Pakistan Economy - News & Updates - Archive

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Pakistan-Jordan to sign Free trade agreement: Jawarneh

ISLAMABAD, May 25 (APP): Pakistan and Jordan will soon sign a “Free Trade Agreement” (FTA) to enhance their economic and trade ties, meeting the common aspirations of their people. This was stated by the ambassador of Jordan Dr. Saleh Ahmed Al Jawarneh on the occasion of the 62nd Independence Day of his country being celebrated on May 25.

The Kingdom of Jordan attaches great importance to its ties with Pakistan, deepening bilateral cooperation in all sectors of common interest, he said adding “We welcome the Pakistani side to seek profitable business and investment opportunities in Jordan”.

He extended heartiest congratulations to the people, the new Government and the politicians of Pakistan on their having held free, fair and transparent elections earlier this year which resulted in a peaceful transfer of power giving voice to the democratic aspirations of the nation.

The Government of Jordan looks forward to joining hands with this newly-formed Government of Pakistan to enhance an appreciable working relationship with the aim of meeting shared objectives and towards strengthening the favourable, bilateral relations which currently exist between the two countries, he added.

It is most fortunate for the countries that such conditions exist and continue to be strengthened as the two nations maintain their historical friendship and association, a testament to the superb leadership of His Majesty King Abdullah II Ibn Al-Hussein and his Pakistani leaders, President Pervez Musharraf and Prime Minister Syed Yousuf Raza Gilani.

The occasion of Independence Day of Jordan, he said reminded the warm, brotherly ties between two countries, existing since the inception of both our nations and which have flourished in all of the years since. These ever-growing, bilateral relations touch every facet of a nation’s existence -political, economic and social.

Dr. Saleh Ahmed Al-Jawarneh said the relationship is so warm that in the hour of need both Pakistan and Jordan can unconditionally depend upon each other. It reflects from the fact that the Queen of Jordan Her Majesty Rania Al Abdullah, immediately came to Pakistan to offer aid and moral support to the victims of the devastating earthquake that hit it in 2005, he added.

There have always been excellent diplomatic ties between our two nations as there have been numerous visits exchanged in the recent past such as the visit to Jordan made by President Musharraf in January, 2007 and former Prime Minister Shaukat Aziz in May, 2007 which were very successful as well as that made by several high-level officials from Pakistan and by the Government and the Royal Family of Jordan that have opened new dimensions of cooperation in different walks of life.

Furthermore, only last week the newly-elected Prime Minister of Pakistan, Syed Yousuf Raza Gilani and Prime Minister, Engineer Nader Dahabi had a very fruitful meeting while they were both participating in the “World Economic Forum (W.E.F.) on Middle East” held in Egypt.

It is in this way that the communication between the two leaderships is always there for the benefit of the peoples of our two countries and the last visit of King Abdullah II Ibn Al-Hussein to Pakistan, which occurred on November 1, 2007, is highly significant for the symbolic relationship between the two leaders and the two brotherly countries.

Recalling his close personal attachment with Pakistan, Dr. Saleh Ahmed Al - Jawarneh had the distinction, completing his Graduation and Master’s Degree qualifications from Karachi University. Then from 1987 to 1992, he had the honour to serve as a Junior Diplomat and Deputy Head of Mission (DHM) of the Hashemite Kingdom of Jordan in Islamabad.

Associated Press of Pakistan.

 

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Musharraf seeks Pakistan’s access to US markets​

ISLAMABAD, May 25: Highlighting the significance of a broad-based and long-term Pakistan-US relationship, President Pervez Musharraf on Sunday underlined the importance of enhanced access for Pakistan to the US market to help build the relationship on sound economic footings and a sustainable basis.

The president was talking to US Senators Carl Levin and Robert Casey who had called on him in Rawalpindi.

Pakistan-US relations and matters related to war on terrorism were discussed in the meeting.

The president also underscored the need for accelerated progress on initiatives like reconstruction opportunity zones (ROZs), Frontier Corps (FC) and the Fata development plan.

The US senators said they supported efforts for close relations between Pakistan and the United States and exchanged views on steps to be taken to build the relationship on a forward-looking and long-term basis.

President Musharraf stressed the importance of a multi-pronged counter-terrorism strategy combining political, socio-economic development and security tracks.

Senator Carl Levin heads the Senate Armed Services Committee. Senator Casey is a member of the Senate Foreign Relations Committee.—APP

Musharraf seeks Pakistan’s access to US markets -DAWN - Top Stories; May 26, 2008

 

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Support policies for a turnaround​

THE business confidence of the textile industry was somewhat renewed after two top textile tycoons, Bashir Ali Mohammad and Tariq Say eed Saigol were included in the Economic Advisory Council. They were expected to play a meaningful role in the continuation of the existing support policies and a possible restructuring of the existing textile sector’s debt.

But the State Bank’s decision to further tighten the monetary policy—the increase in the policy rate from 10.5 to 12 per cent --- has once again upset the textile industrialists.

The industry is seeking to retain all financial incentives and concessions in lending rates for at least ‘next two fiscal years’, to enable it to work for a turn around. Its representatives pin their “hope on some stability in international economic situation, stable oil prices, stable political and social conditions within the country and a better South-Asian region within next two years’’, says a top garment manufacturer/exporter.

Earlier, there ere some speculations that top government officials were seriously considering to withdraw research and development rebate given to exporters of readymade garments and home textiles that cost the national exchequer about Rs32.5 billion since 2005-06 to March 2008. But now it is generally believed that three per cent R & D allowed for fabric exports may be withdrawn.

