Pakistan Economy - News & Updates - Archive

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KARACHI: Manpower export from Pakistan has been declining over the years to the extent of missing its annual target and reducing scope of future remittances, a major source of bridging the trade deficit.

The latest figures compiled by the concerned authorities and overseas employment promoters show that during last two years manpower exports dropped by almost 50 per cent.

“During 2005 total 91,773 people flew abroad against 173,824 in 2004,” said a source close to the Overseas Employment Corporation (OEC). “This shows a negatives difference of 47.2 per cent in a single year and the gap has been on the rise during 2006.”

He said the in 2004 the country also witnessed sharp decline in manpower exports as in 2003 total 214,039 left mainly for Arab countries to earn employment, which had not been the trend during the next couple of years.

Since early 70s hundreds of thousands of Pakistanis fly abroad every year to get better employment opportunities. The overseas Pakistanis have been instrumental in managing good foreign reserves during last three years and bridging trade deficit through remittance that they send home.

The country faced $8.6 billion trade deficit during first nine months 2005-06, which was offset to some extent through $3.63 billion worth of remittances from overseas Pakistanis during the first 10 months of the current financial year.

People involved in manpower export say that during the last few months Arab states ñ once the most favourite destination of jobseekers - have restricted foreigners’ influx to focus more on national and skilled workers.

“Pakistan being a cordial exporter of manpower to Saudi Arabia naturally was affected by decline in demand for unskilled and semi-skilled labour due to completion of major infrastructure projects in the Kingdom,” said Hanif Rinch, chairman Pakistan Overseas Employment Promoters Association (POEPA).

“Currently the demand is for skilled labour, technicians and highly trained professional, but we lack technically trained manpower in Pakistan while our universities, colleges and other professional institutions are considered below standard by foreign employers.” He said professionals from countries like Pakistan would have to undergo technical and electronic tests to win certificate for employment in Saudi Arabia.

“Another important point is that overseas employment promoters don’t have sufficient pool of technically trained manpower,” added Rinch.

“So we can’t run in search of required manpower on demand, which normally results in delayed dispatch of urgently needed persons and therefore the foreign employers have shifted their human resource hiring to other countries.”

The least hiring of Pakistanis in Saudi Arabia and ban on Pakistani labour by some of Arab countries have emerged as threats to hit the permanent manpower export feature from the country.

However the promoters, who drive the manpower export, see Malaysia to become the biggest importer of Pakistani manpower after it announced to hire 100,000 Pakistanis, which would help in handling the approaching crisis.

“The main problems at Malaysian front are smaller wages and slow process of visas making it less attractive than Arab countries,” said Muhammad Faisal of Al-Faisal Promoters.

He said the manpower exports to Malaysia started a few months ago and was likely to gain some pace after Eid, when majority of the willing people plan to fly abroad.

Malaysia in February 2005 announced to recruit 100,000 male Pakistani workers amid an acute labour shortage caused by a crackdown that sent hundreds of thousands of illegal workers fleeing the Far Eastern country.

During the visit of Malaysia premier Dato Seri Abdullah Ahmad Badawi to Pakistan last year he announced to exempt Pakistanis from taking the induction courses, which are compulsory for other foreign workers.

 

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KARACHI: Pakistan’s total oil imports rose 6.8 per cent to 1.42 million tonnes in May from 1.33 million tonnes in April and analysts said on Tuesday water shortages to generate electricity could further boost imports.

Oil imports in April 2006 also rose 24.56 per cent when compared with the same month last year, according to the data issued on Tuesday by the Federal Bureau of Statistics.

Khalid Iqbal Siddiqui, head of research at brokers Invest Capital and Securities, said falling reservoir water levels forced state-run Water and Power Development Authority (WAPDA) to use larger amounts of imported oil to generate electricity. Water levels in major reservoirs are critically low after Pakistan got 40 per cent less than normal winter rain and up to 25 per cent less snowfall.

“Furnace oil consumption of WAPDA has increased considerably from January onwards after water shortages cut hydroelectric output,” Siddiqui said. “The demand is likely to remain high till the start of monsoon in July.”

