Pakistan Economy - News & Updates - Archive

[Neo]

EDITORIAL (June 23 2006): The news that Foreign Currency Deposits (FCDs) under FE-25 scheme are showing a rising trend is somewhat disturbing. According to the latest data from the State Bank, the outstanding amount under this scheme rose to 3481 million dollars by the end of May, 2006 as against 3105 million dollars a year earlier and 3282 million dollars at the end of June, 2005.

The surge was more pronounced in the last five months of the current fiscal year with outstanding balances averaging around 3498 million dollars compared with a similar average of 3327 million dollars in the first six months of the year.

These balances stood at their highest level of 3567 million dollars at the end of January, 2006 and lowest level of 3302 million dollars at the end of July 2005. Earlier, balances under FE-25 scheme had reached 2296 million dollars at the end of FY03 and 2671 million dollars a year later.

It may be recalled that these deposits have a strange history. The FE-25 scheme was introduced in the aftermath of Pakistan's nuclear explosions and the imposition of sanctions by most of the western countries leading to restrictions on withdrawals from foreign currency accounts existing as on May 28, 1998 and was meant specifically to allay fears of any future "freezing".

Separate registers were to be maintained by Authorised Dealers (ADs) for deposits under the new scheme. Also, since FE-25 deposits are outside the State Bank's forward cover scheme, these are not required to be surrendered to the central bank.

The ADs, who are free to decide the return on such deposits, are under no restriction to lend, invest and place these funds in Pakistan or abroad, subject to the observance of the prescribed regulations. As regards their actual utilisation as at the end of May, 2006, 1147 million dollars were used for financing foreign trade, 1529 million dollars were placed under various arrangements including those with SBP and 538 million dollars were held as balances abroad.

The increasing level of deposits under FE-25 scheme is, in our view, a matter of concern for several reasons. It shows that citizens of the country, residing in Pakistan or abroad, have a lower level of confidence in their own currency than foreign currencies.

This is sad but understandable. Clearly, they think that, over time, the loss in interest income by swapping the currencies will be more than compensated by the depreciation of the Pak rupee which is sure to follow because of inflation differential and the deteriorating trend in the external sector of the country.

The authorities need to stop the dollarisation of the economy by making appropriate interest and exchange rate adjustments and reducing the inflation rate in the country, which to a large extent is responsible for the debasement of the Pak currency. It is better to delve into the reasons of the emerging situation and find suitable policy responses.

The Steel Mill case, as it is unravelling now, could also have its own consequences, whatever the verdict of the Apex court. The privatisation efforts of the government could receive a serious setback, which, in turn, would have severe implications for privatisation proceeds, leading to worsening of fiscal deficit and further deterioration of current account balance of the country.

Of course, the foreign exchange reserves held by the State Bank would be the first line of defence to meet the external deficit but in a crisis situation, the authorities may be tempted to try other options including the remote possibility of the use of FE-25 deposits.

Those who argue that freezing of foreign currency accounts during 1998 was the result of explosion of nuclear devices and accompanying sanctions are wrong because the actual reason was that foreign exchange balances of the depositors were eleven times higher than the total reserves of the country and there was no way one could meet these liabilities.

It needs to be remembered that foreign currency deposits are not free reserves of the country but involve an equal amount of liabilities in foreign exchange to be paid on the demand of the depositors. Nobody is saying that such a situation is again around the corner or even on the horizon, but it is better to learn from past experience and be careful when the going is still not that tough.

 

[Neo]

By Dr Saima M. Javed

THE recently released Economic Survey of Pakistan revealed that the methodology used for estimating the poverty levels in the year 2000-2001 was flawed.

The new methodology put the estimates of people living below the poverty line in 2000-2001 at 34 per cent as against the earlier estimates of 32 per cent. This figure, the survey states, had been reduced to 23.9 per cent in 2004-2005. Thus, in the four year period from 2000-2001 to 2004-2005, around 10 per cent of the population has been lifted out of poverty. Impressive figures!

Whatever the methodology and whatever the figures, one thing is clear, different methodologies can lead to very different conclusions. In any event, these indicators give us an idea of the direction that the economy is moving in. It would have been useful, if the estimation of current poverty level based on the previously used methodology, even if flawed, had been indicated in the Economic Survey. Since the details of the new methodology are not spelt out in the Survey either, some other facts make the analysis pretty easy.

According to the government figures, per capita income has risen from $429 to $736 during the same period i.e. 2000-2001 to 2004-2005. Since dollar to rupee ratio remained almost stable during these four years, one could conclude that per capita income has increased from Rs25,740 in 2000-2001 to Rs44,160 in 2004-2005.