Earlier this month, the State Bank governor informed the people that textile sector was given Rs897.5 billion export refinance at 7.5 per cent since July 2003 to December 2007. In last nine months, of the Rs273 billion export refinance, 65 per cent went to textiles.

“Textile sector has always been one of the major beneficiaries of the incentives provided by the SBP under various schemes. These are export refinance scheme, long-term financing for export-oriented business (LTF-EOP) and long-term finance facility (LTFF)”, the SBP governor reminded in her statement.

But the “export is down by 2.54 per cent in last ten months to $8.65 billion from $8.87 billion in the same period last year, she said. The textile industry leaders issued angry rebuttals on this statement.

“Following recessionary conditions in US our exports have suffered somewhat’’, Iqbal Ibrahim, Chairman of the All Pakistan Textile Mills Association (APTMA), explained. “It is true that government support has helped us to remain afloat in the market,’’ he said and argued that what hurt the industry was the rise in interest rate and the rising utility and transportation charges.

“The benefit of rupee devaluation against dollar has been totally eroded by the rising cost of imported ingredients for our products’’, Mr Aziz Memon, a leading readymade garment exporter, said.

“Garments and knitwear is a $3 billion plus export business that is gradually making deep inroads in the EU and US markets”, Mr Bilal Mullah, Chairman of the Pakistan Readymade Garment Exporters and Manufacturers Association, said and added that these sectors were labour intensive and big foreign exchange earners.

He lamented that “in last three years more than 800 small units have been closed down because of rising production cost. Increasing labour charges, utility cost and rising prices of fabrics and accessories have rendered our products uncompetitive in the market’’.

“Right now there are about 50 top readymade garment and knitwear manufacturers who are operating under manufacturing licence for leading store chains of Europe and America” he said.

“We sell our product say at one dollar, they put it on their counter for sale at $3.50 by just putting their label and without any real value addition,’’ another garment dealer explained. He said the leading foreign stores were now passing on their expenses to their suppliers from Pakistan.

“We are asked to keep an inventory of shelf-ready products for three months at a given time’’; that, he said, meant additional cost for them. Many garment and knitwear manufacturers preferred to do the job with their own money rather than depend on banks which charges high rate of interest and then levy heavy penalties.

“At least 50 per cent of our production cost is on fabrics which are mostly imported on buyers’ choice”, said the garment exporter to point out his cost of production. He said the share of labour cost, utility charges and other incidentals were almost 30 per cent while 20 per cent was spent on mostly imported accessories.

“We have very little option in controlling and containing our production cost because either it is import-oriented or flows from government policies.”

“Why should anybody grudge six per cent R and D rebate on readymade garments, five per cent on home textiles and three per cent on export of dyed and processed fabrics,’’ argues Aziz Memon. He justified the rebate on the grounds that Pakistan’s competitors like India, Bangladesh, China and Indonesia were giving hidden and not so hidden support to their exporters.

In the last three years, the readymade garment exporters got about Rs22 billion rebate while the fabrics and home textiles secured a little over Rs10 billion since 2006-07.

Mainly because of these rebates, the readymade garment and knitwear exports have increased from $2.58 billion in 2004 to $3.25 billion in 2007. The target for the current fiscal year is $3.2 billion.

Garment manufacturers are keen to set up big factories to achieve economies of scale to bring down production cost.

“Women are considered good dress makers world over,’’ a garment manufacturer said but regretted that not many women were in this field because of our cultural values and social conditions.

Heavy bank borrowing was a major issue with spinners. But for most of the value-added sectors, the bank loan was a problem but not of much significance. “Mainly it is a problem of spinners,’’ a leader of value-added sector said.

Spinning units are capital intensive and many of them undertook balancing, and modernisation or expansion in 2001 and 2002 when interest rates were at their lowest in 30 years. “Now the interest rates have gone up beyond 13 per cent, the bank loan and debt servicing have become an unbearable liability. Value-added sector wants a fresh look at the interest rate policy but the spinners want an outright moratorium for two or three years.

The industry’s debt problem would worsen with the State Bank’s decision to raise the discount rate from 10.5 per cent to 12 per cent on Friday last. The lending rate will go up further.

The domestic cotton prices have touched Rs4,000 per bale which many textile industrialists believe would be back breaking for the industry. There is a need to consider some pre-emptive measures, they said.

“We expect domestic demands for cloth and apparel generating from rural areas in next few years with increase of prices in agricultural products’’, Bilal Mullah said. He said many small and medium sized units did cater to local market needs of shalwar kameez.

By the time prosperity will come to rural areas in next few years, the demands of upcoming young men and women would be different. “We will try to catch up with these demands,” he said.

“But the government will have to stop the flooding of our domestic markets from apparels and clothing from China, India, Indonesia and other countries that are smuggled and under-invoiced”, a textile unit-owner said.

Support policies for a turnaround -DAWN - Business; May 26, 2008

 

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Stuck in rough waters​

It is getting ugly out there. The private sector says they find business pages of newspapers pretty depressing. The government needs to generate positive economic news to nurture positive sentiments among key economic players. If law and order and the rising cost of living have driven masses up the wall, the hike in the cost of doing business and political uncertainty are dampening prospects of much-needed investment in agriculture and manufacturing sectors.

“Use your connections to get oil facility, charm overseas investors to invest in infrastructure, sell the new image of a democratic Pakistan to European Union and get as much support as possible to bridge social sector deficit. Tell multilateral donors if they want to improve their image, they must support the democratic government by doing what they are best at for Pakistan today. The World Bank and IMF are perceived to be ardent supporters of military dictators in Pakistan as it is during their tenures that they lend most liberally”, said a businessman who sees light at the end of the tunnel if cards are played intelligently by the government.

