Pakistan Economy - News & Updates - Archive

[Neo]

Gwadar port contract review: senate body kept in the dark about progress ​

ISLAMABAD (July 08 2008): The government has kept the Upper House committee in the dark about progress made so far regarding the review of contract signed between the previous government and a consortium of Port of Singapore Authority and AKD Securities.

However, next meeting of the ECC is being convened at Gwadar to sort out all outstanding issues and to take on the spot decisions in consultation with relevant federal and provincial authorities. The Senate committee on Ports and Shipping met on Monday with Senator Gulshan Saeed in the chair to discuss development work issues of the port.

When the chairperson of the committee was asked by Business Recorder whether the committee had been taken into confidence regarding the decision of the Federal Cabinet on June 4, she replied in the negative.

"We have been informed by the minister that a committee has been constituted by the Cabinet to review the Gwadar Port Authority's revised bill for new corporate structure of the port," Gulshan said. Asked why the committee had not been taken into confidence, she said that what the Incharge Minister Qamar Zaman Kaira had apprised the committee that when the committee would reach any conclusion, the committee would be properly informed.

"The Gwadar Port Authority affairs and the contract with the foreign operator called for a thorough review of the whole issue in consultation with the Balochistan government," sources quoted Prime Minister Yousaf Raza Gilani as saying.

The Cabinet had on June 27 last year in its meeting had approved the draft bill for establishment of GPA subject to certain conditions including provision related to appointment of chairman and members of the board and their term of office etc. When Kaira was told that the committee had discussed the issue of 'contract review', he said that it was a separate issue and would be discussed separately.

According to official documents available with this scribe, the revised bill is more or less the same as was approved by the Cabinet headed by Shaukat Aziz. However, Ministry of Law and Justice had made minor amendments in section 2 of the proposed bill.

"As regards corporate structure of Gwadar Port, it is pointed out that the same is already there in view of the provisions of sub-section (2) of sector 4 of the bill where it has been categorically stated that the authority shall be a corporate body, having perpetual succession and common seal, with power, subject to the provision of the Act, to acquire, hold and dispose of property both moveable and immoveable and shall by its name sue and be sued." The general direction and administration of the authority and its powers have been vested in the board of the authority.

It appears that all the authority is a jurist as all its powers shall be exercised by the board consisting of a non-executive chairman along with 15 non-executive members. The committee, however, in its meeting expressed concerns over the slow pace of work on Gwadar port project and on under-construction highways providing connectivity of this port to other cities of the country.

In reply to a question, the chairperson of the committee said that federal government needs more land to construct extended facilities for the port for which it would hold negotiations with provincial government of Balochistan and private land owners of the area.

She said the committee stressed the government to at least make the port operational to the extent that it can be used as transit port for big ships. The Federal Minister for Ports and Shipping assured the committee that the government was taking all steps to ensure that the Gwadar Port would be made operational by the end of this year.

The Committee also expressed serious concern over the grant of land to the Housing Societies despite the fact that the Federal Cabinet had decided that as a sizeable land was required for the port, it will not be given to any other party.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Sialkot exports $900 million goods annually ​

SIALKOT (July 07 2008): Sialkot district is in the north-east of the Punjab province and situated on the feet of the snow-covered peaks of Kashmir near river Chenab. The Sialkot district is spread over an area of 3,016 square kilometres and consists of four tehsils, ie Sialkot, Daska, Pasrur and Sambrial while its total population is 272,348 according to the census of 1998 and population density is 1160 per square km.

The old city has a fascinating muddle of narrow and congested bazaars. The shrine of Hazrat Imam Ali-ul-Haq situated in old city while several shrines of the Shuhada are located in the same complex.

Similarly, the shrine of Hazrat Pir Muradia is situated on historic Sialkot fort. The shrine of renowned scholar Mullah Abdul Hakim Sialkoti, who is known as Fazil Lahori in Middle East, is also situated in the city. Sialkot is an important economic centre and the only export-oriented city in Pakistan. Development of local cottage industries in Sialkot has assumed a model status for the developing world.

Thousands of small and medium enterprises situated in and around the city, are engaged in honouring their global commitments for export of value-added quality goods like sports goods, surgical instruments, leather products, martial art, sports wear and musical instruments. The industrial sector is totally export-oriented and products produced in Sialkot are exported globally and the city is earning 900 million dollars yearly.

