Pakistan Economy - News & Updates - Archive

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Real GDP grew to Rs 5.492 trillion during 2007-08

KARACHI (July 13 2008): Real Gross Domestic Product (GDP) volume reached new peak level of Rs 5.492 trillion during 2007-08 from Rs 5.192 trillion of previous year, up by Rs 300.383 billion, due to the robust performance of the services sector. The State Bank of Pakistan has released sector-wise data of real GDP growth, which showed that the country's economy grew by 5.78 percent during fiscal year 2007-08.

However, the increase in the GDP growth was about 2 percent less than the fiscal year 2007, as then it grew by about 6.8 percent, or Rs 332 billion. However, growth during 2007-08 was also lower than the annual growth target of Rs 374 billion, or 7.2 percent, fixed by the policy markers.

The services sector played a vital role in achieving 5.78 percent GDP growth, as growth in services sector was higher than commodity producing sector. Services sector presented a healthy growth of 8.6 percent during fiscal year 2008. Its volume increased to Rs 2.923 trillion by the end of June, 2008 as compared to Rs 2.702 trillion in fiscal year 2007, showing an increase of Rs 220.591 billion.

The growth of Commodity Producing Sector, comprising agriculture and industry, stood at 3.20 percent in fiscal year 2008. The volume of commodity producing sector reached Rs 2.569 trillion during 2008 over Rs 2.348 trillion of 2007, depicting a rise of Rs 79.747 billion in 2008.

"Internal and external shock, uncertainty on political front, short supply and poor law and order situation has wickedly hurt the GDP growth in last fiscal year", analysts said.

They said that energy shortage in the country, soaring oil prices, political battle and rising raw material prices hampered the economic growth during 2008. The manufacturing sector also presented feeble growth on the back of these internal and external shocks, besides the tight monetary policy. In commodity producing sector, the agricultural volume mounted to Rs 1.148 trillion with an upsurge of 1.48 percent, while the industry grew by 4.6 percent to Rs 1.420 trillion by the end of fiscal year 2008.

Business Recorder [Pakistan's First Financial Daily]

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Tax-to-GDP ratio to be enhanced to 15-16 percent: Yusuf

ISLAMABAD (July 13 2008): Federal Board of Revenue (FBR) Chairman M. Abdullah Yusuf has said that the tax-to-GDP ratio has to be enhanced from 11 to 15-16 percent for reducing gap of Rs 400 billion to Rs 500 billion in revenue collection. Addressing a workshop on 'Management Automation Projects' here on Saturday.

The FBR chief said although tax machinery is happy to cross the psychological barrier of Rs 1 trillion in revenue collection during 2007-2008, a gap of Rs 400 billion to Rs 500 billion still exists at present. This gap cannot be bridged until and unless tax-to-GDP ratio is being enhanced from existing 11 to 15-16 percent. It is not impossible provided we have the commitment and necessary tools to do it, he added.

He, however, said that despite all constraints, handicaps and non-availability of necessary tools, the board has been able to expand tax base in last four years from one million to 2.2 million taxpayers at the growth rate of 20 percent per annum.

Similarly, the board has successfully enhanced revenue collection at an average of about 18 percent per annum, pointing towards a need to plug existing gap. In next seven years, we have to achieve the target of 15-16 percent tax-to-GDP ratio with an annual growth of at least 0.5 percent, Abdullah Yusuf added.

He also called for efficient use of modern technology for more revenue generation, enhancing tax-to-GDP ratio and expanding the tax base. Abdullah Yusuf called upon the officers to equip themselves with latest techniques and technologies. He was of the opinion that as an institution or country, we have to go for a better change. We have to change ourselves with this rapid changing world to face the challenges of modern times, he opined.

Commenting on the ongoing automation projects, he said the FBR would become a totally paperless organization on completion of these projects. He asked the relevant officers and officials to make all possible efforts to achieve this goal.

Earlier, FBR Director (projects) Muhammad Asghar Chaudhry, in his welcome address, said, at present, four pilot automation projects were in the process of development and implementation. They are 'Human Resource Management Solution (HRMS)', 'Electronic Correspondence Management System (e-Dox), 'Budget and Accounts/Inventory Management System- SAP', and 'E-Archiving'.

