Pakistan Economy - News & Updates - Archive

[Neo]

External debt surges to $50.85 billion​

KARACHI: Pakistan’s external debt and liabilities surged to $50.85 billion during the second quarter of current fiscal year from $45.50 billion, according to official data.

The main contributor to this rise in foreign debt was $3.1 billion obtained from International Monetary Fund in November.

Debt owed to IMF rose from $1.239 billion to $4.352 billion during this period.

Foreign debt and liabilities have risen by $15.01 billion during last three and a half years from $35.834 billion at the end of June 2005.

Economists say the annual debt payments would increase as a result of this surge in external debt and liabilities. They say the actual cause of concern would be the annual debt payments that the country would have to make.

This sharp increase in external debt and liabilities shows that the country has failed to get rid of the whooping debt trap despite the favourable conditions that it had following the 9/11 incidents in the United States and despite the assistance it has extended to the US in its “war on terror”.

Pakistan’s foreign debt servicing bill has inflated during the first two quarters of current fiscal year, creating serious problem for the dollar-starved country.

From July to December 2008 the country has already paid bills for debt servicing equal to 77 per cent of what it paid in all four quarters of 2007-08.

The official data shows that the country paid $2.260 billion as debt servicing during the six months. If the payment for liabilities servicing is included the total debt and liabilities services will go further higher to $2.426 billion. During 2007-08, Pakistan’s debt repayment had stood at $2.923 billion.

The country is eagerly looking for more loans to meet its ever-increasing current account deficit but the piling up of loans means larger share of debt servicing as reflected by the data during the last two quarters.

Advisor to government on finance Shaukat Tareen recently stated that government would be seeking $4.5 billion more funds from IMF in near future. This would push the foreign debt further up.

 

[Neo]

Cash-strapped HEC to get $100m loan from World Bank​

* WB asks the commission to increase transparency in higher education infrastructure to avoid financial mismanagement​

KARACHI: The World Bank (WB) will provide a loan of 100 million dollars in 2009 to help the financially strapped Higher Education Commission (HEC) in a bid to allow HEC to overcome its deepening crisis.

“The provision of loan to the HEC is aimed at strengthening its ability to carry on with the uplift work in higher education institutes,” officials of the commission said. The loan would be awarded under the title of ‘Higher Education Development Policy’ to bring the education and administrative affairs at par with international standards besides warding off the fiscal crisis.

The amount will help out HEC as at present is not releasing funds to universities across the country. The gravity of the crisis could be assessed by the fact that it has compelled universities to borrow money from banks in order to pay the staff salaries. A case in point is the Federal Urdu University for Arts, Science and Technology (FUUAST) that borrowed Rs 10 million from a bank to pay its employees.

Likewise, development projects in many universities have been halted by the HEC due to insufficient funds. HEC officials said that the project funding would be made through the International Bank for Reconstruction and Development (IBRD), which is one of five institutions that comprise the WB.

Responding to a query, HEC officials viewed that the WB had also asked to increase transparency in higher education infrastructure to avoid financial mismanagement. “If the amount is properly utilized, another $ 100 million would be provided in 2010 for the development of additional areas, however, all this depends on the program’s performance,” they revealed.

 

[Neo]

$5 billion FDI expected by end of current fiscal: BoI ​

ISLAMABAD (February 21 2009): The government is expecting to receive five billion-dollar foreign direct investment (FDI) by the end of the current fiscal year, Board of Investment (BoI) Secretary Tariq Puri told Business Recorder here on Friday. He said that despite recession in the international market, the country had already received 2.5 billion dollars FDI during the first seven months of the current fiscal.

There were concerns that Pakistan would be unable to attract five billion dollars due to poor law and order situation and the global financial crisis, he said, adding: "If we succeed in realising this figure, it would be greater than what was posted during 2007-08."

The FDI was 5.13 billion dollars in 2006-07 financial year; in 2005-06: 3.51 billion dollars; in 2004-05: 1.524 billion dollars; in 2003-04: 949.4 million dollars; in 2002-03: 798 million dollars; and in 2001-02: 484.7 million dollars. The bulk of this FDI was in the telecom sector.

