Pakistan Economy - News & Updates - Archive

[Neo]

Afghan transit trade facility: no mention of Delhi-Kabul route in the agreement ​

ISLAMABAD (May 16 2009): Pakistan has reportedly refused to extend road transit facilities to India for trade with Afghanistan, which was a longstanding demand of New Delhi, having been conveyed to Islamabad through different international channels, sources told Business Recorder on Friday.

"There is no mention of India in the final draft we formulated on Thursday at a meeting with the Afghan team. All stakeholders were present in the negotiations," sources said. The final draft will be submitted to the Cabinet for approval, before signing the new Afghan-Pakistan Trade Agreement (APTA), they added.

Sources said that whatever the viewpoint of America, or Afghanistan, Pakistan has to take decisions that are in its own national interest. Commerce Ministry has, reportedly, not submitted the new draft of APTA to the Cabinet sent by the Afghan government, "being too laborious".

"A draft APTA, prepared by the Afghan government, was received by Pakistan Embassy in Kabul on November 18, 2008. The draft, including its protocols, is quite voluminous, consisting of 66 pages, and salient features have been attached with the summary," sources quoted Commerce Ministry as justification for not submitting the entire draft.

A para of the proposed draft states: "A new transit agreement is required not only to continue to provide Afghanistan with access to the sea through Pakistan but also to provide Afghanistan with new land routes towards China and India through Pakistan as well as Pakistan with direct routes to the Central Asian States (CAR) through Afghanistan" from the top decision making body.

Suleman Ghani, Secretary, Commerce, in a detailed talk with this correspondent clarified that Pakistan is re-negotiating transit trade agreement with Afghanistan, and not with India. "We are re-negotiating transit trade agreement with Afghanistan because the current agreement is outdated and unfavourable to Pakistan," he said.

He said that the current Afghan Transit Trade Agreement (ATTA), which was signed in 1965, does not contain provision for transit trade to Central Asian Republics (CARs) through Afghanistan, "which is an impediment to Pakistan's aspirations to become a gateway for transit trade" to Central Asia.

"At the time the agreement was signed there was no prospect of trade with CARs. There was a little smuggling of goods at the time of signing the ATTA so much so that the government at that time had encouraged establishment of Bara market in Landi Kotal" he added.

Regarding recent controversy over APTA with special reference to providing transit facilities to India for trade with Afghanistan, he said that Pakistan's existing arrangement with Afghanistan allows any country to trade with Kabul through sea ports.

"As far as land route is concerned, Afghanistan can export its goods to India through Wagha border, but this facility is not available to India," Ghani said. "Trade agreement in place between the two neighbouring countries grants and guarantees freedom of transit of goods without reservation. Because of this, the Afghan government objects to the negative list imposed by Pakistan," said other sources.

Another flaw in the ATTA is that it restricts transportation of Afghan cargo through Pakistan Railways only, while much of the cargo is now being transported by National Logistics Cell (NLC), sources added. A third flaw in the agreement is that it provides for movement of Afghan cargo through one sea port ie Karachi, whereas Pakistan now has three operational sea ports--Karachi, Port Qasim and Gwadar.

According to sources, customs and other procedures, stipulated in the ATTA 1965 are outdated and provide opportunity for pilferage and smuggling. "Now we are re-negotiating the agreement with only Afghanistan in the light of our best national interests ie transit facilities for CARs and improvement in system to eliminate smuggling or at least reducing it," Ghani said.

According to the draft, the main purpose of the proposed agreement is to (i) ensure efficient and effective administration of transit transport, avoiding unnecessary delays in the movement of goods and commercial vehicles in transit through their territories; (ii) to bring about simplification, transparency and harmonisation of documentation and procedures relevant to cross border traffic and traffic in transit; (iii) to promote the use of containers in accordance with the general trend of development of containerisation, (iv) to minimise the incidence of customs fraud and avoidance; and (v) to monitor the trade of controlled chemical substances with the aim of preventing their diversion to illicit purposes (manufacture of narcotic drugs). "In all this there is no India as we have separate bilateral arrangements with New Delhi for trade," Ghani added.

MAIN PROVISIONS: The most convenient routes used for international traffic in transit, including going to third countries, through Pakistan and Afghanistan include:

1) Road and rail links between Pakistan's ports and Afghanistan; and (2) transit corridors connecting land border stations between Pakistan and Afghanistan and their respective neighbouring countries, India and China for Pakistan, Tajikistan, Uzbekistan, Turkmenistan and Iran for Afghanistan.

"As Afghanistan is already exporting its goods to India through Pakistan and demands identical facilities for India, we will examine the proposal in accordance with our bilateral arrangement and composite dialogues," Ghani said. He said that this demand could not be seen outside the bilateral arrangements, explaining "there is no danger of any slippage in that manner, we are very clear".

With reference to the impression in India that Pakistan is being compelled by the US to provide transit facility to New Delhi for trade with Kabul, he categorically stated that irrespective of what India may want, Pakistan would negotiate to ensure that its national interests are served.

