Pakistan Economy - News & Updates - Archive

[Neo]

'CBR plans to improve tax-to-GDP ratio'

KARACHI: June 13, 2007: The Central Board of Revenue (CBR) is planning to improve the tax-to-GDP ratio Commissioner of Income Tax, Medium Taxpayers Unit (MTU), Asrar Rauf said.

He was expressing his views at a post budget seminar organised by Karachi Branch Council (KBC) of Institute of Cost and Management Accountants of Pakistan (ICMAP) at a hotel here, said a statement on Wednesday.

Chairman KBC, Intisar Usmani, in his welcome address said: 'This is the budget for the poor, for the industrialists, for the investors, for the farmers and last but not the least for the prosperity of our dear homeland'.

Rauf in his address pointed out that the Board is planning to improve tax-to-GDP ratio.

"For the first time we are approaching the taxpayers to create awareness and tax culture at shopping malls," he added.

But revenue collectors strongly feel that with the tax reforms in CBR and its policy base of voluntary compliance there also needs to be a change in taxpayers' mindset.

The MTU will ultimately be merged with Regional Tax Office, which will start functioning from July 1, 2007.

"All domestic taxes like income tax, sales tax and federal excise duty of the non-corporate sector will be brought under one roof," Rauf added.

Former president ICAP, S.M. Shabbar Zaidi, said that our future strategy for economic growth should focus on employment generation, import substitution, human development and devolution of financial resources.

"Now we have reached the stage where companies are being seen as having paid the taxes, real distributional equality will arise when individuals start paying taxes on their income," he said.

He said the tax revenues have been collected without chaos, harassment, and sensationalism.

On the occasion he also discussed the policy framework in the budget for income tax.

Earlier, Member National Council of ICMAP, Mirza Munawar Hussain, apprised the audience of the impact on sales tax.

Vice President Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Zubair F. Tufail, Partner KPMG Taseer Hadi and Co. Chartered Accountants, Saqib Massod, spoke on Direct Taxes.

At the end of deliberations, Convenor Seminar Committee, KBC M. Junaid Aba Ali, presented vote of thanks on behalf of the Karachi Branch Council of ICMAP.

Brecorder

 

[Neo]

Rs 163 billion earmarked to pay off DSS cost

ISLAMABAD (June 14 2007): The government has allocated Rs 163 billion pay off, what the Finance Ministry says, a high cost of Defence Saving Schemes (DSS) issued by previous governments at 18 percent compound tax-free return, official sources told Business Recorder here on Wednesday.

"In the current fiscal year and up till 2009-10 there will be a large increase in domestic debt-servicing. The reason is that from 1996-97 to 1999-2000, the then governments, due to their imprudent fiscal policies, resorted to borrowing through high cost DSS instruments, which are of ten years with a bullet payment," sources said.

"This year, the additional impact on debt servicing was Rs 80 billion, and next year Rs 163 billion will be required just for this particular instrument," they added.

For 2006-07, total current year's expenditure was estimated at Rs 879.8 billion, the main components of which were debt servicing, defence, civil government, grants and subsidies. Revised estimates for 2006-07 were Rs 1033.5 billion, mainly due to domestic debt servicing, subsidies and grants.

For 2007-08, interest on domestic debt is estimated at Rs 318.2 billion, while budget estimates regarding interest on foreign loans have been projected at Rs 56.4 billion against the current budgetary allocation of Rs 48.7 billion.

Repayments of foreign loans have been projected at Rs 62.9 billion for 2007-08 against current year's budget allocation of Rs 56.3 billion. The expenditure on running of civil government for 2006-07, excluding pensions, was budgeted at Rs 127 billion. The revised estimates amount to Rs 111.1 billion.

For the next year, expenditure on this account is estimated at Rs 128.2 billion. Civil and military pensions for 2006-07 were estimated at Rs 43.9 billion, of which Rs 8 billion were for civilian pensioners. For 2007-08, an amount of Rs 46.1 billion is likely to be spent on this account.

http://www.brecorder.com/index.php?id=576990&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

US House panel approves package for Pakistan

WASHINGTON (June 14 2007): A US House of Representatives Committee has approved a bill to finance foreign aid for next year that also includes a dollars 752 million package for Pakistan. The foreign aid bill for fiscal 2008, beginning October 1, will now advance to approval stage by the two chambers of US Congress.

It will now go to the full House for passage and the Senate will pass its own version and the two are to be eventually reconciled. The approved package for Pakistan totalling $752.1 million includes assistance in economic and military fields. The bill approved by the House Appropriations Committee also includes assistance for other countries.

Pakistan is a major ally in the US-led fight against terrorism, having played a key role in combating terrorists along Pakistan-Afghanistan border. The two countries agreed on a five-year assistance package in the year 2003 during President Pervez Musharraf's visit to the United States when President George Bush pledged wide-ranging relations with the key South Asian ally. The United States also announced recently to extend cooperation for economic development in Pakistan's federally administered tribal areas.

http://www.brecorder.com/index.php?id=577012&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Poverty level drops, GDP up: Punjab chief minister

LAHORE (June 14 2007): Poverty level has declined while GDP growth rate has gone up in the Punjab. Punjab Chief Minister Chaudhry Pervaiz Elahi said this in his pre-budget policy address here on Wednesday.

Speaking about GDP growth in the province Pervaiz Elahi said that the figure stood at 4.2 percent in 1991 but has now been lifted up to more that 8 percent in the period 2003-2007, a performance unmatched in the history of the province.

The CM said following the federal government steps they would also increase pay by 15 percent and pensions by 15-20 percent. He said Annual Development Fund had been enhanced to Rs 150 billion in the forthcoming provincial budget.

