Pakistan Economy - News & Updates - Archive

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Index of economic freedom

Pakistan’s economy is 56.8 percent free which makes it the 93rd freest economy in the world in 2008. According to Index of Economic Freedom, the country’s ranking has worsened over the last two years.

First of all, one needs to look at how this index is computed and what does it explain. After that, the reason for Pakistan’s slide in economic freedom needs to be discussed.

The index is simple average of 10 individual freedoms, each one of which is important for individual as well as for national prosperity. These ten freedoms are: business freedom (ability to create, operate and close an enterprise quickly), trade freedom (absence of tariff and non-tariff barrier), fiscal freedom ( burden on government from revenue side), government size (government expenditure), monetary freedom ( measures for price stability and price control), Investment freedom (free flow of capital, especially foreign capital), financial freedom (measures for banking security and independence), property rights (an assessment of the ability of individuals to accumulate private property) , freedom from corruption (quantitative data based assessment of the perception of corruption in the business environment, including levels of governmental legal, judicial ,and administrative corruption) and labour freedom (ability of workers and businesses to inter-act without any state restriction).

Each one of the 10 freedoms is graded using a 0 to 100 scale, where 100 represent the maximum freedom. A score of 100 signifies an economic environment or set of policies that is most conducive to economic freedom

Pakistan overall freedom index score is 56.8 reflecting that it lies in the category of the counters which are mostly unfree along with other 57 economies. Its overall score is 1.7 percentage points lower than last year, reflecting worsened scores in six of the 10 economic freedoms. Pakistan is ranked 16th out of 30 countries in the Asia–Pacific region, and its overall score is slightly below the regional average.

The table shows the performance in case of individual freedoms. Pakistan’s scores on business freedom, fiscal freedom, labour freedom, government’s size and in monetary freedom are quite reasonable. Freedom from the corruption is the variable which contributed least towards the overall economic freedom score and its value is most unstable and showing declining trend. Corruption is perceived as pervasive. Pakistan ranks 142nd out of 163 countries in Transparency International’s Corruption Perceptions Index for 2006. Corruption among executive and legislative branch officials is viewed as widespread.

The comparison with India and China shows that overall Pakistan freedom score is the highest among three. Pakistan is leading with regard to four freedoms namely business, fiscal, government size and labour freedom. India is leading in property rights freedom. In trade and monetary freedoms, China is ahead of the rest two. For Pakistan, there is a need to improve the freedom from corruption score but in current circumstances it seems difficult because of political unrest and judicial issues.

Index of economic freedom -DAWN - Business; February 18, 2008

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Financing export-oriented projects

Conventional and Islamic banks will soon start long-term financing for export-oriented projects under a scheme initiated by the State Bank of Pakistan with an indicated amount of Rs8 billion being made available for utilisation up to June.

The central bank will allocate more funds for fiscal year 2008-09 depending on the investment trends as reported by banks in May. All exporters including small and medium enterprises are eligible for loans under the scheme.

Almost all banks are participating in the scheme,’’ an SBP official disclosed. Bankers are looking forward to an encouraging response from their clients who, according to them, demand far too long-term financing for projects.

“We have been providing long-term financing for 12 years,’’ a top executive of a leading bank informed Dawn on Thursday. ‘’A few banks do provide long-term financing but very selectively and only to their chosen clients,’’ a leading industrialist pointed out and said the long-term financing is a very small part of bank lending. The bulk of long-term financing given by banking consortiums is for restructuring of privatised units.

Last week, when the State Bank Governor, Dr Shamshad Akhtar, met businessmen at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and at All Pakistan Textile Mills Association (APTMA), the most articulated complaint was that industrial investment has become too expensive, banks have become too choosy to offer loan facilities, exports are under strain because of rising production cost in which high interest rate on bank loans is a significant factor. She was told that industrial investment has come to a virtual halt, industrial production growth is down from 19 per cent in 2004-05 to seven to eight per cent and exports are trailing behind the target.

Under the SBP scheme, banks will offer long-term loans from three to 10 years for imported and locally manufactured machinery for the export-oriented projects ‘’The facility will be available to only those projects where annual exports fetch $5 million or at least 50 per cent of their sale proceeds is exports’’, is one of the conditions of the new scheme..

Businessmen fear difficulties in compliance of the condition as they are apprehensive of export performance in general and for textiles in particular. ‘’Persisting domestic inflation and likely slowdown in the US and EU economies would increase the cost of production on one hand and lower demand in two major markets’’, Mr Iqbal Ibrahim, Chairman APTMA warned the SBP Governor with reference to minimum export limit condition of the scheme.

While the SBP is providing 70 per cent refinance facility, the participating bank will put in 30 per cent. For the initial Rs8 billion proposed to be offered, the SBP has fixed service charges for refinance at 6.5 per cent for three years, 6.50 per cent for five years and seven per cent for 10 years. But the banks’ spread is 1.50 per cent for three years which will take up interest rate to eight per cent for the borrowers. For loans up to five years, the bank spread is 2.5 per cent which will raise the lending rate to nine per cent. On ten- year loans , the spread is at three per cent and interest rate goes up to 10 per cent.

“The bank spread is on very high side,’’ complained an industrialist who proposed that it should be one per cent for a period of three years, two per cent for five years and three per cent for 10 years. Industrialists want interest rate on loans to be at 7.5 per cent for three years, 8.5 per cent for five years and 9.5 per cent for 10 years.

