market stabilises,” said a written statement of NIT. “As far as the sale of units to the resident Pakistanis is concerned then I see in this matter in future and I will have to know the consent of trustee of the deed in this regard as well,” the NIT chairman said.

On another query, the NIT chairman said details of the fund have been sent to International Monetary Fund (IMF), as they had asked for. This fund was, however, provided by the lenders from their authorised limits of playing at the equity markets, he answered.

“We very strongly feel that the fund due to these stocks with strong fundamentals would perform well and provide the necessary security to the financers of the fund and send strong signals to the market which is depressed at this point of time, said in a statement.

The legal work which retains a lot of details and paper work including the registration and approval of the fund, financing agreements, guarantees etc. has been completed, the statement added.

The chairman clarified that NIT-SEF is a separate fund in all respects from the existing other three funds being managed by NIT.

 

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FBR collects Rs1.54bn under amnesty scheme​

Friday, January 02, 2009
By our correspondent

ISLAMABAD: Some 10,828 people declared Rs77 billion worth of assets in response to a tax amnesty scheme for whitening black money by paying 2 per cent tax.

Under the scheme, the Federal Board of Revenue netted Rs1.54 billion till December 31, 2008, the FBR announced here on Thursday.

Most of the assets were declared in Lahore as the Large Taxpayer Unit and Regional Taxpayer Office there dealt with 4,117 cases under which the tax paid totalled Rs788 million.

“We will take strong action under the law against those who did not avail of this opportunity by declaring their assets,” FBR Chairman Ahmed Waqar said in an exclusive talk with The News here on Thursday. He said the FBR would launch action against those who did not declare their assets and it could not be termed ‘harassment’ on the part of tax authorities.

“The law of land gives us authority to act against non-filers,” he added. He said on Thursday was a bank holiday so the FBR would come up with exact figures of declared assets on Friday as there are reports that a number of taxpayers availed this opportunity on the last date i.e. December 31, 2008.

According to the FBR, the board has collected Rs1.54 billion through the tax investment scheme announced in July this year. According to details, some 10,828 cases seeking to benefit from the scheme were received by FBR until December 31, 2008, the last day of the scheme, and were settled after netting Rs1,542 million as tax equaling two per cent of the fair market value of their assets. The scheme was run by the 16 regional tax offices and large tax payers units of the FBR and received a record 4,114 cases from the RTO Lahore followed by 1,861 cases received in RTO Karachi.

The break-up of the collection shows that an individual in the jurisdiction of Large Taxpayers Unit (LTU) Karachi paid Rs25 million by availing this Tax Amnesty Scheme. Regional Taxpayers Office (RTO) Karachi received 1,861 cases under which Rs288 million tax was deposited into the national kitty.

There is only one case in jurisdiction of LTU, Islamabad in which the taxpayer paid Rs0.4 million tax. RTO Rawalpindi received 979 cases with paid tax of Rs86 million while RTO Islamabad dealt 9 cases and paid Rs6 million into the national kitty. The RTO Multan received 101 cases and paid tax stood at Rs15 million, RTO Faisalabad dealt with 925 cases with paid tax of Rs93 million, RTO Peshawar got 246 cases with paid tax of Rs43 million and RTO Sialkot dealt with 522 cases with paid tax of Rs47 million.

The RTO Hyderabad received 868 cases for declaring assets with paid taxes of Rs44 million; RTO Quetta 48 cases with paid taxes of Rs12 million; RTO Gujranwala 572 cases with paid taxes of Rs65 million; RTO Sukkar 495 cases with paid taxes of Rs23 million and RTO Abbottabad 83 cases with paid taxes of Rs7 million.

 

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Separate tariff for CNG industry sought​

Friday, January 02, 2009
KARACHI/ISLAMABAD: The CNG Stations Owners Association of Pakistan (CSOAP) has urged the government to introduce a separate tariff for CNG industry to protect investment by CNG station owners and middle & lower middle class vehicle owners who have already spent in billions.

