Pakistan Economy - News & Updates - Archive

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By Ivan Gale, Staff Reporter

The timing was uncanny. In early June, as Dubai World vied for the contract to manage Gwadar, the planned deepwater Pakistani port near the Iran border, UAE companies unloaded a treasure trove of investment projects on the South Asian nation.

Limitless, a subsidiary of Dubai World, and Emaar said they would separately build mixed-use developments in Islamabad as well as reshape the port of Karachi with housing, warehouses, office space, recreational and entertainment facilities, and special economic zones.

Pakistan hasn't chosen a Gwadar operator yet, but Dubai World remains the preferred bidder, and with good reason. No other ports company can boast the backing of a billion-dollar real estate subsidiary such as Limitless ready to join in with complementary projects, plus other UAE developers like Emaar seemingly ready to do the same.

Intoxicating mix

The same is true in China, where Damac Properties recently announced it would build a Dh10 billion ($2.7 billion) commercial and residential development around Tianjin Port, which is being redeveloped by a DP World-led joint venture.

Taken together, the offerings present countries an intoxicating mix of development, dollars and expertise that would leave any nation utterly starstruck. The UAE has become an investment powerhouse and when it sets its eyes on a prize, such as Gwadar, it certainly knows how to make its presence felt.

Saeed Ahmad Saeed, CEO of Limitless, acknowledged Dubai World's strategy for establishing a "global footprint across multiple industries" and said Limitless will act as an incubator and master-planner for Dubai World's real estate projects. Imran Afzal Khan, manager of marketing and financial services at Arab Emirates Investment Bank, said each Pakistan project stands on its own merits as investments. But he added they could also be seen as "clearing the way for the jewel in the crown," namely Gwadar port.

UAE companies will undoubtedly sail on with their foreign investment adventuring. While no one knows the chart they'll set, one thing seems certain: where one goes, others follow.

 

[Neo]

Tuesday, June 27, 2006

* Growth has to be accelerated and has to be more widely shared, says the report

ISLAMABAD: Building on recent strong growth, countries in South Asia can dramatically reduce poverty by embracing policies aimed at increasing investment and productivity and improving the quality of labor, while addressing pervasive income inequalities and poor service delivery, according to Economic Growth in South Asia, a World Bank report, released on Monday.

The report finds that while countries in the region are growing rapidly, evidence shows that expansion, due to its uneven nature, is deepening income inequality and may be hard to sustain in the longer term if the key constraints are not addressed.

South Asia’s decade-long economic expansion has raised the possibility that the sub-continent could eliminate poverty in our lifetime, says Shantayanan Devarajan, co-author of the report and the World Bank chief economist for the South Asia region. But to realize this dream, South Asians must create conditions and incentives necessary to sustain and accelerate growth that benefits all. The economic well-being of several hundred millions of people depends on it.

A striking feature of the report is analysis showing that South Asian countries could see single-digit poverty rates in a decade if economic growth accelerates to 10 percent a year till 2015. This means the number of people living in poverty could go down by two-thirds in less than 10 years. Looking back at the remarkable economic performance of the past decade, the report suggests South Asian countries should aspire to this goal and emulate the East Asian growth rates of 7-10 percent that lifted millions of people out of poverty in relatively few years.

Impressive Progress so Far: Bangladesh, India and Pakistan have all grown at over five percent per year on average during the last five years. Growth in both Pakistan and India topped eight percent last year. Forecasts put South Asian economies on a steady

path of expansion this year. Economic growth has already contributed to an impressive reduction in poverty. In the last decade, poverty in Bangladesh, India and Nepal fell by 9, 10 and 11 percent, respectively; in Sri Lanka it fell by six percent. Only in Pakistan did poverty increase by eight percentage points due to economic stagnation throughout the 1990s. The most recent evidence (2004-5 survey), however, suggests that with the resumption of high growth, poverty is again declining rapidly in Pakistan.

Translating growth into poverty reduction: But much remains to be done to achieve accelerated growth rates that increase economic prosperity across the board, the report says. First, economic growth in the past decade has resulted in growing income inequality, which may act as a constraint to higher growth in the future. Second, while conflict, corruption and high fiscal deficits may not have constrained growth in the past, their persistence may become obstacles in the future. Faster growth must also be more equitably shared, the report says. With nearly 400 million poor people, poverty in South Asia is not just endemic, but increasingly concentrated in lagging regions. Not only are these regions poorer, but their growth rates are substantially slower than the better-off regions. The phrase two Indias that describes the great divide between those who benefit from Indian economic growth and the 300 million poor people being left further behind is a vivid example of the current challenge, repeated across South Asian countries. Also key to reaching higher growth will be addressing rural and urban infrastructure deficits. The report says around $25 billion annually is needed for new infrastructure in the region.

While the policy agenda appears daunting, the dynamism and openness that characterizes South Asia today makes us optimistic that some, if not all, of these challenges can be met and the region could be substantially free of poverty in a few decades, says Ijaz Nabi, the report’s co-author and Sector Manager for Economic Policy for the World Bank South Asia region.