Investment in textile sector was 24.4 million dollars during July-January 2008-09 as against 17.6 million dollars during the corresponding period of last fiscal, posting an increase of 38.4 percent.

The BoI Secretary admitted: "It is true that the textile sector is facing problems regarding the cost of doing business in Pakistan and its retail sales in the markets of the US and Europe have declined due to the economic recession." He said the textile sector had requested the government to reduce the interest rate in support of industry.

Responding to a question about high interest rates, he said that inflation was the raison d'etre of the ongoing tight monetary policy. However, he stated that the impact of reduced prices of petroleum products would result in a decline in inflation that might eventually ease monetary policy. Puri said that the inflation rate in foreign countries was lower as compared to Pakistan. The lower inflation rate had allowed the foreign countries to follow an expansionary monetary policy that had low interest rates as an integral component.

 

[Neo]

Weekly SPI inflation swells to 24.19 percent ​

ISLAMABAD (February 21 2009): Weekly SPI inflation swelled to 24.19 percent on February 19, 2009 over the same period of last year on the back of steep increase in the prices of kitchen commodities, particularly vegetables, according to data released by Federal Bureau of Statistics (FBS) on Friday. Figures on weekly inflation, measured through Sensitive Price Indicators, showed a steep increase in the prices of chicken, onion and tomatoes.

The price of per kg chicken went up to Rs 120 during the week from previous month's Rs 112, onion to Rs 33 per kg from Rs 27, and tomatoes to Rs 32 from Rs 28. Increase in the prices of mutton, wheat average quality, beef, vegetable ghee loose, milk fresh and cigarettes was also recorded during the week.

With this increase the dearness for the families with monthly income of Rs 3000 went to over 23.66 percent, for Rs 3001 to Rs 5000 24.32 percent, Rs 5001 to Rs 12000 to 25.33 percent and the dearness for the families of Rs 12000 monthly and over monthly income was recorded 23.96 percent during the week.

During the week, an increase of 0.65 percent in combined SPI was recorded. The SPI bulletin showed that prices of 9 essential commodities increased during the week, 18 declined, and the prices of 26 essential commodities remained stable.

According to FBS, the price of K-2 10 cigarettes increased to Rs 9.38 from Rs 8.94, mutton kg to Rs 262.88 from Rs 261.48, wheat average quality kg to Rs 24.55 from Rs 24.48, beef kg to Rs 144.30 from Rs 144.00, vegetable ghee loose kg to Rs 99.14 from Rs 99.02, milk fresh litre to Rs 36.56 from Rs 36.54.

The average prices LPG (11 kg cylinder) eased to Rs 824.00 from Rs 844.65, potatoes kg to Rs 12.93 from Rs 13.22, egg hen (farm) dozen to Rs 58.74 from Rs 59.88, gram pulse washed kg to Rs 58.32 from Rs 59.38, sugar kg to Rs 41.50 from Rs 42.07, moong pulse washed kg to Rs 47.79 from Rs 48.14, masoor pulse washed kg to Rs 125.77 from Rs 126.57, gur kg to Rs 45.79 from Rs 46.07, bananas dozen to Rs 35.65 from Rs 35.81, garlic kg to Rs 41.56 from Rs 41.74, red chillies kg to Rs 132.61 from Rs 132.95, kerosene litre to Rs 63.59 from Rs 63.71, rice basmati broken kg to Rs 44.38 from Rs 44.45, rice Irri-6 kg to Rs 36.43 from Rs 36.49, firewood 40 kg to Rs 270.49 from Rs 270.93, mash pulse washed kg to Rs 76.08 from Rs 76.19, mustard oil kg to Rs 141.12 from Rs 141.28, wheat flour av qlt kg to Rs 24.54 from Rs 24.56.

 

[Neo]

$2.4 billion services trade deficit recorded during July-January ​

KARACHI (February 21 2009): Deficit of $2.4 billion in service trade has been recorded during seven months of current fiscal year mainly due to larger payments on account of transportation, construction, financial and royalties. However, overall services sector performance improved, as decline in deficit was seen, and exports were rising, when compared with the same period of last fiscal year.