All these projects are at different stages of implementation at FBR headquarters. After their completion, they will be replicated in the field offices of the board, Asghar Chaudhry added. He said that these systems would bring transparency and efficiency in the overall administration and management system of the board.

Business Recorder [Pakistan's First Financial Daily]

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Wapda urged to generate 100 megawatt power from Thar coal

KARACHI (July 13 2008): The Sindh government has urged the Wapda to take steps to generate 100-megawatt electricity from Thar coal, annually, instead of proposed 30 megawatts to overcome power crisis. The demand was made at the 59th board meeting of Lakhra Coal Development Company (LCDC) held here on Saturday with Advisor to Sindh Chief Minister on Mines and Mineral Development, Dr Khatu Mall Jewan.

The meeting was started with a Fateha Khawani held for the departed soul of Shaheed Benazir Bhutto. The Board Chairman and Advisor introduced the members to the participants of the meeting. The meeting approved recommendations of previous meeting. It also announced a honorarium equal to two basic salaries for the employees of the Lakhra Coal Development Company in recognition to their hardworking.

Briefing the advisor, the company officials said that they would now supply coal to Wapda at market rate. The advisor urged Wapda officials to generate more electricity from coal resources so that people could get rid of load-shedding. Sindh Mines and Mineral Development Secretary, Mohammad Younus Dhaga, MD Pakistan Mineral Development Department, MD Lakhra Coal Development Company and representatives of Sindh government and Wapda.

Business Recorder [Pakistan's First Financial Daily]

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Government advised to produce thermal energy by using coal

KARACHI (July 13 2008): Pakistan could have avoided the adverse effects of the high cost of petroleum products including petrol, diesel and furnace oil, if it had avoided over reliance on petroleum based products for generating thermal power and had instead given encouragement to use indigenously produced coal in power generation, reports UPP correspondent.

The conversion of the Pakistan Railways to diesel engines instead of coal engines resulted in growing use of diesel by the railways and the discarding of coal for running railway engines while in India nearly 50 percent of railway engines still run on coal.

The use of diesel in place of coal resulted in widespread use of petroleum products in the road transport. The government also established thermal power plants in which oil was used instead of coal.

As a result, the required growth of the coal mining industry in the country did not take place. The government at the federal and provincial level also neglected the promotion of the coal mining industry and its increase in annual production was also minimal.

Experts have pointed out that several warnings were given by the concerned officials against excessive usage of petroleum based products including diesel. As a result, the coal mining in Pakistan did not develop to the needed extent. In spite of various advances in removal of sulphur content from coalmines in Pakistan, large-scale employment of this technical facility for improving quality of coal was also not used by the authorities.

The development of the Thar coal deposits was also over delayed by the authorities in Pakistan. Details collected by UPP correspondent shows that various efforts by geologists in the country, including the stalwarts of the Geological Department of Pakistan to coax government into developing the Thar coal deposits as early as 1962 did not register. Government should go in for coal development in Pakistan on a larger scale and use it as the raw material for producing thermal energy.

Business Recorder [Pakistan's First Financial Daily]

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PCSIR to initiate projects worth Rs 1.2 billion

PESHAWAR (July 13 2008): The Pakistan Council of Scientific and Industrial Research (PCSIR) would initiate seven research and development projects in the country, which would cost Rs 1.2 billion. This was told during a briefing on the occasion of the Governor NWFP Owais Ahmad Ghani visit to the NWFP branch of the PCSIR laboratories here on Saturday.

The Central Chairman, Engr Sheheryar Khan, Member Technical, Engr Qadar Hilal as well as the Director General of the Peshawar Chapter, Engr Muhammad Tariq, and other senior scientists and researchers of the laboratories were present on this occasion. The Governor was informed that almost 50 research projects in various development sectors are in progress in the laboratories, which also include field activities both in the province and Fata.

Mineral, food nutrition especially the fruits and vegetables processing and preservation, mechanical and engineering sectors are receiving due priorities wherein, apart from individual clients, institutions are also served both in the private and public sectors.