“Banks are making bulk of their profit from stock exchange and foreign trade’’, a business leader remarked and said the manufacturing projects have a longer gestation period and need some accommodation in interest payment when the central bank is providing bulk of the loan money. Banks have been advised to take not more than two months in evaluating loan application under the scheme after getting full information from the borrower. ‘’Where the request is declined, the bank will explicitly apprise the reason to the borrower’’, banks have been told in clear words.

“There is also no maximum limit for seeking loan under the scheme by the borrowers. But in case, the demand is for more than Rs300 million, banks will be encouraged to form consortiums.

“Under the scheme, only new plants, locally manufactured or imported, are eligible for financing. The State Bank has specified the categories of business which are eligible to seek borrowing under the scheme. These are textiles, fabrics, garments, towels, made ups, synthetic textiles, leather and leather goods, rice processing, sport goods, surgical goods, carpets and wools. There are also developmental categories which include, fisheries, poultry, meat, fruits, vegetables and cereals processing, IT software and services, marble, granite, gems, jewellery and engineering goods.

Spinning is conspicuous by its exclusion from the list. The State Bank Governor was asked to include spinning in the list for concession rated financing. ‘’We want to encourage value addition,’’ she replied during a volley of questions put to her at the APTMA meeting.

Industrialists have largely welcomed the scheme but believe that the time is not appropriate. Bankers say that enquiries are being made and they intend to publicise the scheme n a big way. But there are doubts about response. Political environment is not conducive. ‘’Let the elections be held, a political set-up settled in Islamabad and provincial capitals and let it decide about the long and short- term priorities and policies. Then we will think of investment plans,” a leading industrialist remarked.

Bankers too do not expect much response in next few weeks. But a window opening for project financing for export-oriented industries is a good news in otherwise not too congenial environment.

Financing export-oriented projects -DAWN - Business; February 18, 2008

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Soomro for strengthening more Pak-Greece ties

ISLAMABAD (February 18 2008): Caretaker Prime Minister Mohammedmian Soomro has underlined the need for more interaction between businessmen, mediamen and parliamentary delegations of Pakistan and Greece to help further promote relations to cover all areas of interest.

There is a great potential of co-operation in areas of energy, ship-building and tourism where both countries can benefit from each other experiences in promoting bilateral ties and bringing people closer, he said.

Talking to Ambassador of Greece, Petros Mavroidis, who called on him here, the Prime Minister expressed satisfaction over the existing bilateral relations between Pakistan and Greece.

He said Pakistan's economy has benefited a lot from the financial sector reforms and this has been observed and acknowledged by international and local financial institutions and investors.

He said Pakistan has opened up its economy to local and foreign investors in all areas, including banking, telecom, IT, real estate, energy, agribusiness, construction, manufacturing and ship-building. The banking sector, he said, is offering highest return in shape of equity and assets.

The Prime Minister said Pakistan has emerged as a preferred destination for the investors because of its strong economic and structural reforms, which offer great attraction for investments

He said the incentives should be able to attract the Greek business community as well to benefit from and invest in areas of their interest. The ambassador appreciated the economic policies of the government of Pakistan and expressed keen interest in areas of energy, shipbuilding and tourism. He said Pakistanis in Greece are the second largest community and contributing significantly towards its development.

Business Recorder [Pakistan's First Financial Daily]

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Prime Minister asks Greek investors to benefit from Pakistan's friendly policies

ISLAMABAD (February 17 2008): Caretaker Prime Minister Mohammedmian Soomro Saturday underlined need for more interaction between businessmen, mediamen and parliamentary delegations of Pakistan and Greece to help further promote relation to cover all areas of interest.

"There is a great potential of co-operation in areas of energy, ship-building and tourism where both countries can benefit from each other's experiences in promoting bilateral ties and bringing people closer," he said. Talking to Ambassador of Greece, Petros Mavroidis, who called on him here, the Prime Minister expressed his satisfaction over the existing bilateral relation between Pakistan and Greece.

He said Pakistan's economy has benefited a lot from the financial sector reforms and this has been observed and acknowledged by international and local financial institutions and investors.

He said Pakistan has opened up its economy to local and foreign investors in all areas including banking, telecom, IT, real estate, energy, agribusiness, construction, manufacturing and shipbuilding. The banking sector, he said is offering highest return in shape of equity and assets.

The Prime Minister said Pakistan has emerged as a preferred destination for the investors because of its strong economic and structural reforms, which offer great attraction for investments.

He said the incentives should be able to attract the Greek business community as well to benefit from and invest in areas of their interest. The ambassador appreciated the economic policies of the government of Pakistan and expressed keen interest in areas of energy, shipbuilding and tourism. He said Pakistanis in Greece are the second largest community and contributing significantly towards their development.

Business Recorder [Pakistan's First Financial Daily]

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ADB to give $150 million for power distribution project

FAISALABAD (February 18 2008): Asian Development Bank will provide $150 million for Power Distribution Enhancement Project-1 to Pakistan, which will be implemented by Pakistan Electric Power Company (Pvt.) Limited (Pepco). According to ADB sources, this project will address the capacity shortfalls that currently result in regular system outages and supply interruptions to customers.

This will include (i) addition of circuit and transformer capacity to enable the already overloaded systems to reliably deliver present demand and meet the expected load growth; (ii) loss reduction; and (iii) refurbishment of distribution networks.

ADB is also considering another loan proposal of $810 million MFF - Power Distribution Enhancement to Pakistan. ADB sources stated that this investment programme will enhance the efficiency of the overall power distribution system and provide an adequate and reliable power supply to a greater number of industrial, commercial and residential customers, through funding of investment requirements within each of the eight power distribution companies in Pakistan.