Overall, Pakistan's services sector exports stood at 2.161 billion dollars against imports of 4.632 billion dollars, depicting a deficit of 2.471 billion dollars during the July-January. Rising trend in exports and slowdown in imports helped in slashing services deficit by 1.49 billion dollars, or 38 percent, during seven months as compared to the same period of last fiscal year, in which services deficit amounted to 3.968 billion dollars.

Services sector imports declined by 950 million dollars, or 17 percent, to 4.632 billion dollars during July-January of current fiscal year against imports of 5.582 billion dollars in corresponding period of last year. Services sector exports, with an increase of 34 percent, mounted to 2.161 billion dollars as against 1.614 billion dollars in same period of last year.

Major contribution in services trade deficit was witnessed in transportation services, travel services, and royalties, as only transportation sector contributed over 50 percent share in overall deficit. The country faced a deficit of 1.486 billion dollars in transportation services, as its transportation earnings stood at 691million dollars against the payments of 2.177 billion dollars during the July-January of current fiscal year.

Similarly, some 659 million dollars deficit was registered in travel services, as its imports stood at 791 million dollars over the export of 132 million dollars. The country paid 56 million dollars on account of royalties, 38 million dollars for construction, 76 million dollars on account of insurance and 121 million dollars of financial services import.

 

[Neo]

'Economic indicators show Pakistan enters reflation cycle' ​

KARACHI (February 20 2009): The recent economic indicators such as inflation, current account, LSM data and PIB auction reflect that Pakistan has entered a reflation cycle, economist said. However, economist sees sluggish growth following weak microeconomic fundamentals and the absence of fiscal policy impetus in addition to falling inflation in the next 12 months.

"The policy rate is likely to cut by some 400 bps to 11 percent during 2009 due to the large decline in inflation," said KASB economist Muzammil Aslam in Merrill Lynch report.

Muzammil said that key equity sectors that would benefit from a steep cut in the discount rate are defensive dividend plays, consumer and financials. The Federal Bureau of Statistics has reported headline CPI at 20.52 percent YoY in January, down 2.82 percent from 23.34 percent during December, he said. The drop is primarily due to the decline in food price inflation, which came in at 21.61 percent down from 27.9 percent during December, he added.

"We are expecting the price reversal trend to continue in coming months on the back of retail and wholesale price differential, falling commodity prices and slackening output gap. Inflation would be single digit in June compared to 20.58 percent currently," he said.

He said that the FBS reported dismal negative growth of 4.72 percent for Large Scale Manufacturing (LSM) during July-December 2008 as compared to growth of 4.8 percent a year earlier. Although, the manufacturing data improved to -1.6 percent during Dec-08 from -6.2 percent YoY during July-November '08, we still expect weak manufacturing fundamentals on the back of global recessionary woes, higher interest rates and the absence of a fiscal stimulus plan, Muzammil said. "We expect flat LSM growth during FY09 and GDP at 3.0-3.5 percent," he added.

He said that overall, participation in PIBs remained broad-based and the ministry of finance opted to mop up Rs 20.33 billion through 3-, 5-, 7-, 10-, 15-, 20-, and 30-year bonds.

However, cut-off yields came in below market expectations, which sparked a rally post auction. The government is targeting to raise Rs 60 billion by June 2009 and we are expecting a bullish bond market, Muzammil said.

He said that in reflation, GDP growth would be sluggish and excess capacity and falling commodity prices drive inflation lower. However, he said that profits are weak and real yields would drop. The yield curves shift downward and steepen as the central bank cut short rates in an attempt to get the economy back onto a sustainable growth path.

 

[Omar1984]

Pakistan, China sign agreement on trade in services

WUHAN, China Feb 21 (APP): Pakistan and China on Saturday signed a Memorandum of Understanding in trade in services to attract investment in services sector. The agreement will enhance the capacity of services providers in the two countries and create new jobs in various sectors including IT.