Measuring the quality of South Asia economic growth: A good way to measure South Asia's quality of growth and its potential impact on economic prosperity is to compare key economic indicators with those of East Asian countries growing at a similar pace. Even though recent increases in South Asian per capita incomes now match those in East Asia, data shows that East Asian levels of prosperity are associated with much higher Foreign Direct Investment (FDI), skills, infrastructure and perceptions of the business environment than those currently present in South Asia. For example, it takes 89 days to start a business in India, compared with 41 in China.

Although manufacturing in South Asia has registered healthy growth in recent years, it needs to grow much faster for the region to catch up with their eastern neighbors. Between 1968 and 2001, the share of manufacturing value added in GPD increased 400 percent in Malaysia, 300 percent in Thailand and over 200 percent in South Korea compared with an increase of only 20 in India and 30 percent in Pakistan. To catch up with East Asia, the report says, South Asian economies must save and invest a lot more.

They must also increase the efficiency of investment and ensure that higher economic growth drives faster poverty reduction. The report further cites country-specific challenges that policy-makers would need to address to accelerate growth. These include reducing fiscal deficits and public debt in India, strengthening governance in Bangladesh, deepening human capital in Pakistan and addressing civil conflict in Sri Lanka and Nepal.

http://www.dailytimes.com.pk/defaul...7-6-2006_pg5_10

 

[Neo]

Tuesday June 27, 2006

ISLAMABAD: Appreciating the strategic and consistent role played by Asian Development Bank (ADB) in Pakistan’s development process, prime minister Shaukat Aziz has asked the Bank to contribute in the construction of hydel projects, North-South Corridor and the energy, trade and transportation corridors between various Asian regions.
Talking to Mr Liquin Jin, Vice president of ADB, who called on him at the prime minister house on Monday, the prime minister said Pakistan attaches great importance to its relationship with the Asian Development Bank as it has always stood by us.

The prime minister also asked the Bank to participate in urban planning, mass transit projects as well as social sector uplift.

Mr Liquin Jin termed the economic performance of Pakistan as "very impressive" and said the success is mainly due to a strong leadership and efficient economic team.

"A strong economic team under President General Pervez Musharraf and Prime minister Shaukat Aziz is doing a wonderful job, said Mr Liquin Jin.

Giving an overview of the economy, the prime minister said Pakistan’s economy maintained a solid pace of expansion in 2005-2006 and achieved 6.6 % growth despite an extraordinary surge in the oil prices and the losses caused by the earthquake of October 8, 2005. the magnitude of growth that Pakistan has achieved during the last four years in row has positioned Pakistan as one of the fastest growing economies in the Asian region.

The prime minister said the exchange rate is steady, inflation is reducing and credit rating and balance of payment situation has improved. There is an appreciable increase of 20 percent in country’s exports and 22 percent in the revenue collection on the investment, the prime minister said.

He said Pakistan is fast becoming a destination of choice for the foreign investors and this year the Foreign Direct Investment has reached $ 3.5 billion which is a record.

He said after gaining the economic strength the government is now there on transferring the benefits of growth to the people and as a result there is improvement in the living standards. He said per capita income has reached $847 and poverty is down from 34.46 in 2000-01 to 23.9 in 2004-05.

He said World Bank and UNDP have approved the methodology adopted by us. Talking of the future, the prime minister said the record high amount of Rs 415 billion allocated for PSDP in the current budget will open new avenues for development.

Mr Liquin Jin said 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 ADB is keen to provide technical and financial assistance to Pakistan to build the corridors being planned by it as these will bring progress and prosperity to the region.

Mr Liquin Jin said during his visit to earthquake affected areas he was impressed by the work being done for rehabilitation of these areas and said the level of progress made in reconstruction of these areas is a manifestation of the commitment of the government as well as the people of these areas.

The meeting was attended among others by Adviser to the prime minister on Finance, Dr Salman Shah, Minister of State for Economic Affairs, Ms Hina Rabbani Khar and senior officials.

http://www.paktribune.com/news/index.php?id=148118

 

[Neo]

Washington: Pakistan has underlined the need for a civilian nuclear energy deal with the United States during talks here.

The Pakistan delegation was led by the Advisor to the Prime Minister on Energy Mukhtar Ahmed, while the U.S. team is headed by Karen Herbert, Assistant Secretary in the Department of Energy.

After four-hours talks with US officials Pakistan delegation head Mukhtar Ahmed in a press briefing at Pakistan Embassy Washington said the talks covered the country's expanding energy requirements over the next 20 years.

The two sides decided to constitute a joint working group to boost cooperation in the energy sector.

The leader of the Pakistan delegation said the country was meeting its 80 percent energy needs with oil and gas, while eight percent energy produced each from the nuclear technology and coal-based energy, while two percent energy requirements met by the hydro-electricity.

Pakistan is seriously seeking alternate energy sources but highlighted the crucial need of the nuclear energy saying that Pakistan will continue its nuclear energy programme, he said.

U.S.Energy Secretary Samuel Bodman met with the Pakistani officials after talks and discussed the energy related issues.

The delegation also met with private sector energy company representatives at an event held under the auspices of the U.S. Chamber of Commerce.

 

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Tuesday, June 27, 2006javascript:; http://www.dailytimes.com.pk/print.asp?page=2006\06\27\story_27-6-2006_pg5_1

* CDWP likely to approve the plan on Thursday
* It will also consider 24 other development schemes

By Fida Hussain

ISLAMABAD: The government has decided to launch a nationwide mass awareness campaign for water conservation and development at a cost of Rs 194.22 million.