In a statement after a meeting of CSOAP executive committee members here on Thursday, President Malik Khuda Buksh said that the recent steps by the government to increase gas price would damage the CNG industry and would put additional burden on the common man who is already burdened by huge inflation.

The investments of more than 60 billion of middle and lower middle class people who converted their vehicles to use cheap and environment friendly CNG would go waste if the government does not revert the recent increase of gas price immediately.

“This 10 per cent rise in gas prices is unjustified and uncalled for when the fuel prices all over the world have gone down considerably”, he added.

Malik Khuda Buksh said that it would force the CNG vehicle owners to buy CNG at a higher rate and would force CNG stations to close down their businesses leaving 2.1 million households (vehicle owners) including rickshaws and taxis to come to a halt. He said the association has urged the Ministry of Petroleum and OGRA to keep the CNG policy 1992 enforced as any unwanted change in the said policy could really be damaging for CNG industry in particular and the economy as a whole.

He pointed out that CNG Policy had provided a cover to millions of vehicle owners who had made investments to use the environment friendly fuel, which is very cost effective and provides a cheaper fuel for them.

Any change in the said CNG policy would discourage investment and result in political turmoil since it would force the middle and lower middle class to use higher priced fuel, either petrol or diesel, which have extremely harmful effects on our environment as well, he added.

CSOAP president claimed that CNG has resulted in savings of more than $250 million per annum of foreign exchange for Pakistan. CNG sector as a whole consumes less than 6 per cent of total gas output from SSGCL and SNGPL.

They refuted the claims by some industrialists and government officials that load shedding at CNG stations would help industry and household consumers to get uninterrupted gas supply and said it was contrary to the facts. In fact, load shedding for CNG stations would bring more than 2.1 million vehicles to a halt and would aggravate the situation, he noted.

CSOAP demanded that in order to promote use of CNG in vehicles, a minimum price differential of 50 per cent needs to be maintained at all times so as to discourage people to use environmentally harmful and hazardous fuel ie diesel in vehicles.

He said that the participants of the meeting have affirmed that if their genuine demands were not met by the government, they will be forced to shut down their businesses and would not be able to pay their leasing payments and other loans.

Price hike opposed: All Pakistan CNG Association on Thursday denounced CNG’s price increase and demanded the government to withdraw it by Jan 5.

“Price increase of CNG is highly detrimental to industrial growth”, said Tariq Kundan, the President of All Pakistan CNG Association in a briefing to the media persons.

Around 2800 CNG stations would shut their business if government couldn’t withdraw the proposed increase. Till January 5, CNG’s owners would not charge increased price.

 

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First ever private sector CFC inaugurated​

PESHAWAR (January 02 2009): General Manager Smeda, Syed Iqbal Kidwai on Thursday inaugurated a Common Facility Center (CFC) at Takhtbhai Mardan, first ever CFC established by private sector through Anjuman-e-Loharan Takhtbhai with support of Smeda. A simple ceremony was held in the presence of stakeholders where it was resolved that SMEs of the cluster and Smeda would work hand-in-hand to make this center a huge success story for the industrial clusters, said a press release issued here.

Haji Amir Sani President of the Association appreciated efforts of Smeda team. He specially thanked Kidwai for embracing the occasion by his presence and he thanked Provincial Chief Javed Khattak, Manager Sarmad H Khan and other team members of Smeda for their untiring efforts to make this dream a reality.

Syed Iqbal Kidwai congratulated members of the Association on this landmark achievement that would benefit SMEs of the region in a long way. He asked representatives from other industrial clusters to follow this model to get advantage from joint purchases and utilisation of common facilities that will result reduction in cost of production.

Javed Khattak shared the whole process of establishing the CFC starting from idea generation till execution of the idea. He informed that the project in its soft launch period of two months resulted in a monetary benefit of around Rs 200,000 to the SMEs. On full production of CFC, it is expected that monetary benefit of SMEs would go up to Rs 2 million in month basis.