The agreement also envisages development of efficient services infrastructure and will ensure transfer of technology in all sectors.

Under this agreement, China has increased its commitment to Pakistan in several sectors and sub-sectors and liberalized its trade regime.

China will give market access in the services sector beyond any other member country of WTO or bilaterally.

Ambassador of Pakistan to China Masood Khan said that the two countries signed Free Trade Agreement in November 2006 and under the agreement signed Saturday the two countries will be able to trade in the services of professionals from each other’s country.

The agreement was signed by Pakistan Ambassador to China Masood Khan and Chinese Vice Minister for Commerce Chen Jian. President Asif Ali Zardari and State Councillor Dai Bingguo also witnessed the signing ceremony.


Associated Press Of Pakistan ( Pakistan's Premier NEWS Agency ) - Pakistan, China sign agreement on trade in services

 

[Neo]

KSE gains 343 points on positive developments ​

Sunday, February 22, 2009

KARACHI: The announcement of attractive payouts in the on-going corporate result season, and news about reinstatement of Pakistan on the Morgan Stanley Capital International (MSCI) Frontier Index helped Karachi bourse cross 6,000 points on Thursday, but profit booking on strength ended the week slightly lower than this psychological level.

The KSE 100-share Index gained more 343.19 points or 6.10 per cent on week-on-week basis and concluded at 5,956.09 points on weekend.

“Now that the benchmark KSE-100 Index has increased by 26 per cent from its bottom of 4,815 points, we see some profit taking coming into play during the next week,” predicted KASB Securities.

The free-float market capitalisation based 30-Index surged by another 450.61 points or 7.93 per cent on weekly basis and ended at 6,132.50 points.

Analysts said that buying euphoria was already there in the market owing to disbursement of higher dividends and bonuses by cash rich top companies, therefore, news about the re-inclusion of Pakistan in MSCI Frontier Index restored investors’ confidence to higher.

The slightly lowering of current account deficit in January 2009, maintaining of country’s foreign exchange reserves higher (above Rs10 billion), discovery of new gas reserves by Oil & Gas Development Company, praise from World Bank on improvement in macro economy indicators of Pakistan and the reported active-buying by NIT-State Enterprise Fund helped market cross 6,000 points on Thursday. It (market), however, failed to sustain the level owing to profit booking on the available margins. The overseas investors, however, took no inspirations from MSCI Barra statement and remained determinant of getting exit from the local bourse. They cumulatively sold shares worth US$11.6 million this week. During they week, therefore, they (foreigners) bought shares worth US$7.8 million and sold US$19.4 million.

Cumulative net foreign selling since the removal of floor-price mechanism has now reached to US$201 million. Moreover, foreigners who held shares worth US$1.3 billion at the beginning of 2009, now hold Pakistan equities estimated around US$1.1 billion on account of eroding share values and offloading of shares, JS Research calculated.

Average daily volumes in the ready market stood at 203 million shares versus 144 million shares, showing an increase of 41 per cent on week-on-week basis. The overall market capitalisation improved by Rs51 billion to Rs1,859 billion this week.

Muhammad Saqib Sajjad at KASB Securities said that apart from attractive valuations, the on-going earnings season also added to investors’ excitement. Going forward, the next week might remain range-bound where continuation of boom bust results shall keep excitement alive in select stocks.

Next week, the market will be looking at results of Pakistan Telecommunication Company, Oil & Gas Development Company, Pak Oilfields, Hub Power, Kot Addu Power Company and United Bank Limited.

“We expect more clarity on the resolution of inter-corporate debt through issuance of Rs75-98bn TFC. This could boost excitement in IPPs (Hubco and KAPCO), refineries and OMCs (PSO). However, growing asset quality concerns may keep the banks at bay. On the macro front, successful negotiations with IMF to increase financing by US$4-4.5 billion and relaxation of interest rates can also prove to be a sentiment booster,” he added.

Habib Bank, EFU General Insurance, United Bank, Allied Bank and Agriauto Industries were major gainers while First Capital Securities, Ibrahim Fibre, Bestway Cement, JS Global Capital and Azgard Nine were major losers at the KSE this week.