Sports goods, surgical and musical instrument industries are more than century old industries of this export-oriented city and nucleus of cottage industry. It is the distinction of Sialkot that the hands stitched soccer balls are made and export it for world soccer cups, European Championships and other international events.

The best cricket and hockey players of the world prefer to use bats and hockey sticks "Made in Sialkot" which has made Sialkot a "Household Name" all over the world. About 85 percent of total production of soccer ball of the world comes from Sialkot while all international brands are sourcing their supply of footballs from this export-oriented city and nucleus of cottage industry of the country.

Pakistan enjoys a unique position in the global trade with reference to sports goods and its main forte is hand stitched inflatable balls and such masterpieces were being produced and exported for around 100 years now.

On the other hand, soccer ball manufacturers and exporters were facing shortage because of size of trained and highly skilled soccer ball stitchers is reducing day by day due to non availability of training institute for producing fresh skilled and semi-skilled stitchers.

The surgical industry is enjoying monopolistic position globally because no other country can produce surgical instruments in the price range and variety. The total export of surgical instruments is approximately 191 million dollars during 2006-07 while the industry is producing 100 million instrument per annum of which 60 percent disposable and 40 percent reusable instruments.

As many as 1200 small and medium surgical units are functioning in and close to Sialkot and over 150,000 workers are engaged with surgical industry. Almost 74 percent production of surgical instruments is sold to United State of America, Germany, United Kingdom, Italy, UAE, France, Republic of Korea, Japan, Mexico and Australia while remaining 26 percent was being sold to rest of the world.

The average price of an instrument is 1.24 dollars, which is lowest in the world whereas the average price of German made instrument is about US 18 dollar. Due to low cost of local made surgical instruments, the surgical industry in enjoying monopolistic position globally.

Apart from this Readymade Garment Industry was also playing its tremendous role in strengthening the national economy through its exports of quality products. The industry was fulfilling 30 percent world-wide consumption of martial art uniform and resultantly become key source of foreign exchange earner.

Similarly Daska is also legendary and had a special repute in producing the agricultural inputs with traditional techniques and without any support of the government catering the needs of farmers and cultivators. Some 90 small and big agri-tools manufacturing units are functioning successfully in and close to Daska out of this 58 units are producing complete machinery while remaining units were producing components of agriculture machinery.

Daska is pioneer in manufactured the wheat straw chopper and rice stubble chopper machines in the very beginning and with the passage of time the industry is now producing hi-tech machinery to facilitate grower community of the Punjab.

The business tycoons of the city are not only engaged with exports but they are also fulfilling the social responsibilities with missionary zeal and commitment. The Sialkot Chamber of Commerce and Industry (SCCI) in collaboration with other trade bodies of the area initiated a unique Sialkot City Package Programme under which main arteries of the city have been constructed and work on remaining roads is in progress.

The business community of Sialkot has set up a matchless precedent by constructing mega project of Sialkot International Airport totally on self-help basis.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Pakistan's diesel exports to Afghanistan up 50 percent ​

SINGAPORE (July 08 2008): Pakistan is exporting about 50 percent more diesel a month to Afghanistan to 100,000 tonnes from June to September versus the usual monthly volumes to help in reconstruction works, an industry source said on Monday.

Pakistan normally moves 50,000-70,000 tonnes of diesel each month to geographically challenging Afghanistan. During June to September last year, such cross-border flows were 60,000-70,000 tonnes a month, the source that is familiar with the flows said.

"Afghanistan is importing more gas oil for construction works. The country is rebuilding," said the Karachi-based source, which asked not to be named. But Pakistan has suspended jet fuel exports to Afghanistan since June 25. "The suspension is indefinite. Afghanistan is drawing jet fuel supplies from Iran," he added.

Pakistan used to send 10,000 tonnes of jet fuel to Afghanistan every month. Part of such diesel intake was for military consumption in Afghanistan, the source said. The United States has some 32,000 troops in Afghanistan - around 14,000 in the Nato-led force and some 18,000 performing missions from counter-terrorism to training Afghan forces.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

World Bank to provide $54 million loan to Iesco ​

ISLAMABAD (July 07 2008): World Bank will give $54 million as first instalment of loan to Islamabad Electric Supply Company (Iesco) for improvements in its electricity distribution and transmission system.

