Pakistan Economy - News & Updates - Archive

[Neo]

KARACHI, July 8: Textile leaders continue lobbying for getting tax relief, subsidised bank loans and a package of concessions and facilities to enable them to invest about $7.75 billion by 2010 when they expect to push Pakistan’s textile exports to $14 billion a year and provide direct and indirect employments to about 6.2 million people.

While the original package designed by a group of textile leaders before the budget 2006-07 presentation demanded straight away Rs50 billion relief, incentives and concessions on taxes, bank credits and utilities, a revised document reviews the progress made in domestic textile production and export in the last five years in the light of future production and export plans of Bangladesh, India and China.

Mirza Ikhtiar Baig, a well-known textile leader, pleaded for his industry last Tuesday at the National Credit Consultative Council (NCCC) meeting before a gathering of top bankers and bureaucrats to convince them that the domestic textile industry did fairly well in production, employment generation and exports in the last five years mainly because the inflation rate remained under control, banks’ interest rates were affordable and all other economic factors were supportive.But now, the Baig committee argues the inflation rate has crept up, bank interest has spiralled to new heights, utility costs are high and what they believe the domestic labour cost is higher than Bangladesh, India and China and tough times are ahead for Pakistan and an expansion is imminent as the world textile export market is all set to expand.

The government is asking textile industry leaders to furnish official notifications on relief, concessions and incentives being offered to textile industries in Bangladesh, India and China. “These are visible on computers and government agencies have been given addresses of al these sources,” argues Mr Baig.

Pakistan’s current textile exports are estimated at around $9 billion as against $14.50bn of India, $116bn of China and $6.60 billion of Bangladesh. In the next five years, Bangladesh is all set to push up its exports more than twice to $14.5bn as against Pakistan’s projection of $14bn. India plans to increase its exports to $50 billion a year and China to $220 billion -- almost 80 per cent more than the existing exports.

According to the Baig com-

mittee, the Indian textile industry enjoyed a five per cent interest reimbursement under the Technology Upgaradation Fund Scheme (TUFS) that stipulated a total investment of $31 billion by 2010. The document reveals that $8 billion investment has been approved under the TUFS which offered $2 billion subsidy. All innovative taxes in India are zero rated for the textile industry. There is no education cess, duty on HSD and furnace oil factored in drawback calculation.

Export earning in India was exempted to the extent of 80 per cent in the year 2001-02, 70 per cent in 2002-03, 50 per cent in 2003-04 and 30 per cent in 2004-05.

In Bangladesh a five per cent cash subsidy is given on local procurement of yarn and fabrics, while duty drawbacks are given at 60 per cent on water, 80 per cent on electricity, 60 per cent on telephones, 100 per cent on insurance and clearing and forwarding agents. There is a deduction of 0.25 per cent at source on total export earning in Bangladesh of knitwear and readymade garments as final settlement of tax liability. There is no detail information available about China but the general belief is that labour is cheap and utility and transportation are highly subsidised. Large-scale production keeps the production cost relatively low.

The currency of Bangladesh has been devalued from 64 taka a dollar to 72 taka which gives an advantage in the export market.

Besides high interest rates, creeping inflation, high utility cost, the Pakistan textile industry, the Baig committee argues, is subjected to various innovative taxes, such as EOBI, social security, professional tax, surcharges and duties on utilities, cross subsidies and stamp duty.

Keeping in view the fast expanding textile market and growing unemployment at home, the textile industry proposes to invest $3.50 billion in the spinning sector in the next five years to increase its capacity by one million tons more from the existing two million tons. A sum of $300 million is proposed to be invested in the polyester fibre industry to raise its production capacity from the existing 600,000 tons to about one million tons. An investment of $1.63 billion in the weaving industry will add another 3.5 billion square metre capacity to the existing 6.5 billion square meter capacity; and $1.79 billion investment will enhance finishing capacity by a billion square metres to the existing capacity of 2.7 billion square metres. The knitting and value added sector needs an investment of $307 million and readymade garments $222 million.

Financial analysts and market watchers say since almost 80 per cent of banking in Pakistan is in private hands and the utilities are all set for privatization and disinvestment, the government has virtually no role in textile industry demand for subsidised loans and concessional utility tariffs. Whatever relief can be offered is from the budget which has given a total subsidy of Rs109 billion that cost budget a 4.2 per cent deficit. Further concessions and relief on duty and taxes can push up budget deficit to five per cent and even more that can trigger inflationary pressures. Expansion of bank credit is also fraught with consequences of monetary expansion getting out of control.

