Pakistan Economy - News & Updates - Archive

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Private sector participation in industrial sector growth urged​

ISLAMABAD (January 30 2009): Federal Minister for Industries and Production, Mian Mazoor Ahmed Wattoo has urged the business community to enhance their participation in industrial growth for the development of the sector. He was talking to the delegation of Saarc Chamber of Commerce and Industry, which headed by its President, Iftikhar Ali Malik called on him here on Thursday.

Wattoo said that government is working to strengthen the national economy for which industrial growth is important adding that private sector can play a vital role to promote industrial activities in the country. He said government is working on a policy to promote public-private partnership in all economical activities especially in industrial sector development.

Problems face by the business community in this field would be solved on priority basis, he added. The minister said that business community should establish their contacts with Saarc country's business community and make efforts to develop joint ventures, as there are good potential for them in industrial sector's investment.

He said government is encouraging foreign investment in the country for which private sector should play their due role for economic uplift of the country. He asked that Gwadar Industrial Zone is a tax free zone and having attraction for Saarc member's countries while other industrial zone are also available for them.

He said that representation would be given to members of chambers and commerce in board of directors of all state enterprises, as consultation with business community will provide a boost in their development. President Saarc Chamber of Commerce and Industry, Iftikhar Ali Malik has said private sector is active in setting up of new industries and in this regard many joint venture have been signed with Saarc members countries. He said government should considered on our request about grant of incentives for the investors as this will help in promoting the investment.

 

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Gilani invites investors to explore country's economic potential​

DAVOS (January 30 2009): Prime Minister Syed Yousuf Raza Gilani on Thursday invited the foreign businessmen to invest in Pakistan and said a successful elected government was in place to ensure safe business environment for the investors. "Investing in Pakistan is investing in future," the Prime Minister said while addressing a lunch he hosted for the leading businessmen here on the sidelines of the World Economic Forum.

The Prime Minister said Pakistan's sound fundamentals offered the investors an opportunity to explore the country's economic potential in diverse fields. Gilani emphasised the need for more foreign investment coming into Pakistan and benefit from its investor-friendly economic policies.

He said Pakistan's liberal economic regime with zero import duty on raw material provided equal opportunities for the local and foreign businessmen. He said Pakistan was though confronting with a number of challenges including economic crisis, however the democratic government was struggling to improve the situation.

"Despite all the challenges, economy continues to be buoyant and vibrant in Pakistan," the Prime Minister said, adding the country's mineral and work-force resources had the great potential to be fully tapped. He said the government had converged its focus upon the development of agriculture sector to utilise it particularly during the recession phase. "It will be just a matter of time that Pakistan will become a regional hub of economic activity," the Prime Minister said.

Gilani said the government was taking a number of strategic measures, and mentioned increased trade with Afghanistan and improved regional mechanism with the Saarc countries. He said a deep seaport at Gwadar had been established for greater economic activity among the Central Asian and Asian states.

He said the improved economic plan for civil aviation, customs and logistics would substantially enhance the country's trade activities. The Prime Minister said Pakistan had the capacity to join hands with partners in food security, being a major food producing and also the fourth largest milk producer in the world. He said the government was endeavouring to use the trade policy prudently by pursuing the ongoing growth.

"Our economic strategy rests on strengthening the trade dividends and ensuring a business-friendly environment in the country," he said. Prime Minister Gilani said in WTO context, Pakistan would support substantial reduction on tariffs in the developing countries.

 

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Pakistan's foreign exchange reserves rise to $10.21 billion​

KARACHI (January 30 2009): Pakistan's foreign exchange reserves rose $260 million to $10.21 billion in the week that ended on January 24, the central bank said on Thursday. This included $500 million Pakistan received from China to help build foreign reserves, said Syed Wasimuddin, chief spokesman for the State Bank of Pakistan.

The State Bank of Pakistan's reserves rose to $6.87 billion from $6.59 billion a week earlier, while reserves held by commercial banks were $3.34 billion, down from $3.36 billion, the bank said.

Pakistan's foreign reserves hit a record high of $16.5 billion in October 2007 but fell to $6.6 billion in November, largely because of a soaring import bill. Pakistan signed a $7.6 billion loan agreement with the International Monetary Fund in November to stave off a balance of payments crisis. It received its first tranche of $3.1 billion that month.

