Pakistan Economy - News & Updates - Archive

[sohailbutt]

PARB approves 18 agricultural projects worth Rs 359.8 million​

LAHORE (April 15 2009): Punjab Agricultural Research Board (PARB) has given approval of 18 agricultural projects worth Rs 359.8 million to carry out research in wheat, rice, vegetables and cotton crops. The approval was accorded at the 18th meeting of the PARB board of directors held here on Tuesday with the Punjab Agriculture Minister, Malik Ahmad Ali Aulakh.

All these projects will be completed in three to five years. The Board will review progress on these projects every six months and funding would be stopped of any project in case of unsatisfactory progress was observed. The meeting also decided to acquire services of senior researchers and experts of foreign universities.

These projects include five projects for wheat, two for cotton, four for rice, four for fruits, one project for oilseed development and two for vegetables. Out of these seven projects are of University of Agriculture Faisalabad worth Rs 115 million, two projects of Punjab University worth Rs 54 million, one project of CABI International worth Rs 38 million and one project of University of Sargodha worth Rs 28.25 million.

According to the sources, these projects include research to look for remedy for Leaf-Curl virus disease in cotton (CLVC), getting more production with less use of fertilisers in non-irrigated areas, new and better variety of mangoes and research to reduce expenses on transporting fruits and vegetables to markets from farms.

These also include preparing a new variety of wheat suitable for drought hit areas and paddy variety for salinity affected areas. The meting also decided to give five gold medals to the five top five agricultural scientists this year and allocated a sum of Rs 0.5 million in this regard.

The Minister for Agriculture, Malik Ahmad Ali Aulakh emphasised to promote demand driven research to address farmers' problems for meeting food requirements. The meeting was attended among others by the Secretary Agriculture Punjab Arif Nadeem, Chief Executive PARB Dr Mubarak Ali, Vice Chancellor Agriculture University Faisalabad, members of the Punjab assembly and other board members.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Friends of Pakistan meeting: Pakistan to seek $10.8bn debt swap from Paris Club countries​

ISLAMABAD: Pakistan would seek debt swap facility to the tune of $10.8 billion from 19 countries members of Paris Club at the forum of Friends of Democratic Pakistan forum, official sources told Daily Times on Tuesday.

Paris Club member countries include Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Netherlands, Norway, Russia, Spain, Sweden, Switzerland, United Kingdom and United States.

Pakistan would table its request at FODP meeting scheduled at Tokyo on April 17, however, bilateral negotiations would be held with these member countries separately later on, the official sources added.

Possibility to conduct debt swaps: According to the mechanism available with Paris Club member countries for debt swap, on a voluntary and bilateral basis, the government of each creditor country or its appropriate institutions may sell or exchange, in the framework of debt for nature, debt for aid, debt for equity swaps or other local currency debt swaps : (i) all ODA loans ; (ii) the amounts of other outstanding credits, loans and consolidations. All elements necessary to evaluate the operation, its impact on Pakistan’s economy and on the evolution of creditor’s exposure will be transmitted to the Secretariat including.

Paris Club creditors agreed on January 23, 2001 with the Government of the Islamic Republic of Pakistan to a restructuring of its public external debt. Representatives of the creditor countries welcomed the efforts at economic recovery undertaken by Pakistan, and supported by a Stand-By Arrangement approved by the International Monetary Fund on November 29, 2000.

The agreement provides for the rescheduling of roughly $ 10.8 billion consisting of arrears as of November 30, 2000 and of maturities falling due between December 1, 2000 and September 30, 2001.

Paris Club creditors agreed on December 13, 2001 with the Islamic Republic of Pakistan to a restructuring of its public external debt. Representatives of the creditor countries welcomed the efforts for economic recovery undertaken by Pakistan, supported by a three- year arrangement under the Poverty Reduction and Growth Facility with the International Monetary Fund, approved by the Executive Board of the Fund on December 6, 2001.

The agreement provides for a comprehensive restructuring of a stock of debt amounting to $12.5 billion as of November 30, 2001. The restructuring is conducted according to the following terms : commercial credits are to be repaid over 23 years, with 5 years of grace and progressive payments, at the appropriate market rate ; Official Development Assistance credits are to be repaid over 38 years, with 15 years of grace at in interest rate at least as favourable as the concessional rates applying to those loans.

Taking into account the current situation of Pakistan, the Participating Creditor Countries decided to grant the Islamic Republic of Pakistan substantial cash-flow relief during the program period. They decided to defer between November 30, 2001 and June 30, 2002 the maturities of post cut off date debts as well as the interest payments due on the restructured amounts. During the following two years, 20 percent of interest payments will also be deferred.

 

[Neo]

Proposal on 1,000 megawatts power from Central Asia vetoed by Cabinet ​

ISLAMABAD (April 15 2009): The Cabinet has 'vetoed' a long-debated proposal of the Ministry of Water and Power regarding import of 1000 MW electricity from Central Asia -South Asia (CASA) until the project's tariff, economic feasibility and other issues are resolved, sources close to the Ministry's Additional Secretary, Zarar Aslam, told Business Recorder.