However, the launch of the scheme will take place after approval of the Central Development Working Party (CDWP) of the Planning and Development Division (P&D), which is likely to meet on Thursday to consider around 24 other development schemes with an estimated cost of Rs 7.6 billion, a senior government official told the Daily Times on Monday.

Pakistan has become a water-deficient country and the ministry of science and technology is of the view that there is an urgent need that the general public should be informed about the conservation of important natural resource so that it can be judiciously utilized for improvement in agricultural productivity and other purposes by decreasing water losses through awareness.

The two other important projects to be considered by the CDWP is GSM Expansion for Azad Jammu and Kashmir that will cost Rs 565 million and Rs 567 million scheme of establishing a national monument of Pakistan at Islamabad will also be considered by the planning body, which will be presided over by Deputy Chairman of the Planning Commission Engineer Dr Akram Sheikh. The total foreign exchange component (FEC) has been estimated at Rs 571.715 million.

Other schemes likely to be considered are establishment of poultry and dairy animals training and research center at Pattoki, Punjab, costing Rs 464.988 million, establishment of faculty of veterinary and animal sciences at the University of Arid Agriculture, Rawalpindi costing Rs 470.87 million, strengthening of the existing earthquake engineering center at NWFP University of Engineering and Technology, Peshawar, costing Rs 487.219 million, merit scholarships for scholars worth Rs 284.523 million and development of infrastructure for improved educational facilities at Kohar University of Science and Technology costing RS 459.916 million. These schemes are to be taken up in the higher education sector. The CDWP will also take up the communication division’s schemes of establishing a construction machinery training centers at Quetta and Karachi at estimated of Rs 610.623 million each. In the energy sector, the installation of capacitators at 132/66 KV grid station under Hyderabad Electric Supply Company (HESCO) worth Rs 475.95 million.

In the physical planning and housing sector, five development schemes including construction of administrative blocks, magazine quarter guard, barracks, horse stable and parade ground in Diplomatic Enclave at a cost of Rs 201.04 million, rehabilitation/ replacement of lifts installed at Pak Secretariat building, Islamabad, and construction of B-type police stations in various sectors of the federal capital at a cost of Rs 98.97 million are some of the projects which will be sponsored by the Interior Division.

A Rs 815.478 million scheme for the construction of second floor of Shaikh Zayed Hospital main building at Lahore of the Cabinet Division and upgradation of BMSI and laboratory services at the JPMC, Karachi, worth Rs 59 million of the Health Division will also be taken up by the CDWP, which will be its last meeting in the outgoing fiscal.

The planning body will also consider a proposed scheme for support to good governance of the National Reconstruction Bureau worth Rs 235.4 million. Capacity building of the Pakistan Institute of Development Economics worth Rs 92.68 million and framework for institutional cooperation project of P&D will also come up for consideration.

 

[Neo]

Economic taskhttp://www.thenews.com.pk/images/shim.gifhttp://www.thenews.com.pk/images/shim.gifhttp://www.thenews.com.pk/images/shim.gif

Both the prime minister and the president, of late, have spoken on the need to attract foreign investment into the country to sustain the current rate of economic growth. Foreign direct investment is said to have significantly increased during 2005-06 but much remains to be done. After achieving some semblance of macro-economic stability over the last four years, the government now needs to focus its attention on institutionalising reforms and ensure that the benefits of economic growth reaches the millions of Pakistanis who are poor and impoverished.

Investment can be attracted by putting in place policies and procedures that are transparent and by giving investors recourse to legal redress to safeguard their investment. Of course, the decision by the Supreme Court to annul the sale of the Pakistan Steel Mills could have a dampening effect on foreign investment, had the privatisation process in this case been transparent and truly aboveboard, things would not have come to judicial intervention becoming inevitable.

Crucial also for sustaining economic growth is a long-term plan that meets the economy's rising energy demand and also tackles the increasingly complex issue of water storage and conservation. The latter is especially important because the agricultural sector, despite impressive growth in recent years in the manufacturing and services sectors, remains crucial to the economy's well-being. The irony of the past has often been that the economic policies of one government were usually undone or drastically altered by its successor. Private sector-driven industrial growth was followed by a period of nationalisation.

This was followed by a process of privatisation that started in the early nineties and has since continued. With the court's verdict, this process will need to be fine-tuned. With a rapidly growing private sector, the government will now have to step up and play the role of a regulator and look out for the interests of the consumers, something that it has effectively failed to do so far. As for the benefits of economic progress reaching those who truly need it, it is necessary that prices of basic necessities be monitored and prevented from rising too much. Larger allocations have been made for social sector development but in absolute terms the funding for both education and health, as a percentage of the GDP, is very low. Human development indicators are low by international standards and need to be improved considerably. But this will only happen when there is good governance, transparency and accountability, and not just hollow slogans or claims made that all is well.

 

[Neo]

Mobilink to start first ever private sector undersea cable worth $60m

By Imran Ayub

KARACHI: Pakistan Mobile Communication - Mobilink - eyes its $60 million undersea fibre cable project by the end of July 2006 as a first ever private sector’s venture in the particular area, which would bring third submarine telecom into the country.