”No one is interested in knowing what is wrong with the economy. However, if someone can elaborate how a turnaround will be engineered that would be captivating for businessmen,” said another business leader. Unfortunately, nine out of ten people like to be anonymous. The message that came loud and clear from the private sector was that the wait for political stability is becoming tedious. Political impasse must not be allowed to paralyse the economy.

The government could create a core economic lead team for the next five years that would stay in office to deliver on economic front, irrespective of the shape and design of the federal and provincial governments. “Extraordinary situation begs for extraordinary response”, commented a textile tycoon.

But political analysts believe that institution building, good governance and political stability can only be ensured by solving constitutional issues including judicial crisis.

The fragile macroeconomic indicators: price hike, fiscal and external deficits, lean performance of agriculture and industry coupled with sliding rupee, tumbling stock market and falling international credit ratings clearly indicate the direction in which the economy is heading.

Madam Governor Dr Shamshad Akhtar finally made a move on Thursday last when she mandated commercial banks to raise the return on savings to the minimum of five per cent and raised the discount rate by one and a half to 12 per cent in an effort to apply break to the upward drive of inflation.

”This was too much in a go and too late”, said a corporate bigwig criticising the governor who allowed free hand to banks to exploit depositors all through her tenure and is punishing investors for the folly of financially irresponsible government and banks by increasing the cost of credit. Dr Shamshad’s three year contract will expire in November 2008.

”So far all that the elected government has been able to do is to scare investors. They have signalled that more taxes will be introduced on capital gains and property transactions. They are telling people that government is bankrupt so the size of PSDP would actually be reduced which means no improvement of physical infrastructure. They have announced that subsidies will be reduced or withdrawn which would increase the costs,” said a businessman from Lahore.

”It does not take a rocket science to get the sense of direction the economy is heading towards”, said a businessman on condition of anonymity.

”The situation is still retrievable”, said a businessman from Islamabad. “All you need is will. Where there is will there is a way”.

”Believe me, in Islamabad, in the ministries I visited, there is absolutely no sense of urgency. It is frustratingly calm. Officers are found with files to get approval of the relevant minister for scholarships before the fund lapse in June. It is life as usual,” said a Karachiite visiting Islamabad.

”Life is certainly not as usual in the economic ministries. We are working hard to meet the deadlines of economic documents expected early next month”, Khawaja Shahab, federal secretary industries told Dawn over telephone from Islamabad. The federal secretary finance Farrukh Qayum and the minister Naveed Qamar cannot be reached because of their busy schedule.

”The business community is in touch with the government discussing different proposals acceptable to both sides. They cannot dodge issues any longer. They will have to improve governance and refrain from opting for easy way out”, said Iqbal Ibrahim from Lahore. Ibrahim heads All Pakistan Textile Mills Association.

He was critical of the recent increase in gas rates and interest rates. “What does Sui gas has to do with international oil price hike. If the SBP failed to control inflation why should the private sector be penalised by increasing credit cost”, he retorted.

”Democracy will take time to grow roots and stabilise in the security state of Pakistan. The economy on a slippery slope cannot hold on. The government will have to sideline the vested interest and revitalise the agriculture to feed the growing demand of food and raw material. Till the time, the private sector regains confidence, the government should start some public sector projects to cover infrastructure deficit and absorb manpower in gainful economic activity”, said a senior analyst.

” The tariff rates should be increased to discourage imports of non-essential items. It would not be easy as importers’ lobby and commission agents rule the roost,” said the head of an industrial house.

The recent incidents in which mob lynched and torched bandits were horrifying. More than anything else, they also reflected the level of frustration and desperation amongst the common people. It would be naïve to consider them one off incidents un less the rule of law prevails in the country. These incident are also indicative of the havoc that could be played out across the country if economic pressure continue to mount and economic activity fails to pick up pace.

”It sends shivers down my spine as I see a strong possibility of mobs invading food godowns and God forbid, in the end marching towards well off localities to loot private property to vent their anger over economic injustice,” said a worried manager at an influential business house planning to move to West with family for the time being.

Stuck in rough waters -DAWN - Business; May 26, 2008

 

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Wheat: where has the trading surplus gone?​

THE biggest question mark lurking before the Punjab food planners these days is where the over two million tons of tradable surplus of wheat has gone.

Administrative measures involving law-enforcing agencies, policy reversals, increased commodity financing and direct raids on farmers and middlemen’s stocks have failed to deliver the desired results so far, going by the pace and volume of official wheat procurement drive in the province.

The government has, as usual, rushed to order imports ignoring the domestic factors responsible for the fiasco and letting the guilty go scot-free. While import of wheat is necessary, digging out the internal root-cause of the problem is equally important.

Target: The Punjab Food Department has so far procured only 2.1 million tons against its target of 4.3 million tons that includes procurement of around three million tons for Punjab, one million tons on behalf of the NWFP government and 300,000 for Balochistan. The Punjab Food Department was once talking about procuring over 4.5 million tons for the province alone. But, its procurement drive has nose dived; arrivals at its procurement centres have dropped to less than 50,000 tons (a paltry quantity during the peak procurement period) after touching over 100,000 tons for a few days.

The federal procurement agency, the Pakistan Agriculture Storage and Services Corporation (Passco), has been able to procure around 0.7 million tons against its target of 1.5 million tons, despite increasing price twice by Rs10 per 40 kg to attract the farmers but failed.

Estimates: For the last 60 years, Pakistan has been calculating its wheat requirements and tradable surplus by two formulae: one is population-based and the other is based on market mechanism. This year, private market and official procurement situations defy these 60-year old tested formulae. Some two to four million tons of wheat somehow is still lying outside these formulae.