Analysts said there would be an increase in petroleum imports as the country’s energy needs were high due to its fast economic growth.

Pakistan’s economy grew by 8.6 per cent in fiscal 2004-05 (July-June) - its fastest for nearly two decades - and the government is expecting a growth of 6.6 per cent in 2005-06. In terms of value, Pakistan’s crude and petroleum product imports rose to $713.92 million in May, compared with $615.41 million in April and $413.60 million in May 2005.

For the July-May period, the total bill was $5.958 billion, compared with $3.626 billion in the same period a year ago.

 

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Wednesday June 28, 2006

ISLAMABAD : The government is taking steps for expansion and promotion of engineering industry to diversify its base and get into production of value-added products.

This was said by Prime Minister Shaukat Aziz while presiding over a meeting on Tuesday to review the performance of the Engineering Development Board (EDB) and development of engineering industry in the country.


The prime minister said that the steps taken by the government had paved way for a dynamic engineering sector by facilitating capacity expansion and competitive production.


“Last year automobile sector showed a growth of 30 per cent. Several parts manufacturing companies have set up plants in Pakistan,” he said.


The government was encouraging local production and technology upgradation both for import substitution and export enhancement, he said.


He said that Pakistan was fast becoming a regional hub for production and trade activities because of its geo-strategic location, availability of skilled labour and business-friendly policies.


He said that engineering sector should focus on modernization and innovative technologies to improve the quality and competitiveness of the locally manufactured products.


The EDB officials made a presentation on its performance and submitted proposals to expand and further promote engineering sector.


The prime minister was informed that economic recovery of the country had led to an increased demand for automobiles which was being met through enhanced production.


Prime Minister Aziz was informed that the market for cars had expanded to 200,000 cars. “Local production of cars has gone up to 160,000 in 2,006 from 80,000 cars in 1,999 and that of motorcycles from 90,000 motorcycles in 1,999 to 850,000.”


Mr Aziz was informed that expansion in automobile industry had led to a substantial increase in employment generation and presently 190,000 people were employed in it.

 

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Wednesday June 28, 2006

Islamabad: As many as 0.7 million motorcycle were produced during the year of 2005-06 and this volume is going to cross 1 million mark by year 2010.
A delegation of delegation of Association of Pakistan Motorcycle Assemblers (APMA) expressed these views while talking to CEO of Engineering Development Board, Imtiaz Rastgar who called on him here on Tuesday and discussed the issue in depth.

The delegation said the increasing volume has compelled the vendors industry to increase parts production manifold, as it is not only meeting the demand of OEMs but also the after sales market.

They pointed out that crank case, crankshaft, transmission, shaft rocker arm, spindle, complete kick starter, spindle gear and spindle cam chain, guide sprocket were in short supply as the production capacities of vendors for these parts are very low.

The gap between supply and demand is met by import.

The situation can be judged from the fact that crankcase is manufactured mainly by only two companies but their production capacity is approx 6000 sets per month, they observed.

It is pertinent to mention here that Honda is manufacturing the part in house for 70 cc motorcycles only.

CEO advised them that they should not only encourage the existing vendors to increase their production but also provide impetus to investors to invest in this industry for rich dividends in short period.

The scale of volumes involved was now enough for new entrants to come forward and start producing these parts to fill the gap between the supply and demand, he added.

As evident from the current scenario, the gap between the supply and demand of the motorcycle parts is going to widen with the increase in production of motorcycles.

This gap is an open invitation to the progressive businessmen for availing this opportunity and venturing in the manufacturing of crank case, crankshaft, transmission, shaft rocker arm, spindle, complete kick starter, spindle gear and spindle cam chain, guide sprocket, sheet metal parts and others.

 

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KARACHI: Panic selling continued to scrap early gains and shrank overall turnover at the Karachi stock market as the index even breached through 9,500 level in reverse gear and closed very close to 9,000 pathetic mark.