Giving details of per capita income in the province the CM said that it was at Rs 30,281 in 2002 and reached Rs 59,219 in 2007. The CM said that literacy rate in Punjab that was at 42 percent in 2002 has now gone up to 62 percent.

The CM said that prior to his government's take over, Punjab's social indicators were extremely poor. 'The literacy rate was below the national average; the public education sector was marred by poor access. The enrolment rate was low the dropout rate high the student-teacher ratio was poor; school buildings were inadequate; female literacy was lagging; teacher absenteeism was rampant and student participation rates had actually dropped', he said.

The CM said besides improvement of literacy rate to 62 percent in 2007, the net enrolment rate at primary level now stands at 70 percent in Punjab. Talking about gender parity index (GPI) for tertiary education, he said was at 0.78 in 2002. In 2007 the GPI for tertiary education was 0.93.

Speaking about improvement in health care system, he said in 2002 infant mortality rate was 82 per 1000 which was reduced to 72 in 2007, he added. Talking about immunisation, he said as compared to 57 percent of children in age group 12-23 percent fully immunised in 2002, the figure rose to 76 percent in 2007. Talking about maternal mortality rate that stood at 350 per 100,000 births in 2002 it was down to 257 in 2007.

Speaking further about development he said as compared to 6 percent access to piped water in 2002 now in 2007, 19 percent of the rural population had access to piped water. He said in 2002, 31 percent of the rural population had access to flush toilet while in 2007 this figure went up to 50 percent ,he added.

Speaking with reference to poverty alleviation in agriculture zones, he said 12.5 acres were exempted from Agriculture Income Tax. He said provincial government consistently increased the minimum guaranteed price of major crops to generate higher income for the farmers.

He said that with reduced mark up on agricultural loans by 5 percentage points, the provincial government progressively increased agricultural sector loaning through the Bank of Punjab from Rs 159 million in 2001-02 to Rs 7 billion in 2006-07.

He said with over 100,000 land-less people were provided access to land and Rs 6.1 billion disbursed as soft term loans to live stock farmers and introduction of crop insurance. The Punjab government progressively increased agricultural sector loaning through Punjab Provincial Cooperative Bank from Rs 4.8 billion in FY 2001-02 to Rs 8 billion in FY 2006-07.

The CM said that the scheme for subsidised credit for Small and Medium Industrial Enterprises and Cottage Industry in 2005-06 and credit outlay of over Rs 1 billion was achieved in 2006-07. The momentum would continue in 2007-08, he pointed.

The CM said that focus on direct interventions to reduce poverty through micro-credit through Punjab Rural Support Programme amounting to Rs 3.4 billion generating self employment and disbursement of over Rs 17 billion through Zakat funds as direct income support to the poorest of the poor and to facilitate their permanent rehabilitation was the endeavour of provincial government to be remembered.

Speaking about their development efforts in South of Punjab, the CM said while concentrating on poverty alleviation, generally they had not lost focus of those areas that required special attention such as the districts in the South of Punjab and some of the barani areas of Potohar region.

Talking further about interventions of his government in the social sectors over the last four years, he said in 2002-03, the total amount allocated in, Education, Health and Water Supply & Sanitation was Rs 43.6 billion. While these allocations were increased progressively to Rs 57.3 billion in 2003-04, Rs 77.5 billion in 2004-05, Rs 107 billion in 2005-06 and Rs 132.4 billion in 2006-07. He said that in 2007-08, the total investment planned in these sectors was Rs 165.1 billion.

Pervez Elahi talking specifically about education uplift endeavours of his government said his government provided education up to matriculation for all students in government schools. This includes free textbooks up to class 10 in all government schools benefiting over 28 million students, at a cost of Rs 2 billion, till date.

He said Punjab government provided stipends to girl students in 15 low literacy districts benefiting over 1.1 million girl students, at a cost of Rs 1.64 billion, till date including giving of 118,276 Missing facilities to 63,882 government schools in the province, at a cost of Rs 19.5 billion.

Pervaiz Elahi said that besides recruiting over 50,000 new schoolteachers the present government created department of special children. The CM said that in education sub-sector his government was able to check the dropout rate and increase the stagnating enrolment in elementary education by achieving 25 percent increase in enrolment and providing access to 2,209,912.

Adding to the performance of provincial government in health sector, he said that they initiated to provide free emergency treatment to all citizens in tertiary hospitals, fully activated the dormant primary healthcare services in BHU's/ RHC's in the province through provision of doctors, nurses, paramedics (at rationalised salaries) and medicines.

The CM said besides cardiac centres being built in Multan and Faisalabad including coming up of new burn centres in the provinces special emphasis had been given to nurses' training. He said introduction of 1122 service would ultimately be extended to whole of the province.

Talking about the Northern Arc of Lahore Ring Road from Niazi Chowk to Ferozepur road covering 43kms he said it commenced in November 2004 and shall finish in 2007-08.

He averred that Southern Arc of Lahore Ring Road from Ferozepur road to Shahpur Interchange covering over 18kms. shall commence in 2007-08. Speaking about Sialkot Lahore Motorway (SLM), he said that ground breaking ceremony of Sialkot Lahore Motorway took place in 2007 and by this travel time between Sialkot and Lahore shall be reduced to 45 minutes and it would be connected to the Lahore Ring Road, he added.

He said SLM should serve as a new economic corridor having three industrial zones and three foreign universities of science and technology. Talking about Lahore Rapid Mass Transit System (LRMTS) he said that groundbreaking ceremony of LRMTS is scheduled in FY 07-08 and completion of the first phase expected by 2012.

Stating about preparation and execution of irrigation sector reforms, the CM said 37,000 kms of irrigation channels with cultivable command area of 21 million acres were being rehabilitated with an investment of Rs 120 billion in 10 years.