A top company official said the Trans World Associates (TWA) - a subsidiary of Mobilink’s parent company Orascom - was executing the project and it could take next few weeks to take off.

“We have not yet set the exact timeframe for this project,” Zouhair Khaliq, President and CEO Mobilink told The News when reached over telephone. “But as we hope it would be ready by July end or may be early, as it is very near to its completion and then it would be operational after testing.”

He said the undersea cable would cater the project offered distinct privileges to the company with own optic fibre backbone, the largest cellular network of over 16 million subscribers across the country.

The Mobilink’s undersea fibre cable project would add to other two such networks being operated by the Pakistan Telecommunication Company Ltd. The second $500 million undersea fibre cable called SEAMEWE-4 (South East Asia, Middle East and Western Europe) landed early 2006.

Pakistan’s Internet and other telecom links with the rest of the world were severed in June 2005 by a fault in the only key submarine cable at that time, which took 11 days to repair. Millions of people were affected by the breakdown in the main fibre-optic link beneath the Arabian Sea 10 kilometres south of Karachi.

The Mobilink chief said the undersea fibre cable link and other projects were part of the company’s future investment plan in Pakistan, for which it planned to issue a Rs3 billion bond to expand and upgrade its network.

“But the two developments (fibre link and bond issue) don’t have any direct link as such,” he added. “We are issuing as our continued investment plan executed solely by Mobilink but the undersea project would provide cushion in line with network expansion and introducing value-added services.”

The Mobilink, Pakistan’s leading private cellphone service provider in terms of market share, plans to issue a Rs3 billion bond to expand and upgrade its network, an official associated with the transaction said on Monday.

Mobilink has planned to issue the seven-year bond with a green shoe option of Rs500 million. Jahangir Siddiqui Capital Markets, MCB Bank and KASB Securities are the three lead managers for the transaction. Analysts see the development showing continued growth and investment in telecom.

“The continued growth in telecom is now pushing operators to improve service quality,” said Anwaar Ahmed Khan, a telecom analyst at Capital One Equities. “Being a largest cellular operator, Mobilink needs to upgrade and expand its network with quality service maintain top-level ranking amid rising competition.” He said the company was likely to increase its subscriber base, once it got upgraded its network but improvement in quality would be the main objective to win such huge financing.

 

[sigatoka]

By Dr Saima M. Javed

“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.”

Totally false, the wealth in society is not a zero sum game. That is, you can’t change the size of slices that people get without changing the size of cake. By taking 1% of income from the rich, you can give only 1-X% to the poor because X is a reduction caused by deadweight loss and administration.


“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.”

No, they don’t, two factors alone can explain poverty. That is average income AND Ginni coefficient. These two variables describe both the average and dispersion of wealth in society without being subjective which if the other factors are introduced will do. Secondly the average income includes these other factors because if there is under or over provision of public goods, it will lower income growth. Including it again creates the problem of double counting.


“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.”

Could be true but no reasons given.


“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.”

Not true at all, since the industrial revolution since the 18th century, technological improvement has improved the lot of ALL people. Just look at Britian, the first nation to Industrialise.

This misconception arises because it believes that labour and Capital are substitututes, when empirical evidence overwhelmingly suggests that in most cases they are complementary. That is, technological advances INCREASES not Decreases productivity of labour and their income.

This assumes that poor people will not find other jobs (new jobs are created) and that they will not consume (the increase in production lowers prices.)



“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.”

Indeed true, most improvements in the increase in productivity in land is captured by the owners not workers of the land.

However, this assumes that the landowners don’t spend their extra money on other things that poor people produce (untrue, therefore some income trickle down to poor people) and secondly IGNORES that Food forms the biggest component of Poor peoples expenses. Therefore the green revolution increased food production, lowered prices and helped poor consumers.

What about smaller units? Well they took a one off massive financial hit and the decrease in income in that sector would slowly force them to other more productive sectors, in the long run everyone is better off.


“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.”

False, the increased exports in manufacturing units in Karachi increases incomes of people there who spend it and some of it will be spend on stuff the remote village produces.


“Profit sharing between the landlord or industrialist, the middle man and the worker is another determinant of poverty. The worker gets inelastic wages which hover around his bare minimum requirements. This traditional pattern with no labour laws has been the most important contributory factor to poverty”

Bullshit, increase in profits drives investment which provides employment and income growth, it takes time though. Pak. Has only been growing strongly for 6 years and was a desperately poor nation before.

The wages of workers are rising, what is being said is lies.

Labour laws can only increase unemployment and decrease national income in the long run and fuels inflation. (Sad but true) Because they lower profits, they will reduce investment in the nation and jobs will be off shored.

I think charity and direct monthly cash payments is not only morally right, but is economically much better than distorting labour markets for income destruction. (Labour market laws not only redistribute wealth, (that is change the slices of the cakes) they also destroy wealth (make the cake smaller))


“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.”

A same rate uniform indirect tax ensures deadweight loss is minimum because it doesn’t distort between relative prices of goods. (It ensure the cake is bigger than under other taxes)

Secondly an indirect tax help reduce CAD problem because it encourages savings. (that is the relative distortion in income taxing which double taxes savings is removed.)

The impact of indirect taxes is higher on poor people because they have lower savings than rich people. However this effect can be removed by direct monthly cash payment to poorest 5% of Pak. Families which would retain the benefit of indirect tax as well as remove the effect on the poor.