The project had been overwhelmingly pushed by World Bank, Asian Development Bank (ADB) and US government. Now, ADB is least interested in the project due to geo-political situation of the region. Last year, the Ministry of Water and Power had inked Memorandum of Understanding (MoU) with the Ministers of CASA countries, but did not get Federal Cabinet's nod before signing the agreement.

The Ministry, sources said, had submitted a summary to the Cabinet for ex post facto approval to the MoU and agreement for import of electricity from the CASA market, which was not cleared by the Cabinet in its meeting on April 8, 2009, they added.

"The Cabinet observed that the decision to import electricity could be taken only after its tariff/import price was estimated, and its economic feasibility conclusively established, in comparison with the existing sources including rental plants," sources said.

Official documents, obtained by this correspondent, show that Pakistan's team, IFI consulting teams and the representatives of the US government had met over July 3l-Aügüst 2, 2008 to discuss the CASA 1000 mw project and reached the following consensus, which is to be considered as a recommendation to the IGC for endorsement.

INSTITUTIONAL STRUCTURE The concession would now also include the Kyrgyz-Tajik link (aka AC facilities). The concession company would develop, construct and operate Tajik-Afghan-Pakistan transmission system (aka the DC facilities) as well as construct Kyrgyz-Tajik link. A decision on whether to also include the operations and maintenance of the AC facilities in the concession is under consideration.

TRADING ARRANGEMENTS In the first IGC meeting over VC, it was considered in principle that Barki Tojik (Tajikistan) could be the consolidator in the initial phase which would require Kyrgyz Genco to sell power to Barki Tojik (at the Tajik-Kyrgyz border) on the Kyrgyz-Tajik link (which is part of the CASA 1000 mw project) and Barki Tojik will then sign a single PPA each with DABM/DABS and CPPA. But this was subject to further discussion.

The documents further said that decision was reached to consider concluding a joint commitment of energy from Kyrgyz Republic and Tajikistan. While they may conclude separate direct PPM with the purchasers, they will make arrangements for close co-operation on energy delivery and storage to meet their joint commitment.

LEGAL FRAMEWORK There will be a single concession agreement. The legal advisors will examine the need for host country agreements, one with each country, to capture the country-specific rights and obligations (eg tax, labour laws) and concessionaire's rights and obligations to that country (environmental, social).

ENERGY FLOWS Until additional exportable capacities are developed, Kyrgyz Republic and Tajikistan should together firmly commit 5 TWh flow on average per year through the line during the operating period of the concession agreement (which will be 25-30 years) to be delivered during the summer months. Roughly speaking, Tajikistan should commit to 3 TWh and Kyrgyz Republic to 2 TWh. Exporting countries will invest to cover the load growth and, in doing so, they can maintain the summer surplus.

Once the line is constructed, the options for additional generation include upgrading existing facilities and constructing new generation projects. This could include thermal projects which would allow for non-summer power to be exported. The long-term objective of all the parties is to stimulate additional low cost generation to expand the CASA regional electricity market and all parties agree to ensure the conditions for early implementation of new generation capacity.

INVESTMENT AND FINANCING The inter-government negotiators had recognised that there had been increases in costs, in part because of demand for electricity equipment and in part because of commodity price increases (eg for steel and aluminium). The final project cost will be determined through the bidding process.

For purposes of determining the threshold to be used during the tendering process, the EPC cost to be used will be $774 million (DC: $574 million, AC: $200 million) as estimated by SNC (June 2008 prices). In addition, other costs are included in the total project cost in the model such as supervision by owner's engineer, interest during construction, environment and social mitigation costs, and other financing costs. ADB has noted that this EPC price does not include contingencies. Both components are to be financed 100 percent under CASA-1000 mw project. Additional financiers will be needed to be brought in to fill any financing gaps.

PROJECT TENDERING TRANSMISSION TARIFFS Average transmission tariff estimates for the TSA will be the ones calculated by IFC/Infra Ventures incorporating the assumptions referred to in the investment and financing. These tariff estimates will be adjusted once the final EPC is determined during the tendering process. IFC/Infra Ventures will recommend options for transmission service pricing between sellers and buyers as a basis for TSA negotiations.

WORKING ARRANGEMENTS The countries agree to authorise their advisors to meet for the purposes of advancing the agreement on the commercial terms of the project without the presence of IGC members and the need for formal meetings. However, each country's advisors will be responsible for seeking necessary approval of all proposed contractual terms.

ROLE OF IFC INFRA VENTURES The governments and the IFIs also recognised that IFC/Infra Ventures is contributing to the development of the project by preparing appropriate terms and documents and a financial model for consideration and negotiation by other project parties.

In elaboration of the agreed principle during the first IGC meeting via videoconference, for the early stage efforts and the risk taken by IFC/InfraVentures, an amount equal to 110 percent of the expenses incurred by IFC/InfraVentures will, if the project reaches financial close with a private investor, be convertible into an equity investment in Concession Co.

Each of the governments and the IFIs had acknowledged that IFC/InfraVentures is acting as a surrogate for a private sector project developer and not as an advisor to any government. The government and IFC/InfraVentures will conclude an agreement elaborating this arrangement at the appropriate time. Sources said that the Cabinet has accorded approval of the MoU, which is not binding, as proposed by the Ministry.