The CM said that hydraulic infrastructure was being rehabilitated and modernised in phases and re-modelling and modernisation of Taunsa Barrage was almost complete. Hydel power stations in Punjab were being developed, he said.

Giving performance highlights in the economic sectors, the CM said that agriculture strategic interventions in extension, research, marketing and water management had been made. He said 6.27% growth rate in agriculture was estimated in 06-07. The CM declared that record wheat production of 17.85 million tonnes including record sugarcane production of 37.542 million tonnes were achieved in 06-07.High level of maize production of 2.044 million tonnes achieved in 06-07, he said.

The CM said that cotton production of 10.35 million bales was achieved in 06-07 including rice production of 3.076 million tonnes achieved in 06-07. About livestock, the CM said that development budget of livestock sector increased from Rs 57 million in 01-02 to 1,137 million in 06-07. With huge increase witnessed in targets for breed improvement and animal health special emphasis on veterinary education and training and up-gradation of infrastructure.

Rs 6.1 billion was disbursed as soft loans to livestock farmers. About establishing industrial estates, the CM said that Sunder Industrial Estate, Lahore, M3 Industrial City and Value Addition City, Faisalabad, Multan Industrial Estate, Rehabilitation of Kot Lakhpat Industrial Estate were the key achievements of the present government.

The CM said that through TEVTA training capacity was targeted to double in two-years. The CM said with a number of construction ventures coming up in Lahore, construction of state of the art 17-storey Software Technology Park Lahore; computerised vehicle registration system in 35 districts and computerisation of land records was taking place.

He said in order to boost housing sector provision of tax and non-tax incentives to realise the potential of this sector including reduction in stamp duty, 5% to 2%; Promulgation of Punjab Site Development (Regulation) Rules 2005 to facilitate bona fide private housing societies and to eliminate the fraudulent ones had been made.

He said that establishment of Punjab Government Servants Housing Foundation, establishment of Punjab Journalists Housing Foundation, tourism and resort development were the key ventures of provincial government.

He said the provincial government was establishing new jails including better facilities for prisoners, especially children and women prisoners. The CM said that with introduction of Gender Reform Action Plan (GRAP) to provide special focus on women development, expansion in the role of Bait-ul-Maal to provide financial assistance to the needy was undertaken.

Pervaiz Elahi speaking of measures for preventing abuse of children said that establishment of Social Security Health Management Company in public-private partnership mode; establishment of three dedicated 100-bed hospitals for labour in Lahore, Sheikhupura and Muzaffargarh; introduction of self declaration system in assessment of social security had been made.

Speaking about the Punjab government's efforts in Southern Punjab, he said Urban Development Project there would result in improving quality of life in 425 low-income areas of 21 towns in 6 six district of Southern Punjab at a cost of Rs 7 billion.

He said that introduction of Tameer-e-Punjab Programme with an annual outlay of Rs 1.86 billion to finance would publicly identify schemes. 'Introduction of Local Development Programme at a cost of over Rs 5 billion was to improve infrastructure in local governments, he added.

The CM said that they had given a broad-based direction for Punjab's economic and social uplift through Vision 2020. Based on the vision, prepared a medium term development strategy for economic and social sectors through the Punjab Economic Report focusing on quantitative and qualitative improvement in the lives of the citizens of the Punjab through, he added. He said that with poverty focused investment strategies in six key sectors, 82% of PSDP goes to pro-poor sectors. He said in order to provide relief to common man, the government of Pakistan had already announced establishment of utility stores in every union council of Pakistan to provide essential commodities at an affordable level to the poorer segments of society. This decision has therefore, supplanted my 'Sasta Store' Programme, which was announced last year and was ready for implementation this year.

The CM said that from the first of July 2007 the minimum wage of the highest category of skilled worker in Punjab would be Rs 5,644 and that of the highest category of semi-skilled worker would be Rs 4833 per month.

The CM speaking of measures to support weaker strata of the society said that they would provide Rs 500 per month support to 646,000 households with a total population of 4.24 million who were the poorest of all in the province. He announced regularisation of 385 katchi abadies all over Punjab by extending the cut-off date of regularisation to 31st December 2006. '

The CM on the further announced a two-kanal land-grant, linked to support for shelter-provision to the land-less, homeless poor of the rural areas of the Province. This grant would be backed by micro-financing facilities and extension services in livestock and agriculture in order to ensure livelihood on a sustainable basis', he added.

The CM told that this programme would commence in Districts of Rajanpur, Muzaffargarh, Bahawalpur and Bahawalnagar in FY 2007-08 and subsequently extended to other poorer areas of all districts of the province.

http://www.brecorder.com/index.php?id=577003&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Apparel industry misses over $1 billion deals

KARACHI (June 14 2007): The country's export-oriented apparel industry misses over one-billion dollar deals as it does not participate in the internationally floated tenders due to inconsistent government policies regarding revision of utilities' tariffs, industry sources told Business Recorder here on Wednesday.

They said that the apparel sector of the country is deprived of greater chunk export deals, as the system of the international tendering has been upgraded, according to which only one can participate who could ensure that the product supply at the same rate has been quoted in the tender document.

"We annually lose around $1.25 billion worth apparel orders, as we can not give assurance regarding the same price quoted in the tender document, because we don't know whether the tariffs and cost of different utilities will remain the same or go up even in the next three months," said Ijaz Khokhar, Central Chairman, Pakistan Readymade Garment Manufacturers and Exporters Association (Prgmea).

Exporters are always bound to export the consignment at any cost to meet the dateline irrespective of country's law and order situation, increasing cost of products, etc, he said.