Chief Executive Iesco Raja Abdul Ghafoor talking to APP said on Sunday that the amount will be spent to increase efficiency and quality of electricity supply by supporting reductions in overall technical and commercial losses and increasing availability of electricity besides improving voltage.

The company will also receive an amount of $32 million from Asian Development Bank (ADB) to improve electricity supply chain in its region, Iesco chief said.

He added the company has planned a number of projects to strengthen its network included distribution, rehabilitation and energy loss reduction, distribution of power to new consumers and rural electrification.

Raja Abdul Ghafoor said the company has provided 97,725 electricity connections to various consumers during one year while by the end of July a target of 101,380 connections will be achieved. He said during the period out of total the company has provided 86,826 connections to domestic consumers, 10,059 connections to commercial consumers, 497 connections to industrial consumers, 294 tubewell connections and 40 streetlights.

He said during the period three grid stations have been upgraded from 26MVA to 40MVA included Satellite, DHA and Chakri while Talagang and Bisal grid stations have been upgraded from 66MVA to 132MVA. He said under its contingency plan, the company has provided sufficient material at its complaint centres at all divisions to properly address citizens' complaints. He expressed the hope that load shedding hours will be reduced as the ministry has taken sincere steps to generate more electricity in the country reducing the gap between demand and supply.

Raja Abdul Ghafoor said to give relief to its consumers, the company has requested the concerned authority to reduce load shedding share of Iesco. He added the company is also implementing the directions of Minister for Water and Power regarding energy conservation and appealed citizens to help company to save energy.

He said the company under its awareness drive published pamphlets and brouchers to educate people to consume energy as it also helps reduction in electricity bills.

The Iesco chief said citizens should use energy saver bulbs instead of tube lights and ordinary bulbs which will not only save energy overall in the country but due to this power customers will receive affordable bills. He appealed commercial consumers to close shops before 8pm and avoid using additional lights in wedding halls, shopping plazas and hotels to save energy.

He said the company is strictly following load shedding schedule in rural and urban areas of the region and there is no discrimination in this regard. Replying to a question, he said company's officials and workers have been directed to address public complaints in time and no negligence will be tolerated in this regard. He said efforts are being made to make Iesco diversified, transitional and integrated power supply company with a strong environment conscience, playing a national role in electricity supply and distribution.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Big decline in telecom FDI in 2007-08 ​

ISLAMABAD (July 08 2008): After an impressive growth for two successive years, the foreign direct investment (FDI) in Pakistan telecom sector substantially declined during the last fiscal year, it is learnt. Sources said that FDI in telecom sector amounted to only $810.9 million during first three quarters of 2007-08, showing declining trend in the successive quarters against $1.824 billion for 2006-07.

Apart other reasons, the telecom experts believe that the uncertain law and order situation and political conditions also contributed to the decline. The data showed that after 37 percent share, with $363.90 million in total FDI of $962.5 million for the first quarter of last fiscal year, the investment in telecom sector dipped to $290 million in the second quarter of October-December 2008.

From $290 million in the second quarter, it declined to $156.6 million in the third quarter (Jan-March) with hardly 15.9 percent contribution in $982.2 million total FDI. The telecom sector with $1.824 billion FDI in 2006 emerged as major contributor in terms of foreign inflow but during last fiscal year the inflow in telecom sector was very low. Analysts believe that the declining trend should have continued in the last quarter as well.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Minfal to start 10 new schemes to enhance crop output ​

ISLAMABAD (July 08 2008): Government will spend Rs 1503.224 million on 10 new schemes in food agriculture and livestock sector to further boost production of the sector. An official in the Ministry of Food Agriculture and Livestock (Minfal) said here Monday that government has allocated a huge amount of about Rs 20515.876 million for the development of agriculture sector for the financial year 2008-09.

He said special attention would be paid in crop and livestock sector to enhance crop and livestock production by introducing modern techniques of cultivation and to give trend to cultivate hybrid seeds to increase per hectare crop production.

Rupees 18 million will be spent on establishment of 'Monitoring of crop through satellite technology' to provide latest information to the growers of far-flung areas of country and to save the crop from insect attack, he added. Every year, a lot of area, under cotton crop is attacked by a deadly insect called Mealy bug and destroy the crop, this year Rs 150.224 million will be spent for eradication of the insect, he added.