Banking, oil and cement sectors witnessed a heavy battering. Accordingly, KSE 100-share index shed another 363.08 points to 9,041.62, therefore, the turnover remained pegged to low at 150.964 million shares on Tuesday.

Carrying forward a day earlier decline, the market plummeted further. So far the index has gone down by 1,130 points (11.5 per cent) in the three consecutive sessions.

Analysts observed that the equity market was getting upset, as it was passing through the rollover week that might witness more wreckage at the KSE to square up position in the leverages.

Moreover, the retail investors have set themselves aside of the local bourse and have no intentions to participate in the crumbing equity market. Market might witness another colossal loss to 8,500 level on Wednesday, said Usman Farooqi, Head of Research Department of Alfalah Securities.

He opined that market would continue in the red with range bout sessions till July 10, 2006, however, might recover on Thursday on the hope of good cash dividend be announced by NIT.

Haji Ghani Haji Usman, member director-KSE said that position in leverage work was halting progress at the stock market. He noted that there are three folds of the losses in the deteriorating market, as member commission gets reduce, Continuous Funding System minimises and shares’ prices decline further.

He endorsed that the small investors sit in the pavilion and watching the ongoing show at the Karachi bourse.

Another analyst said that as the day of July 01 is coming near the investors getting distance from the local bourse. On July 01, the CVT on shares’ transaction and withholding tax on the brokerage houses would get doubled. This particular reason compelled the day to day, jobbers, and retail investors to remain outside of the stock exchange.

Despite the ban on short selling, the market sank further, a detailed report issued by Live Securities said.

There were rumours of selling by a major mutual fund on account of huge redemptions. Retail selling was also visible as investors struggled to fulfill their margins. The Supreme Court’s verdict on the Pakistan Steel Mill privatisation has further eroded investors’ confidence, as no immediate progress seems likely in the country’s privatisation programme.

Report added, “Despite the low quantum of leverage, the futures rollover is also taking its toll. It can be noticed that in two days, the addition of open interest in the July futures is higher than the decline in the June contract. Instead of reflecting an increase in genuine leverage, this probably reflects investors’ hesitancy to completely rollover their positions in view of the unabated descent in share prices and the relatively higher futures spreads in July. Open interest in June presently stands at Rs7.2 billion and with just three days remaining for the contract to expire.”

No change was witnessed in the trading volumes as they arrested at 150.964 million on both the trading days of the week. Across the board selling was witnessed as all the blue chips ended in the reds at lower circuit breakers.

The losers remain winners in terms of scrips’ number, as 252 advanced, 49 declined while the value of 24 scrips remained unchanged. Consequently, market capitalisation declined by another Rs97 billion to Rs2.544 trillion.

OGDC shed Rs6.30 at Rs119.70 on 22.439 million shares. TRG Pakistan enhanced by five paisa at Rs10.10 on 13.903 million shares.

National Bank plunged by Rs9.90 at Rs188.25 on 10.613 million shares. MCB Bank downed by Rs9.55 at Rs181.75 on 10.577 million shares.

Pak Petroleum declined by Rs9.60 at Rs183.05 on 9.053 million shares. PTCL deprived of Rs1.90 at Rs36.70 on 6.689 million shares. Fauji Cement, Pak Oilfields, DG Khan Cement, Pak PTA were the other which closed in the red at the bottom of the day top-ten volume leaders.

Forward Counter: OGDC led the list of actives on this counter, shed Rs6.31 at Rs120.04 on five million shares followed by NBP, which declined by Rs9.92 at Rs188.63 on three million shares, OGDC-July plunged by Rs6.36 at Rs120.99 on three million shares, MCB Bank deprived of Rs9.31 at Rs182.40 on two million shares, PPL dropped by Rs9.68 at Rs184.03 on two million shares.

 

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KARACHI: State Bank of Pakistan on Tuesday allowed commercial banks to establish full-fledged and new micro finance bank.

A press note issued by the central bank said commercial banks’ entry into micro finance banking will be in four types.

Through existing branches micro finance counters are allowed to open.