"In the first meeting on APTA held on Thursday, neither the USA nor India was present because these were just bilateral deliberations," Ghani said. Commenting on the 'hidden' American pressure on Pakistan for provision of land route to India for Afghanistan, he said: "You are seeing American pressure; but I as negotiator and Secretary, Commerce, do not see such a thing". He said that nobody was pushing him as he was running the office of Secretary Commerce and not anybody else.

This reporter cited a passage from the MoU signed in Washington between the foreign ministers of Pakistan and Afghanistan under the auspices of Hillary Clinton that led many an analyst to argue that India was exerting considerable pressure to compel Pakistan to open its land for transit trade with Afghanistan: "the Government of Islamic Republic of Afghanistan and the Government of the Islamic Republic of Pakistan commit to realise the advantages of greater regional and global trade linkages and export-oriented business development." Asked if the use of the word 'regional' in the MoU may open the door for India, Ghani said: "This is ridiculous. I am tired of it. There is no confusion, except in your mind."

 

[Neo]

July-April foreign investment down 43 percent ​

KARACHI (May 16 2009): Domestic shocks such as worst law and order situation, negative economic indicators, power shortage and future uncertainty have largely hurt foreign investment, which has posted a sharp decline of over 43 percent during the first 10 months of current fiscal year.

"During the last five years, Pakistan was the most favourite country for foreign investors in the wake of high profit margins, however at present foreign investors are reluctant to invest in Pakistan due to the discouraging economic indicators and domestic shocks," economists said.

They pointed out that reduction in private sector credit clearly reflects that local investors have also stopped new investment due to power shortage and worst law and order situation. Economists said that operation against militants and rising tension in the northern areas have also played an important role in the depleting net foreign investment.

"If the operation against miscreants in Swat and other northern areas would not end in next few weeks, it would put negative impact on the country's economy in long term," they added. They said that the country's overall net foreign investment, which was in positive zone in the initial months of current fiscal year, has been constantly on decline for last few months due to domestic shocks.

"Only portfolio investment was on decline during the first half of current fiscal year due to high outflows from the equity market, however at present both Foreign Direct Investment (FDI) and portfolio investment are presenting negative growth," they added.

They said that major dip has been witnessed in the portfolio inflows, as foreign investors are reluctant to invest in the equity market due to uncertainty on the political and law and order side. "Foreign investors have adopted wait and see policy and stopped new investment in the country until the situation in the northern areas is cleared," they added.

The State Bank of Pakistan on Friday said that net foreign investment comprising foreign direct investment (FDI) and portfolio investment has registered a decline of some 1.6496 billion dollars during the first 10 months (July-April) of current fiscal year-2009. After current decline, overall net foreign investment stood at 2.2129 billion dollars during the first 10 months of FY09 as compared to 3.8625 billion dollars in the same period last fiscal year.

Statistics show that both Foreign Direct Investment (FDI) and portfolio investment have presented a negative trend during the period. FDI has shown a decline of 13.8 percent, while the massive outflow from the country's equity market has posted a significant decline of 792 percent in portfolio investment.

FDI stood at 3.2054 billion dollars during July-April as compared to 3.7191 billion dollars in the corresponding period of FY08, depicting a decrease of 513.7 million dollars.

Portfolio investment stood in the negative at 992.5 million dollars during the first 10 months of current fiscal year over the investment of 143.4 million dollars in the same period of last fiscal year. Total private investment including privatisation proceeds shows a decline of 27.9 percent to 2.7539 billion dollars during July-April as previously it stood at 3.818 billion dollars.

 

[Neo]

Smeda tasked to prepare economic revival plan for Malakand​

PESHAWAR (May 16 2009): The Ministry of Industries has tasked Small & Medium Enterprise Development Authority (Smeda) for preparing Economic Revival Development Plan for the Malakand region. The purpose of the plan would be rehabilitation of the business activities in the Malakand Division where security forces are battling militants, who had challenged the writ of the government through running parallel administration.

The plan would cover strategy for both the skill development of the IDPs residing in different camps as well as rehabilitation plan after the completion of the military operation.

The military operation in Swat, Buner and Dir Lower had caused massive migration of the residents to safe areas of the province. The government has established 14 camps in districts, Dir Lower, Malakand, Mardan, Swabi, Nowshera, Charsadda and Peshawar. The two years long insurgency and launching of the military operation to clear the area of the militants has brought business activities in the tourists attractive summer resort to standstill.

 

[sohailbutt]

GDP growth well below target​

ISLAMABAD: Pakistan failed to achieve even the revised GDP growth rate target, with GDP growth for the current fiscal year a paltry 2.37 per cent, the National Accounts Committee was informed here on Saturday.

The decline comes despite the government’s usage of what sources in the finance ministry have deemed ‘improper methods of calculation.’ Despite the availability of nine month figures for large scale manufacturing (LSM) from the federal bureau of statistics, the group opted to use eight month numbers.