Ex post facto approval of the inter-governmental agreement was, however, deferred till tariff/ import price of electricity from these sources was estimated conclusively, established economic feasibility in comparison with the existing sources, including rental plants.

 

[Neo]

To Tokyo with great expectations ​

Eisuke Suzuki

ARTICLE (April 15 2009): Japan and the World Bank will co-host a Pakistan Donors Conference on April 17, 2009, in Tokyo. It is expected that Pakistan will present its strategy for the challenges it faces today along with its assistance needs. During the Donors Conference it is also expected that countries and international organisations will pledge additional resources to support Pakistan's efforts.

On the same day in Tokyo, the Government of Pakistan will hold the Friends of Democratic Pakistan (FDP) Group's Ministerial Meeting to discuss a mid-term strategy for Pakistan, and each country is expected to announce political support for the country.

For President Asif Ali Zardari, April 17 will be a very busy day as he not only heads the Pakistani delegation to the Pakistan Donors Conference, but he will also chair the FDP's meeting itself. For Pakistan in need of massive infusion of foreign aid at the dire state of national and global financial situations, expectations are understandably very high.

The "Friends of Democratic Pakistan" was organised in September last year at the initiative of President Asif Zardari to garner international support for bolstering Pakistan's security and economic situation.

At present, there are 15 countries and international bodies in the group: Australia, Canada, China, France, Germany, Italy, Japan, Saudi Arabia, Turkey, UAE, UK, USA, EU, EC and the UN. In addition, Sweden, Norway, Spain, The Netherlands and others are likely to join the forum in the near future. But the overall situation surrounding Pakistan has undergone a drastic change, both economically and militarily.

The war in Afghanistan is already in the front yard of Pakistan's leadership. According to Samina Ahmed, the International Crisis Group's long-time Pakistan analyst, the Taliban and other extremists have placed half the country beyond the control of security forces. The government had recently ceded control over the Swat Valley, 100 miles from the nation's capital, to the extremists who installed Sharia law.

The United States' renewed determination to eradicate al Qaeda elements and Taliban extremists in the tribal areas by the persistent bombing by US forces, whether by manned-aircraft or remote controlled unmanned aerial vehicles like Predators, which invariably result in the killing and maiming of civilians, is no doubt creating a rift between the Pakistani authorities and the United States. And, more importantly, it has been only reinforcing hostility to the United States among ordinary Pakistanis.

President Asif Ali Zardari himself warned the United States against violating Pakistan's territorial integrity: "We will not tolerate the violation of our sovereignty and territorial integrity by any power in the name of combating terrorism," he said in his first address to a joint session of parliament on September 20, 2008. But the reality is that attacks by drone aircraft continue today.

The extremism, for the Obama administration, has made Pakistan quite possibly the most important, and dangerous, country in the world. For the American people, President Obama announced on March 27, 2009, this border region has become the most dangerous place in the world. The New York Times Sunday Magazine published James Traub's long article, Can Pakistan Be Governed? on April 5, 2009.

Not surprisingly, it was followed by The Financial Times which ran, on April 7, 2009, an article, For America, the problem is Pakistan, written by Anatol Lieven, a professor in the War Studies Department of King's College, London. Commentaries from outside Pakistan have not been particularly encouraging.

Even Pakistan's foreign minister acknowledged that the bottom line is the question of trust between the two countries, particularly over the issue of American missile attacks in Pakistan's tribal areas.

Minister Shah Mehmood Quresh, with two high ranking American officials, the chairman of the Joint Chiefs of Staff, Adm. Mike Mullen, and the special envoy to the region, Richard C. Holbrooke, at his side, openly stated: We did talk about drones, and let me be very frank: there is a gap between us.

The foreign minister's public criticism of the US was followed by the head of Pakistan's intelligence service, Lieutenant General Ahmed Shuja Pasha's refusal to meet separately with Holbrooke and Admiral Mullen. The deep wounds between the two countries are now breaking up in open. This gap of appreciating the other party's situation between the two countries is quite big.

The war in Afghanistan is casting a wide shadow over the country as the war is being waged both sides of the border with Afghanistan. Without co-operation from not only Pakistan's authorities, but also from Pashtun population, the United States alone cannot carry out the war successfully.

That much is well understood; however, the more the United States asks Pakistan to join its military strategy, the more it creates schisms in a large majority of Pakistani citizens, who are not happy about their government helping the United States attacking the Taliban.

As I mentioned previously in this column (The War in Afghanistan II, October 29, 2008), a new strategy calls for a political settlement. Principal commanders on the ground are more or less in agreement: the solution to the war in Afghanistan is not in the military power, but in more basic improvements in the conditions of life: rehabilitation and construction of infrastructure, provision of better basic services of government, and the establishment of good governance in all public sector administration in addition to more training of Afghan troops and police force. The same applies to Pakistan's strategy against extremism.