The value-added garment sector receives only 3 percent to 5 percent of the total bids every year, while the rest is grabbed by the Indian, Bangladeshi and Chinese exporters in the world market, he added. He pointed out that during last two years Pakistan had missed about $4 billion in such tendering process due to high cost of production, leaving the industry almost prostate in the world market.

"The online tendering system internationally is new in the country according to which the lowest bidder qualifies while the higher and the highest ones respectively are disqualified automatically from the process, of which Pakistani exporters are amongst the prominent ones," Ijaz elaborated. This system was earlier utilised in the home textile sector worldly, however it is now overwhelmingly spreading in the world, he said. Adding that, "Local exporters mostly fail to attract the foreign buyers because of technical errors they commit during the online tendering process due to lack of know-how of this new system," he added.

Urging the government, Chairman Prgmea said that it should come forward to acquaint the local exporters with latest methodologies and techniques to apply in the international contest to grip maximum of the export contracts.

A minor mistake could lead to knock out of the entire process, he added.

"Trade Development Authority of Pakistan (TDAP) can play a vital role in making the exporters of all sectors enable to participate in the online tendering process free of errors," he said.

Ijaz said that advisory boards of the European, Far Eastern and US suggest to their citizens particularly to business communities not to travel Pakistan for various reasons including law and order situation making the local exporters constraint to travel various other region and countries to finalise export deals.

"Value-added garment exporters are continuously travelling to world's neutral venues acceptable for foreign buyers just to strike export deals, causing them million of rupees losses annually," Ijaz said.

High electricity and gas tariffs with uncertain prospects are the major hurdles for this sector in augmenting its exports besides manufacturing products on world class standards, he said and added that government should cap the utility tariffs at exiting levels at least for next three years. He said that the apparel sector with 60 percent employment share is on the verge of complete paralysis and if government did not heed on our genuine demands, it could almost come to a standstill.

Expressing disappointment over the government's policy making process, he pointed out that it had never consulted with the Small Medium Enterprises (SMEs) sector in evolution of policy, which had badly hit the ready-made manufacturing sector in the country.

Government has completely overlooked the value added garment sector in the federal budget 2007-08, as 60 percent of this sector is based on SME badly need its support to grow, he added.

Chairman Prgmea appealed to the government to formulate a long-term policy for the apparel sector so that it could at least sustain in the face high competitiveness in the world market. Government should also support the country's apparel industry to scale down the increasing export deficit by 30 percent, he added.

http://www.brecorder.com/index.php?id=577031&currPageNo=2&query=&search=&term=&supDate=

 

[Neo]

Capital gain tax relaxation to encourage FDI

KARACHI (June 14 2007): The Capital Gain Tax (CGT) relaxation to the bourses and real estate sector till 2008 has been given to encourage inflow of foreign direct investment (FDI) in the country. These views were expressed by DG, RTO, Asrar Rauf while addressing a post-budget seminar organised by Institute of Cost and Management Accountants of Pakistan here on Tuesday.

He said there had been a huge influx of FDI in the country and if any such tax was imposed the investors' sentiment would be hurt and their focus would be diverted. He said the Federal Budget 200-08 was an industrialist-friendly budget that had brought incentives for the industry, adding the main objective of the CBR was to facilitate the taxpayers.

Asrar Rauf said it was due to this facilitation that their collection had reached Rs 835 million and the target for the coming fiscal year had been set at Rs 1.025 billion. He said the budget had allocated Rs 520 billion under PSDP, which would generate millions of direct and indirect employment besides, allocations for other social sectors were also satisfactory.

Later, responding to the queries of Business Recorder, he said although there had been demands from the cellular operators to waive the SIM activation tax of Rs 500 on every connection issued, the tax would be continued. "Cellular business is growing apace and the continuation of this tax would have no affect on the sector," he justified.

About the 15 percent GST on the import of computer hardware components, he said there was no plan to withdraw the tax in the current fiscal. However, it may be gradually reduced after that.

It may be mentioned here that the importers and assemblers of computers and PC/servers had been demanding of the government to withdraw the 15 percent GST, as this had been adversely affecting the IT sector. Instead of removing this tax, the government imposed 1 percent import surcharge.

Commenting on this issue, Asrar Rauf said that 1 percent import surcharge had been imposed but the 6 percent income tax had been reduced to 5 percent, therefore, there would be no difference.

FPCCI Vice-President Zubair Tufail regretted that the proposal of gradual reduction of 15 percent sales tax to 10 percent was not considered, as this had been an incentive for the industrial sector.

He said that no incentive was given to the industrial sector, instead 1 percent surcharge on the import of raw material was another blow to the already under-pressure industrial sector. He proposed that this surcharge could be imposed on the import of consumer products, as this would encourage the local manufacturers. It may also be imposed on luxurious items. Other experts also highlighted various features of the federal budget.

http://www.brecorder.com/index.php?id=577082&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Tory party leader praises Pakistan economy's growth

LONDON (June 14 2007): The British Opposition party leader David Cameron has praised Pakistan's economy growth and described its expansion as only second to China. He was speaking at a gala dinner, hosted by the Conservative Party to mark the 60th independence anniversary of Pakistan and India here on Tuesday evening.

The event attended by about 500 guests invited by the Conservative Party included members of the Pakistani and Indian community in the UK. Among prominent Pakistani or Kashmiri origin Conservatives, who were present was one of the vice-chairs of the party, Sayeeda Warsi, Mahboob Bhatti, Councillor from High Wycombe and Naweed Khan, deputy head of Cities and Diversity. The acting Indian High Commissioner also attended the independence ball.

