Pakistan Economy - News & Updates - Archive

[Neo]

China, World Bank keen to invest in Thar coal project: Qaim ​

KARACHI (January 15 2009): Sindh Chief Minister Syed Qaim Ali Shah on Wednesday said that China and the World Bank are keen to invest in Thar coal project for energy generation and the business community be assured that the electricity crisis will end in a year.

Federation of Pakistan Chambers of Commerce & Industry members voiced their concern over the worsening law and order situation and ongoing energy crisis during a meeting with the Chief Minister as he visited the Federation House here. This situation has reduced the industrial growth phenomenally, due to which unemployment peaked and gave rise to street crimes, the members said.

The CM while replying to the volley of questions said that the government is working on a two-tier policy - political and economic - to create social and economic stability in the country. He acknowledged that the law and order situation has deteriorated in the wake of massive unemployment that escalated from the decline in industrial growth after sheer energy shortage.

Commenting on the issues raised by FPCCI President Tanvir Ahmed Sheikh, Qaim said that the economic crisis in Pakistan has fortunately not reached the level that is being faced by other greater world economies including the US. The problems are still there and need resolution, he added. He apprised the business community that the government has recently held a conference in Washington, attended by around 35 countries.

This conference has raised hopes for investment in the energy sector, he added. He maintained that keeping in view the World Bank's interest in Thar coal, the government is likely to give the bank two of eight developed blocks. He said that there is Thar Energy Board headed by the CM himself offering one-window operation to investors.

Now the investors need not run from pillar to post for getting their jobs done. The board is backed by the federal and provincial governments. The previous Thar Coal Authority failed to play its due role and remained almost inactive, the CM observed.

There is Rs two billion investment offer for Thar coal project, he said, adding that the project will not only enable the country produce electricity but also gas and water. He said that President Asif Ali Zardari is in touch with the business community on the overall economic situation of the country.

He termed the increasing unemployment as a "major challenge" not only for the government but also the business community. He urged industrialists to generate employment, as it is their prime responsibility. He said that the jobs should be given on merit to serve the purpose.

Inviting the attention of investors, Qaim said that in the present day economies, food production has attained great importance and has great potential to grow. Investment in the agriculture sector will also be encouraged, he added. He pointed out that various countries are eyeing the agriculture sector.

Qaim assured the FPCCI members of settling their claims of compensation for losses in the wake of December 27 hooliganism. Regarding land provision to business community willing to establish a university, he said a scrutiny committee has been set up with two members from the businessmen side.

He said the Sindh government is committed to ensure quality education and has reopened some 2500 closed schools. The World Bank is also assisting the Sindh government in developing the education sector. He said that some 7,000 teachers have been appointed while the Sindh government plans to appoint another 15,000 for universities and higher academic institutions.

 

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Hydroponic technology may help boost crops yield ​

FAISALABAD (January 15 2009): Pakistan may enhance vegetable and fruit crops yield with hydroponic farming technology to overcome the food shortages and price hike tendency. According to the Ministry of Agriculture sources, this technology would not only raise yield, but would also enhance nutrition abilities of plants. A hydroponic pilot project has recently been started in Rawat (Islamabad) under the name bio-blitz over just five acres of land.

The state-of-the-art five-acre Green House facility is producing hydroponic tomatoes of all varieties, including tangy, elegant, cherry and others. If hydroponics farming technology is introduced properly, then country can triple the revenues earned on agriculture exports.

According to agriculture scientists, there are two main types of hydroponics culture, namely solution culture and medium culture. The solution culture excludes roots as source of nutrition, while the medium culture is based on roots as part of the process.

The solution culture method is further divided into three types - static solution culture, continuous flow solution culture, and aeroponics. The medium culture, on the other hand, is based on medium through which the root is routed - sand culture, gravel culture or rock wool culture. These media of nutrition are again sub-divided into two categories - sub-irrigation and top irrigation.

In all these techniques, mostly plastic is used for hydroponic reservoirs, though other materials have also been used, which include concrete, glass, metal, vegetable solids and wood. Experts advise that the containers should block light to prevent algae growth in the nutrient solution. Hydroponics is a method of growing plants, using mineral nutrient solutions without soil. Terrestrial plants may be grown with their roots in the mineral nutrient solution only or in an inert medium, such as perlite, gravel, or mineral wool.