To change the attitude and perspectives of ordinary Pakistani citizens in general and those in the tribal areas in particular will require sustained and consistent efforts over a long period of time. To do that will cost an enormous amount of investment. Just consider Marshall McLuhan's notion of social changes as the effect of new technologies (self-amputations of our own being). That would be the effect of such transformation of tribal villages in Pakistan.

The forthcoming April 17 conference will be critical for Pakistan. Pakistan is seeking between $4 to 6 billion in economic aid at the donors conference to fill a financing gap over the next two years. All donor countries, the World Bank and the Asian Development Bank, will closely examine the proposal of the Government of Pakistan for the purpose, amount and use of each item of expenditure.

The Japanese government is reported to have been contemplating economic aid of up to $1 billion over the next two years. The assistance would consist of yen loans and grant aid, and is aimed at helping poverty-stricken areas that could become breeding grounds for extremists, as well as financing infrastructure, education and job training.

They all recognise the potential linkage between poverty and the supply source of Taliban/al Qaeda extremists. In a larger context of the global decision process, these donor conferences provide an opportunity for review and appraisal by the international community of Pakistan's policy and its performance.

Apart from the obvious economic and financial questions, there are two related questions: (a) whether the Charter of Democracy of May 2006 will be implemented; and (b) whether the government is doing credible efforts in strengthening civil society by promoting transparency and accountability.

As discussed previously in this column (The emperor's new clothes and the Charter of Democracy,May 27, 2008), the history of Pakistan's political processes is punctuated by military coups, each of which was rationalised by the Supreme Court: the Dosso case of 1958, the Jilani case of 1970, and the Bhutto case of 1977. Musharraf's coups of 1999 and 2007 are no exception.

The army became the singular underwriter of the civilian government. The civilian leadership sought and cultivated the army's support to enable itself to govern. Ayesha Siddiqa ably analyses the immense economic, financial and corporate interest of Pakistan's army in her book, Military Inc.

Whether Pakistan's civilian leadership will be able to marshal its own resources and determination to govern the nation without the assistance of the army is the fundamental question to the restoration of democracy. The development of civil society is an indispensable component to that end. The only way to counter the rising force of extremism in Pakistan today is through the strengthening of civil society, I was told. Zardari is doing just the opposite.

 

[Neo]

Record remittances ​

EDITORIAL (April 15 2009): The country has been very fortunate this fiscal year to have received the much needed relief in the form of a very handsome increase in home remittances. According to the latest data released by the State Bank of Pakistan (SBP) on 13th April, the overseas workers sent the highest-ever amount of dollars 739.43 million as remittances in March, 2009, surpassing the previous record of dollars 673.50 million received in December, 2008.

The remittances during the month were also higher by 22.79 percent or dollars 137.22 million than dollars 602.21 million received in February, 2009. Overall inflow during the first nine months (July-March, 2009) amounted to dollars 5,658 million as against dollars 4,728 million during the same period last year, showing an increase of dollars 930 million or 19.66 percent.

This amount includes only dollars 0.45 million received through encashment and profit earned on Foreign Exchange Bearer Certificates (FEBCs) and Foreign Currency Bearer Certificates (FCBCs). The highest amount of remittances was received from USA (dollars 1.29 billion), followed by UAE (dollars 1.21 billion) and Saudi Arabia (dollars 1.11 billion).

It may be mentioned, however, that amount received from USA during July-March 2009 was marginally lower than dollars 1.31 billion received in the comparable period last year. An increase of over dollars 103 million per month in home remittances is very welcome indeed, particularly at a time when other elements of current account balance of the country including the merchandise trade account were showing disturbing trends.

Obviously, if such a huge amount of foreign exchange had not been received, the country would have been forced to borrow more from other sources to keep itself solvent or constrained to restrict imports by a huge margin which would have negatively impacted the flow of essential imports.

A great advantage of home remittances is that these are unrequited transfers and do not add to the foreign debt burden of the country. No need to add that if the present trend continues, the target of dollars 7.5 billion fixed for home remittances during 2008-09 would easily be surpassed. However, a sharp increase in remittances during the year would appear to be somewhat surprising to many analysts.

Though narrowing of difference between the exchange rate offered by banks and informal channels and closer scrutiny of the money changers by the government might have induced the expatriates to send a higher level of their remittances through banking sources, the increasing political uncertainty, militancy and lawlessness within the country could have been huge negative factors impacting the flow of remittances.

Anyhow, Pakistan was lucky that overseas workers did not pay much attention to these negative developments and continued to have faith in the destiny of the country. The maintenance of such an attitude on longer term basis would of course depend on positive vibes from the country and certainly would be a great challenge for the political and economic leadership of Pakistan.

Of course, expatriates of Pakistani origin are patriots but we should not continue to mess-up the domestic scenario and test their resolve to the extreme limits. The policy makers need to understand that it is very easy for the workers based in foreign countries to maintain their bank accounts abroad in a risk-free environment.

 

[Neo]

Pakistan may get $6bn in donor pledges: World Bank​

WASHINGTON: The World Bank said on Monday Pakistan is expected to get pledges of aid from four to six billion dollars at a donors’ conference in Tokyo this week.