 

[Owais]

Crisis looms over edible oil supply: truckers demand withholding tax raise adjustment

ISLAMABAD (July 10 2006): A serious crisis of edible oil supply is looming as the carriage contractors have set the deadline of July 10 for importers to accept their demand for adjustment of the increase in withholding tax or face the strike for indefinite period.

A letter written by All Pakistan Tanker Owners Association (APTOA), to Pakistan Vanaspati Manufacturers Association (PVMA) on July 6, sounded a clear warning to the edible importers. The letter, signed by APTOA president, said that it was difficult for carriage contractors to lift edible oil from the port for different parts of the country at the enhanced rates of withholding tax, especially in the given situation when they were already facing huge financial burden due to inflated rates of diesel oil and rising prices of tankers spare parts.

APTOA made it clear that the carriage contractors would only lift and transport edible oil when the importers will adjust the recent increase in withholding tax on their services in their cost.

It said "The increase of 4 percent in withholding tax on contractors services was a serious issue and it needs to be resolve on priority basis to ensure that the supply of edible oil to different parts of the country does not suffer".

The edible oil importers are resisting the contractors' demand. They argue and want that APTOA should withdraw the strike call and solve the issue with PVMA amicably.

The contractors and importers had entered into a severe controversy from the announcement by Central Board of Revenue (CBR) for 4 percent increase, in withholding tax on carriage charges for the contractors.

The contractors were paying two percent withholding tax by June 30.

The CBR had increased the tax to 6 percent in the budget and implemented it from July 1.

Increase in withholding tax on contractors' services is also emerging as a controversy among the stakeholders of other sectors.

One can name fertiliser, cement and many more areas where the transporters and owners have problems due to the increase in withholding tax on the contractors' services.

 

[Owais]

Government committed to tap Northern Areas and Chitral tourism potential: Musharraf

SHANDUR (July 10 2006): President General Pervez Musharraf on Sunday expressed his firm commitment to the economic development and promotion of tourism in Chitral and Northern Areas, and called upon the masses to make proactive efforts in staving off extremism and terrorism as "the menaces retard progress".

He was addressing a mammoth gathering at the closing of a three-day Shandur Festival at the scenic polo ground on the foothills of Shandur in District Chitral.

The President also witnessed a polo match played between Gilgit and Chitral teams at the annual festival, which was attended, besides the local populace, by a large number of local and foreign tourists and a number of diplomats and their families.

"I urge you not to let terrorism and extremism come into this area, as these affect progress--stand up and be counted against those elements who want to spread the menace of terrorism and extremism," he stressed.

The President said that "the people of this area, which is one of the world's beautiful places", were fortunate to be living in this most scenic and pleasant environment with peace and brotherhood.

He said that the government was for promoting tremendous tourism potential in this area, and added that the role of local people in this respect would be of great importance. "You should welcome the tourists, show them hospitality and warmth, and do not let extremism affect the area."

President Musharraf recalled his 2002 visit to the area and said that he was very proud and happy to fulfil his promise by performing the ground breaking of the long-dreamt Lowari rail tunnel project. He said the completion of project would open up Chitral to the country and the whole world.

Amid rousing applause, he announced black-topping of Gilgit-Chitral road and a bridge on Mastug river. "This road will come up to Shandur. However, the beauty of Shandur pass would be preserved."

President Musharraf informed the gathering about his vision to link the country and region with Chitral and Northern Areas through best means of communications and said the Karakoram Highway (KKH) would be further widened along with the construction of Dir-Bajaur road.

He also pledged to initiate three public sector power generation projects in the area, besides encouraging the private power projects to meet the growing electricity demand of the area.

 

[Owais]

Cont...............................

The President said that the government had already written off Rs 200 million loans owed by some 6000 poor people of this area. Recounting the steps taken for the wellbeing of the local people, he said that the government had earlier opened two utility stores shops in Chitral within one week. He said now a chain of utility stores would be opened at the union council level in the area, in addition to mobile utility stores to provide the essential commodities to masses at lower and controlled rates in every village for the benefit of poor people.

President Musharraf also announced that mobile telephone facility would be extended to Chitral, adding that the number of mobile phone users in Pakistan has galloped to a record level of around 32.5 million at present as against a mere 600,000 users three years back.

Speaking of the government's initiatives to exploit natural resources of the areas, he said that marble industry would be modernised with the introduction of state-of-the-art technologies of mining, cutting, polishing, adding, it would bring about an era of prosperity in the area through increased job creation.