This technology was discovered in the 19th century. In this technology plants absorb essential mineral nutrients as inorganic ions in water. In natural conditions, soil acts as a mineral nutrient reservoir, but the soil itself is not essential to plant growth.

When the mineral nutrients in the soil dissolve in water, plant roots are able to absorb them. When the required mineral nutrients are introduced into a plant's water supply artificially, soil is no longer required for the plant to thrive. Almost any terrestrial plant will grow with hydroponics.

Hydroponics is also a standard technique in biology research and teaching. In recent decades, Nasa has done extensive hydroponics research for their Controlled Ecological Life Support System or CELSS. Hydroponics, intended to take place on Mars, are using LED lighting to grow in different colour spectrum with much less heat.

Researchers have obtained groundbreaking results in various countries, however the process has proved it to be thoroughly practical, having an edge over conventional methods of horticulture.

The two major merits of the soilless cultivation of plants are: (1) higher yield, and (2) hydroponics may be helpful in places where ordinary agriculture is impossible. That has removed constraints of cultivable land.

THE FOLLOWING ARE OTHER BENEFITS:

-- It saves water - it uses as little as 1/20 the amount at a regular farm to produce the same amount of produce.

-- Faster growth.

-- Freedom from soil diseases and weeds.

-- Very consistent crops mean uniform quality.

-- Less labour needed and cost effective. Scientists agreed that hydroponics fruits and vegetables are sweeter and more luscious than those grown in ordinary soil are. The technology is being utilised around the globe, including the US, European Union (EU) and African countries.

 

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Pakistan misses opportunity to export $300 million rice ​

KARACHI (January 14 2009): Pakistan has missed an opportunity to export rice worth $300 million as it could not participate in three different tenders of 0.750 million tons rice in international markets due to high prices, sources said. Pakistani rice was offered higher by $29 to $55 per ton as compared to others, sources added.

Sources said Pakistani rice exporters missed the opportunity to export 0.5 million tons rice to Philippine for their prices were much higher than the other participants. In the same way they missed another opportunity to export 175,000 tons rice to Iraq and 75,000 tons rice to Mauritius due to the same reason in last five days. Rice exporters from Thailand and Vietnam offered much lower prices and grabbed the opportunity to export the said quantity of rice to three different countries.

Pakistani rice exporters blamed the intervention of the government institutions in rice trade for the recent price hike of this commodity. They said that the price of coarse rice has increased by 30 percent in the local market. They were of the view that the country's rice export could affect negatively due to price hike.

Thailand and Vietnam are the major competitors as they are offering much lower prices in the international market. On the other hand, India, after having a bumper crop this year, can also affect the Pakistani rice export, they added. India is considering to abolish $200 per ton export duty on Basmati rice imposed last year, while the Indian farmers and exporters are asking their government for lifting ban on export of non-Basmati rice.

Pakistani rice exporters demanded of the government to take immediate supportive steps to promote the export of this commodity. They said that the private sector has played an important role in increasing rice exports from $300 million to $1.2 billion. They demanded that they should be allowed level playing field without intervention of the government-owned organisations to achieve the target of $2.3 billion rice export for this fiscal year.

 

[asaad-ul-islam]

[URL="http://www.dawn.net/wps/wcm/connect/Dawn%20Content%20Library/dawn/news/pakistan/govt-appreciates-economic-policies-of-musharraf-regime-aah]Govt appreciates economic policies of Musharraf regime[/URL]​

ISLAMABAD: While publicly it criticizes former President Musharraf for the present economic mess, the government in its official documents has appreciated the economic policies of the previous regime that became a strong base for seeking loans from multilateral donors and friends of Pakistan.

The PPP-led coalition partners have been blaming Musharraf regime in public speeches for fudging economic figures to paint a rosy picture, while its overall policies pushed the country into economic crisis.

The letter of intent (LoI), on the basis of which, Pakistan sought the much-needed $7.6 billion bailout package from the International Monitory Fund (IMF), has bit by bit appreciated the Musharraf policies since 2000.