The laboratories, it was added, has developed its branches in Chitral and Skardu, wherein latest technologies, matching to the local needs have been introduced to ensure due return to the respective farming communities, particularly in the fruits and vegetable sector. The Governor was further informed that the laboratories have developed quality control system in the field of honey production, which is proving highly beneficial to enhance earnings especially in the shape of foreign exchange.

The scientists of the laboratories, the Governor was informed, have published 157 research papers and introduced 10 patent products over the year, apart from making upgradation and improvement of quality and standard of a number of products in various fields and providing chemical analysation services to clients.

Speaking on the occasion the NWFP Governor Owais Ahmed Ghani appreciated the achievements of the Pakistan Council of Scientific and Industrial Research (PCSIR) Laboratories in its research activities and also expected to develop more efficient, effective and result oriented liaison with industrialists and entrepreneurs to translate their findings into reality to the maximum extent and ensure timely transfer of benefits to the public.

Referring to working of the organisation, the Governor said, "today, highly enthusiastic and talented entrepreneurs are actively in almost every discipline of industrial sector, who not only have the thirst for making development of the country but also have due abilities to achieve the desired goals.

Meanwhile, the Governor went round various laboratories, installations, and workshops of the organisation and exchanged views with the researchers and scientists. He took keen interest in each and every aspect of the research activities and apprised him about their achievements as well as their future scope of work. Later on the Governor also inaugurated the newly established Pakistan Dimension Stones Centre at the premises of PCSIR Laboratories, Peshawar, which is the first institution of its nature in the province.

Business Recorder [Pakistan's First Financial Daily]

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2200 megawatts addition to national grid: government unlikely to meet promise by April 2009

ISLAMABAD (July 14 2008): The government is unlikely to meet its promise regarding the addition of 2200 MW to the transmission system by April 2009 in an effort to meet the energy crisis. This promise was repeatedly made by Prime Minister Syed Yousuf Raza Gilani and the water and power minister on the floor of the National Assembly.

Official documents obtained from PPIB reveal that some of the thermal power projects were behind schedule. "The target of 2200 MW programme runs the risk of delay due to several reasons," PPIB acknowledged in documents made available exclusively to Business Recorder.

According to these documents, a meeting was held on March 27 in the Prime Minister Secretariat with the Principal Secretary in the chair in which certain important decisions were taken targeted to ease the power shortage, including setting up thermal powers plants in the public and private sectors by April 2009.

The meeting also decided that the water and power secretary would be the focal person for co-ordination and resolution of problems related to the effective implementation of the decisions taken in the meeting. The government had assigned the PPIB to manage the awarding of projects of 615 MW capacity to the private sector.

The projects were Balloki (Orient) Power projects (simple cycle operation) with the capacity of 150 MW whose commissioning target was July 2008, followed by 150 MW Attock General Power Project by October 2008, 225 MW Atlas Power project by March 2009 and Balloki (Orient) Power project - combined cycle operation with 75MW capacity.

The PPIB has claimed that 225 MW combined cycle power project by Orient Power Company Limited (OPCL) had successfully signed all project-related agreements and achieved financial close. The ground-breaking of the project was held on November 29, 2005. Construction activities are underway, but some equipment is yet to arrive.

Following Prime Minister's decision, the PPIB had advised the sponsors of OPCL and Pepco to commission simple cycle phase 150 MW of the project by July 2008, but the parties have not yet signed the tolling agreement.

Another issue, which is delaying the project, is the non-availability of gas. OPCL was allocated 38 mmcfd from SNGPL on a 9 month basis up to 2011 based on a gas quota allocated to PPIB. The petroleum ministry was requested to ensure gas supply of 38 mmcfd to OPCL through SNGPL to start operation of the plant in simple cycle mode by July 2008.

The ministry conveyed its reservations on requisite gas supply for operation of the plant in simple cycle mode. In response, the PPIB clarified that its intent was not to provide gas for simple cycle operation of the OPCL's power plant by diverting gas from any of the existing power plants like Kapco; moreover, such arrangements would not result in any "capacity addition".

Further, the petroleum ministry was once again requested to arrange gas supply of 38 mmcfd to OPCL power project from gas quota of SNGPL placed at PPIB's disposal, without curtailing gas supply from any other power plant including Kapco.