 

[Neo]

US to help boost Pak economy ​

Sunday, February 22, 2009

KARACHI: US Mission Deputy Chief Gerald Feierstein has said that the future of Pakistan is bright and prosperous and the positive assessment would certainly give a green signal to the international business community.

A six-member delegation of the US mission, led by Gerald Feierstein, visited the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Saturday on a courtesy call and met its President Sultan Ahmed Chawla and others.

As part of a strategic review to support Pakistan, he said, the priorities of the US government were to provide special equipment and training to Pakistani counterparts to enhance their capabilities to meet the challenges of law and order.

Sultan Ahmed Chawla said due to US financial meltdown and international recession, Pakistan’s economy also faced several challenges which had sternly hit its industrial competitiveness besides hampering the achievement of export target. He said there were many core areas where the US could assist Pakistan, especially education, energy, etc.

Gerald Feierstein said the US had a number of programmes for Pakistan to boost its economy and growth and it could play an important role in laying the foundation, which included projects related to infrastructure development, energy, education, vocational training, etc.

He said the US mission had also planned to take a business delegation to the US as the most important component was to attract American business people to Pakistan for establishing business ties.

He said the FPCCI could play a pivotal role in convincing the American business people that there were good opportunities in Pakistan with conducive environment.

FPCCI Vice President Zakaria Usman said the US should give similar tariff facilities to Pakistan as given to its neighbour. Another FPCCI Vice President Mansha Churra said the US should honestly portray Pakistan’s real picture in a positive manner and issue a positive travel advisory to its citizens intending to visit Pakistan.

Pakistan-US Business Council former chairman Arshad Alam pointed out that tariff rates in the US for Pakistani products were high ranging between 13 per cent and 17 per cent. “It is important that the US brings down the tariff rates for Pakistani products to be competitive in the US market,” he said.

 

[Neo]

Russian trade team to arrive next week ​

Sunday, February 22, 2009

KARACHI: A high-level Russian trade delegation will visit Pakistan next week for the first time in 30 years, Chief Executive Trade Development Authority of Pakistan Syed Mohibullah Shah announced on Saturday.

Speaking to the media at the TDAP office, he said Pakistan was on the path to enhance relationship with several countries and was finding new markets. Shah said that Russia was a huge market, which imported goods and services worth $190 billion annually, but Pakistan had a meagre share of $100 million only.

Pakistan had the potential to increase that share, especially in textile and clothing. Meetings were conducted with textile manufacturers, he said, who gave a positive response.

The Russian trade delegation will arrive on February 25 in Karachi and later it would visit Faisalabad. Pakistan had the potential to double its exports in five years, Shah said, adding the TDAP was working on involving value addition in agricultural crops like wheat, rice, fruits as well as livestock and fisheries.

He spoke about several steps for restructuring the organisation for facilitating the trade and said Pakistan was working to establish trade and investment linkages with the Central Asian Republics, including energy corridors (gas from Turkmenistan and electricity from Kyrgyzstan) within the context of the CAREC regional programme sponsored by the Asian Development Bank.

While most of the imports to the Kyrgyz Republic were related to agricultural products, the major share of agriculture products in Kazakhstan, including fruits, vegetables and seafood was imported from Russia, Turkey and Europe. A Pakistani trade delegation would soon visit these countries, he said.

Answering questions, the TDAP chief said though Pakistan’s seafood export to the European Union member countries had been suspended for two years, the country had found new markets in Russia and South East Asian countries, which were out of recession compared to Europe and the US.

 

[Neo]

‘PSM on the path of recovery’​

KARACHI: Despite being affected by global economic recession and incurring losses, the Pakistan Steel Mills will regain its lost sales and will reach the mark of expected sales by July 2009, Chairman, PSM, Mueen Aftab Sheikh said while addressing a press conference in Pakistan Steel Mills Saturday.

The steel mills sales are going up as it recorded Rs 1.5 billion in November 2008, Rs 2.8 billion in December 2008 and in January 2009 the sales were recorded at Rs 3.8 billion.