During the past one decade (1999-2007), the LoI says Pakistan’s economy witnessed a major economic transformation from substantial increase in the volume of gross domestic product (GDP) to greater international trade.

Talking to Dawn on Thursday former Finance Minister Ishaq Dar said whatever he said about the health of economy was based on the balance sheet existed on March 31, 2008. He said the balance sheet was dully approved by the then cabinet headed by Prime Minister Syed Yousuf Raza Gilani.

He said no body denied the contents of the balance sheet. The focus of the previous economic policy was on promotion of consumerism without supporting the industrial base.

Apparently not willing to agree with the LoI contents, he said though he has a different view of the past economic growth but quickly added the same was destroyed in the last 15 months of the military led dictator.

An official source requesting not to be named said the economic wizards in the finance ministry are not politicians to make only speeches but they have to look into ground realities. ‘We reported to IMF whatever is factual and based on evidence,’ the official added.

The LoI said the country’s real GDP increased from $60 billion in 2000-01 to $170 billion in 2007-08 with per capital income rising from under $500 to over $1000. During the same period, the volume of international trade increased to nearly $60 billion from $20 billion.

For most of this period, real GDP grew at more than 7 per cent a year with relative price stability. The improved macroeconomic performance enabled Pakistan to re-enter the international capital markets in the mid-2000s. Buoyant output growth, low inflation, and the government’s social policies contributed to a reduction in poverty and an improvement in many social indicators.

Former Finance Minister Dr Salman Shah told this scribe the government has made the 170 million people fool while telling them pack of lies in the past nine months about the economic policies of the Mushrraf regime.

He said that as the present government acknowledged in black and white, the impressive past growth made their way easier to make access to the new facility of the IMF for emerging markets hit by the crisis to support the balance of payment problems.

Had growth not been achieved, Pakistan would have to apply for other long term IMF financing facilities like poverty reduction, structural adjustments etc, Shah said adding government should tell truth to the nation if they have confidence.

‘The recruitment made so far for running the finances of this country is very depressing. This shows this government has neither commitment nor capabilities to take the country out of the current crisis,’ Dr Salman said.

He said the government admitted in the LoI, the current crisis was because of price shocks, global financial turmoil and policy inaction during the political transition to the new government. He blamed the current government for blocking inward movement of $5 billion by suspending privatization of major transactions.

The short term liquidity facility established by IMF was for those countries that have a good track record of sound policies, access to capital markets and sustainable debt burdens with a size of loan up to 500 percent of quota with a three month maturity.

 

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SBP scales up export refinance by Rs3bn ​

Friday, January 16, 2009

KARACHI: The State Bank of Pakistan has increased the amount of export refinance by Rs3 billion to Rs182 billion.

In a meeting with Dr Mirza Ikhtiar Baig, Adviser on Textiles, SBP Governor Saleem Raza confirmed the surge in the present ceiling export finance for banks and said there were still Rs27 billion available with banks. “Unutilised export refinance amount has been transferred to needy banks,” he further said.

In a statement, Dr Baig said he explained to the SBP governor the crisis in the textile industry, decline in exports, closure of textile units, impact of global recession, high cost of doing business due to increase in mark-up, power-cum-gas rates and prevailing load-shedding.

He strongly advocated a write-down in the mark-up of banks by at least 2 per cent by reducing CRR (Cash Reserve Requirement) of banks with the SBP that would improve liquidity as the bank’s interest free funds with the central bank would be released.

The SBP governor promised to knuckle down some serious work on reducing CRR, which would cut the cost of funds of banks enabling them to decrease their lending rates. Dr Baig requested the governor to allow a one-year moratorium to textile industries on payment of their principal amount as the mills were unable to service debt.

Raza assured he would hold a meeting with heads of banks to finalise its modalities. He agreed that the textile industry must be given some breathing space.

Dr Baig requested payment of 3 per cent interest differential that amounts to Rs1.2 billion for the spinning sector as approved in the cabinet meeting on Nov 5, 2008.