The PPIB has clarified that timely provision of gas is imperative to start operation of the plant in simple cycle mode. However, the ministry has not yet responded to PPIB. Pepco recently informed the PPIB that simple cycle mode of OPCL project will only be possible (by end of August 2008) if timely supply of gas is made available to OPCL.

Regarding Attock General Power Project, the PPIB has clarified that the project has encountered hindrances in movement of engines since May 2008. The PPIB is in co-ordination with all the departments concerned to ensure smooth movement of engines. Due to its efforts, 3 out of 9 engines have reached the AGL project site since June 28, 2008.

Wartsila, the EPC contractor of AGL has lately communicated that the diversion made to Dhoc Pattan Bridge on Sawan River has been washed away due to recent rains and flooding, and consequently, six engines are stuck at Dhoc Pattan Bridge since June 12, 2008.

It has also been communicated that owing to the large volume of water flow and expected heavy monsoon rains, the re-construction of the diversion may take several months. Accordingly, Wartsila/AGL has sought permission from the Punjab government that they be allowed to use the new bridge of Dhoc Pattan with an undertaking for the repair costs against partial or whole damage caused to the bridge.

The PPIB has written a letter to the Punjab chief secretary that Warstila/AGL proposal may be considered favourably so as to amicably settle the issue. The PPIB is of the view that any delay in delivery of the engines may delay in the AGL Project commissioning, thus hampering the government efforts. The Atlas (Shirazi) Power Project is expected to be commissioned within schedule ie March 2009.

Business Recorder [Pakistan's First Financial Daily]

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Soaring trade deficit and sliding rupee

For decades, Pakistan’s balance of trade remained negative, though not as high as now. In 1996-97, with the PPP in power, it touched $ 3.52 billion; today it is a staggering $20.75 billion. This deficit is based on imports of $39.97 billion and exports of $19.22 billion recorded by the Federal Bureau of Statistics (FBS) in 2007-08 but, as always, the export figure will be revised downward and the deficit could be six times of its 1996-97 size.

PPP is in power again and facing challenges that defy a solution to the economic predicament. Although this deficit is the legacy PPP knowingly inherited, its failure to devise a strategy to contain it until the economy attains a sustainable posture exhibits a lack of consciousness of its responsibility. This factor is escalating the psychological impact of the deficit i.e. eroding confidence in the economy.

The deficit is creating a directionless economy, which is the ideal environment for bounty hunters, as proved by the steady slide of the rupee (20 per cent) since January 2 reaching a climax on July 8. It forced SBP to take corrective actions yet again that central banks rarely take.

Trouble began when trade deficit more than doubled to $6.183 billion in 2004-05 over it 2003-04 level. The fact that it was met primarily by workers’ remittances was a red signal about consumption rising rapidly and becoming import-oriented. Containing imports called for supporting domestic producers of import substitutes to cut their costs and stay competitive with imports. Unfortunately, that wasn’t done.

Instead, we went headlong for ‘cheap’ imports not realizing that this addiction had lethal after-effects even on economies like the US. But by then Pakistan had entered the age of ‘liberalization, deregulation and privatisation’, courtesy its erstwhile Prime Minister. In 2005-06 the trade deficit doubled again to $12.011 billion, and in 2006-07 it rose further but was dubbed as the ‘sure’ sign of growth. That ‘growth’ has now pushed the deficit to $20.75 billion.

The figures show rising dependence on external sources to finance consumption as well as the waste that goes along with it. Except for workers’ remittances, no other source depicts any stability because all of them depend on political and economic stability. Tragically, the distortion escalated even during the tenor of the banker Prime Minister Shaukat Aziz.

According to the Governor SBP, imports during Jan-May 2008 were 51 per cent more than those of the corresponding period of 2007. Admittedly, the full-year 2007-08 imports include oil imports of $12 billion but the remaining $28billion is accounted for other imports, a huge component comprising consumer goods. In effect, we had been pumping a balloon that is now ready to burst.