The official said that National Pesticide Residue Monitoring System will be set up at a cost of Rs 20 million to check the quality and standard of pesticide and other chemical used in agriculture sector.

Rupees 500 million will be spent in "Wheat maximisation programme" to increase wheat production to fulfil the domestic consumption of wheat as well as to export, the official further added.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

A stagnant tax: GDP ratio ​

EDITORIAL (July 07 2008): Despite reform initiatives mounted by FBR, the ratio of direct taxes to GDP in Pakistan has remained stagnant at 3 percent over the last many years, which is the lowest ratio among the countries of this region, says a Recorder Report, quoting the FBR Quarterly Review. As compared to Pakistan, direct taxes in the region have assumed greater importance by becoming a major source of revenue generation for regional governments.

For instance, in India the proportion of direct taxes to total tax collection increased from 30.2 percent in 1995-96 to 45.1 percent in 2005-06, going up further to 48.8 percent in 2006-07, while the ratio of direct tax-to-GDP was only 2.8 percent in 1995-96, which improved to 5.6 percent in 2006-07, and is budgeted at 5.7 percent for 2007-08. The system there has not only been simplified; it also provides more incentives for compliance.

In emerging economies like Singapore, Malaysia and Indonesia, the direct tax-to-GDP ratio ranges between 6 and 7 percent. In contrast to this, the position of direct taxes in Pakistan has remained at around 3 percent for the last many years. Pakistan's tax regime largely resembles the one practised in Latin American countries, where indirect taxes, particularly the sales tax, account for a relatively higher share within the overall tax revenue.

The indirect tax-to-GDP ratio stands at around 4 percent and less than 2 percent if the withholding taxes are excluded. The FBR Quarterly Review has highlighted major reform initiatives undertaken by the Indian tax authorities, which have helped improve the overall direct tax collection. The tax authorities in India have introduced the Permanent Account Number (PAN) for all taxpayers which has to be quoted on tax returns in all financial transactions. This has helped the tax authorities to keep track of taxable income.

The revenue target set by Pakistan for the current fiscal is expected to reach one trillion rupees. The broadening of tax base will ensure fair distribution of the tax burden among various sectors of the economy. The overall services sector, including wholesale and retail trade, as well as agriculture are potential candidates for increasing collection. The tax base has remained narrow due to a wide range of exemptions and concessions as well as large-scale tax evasion. Secondly, the tax rates have been pitched at high levels, which has created a vicious circle of widespread evasion.

The revenue loss to the national exchequer due to tax exemptions declined by 51.2 percent to Rs 89.52 billion in 2007-08 against Rs 183.69 billion over the previous year. While comparisons with other countries can throw up useful lessons for us, there is a need to understand the composition of tax-GDP ratio in Pakistan before undertaking any similar exercise. The tax-to-GDP ratio declined in 2005 due to the re-basing of GDP by the Finance Ministry. Enhancing the tax-to-GDP ratio is essentially a policy issue that calls for determination of the parameters of composition of GDP and identification gaps.

The major causes of a low tax-to-GDP ratio in Pakistan include a narrow tax base, poor compliance by taxpayers, too many exemptions (the most notable being agriculture), the presence of a huge underground economy, and a serious mismatch between sectoral contributions in the tax-to-GDP ratio. There is a need for FBR to further broaden the tax base by effectively plugging all loopholes in the tax collection system. A thorough revamp of the entire tax machinery is also called for to remove the flaws that have kept our tax-to-GDP ratio one of the lowest in the region. Secondly, the camouflage of indirect taxation should be removed to make the system more transparent.

Business Recorder [Pakistan's First Financial Daily]

 

[Nafees]

Focus on Pakistan's educational sector
By Farhan Bokhari, Special to Gulf News
Published: July 09, 2008, 00:07

Pakistan's annual budget last month has been an opportunity to reflect upon the many challenges faced by the country as it seeks to consolidate itself in a rapidly changing world. But the budget has also been an occasion to consider some of the key areas of promise and success as Pakistan has tried to overcome its many pitfalls.

Education and the neglect of the government owned school system are indeed a recurring theme in the country. But the success of the past decade in beginning to revitalise higher education in Pakistani universities is a case in point that needs to be almost celebrated.