The President said that the government would consider and analyse the proposal of helicopter service in the area, as suggested by Minister for Tourism Nilofar Bakhtiar for promotion of tourism.

Referring to the proposed setting up of a 'Tourism Training Institute' in Swat, he said it was all due to economic turnaround in the country that the government was able to launch development projects.

President Musharraf said that during his visit to the Northern Areas, he has announced a development package for Gilgit, Hunza, Skardu, etc besides inaugurating Sust Dry Port and announcing a University in Gilgit.

He said Sust Dry Port along with the broadening of KKH would boost trade between Pakistan and China and establish trade links with the landlocked Central Asian States.

"The opening of Chitral and Northern Areas for trade up to the Central Asian States will greatly benefit the people of this area and realise their long-desired progress."

He also urged the local populace to take the women of this area along in the socio-economic development and progress through their education and increased participation in various fields of national life and economy.

Welcoming foreign tourists, diplomats and dignitaries participating in the event along with their families, the President asked them to inform the world about the tremendous tourism potential and beauty of the areas.

"We want to encourage tourism; we would like to encourage more of you coming here every year, and it is you who are going to spread the beauty of this place to other people."

He said that the Shandur Festival provides the opportunity to witness a unique and thrilling polo competition and the tourists can enjoy such a wonderful occasion every year.

The President also encouraged tourists from all over Pakistan to visit the area in large numbers, saying that their larger participation in the festival would attract more and more foreign tourists to the place and, therefore, would contribute vitally to tapping tourism potential to the enormous benefit of local people.

President Musharraf asked the countrymen to serve Pakistan and make all-out efforts for its progress. "If Pakistan achieves new heights of development with peace and prosperity, we all will also make progress."

Meanwhile, Chitral Polo Team defeated Gilgit Polo Team with 9-7 in the final day of the match.

President Musharraf announced Rs 50,000 and Rs 25,000 for winner and runner-up teams, respectively. He also awarded the Trophy to the winner team and cup to runner-up team.

NWFP Governor Ali Muhammad Jan Orakzai distributed prizes among the best players.

Earlier, Chitral Nazim, Federal Minister for Political Affairs Amir Muqam and Minister for Tourism Nilofar Bakhtiar also spoke on the occasion and highlighted various aspects of the Shandur Festival. They welcomed the guests and appreciated the policies of President Musharraf for the fast-paced progress of the country.

 

[Owais]

PNSC seeking $135 million financing from foreign banks: plan to buy three oil tankers


KARACHI (July 10 2006): Pakistan National Shipping Corporation (PNSC) has started negotiations with two foreign banks for $135 million financing to buy two double-hull oil tankers of 'Aframax' class and one bulk carrier of 'Panamax' class.

Sources told Business Recorder that the national flag carrier is negotiating for deal with foreign banks which have given separate presentations to the Corporation in this regard.

They confirmed that PNSC was negotiating a $135 million financing for purchase of the vessels and the deal was likely to be finalised during this calendar year.

PNSC is planning to replace its ageing oil tankers as one of its oil tankers would be out of business under restrictions of International Maritime Organisation (IMO) and Safety of Life At Sea (SOLAS) in 2007, while another three tankers would fall under IMO/SOLAS in 2010.

Lack of adequate fresh tonnage (new ships) due to past financial constraints has resulted in gradual deterioration of the PNSC fleet in terms of age profile, and unless the trend was reversed, foreign vessels would grab a bigger chunk of the country's sea borne trade, sources said.

The age profile of the fleet, however, is gradually deteriorating as, in terms of dead-weight tonnage (dwt), over 62 percent of the fleet of 15 ships with about 645,466 dwt is over 26 years old, while remaining 38 percent is 23 to 18 years old.

With this age profile it has been estimated that over 60 percent of the fleet needs to be replaced within four to six years. The PNSC has decided to operate ships till the age of 30 years, except the oil tankers which would come under the restriction of IMO/SOLAS from next year. During the past three years, the Corporation paid $21.9 million for the purchase of three oil tankers--MT Shalamar, MT Swat and MT Johar--while MT Lalazar was purchased for $13.5 million and a bulk carrier MV Kaghan for $15 million.

With the help of these two oil tankers the country's liquid cargo import, especially crude oil handling, would be enhanced. These tankers are over 20 years old, as new tankers are very costly and financial constraints have forced the Corporation to opt for second-hand vessels. The requirement of double-hull tanker, against single hull, came in 1998, and those countries using old oil carriers have to replace them with the new version of tankers--double-hull.