Khattak praised unity and teamwork displayed by entrepreneurs of the cluster in the whole exercise and he stated that there is no doubt that this CFC would become a role model for the whole industry if the same devotion and determination is continued by the stakeholders. Samad H Khan highlighted future plans of CFC expansion and support of Smeda in future initiatives in the cluster.

 

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Fast track development of Fata top priority​

PESHAWAR (January 02 2009): The fast track development of Fata is the top priority of the government and all out efforts are being made to provide maximum healthcare facilities to the tribesmen.

An allocation of Rs 829.694 million has been made in the current financial year for implementation of 129 development schemes in health sector embracing projects like control of communicable diseases and aids, improvement and rehabilitation of the existing health institutions, strengthening of mobile hospital programme to provide medical facilities to the tribesmen of the far-flung areas at their door steps and a feasibility study for construction of a Medical College in Fata.

According to a handout of Fata Media Cell issued here on Thursday, a total of sixteen Civil Hospitals, Rural Health Centers (RHC) and Basic Health Units (BHU) are being upgraded to type 'D' hospitals at a cost of Rs 1162.972 million. Out of this Rs 423.375 million have already been spent while Rs 204.573 million are being spent during the current fiscal year.

The health institutions being upgraded to type 'D' hospitals include Civil Hospital Nawagai and RHC Pashat (Bajaur Agency), BHU Had Kore Ambar and BHU Momad Gat (Mohammad Agency), BHU Dogar (Kurram Agency), Civil Hosptial Kalaya and RHC Dabori (Orakzai Agency), Civil Hospitals Datta Khel and Razmak (North Waziristan Agency) and Civil Hospital Darazinda (FR DI Khan).

Moreover, type 'D' hospitals at Makin and Sarwakai (South Waziristan Agency) and Dara Adam Khel (FR Kohat) have been established, reconstruction of Civil Hospital Jandola (FR Tank) and its up-gradation to type 'D' hospital. Conversion of BHU Shin Dand and into type 'D' hospital is also included in the scheme of up-gradation while Tehsil Headquarters Hospitals Saddah (Kurram Agency) and Mir Ali (North Waziristan Agency) are being upgraded to type 'C' hospitals.

All these development schemes in health sector, Fata are designed to provide best possible treatment facilities to the tribesmen. A sum of Rs 7.560 million has been earmarked for establishment of an emergency center in Dara Adam Khel (FR Kohat) to provide immediate medical relief to coal miners in case of an accident.

 

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Malaysia tops FDI list in Pakistan​

M RAFIQUE GORAYA
LAHORE (January 02 2009): Malaysia tops the list of investors making direct foreign investment (FDI) in Pakistan during the first six month of current financial year (July-December, 2008) with Maybank making the biggest investment of 907 million dollars in banking sector followed by Saudi Arabia with an investment of 750 million dollars in steel sector and United Arab Emirates (UAE) with an investment of 500 million dollars in power sector.

In an e-mail message to Business Recorder, Pakistan High Commission in Kuala Lumpur said the current global economic meltdown had not deterred the foreign investors, including Malaysia, to invest in Pakistan, as the Pakistan's economy had shown resilience and had defied the economic recession with registering growth in the FDIs.

According to latest data, released by the Ministry of Foreign Affair recently, the FDI during the first five months of the current financial year reached 1.8 billion dollars, registering an increase of 1.5 percent, export reached 8.2 billion dollars, registering a growth of 20 percent and foreign remittance at 2.9 billion dollars, registering an impressive increase of 15 percent.

According to the data, another Asean-member country, Singapore, has made an investment of 147 million dollars in banking sector and 30 million dollars in power sector and as such trails far beyond Malaysia. Other countries, which are rushing to Pakistan for FDI in banking sector are Switzerland with an investment of 200 million dollars, United Kingdom 125 million dollars and Saudi Arabia 200 million dollars.