The country has adopted internationally accepted population-based formula, which says that every individual consumes around 124 kilograms of wheat annually. If we deduct the wheat required for the rural population based on this formula, the rest of it should come to the city markets for trading.

The current situation does not fit the frame. According to the Punjab Agriculture Department, the province has produced 16.3 million tons of wheat against the target of 18.5 million tons. To begin with, it concedes a crop reduction of around 2.2 million tons.

If 16.3 million tons production is taken as a baseline and the Punjab population at 100 million, the rural segment at the most comes around 700 million people who should not have kept more than 8.68 million tons of wheat. If seed requirements scientifically calculated at around 850,000 tons are also deducted, the figure comes to around 9.5 million tons. That means 6.8 million tons of wheat should have been in the market for trading. But the federal and provincial agencies have been successful in procuring only 2.8 million tons so far.

The other formula, based on historical market trends and calculations, becomes equally irrelevant when given a reality check. According to this formula, wheat growers keep around 70 per cent of the total production for feed and seed and the rest 30 per cent is traded in the market. That means out of 16.3 million tons, around 4.89 million tons of wheat should have become tradable surplus.

Confusion: Interesting theories are being cooked up by officials explaining the “missing” wheat stock. According to the Punjab Food Department officials, the farmers are hoarding the produce. But a majority of the farmers do no have holding capacity, which, in the past, has regularly led to price crash during harvesting season.

How can these poor farmers build such a holding capacity and that too beyond the sight of official agencies, which had been raiding every possible place for recovery of stock? Even individual buyers, who wanted to purchase wheat for domestic consumption, have not been able to do so for the fear of confiscation.

The millers think the investors have paid the farmers for their crop and asked them to keep the wheat within the confines of their homes as no agency would break in to check domestic storage. Now a question arises, can farmers hoard two to four million tons in their homes? The figure, interestingly, is more than the total indoor stocking capacity of the government agencies put together.

Unable to trace the hoarded wheat, the government has resorted to an easy solution: import the deficit amount. Even if over 2.5 million tons of wheat is imported to meet domestic food requirements, it is equally important to look into factors that affected wheat production this year.

Who delayed announcing the procurement price, and how much this delay affected the final yield. It should also look into the factors that caused 50 per cent drop in the use of phosphate fertiliser – its usage came down by 9.8 million bags in a single year. How the country missed the target for area under sowing by more than a staggering 1.2 million acres. The past mistakes and blunders identified should be avoided in future.

The Punjab government threw private sector out of procurement with every conceivable means – legal, administrative and financial. But the crisis has only worsened. Instead of being reactive to crisis on yearly basis, the government should find long-term solutions to such problems.

Wheat: where has the trading surplus gone? -DAWN - Business; May 26, 2008

 

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Saudis eying investment in farming​

A 3-day international conference of the World Economic Forum (WEF) held from May 18-20 at Sharm El Sheikh, Egypt, provided an opportunity to the world leaders and investors to discuss, on the sidelines, issues of bilateral trade and investment..

Prime Minister Syed Yousuf Raza Gilani held a number of bilateral meetings with President Bush, President Hosni Mubarak, Prime Minister of Jordan and agriculture minister of Saudi Arabia.

Mr Gilani’s meeting with Saudi agriculture minister was considered significant in the context of attracting Arab investors in the development of agriculture in Pakistan. Saudi minister indicated his country’s interest in substantial investment in the agriculture sector. He sought land on lease with the prime minister’s assurances to oblige.

Prime Minister’s Special Assistant on Finance and Economic Affairs Hina Rabbani Khar, who also attended the WEF, when contacted said that Saudi co-operation extended in the field of agriculture would help Pakistan to become a net exporter of wheat.

Analysts believe that Saudi investment would be export-oriented to cater to the agricultural needs of Saudi Arabia. Saudi Arabia suffers from food insecurity

Pakistan itself suffers from food insecurity and is making a serious attempt to attract Arab investment in agriculture. Federal Minister for Investment Naveed Qamar told the Middle East-Pakistan Forum in Dubai last month that his government would facilitate investments in agriculture and also remove snags if any. Arab investment can help realise the tremendous potential that agriculture offers to meet domestic needs and to cater to the needs of food deficit Middle East. The UAE is reported to have acquired some agricultural land in Pakistan recently.

Pakistan has received significant amount of Arab investment particularly for development of Islamic banking and insurance and setting up of investment companies. All Sharia compliant loans are linked to commercial transactions – purchase of goods and services -- and cannot be diverted towards speculative trading as is the practice in borrowings from convention banks.

Analysts say that joint ventures can be set up for development of modern agro-based industries whose products can be exported to the Middle East.

While returning from Cairo, the prime minister informed the reporters on board his special plane that he planned to set up a Land Bank to offer loans to individuals and companies to help build low-cost houses. The government wants to build immediately one million such houses for the middle and lower-middle income groups.

Ms Hina Rabbani Khar said that Free Trade Agreement (FTA) would be signed with Jordan for which both sides were working out modalities. Both sides had also agreed to set up a business council to improve their trade and economic relations. Similarly, she said, strategic relations would be established with Egypt to forge greater cooperation in energy and infrastructure sectors.

Mr Arthur Bayhan, Vice-President of The Competitiveness Institute (TCI), which is working in collaboration with the WEF, when approached said that the WEF conference, held for the first time in the Middle East, would boost economies of the countries in the region.

He said that the Sharm El Sheikh WEF conference would help promote competitiveness and require action at the regional, states, provincial and district levels. Competitiveness would also require a change in mindsets. Industry would need to focus more on its customers and less on the government for the basis of its competitiveness. The government would need to listen to the private sector and remove impediments that raise the cost of doing business, Mr Bayhan added.