PNSC is also looking for potential financing from local or foreign investors for construction of new vessels. At the same time, "we are also looking for economical ship building yard for building of new vessel," sources said, adding that the Corporation was working on a plan, and had discussed it with many foreign and local investors but it has yet to take concrete shape.

A new tanker of double hull of 'Aframax' class costs around $40 million to $60 million, but PNSC had purchased four oil tankers at a cost of about $35.4 million.

However, sources said that better maintained tankers have a longer life. "The purchase of these tankers was arranged from our own financial resources, without borrowing a single penny from any financial institution," they added.

At present, the Corporation is lifting only 20 percent of the country's total cargo, that stands at 55 million tonnes, due to high growth activity in national economy.

The national flag carrier has already secured a 10-year 'Contract of 'Affreightment' from January 20, 2003, for crude oil transportation with Pakistan Refinery Limited, National Refinery Limited and Pak-Arab Refining Company.

The corporation transported 90,900 tons crude oil from the Gulf to Colombo for Sri Lanka-based Ceylon Petroleum Corporation and also got itself registered with the company.

In mid-1990, the Corporation had availed a loan option of $50 million from National Bank of Pakistan (Bahrain) for the purchase of three small size gearless container vessels. These three vessels were used for feeder services and have a carrying capacity of about 1100 'twenty equivalent units' (TEUs).

 

[Owais]

THE RUPEE: marginal fluctuations in currency market


KARACHI (July 10 2006): In the first session of the new fiscal year 2006-07, the rupee fell slightly versus dollar in the week ending on July 8, 2006, money experts said. In the interbank market, the rupee shed two paisa for buying at Rs 60.26 for a dollar and lost 3 paisa for selling at Rs 60.28, dealers said.

The rupee followed suit in the open market, and lost 5 paisa in terms of dollar for buying and selling at Rs 60.55 and Rs 60.60, respectively, while against euro it showed no big difference and held on to its previous week's level at Rs 77.19 and Rs 77.29, for buying and selling, they said.

Some market observers said that rising trend in import bills was likely to push up the demand for dollars. As recently, the State Bank of Pakistan (SBP) reported that soaring current account and fiscal deficits were signalling negatively, the demand for dollars might rise to meet foreign payments. This may push the rupee down, money experts said.

According to SBP, the current account deficit during 11 months of last fiscal year reached a dangerous level of 5.227 billion dollars (4.28 percent of the Gross Domestic Product).

INTER-BANK MARKET RATES: On July 3, the rupee started the new fiscal year 2006-07 on a negative note, showing 4 paisa loss against dollar for buying at Rs 60.24 and three paisa loss for selling at Rs 60.25.

On July 4, the rupee mostly held its overnight levels versus dollar at Rs 60.23 and Rs 60.25 for buying and selling, respectively.

On July 5, the rupee shed 3 paisa versus dollar for buying and selling at Rs 60.26 and Rs 60.28, respectively.

On July 6, the rupee held its overnight levels versus dollar for buying and selling at Rs 60.26 and Rs 60.28, respectively.

On July 7, the rupee shed one paisa versus dollar for buying and selling at Rs 60.27 and Rs 60.29, dealers said.

On July 8, the rupee picked up one paisa in relation to dollar for buying and selling at Rs 60.26 and Rs 60.28, respectively.

INTERNATIONAL MARKETS: In early sessions of the week, the dollar got hurt slightly against yen, but the Japanese currency could not sustain a rally triggered by an upbeat reading in the Bank of Japan's quarterly tankan business sentiment poll.

The euro held near an earlier three-week high, as stronger than expected eurozone manufacturing sector data supported the view that the European Central Bank could accelerate rate hikes.

In the middle sessions of the week, the euro held its overnight firmness versus leading currencies. The yen recovered from a fall against dollar and a record low versus euro after missile launch by North Korea provided only a limited distraction from interest rates.

At the weekend, weaker-than-expected US job report pushed the dollar down which shed more ground versus major currencies.

OPEN MARKET RATES: On Monday, the euro picked up nearly a rupee at Rs 77.20 and Rs 77.30 for buying and selling, respectively.

The rupee did not show any change versus dollar at 60.60 and 60.65 for buying and selling, dealers said.

On Tuesday, bullish sentiment prevailed as the rupee picked up 10 paisa versus dollar for buying and selling at 60.50 and 60.55, dealers said at the open market.

The rupee did not fluctuate sharply versus the euro for buying and selling at Rs 77.21 and Rs 77.31 in process of trading, dealers said.

On Wednesday, the rupee gained 10 paisa against dollar for buying and selling at 60.40 and 60.45, dealers said.