The countries making investment in hypermarkets in Pakistan are Germany with an investment of 100 million dollars, Holland with an investment of 100 million dollars and France with an investment of 40 million dollars, whereas countries making investment in power sector are the UAE with an investment of 500 million dollars, Opec with an investment of 30 million dollars and Turkey with an investment of 130 million dollars.

The Information, released by the Ministry of Foreign Affairs, says that China, UAE and Korea have also announced additional investment in telecom, banking and power sectors.

China has announced 800 million dollars in telecom sector, UAE has committed an investment of two billion dollars in banking sector and Republic of Korea has announced investment of 300 million dollars in hydropower sector.

In addition, Chinese companies have further announced FDI to Pakistan at five billion dollars and UAE/Saudi Arabian companies have assured FDI of three billion dollars during the current financial year of 2008-09. The data further suggests that foreign investors, who have burnt their fingers elsewhere, are finally beginning to look at Pakistan as safe haven for long term sustainable and profitable partnership.

 

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Pakistan's foreign exchange reserves up by $227 million​

RECORDER REPORT
KARACHI (January 02 2009): The country's liquid foreign exchange reserves surged by some 227 million dollars during the last week. The total liquid foreign exchange reserves held by the country stood at 9.662 billion dollars on December 27, 2008 as compared to 9.435 billion dollars on December 20, 2008.

Foreign exchange reserves held by the State Bank of Pakistan stood at 6.369 billion dollars from 6.148 billion dollars, depicting an increase of 221 million dollars. In addition, foreign exchange reserves held by banks also witnessed a surge of some 5.1 million dollars to 3.292 billion dollars during the last week.

 

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Purchase of 75 locomotives: Zardari's intervention helps Chinese firm win Rs four billion contract​

SAFDAR RASHEED
LAHORE (January 02 2009): On the intervention of President Asif Ali Zardari, Pakistan Railways has finally awarded contract worth rupees four billion to Chinese state-owned Donfang Electric Corporation (DEC) for the purchase of 75 locomotives, The Business Recorder has learnt. The contract award ceremony was held in Islamabad in the presence of Federal Minister for Railways.

The Pakistan Railways authorities and DEC officials signed the contract. Director of Procurement Nisar Mehmon and Member, Finance, Pakistan Railways, Jehangir Aziz signed the paper, and on the behalf of Chinese company Hoo Weidong, Vice-President of Donfang Electric Corporation (DEC) and Mli Depuo, General Manager Import and Export of Dillian Locomotives of China, signed on the contract documents.

It may be mentioned here that the Chinese company had offered to provide 75 engines at the cost of 107 million dollars as against the US company's tender of 227 million dollars. The cash starved Pakistan Railways had entered into several agreements with Chinese railway companies for its development and modernisation of its outdated system.

In 2001, Pakistan Railways signed a 91.89 million-dollar contract with China National Machinery Import and Export Corp for the manufacture of 175 new high-speed passenger coaches. The project was funded by Exim Bank China on a supplier credit basis.

Under an agreement, signed with China in 2003, Pakistan Railways purchased 69 locomotives of which 15 were delivered as completely built units, while the remaining 54 were built at Pakistan Railways' locomotive factory. The locomotives were purchased on suppliers' credit basis with funding provided by Exim Bank of China through the Dongfang Electric Corporation.

However, the quality of Chinese engines has come under severe criticism. There are circles that claim that the Chinese railway engines are not up to the mark, therefore, Pakistan should not buy additional railway coaches and engines from China.

Nevertheless, a senior Railway official remarked that the coaches and locomotives, provided by China on credit, were being successfully used on Pakistan's mail and express trains from Rawalpindi-Lahore-Karachi, Lahore-Faisalabad and Rawalpindi-Quetta.

He said: "Pakistan Railways is already facing an annual deficit of Rs 42 billion. Therefore, we have to keep in mind the price tag of each locomotive engine. A man, who could afford only a Suzuki car should not dream of a Mercedes or BMW car," he emphasised.