Saudis eying investment in farming -DAWN - Business; May 26, 2008

 

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The lure of the international market​

Pakistan’s rice merchants may find it luring to export a much larger quantity of basmati this season because of some favourable turns in the global market. Similarly, more wheat imports may ultimately be the Hobson’s choice as lower production, inefficient handling of the supply and distribution is encouraging smuggling and hoarding on a large scale, keeping the prices unsettled. And, for Islamabad, it is easier to blame the local chaos on the worldwide phenomenon of shortages and higher food prices.

Last week, India imposed an export duty of Rs8,000 a tonne on basmati rice with a view to discourage its exports and bolster domestic stocks to meet any eventuality. This, says a top Indian industry official, is likely to “benefit farmers in Pakistan” in a big way. It is estimated, according to him, the export duty would ultimately “transfer Rs 3,000-crore worth of Indian farm income to Pakistani farmers.” This appears to be an exaggerated estimate mixed up with an expression of anger over the huge export duty but also indicates the losses Indian trade may suffer.

New Delhi has also lowered the minimum export price (MEP) on basmati from $1,200 to $1,000 a tonne. “Lowering MEP does not make fiscal sense as Pakistan MEP on basmati ($1,300) would help them gain the Gulf market,” says Anil Mittal, chairman of KRBL which sells basmati under the ‘India Gate’ brand. But how far Pakistan, the fifth biggest exporter, can benefit from the situation and rush to occupy the space being vacated by its neighbours is difficult to predict. .

These are extraordinary times of scarcities and every rice-growing country is building up reserves to meet local needs first and for this purpose has placed ban or curbs on exports. Pakistan’s current rice production is estimated at 5.5million tonnes, of which two million tonnes can at best be exported but exporters are already determined to make a kill by selling at least 2.8 million tonnes.

India exports over 80 per cent of the basmati rice it produces apart from a larger quantity of non-basmati variety. But now its export demand has already come down by 31 per cent and may decline by 38 per cent in 2009 as an outcome of the government policies and market changes in the last six months. Indians had spent millions of dollars and worked hard to win a big market for their basmati in particular at the direct expense of Pakistan –– the other country which produces the rare and precious variety –– and after facing numerous WTO disputes. That the Indians can give up their gains so easily is difficult to swallow. These economy measures at the most must be a temporary phenomenon and would go away once the current wave of shortages and high food prices begins subsiding.

But this wave, American officials say, is likely to linger for two to three years. The World Bank also puts it at three years. The prices will continue to stay high but would not escalate at the same rate as they did last year. Americans, however, insist on continuing production of ethanol which is widely seen as a major contributor to the current crisis, saying it is responsible for only three per cent of the overall increase in global food prices, while American Farm Bureau Federation says it accounts for up to 30 per cent of the surge.

Meanwhile, rice prices fell by 13 per cent on the Chicago Board of Trade, a leading market for global agricultural commodities, on May 16 on a report quoting Mohammad Azhar Akhtar, chairman of Rice Exporters Association of Pakistan that his government has permitted shipments of one million metric tons because local needs have been met. This development, coupled with Japan’s move to export its imported rice, helped ease concerns that a global food shortage was worsening, according to Bloomsberg.

A month before, prices in the world market had surged above the $1,000-a-tonne level for the first time as importers desperately looked for rice because most of the rice-producing countries have stopped exporting the vital staple commodity. The jump in price came about when the Philippines, the largest rice importer, failed for the fourth time to secure as much rice as it wanted. However, the prices came down by 11 per cent in the global market when the US agreed not to stop Japan from reselling 1.2 million tonnes rice imported from it. Japan is obliged to import American rice and cannot re-export it without US permission.

Meanwhile, Malaysia has given a new dimension to global rice diplomacy by saying it is prepared to offer palm oil in exchange for rice to any rice-exporting country. Such barter deals are a better way to build up rice stockpile. The proposal could lead to swaps with countries such as India because the latter is one of the world’s largest palm oil importers and was also the third-largest rice exporter until it imposed restrictions on overseas sales.

Pakistan can gain much from entering this kind of swap arrangement with Malaysia, a friendly country, particularly when it has placed no curbs on rice export and is also a major importer of palm oil. At the moment, only Thailand, Pakistan and the United States, among leading exporters, are exporting rice without any constraints. World rice trade is forecast to drop about by seven per cent to 28.8 million tons in 2008, mostly due to export curbs.

Why Pakistan is experiencing a continuing rise in prices of various rice varieties is difficult to understand at a time when it is in excess. Last week, the price of Sela type basmati increased by Rs3,000 per bag of 100 kg to Rs10,000, the highest-ever price so far. This shows that fixation of minimum export price by the government at $1,500, $1,350 and $750 per tonne for different varieties has failed to check speculative trading and had, in fact, further worsened the supply situation.

There is a strong reason to believe that the commodity trade is now largely managed by hoarders and speculators who have enormous funds at their disposal and have also the means to clandestinely store the stocks to create artificial shortages and keep the prices high. These price hikes have no relevance to the normal supply and demand factors.

It is amazing to note that wheat prices continue to increase during the harvesting of the crop. Maybe, a significant quantity of wheat finds its way across the border at a much higher rate, although 50,000 tonnes is already scheduled to go to Afghanistan. Meanwhile, reports that Pakistan is to import 2.5 million tonnes, including the 1.5 million tonnes earlier planned, have raised the prices in the international market. The wheat which was available at $350 per tonne rose to $400 over the announcement and by the time Pakistani importers would place orders, the price is likely to shoot up to $450. So, the imported wheat will also be sold at higher prices when it lands in local market, unless subsidised.