Cameron said he planned to visit Pakistan soon and also mentioned the South Asian country's focus on the higher education while noting that Pakistan was planning to establish six engineering and three technology universities to equip a new generation with the skills necessary to compete in the globalised world.

The Tory Party leader said that as the world's centre of gravity was moving from Europe and the Atlantic to the south and the east, the time was right for Britain to build a special relationship with the countries of the Asian subcontinent.

Cameron also urged renewed efforts to build more competitive economies to meet the challenge of globalisation. He called for a new special relationship between Britain and Pakistan for the 21st century.

Referring to the Asian community living in Britain, he said British Asians were thriving and making a contribution in all walks of life. In London alone, there are over 14,000 businesses owned by those of Pakistani or Indian origin.

He said Britain's relations with both Pakistan and India were based on historical, economic cultural and family ties. Cameron stressed the need for closer cooperation to confront common challenges, including terrorism, which had to be defeated, not appeased.

But he urged a serious, long-term approach to the challenge of terrorism, not just a security response. The Tory leader made an impassioned plea to build what he called a "positive society" in Britain, which involved building a responsible society.

The British Opposition leader paid rich tributes to Pakistan-UK relationship and also praised the role of High Commissioner Dr Maleeha Lodhi, describing her as among the most talented diplomats in London.

In her message on the occasion, Dr Maleeha Lodhi said that Pakistan valued its growing strategic ties with the UK, which were broad-based and anchored in a shared vision of peace and prosperity for the 21st century. Close to a million British-Pakistanis/Kashmiris living in the UK serve as a living bridge between the two countries.

The leader of the Conservative Party pledged in his address to adopt more ethnic minority candidates to represent his party at all levels. He said he was delighted that the Conservative Party was already doing that, citing as examples Sayeeda Warsi and Syed Kamell.

http://www.brecorder.com/index.php?id=577104&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Dams and gas areas may get big share of profit, royalty: NWFP

PESHAWAR (June 14 2007): NWFP Finance Minister Shah Raz Khan has said the provincial government is seriously considering allocating a big share received in head of hydel net profit, royalty on gas and oil for the development of the areas where the dams are located or from where gas and oil is being produced.

He said the local government has been allowed to carry out their development projects through project committees. He stated this while addressing a delegation of town/tehsil Naib Nazis of NWFP led by Israrullah, President Town/Tehsil Naib Nazimeen Forum, NWFP in the Conference Room of the Civil Secretariat here on Wednesday.

The meeting was also attended by Secretary Local Council Board Rehmat Ghazi, Special Secretary Finance, Aurangzeb Haq and Director Decentralisation Support Programme Hifzur Rehman.

He said provincial government believed in justice and fair play and we are of the opinion that the areas where dams were located or from where gas, oil, marble etc; were produced would be given a share from the royalty for development of those areas.

He said this decision would go a long way for the uplift and prosperity of the people of the area where dams ie Warsak Dam, Tarbela Dam, Jabban Power House, Dargai Power House, Malakand-III Power House and areas from where gas and oil is produced ie Shakardara, Gurguri, Makori or marble rich areas of Buner district.

Shah Raz Khan also said the provincial government is interested in the uplift of backward areas of the province and a committee has been constituted to identify backward areas and devise formula for special development funds and grant in aid for such areas.

He said the provincial government is very keen to keep quality of the development projects and ensure transparency, therefore, it has been decided to allow local governments to carry out their projects through project committees.

He hoped that the elected local bodies representatives would ensure quality works through project committees and come up to the expectations of the people. He also directed immediate implementation of section 65 sub-clause IV of the NWFP Local Govt: Ordinance, 2001.

Earlier, President Town/Tehsil Naib Nazimeen Forum Israrullah informed the minister of the various problems and difficulties being faced by the town councils and thanked the minister for taking interest in the solution to their problems. He also lauded the efforts of the MMA government for achieving the goal of getting hydel net profit for the province.

http://www.brecorder.com/index.php?id=577043&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Pak-German trade agreement mutually beneficial

ISLAMABAD: Federal Minister for Commerce, Humayun Akhtar Khan met with Dr Bernd Pfaffenbach, State Secretary of German Federal Ministry of Economy and Technology here today. During the meeting they exchanged views on bilateral trade and issues related to free trade agreement.

Minister for Commerce apprised his German counterpart of the existing EU’s preferential treatment to most countries in the South Asian region. He said that Pakistan wants to have a level laying field in trade regime and that Pakistan wants to have market access on the same conditions offered by the EU to its other competitors, and that free trade agreement will be mutually beneficial for both,

says an official release.

The two sides recalled joint EU-Pakistan ministerial meeting in Pakistan last month and formation of a sub-group on trade. They agreed that this was a step forward for better trade relations.

The German State Secretary said that presently Germany was focused on multilateralism but the government could review the need for bilateral arrangements in view of the competitor, EU has in the international market.

He assured the Minister that Germany will continue to support Pakistan to further improve bilateral cooperation in various domains.

Both sides agreed that EU Commission’s study group will review the situation in South Asia in the light of trade arrangements in the region and evaluate its impact on Pakistan.

Ambassador of Pakistan to Germany Asif Ezdi, senior officials of the embassy and German Ministry of Economy & Technology were also present during the meeting.

http://www.thenews.com.pk/daily_detail.asp?id=60411

 

[Neo]

June 14, 2007
Improved financial management urged for credibility

ISLAMABAD, June 13: The World Bank has urged Pakistan to improve public financial management, accountability, transparency, and enhance the capacity of public sector managers to meaningfully use credible financial information for better and informed decision-making.

The World Bank in its latest Country Report, which was made available to Dawn, said that an improved financial system would increase the national and international credibility of the federal and provincial governments’ financial statements and assurance processes.