“We are still making efforts, we think this is possible,” Isabel Guerrero, the bank’s vice president for South Asia, told reporters when asked whether such an aid projection could be met at the talks on Friday.

Guerrero said 27 countries and 16 organisations would attend the conference. She said a “Friends of Pakistan” meeting on political and security issues would be held before the donors’ conference, which could also include pledges.

Hajime Hayashi, a senior Japanese embassy official, said the Pakistan government was under “heavy pressure” and “it is naturally very important for the international community to provide fresh pledges to provide financial assistance”. afp

 

[Hasnain2009]

During 2008-2011: external debt to reach 32.5 percent of GDP: IMF

ASMA RAZAQ/ZAFAR BHUTTA
ISLAMABAD (April 15 2009): The International Monetary Fund (IMF) has projected the external debt stock of Pakistan to rise, temporarily, to around 32.5 percent of gross domestic product (GDP) during 2008-2011 due to significant increase in external financing from official creditors, including the Fund itself, to help Pakistan with recent balance of payments pressure.

It has been stated by IMF in a report titled 'Pakistan: 2009 Article 1V consultation and First Review under the stand by agreement-Staff Report', released on Tuesday. Combined shocks to growth, current account, and depreciation could vault the end-period debt stock to around 45 percent of GDP, significantly higher than under the baseline scenario.

According to IMF, the debt ratio of Pakistan is projected to rise, temporarily, due to significant increase in external financing from official creditors (including the Fund) to help Pakistan with the recent balance of payments pressure. The debt stock would be around 32.5 percent of GDP during 2008-2011, and then gradually decline to 27.5 percent of GDP by 2013-14.

Pakistan's external debt burden has been relatively moderate in recent years as a result of successive debt relief undertaken in the late 1990s and early 2000s. At the end of financial year 2007-08, external debt stock stood at around 26.5 percent of GDP and debt service was about 15 percent of exports of goods and services. Most of its debt was public sector debt owed largely to official creditors, and there were limited private sector debt.

The debt service burden would increase, but remain manageable, during the projection period. Debt service as a ratio of exports of goods and receipts are projected to increase to 20 percent under the baseline scenario. This increase is sizeable but debt service burden will decline markedly following repurchase of outstanding Fund credits.

The relatively benign debt outlook under the baseline scenario is subject to serious downside risks. They include risks from higher non-interest current account deficit, lower growth, higher depreciation, higher interest rates, as well as lower FDI flows. The standard bound tests show that debt ratios are sensitive to shocks to higher current account deficits, large depreciation of exchange rate, and lower FDI inflows given the large financing needs.

The Fund said, for example, if non-interest current account deficits are higher by half of the ten-year standard deviation, the debt as a ratio to GDP would rise sharply and be over 10 percentage points higher than under the baseline scenario.

Pakistan's public sector debt burden declined through 2006/07, but has been rising since then, reflecting the expansionary fiscal stance. At the end of fiscal year 2007-08, the public sector debt stock stood at 57.4 percent of GDP, with domestic public debt 31.2 percent of GDP slightly exceeding external public debt 26.2 percent of GDP.

Interest payments 4.7 percent of GDP are a significant burden for the budget, accounting for 32.6 percent of total revenue excluding grants and 26.3 percent of current expenditures. Interest payments on domestic debt accounted for only 12 percent of total interest expenditure, partially reflecting that official creditors account for the bulk of total external debt.

The public debt ratio is projected to decline gradually, reflecting fiscal consolidation and lower interest rates in line with macroeconomic stabilisation. The stock of external public debt will increase temporarily in 2008-09 owing to external financing from official creditors, including the Fund, to address Pakistan's recent balance of payments pressure.

The total stock of public debt is projected to decline gradually to 47.5 percent of GDP by 2013-14. The burden of interest payments on the budget would be halved. The ratio of interest payments to total revenue excluding grants would decline from 31 percent in 2008-09 to 14 percent in 2013-14, despite an increase in interest expenditure on external public debt by about 65 percent in dollar terms.

The standard bound tests show that risks from shocks resulting from higher interest rates or lower growth are moderate, as they would slow down rather than reverse the medium-term decline in the public debt ratio. However, a primary balance shock as well as 30 percent devaluation and a contingent liabilities shock would lead to a perceptible increase in the public debt ratio.

Copyright Business Recorder, 2009

 

[Hasnain2009]

Thats why i say Musharraf is da best!!

 

[Neo]

KESC to add 400MW by December ​

Thursday, April 16, 2009

ISLAMABAD: The federal government has managed to strike an implementation agreement (IA) with the new management of Karachi Electric Supply Company (KESC) under which it would inject $361 million investment into the power sector and in the first phase it will add 400 megawatts to the Karachi electricity system by December this year.

Minister for Water and Power Raja Pervez Ashraf said this here on Wednesday during a press briefing. In case the new management violates the implementation agreement, he said, the government will act accordingly.

According to an official, the prime minister has already constituted a three-member committee, which has been given the mandate to monitor the execution of the implementation agreement. About massive financial irregularities in the Private Power Infrastructure Board (PPIB), the minister said when he took charge as minister of water and power, he placed order for conducting a special audit. “Now audit report has been finalised and whosoever found guilty will be sternly dealt with as per law.”