Chaired by the secretary statistics division, the 88th NAC meeting approved the statistics during the nine months of current fiscal year. These figures will be utilised for preparations of economic survey 2008-09 and eventually the budget for the next fiscal year.

The meeting observed that the country would be falling short of meeting the GDP growth target of 2.5 per cent which had already been revised downwards from 5.8 per cent after Pakistan entered the IMF program.

The NAC also approved the revised GDP growth of the previous fiscal year, which has been reduced from 5.8 per cent to 4.1 per cent. However sources in the finance ministry said that the reduction served only elevate the economic standing of the country during the current fiscal year.

Experts suggest that not revising last year’s GDP growth rate and using 9 month LSM data have shown negative growth rates for GDP and income per capita this year.

However, using the new definitions, the NAC approved income per capita growth rates of around one per cent in the fiscal 2008-09 against the previous fiscal period.

The committee approved the negative growth of Large Scale Manufacturing at 5.73 per cent from July 08 to February 09, while over nine months the LSM growth rate was more than negative seven per cent.

Official sources told Dawn that the three main component of the GDP are agriculture, manufacturing and the services sector, and that the NAC was informed that only the agriculture sector registered positive growth in the nine months of the current fiscal year.

The NAC also approved the industrial sector’s negative growth of 2.57 per cent against previous fiscal sources said, adding that the manufacturing sector registered a decline of two per cent.

The data approved by NAC showed the construction sector declining a massive 10.8 per cent against the previous period, while the electricity and gas sector registered a negative growth of 3.7 per cent.

With the industry and manufacturing sector moving into negative territory, the services sector also witnessed a negative growth of 3.8 per cent in the nine months of current fiscal year.

Sources informed Dawn that the national accounts committee approved the agriculture sector growth of 4.7 per cent, while the manufacturing sector registered a decline of two per cent, the industrial sector declined by 2.6 per cent and the services sector dropped 3.8 per cent.

The NAC approved the cotton production figures in the country at 11.81 million

bales against the target of 14.11 million bales, sugar cane production at 50.04 million tonnes showing a drop of almost ten per cent against its target.

The NAC acknowledged that the wholesale and retail trade witnessed a rise of 3.8 per cent .

During the current fiscal year private sector investments registered a growth of 11.6 per cent and the public sector investment growth was 8.4 per cent.

The meeting was attended by financial experts and economists from the planning commission, finance ministry, state bank, federal bureau of revenue and other departments.

The committee will review the economic performance of current fiscal year and that of previous fiscal year for 2009- 2010 budgetary preparations and the final figures are the basis for the economic survey.

DAWN.COM | Business | GDP growth well below target

 

[sohailbutt]

$14.5bn investment needed in energy sector​

ISLAMABAD: Speakers at a consultative group meeting on energy efficiency and conservation here on Thursday highlighted that Pakistan needs $14.5 billion investment in the energy sector in 10 years.

Sponsored by the Asian Development Bank (ADB), the conference was informed that Pakistan offers huge potential for investment in fuel and electricity sector.

The experts also said that the regulator has to improve fuel efficiency in both the public and private sectors.

Bayanjargal Byambasaikhan, ADB energy expert, highlighted the concept of energy efficiency investment programme (EEIP) of $1.20 billion for Pakistan for 8-10 years.

The programme is being financed by the ADB, French official aid and the government of Pakistan.

‘Energy efficiency is the quickest and cheapest way for Pakistan to reduce the electricity demand–supply,’ he said and added that conservation of electricity and gas through energy efficiency saves equivalent to the total generation capacity of 6,770 MW.

ADB’s country director Rone Strom pointed out that subsidies were causing financial burden to the sector and the government.

The conference was informed that in the first phase of $1.2 billion programme, around 30 million energy savers would be introduced in the country.

The cost of this project is estimated at $60 million. This programme after implementation would help reduce the peak load by 1,131 MW.

‘This was a low cost solution compared to $2.02 billion needed to establish a 1,751 MW generation plant,’ Mr Byambasaikhan informed the seminar.

The other projects in EEIP includes efficiency improvement of oil and gas sector, including the energy utilised by both the Sui gas companies to compress and push gas forward in their pipelines.

Similarly, thermal power plants of the country in the public sector were also high energy users. The programme has offered $675 million for the efficiency improvement of generation companies (GENCOS) and Sui gas companies.

The programme would also offer technical support to manufacturers of gas heaters and geysers and other electrical appliances to improve their efficiency as per international standards.

‘Pakistan has to improve it’s industrial base which was a heavy energy users segment and educate its domestic consumers to conserve electricity and fuel,’ Byambasaikhan said, adding that would eventually benefit the end-user.

Experts said that Pakistan’s energy demand will continue to increase in the next 20 years, while the overall cost to the economy, businesses and consumers would be huge unless there is a concerted shift in policy and consumption.