Consulting services will be required for, among others, (i) preparation of sub-projects, (ii) detailed design, and (iii) construction supervision and contract management. Consultants will be selected and engaged in accordance with ADB's guidelines on the Use of Consultants (2007).

Consulting firms will be selected through international competition using the quality- and cost-based selection method. Individual consultants will be recruited for specific assignments in accordance with ADB's procedure. It is envisioned that, because of the continuation of a number of tasks during implementation, single-source selection may be used for certain assignments with the prior approval of ADB.

Procurement will be done in accordance with ADB's Procurement Guidelines (2007). International competitive bidding (ICB) will be used for goods and works. ICB will be utilised for supply contracts estimated to cost the equivalent of or more than $1 million and works contracts estimated to cost the equivalent of more than $5 million.

Business Recorder [Pakistan's First Financial Daily]

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Business leaders vote with mixed feelings

Tuesday, February 19, 2008

KARACHI: Business leaders all over the country expect a mixed-party government as they played their part and cast votes for their favoured leader while many small and medium entrepreneurs also ardently voted in Monday’s elections.

Federation of Pakistan Chambers of Commerce and Industry Vice President Zubair Tufail, commenting on the ballot, said he had cast his vote at PECHS College polling station in Karachi where turnout of voters had been very good. He said he was happy that the polling had gone smoothly, adding he had witnessed a steady stream of voters throughout the day in most polling stations around PECHS.

Tufail did not wish to reveal whom he voted for, nevertheless he was of the view that Pakistan People’s Party (PPP) would sweep the votes of the city. He said “voting is our right and that was the first thing that I did this morning as we owe it this much to our country.”

Lahore Chamber of Commerce and Industry ex-president Shahid Hasan Sheikh said the turnout seemed to be only 15 per cent around his polling station jurisdiction. “I live in an elite district and unfortunately these people don’t seem to bother too much about voting so the low turnout.”

He said not much could be predicted about these elections as all the political parties had equal favour from the people of Pakistan. Sheikh did say Pakistan Muslim League (N) had the highest support from the people of Lahore while PML(Q) seemed to have fared poorly in the city.

“The new government would have lots of challenges to face and work on, that’s one thing I’m sure of,” he pointed out. Islamabad Chamber of Commerce and Industry ex-president Muhammad Nasir Khan informed the twin cities of Islamabad and Rawalpindi were strongly supporting “the lion” (PML-N). He said that was astonishing as the general belief had been in favour of PPP but the city “has always been full of surprises.”

Khan added the road leading to Sheikh Rashid’s house was heavily guarded and blocked as violence had been feared. However, he said the entire polling session had gone peacefully while the turnout of voters had been reasonable. Khan said he had voted for PML-N as he believed that a democratic leader was essential to steer the country towards progress.

Sarhad Chamber of Commerce and Industry President Haji Muhammad Asif was of the view that the turnout had been low all over Pakistan due to the presumption that the elections had been rigged. He said “people don’t believe in any of the parties anymore and moreover with the recent violence in the country, people are plain scared to venture out during such times.”

Asaf said the fear was greater amongst the citizens of the country than their sense of responsibility to cast votes. He said in Peshawar the security arrangements were strict and yet the number of voters was dismally thin.

He said while Peshawar was mostly supporting ANP, the results could not be predicted as “not a single party is representing the people at the national level anymore.” Asaf said he had also voted for ANP while his belief was that PPP was another party closely contesting in Sarhad.

Dera Ismail Khan Chamber of Commerce and Industry President Zafar Jalil Khan said while he had cast his vote for Maulana Fazlur Rehman, the battle for seats in Dera Ismail Khan was between Jamiat Ulema-e-Islam (F) and an independent leader. He said the turnout of voters in his district was about 45 per cent and polling went peacefully.

Overseas Investors Chamber of Commerce and Industry President Zubair Soomro was in Jacobabad to support his father, who was contesting the election on a PML-N ticket. He said the atmosphere in Jacobabad was unusual and the turnout very good as Prime Minister Mohammadmian Soomro had visited the city with his family to visit polling stations and cast votes as Soomro’s nephew was also contesting.

Sonu Khan from Balochistan informed that the turnout in cities had been better where about 55 per cent voters had turned up whereas rural areas experienced a thin turnout of about 25 per cent. Khan refused to comment whom he predicted would win in the province and said “we will have to wait for the results to find out.”

The News conducted a short random survey of small entrepreneurs in Karachi and asked them if they had voted on Monday. About 65 per cent of those questioned, answered in affirmative while the remaining 35 per cent said they did not believe their votes could make any difference. They said they preferred to relax at home and watch the results as they did not believe “any political party deserves to win.”

Business leaders vote with mixed feelings

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Economists for analysing present, past economic successes

Tuesday, February 19, 2008

LAHORE: Economists have suggested that the upcoming government should analyse difference between economic growths achieved during Musharraf and Ayub Khan regimes, pointing out that current growth has created shortages in contrast to surpluses during Ayub’s period.

They say prudent economic managers devise policies that ensure sustained growth and better distribution of resources. Citing an example, the economists say industrial growth during the Ayub regime was accompanied by increase in electricity generation capacity. Agriculture was given same importance as the industry. Besides construction of mega dams, the planners at that time introduced new seed varieties. High-yield Mexi-Pak wheat seed was introduced at that time, besides new Irri rice varieties.

They said early maturing poultry bird was introduced that ensured stability of meat prices. Increase in agricultural commodities’ production ensured that enhanced demand due to raised incomes did not impact prices of essential items.