He said “we are making efforts to incorporate clause in PPRA rules authorising any government department committee to negotiate with suppliers to adjust the contracted prices equivalent to difference of current international prices of raw material and other consumables.”

Aftab said: “We have initiated a project for making briquettes of coke dust 0-15 mm, as in the past around 40,000 tonnes of coke dust was wasted every year, but the coke briquette made from this dust would be worth $20 million per annum.” PSM has also started using local Sharrigh coking coal to the tune of 5 percent in the plant. The price difference between local and imported coal is $275 per MT. To cut down the surplus contents PSM is also procuring a desulfurization plant to use more local coal as substitute of expensive imported coal, chairman informed.

The PSM management has also approached FBR for imposition of regulatory and antidumping duty because EU has imposed 85 percent duty on import of steel products from China. USA has imposed 153 percent dumping duty on Indian steel products and India has imposed 30 percent duty on import of steel products. Due to the global recession, the PSM is operating at 75 percent capacity instead of 90 percent. Market share of PSM prior to recession was 20 to 45 percent for long and flat steel products and the rest of demand was being met through imports in case of flat products, whereas, long products were being produced locally through re-meltable scrap or ship breaking, he said.

 

[Neo]

Development expenditure exceeds Rs 125bn​

ISLAMABAD: The development expenditure of the government has exceeded Rs 125.450 billion in the first 6 months of the current fiscal year 2008-09, officials sources told Daily Times here on Saturday.

The expenditures of Rs 369.8114 billion carry Rs 247.632 billion on development and Rs 122.182 billion on non-developmental expenditure during the first half of the current fiscal year 2008-09.

Classification of these sectors is: development expenditure on roads, highways and bridges Rs 3.395 billion while non-development expenditure is Rs 3.395 billion. Development expenditure on water supply and sanitation is Rs 3.792 billion while non-development expenditure is Rs 2.766 billion. Development expenditure on education is Rs 5.985 billion while non-developmental expenditure on it is Rs 77.958 billion.

Out of a total expenditure of Development expenditure of Rs 2.255 billion on population planning, development expenditure is Rs 2.163 billion and non-developmental expenditure is Rs 0.092 billion. Development expenditure on social security and social welfare in the current half fiscal year is Rs 2.616 billion while non-developmental expenditure is Rs 0.870 billion.

Developmental expenditure on agriculture is Rs 17.291 billion and non-development expenditure on it is Rs 13.878 billion. Total development expenditure on rural development is Rs 1.742 billion and non-development expenditure on this sector is Rs 0.377 billion.

There are some sectors on which the expenditures is treated as developmental, these sectors are: natural calamities and other disasters worth Rs 2.791 billion, spending on Law and Order Rs 42.175 billion, spending on Low cost housing Rs 0.128 billion, expenditure on Justice Administration Rs 4.020 billion, spending on Subsidies worth Rs 116.958 billion, expenses on Food Support Programme worth Rs 9.383 billion, spending on People’s Works Programme-I worth Rs 0.407 billion and expenditures on People’s Works Program-II wroth Rs 15.183 billion.

Federal spending: Total expenditure of at Federal level in current half fiscal year 2008-09 is Rs 179.087 billion. At federal level the classification of 6 months spending are; Roads, Highways, and Bridges is Rs 1.366 billion, Water Supply and Sanitation is Rs 75 million, Education is Rs 10.737 billion, Health is Rs 5.002 billion, Population Planning is Rs 1.426 billion, Social Security and Social Welfare is Rs 0.291 billion.

Punjab: Total expenditure of Punjab province in current half fiscal year 2008-09 is Rs 97.776 billion. Provincial spending on different sectors are; Roads, Highways, and Bridges is Rs 11.997 billion, Water Supply and Sanitation is Rs 3.396 billion, Education is Rs 40.119 billion, Health is Rs 11.226 billion, Population Planning is Rs 0.544 billion, Social Security and Social Welfare is Rs 0.421 billion.