In a response, the governor promised to solve it on the top priority basis and said funds would be released as soon as a letter in this regard is received from the ministry of finance.

Research and development (R&D) claims have not been paid to the exporters from June 25 to 30, 2008. Dr Baig also suggested to Raza to form an advisory committee of the stakeholders, bankers and SBP officials to quarterly meet in a bid to address problems of the industry. Talking to The News, Dr Baig said he was positive about the meeting with the SBP governor.

 

[Neo]

PIA sees Rs600m profit in 2009 ​

Friday, January 16, 2009

KARACHI: Pakistan International Airlines (PIA) is finally set to make profit in 2009 after four years of substantial losses which have marred growth and nearly made it bankrupt.

Sinking fuel prices have emboldened the airline to hope for an after-tax profit of Rs600 million and revenues at a whopping Rs121 billion, Managing Director Capt Aijaz Haroon told PIA’s board of directors on Thursday.

“PIA could have posted profit in the last quarter (October-December) of 2008 had it not been for the pension issues settled out of airline’s accounts,” he later told The News. “We cannot do much about carryover losses but we will reverse the trend this year.”

Despite a decent growth in revenues, financial losses climbed to a record high of Rs38bn between January-September 2008 as surge in fuel cost took its toll. Full-year results are still awaited.

Haroon stressed that government’s support will be imperative for the national airline’s comeback. “We need to stop the Gulf carriers from taking away our market.” The incumbent MD, who is also a pilot of Boeing-777, has been vocal about the onslaught of Gulf carriers on the Pakistani market. He has even proposed some bold steps to discourage Pakistani transit passengers from using those airlines.

“Aviation authorities should at least stop giving them more capacity,” he said, adding that the national airline needs some protection similar to the anti-dumping duty imposed on goods which harm the nation’s industry.

But besides this and high expenditure related problems, PIA has seen severe management crisis in the last few years as managing directors succumbed to political interference and employees’ revolt one after another.

Corruption and dilapidated condition of most of PIA’s 42 fuel-guzzling aircraft have made any recovery all the more challenging.

Haroon, who was appointed by the Pakistan People’s Party (PPP) government last year, has played a key role in soothing the grievances of employees who were not happy with contractual status of their jobs and pay scale.

Around 4,000 contractual workers have been regularised since his takeover. “Issues pertaining to basic pension of the employees had been resolved,” he said. “Now minimum pension will be Rs2,000 and widows of our employees could avail it all their lives.”

While he has already indicated that PIA will be inducting 10 new aircraft into its fleet by 2010, the present management’s failure to profitably manage the routes has time and again surfaced.

“This year we will target high-yielding routes and cut down unprofitable ones,” Haroon said about his recovery plan. “Bigger aircraft will be used for destinations in Middle East region while new destinations like Barcelona will be added to network.”

 

[Neo]

Pakistan seeks US investment in oil & gas sector ​

Friday, January 16, 2009

ISLAMABAD: US Ambassador to Pakistan Anne W Patterson called on the Advisor to Prime Minister on Petroleum and Natural Resources Dr Asim Hussain here on Thursday and discussed with him matters pertaining to promoting energy cooperation between the two countries.

While talking to the ambassador, Dr Hussain said that the new government is taking concerted steps to exploit the untapped hydrocarbon resources in onshore and offshore areas to meet the growing energy needs of the country, said a press release.

The advisor informed the envoy about the steps being taken by the government for the utilisation of 185 billion tons of coal deposits of the country. He sought US cooperation and investment in utilising the huge coal deposits for gasification and power generation.

Coal can be converted into oil and gas by use of advance technology, the advisor added. Highlighting the investment opportunities in Pakistan Dr Hussain said that the government has announced enormous incentives and packages in the new petroleum policy for foreign investors.

The bidding process for issuance of exploration license to the aspirant companies has been cut short to attract foreign direct investment in Pakistan’s energy sector.

The government is pursuing fast track exploration policies as we want to be self sufficient in indigenous gas production in the coming three years, the advisor informed the envoy. The US ambassador said that the US wanted to build long-term and multi-faceted strong relations with Pakistan.