Donors highlighted the projects and proposals for strengthening the energy sector in Pakistan and in the region, including development of regional energy hub where electricity and gas would be imported from central Asia for consumption in South Asia.The consultative group decided that the energy section of planning commission, headed by Dr Pervaiz Butt, member energy, would be responsible for ensuring proper implementation of the projects finalized in meetings with donor agencies and the government of Pakistan.

DAWN.COM | Business | $14.5bn investment needed in energy sector

 

[Neo]

Afghanistan offered use of Gwadar, Port Qasim ​

In return Pakistan seeks access to CARs under new transit trade accord​

Sunday, May 17, 2009

ISLAMABAD: Pakistan has offered Afghanistan to use Gwadar and Bin Qasim ports for trading activities under the Afghan Transit Trade Agreement (ATTA) while in return it wants access to Central Asian Republics (CARs), official sources confided to The News on Saturday.

The current Afghan Transit Trade Agreement (ATTA) signed in 1965 allows Afghan cargo movement only through Karachi Port. After that, the cargo is transported to the landlocked country either through Landi Kotal in NWFP or Chaman, Balochistan.

The current ATTA does not contain any provision for transit trade to Central Asian Republics (CARs) through Afghanistan, which is an impediment to Pakistan’s efforts to become a gateway to Central Asia.

Pakistan and Afghanistan signed a memorandum of understanding (MoU) in the US during the recent visit of President Asif Ali Zardari for improving trade and accession facilities between the two sides.

Under the MoU, both sides agreed to conclude and sign a complete Afghanistan Pakistan Transit Trade Agreement (APTTA) as early as possible and no later than December 31, 2009. Afghanistan has submitted a draft of the new agreement with the government of Pakistan.

In view of the MoU, a joint working group met in Islamabad the other day to discuss the advantages of greater regional and global trade linkages and export-oriented business development, an official who attended the meeting told this scribe.

They also discussed trade liberation and facilitation and public outreach on trade-related issues with a goal to improve processes and reduce impediments affecting the trade and investment environment in Afghanistan and Pakistan, the same official said.

The meeting also agreed that the next meeting of the group will be held in Afghanistan in June and date will be communicated with understanding.

They also agreed to coordinate and resolve all the issues relating to cross-border commerce and inland freight transit trade.

Under the expired Afghanistan Pakistan Transit Trade Agreement (APTTA), Islamabad has kept six items in the negative list that include i) cigarettes, and cigarettes of tobacco or of tobacco substitute, ii) cooking oil, iii) automobile parts, iv) television, v) telephone and vi) and tyres and tubes.

 

[Neo]

Pakistan just misses IMF’s GDP growth target ​

Sunday, May 17, 2009

ISLAMABAD: Pakistan has missed its revised GDP growth target by a slight margin as the economy grew 2.37 per cent in the current fiscal year 2008-09 against the target of 2.5 per cent, which had been agreed with the International Monetary Fund.

The National Accounts Committee (NAC) met here at P Block auditorium on Saturday to approve provisional economic figures, during which gross domestic product (GDP) growth for the last financial year 2007-08 was sharply revised downward by 1.7 per cent, for the first time in the last few decades. As a result, GDP went down to 4.1 per cent in accordance with final figures from earlier projection of 5.78 per cent in 2007-08.

By lowering the baseline, the government reached close to the growth target of 2.5 per cent agreed with the IMF under $7.6 billion Standby Arrangement (SBA) programme.

According to a working paper approved by the NAC, a copy of which is available with The News, provisional GDP estimates for 2008-09 stand at Rs5532.4 billion compared to the previous fiscal year’s Rs5404.5 billion, showing an increase of 2.37 per cent.

The contribution of industrial sector showed a negative growth of 2.6 per cent, while agriculture and services sector grew 4.7pc and 3.8pc respectively in the current fiscal year.

Per capita income achieved a slight growth of 0.97 per cent at constant factor in rupee terms, but its current level had not been calculated by the authorities concerned. Growth in electricity, gas and water supply was negative at 3.68 per cent in 2008-09. The country’s overall GDP grew by 6.81pc, 4.1pc and 2.37pc in 2006-07, 2007-08 and 2008-09 respectively.

Although, the agriculture sector rescued the country by achieving a growth of 4.7 per cent in the current fiscal year against revised final estimates of 1.08 per cent growth in last financial year, the government failed to achieve its wheat production target in 2008-09 which stood at 23.4 million tons against the target of 25 million tons.

The major crops in agriculture sector achieved a growth of 7.67 per cent in 2008-09 compared to negative growth of 6.4 per cent in 2007-08. Despite this, all major crops except rice missed their envisaged targets. Minor crops production declined to achieve a growth of 3.62 per cent in 2008-09 against 10.9 per cent in the previous fiscal.

The livestock and fishery sectors grew by 3.70pc and 2.33pc respectively in 2008-09, while forestry’s growth registered a negative growth of 15.67 per cent.