After years of continuing and blatant neglect of the university system, President Pervez Musharraf's regime - after taking charge of the country in 1999 - began, for the first time in years, to revitalise university level education. The key objectives of this exercise was essentially to bring Pakistani university level education on par with global standards.

It would be wrong to say that Pakistan has succeeded in achieving all of its objectives with regards to higher education. But it would be right to note that the track record of the past decade is impressive at a minimum.

There are many past legacies which have begun to be reversed during this time. In a country where students aspiring for a higher degree outside Pakistan and were denied that opportunity in the past have had the government supporting their ventures to foreign lands in search of academic excellence.



Improved

At the same time, the government has significantly improved the salaries of foreign-based Pakistani faculty members, thereby laying the basis for the return of many of those who would otherwise never consider teaching at a university in the country.

Other ventures have included new measures to help universities overcome their internal weaknesses. They range from ranging the provision of funds to support the creation of new infrastructure to aiding in the revamp of syllabus. Almost simultaneously, Pakistan has begun embarking on the creation of a network of new universities, reversing a long legacy of neglect to this vital sector.

This overall trend fits into a two pronged pattern. On the one hand, higher education as a fundamental pillar of government policy cannot be neglected. While it is important to concentrate on schools as a fundamental pillar of educational policy, it is also significant to recognise that without a successful turn around in higher education, finding educators of tomorrow would be impossible.

On the other hand, supporting universities overcome their inherent gaps is essential to aid in the overall progress of state and society. No country can hope to flourish unless it has the ability to also oversee the spread of centres of knowledge, excellence and above all discourse.

Pakistan's outlook has suffered badly owing to the failure to discuss and debate issues of national relevance. Pakistani universities at one time did provide a credible forum to undertake such discussions on key challenges facing the country.

But the neglect of almost 20 years has now begun to pay off. It would therefore be a tragic outcome if Pakistan's newly elected government scales down on the government's support to higher education. This word of caution is an essential must in a country where the new government is trying to undo what has been done by its predecessors.

In the politically charged environment of today, it is possible that in undoing the successes of the previous government, the new regime may well decide to target higher education. If so, that would not only be a tragic proclamation upon an area which should otherwise be the source of national pride.

At a time when Pakistani politics is becoming once again intensely charged up, it is vital to protect what has been gained for higher education, and to take the success forward. The best way to do this is to begin celebrating the record of the past decade as an attempt in sincerity to revitalise university level education, while seeking to improve upon this further without dragging the issue through controversy - political or otherwise.



Farhan Bokhari is a Pakistan-based commentator who writes on political and economic matters.

 

[Owais]

SBP takes measures to arrest rupee slide: central bank to make 100 percent oil payments

KARACHI (July 09 2008): The State Bank on Tuesday took tight measures to safeguard Pak rupee from further decline against US dollar. In line with the measures, the State Bank of Pakistan will now make 100 percent oil payments, and has suspended afternoon session for all types of foreign exchange transactions by authorised dealers with their customers and in the interbank market.

The SBP has also suspended Forward Cover Facility (FCF) against imports and advance payment against imports cut to 25 percent with immediate effect to rationalise the foreign exchange markets. The SBP has taken these measures after continuous depreciation of Pak rupee in interbank as well as open market. Amending Exchange Companies Rules and Regulations, the SBP has further strengthened monitoring mechanism of transactions made through exchange companies.

The SBP said that authorised dealers were previously allowed forward booking against imports through Letter of Credit (L/C) basis. However, at present it has been decided to temporarily suspend forward booking against all types of imports, therefore, authorised dealers have been directed not to sell foreign exchange on forward basis against imports.

However, the SBP has allowed dealers to honour their commitments already made in accordance with the terms of related contracts subject to compliance of related rules and regulations. In another step the central bank has reduced the limit of advance payment against the imports.

The SBP has now decided that the said facility will be available only to the extent of 25 percent of the FOB or CFR value of the goods to be imported. Earlier, importers were allowed to effect advance payment to the extent of 50 percent of the FOB or CFR value.

Changing the policy regarding payments against import of POL products, the central bank has now decided that it will provide foreign exchange to the authorised dealer for the import of all categories of furnace oil and also against the above mentioned Form 'M' approvals.