"The reform efforts need to include identification of the relevant international standards of accounting and auditing applicable to the public sector and help achieve compliance with those standards," the report – Pakistan Public Sector Accounting and Auditing, a comparison to International Standards - said.

It also called for adoption of International Public Sector Accounting Standards (IPSAS) for accounting and financial reporting in improving the basis for adequate public financial management.

The World Bank also urged Pakistan to build capacity aimed at improving the accuracy, comprehensiveness, reliability, and timeliness of intra-year and year-end government financial reports at federal and provincial levels.

It called for initiating the process at district and sub-district levels for strengthening the financial accountability cycle.

The Bank has expressed its willingness to provide financial and technical support to help undertake the second phase of reforms in improving country's overall financial and auditing system.

The replacement of inefficient manual and outdated accounting processes in the general government sector by faster and updated computerised programmes, the Bank said, is underway with a programme to computerise all district accounting offices by the end of 2007.

According to the World Bank, the assessment of public sector accounting and auditing is generally meant to help implement more effective public financial management (PFM) through better quality accounting and public audit processes in Pakistan and to provide greater stimulus for more cost-effective outcomes of government spending.

More specific objectives are: (a) to provide the country's accounting and audit authorities and other interested stakeholders with a common, strongly-founded knowledge where local practices stand against the internationally developed norms of financial reporting and auditing; (b) to assess the prevailing variances; (c) to chart paths for improving the accordance with international standards; and (d) to provide a continuing basis for measuring improvements.

At the present time, the Bank said, Pakistan does not comply with the IPSAS in preparing its annual accounts. The country's accounts do not provide a statement of cash receipts and payments which (a) recognises all cash receipts, cash payments, and cash balances controlled by the entity; and (b) separately identifies payments made by third parties on behalf of the entity.

"In addition, the country's accounts do not provide accounting policies and explanatory notes." A general programme is underway for the adoption of accounts in a form specified in its New Accounting Model (NAM).

"Under the guidance of the Auditor General of Pakistan (AGP), the Controller General of Accounts (CGA) needs to restructure the present cash basis of financial reporting to conform fully to the cash basis IPSAS," the report added.

While the IPSAS-2 reporting format has been designated by the Auditor General as additional reporting requirements for the government, it would be appropriate to set up a committee to review and steer the process to implement cash basis IPSAS on a continuous basis.

http://www.dawn.com/2007/06/14/ebr12.htm

 

[Neo]

June 14, 2007

World’s 2nd largest bank seeks entry into Pakistan

KARACHI, June 13: The world's second-largest bank--The Industrial and Commercial Bank of China (ICBC) -- has entered into an agreement with the National Bank of Pakistan (NBP) for co-operation in establishing its presence in Pakistan, S. Ali Raza, President of NBP told Dawn on Wednesday.

“A Memorandum of Understanding (MoU) will, hopefully, be signed this month,” said the NBP President in reply to queries regarding reports that ICBC was eyeing Pakistan for extending financial support to Chinese companies investing in the country.He said being a listed company on the Hong Kong Stock Exchange, the Bank had to complete certain formalities before moving forward.

ICBC, with $41 million in assets and 18,000 branches stood out as world’s second largest bank.

A banking sector analyst said chairman of ICBC board, Jiang Jianqing, along with his delegation, had visited the country last week and held meetings, among others, also with Prime Minister, Shaukat Aziz.

“The Chinese banking giant is currently looking into two models,” NBP’s S. Ali Raza says. One choice that ICBC was thinking over was to establish its presence by acquisition of existing banks or opening its own branches and the second option under consideration was to work with the NBP as local currency provider for the bank’s investment in giant infrastructure and other projects.

The NBP President explained that suppose investment in a refinery was to be made up to $150 million; NBP would arrange finances of $100 million of the equity stake to be taken by ICBC.

Banking sector analysts thought that the ICBC may have taken initiative to gain the first mover advantage to be the largest financier to Chinese companies, who would be setting up projects for production of Chinese goods in the Special Economic Zones to be set up near Lahore. The government had expressed its intention to establish such zones, in the federal budget announced last Saturday.

http://www.dawn.com/2007/06/14/ebr1.htm

 

[Neo]

Thursday, June 14, 2007

Incentives for power producers: Govt decides to amend power policy 2002

ISLAMABAD: The government has decided to amend the Power Generation Agreements 2002 Policy to resolve the issues of currency exchange rate, return on equity and risk to nationwide fuel storages, an official at Ministry of Water and Power told Daily Times.

The resolution of these issues would help the independent power producers (IPPs) to plan fresh investment on power generation projects and expand their existing generation capacity, the official added.

A meeting chaired by Adviser to PM on Finance and Revenues Dr Salman Shah with different relevant ministries and divisions has finalised recommendations in this regard for the approval of the government.

According to the official, a number of IPPs had been raising the issue of inadequate protection against risk of variation in currency exchange rates in the Power Generation Projects 2002 Policy. Besides, they had also been highlighting discrimination in the rate of return on equity to local and foreign investors as well as lack of covering the risk to nationwide fuel storages.

To settle these issues, the meeting has recommended that to enable maximum competition from suppliers and contractors, the IPPs should not be exposed to impact exchange rate variation between US Dollars, Euros, Pounds Sterling and Japanese Yen up to the Commercial Operation Date (COD).

Consequences of this variation, whether resulting in an increase or decrease in tariff, should be reflected in final tariff to be fixed at COD. Engineering procurement and construction contracts dominated in these four currencies besides rupee should be accepted by the National Electric Power Regulatory Authority, the official said.

The meeting also recommended that at the COD, the IPPs should establish the relevant cost details to NEPRA with actual documents and proofs regarding EPC contract, sourcing of equipment and finances.