The rupee also rose by 27 paisa versus euro for buying and selling at Rs 76.94 and Rs 77.04, respectively.

On Thursday, the rupee lost 10 paisa against dollar for buying and selling at 60.50 and 60.55, dealers said.

The rupee, however, managed to recover six paisa versus the single European currency at Rs 76.88 and Rs 76.98, respectively.

On Friday, the rupee shed eight paisa against dollar for buying and selling at 60.58 and 60.63, respectively. The rupee also lost 28 paisa in relation to euro for buying and selling at Rs 77.16 and Rs 77.26 in process of trading, they said.

 

[Owais]

Listed banks to reap rich harvest from NIT dividend


KARACHI (July 10 2006): The record dividend from National Investment Trust would provide rich harvest for National Bank of Pakistan, Faysal Bank, Bank of Punjab and Pakistan Re-Insurance Co, boosting their earnings for the quarter ending September 30, 2006.

NIT, the largest mutual fund, on Saturday announced dividend of Rs 5.8 per unit for FY06, the highest ever dividend by the Trust.

Among the listed companies holding NIT units, NBP, FABL, BOP, PAKRI and BOK are the major beneficiaries of the dividend announcement.

National Bank of Pakistan and Bank of Punjab's earning per share would improve by Rs 2.9 per share, Faysal Bank by 2.2 rupees, and Pakistan Re-Insurance by Rs 6.2 per share.

For the purpose of privatisation, NIT would be split into six parts, out of which three parts would be offered to Faysal Bank, Bank of Punjab and National Bank of Pakistan, according to their holdings, while the remaining parts would be offered to investors through auction.

This would probably be the last dividend announcement by the state-owned Trust with the single largest pool of funds before it breaks up into six parts and goes to private hands.

NIT has once again been able to provide superior return to its unit holders where its Net Asset Value increased from Rs 38.12 as of June 30, 2005 to Rs 48.87 as of June 30, 2006, which reflects a return of 28.20 percent for the year ended 2005-06.

The Trust earned a net income of Rs 9.23 billion, which is the highest net income so far earned in its existence. The net income depicts a growth of 62.54 percent, increasing it to Rs 9.23 billion in FY06 from Rs 5.68 billion in FY05. This translates into the record earning unit of Rs 6.19 in FY06 as compared to earning per unit of Rs 3.55 earned by the Trust in FY05. Thus, the earning per unit for the FY06 surpassed last year's highest earning per unit market by 78.31 percent.

The Trust has realised all time high capital gain of Rs 6.8 billion in FY06 as compared to Rs 2.66 billion recorded last year, which shows a tremendous growth of 155 percent in capital gain. This huge capital gain, realised by the Trust, is mainly attributable to the sale of a NIT holding in National Refinery Ltd, through Privatisation Commission as well as gains realised through normal trading activities despite all volatility in the stock market during the period under review.

 

[Owais]

KSE index fails to breach 10,000 barrier



KARACHI (July 10 2006): The share market failed to breach the coveted 10,000 barrier during last week, as all efforts of bulls to restore the confidence of general investors went begging. During the outgoing week, which was the first week of the FY07, the market saw some consolidation with less volatile behaviour.

The market witnessed strong resistance at physiological level of 10,000 and closed the week at 9,836 points - down by 153 points or 1.5 percent from previous Friday.

The market opened the week under pressure due to implementation of double taxation in the form of CVT from Monday. However, expectations of good corporate results and higher dividends notably NIT helped the market rally back over the next couple of days with NBP, BoP and Faysal Bank all closing at their upper lock on Tuesday.

The profit-selling and uncertainty regarding former Securities and Exchange Commission of Pakistan (SCEP) chairman Tariq Hassan's disclosure before the NA standing committee on finance and revenue in Islamabad on Friday that both Adviser on finance Dr Salman Shah and Minister of State for Finance Omar Ayub had close links with the powerful brokers involved in the March 2005 stock market crash and pressurised him not to take action against them, prevented the market from sustaining its upward drive, forcing it to consolidate around 9,900 points.

A couple of developments during the week triggered some rally in individual stocks but was limited. The numbers released by APCMA, cement sales have registered 12.6 percent YoY growth in FY06 to 18.4 million tonnes with an exceptional growth of 23 percent Y-o-Y during the month of June alone. Local sales were up by 14 percent while exports (mainly to Afghanistan) were down by 4 percent Y-o-Y.