Industrial sector demonstrated negative growth of 2.57 per cent in ongoing fiscal year against a positive growth of 1.70 per cent in the last financial year. The mining and quarrying sector grew by 1.31pc, large scale manufacturing by negative 5.73pc, small scaling manufacturing by 7.51pc and slaughtering by 4.22pc in fiscal year 2008-09.

The construction industry witnessed a major decline registering a negative growth of 10.79 per cent in the outgoing fiscal year. The commodity producing sector’s growth was standing at 0.72 per cent in fiscal 2008-09.

The services sector’s growth stands at 3.82 per cent in FY2008-09. In services sector, transport, storage and communication sector grew by 2.88pc, wholesale and retail trade by 3.75pc, finance and insurance registered negative growth of 1.19pc, ownership and dwellings grew by 3.51pc, public administration & defense by 4.99pc and social, community and public services by 7.30pc in 2008-09.

In transport, storage and communication sector, Pakistan Railways witnessed negative growth of 6.41pc, water transport saw positive growth of 6.40pc, air transport negative growth of 2.08pc, pipeline transport negative growth of 8.02pc, communication positive growth of 3.65pc, road transport positive growth of 2.91pc and storage positive growth of 2.65pc in 2008-09.

In the shape of net factor income from abroad, total receipts are projected at Rs845.880 billion in 2008-09, compared to Rs564.010 billion in last fiscal year, showing a growth of 49.98 per cent.

Investment income from abroad declined to Rs65.586 billion in the ongoing fiscal compared to Rs100.047 billion, witnessing negative growth of 34.44 per cent.

 

[Neo]

GDP growth estimates of 2.37pc fudged: official ​

Sunday, May 17, 2009

ISLAMABAD: The government has fudged the figures in an attempt to bring the reasonable GDP growth estimates of 2.37 per cent of ongoing fiscal close to the target of 2.5 per cent as agreed with International Monetary Fund.

If the government did not manoeuvre the figures, the GDP growth for current fiscal would be 0.5 per cent even if the cut in the size of GDP of fiscal 2007-08 by 1.7 per cent from 5.78 per cent to 4.1 per cent was acknowledged. And if the last year’s GDP of 5.78 per cent is kept as base, the GDP growth of the current fiscal must stand at -1 per cent, reveals the detailed investigation conducted by the News.

“The National Account Committee that met here on Saturday put its credibility on stake as it approved without any objection the working paper on GDP prepared by Federal Bureau of Statistics,” a senior official told The News.

For instance, the Federal Bureau of Statistics (FBS) did not include in the national accounts the growth in Large Scale Manufacturing of -7.7 per cent registered during July-March period, instead it included the growth of LSM registered during July-February period that stands at -5.7 per cent, the official said.

Moreover FBS included dubious figures of growth of major crops in GDP growth estimates for 2008-09. According to Planning Commission’s Annual Development Plan (ADP) for 2007-08, the major crops growth target was 4.5 per cent. Under the ADP, the target of wheat was earmarked at 24 million tonnes, rice 5.7 million tonnes, sugarcane 56.5 million tonnes and cotton 14.1 million bales.

But in the working paper prepared by FBS which NAC approved, it has been shown that rice produce in the ongoing fiscal has been estimated at 6.96 million tonnes as against target of 5.7 million tonnes; but wheat produce estimates have reduced to 23.4 million tonnes against target 24 million tonnes, cotton 11.8 against 14.1 million bales and sugarcane 50 million tonnes against 56.5 million tonnes.

However, the working paper of FBS shows that major crops growth has increased to 7.7 percent despite the decline in growth of three major crops as against the target of 4.5 percent.

If the real picture of the major crops is accounted for, the agriculture growth stands at 2.7 per cent and if the LSM growth of -7.7 per cent in July-March period and agriculture growth of 2.7 per cent is included in the national accounts the GDP growth of country for the ongoing fiscal stands at 0.5 per cent.

Advisor to Prime Minister on Finance Shaukat Tarin when contacted for comments over the massive reduction in last year’s GDP growth from 5.78 per cent to 4.1 per cent by FBS and NAC and not including the LSM growth in July-March period in national accounts and inclusion of faulty major crops figures in national accounts, he said: “Let me find out as to what has been approved by National Accounts Committee and then I will come to you for comments for response.”

When he was informed that the NAC approved the working paper of FBS as it is, of which the copy is available with The News, he said it is quite alarming if it happened so.

However, latter The News tried again and again for comments but his cell phone was found powered off.

The official who attended the NAC meeting said that the FBS has also took a dubious decision to drastically reduce the last year GDP growth by 1.7 percent from 5.78 percent to 4.1 percent.

The official said for last 10 years it never happened that growth of last year has drastically been adjusted downward. “The said decision has been apparently taken to reduce the base so that the GDP for current fiscal could be shown at reasonable level closed to 2.5 percent GDP target.”

In 2006-07, the provisional growth was at 7 percent, which got later revised at 6.8 per cent and finalized also at 6.8 per cent. However, the provisional GDP growth for 2007-08 was calculated at 5.78 per cent, which has been finalized by National Accounts Committee at 4.1 percent.