However, the economists say, an analysis of growth achieved during the past nine years reveals that success in economy was lopsided. For instance, growth in home appliances’ manufacturing in the engineering sector remained phenomenal and that increase was accompanied by a decline in prices.

For example, prices of television sets during the past nine years declined by over 50 per cent and that came despite a vast improvement in technology and quality of TVs. Rates of air conditioners and refrigerators fell in the range of Rs3,000 to Rs5,000 per unit. Besides these, washing machines and micro-wave ovens are now within the reach of normal household.

Increase in industrial production like cars, motorcycles, etc resulted in higher income for white collar workers and liberal consumer finances provided them with a chance to buy home appliances and improve the quality of their life.

As the industrial side of economy was performing exceptionally well, it created higher demand for energy. According to statistics of the Water and Power Development Authority (WAPDA), increase in demand of air conditioners alone boosted power consumption by 1,200 megawatts. The electricity demand from the industrial sector grew even more, but the government failed to add new capacities during the period, except for 350MW rental power units last year. The demand now far exceeds supply and shortages of gas and electricity are now well known.

Agriculture, another important sector of economy, depicted lopsided growth. Three years ago, a bumper cotton crop was harvested, but production has been on the decline since then. Wheat production also remained lopsided. Rice production has been stagnant for the last five years while gram output has dropped. The production of edible oil seeds has not picked up despite an abnormal increase in global edible oil rates. Poultry production has not increased in line with domestic demand.

Increase in urban incomes created demand for better food while production remained stagnant and that coupled with growing population further put pressure on supplies. Prices of essential commodities reached historic highs after the supply-demand mechanism was disturbed.

Agriculture is an important sector of economy that contributes over 20 per cent to Pakistan’s gross domestic product. However, agriculture is also the most vulnerable sector. Farmers are weak stakeholders who lack the capability to withstand unfavourable weather and increase in input cost. They also lack the muscle to confront adulterators of inputs.

The pressure on agricultural supplies has adversely impacted the urban poor and has further weakened the farmers as prices of their produce have not increased in line with the rise in production cost. Though prices of agricultural commodities including grains, vegetables, milk and poultry have increased due to short supply, the additional income has been pocketed by middlemen.

The government has failed to construct any water reservoir during the period. The production of fertilisers has remained stagnant while availability of certified seeds is low. No new seed varieties of wheat, rice, sugarcane or cotton have been introduced while biotech seeds are out of reach of local farmers.

The only immediate solution for the new government would be to boost agriculture production as honeymoon period for the government would be very short. The economists are the view that the next government should give full attention to agriculture that has the potential to produce results in short time. Meanwhile, the government should formulate a cohesive policy for trade and industry in line with the successful policies adopted by many East Asian economies.

Economists for analysing present, past economic successes

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WFP offers $111.8m for education, health and poverty reduction

Programme would improve household food security for 114,000 vulnerable poor through creation of employment, assets and skills

Tuesday, February 19, 2008
By Mehtab Haider

ISLAMABAD: The World Food Program (WFP) has proposed a $111.8 million financial support for Pakistan during 2009 and 2010 in areas of education, population welfare and health care, disaster management, rural development and poverty reduction.

The UN and its subsidiary organizations held a consultative meeting recently with Pakistani functionaries to finalize social sector strategy over the next few years. In each year, the WFP would spend $29.2 million on education, $11.8 million on health and population, $1.4 million on disaster risk management, $9.6 million

on environment and $3.9 million on agriculture rural development and poverty reduction, totalling the amount to $55.9 million. The total amount for two years would be $111.8 million for various sectors of Pakistan’s economy.

According to a presentation made by the representative of WFP, Wolfgang Herbinger during the consultative meeting, the WFP would improve livelihood and household food security for 114,000 vulnerable poor through creation of employment, creation of assets and skills development particularly in 15 highly food insecure districts located in Balochistan, FATA, NWFP, AJK and Sindh.

The WFP support would increase primary school enrolment by reaching 400,000 children especially girls into the schools in 33 highly food insecure districts with the lowest literacy rate. The WFP support would also provide meals to school going children as well as take home family rations.

In areas of health and nutrition, the WFP support would improve health status of 213,000 young children and their mothers by increasing health access through food incentive rations in 24 most food insecure districts of Pakistan.

It would also address micronutrient deficiency through fortification of wheat flour, oil and blended foods for all 2.6 million beneficiaries of WFP food assistance. The WFP would contribute to the reduction of iodine deficiency in Pakistan by assisting small-scale salt procedure to iodise salt, which is currently reaching 24 million consumers.

In collaboration with WHO, UNAIDS, UNICEF, the WFP would address tuberculosis and HIV/AIDS by assisting 52,000 patients, he added. In area of disaster risk management (DRM), the WFP representative said that they intend to contribute to guidelines on disaster risk management and preparedness with focus on food security, transport and telecommunication. It would also contribute to standard operating procedures for food security needs and damage assessment.

The WFP intervention aimed at enhancing the capacity of 20,000 households in poor communities to rehabilitate and develop natural resources. It would also assist 24,000 food insecure small landholder households in establishing forest and fruit nurseries in FATA.

The WFP representative said that the available funds with the WFP for 2009 were $46.7 million and they required additional funding of $9.2 million to match with the envisaged target of $55.9 million. In year 2010, the available funds were $37.2 million and the WFP required additional funds to the tune of $ 18.7 million for matching with the desired budgetary estimates of $55.9 million for that period.