How far Pakistanis are going to respond to World Bank’s recommendation for ‘greater investment in agriculture’ is hard to predict, but a Dubai firm is looking at investing in agriculture in Pakistan. The firm whose CEO is a Pakistani, has bought agricultural land for the United Arab Emirates.

The firm, Abraj Capital, is working with the UAE government on agribusiness investments. The UAE has been holding talks with Islamabad about a framework for investment in its agricultural sector as it seeks to secure cheaper, long-term supplies of staples such as wheat and rice, the Financial Times reported.

The lure of the international market -DAWN - Business; May 26, 2008

 

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Returns of shares: India withholds payment of billions of rupees to Pakistanis ​

NEW DELHI (May 26 2008): The Indian government has denied payment of billions of rupees to 18,560 Pakistanis, accumulated on returns of shares they had bought in Indian firms before 1965. India had seized such shares, bought by Pakistanis in 558 Indian companies, after the 1965 war.

Now, these shares are lying with the Office of Custodian of Enemy Properties under the Indian Ministry of Home Affairs following a notification issued by Indian government in 1968.

The Indian government is undecided about the fate of these shares of Pakistanis. Media reports, citing the record of the department, said that the capitalised amount of five shareholders in Indian companies is about Rs 109.6 billion. These companies are the high-profile Indian entities--Wipro, Cipla, five companies of Tata group, ACC and three companies of the DCM group.

Similarly, according to the data, two Pakistani stakeholders have 10 million shares of Wipro, the world's largest independent R&D services provider, valuing about Rs 50.4 billion. Thirty-four Pakistanis have shares in pharmaceutical major, Cipla, worth Rs 48.2 billion. In four companies of Tata Motors--Tata Power, Tata Steel, Tata Chemicals and Tata Coffee--Pakistanis have shares worth Rs 48 million.

Pakistanis invested in Indian companies, including Hindustan Unilever, ITC DLF, Bajaj Electricals, CSCE, Reliance Energies, EIH, Aditya Birla, Nuvo, India Cement, Dalmia Cement and Ballarpur Industries before 1965.

According to the assessment of the Custodian office, the value of the shares owned by Pakistanis in the listed 45 Indian companies is Rs 18 billion.

The Hindi edition of India's paper 'The Economic Times', while contesting the figures of the Custodian department, said that Pakistanis have far more shares in the companies than revealed by the Custodians.

The custodians have recorded 1.66 million Pakistani shares in Wipro. But, company sources say there are 10 million Pakistani shares. Similarly, there are 23 million shares of Pakistanis in Cipla, but the custodian has recorded just 1.1 million, the paper added.

Business Recorder [Pakistan's First Financial Daily]

 

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July-April EU investment falls to $414.7 million ​

KARACHI (May 26 2008): European Union (EU) countries' investment in Pakistan has declined by 78 percent during the current fiscal year due mainly to the poor law and order situation and political unsuitability in the country. The country is continuously facing a political turmoil for the last one year and despite the establishment of political government the country is still facing some political problems.

The political parties are still locking horns over the judges issue and two leading parties, Pakistan People's Party (PPP) and Pakistan Muslim League-Nawaz (PML-N) coalition is also at stake on the deposed chief justice issue, which has badly hurt the foreign investment.

The central bank statistics shows investment by the EU countries have been gradually decreasing in the country and during July-April of last fiscal year, the EU countries' share in overall investment stood at $ 1.9 billion against the overall investment of $ 5.9 billion.

However, during the current fiscal year, the investment by the EU states witnessed a decline due to the uncertainty on the political front. Overall investment by the European Union has declined by some 78.3 percent to $ 414.7 million during the first 10 months of the current fiscal year against the investment of $ 1.911 billion during the same period last fiscal year, depicting a dip of $ 1.497 billion.

The foreign direct investment (FDI) by the EU countries has dipped by 68.4 percent to $ 476.9 million in July-April of the current fiscal year over the investment of $ 1.511 billion during the same period last year.

In addition, the portfolio investment by the European Union has declined by 115.5 percent to a negative position of $ 62.2 million. The investment by the three major European countries, including UK, Sweden, and Netherlands have declined, while the investment by the Luxembourg, Denmark, France and Germany have increased during the period, however, these countries have a minimum share in overall investment.

The UK is the leading country of the European countries, which overall investment has slashed by 85.5 percent to $ 165.4 million during the first 10 months of the current fiscal year as compared to $ 1.101 billion in the corresponding period last year.

The FDI by the UK depicting a decline of 57.8 percent to $ 303.1 million from $ 718.8 million while the portfolio investment has declined by 136 percent to negative position of $ 137.6 million as compared to an investment of $ 382.2 million.

The investment by Sweden has dipped by 85 percent to $ 165.4 million while Netherlands' investment dropped to $ 3 million during the first 10 months over the investment of $ 3.1 million in the same period last year.

However the investment by the Luxembourg has up by some 53 percent to $ 19.5 million and the Denmark's investment from $ 0.8 million to $ 17.7 million during the current fiscal year.

In addition, France and Germany's investments have gone up by 520 percent to $ 7.1 million and 66 percent to $ 61.2 million, respectively. On the other hand, in the foreign investor countries USA is on the first position with $ 1.682 billion investment while UAE with $ 553.2 million investment on the second number during the current fiscal year.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

New power and agriculture policies to be announced soon, says Gilani ​

LAHORE (May 26 2008): The government would shortly announce new energy and agriculture policies to overcome the existing shortfall of power and prevailing food crisis. Prime Minister Yousuf Raza Gilani said this while talking to newspaper editors at the State Guest House here on Sunday.