The official also disclosed that one of the participants objected on non-inclusion of LSM growth till March which is of -7.7 per cent, but the FBS official said that the month of March was abnormal because of the Long March activities so the growth in March was not included knowing the fact that whole current fiscal remained the abnormal year but it did not mean the abnormal months and year should not be includes in national accounts.

Head of the National Accounts Wing in FBS could not be contacted for comments despite many attempts.

 

[Neo]

Experts suggest steps for improving economy ​

Sunday, May 17, 2009

LAHORE: Trade, industry and economists are hoping that the government would determine the economic direction of the country as its failure to chalk out a recovery plan has increased unemployment and poverty.

Economists point out that the inaction of economic managers during the past 14 months has increased poverty to an unprecedented level. They said the government has in fact taken the approval of IMF to increase targeted subsidies for poor families as the number of poor is on the rise.

Increase in poverty could have been arrested, had the government taken timely decisions to facilitate the manufacturing sector, particularly small and medium enterprises that generate huge employment opportunities.

Senior economist Naveed Anwar Khan, an FCA, said that the negative growth of large-scale manufacturing sector by 8 per cent has been accompanied with an even higher decline in SME productivity during the first nine months (July to March 2008-09) of the current fiscal year. He said this year there have been more retrenchments than the jobs created in the industry, adding high inflation had already eroded the purchasing power of poor families.

He said low-paid workers from poor families lost more jobs than the high-paid white collar workers. “Increase in productivity is the only answer to resolve the current crisis.

This needs a paradigm shift in economic policies that should be forthcoming in next budget.”

Leading engineering entrepreneur Almas Hyder said that the planners would have to decide whether they want Pakistan to be a trading, manufacturing or an agriculture nation. He said current policies do not support any of these concepts. Trading nations like Singapore, Hong Kong and Dubai allow imports at a fixed low duty and allow export of all imported items to any destination in the world.

He said with a small population, these countries are able to ensure full employment to their people through services. Pakistan, he added, cannot afford this because it needs to create four million jobs a year just to absorb the four million persons that join the workforce every year which a service-oriented economy cannot absorb.

He said another option for supporting the manufacturing sector required a different approach altogether. He said the government would have to improve transparency, governance and infrastructure. At the same time, the high cost of doing business would have to be tackled by bringing the mark-up to a single digit and arresting the high inflation in the country.

Almas said agriculture can not be promoted in the country if the government continues to encourage the import of agricultural commodities as it discourages farmers to increase productivity. He said farmers would increase productivity if they are assured that their efforts would not be compromised by importing the agricultural produce.

A Canada based Certified Public Accountant said that the best way to reduce poverty is to increase the expenses of the poor so that they are motivated to work hard. He said in Pakistan’s case that condition has been fulfilled but the government is depressing the incentive of the poor to work by disbursing monthly cash subsidies to the heads of poor families. He said that the industry has been left alone to struggle for survival and even the infrastructure has been allowed to deteriorate because of lack of funds.

He said the global recession demands a prudent pro industry approach by the government that has not come as yet. He hoped that some of the major issues faced by the manufacturing sector would be addressed in the next budget.

 

[Neo]

GDP growth rate further revised to 2.37% during FY09​

ISLAMABAD: The real Gross Domestic Product (GDP) growth has been further revised downward from 2.5 percent to 2.37 percent, official sources told Daily Times.

These estimates were reviewed at National Accounts Committee (NAC) meeting held here under the chairmanship of the Tariq Shafiq Khan, Federal Secretary Statistics Division. Officials from federal economic ministries and officials from provinces participated.

Federal government targeted GDP growth at 5.5 percent in the budget 2008-09; however, with the finalisation of $7.6 billion Stand By Arrangement (SBA) with International Monetary Fund it was decided to slowdown the economy to curtail demand.

Keeping in view the IMF programme conditionalities and the aim of lowering inflation along with impact of world financial crises, the government had agreed to revise its GDP growth target from 5.5 percent to 2.5 percent for the ongoing fiscal year 2008-09.

NAC Estimates: According to the NAC meeting estimates, less than expected growth in services sector of 3.8 percent against the target of 4.1 percent resulted in missing the downward revised growth target of 2.5 percent, official sources informed. Agriculture sector has emerged the only better performing sector in the economy during current fiscal year as it recorded a growth of 4.7 percent as against the target of 3.3 percent.

Major crops have recorded a growth of 7.7 percent against the target of 4.5 percent which has surprised the economic experts as they strongly feel the three major crops have missed their production targets.

Explaining the situation the sources said that that wheat production has been estimated at 23.4 million tonnes against the target of 24 million tones. Cotton production also fell short of the target as its production has been estimated at 11.8 million bales against the target of 14.1 million bales. Similarly, sugar cane production was estimated at 50 million tonnes against the target of 56 million tonnes.

Growth in livestock sector helped the agriculture to post healthy growth of 4.7 percent against the revised target of 3.3 percent.