WFP offers $111.8m for education, health and poverty reduction

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Businessmen optimistic about economic prospects

KARACHI, Feb 18: Irrespective of the results and massive challenges for the new government, businessmen and traders now appear highly optimistic regarding the economic prospects as the nation turned a leaf in the history of the country by completing the polling process peacefully on Monday.

They say they are now more anxious to see the economic and political harmony in days ahead after a series of unfortunate political events in the last one year that led to huge trade and business losses domestically and globally.

The new government will face a tough task in handling various consumer as well as industries related issues like rising prices of essential items, especially rice, pulses, and wheat flour coupled with falling exports of textile items, power and gas load-shedding and maintaining the prices of petroleum products.

They say that reports swirling in the markets for the past 10 days speak about violent elections but overall elections remained peaceful, which means that the political situation may remain under control in future.

Chairman, Korangi Association of Trade and Industry (Kati), Sheikh Fazl-e-Jalil, said: “Even if a coalition government is formed, the businessmen hope for economic prosperity. The business community cannot afford further losses on account of violence and political instability.”

However, he suggested that the new government should avoid increasing petroleum products’ prices as it would lead to food inflation, which is already very high. Besides, the government should not make any drastic changes in the economic policies, he added.FPCCI vice-president, Zubair Tufail, said that if the PPP-PML made a government or it was a hung parliament, there will definitely be an improvement on the country’s economic side.

However, he said that the new government would have to face some economic challenges like rising food prices for which it has to chalk out new policies so that the country could not face any wheat and flour crisis this year.

Chairman North Karachi Association of Trade and Industry (Nkati), Noor Ahmed Khan, said that the trade and economy would get a boost after receiving a good signal from peaceful elections. He urged the new government to look into the problems of the textile industry.

Chairman, F.B. Area Association of Trade and Industry (Fbati), Idris Gigi, said the holding of general elections had wiped way the uncertain environment and this would help restore the economic stability no matter which party forms the government.

He said many exporters of textile and other items, who had been losing orders owing to country’s political turmoil, will start getting orders.

Chairman, Karachi Wholesale Grocers Association (KWGA), Anis Majeed, urged all the political parties to accept the outcome of the results so that economic stability could return to the country.

President, Tariq Road Traders and Welfare Action Committee (TRTWAC), Siddiq Memon, said that the peaceful holding of elections augurs well for the economic stability even if two or three political parties jointly form a government. He said the people, who have been avoiding visiting the markets for the last few months will return to the markets from Tuesday.

He said the traders wanted the new government to focus on improvement in law and order situation and the power load shedding.

A commodity trader, who asked not to be named, ruled out any big improvement in country’s business environment in future as the new and old faces, belonging to the PPP and PML-N, are coming back to make a new government. Their governments had been dissolved in the past on various charges of corruption.

Businessmen optimistic about economic prospects -DAWN - Business; February 19, 2008

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Weekly Inflation surges by 11.96pc

ISLAMABAD, Feb 18: The weekly inflation measured through the Sensitive Price Index (SPI) increased by 11.96 per cent during the week ending on February 15 over the corresponding week last year, according to the weekly price data released by the Federal Bureau of Statistics (FBS).

A 0.2 per cent increase recorded during the week under review in comparison to the previous week. However, the SPI was on decline in February after reaching the highest ever 14 per cent in January owing to steady increase in prices of wheat, vegetables, edible oil, gas etc.

The increase in prices came very hard on the low-income class. The prices rose by 13.80 per cent for households with Rs3,001-5,000 income and to 14.06 per cent for those at the bottom-incomes up to Rs3,000.

The households with monthly incomes between Rs5,001 to Rs12,000 witnessed an increase of 12.82pc in prices while those in the highest income bracket i.e. above Rs12,000, the increase was much lower to 10.21 per cent.

Prices of 26 items recorded increase under the week under review over the previous week.

Price of soap jumped by 5.84 per cent to Rs18.12 per cake and chicken became costlier by 4.51 per cent to Rs74.42 per kg despite the fear of bird flu during the week.

Masoor pulse (washed) showed 3.88 per cent increase to Rs74.16 per kg, tea packet up by 3.80 per cent to Rs67.47 per 250-gram, tomatoes by 3.08 per cent to Rs39.86 per kg, potatoes by 2.59 per cent to Rs11.49 per kg, banana by 1.80 per cent to Rs32.74 per dozen, rice basmati broken by 1.51 per cent to Rs36.42 per kg, firewood by 1.07 per cent to Rs232.43 per 40 kg.

The vegetable ghee (loose) increased by 0.77 per cent to Rs115.37 per kg, rice irri-6 by 0.76 per cent to Rs26.44 per kg, moong pulse (washed) 0.65 per cent to Rs51.22 per kg, bread plain by 0.62 per cent to Rs19.38 each, coarse latha by 0.59 per cent to Rs29.23 per metre, cooked beef plate up by 0.54 per cent to Rs33.56 each, mash pulse (washed) by 0.45 per cent to Rs70.78 per kg, tea (prepared) by 0.43 per cent to Rs7.03 per cup, voil printed by 0.36 per cent to Rs39.06 per metre.

The price of milk powdered Nido increased 0.30 per cent to Rs145.44 per 400-gram pouch, mutton by 0.22 per cent to Rs234.73 per kg, cooking oil by 0.20 per cent to Rs319.12 per 2.5-liter tin, curd up by 0.17 per cent to Rs34.86 per kg, sugar rose by 0.16 per cent to Rs25.77 per kg, shirting 0.13 per cent to Rs71.74 per metre, gram pulse (washed) 0.12 per cent to Rs41.99 per kg and vegetable ghee up by 0.11 per cent to Rs315 per kg 2.5-kg tin.