 

[Neo]

Govt to drop over 100 projects from PSDP ​

Friday, January 16, 2009

ISLAMABAD: In a bid to meet the International Monetary Fund’s conditionality to contain fiscal deficit to 4.2 per cent of GDP, the government has decided to remove over 100 development projects costing billions of rupees from the list of Public Sector Development Programme (PSDP), it is learnt. The government has convened a two-day meeting of ministries/divisions on January 20 and 21 at the Planning Commission in order to get the input for identification of projects which would altogether be deleted from the PSDP list.

Almost one-third of the PSDP allocation will be cut in the current fiscal year, sources said.

“This exercise is aimed at reducing throw forward, which has already gone to Rs1.8 trillion for around 1,800-1,900 development projects,” an official said while talking to The News here on Thursday.

In an official communication sent by the federal government to the ministries/divisions, the Planning Commission has given four options to all the ministries to identify those development projects which are showing satisfactory progress, categorise projects which could be delayed for a few years, point out projects which could be deleted completely and those projects which could be transferred to the mode of Public-Private Partnership (PPP) under the umbrella of Infrastructure Project Development Facility (IPDF).

The government, the sources said, wants to categorise development projects in consultation with relevant ministries and there will be no compromise on those projects which are showing satisfactory progress.

“Problematic projects, where there is no progress owing to a variety of reasons, should be deleted from the PSDP list and hundreds of projects will fall in this category,” said the official. The ministries were also asked to come up with identification of those projects which could be delayed for two to three years. There is also an option available to ministries to transfer certain number of projects on the mode of PPP where private sector investment can be lured.

But the sources pointed out the government’s idea about success of the IPDF seems unviable equation because its former CEO remained unable to get any breakthrough and how political appointees at highest level can move forward the idea for promoting private investment in crucial development projects is beyond imaginations.

Under the directives of the IMF, the government is axing expenditures and the easiest way is to reduce public investment, which is bound to result into further slowing down the economic activities. The PC and the ministry of finance possessed divergent views on this issue. The finance ministry officials are of the view that there was no direct link between PSDP allocation and higher GDP growth but the PC high-ups say that there is empirical evidence that when there were higher PSDP allocations the country’s GDP growth witnessed improvements.

The sources in the ministry said that this level of fund releases would continue in the same range in the remaining months of the current fiscal year in order to achieve the envisaged fiscal deficit target for the ongoing fiscal year.

The sources said the government would make all-out efforts to avoid any practice where funds remained unutilized in accounts of ministries on which the federal government paid interest cost. “We have told the ministries and provinces to get releases when they will be able to spend it,” added the sources.

 

[Neo]

FDI surged by 45 percent​

KARACHI (January 16 2009): The Foreign Direct Investment (FDI) has witnessed a raise of some 45 percent during December despite the looming clouds of war between Pakistan and India. The central bank on Thursday revealed that FDI has also crossed the mark of 2 billion dollars during December 2008 with a highest investment of 724 million dollars in a single month during the current fiscal year 2008-09.

"The surged in the FDI is a positive indication and reflected that confidence of foreign investors on Pakistan economy is still retained despite the tensions on Eastern boarders after Mombai attacks," economists said. They said that increasing FDI reflects that country's economic fundamentals are still strong despite several internal and external shocks and have ability to attract foreign investors.

Other economic indicators like foreign reserves and exports are also improving and would attract more investment in the future, they said. "With the current trend we are expecting that country's FDI would be around four billion dollars by the end of current fiscal year 2009", they added.

With an increase of some 260.95 million dollars, FDI has reached 2.2327 billion dollars during the first half of current fiscal year 2008-09 (July-December), as compared to 2.0663 billion dollars during the same period of last fiscal year 2008. Month-on-month basis the country has witnessed highest FDI in December as compared to other first five months of the current fiscal year, as foreign investors have invested some 724.28 million dollars in December 2008.

FDI has surged by some 45.18 percent to 2.32 billion dollars in December 2008, previously was stood at 1.603 billion dollars end of November 2008. Previously some 340.7 million dollars FDI registered in July 2008, 413.36 million dollars in August, 356 million dollars in September, 211 million dollars in October and some 282 million dollars in November 2008.