 

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Textile exports to help economy grow by 4pc​

By Dawn Special Correspondent
Friday, 30 Jan, 2009 | 02:14 PM PST |
Prime Minister Gilani addressing an audience at Davos - Reuters photo.
Prime Minister Gilani addressing an audience at Davos - Reuters photo.

LONDON: Exports of Pakistani textile goods to the US market are said to have held up, making it possible for the overall economy to grow by 3.5 to 4 per cent in the year ending June 2009, despite global downturn.

The Financial Times in a despatch ‘Pakistan defies global downturn’ on Wednesday quoted country’s top financial officials as saying the growth figure would be down from seven per cent in the previous fiscal year, but respectable given the political and security challenges facing the country which was driven to seek a $7.6bn rescue package from the IMF at the end of last year.

Shipments by Pakistan’s textile industry, which account for more than half of the country’s exports, have held up despite the downturn in the US economy.

The official said the sector was facing severe price pressures, but that retailers in the US and Europe were favouring low-cost Pakistani home furnishings over more expensive products from competitors, such as Egypt.

The official estimated textile shipments grew 7-8 per cent in the second half of 2008. Analysts have expressed concern about Pakistan’s textiles industry. Earlier this month, chronic power cuts badly affected production.

A downturn in textiles could increase the possibility of job losses and social unrest to Punjab. The sector employs about 3m people.

The official also noted that Pakistan had yet to see any mass return of migrant workers from Gulf states, a hopeful sign that remittance flows may be sustained.

Pakistan’s economy has weakened significantly over the past year. As part of fiscal and monetary tightening, interest rates surged to 15 per cent in an effort to curb inflation that hit a peak of 25 per cent in October.

‘I had to tighten our belts economically, we stopped borrowing, we had to put right the fiscal policy and we withdrew all subsidies. There was a lot of hue and cry from the people of Pakistan. For a new government, it was extremely difficult but somebody had to do it,’ said Yousuf Raza Gilani, the prime minister, in an recent interview with the Financial Times.

But Mr Gilani said terror was sapping the economy.

‘With one suicidal bomb blast, there is flight of capital. With one suicide bomb blast, there is no investment in the country.’

Pakistan’s central bank on Tuesday reduced the amount lenders need to set aside against bad loans to spur lending. Banks may now use 30 per cent of the value of assets provided as collateral as provisions against delinquent loans for three years, according to a statement on Tuesday from the State Bank of Pakistan. Previously banks had to set aside cash against the full amount owed. The rule is effective retrospectively from Dec 31.

The central bank, under the leadership of newly appointed governor Saleem Raza, aims to bring inflation down sharply to 10-11 per cent by June. It has set about rebuilding the country’s depleted foreign reserves to $10bn by June from a current $7.3bn.

Pakistan’s industrialists have complained about high interest rates, saying they have increased the cost of borrowing and dried up liquidity in the banking system.

The Lahore Chamber of Commerce and Industry this week called for a rate cut, warning of the ‘extremely negative impact on the industrial sector’ of current levels, including the risk of factory closures. It said urgent steps needed to be taken by the government to avert mass redundancies in Pakistan’s manufacturing sector.

 

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Govt targets 100 exploration wells for 2008-9​