Taking into account the official figures of inflation (21.45 per cent), the buying power of Rs25,740 of 2000-2001 equals that of Rs31,261 four years later. In other words, the finance ministry says that net increase in the average buying power over these four years has been around 41 per cent.

Given the facts that the unofficial estimates of inflation are much higher than the official ones, there does not seem to be a significant reduction in the poverty levels. One can put inflation figures to a simple litmus test. Salaries of the government servants during the period 2000-2001 to 2004-2005 were raised more than the official inflation figure of 21.45 per cent. How many government servants would agree that their economic condition was better in 2004-2005 than four years back. Surely, none.

The increase in the average per capita income, as stated by the ministry of finance in four years has been only 41 per cent. This increase has to be seen against the prosperity levels of the upper strata. Whether it is visit to a real estate office, a view of expensive flashy cars in Lahore, Karachi and Islamabad or a mehndi ceremony in a five-star hotel, just a glance leaves little doubt about an unprecedented increase in the wealth of the rich.

Why go through the small font statistical tables in the economic survey when the reality is visible so clearly and glamorously! With around eight per cent increase in the national per capita income, this hustle bustle must have been a drain on some other pockets.

The Economic Survey comes handy in understanding the point. The consumption expenditure of various economic strata grew during these four years proportionate to their wealth. Richer ones getting much more than the poorer ones. A typical feature of free market economies!

The consumption expenditure of the richest 20 per cent grew by some 22 per cent while that of the poorest 20 per cent by only 9.25 per cent. Not to forget that a one per cent increase in the income of an upper strata family implies a crucial reduction in the income of dozens of families at the lowest economic strata. Unlike the finance ministry’s complicated methodologies, this is simple logic.

Level of well-being of a person cannot be evaluated in vacuum. Poverty indicators based on income need to be seen against a host of other factors - availability of free or subsidised medical facilities, clean drinking water, education, insurance, access to roads, so on and so forth.

These factors affect the life of a common man, at times more than his income. The well being levels of two families with same income, one with and the other without all these facilities would be poles apart. Poverty as they say doesn’t exist in books or economic surveys. It haunts the nations as a reality in villages, towns and cities.

Again according to the Economic Survey, Pakistan’s infant mortality rate stands at 74 per 1000 live births which is the highest in the region. Comparative figures for India, Bangladesh and Sri Lanka are 63, 13 and 46. Pakistan also tops the list of regional countries in terms of child mortality with a figure of 98 per 1000 live births as compared to 87 for India, 69 for Bangladesh and 15 for Sri Lanka. What other than poverty could one put the blame for these depressing figures. Lack of simple medicines, safe drinking water, food, what else? Who has the time to care for the luxuries like education!

Many dread the memories of October earthquake which took away 83,000 of our brothers and sisters. It is a nightmare. With a crude death rate of 8.1 per cent, a calculator would not take long to show that every year more than 300,000 children die before reaching their first birth rate. We are having a bigger earthquake than the October one, only for below one year children, every four months. Every morning 800 mothers get up to see the death of their infant child. All that goes unnoticed without becoming a news even in the inner pages of the newspaper.

All that in a nation that created an unbeatable example of brotherhood on October 8! Is it not frightening! What is still more frightening is that these figures do not take into account other equally deadly faces of poverty - similar fate of above one year children and adults. What is critically important for poverty alleviation is to pay due attention to the hitherto neglected health sector, both in terms of budgetary allocations as well as governance.

Economists are generally unanimous their view that market economies, unless coupled with specific and effective government policies for a fair income distribution, lead to income disparities. It is these government policies for a fair distribution that make market economies different from the law of jungle where only might is right.

Benefits of new technologies and markets under any free economy go to those who have the resources to make use of them or in other words cushion money to put at stake in the new technologies. Once they do so, the ones that do not have that kind of money, are weeded out of the market because of their obsolete technologies. The outcome for the poor is a slide downwards from bad to worse. Law of the jungle!

The green revolution of 1960s provides the best example. Newer varieties of seeds and fertilizers benefited the big landlords. The smaller units were economically weeded out. This was not a phenomenon specific to Pakistan. Today, with all the global emphasis on market economy and a potential increase in the markets, the phenomenon is of greater relevance than it was ever before in the past.

An important feature of any poverty alleviation programme, particularly when luckily the overall economy is improving, is the integration of the poor into the country’s mainstream economy. The point needs elaboration.

Poor people in a remote village whose total income as well as spending is based on agriculture for their own consumption would not benefit from increased exports in manufacturing units in, say Karachi or Sialkot. They would benefit from an increase in national income only if their livelihood is in some way related to the main areas of economic activity.

To illustrate the point further, a village that is not connected to the rest of the country by road and transport network would not benefit from new technologies. Even if by some miracle it did, it would not be able to sell its increased produce to the market. Even if by another miracle, it succeeded in doing that too, its produce will not be cost effective because of the difficulties in transportation.