A drop in exports is indicative of supply hurdles and government's withdrawal of tax rebate, discouraging exports compared to local sales. With the peak demand growth phase already over, we expect cement demand to settle down at 1.5 percent of GDP growth in the long-term where an expected supply glut situation will make FY07 a crucial year for the cement sector.

According to another report, Privatisation and Investment Minister Zahid Hamid, chairing the Privatisation Commission Board meeting, urged the Privatisation Commission (PC) to speed up the privatisation programme.

The Privatisation Commission faces a heavy agenda with the privatisation of 21 entities scheduled by December 31, 2006. This includes the privatisation of PSO, NIT, and the finalisation of the OGDCL's GDR. The privatisation of SNGPL, SSGC and PPL has been delayed until the second quarter of 2007. The IPOs of UBL, Slic and OGDCL were also considered where the minister encouraged small investors to participate in these upcoming public offerings.

An analyst from KASB Equities said former SECP chief's disclosure before the NA standing committee on finance and revenue could determine the short-term direction of the market, adding: "We believe the market will continue its upward drive on the back of attractive valuations and excitement build up regarding upcoming results for the period ending June 30th.

The only threat to investors' confidence may be the implementation of the UIN next month, which could create some panic. Our top picks remain POL, FFBL, PTCL, NBP, BoP, NML, ICI, Packages and DGKC.

 

[Neo]

SIALKOT (July 10 2006): Sialkot Chamber of Commerce and Industry (SCCI) President, Dr Nouman Idris Butt said that a recent survey conducted by an International agency on business-friendly countries had ranked Pakistan 6th among 180 countries, included in the survey.

This was a clear proof that doing business in Pakistan had become easy and business could be executed without irritants, Dr Nouman said.

Talking to acting High Commissioner of Republic of South Africa to Pakistan MM Measatywa and reporters here on Saturday evening, he said that the government had taken tangible steps to encourage private sector and ensuring its minimum involvement in business.

The government was pursuing policies of fiscal and capital market reforms, deregulation and privatisation, liberal investment regime and improved good governance, he said.

The SCCI President said that the consistency and continuity of economic policies and high corporate profitability was turning Pakistan into a destination of choice for the investors from Middle East, Asean, Europe, Africa and North America.

Dr Nouman Butt further informed that there was a network of export processing zones and industrial estates and import of raw material for export manufacturing was zero-rated. He said it was high time that foreign investors, including South Africa would gain benefits from the exceptionally favourable investment policy of the Pakistan government.

The SCCI president also discussed the issue pertaining to visa with the High Commissioner.

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[Neo]

BEIJING (July 10 2006): Transporting crude oil to China from Gwadar Port, across Balochistan and NWFP, and through the mountainous regions of the Northern Areas, over the Khunjerab Pass to north-western China is a feasible project, say Chinese experts.

Pakistan has suggested building a railway as one option. Another option suggested by Pakistan is to use an upgraded Karakoram Highway to transport the oil in tanker/lorries.

Acknowledging the proposal, Li Jiang, a senior official working with China National Petroleum Corporation (CNPC), said a feasibility study will be undertaken soon to exploit this new communication link for oil transportation.

He hoped that the Gwadar port could provide a shortest route to act as a transit facility giving China access to Central Asian markets and energy sources. The proposal was formally floated by President Pervez Musharraf during his recent talks with Chinese leadership, when he recently visited Beijing and Shanghai.

"We will be interested in studying the prospects of using Pakistan as energy corridor for China", he said, while talking to APP.

The two sides could work out a strategy to evaluate the future prospects of bilateral co-operation in the energy sector both on medium and long-term basis.

The Gwadar Port on the Arabian Sea coast in Balochistan through which crude oil imports from Iran and Africa can be transported to Northwest China's Xinjiang Uygur, an autonomous region by land. The route on which a feasibility study to be conducted is a short-cut compared with the one via the Strait of Malacca.

The port is strategically located as it is quite near the Strait of Hormuz, through which 40 percent of the world's oil passes, he noted.

Li Jiang said the Chinese crude oil importers will be looking forward to the results of the feasibility study on transporting crude oil via mountainous regions in Pakistan.

About Pakistan's offer of extending gas pipeline to China, Sun Shihai, a researcher with Chinese Academy of Social Science, said although the proposed pipeline is not a project that can be launched soon, it could work well in the long run.

"It will help maintain peace and stability in the region when the commercial interests of China, Pakistan and a third country are involved," he said.

Pakistan and China have recently emerged as a strong partner in the energy sector. Besides strengthening co-operation in hydropower sector, China also helped its traditional friend set up the Chashma Nuclear Power Plant Phase-I; and building on the 300 MW Phase-II started recently.