After the downgrading of Pakistan risk by rating agencies it became clear that, except for workers’ remittances, other inflows would dry up and the rupee was in for a big slide. This view encouraged importing far more and quickly, which explains the meteoric rise in January-May imports. The strategy was to subsequently profit by selling everything on hugely inflated prices as the rupee depreciated.

Market players, who had earlier pumped that balloon, also don’t want to risk the wealth they are earning. They therefore began stashing away their wealth to safe heavens. The 3.6 per cent slide in rupee’s value on July 7 and 8, which was reversed on the third day after imposition of SBP’s punitive measures proves that the slide was not caused by import payments but by capital flight-driven speculation, that has stopped for now.

SBP has cut down exchange trading hours, banned forward exchange trading, cut the amount of advance payments for imports to 25 per cent, and told moneychangers to seek its permission before remitting abroad any amount exceeding $ 50,000 or its equivalent in other currencies. It is significant that SBP will now provide 100 per cent exchange cover for oil imports. It should remedy some fears, though not all.

The trade deficit is twice the size of the available exchange reserves. Given the load of external debt instalment payments, the reserves could fund oil imports for about six to seven months, nothing else. This is too optimistic because government imports of food grain must be covered by the reserves, and secondly, what do we do after the reserves are exhausted? That is the crux of the matter.

There is no option but to mobilise external sources. With its risk rating downgraded, Pakistan will find market borrowing expensive. Borrowing from the IMF would force government to cut subsidies more rapidly, which could further enrage businesses and the public. State enterprises could be privatised at this stage only on dismally low prices. Borrowing from friendly countries is the only option but it requires ingenuity and a convincing ability for governance in the coming years to raise domestic resources for repaying the debts.

Pakistan’s friends in the Middle East may be prepared to take a risk on Pakistan yet again but not without clear-cut plans to bolster internal resources through focused policy-making, fiscal discipline and tax collection, reviving domestic industry, and improving agricultural growth (for which these states see a potential). The last federal budget exhibited nothing of the sort.

The current economic state can, at best, be summed up as alarming. But, at the same time the sheer size of young workforce (a ticking bomb if it remains unskilled and unemployed), and the potential for benefiting from nature’s bounty, hold out enormous promises. What we must overcome is the lack of capacity for achieving what we can achieve from these resources.

What we need is a new team.. The team Mr Asif Zardari has put in place lacks the requisite credentials. This was hardly the style to adopt while inheriting an economy with record fiscal, trade and current account deficits.

Soaring trade deficit and sliding rupee -DAWN - Business; July 14, 2008

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G8’s meaning for Pakistan

Why should Pakistan’s policymakers — or, for that matter, the country’s citizens — be interested in the meeting of the G 8 industrial countries held in a remote corner of Japan. The answer is simple. It is because of globalization, a process that began a couple of decades ago as most large economies lowered the barriers to the movements of commodities, goods and capital. The result is a world economy that is better integrated as never before. What happens in one large country affects the rest of the world.

It was the adverse consequences of a development some thirty years ago that first brought together the industrial countries. They met to formulate their response to the sudden increase in the price of oil in the mid to late 1970s. That increase in price was orchestrated by the Arab members of the cartel of oil producing and exporting countries, the OPEC, to show their displeasure at the West’s one-sided approach to the Israel – Palestinian conflict.

The first time the leaders of the industrial world met as a group, there were seven countries involved – Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. Later, after the dissolution of the Soviet Union, the group added Russia to its ranks and the G-7 thus became the G- 8.

About a decade ago, the group also began to invite the leaders of some other major economies without having them become full members. Also in attendance are the President of the European Union and the heads of the IMF and the World Bank. The chairmanship of the G- 8 conclave rotates amongst its members along with the venue of the meetings. The presiding country has some role in determining the agenda and in issuing invitations to the non-G 8 countries to attend. It has become customary for the leaders of the BRIC nations – Brazil, Russia, India and China – to attend the meetings.

In 2007, when the G 8 leaders met in Germany’s seaside resort of Heiligendamm, no one was even remotely aware of the havoc the collapse of the United States’ sub-prime housing market would visit on the global economy. No one was expecting that the price of a barrel of oil would increase from $ 65 to $ 140 or that the price of a ton of rice would more than triple, from $ 300 to $ 1000. Anxiety about the price rise of oil undermining the global economy was absent from the deliberations of the G 8 since its early days.