Industrial sector posted negative growth at 2.67 percent as against the projected negative growth of 2.9 percent for the ongoing fiscal year 2008-09. Small-scale manufacturing witnessed a growth of 7.51 percent as compared to Large Scale Manufacturing (LSM), which nose-dived to negative 5.73 percent due a host of reasons.

Load shedding, gas shortages, depreciation of Pak-Rupee along with other difficulties led to negative growth in industrial sector, which are the largest employers of the country and major contributor in federal and provincial taxes.

According to the official sources the NAC has also revised downward GDP growth estimates for the last fiscal year 2007-08 from 5.8 percent to 4.1 percent. Revision up to 1.7 percent in GDP has been done for the first time in the history of the country. Sources said that was done to project higher GDP growth in ongoing fiscal year from a low base. Otherwise, the sources said the GDP growth estimates should have been less than 2.37 percent.

According to the sources, Large Scale Manufacturing latest figure for the month of March was available, however, to keep GDP growth estimates higher, the NAC used the LSM figure of July-February instead of Jul-March.

According to the other estimates, Construction sector posted negative growth of 10.79 percent, Electricity and gas production negative 3.68 percent and per capita income recorded 1 percent growth in the ongoing fiscal year.

 

[white_pawn]

FDI plunges 13 per cent in 10 months ​

By Shahid Iqbal
Sunday, 17 May, 2009 | 04:49 AM PST |

KARACHI: Foreign direct investment declined by 13 per cent during the first 10 months of the current fiscal year as compared to the corresponding period of last year, but the fall is mainly because of sharp reduction of inflows from the US.

Situation in Northern parts of the country has shattered confidence of foreign investors and impact is gradually appearing during the last couple of months.

The State Bank reported on Saturday that FDI from the US sharply declined to just $745 million while the inflow during the same period last year was $1.161 billion.

The overall FDI declined by 13.8 per cent during July-April, 09 while the FDI from US fell by 36 per cent or a decline of $415 million.

Experts and economists feel that the situation is still not hopeless as FDI has globally fallen due to changing financial health of the developed and developing economies.

During the 10 months of the current fiscal year, Pakistan received $3.205 billion against $3.719 billion in the same period of last year. It shows a shortfall of about $514 million which is close to the decline in FDI from the US which is $415 million. FDI inflows from developed economies fell from $2.108 billion to $1.661 billion, a fall of 21 per cent.

The developed economies are under serious recession prevailing in the US, the biggest stakeholder of the global economy. The European economies are also following the same path which collectively hampered flow of dollars from developed to developing countries.

However, China remains attractive for FDI despite a consecutive seven months’ fall in FDI.

China attracted a record $92.4 billion in non-financial FDI in 2008, an increase of 23.6 per cent from 2007.

Foreign Direct Investment in China has dropped 22.5 per cent year-on-year in April for the seventh straight monthly fall.

Pakistan has a relatively better record despite massive difference in the volume of FDI of the two countries.

Experts view the situation becoming more negative for FID since both the political and economic growth are not in the direction of improvement.

However, they said inflow of dollars would rise despite fall of FDI as the US has recently approved $1.9 billion to help the country deal with terrorism in north of Pakistan and the internally displaced people.

‘The country still has great attraction for investment in the energy sector, especially power generation and distribution,’ said Mohammad Imran, an analyst.

The country is facing a serious shortage of power which has crippled its manufacturing sector while the government is facing growing criticism over its failure to resolve the problem.

Analysts internationally believe that the FDI could improve with recovery of global economy and 2010 is the year of recovery.


DAWN.COM | Business | FDI plunges 13 per cent in 10 months

 

[white_pawn]

CFS rates soar to record 40 per cent By Dawn Staff Reporter ​

Sunday, 17 May, 2009 | 04:39 AM PST |

KARACHI: The CFS rates on the Karachi Stock Exchange last week soared to a record high of 40 per cent after early having shown divergent movements, reflecting an erratic demand for fresh credit lines, analyst Muniba Saeed said.

The market talk followed by KSE delegation’s meeting with the SECP high-ups that the ban on the in-house badla may be lifted to easy pressure on money supply was the chief factor behind the two-way movement, she said, adding the net increase was 14 basis points.

But on the other hand CFS investment maintained their downward drift for the fourth week in a row and posted a sharp fall of 17 per cent at Rs214 million, she added.

The top five companies, which accounted for 86 per cent of the total amount were led by ICI Pakistan followed by Engro Chemical, United Bank, MCB Bank and Lucky Cement.


DAWN.COM | Business | CFS rates soar to record 40pc

 

[white_pawn]

Rs2740 billion next fiscal year budget expected​

ISLAMABAD: The national budget for the fiscal year 2009-10 is expected to amount to Rs2740 billion, higher by Rs211 billion as compared to the current fiscal year.