Pakistan, whose nuclear-power capacity is 437 MW, plans to increase the figure to 8,500 MW by 2030.
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[Owais]

Pakistan, Iran, Turkey to set up ECO bank

ISLAMABAD (updated on: July 11, 2006, 03:26 PST): Pakistan, Iran and Turkey will set up ECO trade and development bank a meeting of bank officials of the three countries decided in Ankara.

This was reported in a private TV News channel.

Head of Iran's Foreign Exchange Reserves, Muhammad Jafar Mojjarab said that ECO trade and development bank would play vital role in the economic development of the three countries.

The bank is likely to be set up in Istanbul in two and half months with its branches in Iran and Pakistan.

 

[Owais]

Probe ordered

MULTAN (July 11 2006): PIA chairman Tariq Kirmani announced Rs 200,000 financial compensation for each family of victims of the Fokker plane crash. While addressing a press conference here on Monday, Kirmani said PIA has made all arrangements to transport families of victims to Multan and will arrange transportation of bodies of victims to their respective areas at PIA's expense.

He said manufacturers of Fokker planes and experts from Rolls Royce, the manufacturing company of Fokker plane engines, would be reaching Pakistan within a day or two to assist the inquiry teams in investigating the plane crash incident.

The PIA chairman said Fokker manufacturers have been called to help the joint inquiry team of PIA and CAA to find out causes behind the Monday's Fokker plane crash that claimed lives of 45 passengers at Multan.

Fokker planes would continue to operate and serve the passengers, he said.

Senior Vice President PIA Engineering wing Iftikhar Gull said that the experts from Fokker manufacturers and Rolls Royce would reach Multan within a day or two to help the inquiry team. The PIA chairman said, PIA now has six Fokker planes, five owned by PIA and one it got on lease.

Fokker planes would continue to operate and serve the passengers, he said.

PIA deputy managing-director Farooq Shah, while addressing a press conference along with flight operation director Captain Athar here at the PIA training centre in Karachi said the Fokker aircraft had lost its contact with the control tower soon after takeoff.

He said as soon as the captain's contact with control tower was lost, an emergency was declared. Refusing comment on possible causes of crash, Farooq Shah said senior executive vice-president Captain Shah Nawaz Dara would conduct the inquiry. Replying to a question, he said still no Fokker has been grounded.

 

[Owais]

Five firms allowed to establish power plants



KARACHI (July 11 2006): The federal government has given approval to five business houses of the country to set up power plants at an estimated cost of around $1 billion, sources told Business Recorder on Monday. They said that the five business houses, which have been given 'green signal', include a Dubai-based firm which has been told to kick-off development work on the power plants on war-footing.

The licensees are now engaged in erecting their plants in Sindh and Punjab region. Sources said that the power generation capacity of each of the five independent power producers (IPPs) would be 200MW, totalling to 1000MW. These IPPs are: Fauji Al-Kubail (from Dubai), Orient Power, Nadeem Power, Saif Power and Muridke Power.

The estimated cost of each power plant would be $182-$200 million and the turbines would be run on gas. Officials have estimated that the new IPPs would operate at 60 percent capacity. However, if the demand increases, these plants would have the capacity to operate at 90 percent.

Source said that top officials of the five business houses had held a meeting with President General Pervez Musharraf in Islamabad a few days ago. The President lauded the efforts of the private sector in helping the government to overcome power shortage in the country, especially in Karachi.

Source said that the President had strongly urged the investors to start work on 24x7 basis, so that their projects could be operational within two years. Sources said that the new entrants have negotiated and fixed their production with Wapda at the rate of 4.5 cents per unit, which is about Rs 5.90 per unit.

They said that the investors would get 15 percent return on their investments and all sales will be made to Wapda, which has entered into the power supply contract for 30 years. "These five projects are from the first batch, while in the second batch four more power projects would be considered as standby projects," sources said.

However, they said, the standby power plants would use furnace oil and their generated power would be used if any mishap occurred. Sources said that the estimated cost of the standby power plants would be around $182-$215 million and their generation capacity would be 1000MW each.

About technology and machinery, sources said that the managements of all the five IPPs had contacted well known companies of United States, Sweden and Germany for importing large generators.

Sources believe that with the setting up of the five new IPPs and four in the standby position, the power crisis in the country would be managed to a great extent.