Stand-alone or designated micro finance branches can be opened as new branches or present branches could be converted into specialized micro finance branches.

Micro finance banking could be started by establishing an independent subsidiary having its independent board of directors.

But this subsidiary will be governed by Microfinance Institutions Ordinance, 2001, which means they have to face dual control of ministry of finance as well as central bank of the country.

Finally developing linkage with microfinance banks, licensed by central bank and NGOs or Micro Finance Institutions that are not licensed by SBP to extend wholesale funds for onward lending.

Press note said the already promulgated prudential regulations for micro finance will be applicable to micro finance operations of commercial banks.

Press note has not mentioned about whether the newly established micro finance banks by commercial banks will be eligible to solicit deposits and will act as chequeing banks.

The combined outreach of micro finance banks and NGOs *** micro finance institutions is around 0.5 million borrower clients that is less than 10 percent of the potential market of 6.5 to 7 million poor households of the country.

 

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UAE firms to invest $40bn

ISLAMABAD, June 27: Pakistan is an attractive place for United Arab Emirates investors as more and more companies are investing in various sectors. Director of the Middle East and Central Asia unit for the IMF, Mohsin Khan said on Tuesday that the UAE companies were feeling more comfortable with the Pakistani economy, and cultural similarities with the Gulf, all contributed to the deals.

The Gulf News online edition on Tuesday reported while quoting him saying that many Pakistanis also hold senior positions in Dubai firms and provide local expertise in the Pakistan business climate.

He said that he was surprised by the huge investment made by Dubai companies such as Emaar and Limitless which announced real estate projects valued at $40 billion (Dh147 billion) for Pakistan in early June.

He said, “A few years ago Pakistan was not a popular investment choice for the UAE companies. But after making impressive strides reforming its banking sector and standardising business practices, Pakistan is showing a big green light which Dubai companies are finding hard to ignore.”

An IMF success story, in 2004, Pakistan passed through the latest of several structural adjustment programmes.

The same year, it raised $500 million through a Eurobond. In another progressive step, just months ago it adopted international arbitration standards in business disputes, he added.

http://www.dawn.com/2006/06/28/ebr10.htm

 

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ISLAMABAD (June 29 2006): The Petroleum Ministry has announced incentives for setting up deep conversion grass-roots refinery of 200,000-300,000 barrels per day capacity at Khalifa Point (Hub), Balochistan, for which 2000 acres land would be offered to the successful investor through international competitive bidding (ICB).

The government is expecting $2 billion investment on 'Build-Own-Operate' (BOO) basis refinery, which should be completed by December 31, 2010. According to the terms, all facilities would be provided as per Export Promotion Zone Authority (EPZA) rules with the modification that land owned by State Petroleum Refining and Petrochemical (Perac) for setting up refinery would be provided free of cost to be used only for the refinery, and not as government equity.

There would be no restriction on import of crude oil which would be exempted from customs duty and taxes (all other incidental charges associated with import would, however, be applicable).

The government will facilitate installation of supporting infrastructure, including single-point mooring (SPM), submarine pipelines, product pipelines and electric power supply from national grid. Sales tax exemption will be allowed on the quantity of petroleum products exports while sales tax would be applicable on products marketed locally.

The Ministry has set following terms and conditions for setting up the new oil refinery:

i) The refinery will be designed and constructed in accordance with internationally accepted technical codes and standards.

ii) The refinery will have the capacity to produce at least 60 percent middle distillates.

iii) Product specifications for the refinery will be in accordance with EURO-III specifications for both domestic and export markets.

iv) There will be no guaranteed return for this new refinery.

v) The refinery will be required to optimise its own operations and thus be responsible for its margins.

vi) The refinery will be free to sell surplus products in the international market at internationally competitive prices.

vii) The proposed refinery location will be declared as EPZ and the criteria/incentives offered by the EPZA will be applicable.

viii) The 80/20 rule (which requires export of 80 percent of total production to foreign countries) applicable for industries established under EPZA rules will be relaxed for this project to attract investment.

The investment proposals would be evaluated on the basis of technical and financial soundness of development and operation of the proposed refinery.