However, the SBP will also continue to provide foreign exchange to banks for the import of all other POL products including those specified in point No 1 and 2 (as per EPD Circular letter No 12/Policy-2004 dated November 01, 2004). Whereas previously all purchases of foreign currency related to the import of furnace oil were made by the authorised dealers from the interbank market.

To maintain Pak rupee on a sustainable level, the SBP has also reduced the time for all types of foreign exchange transactions by authorised dealers with their customers and in the interbank market up to 2:00pm Monday through Thursday and up to 1:00pm for Friday and Saturday. Authorised dealers are, however, allowed to transact foreign exchange swap transactions in the interbank market up to 4:30pm Monday through Friday and up to 1:00pm on Saturday.

Interbank swaps would include normal swap transactions involving two simultaneous transactions with the same authorised dealer and exclude any structured Foreign Exchange Swaps ie two outright transactions with different authorised dealers. Similarly, the SBP has said that henceforth exchange companies (including A and B category) will be required to take prior approval of SBP for all transactions of US dollar 50,000 or above (or equivalent in other foreign currencies) on account of outward remittances or sale of foreign currencies to the customers.

However, this requirement will not be applicable to sale of foreign currency to the banks and exchange companies, the SBP added. Accordingly, the central bank has advised exchange companies to forward their related requests to SBP along with complete details of the transaction including particulars of the customer such as name, address, CNIC, amount and purpose of the transaction. The SBP has made it clear that failure to comply with the above instructions will attract severe regulatory action under related rules and regulations.

Business Recorder [Pakistan's First Financial Daily]

 

[Owais]

Power plant feasibility study deadline: Chinese investors turn to ministry against PPIB move

ISLAMABAD (July 09 2008): Chinese investors have sought the foreign ministry's assistance against the Private Power Infrastructure Board decision not to further extend the date of submission of a feasibility study of 250MW coal-based power plant, sources in the PPIB told Business Recorder.

The sources said that China National Machinery Import and Export Corporation (CMC), which is currently working on Sonda-Jherruck coal mine and power project, wrote a letter to Foreign Affairs Secretary Salman Bashir, reminding him of his endeavours to attract foreign investment, an objective that has been compromised by the PPIB decision.

Bashir was Pakistan's ambassador to China before being promoted to Foreign Affairs Secretary. He enjoys good relations with the Chinese government and investors in his personal capacity.

"As the project is the first of its kind in Pakistan and also the first for the CMC on BOT basis, there are host of complex issues that need to be resolved between the company and relevant organisations both in China and Pakistan," the sources quoted the company's Vice President Qin Ruijuan as stating in the letter.

The firm had also written a letter to the PPIB Managing Director, in which it said that the board decision might harm bilateral relations between the two countries. The sources said that a senior diplomat in the Chinese embassy has met with Water and Power Secretary Ismail Qureshi and conveyed him the Chinese government's reservations about the PPIB decision.

Giving the background development engagements, CMC, in its letter clarified that it was working for long time with relevant government agencies in Pakistan to develop the integrated coal mine and power project at Sonda-Jherruck in Thatta (Sindh) on BOT basis.

According to the company, detailed coal geological investigation for the project had already been completed in 2007 whereas feasibility study for the coal mines was completed and based on that, the mining licence was granted by Sindh government and lease deed was signed with the provincial government in 2008.

After signing the lease deed, the company was in the process of undertaking further hydro-geological investigative work to determine whether the adequacy of water resources for the power plant as the river nearby was unable to cater to the needs during the dry season.

"We have to look forward and we are preparing the second draft of technical and commercial proposals for review by the PPIB and other government authorities concerned," the sources quoted the company as saying. The company had submitted the first draft a couple of months ago to the organisations concerned.

According to the letter, the company has claimed that it was also working on a financial model for tariff which would be submitted to the National Electric Power Regulatory Authority (Nepra) for their information and comments. However, the company has admitted that as foreign investors, they lack experience and to some extent underestimated the situation, which led to the delay in submission of the feasibility study.

"We are making every effort to expedite the process but some issues were new to CMC as well as the authorities concerned, and are beyond our control and expectation," the company added.