By Mubarak Zeb Khan
Friday, 30 Jan, 2009 | 11:24 PM PST |

ISLAMABAD: The government will achieve the drilling target of 100 new oil and gas exploration wells in the year 2008-09 ending on June next, said Advisor to Prime Minister on Petroleum and Natural Resources Dr. Asim Hussain here Friday.
‘We would make utmost effort to achieve this target. The government has already envisaged a plan to provide security at the oil and gas exploration sites to attract foreign investment in this field,’ the advisor said while replying to a question at a press conference.
Pakistan has so far drilled 725 exploratory wells till to date. Of these only 66 existed before the partition of the sub-continent. All these drills produced 219 wells, 54 of oil and 165 of condensate oil and gas.
‘The country has so far 960 appraisal wells. This indicates how much potential of oil and gas existed in the country’, the advisor said and adding his ministry has so far awarded 119 exploration licences to public and private sector exploration companies.
Mr Hussain claimed success rate in oil and gas exploration was ‘very high’ in Pakistan as compared to other discoveries at international level. ‘This figure shows that after almost every three to four drillings there was a result, while at international level discovery comes after eight to 10 attempts,’ he added.
He said that in Balochistan alone drilling activities were now opened at 16 places, which had been closed down owing to security reasons. He said at the remaining nine places, the activities will be resumed shortly.
Currently, gas production was 4 billion cubic feet per day (bcfd) and the oil production was 37,000 barrels per day (bpd) against the demand of 9-10 bcfd of gas and 77,000 bpd of oil. Presently, the country has about 45 rigs from where oil and gas is being produced and supplied to meet day to day demands of the country, he said.
Answering a question, the advisor said the new petroleum policy had almost been finalized, and would be announced soon. A social work programme was being considered under the new policy, he added.
The advisor said that government has decided to trickle down production bonus to respective provinces directly for further disbursement to districts under the new policy. Currently, it was not allowed to those areas from where discoveries were made.
To make the country self-sufficient in oil and gas sector the network of OGDCL and PPL was being expanded to other countries like Yemen, Iraq, Nigeria and Sudan. ‘We have taken a concession in Yemen from the oil company named OMB and further negotiations are underway,’ he added.
Commenting on present status of Iran-Pakistan-India (IPI) gas pipeline project, he said all modalities with regard to the project have been finalized except gas pricing formula.
‘Iran is demanding very high price for its gas, which is not affordable for the domestic consumers of Pakistan. It’s very expensive. He was of the view that all modalities of the project would be put before the parliament for its approval before finalising the deal with Iran’, he said.
Mr Hussain said the government has asked exploration companies to create a special security fund to involve locals in Balochistan. He said the government has planned to expedite oil and gas exploration to reduce reliance on imports.
Answering a question, the adviser said petroleum prices were expected to remain unchanged for a month as prices in international market was moving upward. The freezing of oil price for the past one and half month help the government raised billions of rupees to bridge budget deficit.

 

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$149.965 million withdrawn from foreign portfolio in January​

AHMED MALIK
KARACHI (January 31 2009): A massive outflow of $149.965 million from foreign portfolio was witnessed during the current month while the offshore investors withdrew $50.845 million of this mode of investment in the week ended on January 30, 2009. According to National Clearing Company of Pakistan (NCCP) data the foreign investors remained net sellers of $532.380 million in the period from January 1, 2008 to date.

"The continuous outflow of foreign portfolio investment from the country's equity market is being witnessed since 2008 due to global recession and a heavy decline in almost all international markets", Khurram Schehzad, analyst at Invest Capital & Securities said.

He said that after a heavy decline in all international markets, the foreign investors were preferring to withdraw their investments from the emerging markets to invest in their own countries. Despite low returns, the foreign investors are preferring to invest in western markets, mainly due to low risk, he said.

On the other hand, depreciation in the local currency and liquidity crunch were also major reasons which forced the foreign investors to withdraw their investments from the Pakistan's equity market. Some other policy and regulatory issues including imposition of price floor, geo-political and law and order situation also forced the foreign investors to pull out their investment from the country.

The foreign investors remained net sellers throughout the week, as an outflow of $6,682,907 was witnessed on Mondayy and $15,445,190 on Tuesday. The negative trend continued as the offshore investors withdrew another 15,911,714 on Wednesday, $4,060,986 on Thursday and $8,744,697 on Friday.

 

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BMA releases Economic Strategy Report​

KARACHI (January 31 2009): Pakistan's Premier Investment Firm, BMA Capital, has released its Economic Strategy Report for 2009 entitled "Slowing Down, U-turn Ahead", which encapsulates BMA's economic review of 2008 and forecast for 2009, advising on specific opportunities for investors in the coming year.

The report has been released in the context of the unusually challenging year that 2008 has been economically for Pakistan, the region, and the world. The global downturn and volatility has challenged the business models of financial services firms the world over, with many firms not surviving.

Aided by a strong corporate culture, talented team, and excellent client relationships, BMA has endured with a clear determination to succeed and to continue to deliver value for our clients with integrity.

The report explains that 2008 witnessed a 58 per cent decline in the Karachi Stock Exchange's KSE-100 index which is currently at a five year low and trading at its historical bear market price to earnings (P/E) multiple of four and one half times (4.5x). The good news in this for investors is that stock valuations are now extremely cheap, potentially representing rare opportunities for astute investors.

An upswing in business activity towards the end of the year on improved macroeconomic fundamentals could well see the index close higher on a Year-on-Year (YoY) basis by December 2009. Key factors, which will determine whether a sustained upswing is imminent, include monetary easing by the summer of 2009 and the subsequent return of liquidity, stronger earnings growth in Fiscal 2010, and stability in global markets.