Profit sharing between the landlord or industrialist, the middle man and the worker is another determinant of poverty. In Pakistan, increased profits largely benefit the middle man and the capitalist. It is obvious to all. The worker gets inelastic wages which hover around his bare minimum requirements. This traditional pattern with no (or at least no effective) labour laws has been the most important contributory factor to poverty.

Then there is the role of taxes in increasing or decreasing the poverty levels. The greater the indirect taxes, the more hard hit are the poorer segments of the society. The greater the direct taxes, the greater is the impact on the well-to-do people. Compared with many other developing countries, the taxation in Pakistan is skewed towards indirect taxes. This skewed nature of taxation further accentuates poverty.

Last but not the least is the sociological context of poverty. I remember my “gup shup” with my maid whose husband owned a taxi and was earning more than Rs15,000 a month - statistically, well above the poverty line by any standards.

At the peak of her emotions, which appeared ready to be poured out, she told me that for the last six years, her husband had been trying to gather money for his daughter’s marriage. He failed because of the expenditures on his father’s illness.

Having married his daughters, he would start collecting money for his own old age sickness. On what side of the poverty line would this family fall. With no social securities available, the insecurities have reached a level where most of the poor people cannot think of comfort or luxuries, which for them includes education, even if they have the cushion money to do so. Poverty levels cannot be judged in vacuum!

http://www.dawn.com/2006/06/26/ebr9.htm

 

[Neo]

WASHINGTON, June 24: Pakistan is in active talks with Turkmenistan to build a pipeline that will bring natural gas from the Central Asian republic to energy-starved South Asia, says Mukhtar Ahmed, energy adviser to the prime minister.

His statement, given at a seminar in Washington, comes amid renewed doubts about the plausibility of another proposed pipeline for bringing natural gas from Iran.

On Friday President Musharraf told a private television channel in Pakistan that the Iran pipeline project had been held up due to disagreements over the pricing formula.

Gen Musharraf said Pakistan recognised that Iran should make a profit, but the price of piped gas should be less than that of importing liquefied natural gas. "We certainly are not asking for any subsidy, but at the same time we are not going to allow them to fleece us."

The United States has discouraged both India and Pakistan from entering into any

deal with Iran, because of concerns that Tehran intends to develop nuclear weapons. There is also a US law that forbids any major investment in Iran’s oil and gas sector and requires mandatory sanctions against those violating the ban.

Hours after President Musharraf complained that Iran was asking too steep a price for its gas, Mr Ahmed told a conference in Washington that Pakistan was in active talks with Turkmenistan to build a pipeline that would run through war-torn Afghanistan.

“We have been assured in writing by the Turkmen government that the required amount of gas will be made available notwithstanding (their) other commitments,” Mr Ahmed said. Turkmenistan, he said, had enough gas reserves to support a 30-year project for Pakistan and India.

Turkmenistan is also pursuing export deals with Russia, Ukraine and China, raising questions whether it will have enough supplies for other customers.

Mr Ahmed, however, said that Pakistan was also pursuing the proposed project to build a $7.4-billion pipeline from Iran that would also supply India. Future demand would justify both the Iran and Turkmenistan projects being built, he added.

Officials from Pakistan, Iran and India will meet in New Delhi next month to negotiate gas pricing before finalizing a deal to pipe Iranian gas to India through Pakistan, he said.

Mr Ahmed said he hoped to convince the Bush administration that the Iran project was worth pursuing. The energy adviser is leading a high-level Pakistani delegation to Washington for the first round of US-Pakistan energy talks that begin here on Monday.

But a senior US State Department official, Paul Simons, told reporters that the Bush administration was against the proposed Iran-Pakistan-India gas pipeline project. The Turkmen gas pipeline, however, “deserves a close look,” he added.

“The government of Pakistan is well aware of the fact that we are not in favour of Pakistan moving ahead with this pipeline to Iran,” he said.

Instead, Mr Simons said Pakistan should tap domestic natural gas supplies, build transmission lines to import power from neighbours like Kyrgyzstan and ship in LNG from places like Qatar, Indonesia and Nigeria.

But the prime minister’s energy adviser said meeting Pakistan’s rising demand through LNG “is probably not a realistic assessment,” he later said, because major world exporters like Qatar have committed future supplies elsewhere.

 

[Neo]

Monday June 26, 2006

ISLAMABAD: The country has registered the wheat production to 21.7 million tons in the Rabi season 2005-06 against the set target of the 22 million tons, it is learnt.
However, MINFAL in April estimated 20.5 million tonnes of output against the earlier targert of 22 million tons claiming the heavy rains in Punjab had damaged the wheat crop.