The company has assured the Foreign Secretary that it would not like to enter any argument with regard to the 'reasons for delay', as it would cause unnecessary unpleasantness. However, the company was serious in undertaking the project as it has already invested $10 million and is making every effort to finalise the feasibility study as soon as possible.

On the other hand, PPIB is unwilling to further extend the deadline maintaining that such promises were made by the CMC through its representatives during their visit to Islamabad in the past, promises that were never fulfilled. However, if the company submits a bankable feasibility study for the project, then the PPIB, without any financial or legal obligation on its part, may review the study.

Business Recorder [Pakistan's First Financial Daily]

 

[Owais]

Thar Coal Authority formed


ISLAMABAD (July 09 2008): The federal government on Tuesday formed Thar Coal Authority to attract investment for coal mining and coal gasification at Thar and other areas in the Sindh province for power generation. According to official sources a notification has been issued in this regard by the Cabinet Division under which Prime Minister Syed Yousuf Raza Gilani has approved constitution of Thar Coal Authority.

Sources said Chief Minister Sindh will be the Chairman of the authority while Vice Chairman will be the Federal Minister for Water and Power and Deputy Chairman Planning Commission will be its Deputy Chairman.

Other members of the authority included Secretary Ministry of Water and Power, Chief Secretary Sindh and one minister from Sindh cabinet while Managing Director/Secretary of the authority will be appointed later who will also act as member of the authority.

Sources said after formation of this authority the government has abolished Thar Coal Mining Company and Sindh Coal Authority. They added the head office of the authority will be in Karachi.

Sources said the authority will act as a one-stop organisation on behalf of all ministries, departments, and agencies of the federal government and those of government of Sindh in the matter relating to development, leasing/sub-leasing at Thar, mining, development of clean coal technologies, R&D activities and other allied matters including gasification, priquetting on Thar coal.

The authority will be responsible to attract investment for coal mining and or coal gasification at Thar and other areas in the Sindh province, to be used for power generation and other purposes, by creating a conducive environment through conducting bankable feasibility and other relevant studies, resolving issue of cooling and drinking water, improving infrastructure and law and order and carrying aggressive marketing.

Business Recorder [Pakistan's First Financial Daily]

 

[Owais]

SECP and KSE to set up Rs 50 billion market support fund

KARACHI (July 09 2008): The Securities and Exchange Commission of Pakistan (SECP) and Karachi Stock Exchange (KSE) board meeting held here on Tuesday ended with a note to form a market support fund worth Rs 50 billion with the help of the institutions.

Sources said that SECP will arrange and co-ordinate with the institutions and board of KSE will give a presentation. "If everything goes right then the fund will inject liquidity after the July 15, 2008 meeting of locks revision", they added.

Meanwhile the SECP has decided to convene a meeting of three stock exchanges on Friday, July 11. The meeting would review and assess the impact of various market stabilisation measures of temporary nature decided during a meeting held on June 23 between SECP and Board of Directors and Management of Karachi Stock Exchange.

The SECP, in its press release said that the decisions to be taken during the upcoming meeting would be disseminated to the market participants along with their date of implementation.
Business Recorder [Pakistan's First Financial Daily]

 

[Owais]

ADB seen inking $810m loan to Pakistan

ISLAMABAD (updated on: July 09, 2008, 13:04 PST): The Asian Development Bank (ADB) has negotiated a credit facility of $810 million dollars with Pakistan for power projects, and the inflows are expected to begin in September, an official said on Wednesday.

"The facility to be implemented over the next 10 years has been negotiated with power distribution companies and the formal approval by the bank is expected in August," said an official with knowledge of the transaction.

"The disbursement is likely to start from September or October," said the official, who declined to be identified.

brecorder.com

 

[Neo]

Rupee’s plunge swells external debt by $5.4bn ​

Wednesday, July 09, 2008

ISLAMABAD: Pakistan’s economy has to bear a $5.4 billion increase in external debt as a result of rupee’s depreciation against world’s major currencies. This came due to mismanagement on the part of government’s economic planners as they neither hedged the currency nor took risk management measures, The News has learnt.

Due to this huge rise in liabilities, the country’s external debt during July-March 2007-08 increased to $44.6 billion. Interestingly, this huge increase was not because of increased borrowing from external sources but was due to negligence of the economic policy-makers.