Sindh: Total expenditure of Sindh province in current half fiscal year 2008-09 is Rs 43.824 billion. Provincial spending on different sectors are; Roads, Highways, and Bridges is Rs 4.645 billion, Water Supply and Sanitation is Rs 1.502 billion, Education is Rs 16.281 billion, Health is Rs 4.699 billion, Population Planning is Rs 26 million, Social Security and Social Welfare is Rs 2.612 billion.

NWFP: Total expenditure of NWFP province in half fiscal year 2008-09 is Rs 35.654 billion. Provincial spending on different sectors are; Roads, Highways, and Bridges is Rs 1.672 billion, Water Supply and Sanitation is Rs 0.775 billion, Education is Rs 13.561 billion, Health is Rs 4.900 billion, Population Planning is Rs 200 million, Social Security and Social Welfare is Rs 74 million.

Balochistan: Total expenditure of Balochistan province in half fiscal year 2008-09 is Rs 13.473 billion. Provincial spending on different sectors are; Roads, Highways, and Bridges Rs 1.773 billion, Water Supply and Sanitation Rs 0.729 billion, Education Rs 3.245 billion, Health Rs 1.011 billion, Population Planning Rs 59 million, Social Security and Social Welfare Rs 88 million.

 

[Neo]

Gwadar Port: ‘Accord with Singapore firm needs revision’​

KARACHI: The agreement signed with Singapore firm on Gwadar Port needs to be revised.

State Minister for Ports and Shipping, Sardar Nabil Ahmed Gabol said this on Saturday.

The Minister said making Gwadar Port operational is a big success of the present democratic government and this port would soon emerge as one of the best ports in the world, says an official statement here. He said Gwadar Port would prove as an instrument for strengthening the country’s economy, promotion of regional trade and socio-economic uplift of the people.

Gabol said that more ships carrying wheat and urea are scheduled to arrive at Gwadar Port. Labourers and traders would be provided maximum facilities at the port along with creating more job opportunities for the people of Balochistan at Gwadar Port and other associated facilities.

 

[Neo]

Direct taxes on rich people proposed: Dr Ishrat sees 3-4 percent growth over next two years​

KARACHI (February 22 2009): Pakistan can manage to achieve 3 to 4 percent growth rate over next two years and would return to the long-term average of 5 percent after 2010. This was stated by former Governor of State Bank of Pakistan and Dean and Director Institute of Business Administration Dr Ishrat Hussain while addressing Pakistan Belgium Business Forum (PBBF) on "Survival of Pakistan's Economy" at a local hotel on Saturday.

The gathering was attended by Francis Widmir, Commercial Counsellor, Embassy of France in Pakistan and Head of Economic Department in Pakistan, Takreem-ul-Haque, Honorary Vice Consul Belgium, President PBBF Mohammad A Rajpar and members of PBBF.

Dr Hussain said Pakistan for a long time had achieved the rare distinction of having 5 percent per annum GDP growth rate, hence a pessimistic view of the alarmist 'experts', who are talking down the economy, was not justified, as the capitalist system entails boom and bust cycles alike.

Pakistan should change its traditional view of looking at the West for economic reforms, now Islamabad should look at the fast growing future economies of East like China, South Korea, Vietnam, etc, he added. He said though the short-term issues, such as power, water etc, were there but in the long-term Pakistan should learn from China and induct incentives for industrial production, innovation, education, culture of hard work, transparency in corporate working, etc.

Dwelling on the prospect, he said since July 2008, the government had taken tough decisions with subsidies being eliminated to reduce fiscal deficit, IMF programme has begun plus reduction in world oil and commodity prices were easing pressure on the economy. He said 2009 would be a tough year though.

The former SBP chief said the country's banking system had insulated from global liquidity crisis due to earlier reforms, whilst the central bank was injecting needed liquidity into the banking system.

Terming the tax ratio as "not enough", Dr Hussain said rich people needed to pay more and the emphasis should be on direct taxes instead of the indirect ones that affect the poor more. He said the recession-hit world growth was expected to be zero or negative over next two years with developed countries to be the most affected ones.