He said the technical and the tender committee had not unduly favoured Dongfang in awarding the contract as it had fulfilled all required technical requirements and standards. Under another project, the Chinese companies are rehabilitating 450 passenger coaches at an estimated cost of Rs 2.14 billion. The project also included the conversion of 40 coaches into air-conditioned cars and the conversion of 10 power vans.

Furthermore, there was a provision of 100 new high-speed bogies, 30 of which were imported from China, while 70 were manufactured locally on a transfer-of-technology basis. It may also be mentioned that President Asif Ali Zardari has intervened to resolve the thorny issue of purchase of 75 locomotives by Pakistan Railways, and directed the government to decide the matter on merit.

Chinese Ambassador Luo Zhaohui met the President at the Aiwan-e-Sadr, and briefed him about pressures on the Pakistan Railways to cancel the 107 million-dollar deal with the Chinese state locomotive manufacturing company, Dongfang (DEC), for the purchase of 75 railway engines.

It is pertinent to recall that Chinese firm was the lowest bidder in the international tender and the Pakistan Railways had accordingly awarded the contract to it in July. The contract document has already been finalised, the Ministry of Law has vetted it and each has been stamped.

Sources said the only reason for the delay in signing was the availability of the Prime Minister of Pakistan to grace the signing ceremony for which reason the Chinese extended the validity of their bid from October 31, 2008 to November 30, 2008. After the President's intervention and directives to the Railways Ministry, Dongfang has further extended the validity of its bid till December 31, 2008.

Contract of 75 locomotives was awarded to Dongfang Electric Company (DEC) on July 31, 2008 subsequently Pakistan Railways confirmed this vide letter issued dated September 22, 2008. The draft contract agreement was finalised on September 29, 2008 and forwarded to the Law Division, government of Pakistan for vetting the agreement.

A high official in the Pakistan Railways told Business Recorder that it was admirable that as a responsible company, despite changing economical situation and other difficulties, the Chinese state-owned company was maintaining its prices of more than 14 months ago as a good gesture of co-operation towards Pakistan.

DEC Chief Executive officer Li Hong had also appreciated the role of Federal Minister for Railways Haji Gulam Ahmad Bilour in finalising the contract on merit. He said this decision would further strengthen the bilateral as well as business and friendly relation between Pakistan and China.

 

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Agreements of exchange companies with foreign entities: State Bank develops new guidelines​

RECORDER REPORT
KARACHI (January 02 2009): State Bank of Pakistan has issued new guidelines for home remittances related agreements of Exchange Companies with Foreign Entities. SBP said that over a period of time, while reviewing agency arrangements of Exchange Companies, certain structural weaknesses have been identified which could impair Exchange Companies ability to effectively mobilise funds from overseas.

Therefore, in order to facilitate Exchange Companies in their diligence process and bring uniformity & discipline in agency arrangements of exchange companies, it is considered necessary to provide fundamental structure of agency arrangements.

In the above backdrop, SBP has developed some guidelines and it is mandatory for Exchange Companies to follow them in true spirit. These guidelines do not supersede other directives issued by State Bank of Pakistan in respect of areas not covered therein. Please note that overall responsibility of safeguarding interest of the company and avoidance of all related legal, regulatory and commercial risks would rest with the company.

GUIDELINES:

SELECTION OF FOREIGN ENTITIES:

1. Only those foreign entities that have effective customer acceptance and KYC policies and are effectively supervised by the relevant authorities should be selected for agency arrangements

2. No arrangements should be entered into or continued with a correspondent entity incorporated in a jurisdiction in which it has no physical presence and which is unaffiliated with a regulated financial group.

3. Particular attention should be paid when continuing relationships with entity located in jurisdictions that have poor KYC standards or have been identified by Financial Action Task Force as being "non-co-operative" in the fight against money laundering.

PRE-AGREEMENT STAGE:

1. The Exchange Companies should develop a general understanding of legal & regulatory framework of the jurisdiction involved with respect to the following:-

i. Rules related to licensing requirements.

ii. Rules regarding opening/closing/shifting of business locations.

iii. Rules governing remittances transactions.

iv. Anti Money Laundering & KYC requirements.

v. Laws & regulations related to overseas agency arrangements.