Official said that the wheat production in the province of Punjab stands at 16.8 million tons, Sindh 2.9 million tons, NWFP 1.3 million tons and the wheat production in the Balochistan province has been recorded as 0.7 million tons in the rabi season.

Sources said that the targets of area, production and production targets of 2005-06 were at increase of 2.7 per cent in area and 9.5 per cent in production against the average achievements of the last three years.

According to targets for the provinces were as Punjab to sow wheat on an area of 6,403 hectares to produce 17,655 tonnes, Sindh 900 hectares to produce 2,478 tonnes, NWFP 767 to produce 1,161 tonnes and Balochistan to sow on 345 to produce 706 tonnes of wheat in 2005-06.

In Punjab, the average area sown with wheat during 2002-03, 2003-04 and 2004-05 was 6,233.9 hectares, producing 16,123 tonnes, Sindh cultivated wheat on 876.3 hectares to produce 2,263.1 tonnes, NWFP cultivated 746.9 hectares to produce 1,050.3 tonnes and Balochistan cultivated 335.9 hectares to produce 645 tonnes.

Government has procured wheat amounting to 4.35 million tons so far against the target of 5 million tons during the current season," an official informed.

He said that the Sindh had procured wheat to 0.7 million tons whereas Punjab had reached the figure amounting to 2.35 million tons so far during the current season.

"PASCO has procured wheat from the growers to the tune of 1 million tons so far and we hope that we will succeed to achieve the target of 5 million tons set during the current season," he said adding Punjab’s wheat procurement target was three million tons.

 

[Neo]

Monday, June 26, 2006

LAHORE: The Software Information Technology Park’s construction will improve international communication in the IT sector, and generate economic activity worth billions of rupees, said Punjab Chief Minister Chaudhry Pervaiz Elahi while signing an agreement between Punjab IT Board and the Cooperative Business Society (CBS) at Chief Minister’s secretariat.

According to a statement on Sunday, Elahi said the park, being built on 4.38 acres of land at a cost of Rs 1.5 billion on Ferozepur Road, would boost foreign and local investment. He said that call centres and business process centres at the park would help improve global communication.

According to the agreement signed on Sunday, the CBS would provide land for the park and the IT Board the resources. Consultants of a Singaporean company prepared the park’s design.

The chief minister said the park’s construction would create 10,000 direct and indirect job opportunities for science graduates, software developers, network engineers and management graduates. The foundation stone ceremony of the project will be held on July 03, he added.

He said it would be the most modern and hi-tech park of the country. Elahi said the project would be completed in a year. The project would put Punjab in a prominent place at the global level, he added.

 

[Neo]

RAWALPINDI: President General Pervaiz Musharraf has directed the railway ministry to build a railway track between Hawailian to China’s Sinkiang.

In a meeting with a delegation of German locomotive company, which was also attended by Federal Minister for Railways Shaikh Rashid Ahmad, Musharraf directed the authorities to launch mass transit trains in seven big cities to ease rush on roads.

After the meeting, Shaikh Rashid told Geo News that president has welcomed the investment of German locomotive company in manufacturing of railway engines.

President also directed for construction of a railway track from Hawailian to Sinkiang in China to establish a rail link like the road link of Karakoram Highway to strengthen the closer ties between the two countries.

Federal Minister said that China would construct the rail track from Sinkiang to Pakistan’s border and a high level Chinese delegation would visit Pakistan to prepare the feasibility of the project.

President also stressed the swift completion of Quetta-Gwadar railway line to reduce the traffic load on roads countrywide. Musharraf also given instructions for launching of mass transit trains in Karachi, Multan, Lahore, Peshawar, Hyderabad, Rawalpindi and Islamabad, he added.

 

[Neo]

Doubling per capita income in six years


By Aftab Ahmad
http://www.dawn.com/2006/06/26/images/ebr15.jpg


Pakistan has now a per capita income of $847 as compared to $441 in 1999-2000–the year the national accounts were re-based.

After re-basing, the per capita income for 1999-2000 was revised upward 20 per cent, to $526. It went up to $579 in 2002-03, after remaining stagnant for two years.

Since then, per capita income has been increasing and the current level at $847 is nearly 100 per cent higher than the per capita income of $441. In six years (1999-06), the per capita income has almost doubled. It may be interesting to study the factors behind this growth.

The first and the foremost factor in the per capita GNP was, no doubt, the re-basing of the national accounts from 1980-81 to 1999-2000. The exercise was quite normal, since structural changes do take place in an economy over a period of time. New products appear while old ones disappear. It becomes necessary to incorporate such changes in the national accounts to make income estimates realistic. The practice is followed all over the world.