Also absent were concerns about feeding the world’s poor. The last time G 8 leaders discussed the subject of world food production was back in 1981 at the Ottawa summit when they emphasised in their communiqué “the importance of accelerated food production in the developing world and of greater world security.”

It seemed to the then leaders of the group that simple exhortation would keep the developing world on its toes. All that was needed was a gentle reminder that the sector of agriculture needed the continued attention of the world. Governments had become complacent because of the gains made after the spread of the green revolution in the 1970s.

At the 2008 meeting, the G 8 leaders chose to concentrate their attention on five areas: the state of the global economy; the sharp increase in the price of oil and its consequence for different parts of the world economy; the sharp rise in the price of food grains and its impact on the incidence of poverty; global warming and controls on carbon emissions and, finally, the situation in sub-Saharan Africa, particularly the crisis in Zimbabwe. Four of these five items are of direct concern for a country in Pakistan’s situation.

The Japanese hosts assembled two sets of leaders other than those from the G 8 countries to help their understanding of the items on the agenda. A group of African leaders were called in discuss the continent’s economic prospects and how the G 8 countries could help in the process of growth. The leaders reminded the developed world about its pledge to double economic assistance to the continent. The commitment was given at the G 8 summit in Gleneagles hosted by Tony Blair, then Britain’s prime minister.

On the question of carbon emissions, the G 8 leaders reached a weak compromise, making an unenforceable commitment to reduce by one-half the amount of carbon that was being thrown into the atmosphere and to achieve that target by the year 2050. The response from the NGO was fast and sharp; the coalition of groups working in the area of environment declared that such a pledge would not help reduce global warming. It would further deteriorate the situation in such water-stressed countries as Pakistan.

On agriculture, the G -8 pledged to increase their assistance for improving land productivity. Food production will need to increase by 50 per cent by 2030 in order to save the developing world from famines and to cater to the increase in demand in those countries that are growing rapidly. However, much of this production increase is likely to come from the large farms in developed countries. For it to become available for developing countries, their purchasing power must increase which is unlikely in the required amounts. The only way out is to provide government grants to the poor countries. However, the proportion of development assistance for agriculture has fallen to less than three per cent from 18 per cent in 1979. At the summit, the UN Secretary General referred to the need to invest up to $20 billion a year in agriculture, half of which needs to come from aid.

The performance of the G- 8 summiteers at their recently concluded meeting in Hokkaido, Japan seems to confirm the belief shared by a number of analysts that the group is no longer very relevant for addressing the concerns about the status of the global economy. The diminishing presence of the G 8 countries in the global economy is well illustrated in the IMF data presented in the accompanying table. While the G -8 countries still have a very significant share of global output – estimated at 63.5 per cent by the World Bank for 2005 – some of the countries outside the group have more dynamism. The four BRIC countries accounted for 30 per cent of the addition to global product in 2007, compared to about a quarter for the G 8 nations.

In other words, the future belongs to the BRICs, other large developing countries and to the oil exporting countries and not just to the G 8. This would suggest that if a group of countries is to hold an economic summit every year to decide on approaches and actions concerning the global economy and the difficulties it faces, it has to be a group larger in size than eight countries that are seeing a reduction in their share in global output.

Could Pakistan gain admission into such a group? It could on the basis of the size of its population which is now the sixth largest is the world. It could also be admitted because of its geographical position in the heart of the more troubled areas in the world. But the country will have to manage its affairs, both economic and political, before any such claim would be taken seriously by the international community.

G8’s meaning for Pakistan -DAWN - Business; July 14, 2008

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Pakistan, WB sign accords for water capacity, power distribution

Tuesday, July 15, 2008

ISLAMABAD: The Government of Pakistan on Monday signed two agreements with the World Bank for electricity distribution and transmission improvement project worth US$256.7 million and water sector capacity building and advisory services project worth US$38 million.