“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.”

His father unexpectedly fell sick. To protect against Uexpected things people should get insurance, however assuming Pak. Capital markets are not well developed the Govt. should levy small tax on wealth and income and act as a sort of insurance firm to pay for poor peoples medical bills.

 

[Neo]

ISLAMABAD (June 28 2006): US Secretary of State Condoleezza Rice on Tuesday expressed America's long-term commitment to economic development of Pakistan, while expressing full support for President Musharraf's vision of enlightened moderation and hailing Pakistan as a "friend and a fierce fighter" in the war against terrorism.

President Musharraf, talking to Dr Rice, who called on him at Aiwan-e-Sadr, renewed Pakistan's firm commitment to fight terrorism. Dr Rice praised Pakistan's for its key role in the counter-terrorism campaign and lauded the President's efforts for world peace.

President Musharraf and US secretary of state also agreed over the need for increasing operation in the area of intelligence sharing to make the anti-terrorism campaign more effective in the tribal areas bordering Afghanistan.

President Musharraf reiterated that Pakistan is for a secure and stable Afghanistan, which is in the interest of regional peace and development.

On economic relations, the President said Pakistan looked forward to an early conclusion of bilateral investment treaty, and stressed that a free trade agreement (FTA) between the two countries would greatly contribute to Pakistan's economic development.

"The US is a committed, strong partner and a friend," she said later at a joint press conference with foreign minister Khurshid Kasuri.

Her talks with Pakistan's top leadership, she added, covered ongoing counter-terrorism co-operation and review of progress on discussions for forging stronger co-operation in various fields including energy, education, science and technology and economic development.

Replying to a question, Rice said both Pakistan and Afghanistan are fighting terrorism in a region, which has been difficult for a long time.

"We are trying to commit as strongly as we can to activities, which make it awfully impossible for the Taleban and al Qaeda to operate on the border," she stated.

In response to another question, she said Washington is holding fruitful discussions to deal with Pakistan's growing energy requirements to support its economic growth.

The US secretary of state said Washington backs enlightened moderation, which also has earned world-wide support.

"Pakistan is currently going through tremendous transition and President Musharraf has adopted the course of enlightened moderation, which the US supports and which also has world-wide backing," Dr Rice said. Rice said she also discussed the importance of free and fair elections due in 2007.

The United States, she said, would not only contribute to development of the frontier regions but also to economic prosperity of Pakistan. "Pakistan is a friend and a strategic partner - that is the relationship which will go on for many years, the US remains committed to Pakistan and Pakistan's future," she said and added this is the message President Bush asked her to deliver to Pakistan.

Foreign minister Kasuri said Pakistan has beefed up its troop deployment on its western border with Afghanistan to further intensify its counter-terrorism campaign.

Pakistan army, he said, has offered valiant sacrifices in counter-terrorism and 650 of them have embraced martyrdom.

Kasuri said Pakistan is committed to the cause of peace and security in Afghanistan as a stable Afghanistan is imperative for Pakistan's objective of developing energy and trade linkages with Central Asia.

Referring to last week's visit by Afghan foreign minister, Kasuri said the two countries have agreed not to talk through media but to each other to remove any misunderstandings.

He noted difficult situation in the region and said Pakistan sympathises and empathises with Afghanistan as "which other country has greater stakes in stability of Afghanistan than Pakistan".

"It is a difficult situation - we are trying to talk to each other so that trust deficit does not increase - we are trying to build institutional structure."

Earlier, in his opening statement, the foreign minister said Pakistan and America have a mutually beneficial strategic partnership and described satisfaction with the progress achieved in a range of areas including defence, economic co-operation and energy dialogue.

Earlier, in his opening statement, foreign minister Khurshid Mehmud Kasuri, welcoming secretary of state Dr Condoleezza Rice to Islamabad, said: "She is a good friend of Pakistan."

She has played an important role in the positive evolution of Pakistan-US ties over the past five years - working toward a broad-based, long-term and sustainable relationship, he added. The minister also reaffirmed Pakistan's strong commitment to a stable, peaceful and prosperous Afghanistan.

The two sides also had fruitful exchange of views regarding the security situation along the border.

"Pakistan has taken important steps to strengthen security in that area. Enormous sacrifices have been rendered by our forces," the minister said while adding Pakistan agreed to maintain communication and co-ordination through the Tripartite Commission (TPC) that has been set up between Pakistan, United States and Afghanistan.

He recalled that Pakistan and the United States established a strategic partnership during President Bush's visit in March 2006.

Both sides, he added, were currently focused on implementation of the decisions taken during that visit. The minister expresses satisfaction with the progress made on various tracks since last March.

The minister said the dialogues on science & technology and education were due to take place in the coming weeks.

"It is, thus, clear that the architecture for building a multifaceted relationship created following President Bush's visit to Pakistan in March is progressing well," he added.

 

[Neo]

KARACHI (June 28 2006): The State Bank of Pakistan has prepared detailed instructions for adoption of various approaches for calculating capital adequacy requirements for credit, market and operational risks under Pillar I of Basel II Capital Accord.