In Pakistan, re-basing exercise was completed and approved in 2003. As a result, many new economic activities as well as products such as courier services, travel agencies, information technology (IT) and mobile phones etc became part of the national accounts. As a result, the size of the GDP in 1999-2000 increased by 19.5 per cent, industries by 18 per cent, agriculture by 18.5 per cent and services by 20.8 per cent, over the old base. Accordingly, the per capita income of $441 – relating to the old base – in 1999-2000 had also to be revised upward to $526.

Another factor behind rapid growth of per capita income was the higher GDP growth in recent years. On an average, the GDP growth has remained around seven per cent during the last four years (2002-03 to 2005-06).

Third, a higher GNP and per capita GNP are partly attributable to ‘net factor income from abroad’ that had remained favourable in recent years despite the higher trade and current account deficits. This favourable development was attributed to higher workers remittances, increase in foreign investment and liberal external assistance. When the net factor income from abroad is positive, it adds to GNP. On the contrary, if the net factor income from abroad is negative or unfavourable, the same is deducted, to arrive at the GNP.

Next, exchange rate stability also played a significant role in taking per capita GNP to the present level. In the past, continuous devaluation of the rupee had kept our per capita income in terms of dollar at a lower level. During the last 6-7 years, however, exchange rate of rupee has shown relative stability, due to which higher GDP growth rates has translated into higher per capita income in dollar terms.

Yet another factor may be the decline in the population growth rate. The population growth has reportedly fallen from three to 1.9 per cent and it is likely to reduce further in the coming years. A slower population growth helps improve the growing per capita GNP

Last but not the least, is the element of inflation. The per capita GNP is calculated by dividing the GNP at ‘current’ factor cost (and not the constant factor cost) with the current population. Thus, the per capita GNP contains the element of inflation together with the element of growth.

From 1999-2000 to 2003-04, the inflation remained at a comparatively lower level (between 3.1 and 4.6 per cent). However, during the last two years, that is, 2004-05 and 2005-06, the inflation rate – as measured by the consumer price index – stood at 9.3 per cent and eight per cent respectively. This higher inflation rate had inter-alia pushed up the per capita income in 2004-05 and 2005-06 to $742 and $847, respectively.

The per capita income in 2005-06 is reported to have increased by more than 14 per cent, which actually includes the inflation rate of eight per cent apart from the GDP growth rate of 6.6 per cent. Per capita incomes for past two years are inflation-driven as well as growth-driven.

To keep the per capita income moving upwards, the correct policy would be to maintain the higher GDP growth, bring down the trade and current account deficits in order to keep the net factor income from abroad on the positive side and ensure exchange rate stability. However, all possible efforts should be made to control inflation, which pushes up the income figure, without adding to the real income of the people.

A word or two about the quality of GDP growth may be appropriate here. In 2005-06, the 6.6 per cent GDP growth rate has been achieved through only a 4.3 per cent rise in the commodity producing sector, while the services sector surged by 8.8 per cent. The finance and insurance had registered an increase of 23 per cent. This pattern of growth may not be very helpful in fighting inflation.

To combat inflation effectively, the government will have to focus on the commodity producing sectors and try to substantially raise the availability of agricultural and industrial products. A situation marked by abundant availability of essential commodities may be of immense help in achieving price stability.

http://www.dawn.com/2006/06/26/ebr15.htm

 

[sigatoka]

Text of report by Associated Press of Pakistan (APP) news agency

Islamabad, 25 June: The government under a novel plan to try and bring down the country's population growth has offered free schooling to families that have only one child.

The plan, the first of its kind in the country, is being launched with a survey starting on 1 July to determine the number of one- child families, said Minister for Population Welfare Chaudhry Shahbaz Hussain on Sunday [25 June].

The minister said at present, education is free in state schools only up to the primary level.

Ch. Shahbaz said "I am sure the plan to offer free education to one-child families until the age of 18 will have an impact. Definitely, incentives will increase the acceptance of family planning."

This is a dumbass idea.

 

[Neo]

This is a dumbass idea.

Yep, sounds like a socialist idea which will become a burdon on the treasury in near future as the population growth is declining.
In the early eighties population grew by 3.00% and it has delined to 1.9% today and will settle around 1.3% by 2020.

 

[Neo]

ISLAMABAD (June 27 2006): The government has projected one million tons sugar shortfall during the next year, after receiving reports from the provinces that there was no substantial increase in sugarcane cultivation area, official sources told Business Recorder.

"We have estimated nearly one million tons sugar shortage in 2007 as the provincial governments have informed that there has been no change in sugarcane cultivation area," sources said.

They said the Trading Corporation of Pakistan (TCP) has awarded tenders for 0.815 tons of sugar so far, half of which would be imported by December this tear, which would be enough to meet the requirements for the current year. However, they added that TCP has been barred from floating new tenders for sugar import this year.