 

[Owais]

Wheat procurement: Punjab and Passco fail to achieve targets



ISLAMABAD (July 11 2006): Punjab government and Passco have failed to achieve their wheat procurement targets, but Sindh slightly exceeded the target set for it, sources in the Ministry of Food, Agriculture and Livestock (Minfal) told Business Recorder here on Monday.

"The Prime Minister had enhanced the wheat procurement targets of the provinces and Passco to ensure enough availability at reasonable prices, but his directives have not been implemented in letter and spirit," sources said. They said that Punjab had initially fixed the procurement target of 2 million tons, which was raised to 3 million tons on the intervention by Prime Minister.

The province has huge carryover stock of 1.367 million tons from the previous crop and at the current pace it was unlikely to achieve the target of 3 million tons, sources said, adding that procurement by June 25 amounted to 2,553,916 tons, which is 85 percent of the fixed target, and by the end of season, Punjab is expected to have at least 3.9 million MT in its stocks.

In view of considerable financial and storage costs, the province was requesting the federal government to arrange export of at least 0.5 million tons wheat. Sindh's initial procurement target was 0.6 million tons, which was enhanced to 0.7 million tons on the intervention by Prime Minister.

According to sources, Passco was given wheat procurement target of 1.3 million tons against its own target of one million tons and officials believe that the organisation may fall short of the target by a small margin at the end of the season. In Sindh, Passco procured 50,000 tons out of the target of 100,000 tons, which is only 50 percent of the assigned target. Total wheat procurement by Punjab, Passco and Sindh came to 4,496,560 tons, as on June 25, against the target of 5 million tons, which was 89.95 percent of the target.

Sources said that the private sector participation in wheat procurement was seemingly less than last year. The stocks pledged last year by the private sector were 2.076 million tons besides the purchases from their own resources. But this year, the stocks pledged so far amount to 1.188 million tons only (up to June 10).

The private sector did not demonstrate keenness in procurement because of reduced possibility for speculation and high profits due to better supply and duty-free import of wheat and sufficient carryover stocks, besides high mark-up on bank loans, which discouraged the private sector, sources added.

On mismanagement of bardana distribution, sources quoted the Minfal as admitting that in many cases distribution was done through middlemen and the process remained less than satisfactory, as had been the case in the past as well.

"The procurement agencies have so far not been able to evolve an effective mechanism whereby bardana could be provided directly to the growers, so that full benefit of support price reaches the farmers," sources added.

At some places, they said, gaps in demand and supply created resentment among the farmers, although directions were sent to the provinces, well in advance and from no less a level than the Prime Minister, to make adequate arrangements in time.

 

[Owais]

Prime Minister unhappy with MoC's exports performance



ISLAMABAD (July 11 2006): Prime Minister Shaukat Aziz has expressed displeasure over the performance of Commerce Ministry, particularly with regard to slow exports growth. Presiding over a meeting on Trade Policy 2006-07, scheduled now to be announced on July 17, the Prime Minister directed that stress should be laid on target markets to achieve the next year's target, sources said.

The Trade Policy was to be unveiled on July 19, but the date has been revised on the request of Commerce Minister who would be going abroad to attend a conference. Sources said that neither the export target for the next fiscal nor any specific proposal to enhance exports was discussed at the meeting.

"What was discussed were old proposals like 'Skill Development Board', role of Export Promotion Bureau, exhibitions and establishment of warehouses abroad," they said.

However, an official press release issued by Prime Minister House said that a meeting under the chairmanship of Prime Minister was held which conducted an in-depth review of the trade policy 2006-07.

Secretary, Commerce, Syed Asif Shah, made a detailed presentation on various aspects of the trade policy, and the participants gave several suggestions and provided their feedback on specific issues, but there was nothing new to mention, sources added.

This was the first meeting to formulate and finalise the trade policy. Several more meetings will be held before it is announced. The review process will go on until the trade policy is approved by the Federal Cabinet on July 17.

The meeting was attended, among others, by Humayun Akhtar, Minister for Commerce, Jahangir Khan Tareen, Minister for Industries, Sikandar Hayat Khan Bosan, Minister for Food and Agriculture, Muhammad Nasir Khan, Minister for Health, Mushtaq Ali Cheema, Minister for Textile Industry, Dr Salman Shah, Adviser to PM on Finance, Dr Shamshad Akhtar, Governor, State Bank, Dr Akram Sheikh, Deputy Chairman Planning Commission, Waseem Haqqie, Chairman, Engineering Development Board (EDB), Tariq Ikram, Chairman, Export Promotion Bureau (EPB), Secretary-General Finance, Secretary Health, Secretary Industries and senior officials.