According to SBP the timeframe for adoption of Basel II will be as the Standardised Approach for credit risk from January 01, 2008. Internal Ratings Based (IRB) approaches from January 01, 2010. Banks/DFIs interested in adopting any IRB Approach before January 01, 2010 may approach SBP for the purpose. Their requests will be considered on case-by-case basis.

For Operational Risk, Banks/DFIs can adopt either Basic Indicator Approach or Standardised Approach from January 01, 2008. However, the Advance Measurement Approach (AMA) is not being offered at present.

The decision on the timeline to adopt AMA will be taken in due course keeping in view the preparedness of banks/DFIs and after consulting with Pakistan Banks Association. However, the banks/DFIs are encouraged to follow the international best practices in this regard and prepare themselves for an early adoption.

For market risk, Internal Models Approach has also been allowed along with the standardised approach. However, Internal Models Approach will only be available to the banks/DFIs adopting Foundation or Advanced IRB Approaches. Banks/DFIs are advised to adopt a parallel run of one and a half year for Standardised Approach and two years for IRB Approach starting from July 01, 2006 and January 01, 2008 respectively. They are also advised to submit a quarterly statement on the calculation of their capital adequacy ratio based on the enclosed instructions within 30 days of the end of each calendar quarter.

First reporting, on the basis of Basel II parallel calculations, will be made for the quarter ending December 31, 2006 by January 30, 2007. During the parallel run period banks will calculate their Capital Adequacy Ratio (CAR) based on the instructions contained in this Circular as well as on the basis of guidelines issued vide BSD Circular No 12 dated August 25, 2004 and submit the results of both the calculations on quarterly basis.

Adoption of Foundation or Advanced IRB for Credit Risk and Internal Models Approach for Market Risk will be subject to the prior written approval of the State Bank. Therefore, banks/DFIs interested in adopting any of these approaches are advised to approach the State Bank for getting necessary approval.

Some products/exposure types and their treatment under various approaches have been elaborated in the enclosed instructions for facilitating the banks/DFIs to adopt Basel-II. This should not be construed as a permission to launch such products/conduct business in a particular manner. Therefore, banks/DFIs are advised to ensure compliance of all relevant provisions of law and SBP regulations while taking a decision to deal in a particular type of business/transaction. For instance, securitisation of assets will be conducted only after meeting the requirements of applicable laws and other SBP regulations, etc.

Banks / DFIs are also required to follow the instructions contained in BSD Circular No 6 dated October 28, 2005 regarding minimum paid-up capital requirement and CAR.

Other instructions on the subject shall, however, remain unchanged.

 

[Neo]

ISLAMABAD (June 28 2006): The World Bank (WB) has pinpointed 'deepening human capital' as a specific challenge to Pakistan's economy, and stressed policy makers to search avenues for addressing it to accelerate economic growth and reduce poverty.

Human capital is the education, health and skills embodied in the population in general, but the workforce in particular. Increased production not only requires more physical capital but also enhances human capital. Labour productivity, which is essential for sustained economic growth, requires an educated, healthy and skilled labour force.

According to economists, no nation has enjoyed prolonged economic growth unless its literacy level has crossed 70 percent and the population has been free from enervating diseases. Rapidly advancing technology also requires a high degree of skills.

The World Bank in its report titled 'Economic Growth and South Asia' says that economic growth has already contributed to an impressive reduction in poverty.

In the last decade--1990s--poverty in the region (Bangladesh, India, Sri Lanka and Nepal) fell by 6 to 11 percent. Only in Pakistan did poverty increase by 8 percentage points due to economic stagnation throughout the decade. The most recent evidence (2004-05 survey), however, suggests that with the resumption of high growth, poverty is again declining rapidly in Pakistan.

But much remains to be done to achieve accelerated growth rates that increase economic prosperity across the board, the report adds.

First, economic growth in the past decade has resulted in growing income inequality which may act as a constraint to higher growth in the future. Second, while conflict, corruption, and high fiscal deficits may not have constrained growth in the past, their persistence may become binding in the future.

The Bank has cited country-specific challenges to boosting economic growth that policy-makers would need to address to accelerate their growths. These include reducing fiscal deficits and public debt in India; strengthening governance in Bangladesh; deepening human capital in Pakistan, and addressing civil conflict in Sri Lanka and Nepal.

A striking feature of the report is analysis showing that South Asian countries could see single-digit poverty rates in a decade if economic growth accelerates to 10 percent a year until 2015. This means the number of people living in poverty could go down by two-thirds in less than ten years.

The report says that while the challenges facing the region are daunting, it is possible that South Asia can see poverty rates cut by two-thirds in a decade.

Shantayanan Devarajan, World Bank Chief Economist for the region and co-author of the report, says that growth rates in South Asia have been accelerating in the last 10 to 15 years.

"South Asia as a whole has been enjoying about five to six percent growth with some countries like India and Pakistan growing over seven percent in the last two years," he says.

"If this growth can be sustained and accelerated, South Asia--which is the region with the largest concentration of poor people in the world--has a significant chance of bringing poverty down to single digits in a decade."

A key need, Devarajan says, in the region is new infrastructure. "South Asia is suffering from infrastructure constraints. All of this growth has occurred without commensurate increases in investment in public infrastructure.

"If we can relax those constraints, for instance bring more water to people, more roads, ports and things like that, that can actually benefit the poor and accelerate growth."