To a question, the minister said there still exists a financing shortfall of Rs185 billion between electricity generation and its supply. Although the government gives Rs65 billion subsidy, but it still bears loss of Rs100 billion meaning the PEPCO absorbs Rs10 billion loss per month. Justifying the recent hike in power tariff, the minister said the government does not want to raise it, but the matter of the fact is that the government annually absorbs the loss of Rs185 billion as power generation cost is very high.

He said in the whole world, subsides are being reduced, but “we are still extending to the masses.”

He said the electricity is still being stolen at a large scale owing to which the system is facing tremendous duress. To tackle this issue, a task force has been constituted which will have the mandate to disconcert the connection even of any influential. The minister also unveiled that the government will soon announce a mid-term renewable energy policy focusing on alternative and indigenous resources to produce electricity on affordable prices.

Under the policy the comprehensive short and long term plans will be made to make sure all the renewable energy resources available to overcome power crises. The minister announced that Prime Minister Yousuf Raza Gilani will inaugurate the country’s first wind farm in Jhimpir on April 9. He explained that the farm, established by leading Turkish company, will meet the demand for electricity of 7,400 homes. He said the National Electric Power Regulatory Authority (NEPRA) has awarded tariff of US cents 12.1057 per KWH, which is cheaper than the electricity generated from thermal sources. However, the tariff will be further reduced to 4.5 US cents on per KWH after 10 years. Under the project five turbines have been installed in the first phase, with capacity to generate 6MW electricity, enough to cater to the power needs of 7,400 homes.

He indicated this project would be expended in years to come in order to have the capacity to generate 50MW. He said the ministry has received tariff determination from the NEPRA however the government still didn’t increase the electricity tariff.

Justifying the decision of advancing the clocks, the minister claimed that around 250MW to 300MW are being saved per day as per the research he himself carried out. Pakistan this time will have enough water in Terbela and Mangla not only to cater to Kharif season needs.

The minister reiterated his claim that by December 2009 the government will include additional 3,500MW electricity in the system that will erase the load-shedding after December 2009.

He mentioned that the country possessed huge wind energy potential of 346,000MW, out of which 50,000MW in Gharo, Keti Bandar wind corridor, renders excellent opportunities for private sector developers to execute their project. With a view to supporting development of wind energy sector in the country, indigenous fabrication of wind towers has also kicked off.

 

[Neo]

Foreign investment down 36pc ​

Thursday, April 16, 2009

KARACHI: Net foreign investment in Pakistan fell 35.9 per cent to $2.08 billion in the first nine months of the 2008/09 fiscal year compared with $3.25 billion in the same period last year, the central bank said on Wednesday.

Foreign private investment fell 19.5 per cent to $2.62 billion in the July to March period, compared with $3.26 billion the previous year, the State Bank of Pakistan said.

Out of total foreign investment, foreign direct investment was down 8 per cent to $3.04 billion, compared with $3.31 billion in the year-earlier period.

There was an outflow of $957.5 million from July to March this year compared with an outflow of $53.1 million in the same period last year.

There have been outflows from the stock market because of political uncertainty, and economic and security worries.

Foreign investors also lost confidence and sold shares when stock market authorities placed a floor under the main index in August following sharp falls. The floor was removed in December.

 

[Neo]

PM happy with 98pc recovery rate ​

Thursday, April 16, 2009

ISLAMABAD: Prime Minister Syed Yusuf Raza Gilani has said that microfinance is an important pillar and integral part of Pakistan’s poverty reduction strategy and the government is making all out efforts to expand its coverage through microfinance banking, microfinance institutions and rural support programme.

Gilani expressed these views while chairing a high-level meeting on microfinance network at the Prime Minister House on Wednesday. “Micro-credit is the best way of reaching out to the marginalised and the forgotten and can change the destinies of the ‘have nots’ of the country,” Gilani said.

The Prime Minister said government is making multiple interventions to cause reduction in poverty. As part of our lasting and sustainable poverty reduction strategy, Gilani said, “we are focusing on creating income generating avenues for the poor and disenfranchised and specially the women through micro-credit institutions.”

Gilani said government has adopted a holistic and all-inclusive strategy for the spread of micro-credit. The government, he added, is promoting public-private partnership and encouraging civil society organisations and enterprising philanthropists to come forward and involve themselves in organising microfinance credits to the less privileged sections of society. He said there is a growing trust between the policy makers and practitioners to work jointly to develop the sector. He expressed satisfaction over the 98 per cent recovery rate, 50 per cent rural-urban share as well as observance of gender equality during disbursement of loans.

 

[Neo]

No signs of tapering off: LSM declined by more than 5 percent in first eight months​

KARACHI: The most important indicator for the economy—Large Scale Manufacturing—has witnessed the a decline of 5.73 percent in the first eight months of current financial year, reflecting the eroding capability of industrial sector to withstand the global financial crunch along with the domestic impediments in the form of power outages and law and order situation.