2. The copy of license issued by concerned regulatory body to the foreign entity should be obtained and to confirm that the entity has power to enter into or execute such arrangements.

3. The Exchange Company should obtain brief introduction of sponsors of the foreign entity and thoroughly investigate their credentials and market repute.

4. The details of network of the foreign entity should be in the possession of Exchange Company.

5. The list of existing agency arrangements of the foreign entity should be obtained.

6. All agreement should be made with the principal company and not with any of its agent/subagent. Further, all negotiations/communications should be made/addressed to authorised person of the counter- party.

ESSENTIALS OF THE AGREEMENT:

1. The agreement should be for payment of home remittances in PKR only.

2. All funds against home remittances should be received in advance in Exchange Company's FCY Accounts maintained with banks in Pakistan. In this regard, attention is also invited to Circular letter No 13 dated August 04, 2006.

3. For transactions greater than USD 1,000 the agreement should require foreign entity to provide address of senders in addition to his/her name. However, address may be substituted with any unique Identification Number/ National Identity Number/Customer Identification Number/Date & Place of Birth.

4. The agreement should be non exclusive meaning thereby that it should not restrict Exchange Company, directly or indirectly, from offering similar competing services under other arrangements.

5. The agreement should give ownership rights of all related accounting/book-keeping and other record to Exchange Company and the same is be maintained for at least five years.

6. The agreement should not contain clauses which give blanket approval to foreign entity to assign or transfer their part of the agreement or any right or duty thereof, to any third party without prior approval of SBP.

7. The agreement should be in compliance with all the regulations, instructions, directives, circulars and other communications issued by the State Bank and contains provision of incorporating any amendments made therein from time to time.

8. The agreement should ensure compliance of prudent practices and standard policies related to Internal Controls, Information Technology, Anti Money Laundering and Know Your Customer etc.

9. The agreement should not compromise State Bank right to terminate the agreement at any time.

POST-AGREEMENT FOLLOW UP:

1. The Exchange Companies should continuously monitor market repute and financial condition of the foreign entity to ensure that all the time during validity of the agreement, foreign entity is capable to meet its financial obligations under the agreement.

2. Foreign entity should be bound to immediately bring into notice of the company any change in laws, rules and regulations, which may effect business arrangements.

3. For any subsequent amendment in the agreement, prior approval of SBP should be ensured.

4. Foreign entity should also be required to keep EC updated about any change in its network. SBP has advised all Exchange Companies to review their existing arrangements with foreign entities and submit to SBP a copy of the revised agreements in light of the above guidelines latest by March 31, 2009.

 

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NIT launches Rs 20 billion State Enterprise Fund​

RECORDER REPORT
KARACHI (January 02 2009): The National Investment Trust (NIT) has formally launched the much awaited Rs 20 billion NIT State Enterprise Fund (NIT-SEF) on Thursday. This is an open-end fund and is a separate fund in all respects from the existing funds being managed by NIT, Tariq Iqbal Khan, Chairman and MD, NIT said at press conference here.

"NIT is now in a position to launch the NIT-SEF without any delay and NIT has completed all the necessary legal work, which includes signing of the agreement with the financing institutions and the approval of guarantee by the government of Pakistan", he said.

The legal work which entailed a lot of details and paper work, including the registration and approval of the fund, financing agreements, guarantee, etc has been completed. He said that the fund will starts buying soon. However, the fund will invest in only eight eligible stocks, which are OGDC, PSO, PPL, SNGPL, SSGC, KAPCO, NBP and PTCL.

He pointed out that the four institutions provided financing for the said fund. Among these financing institutions, NBP contributed Rs 7 billion, EOBI provided Rs 5 billion, State Life Corporation of Pakistan invested Rs 2.5 billion while the remaining Rs 5.5 billion were given by a banking syndicate.