Under the proposed power policy, he said, necessary measures would be adopted for energy conservation, construction of small dams, installation of power plants besides other possible steps to overcome the problem of shortage of electricity.

"We are taking steps to resolve the energy crisis in the shortest possible time, and the government would require perhaps one or two years to completely resolve the power shortage problem," he said.

Recalling PPP's past agreements with the IPPs, he said that the PPP government had faced harsh criticism despite the fact that such agreements helped the country to meet its electricity demand. He said that small power generation units would be installed at appropriate locations in the hilly areas, including Kashmir. The provinces would also be allowed and encouraged to tap their potential in this regard, he added.

Giving details of the new agriculture policy he said, revolutionary steps would be taken for the promotion of livestock in the country and to overcome the shortage of food items. He pointed out that the government had allowed import of 2.5 million tons wheat against the demand of shortfall of just one million; thus there was no possibility of wheat crisis now.

The PM extolled the efforts of Punjab government to control the movement of wheat through administrative measures. He said that raise in POL prices and shortage of food items were the two major challenges the whole world was faced with presently, but Pakistan because of its agriculture economy would be in a better position to focus on increasing its agriculture output.

The Prime Minister admitted that Passco had failed to meet wheat procurement target, but pointed out that other departments had achieved 80 percent of their procurement targets.

He said that PPP was fully committed to restore judges as its sacrifices were much more than any other political party's for this cause. "I myself, along with other party workers and lawyers, remained imprisoned for the cause of the judiciary; so nobody had the right to doubt sincerity and commitment of his party for this purpose."

He said that he did not think that there were any differences between the coalition partners on the restoration of judiciary. However, they had their own views about the modalities.

"Our party wants to resolve all such issues on the floor of the parliament as we believe the parliament is supreme institution and backed by people of Pakistan and is capable to counter challenges to the democracy," he said.

About PML-Q, the Prime Minister said people had rejected its manifesto and supported PPP in the Feb 18 general elections. He said his party would implement its manifesto in letter and spirit and meet its commitment to restore the true form of parliamentary democracy in Pakistan. "Independent media, strong and stable institutions and accountable government are the key features of PPP's manifesto." he remarked.

In response to a question about his working relationship with the Presidency and the provincial governments he said he was following the policy guidelines of his party to have good working relationship with the President, all chief ministers, governors and the AJK prime minister.

About Balochistan, he said that it should be resolved through dialogue as he believed that force alone was not the solution to all problems. He said that PPP Co-chairman Asif Ali Zardari would convene an all parties conference (APC) soon over the issue of Balochistan. Earlier, the Prime Minister held a meeting with the members of Peoples Youth Organisation (PYO) at the State Guest House.

Business Recorder [Pakistan's First Financial Daily]

 

[sohailbutt]

Pakistan and Italy to further boost ties: envoy ​

RAWALPINDI (May 27 2008): Pakistan and Italy have reiterated their desire to further promote and intensify bilateral cooperation in the areas of trade, economy and particularly defence. This was discussed at a meeting between Federal Minister for Defence, Chaudary Ahmad Mukhtar, and the Ambassador of Italy to Pakistan, Vincenzo Prati, who called on him here Monday.

The minister told the envoy that Pakistan and Italy enjoyed excellent relations which needed to be further broadened and expanded for the mutual benefits of the two countries. The meeting noted that there was room for promoting security understanding between the two countries.

The ambassador said it was essential to promote people-to-people and military-to-military contacts, which would help in promoting greater understanding between the two sides. The meeting emphasised the need to enhance cooperation in the field of defence collaboration as well as exchange of delegations at political and military levels.

Business Recorder [Pakistan's First Financial Daily]

 

[sohailbutt]

Creekside sales fast gaining momentum​

KARACHI (May 27 2008): Creekside - Karachi's new waterfront lifestyle and business icon - is a joint venture project by Abu Dhabi-based Injaz Mena Investment Company PSC and UK-based Global Haly Investment Limited. The joint venture project was officially announced under the key sponsorship and patronage of His Highness Dr Sheikh Sultan Bin Khalifa Bin Zayed Nayhan, says a press release.

An exclusive shopping mall and office complex, Creekside is inspired by some of the world's most prestigious developments, built to the highest international standards. The project worth $750-plus million is being developed in Phase VIII, Defence. Designed by the leading Australian retail architects, Saunders Global Creekside features sublime architectural style, premium retail and office space, prime waterfront location, first class security and ample covered parking. The planned project will provide a shopping mall and office space, spread on an area of 5.3 acres in a Prime Location of Defence Phase VIII.

Global Haly Development (Pvt) Ltd Chairman and CEO Mubarak bin Fahad expressed his views: "Creekside is a uniquely designed mixed use facility which we firmly believe will bring a new level of luxury and enhancement to the standards of shopping expected today.

The development boasts a design that gracefully maximises sea views whilst maintaining optimal functionality and locality." Creekside site office located in Defence, Phase VIII is accepting bookings, and is facing an unprecedented demand in sales for its retail, office and restaurant spaces.-PR

Business Recorder [Pakistan's First Financial Daily]

 

[sohailbutt]

Minister for establishment of more industrial units ​

KARACHI (May 27 2008): Provincial Minister for Industry and Commerce Rauf Siddiqui has urged business community to make investment in the country and establish new industrial units so that more employment opportunities could be generated.

Speaking at a meeting of Citizens Social Forum, he noted that nations face many challenges and up and downs but the should have meet the challenges bravely and courageously for better future of their coming generations. Referring to nuclear test of Pakistan in 1998 he said at that time many countries imposed sanctions on Pakistan and foreign accounts were frozen.