With these dismal figures, further layoffs are expected in the industrial sector. Major downsizing has already taken place in the textile, auto, electronics and other key sectors. The weakness of industrial sector was not confined to one sector only as almost all the components of the large scale manufacturing performed poorly during the current fiscal and it was also evident from the month of February when it saw a massive plunge of 7.91 percent over the same month of previous year.

The worst show of industrial sector has cast a negative impact on the overall country’s economic scenario as it is the largest contributor in the revenue and employment generation. Food, textiles and apparel, and leather industries to the extent of heavily dominate Pakistan’s manufacturing industry over 50 percent. Other major segments in manufacturing include chemicals and pharmaceuticals (15.2 percent), basic metal industry (7.7 percent), nonmetallic mineral products (5.1 percent), machinery (4.6 percent), cement (4.4 percent) and automobiles (4.4 percent).

Though, global financial crisis has impacted the industrial activities in the country in the shape of dampened demand for the exports particularly textile and clothing from Pakistan. However, economists pointed out that it the domestic problems—infrastructure, power, law & order situation, high financing—which have devastated the local industry. The month of April, an analyst pointed out, is important as it would determine how the things shape up for the future of industry. Any revision in the policy discount rate by the central bank would be made in April as well as whether the government would take corrective measures to ensure the power outage because of the start of summer in next month.

Petroleum sector was the worst performer and its overall production fell 8.40 percent in first eight months of current fiscal. Jet fuel declined 8.62 percent, kerosene oil 12.38 percent, high-speed diesel 4.00 percent, furnace oil 9.14 percent, LPG 20.28 percent. In food sector, production of vegetable ghee declined by 10.86 percent, cooking oil 4.89 percent, wheat and grain milling 6.94 percent, beverages 4.06 percent. The production of tea blended and starch and its production rose 1.32 and 6.73 percent, respectively.

Production of refrigerators dropped 12.94 percent, deep-freezers 17.08 percent, air-conditioners 29.91 percent, electric bulbs 25.30 percent, electric tubes 23.85 percent, fans 6.63 percent, motors 19.29 percent, electric meters 5.66 percent, switchgears 23.36 percent, transformers 14.68 percent, TV sets 38.00 percent and bicycles 30.26 percent. Production of cotton yarn and cotton cloth declined 0.38 and 0.65 percent, respectively.

In the auto sector, the production of trucks decreased 34.39 percent, buses 50.80 percent, jeeps & cars 47.58 percent and motorcycles 18.98 percent.

 

[Neo]

Govt finalises 9-year investment plan for infrastructure development​

ISLAMABAD: Government has finalised a $3.11 billion 9-year investment plan for reduction in cost of doing business and to enhance competitiveness of the economy of the country, official sources told Daily Times on Wednesday.

To ensure required financing for the projects included in this plan the government has decided to it to place before the Friends of Democratic Pakistan as well donors at Tokyo meeting scheduled on April 17.

The investment plan seeks to upgrade Pakistan’s highways to neighboring countries with an estimated investment of $975 million, Railways net work expansion to neighboring countries with an estimated investment of $1.780 billion and up-gradation of ports and shipping as well as Pakistan National Shipping Corporation with an investment of $355 million, the official added.

The details of the plan available with Daily Times are

Roads: The plans seek to invest $125 million in two years on Lawari Rail Tunnel. To link Gawadar with China and Afghanistan, the investment required is estimated at $594 million for the next five years. Similarly, up gradation of Kara Kurrum Highway from Mansehra to Sazin some 258 kilometers has been estimated with an investment of $256 million in next 7 years.

Road sector plans seeks an investment of $212 million in first year, $148 million in second year, $143 million in third year, $225 million in fourth year, $216 million in fifth, $16 million in sixth and $15 million in seventh year.

Railways: This plan seeks up gradation of Quetta-Koh-I-Taftan section to link rail net worth with Iran with an estimated cost of 438 million in next four years. A new rail link for connecting Gawadar Port with Mastung and Quetta in 9 years time frame has been finalized with an estimated cost of $1.342 billion.

Ports and Shipping: This plan seeks to support for private sector to make investment in shipping sector with $100 million, developing capacity for capital and maintenance dredging (upgrading port handling capacity) with estimated cost of $50 million and $50 million for Pakistan National Shipping Corporation. This plan also seeks to invest $155 million in mineral development.

Reducing the cost of doing business: Improvement and modernisation of the transport system is important to Pakistan’s economy and its competitiveness. Through infrastructure improvements, including transport, the country aims to greatly reduce the cost of doing business. Transport contributes about 10 percent of GDP. Road transport accounts for 90 percent of national passenger traffic and 95 percent of freight traffic.

Pakistan has about 5.0 million vehicles on the roads, growing at about 8 percent annually. This includes about 250,000 commercial vehicles. The road transport industry is deregulated and predominantly in the private sector. Pakistan’s road traffic has grown at an average annual rate of 14.1percent during the twenty-year period between 1985 and 2005 (from 70,000 vehicle trips/day in 1985 to 277,000 vehicle trips/day in 2005). Pakistan’s inland freight and passenger traffic has grown at an average annual rate of 10.6 percent and 4.4 percent respectively during the ten-year period between 1991 and 2001. However, Pakistan Railways’ freight traffic has declined (by 48 percent from 11.8 million tons in 1985 to 6.1 million tons in 2005) and passenger traffic stagnated during this period. The country’s truck fleet mostly comprises obsolete, underpowered, and high emission vehicles. Often trucks are overloaded. Their speeds are consequently slow, ranging between 20 to 25 kph compared to 80-90 kph in Europe, and journeys take three times longer than in Europe.