Although the FDI has presented a positive growth, however the portfolio investment has declined by 282 percent during the first half of 2009. Therefore, net foreign investment including FDI and portfolio investment (PI) depicting a slight decline of 1.43 percent.

Net foreign investment stood at 2.138 billion dollars during the July-December of the current fiscal year over the investment of some 2.1699 billion dollars at the same period of last fiscal year, depicting a dip of some 3.1 million dollars.

In addition, portfolio investment has declined to negative position of some 188.31 million dollars during the first half as against 103.66 million dollars in corresponding period of last fiscal year 2008. "The political uncertainty and instability in the country and negative reports regarding world stock markets are the major reasons of declining trend in the portfolio investment", economists said. They also hoped that after the end of tension between Pakistan and India foreign investors would further invest in Pakistan especially in equity market.

 

[Neo]

New investment policy for next 10 years on cards: minister​

ISLAMABAD (January 16 2009): Federal Minister for Investment, Senator Waqar Ahmad Khan, here on Thursday stressed the need for capitalising friendly relations between United Arab Emirates (UAE) and Pakistan by enhancing partnership in mutual business and trade. "Pakistan and United Arab Emirates enjoy close brotherly relations and share commonality of views on host of issues and there is need to capitalise these friendly relations," he said while talking to UAE Ambassador, Saif Sultan Al-Awani at his office.

Senator Waqar said that the new investment policy for the next 10 years is on cards, which would be prepared with the consultation of private sector. He said that the local and foreign investors are welcome to benefit from investment friendly policies adding that the government was extending all possible facilities to investors.

He expressed the hope that Investment Ministry would be able to fetch unprecedented foreign investment in various sectors of the economy. Pakistan has become a destination of choice for foreign investment and the government is committed to provide full legal cover to the investment, he said adding that the government was also providing tax exemption and facility of duty free import of machinery.

Senator Waqar said that the Investment Ministry was operating as one window facility for the investors and acts as trouble-shooter and facilitator. He said the government has opened up a number of areas especially oil and gas, energy, power, agriculture and livestock for local and foreign investors.

Ali Saif Sultan Al-Awani told the minister that people and the government of UAE highly value their relations with Pakistan, adding that government and the private sectors of UAE were eager to start joint ventures with Pakistani companies. The Ambassador also appreciated government's decision of announcing new investment policy, ensuring continuity of policies, adding that it will help foreign investors to benefit from friendly atmosphere.

 

[Neo]

US senator for long-term economic support for Pakistan​

WASHINGTON (January 16 2009): Calling the return of democracy in Pakistan 'historic', a key Republican Senator Lindsey Graham who visited Islamabad as part of a bipartisan delegation last week, has voiced his full support for bolstering US economic assistance for the country over the long-term.

Graham, who is being drafted as counsellor on foreign policy by President-elect Barack Obama told newsmen along with Vice President-elect Joseph Biden that the United States must assist Pakistan economically through Biden-Lugar legislation as the country's help is vital to anti-terrorism success in Afghanistan.

"As to Pakistan, (there's been) historic change in Pakistan. We have a civilian government duly elected by its people, taking over from what has been in the past a dictatorship," said the senator, an important Republican voice on the Hill and a top supporter of former presidential candidate Senator John McCain.

Sitting next to president-elect, Lindsey Graham said he found tremendous goodwill for Obama in Pakistan. "I cannot tell you how much enthusiasm we saw in Pakistan for this new president." "There is a moment in time here for this country (US) to re-engage the international community, to make sure that we have international support to stabilise Afghanistan, Pakistan and Iraq."

The South Carolina lawmaker said the Biden-Lugar legislation "pending before the (US) Senate would create economic aid in a variety of fashions to Pakistan over a ten-year period, is a must." He argued strongly that the US must enhance economic aid for Pakistan, despite facing economic hardships at home.

"And I know people at home in South Carolina have lost their jobs. We are about to encourage a trillion dollars of debt here soon to stabilise a weakened economy never seen since the great depression". But to those American taxpayers, the money is needed in Pakistan because we cannot succeed in Afghanistan without Pakistan. "So I support expenditures of public treasure into Pakistan under the Biden-Lugar legislation. I think it will go a long way toward helping us correct some of the problems we have in Pakistan and Afghanistan."