Macroeconomic indicators are already improving on the domestic front. IMF support for Pakistan has boosted the foreign exchange reserve position to over US $10bn, while remittance inflows have reached new highs. BMA forecasts Pakistan's trade deficit to shrink (YoY) by June 2009 as a result of lower commodity prices. Inflation has been registering a decline since November 2008 and BMA Research expects it to continue to do so rapidly over the next six months.

BMA's top trading ideas for 2009 include FFC, OGDC, PPL, HUBCO, PTC and NBP, which represent our preference for defensive plays. These stocks are expected to post positive earnings growth over FY09, are cheap on both trailing and forward multiples, offer strong dividend yields and possess other strengths such as low gearing. The complete report can be retrieved from BMA's website.-PR

 

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Over 1,600 Malaysian products exempted from import duties​

RECORDER REPORT
ISLAMABAD (January 31 2009): Pakistan has eliminated import duties on over 1,600 Malaysian products as of January this year. This was announced by Ministry of International Trade and Industry (MITI) of Malaysia here on Friday in a statement adding that it was part of Malaysia-Pakistan Close Economic Partnership Agreement. The MITI has also urged the Malaysian business community to take advantage of the duty elimination, as the potential to supply the Pakistan market was considerable.

"These duty elimination will give Malaysian exporters to Pakistan an edge over their competitors, who still to pay duties from five to 35 percent," said the statement. nAmong Malaysian exports to Pakistan that will benefit from the duty elimination are parts and accessories for machinery, digital processing units, natural rubber, sawn wood, industrial chemical products, fruits and nuts, insecticides as well as butter, other fats and oil.

The MPCEPA was singed on November 8, 2007 between Malaysia and Pakistan and came into force on January first last year. Under MPCEPA, both Malaysia and Pakistan, will progressively reduce and eliminate tariffs on most agricultural and industrial products by 2014.

The Free Trade Agreement, already singed between the two countries, also offers opportunities in the service sector. Pakistan has allowed 60 per cent foreign ownership for Malaysian service supplies setting up business in Pakistan. Malaysia has gained now, exclusive and more liberalised market access than what other countries are able to get through the World Trade Organisation.

Malaysia''s trade with Pakistan from January to November 2008 was amounted to Rs 125.4 billion, comprising exports of Rs 116.6 billion and imports totalling equal to Rs 8.7 billion. The FTA with Pakistan provides a greater opportunity for business community of both countries to further expand their bilateral trade and investment linkages and enable the Malaysian business community to use Pakistan as the base to expand their business in South Asian region.

Commercial Council for Pakistan High Commission in Kaula Lumpur, Majid Qureshi while commenting on the statement said like Malaysian companies who are benefiting from the preference duty treatment due to MPCEPA, the Pakistani companies should also exploit immense opportunities of trade being opened up not only to Malaysia but also in Asian region.

 

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Pakistan and Canada to enhance cooperation in vital sectors​

ISLAMABAD (January 31 2009): Pakistan and Canada on Friday reiterated their desire to further intensify and broaden bilateral co-operation in the areas of trade, economy and defence. At a meeting held between Minister for Defence Chaudhry Ahmad Mukhtar and Canadian High Commissioner to Pakistan Randolph Mank who called on him, they stressed the importance for enhancing engagement in bilateral relationship.

Besides exchanging of delegations at military level so as to promote military-to-military relationship. The minister briefed the ambassador about the counter-insurgency and anti-terror efforts made by Pakistan. He told the envoy that terrorism was posing a great challenge to world peace and security, which needed international efforts to eradicate it.

He reaffirmed the government's resolve to weed out the menace of terrorism and extremism so as to make the world a safer place. He said that terrorists were bent upon to destabilise the country but they would not be allowed to succeed in their evil designs.

The minister informed the envoy that Pakistan had suffered a lot at the hands of terrorists as the suicide and bomb attacks had badly affected the economic health of the country. He also expressed concern over drone attacks and said the attacks were proving counter-productive as they were uniting the terrorists.

The Pak-Afghan border security situation also figured at the meeting. The minister told the envoy that Pakistan wanted a stable and peaceful Afghanistan because a stable Afghanistan was in the interest of the whole region. The Canadian High Commissioner told the minister that his country wanted to further promote and expand bilateral ties with Pakistan in all areas of common interests. He said that the Canadian investors were interested to invest in copper mines in Balochistan.