Pakistan has a total road network of 260,000 km of which about 60 percent is paved. The road density is 0.32 Km/Sq. Km. This network has grown at about 4.2 percent annually over the past decade. The National Highway Authority (NHA) under the Ministry of Communications (MOC) is responsible for approximately 11,500 km National Highway and Motorway system (4 percent of the total) which carries 75 to 80 percent of Pakistan’s total commercial inter-city traffic.

The National Highway Authority (NHA) needs to spend about Rs.5.0 billion annually to simply conserve the network in its present condition. Over the past decade, NHA’s maintenance spending averaged less than 6 percent of total expenditures and covered less than 25 percent of stable network needs. NHA has depended almost exclusively on transfers from the government’s recurrent budget to finance its road maintenance expenditures. This has not worked, since these transfers have been inadequate.

Two major ports, Port Karachi and Port Qasim, handle 95 percent of all international trade, and 14 dry ports cater to high value external trade. A few oil pipelines – about 2,100 km in length – have a yearly pumping capacity of 6.0 million tons. Container dwell times – 11 days on average – are four times those in developed countries, and three times the average in East Asia. Of this, customs clearance alone takes 4-5 days as compared to 1.25 hours in Singapore. Port entry costs are 5-9 times more than some others in the region – vessel call charges in Pakistan are $30,000, in Jebel Ali they are $6,700, and in Salalah, Oman, they are $3,900. In addition, the ports’ limited draught – at 9-12 meters – keeps the latest and most efficient ships from calling. Redundant dock labor costs trade $15-20/TEU.

Desired end-state: The desired end-state calls for rapidly reducing transport times and improving the sector’s quality and efficiency. This applies to rail, road and the ports.

In the rail sub sector, government’s priority is to improve the quality of freight services, rapidly improving delivery times, reliability and tracking information. Presently, PR takes 21-28 days to deliver upcountry at a distance of 1800 km, which is 4 to 7 times slower than in China and the US. Freight rates in Pakistan, at 1-2 cents/ton-km, offer no real advantage over road transport which costs the same. In contrast, China rail is 2-3 times cheaper than road. As a result, the railways have a very low and stagnant market share, carrying less than 5 percent of freight and 10 percent of passenger traffic.

 

[Neo]

Microfinance integral to poverty reduction strategy: Gilani​

ISLAMABAD: Prime Minister Syed Yousaf Raza Gilani has said that microfinance is an important pillar and integral part of Pakistan’s poverty reduction strategy and the government is making all out efforts to expand its coverage through microfinance banking, microfinance institutions and rural support programme.

The Prime Minister expressed these views while chairing a high level meeting on Microfinance Network at the Prime Minister House here this afternoon.

“Micro-credit is the best way of reaching out to the marginalized and the forgotten and can change the destinies of the have nots of the country,” the Prime Minister said.

The Prime Minister said the government is making multiple interventions to cause a dent in poverty. As part of our lasting and sustainable poverty reduction strategy, the Prime Minister said, “we are focusing on creating income generating avenues for the poor and disenfranchised and specially the women through micro-credit institutions.”

The Prime Minister said the government has adopted a holistic and all-inclusive strategy for the spread of micro-credit. The government, he said, is promoting public-private partnership and encouraging civil society organisations and enterprising philanthropists to come forward and involve themselves in organising microfinance credits to the less privileged sections of society.

The Prime Minister underscored the need that microfinance network should expand its operation to help the less privileged sections of society thus improving their standard of living. He said in Pakistan microfinance is poised for growth, as the regulatory environment for micro finance institutions (MFIs) in the country presents all the major features of a conducive and enabling policy environment for MFIs. staff report

 

[Neo]

FoDP pledge $5.28 bn to help stabilise Pakistan: FM ​

Friday, April 17, 2009

KARACHI: Foreign Minister Makhdoom Shah Mehmood Qureshi said on Friday that Friends of Pakistan (FoDP) have pledged up to 5.28 bn dollars to help stabilise Pakistan in Tokyo ministerial meeting.

Talking to Geo news, the foreign minister thanked all donor countries who extended their support to Pakistan to meet country’s economic challenges and effectively address the issue of terrorism. Qureshi also thanked the government of Japan in organising the donors’ conference.

He said Iranian foreign minister announced to launch Iran-Pakistan gas pipeline project and promised 330 million dollars which would help Pakistan meet its energy requirements. Qureshi said the donors pledged unconditional economic support for Pakistan.

To a question, the foreign minister said that Pakistan would get the pledged amount within two years. He said the date of new FoDP would be announced after consultations with the Turkish foreign minister.

Qureshi said that Pakistan played a vitally important role in efforts of the international community to counter terrorism and extremism.