To broaden the access for debt financing, debt can be obtained by IPPs in US Dollars, Pounds Sterling, Euro and Japanese Yen. This should receive the same treatment as currently available for US Dollar dominated debt. An Operation and Maintenance (O&M) cost are incurred subsequent to COD, O&M Cost adjustment should continue to be based on exchange rate variation between Pak rupee and US Dollars, the official explained.

The meeting decided to direct NEPRA to stop the practice of accepting EPC contract cost on the basis of quotation. Instead, they should base their determination on firm (non re-openable) competitive price duly initialed and signed by the IPPs and EPC contractors.

The performance guarantees to the Private Power Infrastructure Board (PPIB) and the government of Pakistan and letter of credit in favor of power purchaser may be accepted in Pounds Sterling, Euro and Japanese Yen in addition to US Dollars.

On the issue of return on equity, the meeting recommended that the return on equity should be allowed in one currency i.e. US Dollar. All returns on equity for foreign exchange and rupee based equity be converted to equivalent to US Dollars amount at reference exchange rate as noted in NEPRA’s determination and adjusted for variation in US Dollar and Pak rupee rates as presently being done for return on foreign component of equity, the official added.

It was also decided in the meeting that the present policy of not guaranteeing payment obligations of fuel supplier should continue. However, the nationwide storage of fuel needs to be recognised as Pakistan Political Force Majeure and procedure mechanism allowed in the 1994 contracts be adopted to address the issue. The IA is suitably amended in consultation with Law and Justice Division, the meeting observed.

http://www.dailytimes.com.pk/default.asp?page=2007\06\14\story_14-6-2007_pg5_1

 

[Owais]

Japan agrees to revise tax treaty with Pakistan to enchance economic ties


TOKYO (updated on: June 15, 2007, 11:41 PST): Japan has reached basic agreement with Pakistan to revise a nearly 50-year-old tax treaty to promote investment and build closer economic ties, the Ministry of Finance said on Friday.

Under the current treaty, when a Japanese company has a branch in Pakistan Pakistani taxes are levied on all the income made within the country even if it is made through a direct business with its headquarters in Japan. The same applies to companies in Japan.

But the revised treaty will impose taxes only on income made through operations of branches in the other country.

"I hope this will lead to closer economic ties between the two countries," Japanese Finance Minister Koji Omi told a news conference.

Other revisions include rationalising investment income tax levels for dividend, interest income and other fees.

Japan has been stepping up efforts to revise tax treaties in recent years. Revising a treaty with the United States in 2004 was a breakthrough.

Since then, Japan has revised tax treaties with India, Britain and signed similar agreements with the Philippines and France. It is now in talks for similar deals with Australia, Kuwait, the United Arab Emirates (UAE), and the Netherlands.

Japan and Pakistan plan to sign the agreement around the end of this year or early 2008 and on approval by their parliaments, the Japanese finance ministry hopes that the new treaty could take effect by the end of 2008.

brecorder.com

 

[Owais]

SBP to extricate itself from export refinance scheme: 'banks will continue to provide loans'

KARACHI (June 15 2007): The State Bank of Pakistan (SBP) has decided to extricate itself from export refinance scheme but it will be phased out over a period of time and will be a part of the central bank's monitory policy.

In an Exclusive interview to Business Recorder Governor SBP Dr Shamshad Akhtar said that refinancing has contributed excessively to reserve money growth this year it has caused an exceptional increase. Though there are other monetary instruments available with the central bank but top preferences would be to eliminate refinancing. She added that this would not affect the industrial sector at all because industries will continue to get export credit on the same terms and conditions.

Despite elimination of refinance scheme, banks will continue to provide loans on low rate for exports from their own funds and the difference will be paid by the government, she said. Banks will continue to provide export credit at 7.5 percent and the State Bank will decide what differential will be paid to the banks, she added.

Dr Akhtar said that next financial year's budget is a public budget. This is an election year budget but at the same time it has been recognised what is the need of the masses and the same has been taken care of in the budget. She said that it was satisfying that different segments of society have been adequately provided for in the budget.

There is no doubt that food prices are on the higher side, it is partly for this reason that industrial, corporate and industrial employees' salaries have been increased to compensate for the cost of living.

On the other hand, some measures for availability of essential items for common man on lower rates from the utility stores has also been announced in the budget. If we look at the industrial and the agriculture sectors, for each sector there is something critical, she said and added that today's industrial sector's need is diversification.

There is some tariff rationalisation and incentives in the budget, which supposedly may add to industrial growth. For agriculture sector there is subsidy on DAP has which would have a visible impact on the performance of the agricultural sector this year, she added.

"I think there is a lot of real sector measures and there is lot of public response for giving adequate compensation to the people for the high food prices," she said. A prompt reform agenda to strengthen the financial sector is also on the anvil, governor SBP said. On the fiscal side, there is an attempt to contain fiscal deficit at 4.2 percent or even lower, she said.

She said that current expenditure's share in the total expenditure is declining, while the development expenditure has been increased to Rs 520 billion. A number of countries have also been able to tackle the fiscal deficit more than we have and India is also worse off than we are, Dr Akhtar said.

If you have private sector wages, different level is going up not to give your low income employees and adequate compensation, which is consistent with the overall level of the price increases we have, she said.

Public investments have to be accommodated in the fiscal deficit, as we have clarified to the government that we will have to minimise its reliance on central bank browning. There has been very effective communication from the central bank to the federal government and the government has understood our view-point, governor SBP said.

For reduction in the central bank browning, SBP is conducting communication for the last few years but this year serious communication has been exchanged between SBP and the federal government, she said.