He informed the minister that his country was working on certain projects to support the Internally Displaced Persons (IDPs) of the disturbed areas. He also appreciated Pakistan's co-operation for providing logistic support to ISAF forces in Afghanistan.

 

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Shahbaz for reduction in markup to boost economy​

MULTAN (January 31 2009): Chief Minister Mian Muhammad Shehbaz Sharif on Friday advocated reduction in mark up on loans pleading that reducing the cost of production is the need of the hour to develop industry, agriculture and to enhance export earnings.

While addressing a meeting of Multan Chamber of Commerce and Industry (MCCI) on Friday night, CM said that mark up rates in industrialised countries were low and suggested that changes be brought about in policies to give a phenomenal boost to the national economy. He said, contrary to 22 percent mark up rate in Pakistan, it was only 1 to 1.5 percent in Europe, 2 to 2.5 percent in USA, and just one percent in Japan. He expressed the hope that federal government will pay attention to the matter.

Shahbaz said that country's economic situation demands enhanced support and personal attention of industrialists and business community and added that they need to strengthen their export based businesses and industrial operations to contribute to the goals set for economic uplift. He acknowledged that industry was facing numerous problems including power shortage to survive and suggested an integrated approach to solve them.

He said that our neighbouring countries which used to import textile products were now one of the major exporters. Citing example of Bangladesh, CM said that it imports cotton lint and exports finished textile products. He said that China was making exciting strides in cotton production while India's cotton production has also increased three times the production it used to get in past.

He promised to develop industry and export-oriented agro-industrial operations and added that government will not hesitate in providing funds if needed. Shehbaz Sharif said that federal government has promised to begin the process of installing water filtration plants in Punjab from March next to ensure availability of clean drinking water to the people at union council level.

He instructed CMIT to launch inquiry on complaints from MPAs that substandard material was used in water filtration plants in Multan. He ordered DG Anti-Corruption to launch inquiry on allegations of embezzlement in the affairs of Shah Rukn-e-Alam town.

He gave approval to many development schemes in Multan. He instructed to redesign southern bypass project to link it to Chowk Naag Shah instead of Bahawalpur bypass and promised to release fund of Punjab government within a week. He also ordered that a feasibility report be got prepared from an expert consultant firm for construction of elevation road from Chungi No 9 to Bahauddin Zakariya University (BZU).

He ordered to revive programme to provide treatment facilities to cancer patients at Nishtar hospital. CM said that a sum of Rs 1.5 billion has been released to highway department and ordered that this funding be utilised to complete road schemes from Makhdoom Rasheed to Tibba Sultanpur and Peerowal to Katcha Khoh.

Shahbaz formed a steering committee comprising elected representatives and officials to prepare recommendations for construction of fly-over from Kalma Chowk to Chowk Kumharaanwala. He directed officials to prepare plan to rehabilitate Alang ie the circular road adjacent to the fort wall around the walled city, to preserve the heritage.

He ordered to upgrade inter college at Shujabad road as degree college. He also agreed to speed up work on nine centres of excellence schools. He said that agreement will be signed with some Chinese firm to generate electricity from solid waste on the pattern of projects in Lahore and Rawalpindi. He ordered officials to pay compensation to the legal heirs of those who had died in a roof collapse incident in the city within 24 hours.

He sought detailed report on damage caused by the fire incident in food grain market Multan so that affected people can be compensated. Earlier, Commissioner Multan division Syed Muhammad Ali Gardezi gave detailed briefing to the CM. PML-N leader Makhdoom Javed Hashmi, provincial Auqaf minister Haji Ehsaanuddin Qureshi, MNA Rana Mehmoodul Hassan, MNA Abdul Qadir Gilani, Chief Secretary Punjab Javed Mehmood, IGP Shoukat Javed, chairman planning and development Sami Saeed and other officials attended the meeting.

 

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State Bank to issue monetary policy statement on quarterly basis: SBP Governor​

KARACHI, Jan 31 (APP): Governor, State Bank of Pakistan, Syed Salim Raza disclosed on Saturday that the SBP Central Board of Directors has decided that the Central Bank will issue monetary policy statement on quarterly basis.

Unveiling the Monetary Policy Statement, at a press conference at State Bank’s Head Office here, Syed Salim Raza said that the next monetary policy statement will be issued by the end April 2009.