He says: "What you can observe in South Asia is not only there is a need for infrastructure but there's also need to be able to manage the current stock of infrastructure better.

As Ijaz Nabi, the report's co-author, points out, the economic growth in the region has already seen poverty levels decline.

"Across the board, poverty has come down by six, seven, eight percentage points, as a result of this decade long growth rate," Nabi says. "The one country in the region that did not experience a reduction in poverty was Pakistan, because Pakistan's growth rate virtually stalled in that decade.

"But there, too, growth has now picked up and the most recent data from Pakistan shows a substantial reduction in poverty," says Nabi, who's the Bank's Sector Manager for Economic Policy for the South Asia region.

He says that part of the reason behind their forecast that poverty levels could be down to single digits in a decade is that countries in the region have already shown they're capable of growing despite what he calls 'binding constraints'.

Nabi says their preliminary estimates are that "one would need to spend something in the range of US $25 to $30 billion in order for India, Pakistan, Bangladesh, Sri Lanka and Nepal to have the kind of infrastructure to reduce internal logistics costs to make South Asian products internationally competitive."

 

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KARACHI (June 28 2006): The President of the Netherlands-Pakistan Business Council, Martin J. Leushuis, has spoken of immense opportunities for collaboration between the two countries in the realms of business and industry. He is currently on a visit to Pakistan at the head of a three-member delegation.

In an interview with APP here, Martin pointed out that there are tremendous possibilities for the Dutch companies here. He said that in the Netherlands and Pakistan most of the people speak English and with the collaboration in the business and industry there can be a win-win situation for both the sides.

Martin informed that there are a lot of products, which cannot be produced in Holland because of the labour cost in comparatively much high there. However, he further stated, these can be produced in Pakistan pretty well.

Martin was of the view that both the sides can build a suitable, long-term network. " That is what we are looking for". He stated that we are looking for a collaboration between the Netherlands and Pakistan and the companies of the two countries.

Martin was of the opinion that the situation was conducive in Pakistan for doing business here and that is why he is here along with a delegation to explore the possibilities in this respect. The other members of the delegation were Harold Vreeman and Erik Jansen of the Menzing Industries of the Netherlands.

 

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KARACHI (June 28 2006): A Dutch firm Menzing Industries will sign a memorandum of understanding (MoU) with a Karachi based firm-Research and Development Engineering Company. The MoU will be inked in Islamabad on Wednesday, says the leader of a three-member business delegation from the Netherlands, Martin J. Leushuis, while talking to APP here.

He said that the two countries would be working together. The initial test has already been performed. Martin was of the view that the first step has been taken and after making some progress. "We will see as to what the possibilities there are and we will look into the possibilities of investment and see what new products may come out as a result of such a collaboration", he added.

Martin, who is also the President of the Netherlands-Pakistan Business Council (NPBC), is also looking for the Dutch companies and those from Pakistan to work together.

He said that the NPBC plans to use Pakistan as a hub for other countries in the region. This would be an ideal situation for the export and the re-export to other countries from Pakistan. Martin was of the view that there are tremendous possibilities for the Dutch companies here.

Romy Moiz, Managing Director of Research and Development Engineering Company, located in Korangi Industrial Area here, said that Menzing has already sent material here for trial production.

He said that his firm and Menzing will sign an agreement in Islamabad on Wednesday under the sponsorship of Pakistan's Ministry of Industries and the Engineering Development Board.

Moiz said that we are signing this agreement with Menzing for co-operation and joint projects to be done in Pakistan in future. "This is a first step which would lead to further investment here from Holland in a collaborative manner", he remarked.

Moiz further said that Menzing is also offering technology and inviting our personnel for training so that the same standard of manufacturing could be achieved in Pakistan.

Omar Zaman, Technical Director of Research and Development Engineering Company, praised the initiatives the government of Pakistan is taking in the engineering industry. This, he added, would contribute towards promotion of exports in the engineering goods as has been desired by the government.

Omar said that his firm has sent a consignment of exports to Germany and the client there was of the view that the standard of the product was perfect. Harold Vreeman, Managing Director of Menzing, said that as a result of the signing of MoU there will also be a transfer of technology and know how.

 

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ISLAMABAD (June 27 2006): The Pakistan Atomic Energy Commission (PAEC) by 2030 envisages production of 8800 MW electricity from nuclear sources for which the working plans are underway, PAEC Chairman Anwar Ali said here on Monday.

Addressing the inaugural session of 31st International Nathiagali Summer College, jointly organised by Pakistan Atomic Energy Commission and National Centre for Physics, he said that the country needs more nuclear power plants to meet the growing energy needs.

He said that PAEC would open 13 cancer hospitals and introduce mechanised farming, which would take care of water management, soil and crops by using modern techniques, according to a statement issued here. "In order to work out the vision and future roadmap for the development of science in Pakistan, all R&D organisations have to get together. As far as PAEC is concerned, we have already formed an Advisory Council which will consist of bright and imaginative scientists who will define the future vision and set the new directions for PAEC programmes", Anwar said, according to the statement.

Higher Education Commission Chairman Dr Attaur Rehman said that PAEC contributions in the domain of national defence, industrial development, nuclear energy, health and human resource development were laudable with its ever-increasing engagements in most advanced areas of knowledge.