He said that these financing institutions invested this amount at the rate of KIBOR+1 for three years and they are bound to not withdraw their money before the given three years time. However, NIT has the right to return their money before three years period. The government of Pakistan has given a guarantee to these financial institutions to compensate their losses, if recorded within the three years period.

He made it clear that the said financial institutions provided funds on a fix rate of KIBOR+1, and all the earnings will go to NIT. "We are bound to payback to the financing institutions on the agreed rate of KIBOR+1 on their investments in the said fund. However, all the earnings and profit on the investment of the said fund will go to the NIT", he said. Tariq Iqbal said that this fund intends to sell units to the non-resident Pakistanis after the initial operation and after the market stabilises.

"We very strongly feel that the fund, due to these stocks with strong fundamentals, would perform well and provide the necessary security to the financiers of the fund and send strong signals to the market, which is overly depressed at this point of time", he added. He said that this is the fourth fund managed by NIT. However, the NIT-SEF is a separate fund in all respects from the existing funds being managed by NIT.

 

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Govt to prefer public-private partnership in privatisation ​

Saturday, January 03, 2009

ISLAMABAD: The government, in its policy of privatising major enterprises, would prefer pubic-private partnership rather than selling whole units, a senior government official told The News on Friday.

“The government in a major U-turn on privatisation of public units has decided to enhance workers’ share in privatisation and rather than selling whole units, only their managements will be sold,” said the official who participated in Wednesday’s briefing on privatisation to President Asif Ali Zardari.

In the privatisation drive of the previous Aziz government, workers were offered 10 per cent shares in units, but “now workers’ shares will be enhanced to their satisfaction and also with the consent of management.”

A committee has been set up to assess the exact quantity of shares to be offered to the workers, however, the official was of the view that their shares would range from 10 to 20 per cent.

About the two major companies on the privatisation list ie Qadirpur gas field and Pakistan Steel Mills, the official said they would not be sold without consultation with the management, union representatives and other stakeholders.

The government would also hold a briefing for parliamentarians on the privatisation list and with their input, the policy would be formulated, said the official.

To a question about flotation of Global Depository Receipts (GDRs) of public listed companies, the official said market conditions both internationally and domestically were not favourable and the GDRs would be issued at an appropriate time.

 

[Neo]

Water, power projects for Balochistan planned ​

Saturday, January 03, 2009

ISLAMABAD: The PPP-led government is taking all possible steps to provide basic amenities to the people and for the development of Balochistan.

Federal Minister for Water and Power, Raja Pervez Ashraf stated this while talking to the Chief Minister of Balochistan, Nawab Muhammad Aslam Khan Raisani who called on him at his office here on Friday. Provincial Minister for Finance and Revenue, Asim Kurd Gillo and Adviser Ministry of Water and Power, Riaz Ahmed Khan were also present.

The minister said that different water and power projects with special allocations have been planned in various parts of Balochistan to meet its electricity and water requirements.

Ashraf said a rental power project of 200 megawatts is being set up at Quetta while feasibility study of four dams namely Hingol, Winder, Sukleji and Naolong has been completed by Water and Power Development Authority (WAPDA).

Construction work on the Hingol dam will start soon and after completion of the proposed four dams, plenty of water would be available for irrigation of land for cultivation, he said.

Both the minister and chief minister discussed the current power situation, future water and power projects and progress on the import of power from Iran. The minister asked the chief minister to use his good offices for recovery of long outstanding dues both from the public and private sectors.

The chief minister also discussed political, social and other matters of mutual interest for the development of Balochistan. He expressed hope that due to the allocation of special funds by the federal government, the people of Balochistan would get all the basic facilities.

 

[Neo]

Clearance of power-related circular debt: President directs ministries to work out plan​

ISLAMABAD (January 03 2009): President Asif Ali Zardari on Friday directed the concerned ministries to devise a workable plan to clear the whole circular debt and huge money owed to private power producers by June this year. Following the direction by the President, Finance Ministry released Rs 7.5 billion for partially meeting the fuel cost for power generation.