Ministry of Industries and Central Board of Revenue (CBR) have locked horns with Petroleum Ministry for declaring the refinery location as EPZ, sources said.

They said that CBR was of the view that there was no provision to exempt crude oil imports from customs duty and other taxes, whereas Finance Ministry says that no subsidy be provided under the proposed pricing mechanism and that the proposed concessions should not impact the competitiveness of existing refineries and also that the land may be leased out at nominal rates for the life of the project.

The country's current demand of petroleum products is about 16 million tons per annum, of which, 82 percent is met through imports (crude and finished products) and the rest through indigenous resources.

Pakistan's present total refining capacity is about 12.8 million tons per annum.

It is pertinent to note that energy demand and supply projections indicate that by 2011-12, total deficit of petroleum products in the country would be over 9 million tons and 11 million tons, respectively.

 

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ISLAMABAD (June 29 2006): The government is likely to allow import of second-hand construction machinery, airport handling machines, milk processing units and medical equipment, to be announced in the Trade Policy 2006-07 on July 19, the sources told Business Recorder.

"All the ministries and departments concerned have agreed to allow import of second hand machinery for construction sector, airport handling, milk processing and dialysis machines for the hospitals," they added.

Sources said the construction industry had approached the commerce ministry that its activities were in full swing throughout the country, but the ban on import of second hand machinery has increased the cost, proposing that the ban should be lifted.

They said the rationale behind the decision to allow import of second chillers (milk preserving unit) was that a substantial amount of milk collected from different parts of the country turns sour due to non-availability of preserving units. Since the government was endeavouring to develop dairy industry, it has been decided to allow import of second hand chillers, the sources added.

Sources said kidney patients were also facing problems in dialysis especially in the public sector hospitals where the machines were either old or faulty. Besides some private parties were also approaching the ministry for seeking permission to import second hand dialysis machines.

Keeping in view the hardships of patients, the government has decided to allow import of second hand dialysis machines from the new fiscal, the sources added.

They said that announcement to enhance trade with India was also expected to be made a part of the Trade Policy, and most probably the positive list would be enlarged, but did not give the details.

Sources also said that a technology fund would also be established in the Trade Policy, jointly sponsored by the commerce and industries ministries, adding that if any private sector company was interested in technology transfer that would not only be encouraged, but the Government of Pakistan would contribute its share by 50 percent.

The export refinance scheme and long-term financing were also made more business-friendly and Commerce Minister Humayun Akhtar Khan is expected to meet State Bank of Pakistan (SBP) Governor Dr Shamshad Akhtar shortly to finalise the proposals, the sources added.

They said that establishment of the Trade Development Authority of Pakistan (TDAP) would also be announced in the Trade Policy and in this regard Presidential Order would be issued on July 19, soon after the announcement of the Policy.

According to the sources, some of the controversial proposals in the draft TDAP, including empowering the inspectors for raiding the export and brokerage houses have been withdrawn as the commerce minister viewed the TDAP as trade promotion authority rather than a policeman.

However, one issue regarding remuneration of TDAP chief is yet to be resolved the incumbent chairman was seeking one million rupees monthly package, but the government was of the view that the package should be as per rules applicable to the civil servants, the sources claimed.

They said the EPB chairman was aspiring to enjoy the status of the state minister, but he has been told that it was the discretion of the President and the Prime Minister to give such status.

There was also still a controversy over the powers of the TDAP chief as the incumbent EPB chief was of the view that most of the powers should remain in his domain, but what the ministry says is that there should be balance of powers between the head of the organisation and the board members.

 

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DUBAI (June 29 2006): Pakistan's exports to United Arab Emirates (UAE) doubled during the last five years from 727.49 million dollars in 2001-02 fiscal (July- June) to estimated 1.4 billion dollars in 2005-06 fiscal.

According to figures provided by the Pakistan Consulate in Dubai, total annual trade volume between the two countries also more than doubled in five years period from two billion dollars to 4.4 billion dollars.