He said that acquiring advancement in science and technology was the focus of the present government as knowledge alone would decide the haves and have-nots of the present-day world. "Our 100 million youth will be our chief asset as we are nurturing them in advanced areas of science and technology to transform the country into a prosperous and strong nation," he said.

About efforts in training and education of Pakistani youth, he said that the 1150 students had been sent abroad in the last two years and the cases of another 600 students were underway under 150 million dollars Fulbright scholarships. "We are getting good feedback from the sponsor universities abroad about the quality of our students, and we are encouraged to allocate Rs 15 billion to send 2000 more students in the near future."

Earlier, Director General, National Centre for Physics Dr Riazuddin said that during the past 30 years, over 525 eminent scientists, including six Nobel laureates had shared their knowledge and experience with over 900 scientists from as many as 72 countries. Nearly 6000 scientists, drawn from universities, colleges and R&D institutions from Pakistan had benefited from these colleges.

The first International Nathiagali Summer College was held in 1976 due to the inspiring vision of Dr Abdus Salam and is organised every year since then with remarkable regularity and ever-greater participation from national and international scientists and engineers. It has been an excellent forum for exchanging knowledge and establishment of personal contacts among participants.

 

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KARACHI, June 27: With a hefty cash balance of Rs10 billion, an expected profit of Rs1.3 billion this fiscal year and a big fund source available in the form of land capital, the managers of Pakistan Steel are confident of investing $200-250 million from own source in revamping, modernisation and balancing and also maximising production capacity to 1.5 million tons from the existing 1.1 million tons over the next two years.

“We are looking to Islamabad for guidance and advice,” Pakistan Steel Chairman Lt-Gen (retd) Abdul Qayum informed Dawn on Tuesday when asked about future plans after the Supreme Court annulled the privatisation of Pakistan Steel last Friday. “It is for the government and the cabinet headed by Shaukat Aziz to decide future course,” he said but added that the plant was now in a `pathetic state’ and needed immediate attention.

With virtually no maintenance, no major repair or any significant replacement in the last 25 years, the managers and engineers want a quick revamping, as wear and tear has already started telling on the plant.

The PS chairman refused to be dragged into controversy on valuation of Pakistan Steel or the procedure adopted in the privatisation but agreed to respond to questions on `financial health’ and disclosed that in the current fiscal year ending June, Pakistan Steel was expected to show a profit of over Rs1.3 billion. After tax net profit, he said, would be around Rs720 million.

“We operated on an average of 62 per cent production capacity because of the problems in coke oven battery. Its repair was due in 1997 which was not taken up. Again the repairs were given up in 2005 because of the privatisation plan,” he said. At one time the plant operated on 36 per cent capacity but picked up gradually to average out at about 62 per cent.

Pakistan Steel has been consistently showing a profit for the last more than four years. In 2004-05, total profit was Rs10.19 billion while after tax profit was Rs6.7 billion. In 2003-04, the profit was Rs7 billion and after tax profit was Rs4.85 billion, and it was Rs1.23 billion in the year 2002-03.

“Pakistan Steel’s turnaround is historic and a landmark event in Pakistan,” Mr Qayum said, attributing it to the financial restructuring taken up in 1999-2000 by the Mushsrraf-Shaukat government. “We have paid the outstanding principal amount of Rs11 billion and the government agreed to pick up Rs7 billion interest,” he recalled while pointing out that Pakistan Steel will start servicing interest payment from 2013 to 2020. “We have wiped off our all losses and now look tomorrow with hope and confidence because of cash balance, profitability, favorable international environment and above all a caring government,” he said.

As for those who sought golden handshake after the March 31 privatisation, the PS chief said they should now forget it because “we all have to work together”.

He indicated a rise in prices of steel products in the next few days because international prices are rising and market manipulators are taking undue advantage of this difference. Pakistan Steel on Monday increased price on a product and intends to raise prices of a few more products in next few days. He said prices of input were also on the rise and quoted that the price of coke imported from China went up from $160 a ton to $190.

“Softening international prices and lower capacity utilization have resulted in operating loss of Rs1.4 billion in the first half of 2006,” federal minister Awais Ahmad Leghari informed the legislators on April 8 to justify the disinvestment of Pakistan Steel. Mr Leghari took over the privatisation ministry after Dr Hafeez Sheikh quit the ministry. But in the same draft, the minister says Pakistan Steel earned a profit of Rs140 million on sales of Rs7.35 billion in the first half of the fiscal year 2005-06 when it operated on less than 50 per cent capacity.

Mr Leghari did concede “Pakistan Steel’s improved financial performance over the last few years” which he said was driven by the “unprecedented increase in international steel prices and margins, as the steel industry has globally hit a historic peak”. He referred to PC-1 of Pakistan Steel in October 2004 needing an investment of $200 million to address operational issues and also to increase capacity to 1.5 million tons.

According to financial profile, Pakistan Steel’s operating profit increased from Rs4 million in 2002 to Rs2.27 billion in 2003, Rs6.66 billion in 2004, Rs9.76 billion in 2005 and indicated loss of Rs1.38 billion in the first half of 2006. But the equity base of Pakistan Steel has expanded from Rs8.54 billion to Rs21.29 billion in 2006. Total assets were valued at Rs30.15 billion in 2002 which went up to Rs35.92 billion in 2006.