The economic recession would affect Pakistan's exports and investment inflows, but perhaps the demand would not be hurt as much since Pakistan was the producer of lower value goods.

Terming investment a must in energy supply to industrial, social and infrastructure sectors, Dr Hussain said Islamabad should diversify out of textiles into higher value addition activities, like engineering and manufactured goods. He said the current crisis was not first in the history of Pakistan, which had recovered well from previous ones, like in 1999.

The ex-SBP chief cited three reasons for the current crisis. First, the previous government had not responded in time to increase in global oil and commodity prices ie impact not passed on to consumers for political reasons, he said, adding that instead, government had borrowed Rs 600 billion from the SBP causing inflation and attacking on the exchange rate.

Secondly, he said political crisis and extended transition to new government left the economy without effective stewardship. Finally, the previous government had not planned for energy shortage despite good growth rates. This was a mistake (or policy failure) which had impaired current industrial production and future industrial investment.

Earlier, PBBF President Mohammad A Rajpar in his address of welcome highlighted various aspects of PBBF saying that the Forum was enjoying good reputation among the official and business circles. He said the 80-member Forum was promoting business ties and mutual understanding between the two friendly countries and was engaged in activities such as shipping and freight forwarding, textiles, oil and gas, manufacturing of building materials, cement and glass, etc.

 

[Neo]

Shadows over large scale manufacturing sector ​

ARTICLE (February 22 2009): In a latest move, the ECC of the Cabinet has exempted, on January 13, imposition of the Regulatory Duty on import of capital goods required for various projects. The decision is termed as another blow to the crippling Large Scale Manufacturing (LSM) Sector, of which capital goods industry is an important constituent.

This negates the government's declared policy of facilitating local industry for the reasons of promoting import substitution and value addition and adapting export-led strategy. The Large Scale Manufacturing (LSM), which accounts for 70% of overall manufacturing, has witnessed steady deceleration for the third consecutive year, resultantly increasing import burden on national economy on one hand, and, on the other, having disturbed export targets.

The LSM sector suffered negative growth of 4.8% during fiscal year 2007-08 in relation to 2006-07. A variety of factors are responsible for lackluster performance of the sector, including political instability, massive power and gas load-shedding, higher input costs and other constraints, or, to sum up, structural weaknesses in the economy, to quote State Bank of Pakistan annual report for 2007-08.

The declining trend continues during the current fiscal year too. The sector witnessed a decline of 4% during the month of July 2008, 5% during July-August 2008 and 6.2% in the first quarter of the year (July-September 2008), over the corresponding periods of previous year. There was an overall 5.05% negative growth recorded in the LSM sector during the first 4-month period of the current fiscal year (July-October 2008).

The situation is reflected in the fact that trade deficit during the first half of 2008-09 year (July-December 2008) registered an all-time high level of $9.55 billion. In the past, the correlation of GDP growth was highest with capital goods manufacturing compared with that of the production of consumer and intermediate goods. During the recent years, however, capital goods contribution in total LSM has declined, from 6% share until the 1980s to nominal 3% since the 1990s.

No wonder Pakistan has lost its global competitiveness in 2008-09, as the country is now ranked at 101 out of 134 countries. In comparison, Pakistan was ranked at 82 out of 122 countries in 2006-07, according to a report. In this context, it is rather criminal that the need for reviving the LSM sector is being overlooked by the government. Textile manufacturing units have suffered largely, and are being closed down in record numbers.

Steel industry is in a shambles and there has been no investment in engineering industry for many years. Indeed, the government needs to adopt prudent approach and consistency in policies to improve performance of the LSM sector, on priority. This will be in line with the government's announced measures as per 2008-09 Budget, having set a target of 6%-7% growth for the LSM sector.

The "Asian Development Outlook 2008 Update" of the ADB has forecast that the economic growth in 2008-09 was expected to remain subdued at 4.5%, with a continued slowdown in manufacturing sector. More disturbing are the recent findings of the Commission on Growth and Development in its latest "Growth Report" that Pakistan needs 159 years to catch up with industrialized (OECD) countries, assuming it grows at the highest rate registered in the last ten years.