The trade balance is in favour of the UAE, mainly due to import of petroleum, iron ore, plastic material, chemical products and semi-manufactured gold by Pakistan.

Pakistan's Commercial Counsellor Najeeb Abbasi said his country was able to double its exports after Pakistani businessmen created a foothold in the UAE, and added the exporters improved quality of their goods and increased participation in the UAE exhibitions.

The Pakistan government provided export incentives, resulting in aggressive marketing by traders and its embassy, while the World Trade Organisation (WTO) provided level field for textiles along with introduction of stiff reformative measures.

Abbasi said sharp rise in oil prices and higher imports of automobile machinery to meet demands of increased economic activity in Pakistan were reasons for increase in value of imports from the UAE.

Pakistan's major exports to the UAE include textiles, garments, tents, canvas, rice, leather, leather goods, footwear, surgical instruments, sports goods, carpets, rugs, engineering goods, jewellery, fish and fish preparations. Food and home textiles for hospitality were among new products.

He said under the co-operation agreement signed in September 2005 between Sharjah Chamber of Commerce and Industry and the Pakistan government, the Sharjah government had allocated 1,000 square metres of land to establish Pakistan Trade Centre in Sharjah.

 

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Thursday, June 29, 2006

* Government to give land for free

By Fida Hussain

ISLAMABAD: The government will provide free of cost land at Khalifa Point near Hub for setting up an state-of-the-art deep conversion grassroots oil refinery in Balochistan. The investor will get all facilities, which are provided as per the Export Promotion Zone Authority (EPZA) rules, a senior government official told the Daily Times on Wednesday.

The land owned by State Petroleum Refining and Petrochemical will be provided free of cost as the government is interested in setting up a new oil refinery with a refining capacity of 200,000 to 300,000 barrels per day. According to the official, the incentive package has been prepared in a bid to attract investment in this very important sector.

The new refinery will have no restriction on the import of crude oil. The imports of crude oil will be exempted from customs duties and taxes. However, all other incidental charges associated with this import will be applicable. The proposed refinery location will be declared as Export Processing Zone (EPZ). The condition of exporting 80 percent of the production under the EPZA rules, which are applicable to industries established in EPZ, will be relaxed for this project.

According to the official, the refinery will be free to sell surplus products in the international market at the internationally competitive prices.

Under this incentive package, the government will facilitate installation of supporting infrastructure including Single Point Mooring (SPM), sub-marine pipelines, product pipelines and electric power supply from the national grid.

The government has also granted general sales tax (GST) exemption on the quantity of petroleum products exports. However, the GST will be applicable on the products to be marketed locally.

The prospective investor will be required to produce products in accordance with the specifications listed in EURO III.

Under this clause, petroleum products of the proposed refinery should be in accordance with the internationally accepted environmental standards, the official explained. The refinery will have the capacity for producing at 60 percent middle distillates.

The official said there will be no guaranteed return for this new refinery, which is expected to be completed and commissioned by end of 2010. The investor will be required to optimize its operations. The company will be responsible for its margins of profit. As Pakistan imports oil, the new refinery will give priority to marketing its products locally.

 

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Bloomberg

KARACHI – MCB Bank, Pakistan's No 4 bank by deposits, plans to raise $100 million in the first overseas share sale by a lender from the South Asian nation, President and Chief Executive Officer Mohammad Aftab Manzoor, pictured, said.
The bank, formerly known as Muslim Commercial Bank, will make the offering of global depositary receipts between September and December and use the proceeds to fund expansion, Manzoor said in an interview on June 28.

 

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Thursday June 29, 05:54 PM
KARACHI, June 29 Asia Pulse - The textile industry is asking the government to announce a concession and incentive package of Rs50 billion (US$830 million) so that it can compete with India, China and Bangladesh in export market. For pleading this case, a leading exporter Mushtaq Cheema is locking horns on June 29 with the seasoned bureaucrats of the finance and commerce ministries and officials of the State Bank of Pakistan at a meeting to be chaired by Prime Minister Shaukat Aziz.