 

[Neo]

Aggressive marketing for Pakistani manpower promotion advised​

ISLAMABAD (January 16 2009): The 46th meeting of the board of director of the Overseas Employment Corporation (OEC) was held here on Thursday, followed by its annual general meeting under the chairmanship of Khursheed Ahmad Shah, Federal Minister for Labour, Manpower & Overseas Pakistanis.

The federal minister advised the MD OEC that aggressive marketing need to be done in the labour importing countries for the promotion of Pakistani manpower. He assured that for this purpose MD will have his full support and support of his ministry and the board of directors. The board approved annual budget showing a target of 2,300 workers.

Besides budget, the annual accounts of the corporation for the years ending 30th June, 2007 and 30th June 2008 also came under consideration. The federal minister also approved 20 percent increase in the salary of the employees of the OEC with effect from 1st July 2008.

The board also approved conversion of GSA of the PIA into PSA and appointment of the arbitrator in Jubail Project case in Saudi Arabia and visit of the MD of OEC to Saudi Arabia for the purpose of meeting with the arbitrator. Secretary Labour, Manpower & Overseas Pakistanis, Malik Asif Hayat, Managing Director, Overseas Employees Corporation, Jehangir Alam Chohan and other high officials of the ministry of labour & manpower also attended the meeting.-PR

 

[Neo]

Minister for reducing import of non-essential luxury items​

ISLAMABAD (January 16 2009): Ministry of Commerce and Chambers of Commerce and Industry have an important role to play for the development of national economy. Therefore, frequent interaction and close co-ordination between Ministry of Commerce and Chambers of Commerce is the need of the hour to facilitate the fast growth of business and economic activities in the country.

This was stated by Makhdoom Amin Fahim, Federal Minister for Commerce at a meeting with a delegation of Islamabad Chamber of Commerce and Industry here on Thursday. The delegation was led by its President Mian Shaukat Masud. Amin Fahim said businessmen are playing a crucial role in the development of the country and added that every effort will be made to provide maximum facilities to the business community so that they could be facilitated to further promote business activities in the country and steer the economy out of recessionary trend.

Federal Minister for Commerce emphasised for creating a teamwork spirit between public and private sectors so that government and business community could understand each other's problems and could find out optimum solutions with joint efforts.

He said that with government efforts to control the import of luxury items, import bill has come down during the last two months and stressed for further reducing the import of non-essential luxury items so that country may not face balance of payment problems and other difficulties entailed by rise in import bill.

He also underlined the need of passing on the benefit of substantial reduction in crude oil prices in international market to the public because they deserve relief to ease pressure of high inflation on them. The minister said government will take into confidence traders and industrialists on load shedding problem so that a better solution could be worked out of this issue to minimise damage to industry on this account.

Speaking on the occasion, Mian Shaukat Masud, President, Islamabad Chamber of Commerce and Industry maintained that high interest rates and hike in electricity and gas prices have affected the production of trade and industry due to which Pakistan is losing exports to competitors. He said foreign markets have nothing to do with our production cost and they only demand quality products at affordable rates.

Mian Shaukat Masud said textile industry is the main pillar of exports contributing 57 percent share in it while 80 percent people are connected with this industry directly or indirectly. He urged the government should come up with firm strategy to support textile industry to cope with these challenges.

He said that load shedding for textile industry should be minimised because power outages are cutting into its productivity. Shaban Khalid and Muhammad Ishtiaq Qureshi, Vice Presidents ICCI, former ICCI Presidents and other senior members accompanied Mian Shaukat Masud.

 

[Neo]

British Kashmiris keen to invest in AJK​

ISLAMABAD (January 16 2009): Renowned social and entrepreneur figures of British Kashmiris Tanvir Naz and Raja Haider Abbas called on President Azad Jammu and Kashmir Raja Zulqarnain Khan and expressed their interest to invest in hotel industry and other industrial sectors.