Weekly Inflation surges by 11.96pc -DAWN - Business; February 19, 2008

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Jan remittances jump by record 42 per cent

KARACHI, Feb 18: Overseas Pakistanis have sent 22 per cent more remittances during the last seven months of the current fiscal reflecting the high confidence on economic stability of the country.

In a situation where most of the Pakistanis becoming easy prey to the uncertainty regarding the elections and are prone to quickly accept the negative signals, the continued high rate of remittances would provide a sigh of relief to the economic managers of the country.

During the last seven months, (July-Jan 2007-08), total remittances reached at $3,623 billion, which were 22.4 per cent higher than the corresponding period of the previous year.

This must be encouraging for the government and the investors, who had halted investing in the economy ahead of elections, that the overseas Pakistanis did not show any weakness in their confidence over the economic growth.

In January alone, Pakistanis sent over 42 per cent more remittances compared to the same month of last year. January was one of the most vulnerable months in terms of high degree of political uncertainty.

During January Pakistani workers remitted an amount of $557.07 million, up from $165.74 million or 42.35 per cent. They had sent $391.33 million in January 2007.

The monthly average was even higher than the last year when the country received a record $5.5 billion for the whole year. If the trend continues till end of the current fiscal, the remittances will be another record.

The monthly average remittances for the period July-January, 2007-08 comes out to $517.63 million as compared to $422.76 million during the same period of the last fiscal. It also showed an increase of 22.44 per cent.

The remittances from the United States have crossed $1 billion mark for the first time and the country became the highest remittances sending destination for Pakistan. The increase in seven months is 33 per cent higher than the same period of last year.

The State Bank report said that remittances increased from all over the world. However, the increase from the US was clearly very high.

The high remittances is also encouraging for the country as the trade of goods and services were unexpectedly low soaring the collective deficit of about $9.650 billion in the first 6 months of the current fiscal, which is all time high.

On the other hand, the foreign investment has fallen sharply during the same period while the hope for improvement is linked with the improvement in the country’s political image.

Analysts said the bad image of the country -- emerged after the imposition of emergency, the assassination of former prime minister Benazir Bhutto and purging of judiciary, would be improved after the establishment of a new government in Islamabad.

Jan remittances jump by record 42 per cent -DAWN - Business; February 19, 2008

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Telenor invested $1.8bn in Pakistan till end of 2007: CEO

KARACHI: By the end of 2007, Telenor had invested some $1.8 billion in Pakistan and it intended to connect the remotest corners of the country with valuable services, Chief Executive Officer (CEO) of Telenor Pakistan Tore Johnsen said here Monday.

In an exclusive interview with The Daily Times he said “we have also signed major investment contracts for network expansion and maintenance within the last 15 months and extended the agreements with Nokia and Siemens on network expansion and services until 2009.” The agreements, with a potential to result in $750 million worth of orders from Telenor Pakistan, are some of the largest of their kind in the industry.

“We appreciate the presence of a stable regulatory environment with a clear licensing framework in Pakistan. Ministry of Information Technology (IT) and Pakistan Telecommunication Authority (PTA) have been successful in providing a level playing field and have fostered a culture of industry consultation.”

Although, the government’s progressive policies have boosted market liberalisation process and discouraged monopolies, mobile phone operators are still facing three main areas of policy emphasis that will help with responsible growth in the future. These are: 3-G, infrastructure sharing and Alternative energy sources.

3G: “We understand the government’s ambition of introducing 3G in the market, but growth and investment in the basic mobile infrastructure should not be sacrificed, as there are too many people still without basic access to mobile telephony,” he said. Right now operators are focused on investing in far flung areas and un-served populations. If a huge fee is demanded for 3G, it will divert this investment with limited benefits for those who are still waiting to be connected with basic voice services.

“Therefore, we demand that the government should consider 3G not as a licensing opportunity, but rather as allocation of additional spectrum linked with roll out obligations and not hefty upfront fee. PTA and FAB should also make additional UMTS spectrum available in order to have equitable spectrum allocation,” CEO of Telenor said.

Telenor feels that our proposed “beauty contest” approach as adopted by many countries including Malaysia and Norway is much better than open auction, which has resulted in financial problems and major delays in rollout after 3G auctions in Europe. Also, this way, operators will be able to work on 3G side by side, even as they keep on focusing on provision of mobile services to those who are still unconnected and remain a priority.

Infrastructure sharing: The internationally recommended practice of using one tower to carry antennas for multiple mobile operators instead of having separate towers for each operator makes common sense. At the moment, Telenor Pakistan has the largest number of shared sites and believes that more should be done to encourage and enforce infrastructure sharing. It is an effective way of reducing operational expenditure while achieving long-term environmental benefits and maintaining quality for our customers, he elaborated.

Alternative energy sources: “We are the first in industry to have started using solar energy to power a commercial site,” Johnsen said. Here government has a role to play by practically encouraging such innovation and solutions that are more eco-friendly and less of a burden logistically in difficult terrains, where mobile coverage might be needed the most, and constant generator refueling is an issue, he added.

“Also, we sealed a 20-year capacity and services contract with Telekom Malaysia Berhad’s Pakistani subsidiary, Multinet Pakistan (Private) Limited. The contract has enabled us to utilise fibre optic cable pairs and associated co-location facilities along Multinet Pakistan’s national long haul optical fibre transmission network. The maintenance and associated services from Multinet further improves the reliability of our services to the growing customer base. The aggregate amount of both the capacity contract and the service contract is some $40 million.