They said that $962,712,587 has been spent on import of 23,89,806 tons refined sugar from January 18, 2005 to May 27, 2006, of which 11,70,426 tons has arrived so far. According to sources, 186,345, 888 tons raw sugar import cost $8,70,348, of which 613, 152 tons has already arrived in the country.

Asked about likelihood of floating new tenders for sugar import, sources said that decision to this effect could be taken by the end of December or early January. An official said that sugarcane cultivation was slightly above last year's crop mainly because of good return ie Rs 70-80 per 40 kg.

However, he added that better yield would depend on water availability and protection from diseases. "If all goes well as per the projections, sugarcane production will be better than last year's target of 50 million tons, but even then the production will not be sufficient to meet the requirements," he said.

He said that the Prices Review Committee, headed by Dr Salman Shah, had decided that sugar situation would be reviewed on monthly basis. However, the Economic Co-ordination Committee (ECC) of the Cabinet would continue to review prices of essential commodities. Sources said that investigation against the sugar 'Mafia' was also under process and now the Central Board of Revenue (CBR) was verifying sales tax invoices.

Another official said that the Commerce Ministry has communicated the next year's projections to the concerned quarters to avoid any controversy that could raise questions over its efficiency in dealing with sugar crisis.

 

[Neo]

ISLAMABAD (June 27 2006): Prime Minister Shaukat Aziz on Monday sought the Asian Development Bank (ADB) support for hydel projects, North-South corridor and the energy, trade and transportation corridors between various Asian regions.

Talking to ADB vice-president Liquin Jin, who called on him at the Prime Minister house, he said Pakistan attaches great importance to its relationship with the Asian Development Bank as it has always stood by it in hour of need.

The Prime Minister also asked the bank to help in urban planning, mass transit projects as well as social sector development projects. The Prime Minister said Pakistan's economy maintained a solid pace of expansion in 2005-06 and achieved 6.6 percent growth despite an extraordinary surge in oil prices and losses caused by the October 8 earthquake.

He said the exchange rate is steady, inflation is going down and credit rating and balance of payment situation has improved. There is an appreciable increase of 20 percent in the country's exports and 22 percent in the revenue collection, he added.

He said Pakistan is fast becoming a destination of choice for foreign investors and this year the foreign direct investment has reached $3.5 billion, which is a record. He said after gaining economic strength the government is now focusing on transferring benefits of growth to the people and as a result there is improvement in the living standards of general public.

The per capita income has reached $847 and poverty is down from 34.46 percent in 2000-01 to 23.9 percent in 2004.05. He said the World Bank and the UNDP have endorsed the methodology adopted by the present government, he added.

Talking about the future, the Prime Minister said the record high amount of Rs 415 billion allocated for the PSDP in the current budget will open new avenues of development.

Liquin Jin termed the economic performance of Pakistan as "very impressive" and said success is mainly due to a strong leadership and efficient economic team of the present government. "A strong economic team under President Pervez Musharraf and Prime Minister Shaukat Aziz is doing a wonderful job," said Liquin Jin.

The magnitude of growth that Pakistan has achieved during the last four years in a row has positioned Pakistan as one of the fastest growing economies in the Asian region.

Liquin Jin said the ADB considers Pakistan as one of the most important countries in the region. Pakistan, he said, because of its geo-strategic location can play a very crucial role in promoting regional trade by acting as a bridge between Central Asia, South Asia and West Asia.

He said the ADB is keen to provide technical and financial assistance to Pakistan to build corridors being planned by it, as these will bring progress and prosperity to the region. Later on, Liquin Jin accompanied by adviser to V.P. Hong Wang and ADB country director Peter L. Fedon held a meeting with adviser to prime minister on finance Dr Salman Shah.

Salman was assisted by minister of state for economic affairs Hina Rabbani Khar, finance secretary Naveed Ahsan and senior officials of the finance ministry.

Dr Salman Shah informed the ADB team Pakistan had boosted its allocation of funds for strengthening basic infrastructure in the current PSDP. He said the country was keenly interested in the development of water and energy sectors, communication network and oil and gas pipelines for the socio-economic development of the country and generating employment opportunities for the people.

On this occasion, water and power secretary gave a presentation highlighting energy requirements of the country and strategic programmes chalked out to exploit indigenous energy resources including coal, wind, hydel, nuclear and oil to cater to national requirements of energy.

He also spotlighted constraints that blocked harnessing of these resources to the maximum extent and sought the ADB's help in the execution of prospective water projects. He also underscored the ADB's role and assistance in providing new technologies in flood control projects.

The ADB vice-president stressed the need for preparing a master plan identifying strategic areas as well as measures to be adopted for flood control and financial requirements for implementation of those programmes.