Prepared and designed by a 15-member committee of the textile industry leaders in April, the incentive package failed to evoke any sympathy from the finance and commerce ministries as the budget-makers ignored it completely in June. The prime minister, after getting a presentation on the package on May 30, is understood to have advised the textile industry leaders to "revisit and review" their proposals. Prime Minister's adviser on finance Dr Salman Shah snubbed textile industry leaders in a post-budget seminar held in mid-June in Karachi and wondered as to from where resources would come for social sectors if Rs50 billion in the budget are given to the textile sector.

Well placed business sources confided to Dawn that the prime minister has held an informal meeting with about half a dozen top leaders of the textile industry on June 28 so that he is well-equipped with facts and arguments for a formal meeting on June 29, which State Bank Governor Dr Shamshad is also expected to attend to respond to the proposals that seek concessions on interests on bank loans.

The break-up of Rs50 billion concessions and incentives makes an interesting reading. The textile leaders are seeking Rs10 billion concession on gas tariff, Rs7.30 billion on captive power, Rs8 billion on export refinance cost, Rs6.35 billion for reducing Kibor on all long- term loans disbursed on or after January 1, 2003, Rs1 billion on 10 per cent financial support for capital investment in textile industry, including second hand machinery, Rs0.6 billion by reducing customs duty to zero on import of all textile machinery, spares, generators for captive power and its spares, Rs5.40 billion by introducing a flat rate withholding tax of 0.25 per cent on exports of textiles instead of a multiple rate, Rs1.35 billion by discontinuing export development surcharge (EDS) at 0.25 per cent on all textiles, extension of 6 per cent research and development (R&D) facility to all processed fabrics, garments and made-ups, including home textiles, and Rs3 billion for garment exporters to help them in market access support programme at the rate of 5 per cent of the fob value.

 

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KARACHI (June 30 2006): MCB Bank would soon pick Merrill Lynch Co, or Goldman Sachs Group Inc, to advise the lender to sell as much as $100 million worth of Global Depository Receipts in first quarter of the new fiscal year, it would be the first bank to sell GDRs. The bank is planning to raise $100m from the sale, and is considering to appoint Merrill Lynch & Co and Goldman Sachs Group Inc for that purpose.

In order to strengthen its position in the domestic market and to expand its deposit base, the bank is also eyeing the acquisition of a small domestic bank. The acquisition would allow the bank to further increase its market share in the local banking industry, as the industry moves towards consolidation.

In addition, the bank is also planning to aggressively expand its branch network, from the current level of 960 to around 1200. The increase in branch network also includes opening of several overseas branches in regions like Toronto, Kabul, Dubai and Mumbai. These branches will allow the bank to capture trade and remittances business.

MCB Bank, which is regarded as the fourth largest bank in terms of earning assets in the country (5-year historical CAGR: 12 percent; 5-year prospective CAGR: 16 percent) would reach overseas investors through offering of GDR. As per preliminary estimations, a special purpose vehicle (SPV) is likely to be formed, which would continue to hold these shares against the issuance of the GDR and at the time of maturity these share would again come back to MCB.

In this respect, MCB Bank also plans to shut down some of its local low performing branches and wants to open new branches at high growth areas of the world such as the UAE. This ostensibly provides them an opportunity to handle huge chunk of workers remittances, which is usually considered as the domain of National Bank of Pakistan (NBP), the country's largest bank.

The bank is setting an ambitious target of 150,00 customers in one-year time frame.

However, on the conservative side, Faisal Shaji, head of research at Capital One Equities said: "we have incorporated the figure of 30,000 in our financial model up to CY06, due to the fact that the impending issuance is coming in the middle of the calendar year."

Currently the bank maintains a market share of 10 percent of the industry deposits: "however, our preliminary assumptions depict that due to the above impending expansion plans, the size of the deposit base can increase. That is with a 5-year CAGR of 19 percent, as we expect the deposit base of the bank to go as high as 506 billion at the end of CY08 (CY05: Rs 229 billion), enunciating nearly 11.5 percent of the market share of the industry. This however helps the bank in maintaining risky lending base (5-year CAGR: 20%) assuming a conservative ADR of 65 percent."