But the nation faced these challenges bravely and now all the sanctions lifted, he added. He said that Pakistan is now a front line country in war against terrorism. Expressing concerns over the reports of outflow capital from Pakistan, the minister said, "this is our country and we must face challenges bravely and work for improving conditions rather than running way".

Life member of SAARC Chamber of Commerce and FPCCI, Sheikh Manzar Alam expressed concerns over increase of mark-up rates by State Bank of Pakistan (SBP) and said that it would adversely affect industries and trade. He said that the trade gap is swelling and exports are declining, adding these issues need quick attention of the government.

He emphasised on the need of preparing long term policies for boosting economic activities in the country. Former President FPCCI S.M.Munir said that the country facing a number of serious problems besides restoration of judges. He said that the forthcoming budget should be tax free.

President PIPF Khalid Tawab said that the country is facing very serious challenges. Although budget has yet to be announced the prices of almost all products are on the rise. He urged the government to announce a relief package for low and middle-income peoples in the budget.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Budget on June 7: steps taken to limit budgetary deficit to 6.5 percent, says Naveed ​

KARACHI (May 27 2008): Finance Minister Naved Qamar said here on Monday that the government has taken measures to tighten the budgetary deficit to maximum 6.5 percent by the end of the current fiscal year, aiming to scale down inflation. He said that next fiscal budgetary deficit would further shrunken from the proposed 6.5 percent.

He said that the budget for the next fiscal year would be announced on June 7. He hinted at increase in taxes, and cut in non-developmental expenditure, excepting salaries, in the coming budget, to clip the budgetary deficit.

He termed the widening of tax base as pivotal for economic development. He added that in the coming budget the government would also announce taxation measures. The Minister informed the newsmen at a press conference held at Overseas Investors Chamber of Commerce and Industry (OICCI) that an inflow of $3 billion was expected by the end of the current fiscal year to support the weakening rupee.

He said that the government also plans to minimise its borrowings for fulfilling the budgetary deficit. He pointed out that the government would adopt a new strategy to utilise the stocks exchange to float bonds in international markets.

The government will launch bonds in the world markets next year, he said, adding that rates on national savings scheme should also be increased to get more money from the private sector, instead of borrowing from the central bank.

About exemption or extension of capital gain tax (CGT) Qamar said it would be announced in 2009 budget. "The government will not take surprise decisions on the stock market," he said. "The Government is aware of the fact that stock market is undergoing regression, and its investors and brokers are facing difficulties. The Government will try to overcome the liquidity crunch to ease the market," he said.

Regarding energy generation, he said that the government has already floated online tenders demanding 1,000 MW electricity generation, while the interested companies have offered about 5000 MW electricity generation. "Numerous power generation companies have applied in this regard while the deadline is July 15 this year," he added. He said that the country would be able to get rid of electricity load shedding by the end of next year. He said that steps were being taken for electricity conservation and energy savers in a huge scale will be inducted. He hoped that with the daylight saving the energy crisis will end.

When asked to what extent President Musharraf's abrupt resignation would affect the state of economy, he said that such issues would be dealt with at the time they arose. About the short-term measure to provide relief to common man, he said that the government would also take the affluent stratum of the society on board to arrest food inflation. He said that the government would also provide relief to masses in the face of food inflation and soaring prices of petroleum products worldwide.

Answering another question, Qamar said that the government also plans to improve the state of communication with world rating companies as Pakistan is presently lowering at their lists. He said that he discussed several issues with the overseas investors, which will be resolved at the earliest. Earlier, he had a meeting with the overseas investors at OICCI to discuss issues of business with foreign investors. During the press conference, President of OICCI, Waqar A Malik was also present.

Business Recorder [Pakistan's First Financial Daily]

 

[sohailbutt]

No plan to start Kalabagh dam project: Ashraf ​

LAHORE (May 27 2008): Federal Water and Power Minister Raja Pervez Ashraf has said that Kalabagh is a controversial dam and the government does not intend to start this project. "At the end of this year, Wapda will overcome the power crisis, since the government has started 2,200 MW power generation projects on the fast track basis and will be accomplished by the year-end," he told a press conference on Monday at the Wapda House.

The minister said former rulers had not generated even single unit electricity and the present government has to take the power shortfalls as a challenge. He said the Water and Power Development Authority (Wapda) would enhance the power generation capacity of the existing grid stations. "These grids are not operating in full capacity and Wapda will get approximately 1,000 MW additional power, which will help overcome the prevailing power shortfall", he added.

He said the water reservoir position was improving and Wapda would get 500 MW additional electricity after snow melting on the hills. On the pragmatic measures taken by the government for the energy conservation, he said all the commercial markets would be closed at 9 pm for three months - from June to August.

He said Wapda would not provide power connection to big advertising billboards on main roads in cities. He said there would be a complete ban on air-condition from 8 am to 11am in all the provincial and federal government departments.

"To take more advantage of the daylight clocks will be advanced one hour," he added. Raja Ashraf said the government had earnest desire to solve the power crisis issue that was why Rs 120 billion had been allocated for the development of the power projects.

Tenders for the Basha dam would be launched next year and Nundi Pure 4500 MW, Chichoo ki Malian 500 MW, Dawddo Power Project 500 MW and Faisalabad 400 MW power projects would be accomplished in the next two years.

The minister said the Pakistan Electric Power Company (Pepco) would continue its functioning separately but he bluntly rejected an impression of merger of Pepco into Wapda. He said the government would use all possible rescues for the alternative energy purpose. "The authority concerned is working on the idea of solar and wind energies," he added.

Business Recorder [Pakistan's First Financial Daily]