Finance ministry sources told that following February 2009 talks held with the IMF, it was being expected that the amount of Budget- 2009-10 expected to be higher by Rs211 billion as compared to the sum for current fiscal year.

Sources said that the total expenditures for 2009-10 have been estimated at Rs2170 billion as against Rs2120 billion for the current fiscal year. Similarly, Rs690 billion would be paid on debt financing, which works out to Rs72 billion higher as compared current fiscal year.

The government has estimated an income of Rs2270 billion for 2009-10, constituting of Rs1710 billion from taxes and Rs560 billion from non-tax sources, while the total income for current fiscal year was kept at Rs1970 billion.

Sources said that the budget deficit for the fiscal year 2009-10 was estimated at Rs475 billion as against expected Rs562 billion during the current fiscal year.

 

[white_pawn]

Current account deficit shrinks in July-April
Tuesday, 19 May, 2009 | 03:22 AM PST |

KARACHI: Pakistan’s current account deficit narrowed to $8.547 billion during the 10 months to April compared with $11.173 billion in the same period a year earlier, the State Bank of Pakistan said on Monday.

Analysts said the main reason for the narrowing in the shortfall was lower global commodity prices.

For the month of April, the current account recorded a deficit of $457 million compared with a revised deficit of $243 million in March.

‘The reason for a higher deficit in April as compared to March is due to slowdown in current transfers and also because of monthly fluctuations in imports,’ said Asif Qureshi, head of research at Invisor Securities Ltd.

Pakistan’s trade deficit narrowed to $1.43 billion in April, compared with $2.30 billion in April last year, data showed last week.

Pakistan entered an emergency International Monetary Fund programme for a 23-month emergency loan of $7.6 billion in November to avert a balance of payment crisis.

DAWN.COM | Business | Current account deficit shrinks in July-April

 

[white_pawn]

Ship-breaking picks up pace at Gadani By Parvaiz Ishfaq Rana ​

Tuesday, 19 May, 2009 | 04:55 AM PST

KARACHI: The ship-breaking activity has further intensified at Gadani where presently around 70 ships are beached for dismantling and another seven to eight ships are waiting at the outer anchorage.

Fearing re-imposition of customs duty and sales tax in the new budget importers are trying hard to bring in as many vessels as they can before the end of current fiscal year on June 30.

Ali Sher Behan, Additional Collector Customs at Gadani, talking to Dawn in his office said that the number of vessels at the ship-breaking yard is expected to cross 100 before the end of current fiscal.

He said that removal of customs duty and sales tax had helped revive the ship-breaking industry after a lull of over eight to 10 years.

Giving details of revenue collection Behan said that as there was no customs duty, which generally ranged between 1 to 25 per cent and sales tax at 16 per cent, the national exchequer has collected Rs129.055 million only on 70 ships which have already beached the yard. He said this collection is on account of 1 per cent income tax (withholding tax) at import stage.

However, he said, there is nominal collection of customs duty, sales tax and federal excise duty on those items, which are not part of the vessel but are loaded as leftovers.

Full activity at Gadani generates economic activity in a big way and creates employment opportunities from seashores of Balochistan to up North where most of the foundries and re-rolling mills are located,” the collector observed.

He further said that 80 per cent of ship scrap and plates found their way to the Punjab where most of engineering industry is located and there is huge demand for quality steel.

Due to brisk ship dismantling activity presently around 10,000 to 12,000 workers, mostly from NWFP, are working in the scorching heat and under highly hostile environment where no worth mentioning basic facilities are available.

Chaudhry Abdul Majeed is one of the pioneers of ship breaking industry and entered this business about 35 years back. Talking to Dawn at his plots No111 to 114 said that initially small vessels of 3,500 LDT (long displacement tonnage) were imported for scrapping.

There was a time when there were few ship breaking plots but today these have increased to 127, which are fully operating and another five plots are under development, he added.

Chaudhry said 35 years ago the ship-breaking was done manually starting from cutting, moving ship plates up for loading on trucks. For moving down heavy equipments from a ship with an average height of 60 feet a trolley fixed on wire rope was used. On an average it used to take three years for dismantling one ship but today with all sorts of equipments like cranes, cutters, lifters etc one ship is dismantled within two to three months, he maintained.

He said the present boom at the Gadani ship-breaking yard began early this year after customs duty and sales was waived in the last budget. Presently, ships being dismantled are bulk carriers as they are cheaper than oil tankers in the world market.

However, he looked a bit wary about the future of the ship-breaking industry in view of falling rates of ship plates and scrap. Chaudhry Majeed said the situation prevailing in the country was causing damage to trade and industry as there was a lesser off-take of steel from re-rolling mills.

He further said there were strong rumours that the federal government in forthcoming budget may impose customs duty and sales tax under strong pressure from importers of shredded scrap from Dubai and Singapore.

It would be unfortunate, he said, if the government falls under their trap because their activity does not create jobs nor it gives any benefit to the people of far-flung areas such as Gadani.

DAWN.COM | Business | Ship-breaking picks up pace at Gadani