“I see a healthy development on all fronts in the foreseeable future as in a short period of 3 years, facing intense competition; Telenor Pakistan managed to stand as the 2nd largest mobile communications network with 15 million customers in Pakistan. Today, Telenor Pakistan connects Pakistanis over 5,000 sites and is rapidly expanding,” he said.

Talking on the WiMAX he said, it is only one of the several ways of delivering broadband to the end consumer. The important aspect to consider while investing in technological infrastructure is the economies of scale that ensure economical, quality and wide coverage to the end user. With heavy investments already made in GSM mobile communications infrastructure, it is technologically and economically optimal to invest in broadband technologies evolving from GSM itself. Technologies like 3G and HSDPA are such options. We believe that HSDPA has more performance and economical advantages over mass deployment. This technology enables and encourages users since the handsets and data cards needed by the customer are available in wide variety and at affordable rates. Therefore, free mobility, a highly desired value, is not sacrificed.

Giving his views on telecom future in the country, he said, Pakistan is one of the fastest growing telecom markets in the world. The growth numbers have been remarkable.

According to PTA, the current size of the Pakistani telecom market is 77 million subscribers, 48 percent tele-density with an annual growth rate of 100 percent over the fiscal year 2006-2007. The contribution of telecom in Foreign Direct Investment (FDI) is placed at 35 percent of the total FDI and the sector is reported to make up 2 percent of the GDP.

In FY06-07, the company grew nearly 200 percent in terms of customers, experiencing the highest growth in the industry by a wide margin compared to its competitors. We have just announced excellent financial results for fourth quarter of 2007, with 2 million subscriptions added to its base within the 3-month period. The company crossed 15 million subscribers by mid January 2008 within less than three years of operation.

Daily Times - Leading News Resource of Pakistan

[Neo]

Pakistan rates very highly on State Street models

SINGAPORE (February 19 2008): Stock market investors should be overweight in Pakistan, where election-related uncertainty has overshadowed the country's attractive prospects, a strategist with State Street Global Advisors said on Monday.

The world's largest institutional money manager also thinks that investors should also be overweight cash and underweight stocks and bonds, given the risks of higher inflation and slowing US economy, said Lochiel Crafter, the firm's Asia-Pacific market and investment strategist.

The Singapore-based fund executive said despite fears of violence ahead of Pakistan's general election, it was the firm's third favourite emerging market stock bet after Turkey and Hungary.

State Street Global Advisors is the $2 trillion money management unit of State Street Corp. "We like Pakistan. It rates very highly on our models, overall. It's reasonable value. Our sentiment factor is quite strong and the macro outlook is strong," he told Reuters in an interview.

"(The election) adds risk, but it could also add a buying opportunity if the fundamentals stay strong." Financial markets were closed in Pakistan on Monday with military troops and police on watch over a vote that could return a parliament set on driving President Pervez Musharraf from office.

Crafter, who declined to name State Street's individual stock or bond holdings, said that the firm's other favourite markets in emerging Asia included Indonesia and Thailand.

In both cases, State Street's quantitative models showed their stock markets had healthy momentum. The firm's least favourite market in emerging Asia was India, where a rise in the market to a record high in January had stretched valuations, he said. "It's easily the most overvalued on a relative basis that we have in Asia Pacific," he said.

STOCK, BOND OUTLOOK ROUGH: Boston-based State Street, which managed about $170 billion of assets sourced from the Asia-Pacific region at the end of last year, is favouring cash because it fears the weakening outlook for the global economy could hit first-quarter corporate profits."Our general view is that the first half of 2008 is going to be a bit rough," he told Reuters.

"At this stage, we're bracing the portfolios to make sure that we can weather the storm. It's (a case) of managing risk right now ... we're happy from a risk perspective to be a little conservative."

Bonds often serve as a safe haven when stock markets weaken. But Crafter said bond market yield curves were likely to steepen as inflation concerns were priced into longer-term bonds, hurting prices and driving up yields. In currency markets, the Australian fund executive said Asian currencies were likely to strengthen modestly against the US dollar in the coming year. "Asian economies will continue to grow; therefore, their currencies will continue to be attractive," he said.

Business Recorder [Pakistan's First Financial Daily]

[mujahideen]

KSE gains 443 points as market welcomes polls

Wednesday, February 20, 2008
By Salman Siddiqui

KARACHI: The Karachi bourse is all set to breach through all time high index level of 14,815 points on Wednesday, as the benchmark KSE 100-sahre Index closed just 18 points away from this historical mark on Tuesday.

The KSE 100-share Index jumped 443 points or 3.09 per cent to close at 14,797 points level only 18 points away from 14,815 points historical peak recorded on December 26, 2007.

“This surge in index is a welcoming gesture of equity investors to peace that prevailed on Monday’s polls,” analysts observed and added, “Investors are still having concerns over the making of next government and might react over it (coalition government) in other way if political instability does not ends here.”

Settlement between the next government and President Musharraf on some of political issues would be welcomed at the local bourse, but in case of political disturbance lingering on between prime minister and president camps the future scenario of stocks might be depressive, they added.

Therefore, if jobbers invest fresh funds in their favourite stocks on Wednesday’s session besides booking intra-day profits in the wee hours or middle of the session the market has potential to surge beyond all time high level, they further added.

“Smooth end to the most talked about general elections certainly was a sigh of relief for all the citizens, certainly those who were able to see through dense clouds of uncertainty and went on accumulating,” said Hasnain Asghar Ali of Aziz Fidahusein.