A presentation was also given by the communications secretary focusing on the requirements for the expansion of communication network including trans-Indus connectivity, National Trade corridor, Asian highway routs, North-South corridor connecting Central Asian states, dualization of Torkhum-Jalalabad road, rehabilitation of Karakoram highway, extension of Gwadar linkages and expansion of existing network. He asked for ADB's assistance in the construction of road and rehabilitation of the existing network.

 

[Neo]

ISLAMABAD (June 27 2006): Pakistan has signed MoU with South Korea on Monday to export manpower under Korean Employment Permit Scheme (EPS). The agreement was signed by Minister for Labour, Ghulam Sarwar Khan and Korean Minister for Labour, Lee Sang Soo, says a fax message received here from South Korea.

Ghulam Sarwar Khan who is on a four-day official visit to South Korea said that Pakistan would send its workers in manufacturing, construction, agriculture, services and other sectors where need of workers is created.

Managing Director, Overseas Employment Corporation (OEC) S M Junaid and Director, Zafar Ali accompanied him.

The minister said Overseas Employment Corporation (OEC) would shortly sign an Implementation Agreement with Human Resource Division of Korea, under which OEC will be exclusively exporting manpower to Korea. He said that after the signing of MoU, Pakistan has been included in the list of 10 source countries, which export workers.

He said according to MoU, Pakistan would be able to export more than 3300 workers to Korea in first year while the export of manpower would increase in the subsequent years.

 

[Neo]

ISLAMABAD (June 27 2006): A 10-member delegation of the International Development Committee of the UK Parliament headed by Malcolm Bruce met adviser to prime minister on finance, revenue, economic affairs and statistics Dr Salman Shah here, on Monday.

The International Development Committee of the UK Parliament is currently on a visit to Pakistan to conduct an enquiry into the humanitarian response extended to Pakistan in the disastrous earthquake and to investigate ways and means employed to handle earthquake aftermath. The UK delegation also wanted to apprise itself of the international response to the tragedy, improve international humanitarian system in similar calamities as well as effectiveness of the UK's efforts in assisting Pakistan in rescue and relief operations in the earthquake areas.

Welcoming members of the delegation, the adviser told the delegation that UK's support during the earthquake that hit Pakistan were highly laudable. He said the UK rescue team immediately arrived in Pakistan and started rescue and relief operations and their efforts in evacuating the earthquake victims were par excellence.

To a question from the delegation, the adviser said that the assistance provided by the UK rescue team was in line with the aspirations of the people of Pakistan. The adviser also thanked the UK for extending financial support to Pakistan at such a difficult time and rescuing several precious lives.

He said under foolproof arrangements, the government had so far disbursed about $40 million and not a single complaint had been received in this regard. In response to a question, the adviser said at the macro level, Pakistan's fiscal deficit is estimated to be at 4.2 percent of the GDP, which was projected to be around 3.7 percent, in view of the devastating earthquake.-

 

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RAWALPINDI (June 27 2006): President Pervez Musharraf on Monday said Pakistan will develop its railways as an efficient mass transit service as well as an elaborate communication network for promoting regional commerce.

Speaking to a delegation of German investors in the field of locomotives and passenger coaches, the President said Pakistan Railways offers tremendous prospects for investment and the country would like to benefit from German expertise and technology.

He said in addition to launching mass transit service in eight major cities of the country. Pakistan is planning to establish rail linkages with the regional countries to bolster trade through its deep seaports including Gwadar with Central Asian states and China.

Pakistan is resolved to utilise its geo-strategic potential as a hub of regional trade and as an energy corridor and developing rail link with neighbouring countries including China is a vital component of our vision he stated, while welcoming German entrepreneurs keen desire to invest in the sector.

Federal Minister for Railways Sheikh Rashid Ahmed was also present during the meeting.

The President informed the German entrepreneurs about plans to commence mass transit service in Karachi, Lahore, Rawalpindi, Islamabad, Multan, Faisablabad, Hyderabad and Peshawar, saying it would facilitate travel of common people and minimise traffic problems. He said recognising the importance of railways as a cost-effective means of long-distance transportation, a number of steps have been taken since 1999 for modernisation of Pakistan Railways and in this respect referred to induction of new coaches, dualisation of tracks and improvement in standard of services.

He praised Pakistan Railway's efforts for providing quality services and efficient transportation to people across the country.

Federal Minister, Sheikh Rashid Ahmed said Pakistan Railways is striving for excellence both in terms of providing facilities to passengers and improving transportation of goods.