Water and Power Minister Pervaiz Ashraf said this at a press conference along with Minister for Information Sherry Rehman after a meeting on energy crisis, chaired by President Asif Ali Zardari and Prime Minister Yousuf Raza Gilani in President House here on Friday.

The meeting was also attended by Advisor on Finance Shaukat Tarin, Advisor to PM on Petroleum Dr Asim Hussain and representative of Wapda and public sector corporations related to oil and gas, and Irsa and KESC.

Ashraf said that it was also decided to arrange 30,000 tons fuel supply per day for power generation purposes. He said that it was decided to provide 50 million cubic feet additional gas and 8,000 tons fuel oil to KESC to increase its power generation capacity. This would lift the burden from Wapda which would thus be able to inject several hundred megawatts in the national grid supplies to KESC.

The meeting decided that, subject to the agreement of Punjab government, Indus River System Authority (Irsa) should immediately release additional quantities of water to augment hydroelectric generation.

Ashraf said that circular debt worth Rs 400 billion was the main bottleneck that had resulted in bulk of problems, and added that the government was still providing Rs 10-12 billion per month subsidy for power consumers. He said that Pakistan Electric Power Company (Pepco) was to receive Rs 70 billion dues from Federally Administered Tribal Areas (FATA) and Rs 80 billion from Karachi Electric Supply Company (KESC). Pepco provides 700 mw per day electricity to KESC.

The Minister said that former government had capped the prices for political gains which resulted in huge circular debt. He said that when the present government had the pending dues of Rs 158 billion that were to pay for power generation. He said that former government had not produced even a single power unit.

He said that at present the country has 6500 mw power from all sources against the national demand of 11000 mw with a shortfall of 4500 mw followed by decline in water flow, slump in oil and gas supplies needed for thermal generation, forcing load shedding in the country. He pledged to add 3500 mw power in the national grid station by December 2009 that would help eliminate the load shedding in the country.

He said that water inflow was historically low as it was 36 percent less than the flow during the corresponding period of last year causing a huge drop in hydro generation, and added that the decrease in fuel supplies had caused a shortfall of 2700 mw of power. In January last year there was a shortfall of 3600 mw of power which had now aggravated to 4500 mw.

The Minister said that during the meeting the President directed to end load shedding of natural gas for domestic consumers, besides adopting short and long term measures to meet energy shortfall in electricity. The President said it was imperative that problems of the people are not compounded by resorting to gas load shedding.

During the meeting, convened by the President to discuss the situation arising out of shortage of petrol, gas and electricity in the country, the President called for taking innovative steps to meet power shortage on long term basis as was done by the PPP government in mid-90s, the minister said.

He said that the President advised the government to convene another meeting this week for working out a long term solution to the problem. The President said the meeting should also examine the proposed petroleum policy to provide incentives to entrepreneurs to explore oil and gas.

Sherry Rehman said that during the meeting a formula was chalked out to tackle the problem of energy crisis, and added that 2000 mw electricity would be added to the existing national power grid station. She said that due to water shortage and canal closure in Punjab the hydropower generation had dropped, leading to a series of load shedding. She said that the meeting decided that there would be no gas load shedding for the domestic consumers across the country.

The President said that a number of Chinese companies had shown interest in oil and gas exploration and could be approached for this purpose. He said that measures agreed upon would provide a short term immediate solution but there was a need for devising strategy for the mid and long term solution of the problem.

According to her, the President said that special meeting on energy would be convened this week, which should also address the issue of circular debt in the power sector and recommend ways to address it.

The minister for water and power informed the meeting that nearly 158 billion rupees debt was left unpaid by the previous government, which it owed to power producers and oil companies.

The Advisor to the Prime Minister on Finance said that his ministry would devise plans within the stipulated time. The meeting was informed that these measures will result in immediate improvement in the power supply situation, at least in the short term.