What next? The question still floats in the arena, formation of government and the stance of the political parties forming government mainly on dismissed judges and their willingness to work with the President will certainly matter, confirmation on that certainly will take some time, in the meanwhile however rumours on both fronts will keep the volatility alive, he added.

Also, the free-float market capitalisation based the 30-Index recorded a phenomenal growth of 652 points of 3.77 per cent and finished up at 17,948 points. Increased participation from investors enhanced the ready market turnover to 17-weeks high level at 373.441 million shares that is also 28 per cent or 81 million shares higher compared of last working session’s volumes recorded at 292.359 million shares.

Accordingly, the overall market capitalisation attracted massive fresh funds of Rs137 billion and surged to Rs4.560 trillion. Although it was an across the board buying mainly in energy, banking, telecom and cement stocks, therefore, the heavily dominating banking sector led the rally.

Each of five banks i.e. MCB Bank, National Bank, United Bank, Standard Chartered Bank and Abn Amro Bank contributed massive points in range of 11.28 points to 48.17 points in the total surge of 100-Index.

Followed by oil and gas stocks under the lead of giant OGDC that alone included 76.10 points in the 100-Index. Therefore, Pakistan State Oil and Pak Petroleum added another 14.52 points and 24.83 points respectively. While, Pakistan Telecommunication Company contributed another 29.44 points in the total increase of leading benchmark 100-Index.

“Investors gave a standing ovation to Bank of Punjab that traded 21 million shares after the Governor of Punjab issued an ordinance, allowing sale of 51 per cent shares of BoP to a strategic investor,” reported Live Securities.

S. Kashif Mustafa of ECL Research foresees that future prospects of the market remain favourable as fundamentals of various sectors remain stable in the medium to long-term perspective. Looking forward, introduction newer investment strategies through implementation of demutualization of the stock exchanges and availability of excess liquidity through CFS mark II and involvement of local and foreign institutions is expected to bring harmony in the capital market in medium to longer term.

The plus sign heavily dominated total 361 active counters on board, as 256 stocks advanced against 67 scrips declined besides 38 companies closed unchanged.

Highest volumes were witnessed in OGDC at 44.447 million closing at Rs129.75 with a gain of Rs4.65, followed by NIB at 27.060 million closing at Rs22.60 with a gain of 70 paisa, BoP at 21.054 million closing at Rs101.50 with a gain of Rs4.80, PTCL at 18.871 million closing at Rs43.15 with a gain of Rs2.05 and AH Securities at 17.964 million closing at Rs178.60 with a gain of Rs2.20.

KSE gains 443 points as market welcomes polls

[mujahideen]

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Banks planning to open 800 new branches

No let-up in consumer woes as expansion programmes continue,banks avoiding rural areas despite SBP directives

Wednesday, February 20, 2008
By Shahzad Anwar

KARACHI: Banks are planning to add 800 more branches in their network during this calendar year that may create 10,000 to 12,000 thousand fresh job opportunities, a knowledgeable banking source said. Last year banks had opened 1,000 new branches.

Banks are also planning to increase their customer base and are estimating lending to one million more borrowers. Currently banks have around six million barrowers. According to SBP’s regulations it is mandatory for banks to open 20 percent of their new branches in rural areas but regrettably the banks least care about these regulation and prefer to open new branches in main cities and towns instead of rural areas.

In last few years the financial sector grew rapidly and consumer financing also expanded manifolds. With expansion of banking sector and subsequent surge in consumer financing the different cases in which consumers’ rights were exploited badly also appeared on the surface. But unfortunately consumer protection laws could not be devised accordingly.

However, Complaint Division of State Bank of Pakistan (SBP) was entertaining such banks’ victims. “SBP takes serious action against such banks which are found exploiting consumers,” a senior official at SBP told The News. But he said that as per policy central bank does not interfere in cases which are under trial or sub-judice.

“There are six million borrowers in Pakistan of which SBP receives only four thousand complaints per annum which are very low as compared to total number of borrowers,” the official said.

The Banking Ombudsman court is another forum which hears complaints against banks and provides justice to affectees, but it is very unfortunate that majority of such cases in which consumers’ rights are exploited are not reported at any of the two forums. Moreover, the legislators also failed to protect rights of consumers’ through legislation of proper consumer protection laws. The Automatic Teller Machine (ATM) the basic automated banking service has become popular in the country in last few years. The ATM enable banking customers to excess their accounts 24 hour in 7 day, but underneath this facility there are some sinister problems which are shaking trust of ATM users.

The fake, damaged and written over currency notes doled out to customers by ATM machines is another problem among other numerous daily basis technical issues such as network connectivity and lack of currency notes to dispense.

A customer narrating his saga said, “On Feb 12 at around 11 am I withdrew Rs7,000 from an ATM in Clifton and proceeded to pay several bills. At one of these places, the cashier refused to accept a note of Rs500, which he said had a line on the Quaid’s face written in ink. Despite insistence he said that he could not accept the note. I then went to my bank and asked them to replace it. I did not think it would be a problem because a bank’s ATM had given me the note and commercial banks are legally bound to replace soiled or damaged notes.

However, to my surprise I found that the bank could not replace the note. I told them that their own ATM had dispensed it but to no avail and as for replacing soiled or damaged notes, a senior official at the branch said that the note was neither, I asked him what it was and he did not give me clear enough reply. He also said that if the note was torn the bank could have replaced it, to which I asked him should I tear it, to that also, he gave no reply. I am stuck with a note that nobody not even the bank who’s ATM issued it will accept.”

http://thenews.jang.com.pk/daily_detail.asp?id=97177