 

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ISLAMABAD (June 30 2006): More than anywhere else, Dubai companies are showering Pakistan with new projects, reports Gulf News. In its report published on June 27 on "A magnet for investment", contributed by staff reporter Ivan Gale, said that IMF success story, in 2004 the country passed through the latest of several structural adjustment programs.

The same year, it raised $500 million through a Eurobond. In another progressive step, just months ago it adopted international arbitration standards in business disputes, the Gulf News report added.

These efforts, the report said, have invigorated the economy and created new business opportunities, says Professor Rodney Wilson, director, Durham University's Institute for Middle Eastern and Islamic Studies in UK.

He noted its GDP growth rate has surged six to eight percent in the last few years, creating a new dynamism in the region, and its GDP growth rate has surged six to eight percent the last few years, creating a new dynamism in the region.

Pakistan, the report said, is perceived as an under-served market and a friendly place for Dubai companies to do business.

The country has undeveloped land suitable for large projects and a cheap labour market. It said that as director of the Middle East and Central Asia unit for the IMF, Mohsin Khan is often privy to big deals brewing in Pakistan.

A month ago, he heard rumours that Dubai companies might invest there. But when Emaar and Limitless announced real estate projects valued at $40 billion (Dh 147 billion) in early June, even he was taken by surprise, the report added.

"Most people thought the Etisalat deal in 2005 was big, and it was," he said, adding: "But when you hear deals 10 times that size, that's pretty astounding."

The Gulf News also reported that a few years ago Pakistan wasn't a popular foreign investment choice for UAE companies. In 1998, the country defaulted on an international loan, and was generally regarded as a risky country to do business, it added.

According to statistics by the State Bank of Pakistan, foreign private investment from UAE into Pakistan tallied a modest $17.3 million in 2001-02. But after making impressive strides reforming its banking sector and standardising business practices, Pakistan is showing a big green light which Dubai companies are finding hard to ignore, the report added. It said recently there has been a succession of announcements for multi-billion projects in Pakistan.

In June 2005, a consortium of Etisalat and the Dubai Islamic Bank announced it would invest $2.6 billion for a 26 percent ownership and management rights in Pakistan telecom, PTCL. In May 2006, Emaar said it would invest $20.4 billion in four real estate developments in Karachi and Islamabad.

Limitless, Dubai World's international real-estate arm, followed with news of a $20 billion (Dh 73.4 billion) plan to invest in a mixed-use Karachi real-estate project. At about the same time, the Pakistan government also authorised the Dubai Islamic Bank to open 50 to 70 branches in Pakistan, the report added. It also said that the scale of the deals dwarves all previous foreign investment in Pakistan.

Last year, foreign investors injected $3 billion in the country, compared to more than $40 billion that the Dubai projects will pump into the economy over the next few years equivalent to more than 10 percent of Pakistan's GDP, the Gulf News report said.

The report also said that in truth, Dubai companies won't be spending tens of billions of dollars of their own money straight off. Most projects will build mixed-use residential and commercial units that they can pre-sell, using the proceeds to complete construction over a period of five to 10 years.

Still, Pakistan has emerged as the premier destination for UAE companies aggressively expanding their operations abroad, the report said. The Gulf News report said that part of the reason lies at home.

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

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

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

According to the Gulf News report, the IMF Director Khan said that Dubai companies are ahead of the game by thinking regionally, and particularly likes the name of Dubai World's international real estate development arm, Limitless. "Everyone says 'so and so, limited,'" he said. "It really describes Dubai companies in terms of acquisitions." This audacious investment plan is unfolding all over the Middle East, North Africa and Asia.

Emaar is taking a lead role in the $27 billion (Dh1 00 billion) King Abdullah City development in Saudi Arabia, and is engaged in billion-dollar projects in Morocco and Egypt. Dubai World is also expanding boldly into ports in Djibouti, Vietnam and China, the report said.

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

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

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

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