 

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By Ivan Gale, Staff Reporter

As director of the Middle East and Central Asia unit for the IMF, Mohsin Khan is often privy to big deals brewing in Pakistan. A month ago, he heard rumours that Dubai companies might invest there. But when Emaar and Limitless announced real estate projects valued at $40 billion (Dh147 billion) in early June, even he was taken by surprise.

"Most people thought the Etisalat deal in 2005 was big, and it was," he said. "But when you hear deals ten times that size, that's pretty astounding."

A few years ago Pakistan wasn't a popular foreign investment choice for UAE companies. In 1998 the country defaulted on an international loan, and was generally regarded as a risky country to do business. According to statistics by the State Bank of Pakistan, foreign private investment from the UAE into Pakistan tallied a modest $17.3 million in 2001-02.

But after making impressive strides reforming its banking sector and standardising business practices, Pakistan is showing a big green light which Dubai companies are finding hard to ignore.

Recently there has been a succession of announcements for multi-billion projects in Pakistan. In June 2005, a consortium of Etisalat and Dubai Islamic Bank announced it would invest $2.6 billion for a 26 per cent ownership and management rights in Pakistan telecom PTCL. In May, Emaar said it would invest $20.4 billion in four real estate developments in Karachi and Islamabad. Limitless, Dubai World's international real-estate arm, followed with news of a $20 billion (Dh73.4 billion) plan to invest in a mixed-use Karachi real-estate project. At about the same time, the Pakistan government also authorised Dubai Islamic Bank to open 50 to 70 branches in Pakistan.

The scale of the deals dwarves all previous foreign investment in Pakistan. Last year foreign investors injected three billion dollars in the country, compared to the more than $40 billion that the Dubai projects will pump into the economy over the next few years equivalent to more than 10 per cent of Pakistan's GDP.

In truth, Dubai companies won't be spending tens of billions of dollars of their own money straight off. Most projects will build mixed-use residential and commercial units that they can pre-sell, using the proceeds to complete construction over a period of five to ten years. Still, Pakistan has emerged as the premier destination for UAE companies aggressively expanding their operations abroad.

Part of the reason lies at home. With the pace of new projects beginning to slow, Dubai is approaching a saturation point with high-profile residential projects. At the same time, companies are trying to diversify their assets. Increasingly, they're looking abroad.

Dominant force

Crude oil prices have nearly tripled since 2002, and the UAE is riding an oil boom that the IMF predicts will last for some time. It forecasts crude prices to remain over $60 a barrel for the next five years.

"Where is the money going?" asks financial analyst Steve Brice of Standard Chartered Bank in Dubai. "Due to high oil prices, the answer is hardly surprising almost anywhere," he wrote in a recent paper. Asia remains the dominant force, he said. "Petrodollars are increasingly going to countries in the emerging world."

IMF director Khan said Dubai companies are ahead of the game by thinking regionally, and particularly likes the name of Dubai World's international real estate development arm, Limitless. "Everyone says 'so and so, limited,'" he said. "It really describes Dubai companies in terms of acquisitions."

This audacious investment plan is unfolding all over the Middle East, North Africa and Asia. Emaar is taking a lead role in the $27 billion (Dh100 billion) King Abdullah City development in Saudi Arabia, and is engaged in billion-dollar projects in Morocco and Egypt. Dubai World is also expanding boldly into ports in Djibouti, Vietnam and China.

But more than anywhere else, Dubai companies are showering Pakistan with new projects. An IMF success story, in 2004 the country passed through the latest of several structural adjustment programs. The same year, it raised $500 million through a Eurobond. In another progressive step, just months ago it adopted international arbitration standards in business disputes.

These efforts have invigorated the economy and created new business opportunities, says Professor Rodney Wilson, director of Durham University's Institute for Middle Eastern and Islamic Studies in the UK. He noted its GDP growth rate has surged six to eight per cent the last few years, creating a new dynamism in the region.

Pakistan is perceived as an under-served market and a friendly place for Dubai companies to do business. The country has undeveloped land suitable for large projects and a cheap labour market.

Business friendly

UAE companies are feeling more comfortable with the Pakistani economy, and cultural similarities with the Gulf all contributed to the deals, said Khan. Many Pakistanis also hold senior positions in Dubai firms and provide local expertise in the Pakistan business climate.

A burgeoning economy is creating a new affluent class among its 166 million residents, who will be capable of affording these higher-end real estate projects. Estimates by Limitless put the Pakistan housing shortage at six million dwellings.

The country isn't without its risks, of course. A weakening of the Pakistani rupee would lower the profits Emaar and other companies brought home to the UAE. Also uncertain is what would happen if the current business-friendly leadership were to change.

Nonetheless, most observers give the deals unequivocal thumbs-up, including Brice of Standard Chartered Bank. "Pakistan might not be the easiest place in the world to do business, but the returns should be relatively healthy."