He said that extent of risks and vulnerabilities, which the economy had faced during 2008, have moderated to but we would need to remain watchful of the emerging risks and challenges.

He pointed out that factors such as the vulnerability of the external sector due to high oil and other commodity prices; persistence of high imports and weak prospects of foreign investment, have all moderated considerably owing to improvements related to each area.

Raza said that progress has been made with inflation, over the last four months, but it is very stubborn in the core inflation (i.e. non‑food and non‑energy). The slow improvement in core inflation, while it has a structural element, is primarily owing to the fact that non fuel and non food items, such as wages and rents and fares etc.

continue rising after the supply side shocks recede.

This more entrenched trend is because inflationary expectations remain; for the good reason that we have had 12 months of high inflation and several preceding years during which the potential for inflation breaking out in a substantial way was being developed, he added.

He said that by the end of FY09 there will be some reduction in both the fiscal and external current account deficits relative to FY08. However, not only is the expected magnitude of these deficits high but also there are risks of slippages. This signifies that the demand pressures have not completely dissipated despite a slowdown in economic activity, he said and added that the high expected average CPI inflation of 20 percent for FY09 (significantly higher than the FY09 target of 11 percent) and its persistence, reflected by core inflation measures, clearly reflect the risk on this front.

To mitigate the implications of these risks it is important to continue with the current monetary policy stance, he said and added, therefore, the SBP has decided to keep the policy discount rate unchanged at 15 percent.

While elaborating on the more recent liquidity issues, he said that the present pressure on interest rates would have come irrespective of the discount rate as we have seen an unprecedented fall in banking liquidity post June, between July 1 and Jan 10, deposits have shrunk by 3.4%, or Rs 128 billion, while total credit has grown by 11% or Rs 500 billion, putting a strain of 628 on the system, or shrinking available liquidity by about 14%.

This was the simple counterpart of the CA deficit, and this level of contraction of liquidity would have raised interest rates in and of itself, regardless of where the discount rate was.

 

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Interest rates to go down in March: Dr Asim ​

KARACHI, Jan. 31 (APP): Advisor to PM on Petroleum and Natural Resources Dr Asim Hussain said that interest rates will go down in the month of March, 2009.

He was addressing the members of Karachi Chamber of Commerce and Industry (KCCI) here Saturday. He pointed out that the government has met all the deadlines of IMF in the last quarter of 2008.

Responding to the demand of KCCI, he said that trade bodies will be provided representation on the boards of NEPRA and OGRA. “The file for providing representation on the board of NEPRA and OGRA was with the Prime Minister for signing”, he added.

He said the government was debating whether we need OGRA, NEPRA or not.

Underlining the need for tapping more energy resources, he said that at least 100 wells will be drilled every year in the country to meet the domestic demand.

Although, it will take four years to reach such a level, there is no way than this to become self sufficient in energy, he added.

The Advisor pointed out that the country needed 10 billion cubic feet of gas while the production was 4 billion cubic feet of gas.

He said that government was not in a position to lower petroleum prices as it was still absorbing Rs 5 billion under petroleum development levy (PDL).

Dr Asim said that he has requested the government to remove the present DDGM because he is the corrupt man.

Minister for Ports and Shipping Babar Khan Ghauri, while criticising the role of new KESC management, said that the sponsors of utility company has not invested the promised $ 400 million.

He vowed to undertake more development work than his previous tenure.

Ghauri said that more vehicles will be provided to police despite opposition to improve their performance.

He also opposed the illegal occupation of trade bodies and said inquiry will be held into the alleged reports. We believe that businessmen should not be indulged into such activities and run their bodies in a democratic way, he added.

Minister for Overseas Pakistanis, Dr Farooq Sattar underlined the need for a better coordination between the policy makers in the north and the industrial and financial hub in the south.

He was of the opinion that foreign remittances can be increased from $ 7 billion to $ 15 billion by 2010 if overseas Pakistanis are provided incentives including removal of fee on the transfer of remittances.

He said overseas Pakistanis can come back and invest in Pakistan as has been seen in neighbouring India.

Dr Sattar said that organisations like NEPRA, OGRA and PEMRA have to act with responsibility.

Chairman Trade Development Authority of Pakistan (TDAP) Senator Ahmed Ali said that high mark up has harmed industrial sector, but things will improve soon.