Tanvir Naz, a UK businessman of Kashmiri origin, while showing interest in establishing a five-star hotel and industry in AJK told the AJK President that a number of expatriates intended to invest back home provided they were given patronage by the government and positive co-operation by the concerned departments.

"This could result in an economic revolution." He said expatriates living every nook and corner of the world would not hesitate to render any sacrifice in case India carried out its aggressive designs against Pakistan. President AJK said over the last 61 years India was following malicious designs against Pakistan and Kashmir. India, he said, had disrupted peace of entire south Asian region by occupying Kashmir.

He urged the Kashmiri people living abroad to raise voice in print and electronic media against the tyrannical Indian rule in the held valley, where innocent people were subjected to brutal treatment, subjugation, suppression and torture at the hands of over 800,000 Indian troops.

 

[Neo]

Foreign currency accounts serve our interests​

January 16 2009: There is a proposal from the World Bank to extend cash withholding tax on withdrawals from foreign currency accounts. This suggestion has been, reportedly, laid at the doorstep of the Federal Board of Revenue (FBR). The rationale behind this move is fairly evident. As FBR comes under increasing pressure from the government to generate revenue commensurate to the economic activity in the country, FBR should begin to look at short-term measures to raise tax revenues.

A 2004 International Monetary Fund study on Foreign Currency Deposits (FCDs) in Pakistan argued that "the policy makers thought that the FCDs might be the answer to the low level of savings and investment in the economy, because these deposits could help mobilise both domestic and external savings.

However, the increase in potential savings from the FCDs did not result in a boom in investment, but instead these short-term foreign liabilities helped finance large fiscal and external account deficits for a somewhat longer period than would have been possible otherwise. The end result was that the country was saddled with a debt overhang problem, which severely constrained long term growth prospects."

The report adds that Pakistan's experience demonstrates the importance of public debt sustainability for maintaining economic stability and growth and underlines the problems borrowing governments face in assessing the appropriate debt levels. Regulations that governed the FCDs required commercial banks to surrender it to the State Bank, which provided rupees at the prevailing rate. The commercial banks used the rupees to lend to private and public sector, and meeting their own reserve and liquidity requirements.

The IMF report states that "the commercial banks closed their open forex positions by purchasing forward cover from the State Bank, which was sold at subsidised rates (the rate of depreciation of the rupee exceeded the cost of forward cover) for almost all years...thus the FCDs were a highly profitable proposition for the commercial banks that were more interested in mobilising FCDs than deposits denominated in rupees."

It is rumoured that in response to the severe foreign exchange reserve crisis that was faced last year the SBP was continuing to implement this regulation. FCDs from non-resident and resident Pakistanis peaked in 1996-97 (4.35 million dollars and 5.49 million dollars respectively.) FCDs plummeted as a consequence of the decision taken in the post nuclear blast scenario by the Nawaz Sharif government to freeze all foreign currency accounts and never ever reached the same highs.

In 2003-04 the total foreign currency accounts were only 221 million dollars, a tiny percentage of the pre-nuclear blast position. It is heartening to learn that the FBR has convinced the World Bank, for the time being at least, that such taxation would be counter productive to the economic objectives as these accounts serve to boost the dwindling foreign currency reserves of the country.

It is, however, pertinent to note that the protection given by the Sharif government to such accounts pre-nuclear blast, which overrode all other related legislation, continues to be debated, off and on, by the State Bank and the FBR as a prelude to generating revenue from these accounts. With a burgeoning budget deficit what policy options must the government consider with respect to the FCDs?

IMF argues that international reserve targets must be set in relation to variations in the volumes of foreign trade as well as growth in the short-term liabilities like FCDs. It also urges the government to enact measures to enhance international liquidity, including measures that would make domestic currency denominated assets more attractive to hold.

Lower inflation, adequate rates of return on domestic currency deposits, or in other words with a positive real rate of return, would lead to sustained lowering of reliance on FCDs and the dollarisation of the economy. Be that as it may, these conditions do not apply to the economy today; however, one would hope that the government would follow prudent policies in this regard by seeking to attract FCDs without taxing them and at the same time not use these accounts to strengthen its external account position.