The central bank chief said that the government has announced Rs 130.9 billion bank borrowing for the next fiscal. The central bank aims to negotiate with the ministry of finance what would be making the quarterly negotiations of this borrowing.

'We would like to sit down with the ministry of finance and will do a round of technical level consideration,' she added. In our communication with the government, we would like the government to reduce its dependence on the central bank borrowing this year. They should resort more on non bank browning sources including sales of PIBs, the modalities will be discussed soon, she maintained.

The government borrowed Rs 80 billion from the SBP during the last fiscal year against the target of Rs 120 billion, governor SBP pointed out.

Replying to a question, about banks or non banks share in PIB, she said that in the first phase PIBs go to the primary dealers but after that they go to the secondary market, adding that non banks can have recourse in the secondary market to purchase PIBs.

Dr Akhtar said export refinance is not giving any impetus to exports. The decision to allow export of edibles is undoubtedly made by the government but when the wheat export matter came up, the government decided to retrieve on its decision to avoid its impact on local prices.

The fact is that the SBP does not provide refinance on its own accounts but follows government's decision, whether they want to discourage exports of some products or not, she said.

Export refinancing is not a healthy thing but since traditionally we have been giving refinancing we have to give until we decide as a policy to stop it she added. She said that SBP has stopped the LTE-EOP scheme to the value-added textile sector and no such refinancing will be provided under the scheme anymore.

The SBP had issued Rs 87 billion of PIBs during the last fiscal out of which around 60 percent was held by non-banking, the central bank chief said. Talking about exchange rate, she said that it is not clear that the exchange rate will continue depreciating at the current level. It even may come down. I don't think that there is any indication that every year it will depreciate.

She said that foreign direct investment is not coming due to interest rate differential FDI is coming in because of the very high corporate and banking sector profitability.

She said that interest rate differential is not the determining factor in the environment we are adding that the country's corporate and banking sector's profitability is in double-digits. We should not forget that despite political instability foreign investors are investing their capital in Pakistan.

Governor SBP said that foreign investment is not taking place in the manufacturing sectors due to inefficiencies, adding that industrial and manufacturing sectors are not doing enough to attract foreign investment.

She said that foreign investment has been seen in the power sector and infrastructure besides corporate banking sector. Pakistan continues floating sovereign bonds because that keeps Pakistan's name in the international bond market.

It is setting a benchmark, which is helping other corporate issues. Thirdly, it tells the public world-wide that despite all the political crisis, Pakistan is able to raise long term funding in the international market, she said.

"We are not looking at Pakistan today only. We are looking Pakistan over a longer perspective and have in the process achieved an investment grade. Pakistan's image is improving in the international market after the issuance of sovereign bonds abroad," Dr Akhtar added.

The government has brought OGDC in the international financial market to enhance its investment grade and for this purpose the government has geared up its balance sheet according to international standards, she informed. We want to bring Wapda in the international market by issuing its GDRs but it needs hard work.

If Wapda had strong balance sheet, we would definitely bring it in the international market, she said. Adding, that when the PSO will be privatised then we will be able to issue its GDRs in the international market.

When we took OGDC in the international market it became a brand name for international investment. To achieve more, we will issue more than two or three GDRs in the international market, she added. Having achieved this we will see that a large part will be financed outside sources or equity market.

Talking of the overdraft, she said provincial balances are manageable row. The provincial governments are doing pretty well and overdraft of Sindh is in the surplus position while Balochistan is also settled a major amount.

She said that amongst the overdrafts, Railway is alarming one. We have to stop allowing further overdraft, if Railways revenue's picture has to improve.

For the sustainability of the financial sector we need to continue diversifying both at sector level and at regional level and reaching all segment of the population, governor SBP said.

Banks must get out of the urban area and start opening more and more branches in rural and new urban areas. We would have to train our people in the banking industry to enhance the banking sector efficiency and profitability. There are lot of opportunities of innovation in the Islamic-banking sector, she said.

She said we should encourage banks to finance by 100 percent of exports with own funds besides the long term funding. Export refinancing is unnecessary and burdensome. All countries are dependant world-wide. Even our neighbouring country India has abolished export refinance and now they are providing interest rate differential, she said.

The banking sector will not be supported artificially nor artificial support is viable. Banking sector is totally liberated but banking sector has to mobilise funds to finance export flows on annual basis themselves, she said.

Dr Akhtar said that the central bank has instructed to the banks to be transparent both on the lending and deposit sides and banks have started increasing deposit profits but they are still at an unsatisfactory level.

She said we have ended export refinancing to the textile sector. This is much tricky. Therefore, we have proposed for spinning sector that we are not going to provide refinancing but the banks may convert exiting loans into three percent lower than the market rate.

The SBP wants to bring a positive change in the monetary policy to take out every inflationary element from its monetary policy, which is contributing to inflation, she added.

Reserve money growth is under pressure due to refinance. Therefore we need to eliminate it hopefully at some point in time but this will not be an easy decision, she admitted.
http://brecorder.com/index.php?id=577683&currPageNo=1&query=&search=&term=&supDate=

 

[Owais]

Forex reserves mount to a historical height at $15.3b

KARACHI: Foreign exchange reserves ending the week June 9 soaring by $1.2428 billion climbed to the historical highest-ever at $15.3 billion.

State Bank of Pakistan (SBP) figures showed that the secured foreign exchange reserves with the Central Bank surging by $1.621 peaked at $12.6498, while the existing reserves with the commercial banks swelling $180 million pegged at $2.38 billion.

The aggregate rise in foreign exchange reserves in Pakistan during the current fiscal year was recorded at $1.8932 billion, SBP figures said.

http://geo.tv/geonews/details.asp?id=7547&param=3