He criticised the role of former Governor SBP and said she was treating the inflation with the help of wrong medication.

He said that all the stakeholders will be consulted before making any policy. I will have several committees for on‑the‑spot solution of problems facing exporters, he added.

Earlier, KCCI president Anjum Nisar in his welcome address said that cost of doing was very high due to high mark up, costly utilities and it was hurting the industrial sector specially export oriented sectors.

He demanded that gas prices should be lowered while SME must be supported by the government and called for setting up new SME industrial zones to boost industrial production and exports.

 

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Banks to fund flour mills for buying indigenous wheat​

Saturday, January 31, 2009
By our correspondent

KARACHI: To ensure participation of private sector in wheat procurement during 2008-09 season, it has been decided that banks will continue to provide financing to eligible borrowers for procuring indigenous and fresh wheat.

Only the licensed and functional flour mills would be considered eligible borrowers under this scheme. Fresh financing will be available to them at minimum 10 per cent cash margin of the value of wheat stocks.

The disbursement of the financing would begin with the start of wheat procurement season 2008-09 in each respective province and will not be available after June 30, 2009. These loans will be repayable on or before January 31, 2010.

The State Bank of Pakistan (SBP) in its policy statement announced on Friday said the banks would ensure that the financing facilities extended to their borrowers are strictly utilised for the purpose for which they have been granted.

Special efforts may be made to ensure that the facilities availed for purposes other than wheat procurement are not utilised for financing of wheat stocks.

The central bank stated that the loans provided to the private sector would be for the procurement of fresh indigenous wheat only.

These loans will be repayable on or before January 31, 2010. Non-compliance of the requirement of MFD Circular No.01 dated 11-03-2008 regarding adjustment of loans disbursed during the year 2008 would make the prospective borrowers disentitled to avail financing for procurement of wheat during 2009.

Fresh financing to the eligible borrowers for procurement of wheat during 2009 shall start from commencement of wheat procurement season 2009 in respective provinces.

This financing will be subject to minimum cash margin requirement of 10 per cent of the value of the wheat stock. Banks shall not provide any financial facilities (funded or non- funded) to enable borrowers to meet the margin requirements, the central bank said.

Banks will provide financing facilities against pledge of fresh wheat stock only and shall not extend funds to the private sector for procurement of wheat against hypothecation / charge of moveable or immovable property.

Banks will determine the rate of mark-up on lending to the private sector for the purposes of wheat procurement depending upon the risk profile of each borrower. As lending to the government agencies for wheat procurement is secured against government guarantee, it is expected that the related mark-up rate would be competitive in comparison to the rate charged to the borrower in private sector, SBP stated.

Banks will not entertain any application for grant of fresh loans after June 30, 2009 for procurement of wheat. However, banks may provide financing facility to functional flourmills for purchase of indigenous wheat from the licensed wheat traders, who have procured wheat during the procurement season 2009 and respective Food Department against supply of wheat by them.

Quantum of such loan shall not be more than the value of wheat to be supplied by the respective Food Department or actual purchase from wheat traders, commensurate to the milling capacity of each mill.

Banks will also monitor that existing stock of wheat purchased by the concerned functional flourmill, has been grinded and that the by-products of wheat viz. flour, meada, sujee etc, (financed against bank loan) have also been released to the market gradually to repay the loans so obtained. Financing against by products of wheat shall also be subject to the cash margin of 10 per cent.

Banks are also allowed to provide facilities for wheat procurement by the seed processing plants, in line with their lending policies and the capacity/production plans of the seed processing plants.

However banks may ensure that such stock of wheat will be used for processing purposes, said the central bank.

Banks will ensure that no revaluation of the pledged stock is considered for release of any differential amount to the borrowers against stock of wheat pledged with the banks.

The banks shall be under obligation to immediately recall the advances allowed to the private sector in case of hoarding of wheat by the functional flour mills.

Therefore, while executing financing agreement by the banks with their borrowers, banks will clearly spell out that loans can be recalled before agreed repayment / due date, upon receipt of directives from the State Bank as and when it is deemed necessary to curb hoarding. Banks will also ensure that no financing is allowed by them to the flour mills for retirement of the loans availed from other banks.

Banks will ensure that weekly stock report for the wheat held by functional flour mills and pledged with the bank is inspected periodically.

Report on the inspection should be submitted regularly to this department, within seven days from the close of the month to which it relates, indicating the name of the party, location of its godown etc as per prescribed format.