Ironically, the finance ministry’s Debt Office, established for risk management associated with government borrowing, has not adequate experts. The risk management side of the Debt Office is manned by two financial analysts and both reportedly lack expertise in the subject or exposure to financial markets.

The irony is that the economy has to absorb a double blow in the shape of rupee depreciation against the US dollar and the greenback losing value against world’s major currencies like Japanese yen, euro and others which multiplied the burden.

Economic pundits believe that with one rupee appreciation in the US dollar, Pakistan’s external debt increases by Rs45 billion. It is interesting to note that during fiscal year 2007-08, the greenback appreciated against the rupee by more than seven rupees.

Dollar depreciation against major world currencies was also worsening the country’s debt position and piling up the stock of external debt in dollar terms.

Pakistan’s external debt is contracted and thus denominated in multiple currencies but for accounting purposes, it is reported in equivalent US dollars. Thus, shifts in cross exchange rates among various currencies, especially against the dollar, are translated into changes in the dollar value of the outstanding stock of external debt.

Though the government was experiencing a huge current account deficit and each month it was rising by more than a billion dollars and there was strong anticipation of rupee depreciation against major currencies, the government was unaware of its implications on the debt stock or made no efforts to manage it. During July-May 2007-08, the current account deficit stood at an all-time high of $13.38 billion (about 7.8 per cent of the GDP).

It is also interesting to note that the government was also noticing huge twin deficits (current and budget deficit) of the US economy and it was projected that the dollar would shed value against hard currencies like Japanese yen, euro, SDR and others.

On the other hand, economic managers of the government did not assess its impact on the local economy and especially on external payments and debt or had no experience to manage the hit on the economy.

In the inter-bank market, the rupee depreciated against the dollar by Rs7.69 or (12.67 per cent) for buying and selling at Rs68.40 and Rs68.45 as compared to the corresponding period last year when the dollar stood at Rs60.72 (buying) and Rs60.74 (selling).

In the open market, it depreciated by Rs7.65 (12.56 per cent) against the US dollar during the period under review at Rs68.55 and Rs68.70 against Rs60.90 and Rs60.99 in the last fiscal.

During July-March 2007-08, total disbursements amounted to $2.065 billion and repayment of principal was $878 million. The net impact of these two factors increased the stock of public and publicly guaranteed debt by $1.187 billion.

The rest of the net addition of $4.163 billion in the total addition in the external debt stock of $5.4 billion was the result of depreciation of the US dollar against hard currencies like Japanese yen, euro, SDR and others.

Pakistan benefited from the exchange rate fluctuations for many years in the past, particularly when major currencies were depreciating against the dollar. Unfortunately, in FY 2007-08, Pakistan was on the receiving end.

During these nine months, the US dollar depreciated against the Japanese yen, euro and SDR by 18.7 per cent, 14.9 per cent and 8.2 percent, respectively. Thus the exchange rate movements during the period have caused changes in the reported US dollar equivalent amount of $4.2 billion while net new disbursement impact was just $1.2 billion.

The outstanding stock in yen alone witnessed a rise of $2.2 billion because of massive appreciation of yen against the US dollar. The exchange rate variation in the euro cost an additional $915 million to the external debt.

Rupee’s plunge swells external debt by $5.4bn

 

[Neo]

PEPCO capacity to rise to 20,000MW by end-2009 ​

Wednesday, July 09, 2008

LAHORE: Installed capacity of Pakistan Electric Power Company’s system would increase from 17,834 megawatts to 20,085MW by the end of 2009, which along with conservation measures would help overcome power deficit in the country.

The PEPCO, in a press release, claimed that gradual improvement in its generation system had improved power supply in the country. Out of 17,834MW installed capacity, the PEPCO system has dependable power availability of only 15,926MW.

This would increase to 16,327MW this year and would further rise to 20,085MW by December 2009. The capacity would then reach 24,812MW by 2012.

The PEPCO pointed out that demand side measures to conserve 1,500MW would also mitigate the problem of power outages.

It further said PEPCO and IPP generation was impacted during the past few months due to financial constraints. However, “the situation is now improving and would add 100-1,500MW of energy to the system by the end of 2008.”

The PEPCO praised its consumers for bearing the shortages and assured them that they would feel improvement in electricity supplies from now onwards.

PEPCO capacity to rise to 20,000MW by end-2009