The SBP would also verify the authenticity/genuineness of such inspection reports through its Banking Inspection Department. Banks will also ensure that the wheat stock is gradually released to generate cash resources for the purpose of repayment of bank loan.

Banks will continue to submit a weekly statement in respect of financing to private sector for wheat procurement as per prescribed format within seven days from the close of the relevant week. Delay in submission and / or misreporting of data to SBP will attract penal action under BCO, 1962.

The lending shall be in compliance with the Prudential Regulations and other instructions of SBP issued from time to time. Any violation of SBP instructions would attract penal provisions under BCO, 1962.

 

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FBR to outsource income tax audits​

By Sajid Gondal
Sunday, 01 Feb, 2009 | 08:30 PM PST |
ISLAMABAD: In a bid to create transparency and further facilitate tax payers, the Federal Board of Revenue (FBR) has decided to outsource income tax audits.
Chairman Federal Board of Revenue Ahmed Waqar announced this on Sunday while addressing the businessmen at the Islamabad Chamber of Commerce an Industry (ICCI).
Waqar said that the FBR was hiring services of reputed Charter Accountancy firms to for conducting total income tax audit of tax payers.
He said the private audit firm would select the cases for total audit on a random basis.
The audit out-sourcing would further facilitate the tax payers and would end the complaints of disturbance and harassment.
Ahmed Waqar also rejected the business community’s demand to re-launch tax amnesty scheme. He was of the view that there should be penalty for non-compliance of taxes instead of any amnesty scheme. Tax amnesty schemes discourage the genuine tax payers and encourage tax evasion, he added.
Responding to complaints regarding the delay in refunds payments, Ahmed Waqar announced that the revenue board was considering a proposal to compensate the taxpayers. He said the e-filing of tax-statements and refunds claims had sped up the procedures and FBR was targeting to clear the refunds payment with in 45 days after the issuance of tax refund order.
Regarding the levy of 10 per cent withholding tax on power bills exceeding the monthly amount of Rs 20,000, Ahmed Waqar said that he considered it a serious problem that would create working capital problems. The FBR would seriously consider abolishing the said tax in next finance bill, he added.
Mr Waqar said that the tax facilitation and tax compliance should go side by side. The revenue board would provide every possible facility to tax payers but FBR would take strictly reaction for non compliance of taxes.
He said that the tax to GDP ratio in Pakistan is lowest in the region but revenue board was making all efforts to extend the tax base. He said the all sectors currently escaped from tax net would but brought into tax net in shortest possible time.
However, he mentioned that the agriculture tax in a provincial subject and FBR could not directly involve itself in the matter.
Earlier, the Chairman ICCI, Main Shaukat in his welcome address said that the business entities were facing tough time due to global recession, high tariffs, power outages and bleak law and order scenario.
He said that the universal tax assessment system has reduced the interaction between the tax payer and the tax machinery that has built the confidence of tax payers on the tax department.
Main Shaukat pointed out that the process of harassment of tax payers has been initiated again, and created great panic among business community. He said that once again the Income Tax Officers have started issuing notices to harass the business community.
Chairman FBR has constituted a committee comprising representatives of ICCI and FBR officers from sales tax, Income Tax and Customs department to resolve all the problems of businessmen. The committee would meet on quarterly bases.

 

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All resources being used for mega projects: minister​

ISLAMABAD (February 01 2009): The Minister for Water and Power, Pervez Ashraf, on Saturday said that all resources were being utilised for mega development projects, and funds were being provided on priority basis. He said this while presiding over a meeting to review the development projects here in the Ministry. Representatives of all concerned provincial and federal departments attended the meeting.

He reviewed all development projects in the Rawalpindi region and asked the government officials to ensure quality of work and timely completion of all projects. He was briefed on the construction of 'Railway Underpass' at Gujar Khan. The project will be completed at a cost of Rs 300 million within shortest possible timeframe of four months.

The underpass will be opened for public by June 30, 2009. The minister said that Prime Minister Yousaf Raza Gilani has allocated special funds on his request for this project. He said that he would inaugurate the project on February 22.

There will be no interruption, and the traffic will move smoothly between Punjab and AJK from this underpass, he said. The minister directed that all concerned departments should co-ordinate with each other and there should be no delay in this project. He also directed Wapda to make alternative arrangements of power supply during construction of the underpass.-PR