The financing agreements for both projects were signed by Acting Secretary, Economic Affairs Division Junaid Iqbal Chaudhry on behalf of the Government of Pakistan and Yousapha B Crookes, Country Director on behalf of the World Bank. The project agreements for electricity distribution and transmission improvement project were signed by the representatives of NTDC, IESCO, LESCO, MEPCO and HESCO on behalf of the respective entities.

The Electricity Distribution and Transmission Improvement Project (EDTIP) will assist the distribution and transmission companies in strengthening the capacity of the distribution and transmission network to meet the increase in electricity demand more efficiently and with better reliability and quality. The project will also strengthen the institutional capacity of power distribution companies and support priority areas of power sector reform through components included investment in distribution networks, investment in transmission network, institutional strengthening and capacity building and energy efficiency.

The objective of the Water Sector Capacity Building and Advisory Services Project (WSCAS) is to improve the management and investment planning of water resources in the Indus River System through components included capacity building and support of federal institution in water resources planning and management, improvement in water resources management and development in WAPDA, project management and additional studies.

This process will run concurrently with the national plan to develop hydel storage and power infrastructure. Acting Secretary, Economic Affairs Division Junaid Iqbal Chaudhry told journalists that the soft IDA amount of US$52.6 million in EDTIP and US$38 million in WSCAS is interest free. However, service charges at the rate of 0.75 per cent and commitment charges at the rate of 0.5 per cent on undisbursed balance will apply. He said EDTIP also contains hard IDA for an amount of US$30.5 million on which an interest at the rate of 4.2 per cent per annum will be paid, in addition to the service and commitment charges.

He informed that the Government of Pakistan will repay both the IDA credits in 35 years including a grace period of 10 years. For the IBRD loan portion in EDTIP of US$173.6 million, a front-end fee will be paid at the rate of 0.25 per cent of the loan amount, and the interest will be paid at the rate equal to LIBOR for the Loan Currency plus the Fixed Spread. The IBRD portion will be repaid in 30 years including the grace period of five years.

World Bank Country Director Yousapha B Crookes said that the Bank remained involved in different development projects with the Government of Pakistan and was now involved in power distribution area, which is very import for revenue generation. He said development in this area is important for productivity in the country besides providing quality electricity service to the people.

Pakistan, WB sign accords for water capacity, power distribution

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1.7mT mangoes produced

Tuesday, July 15, 2008

RAHIM YAR KHAN: The annual mango production in the country is estimated at 1.7 million metric tons, with Rahim Yar Khan district accounting for over 0.4 million metric ton of the fruit, almost a quarter of the total national produce.

Talking to APP at the 3-day ‘Mango Show 2008’, DO agriculture Imtiaz Ahmed disclosed that today Pakistan ranks at number five in the world for mango production, and stands at number seven in the export of fruit to world markets.

“This export ranking, which was almost nil 10 years ago, has occurred with the introduction of proper fruit storage know-how, increased facilities, the use of latest post-harvest technology, greater grower trader liaison and positive marketing policies,” he observed.

He lauded the fruit and vegetable development project and other similar programmes introduced by the government. “With government support, our mango export ranking will rise to the top three positions,” he added. The DO said that the Mango Show 2008 was a huge success, where stalls were set up to show the world varieties of delicious mangoes produced in this region and across the country.

1.7mT mangoes produced

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Cement companies to find alternatives to coal

Tuesday, July 15, 2008

KARACHI: Cement companies are trying to find out alternatives to coal, almost 90 per cent of the companies use coal for heating purpose in a bid to overcome effects of a huge increase in coal prices that are touching $180 in the international market, said Badruddin Fakhri, Managing Director of Galadari Cement.

The cement industry is trying to find out alternatives to coal and efforts are being made in this regard, and hopefully they will bring positive results in a few years, he told The News. The prices of coal in the international market are continuing to rise, increasing the input cost of the cement industry in the country. Most of the coal which is used in local cement companies is imported. He said coal is quoted at around $180 per tonne in the international market, which is an important ingredient of the cement industry.

To find out alternative solutions, a number of cement companies are working to use city waste, which would be processed and turned into cakes, which would be later used as a coal alternative in the industry. International coal prices are also affected by the huge coal demand in India and China.

“India and China are in dire need of coal as their consumption is mounting, but in future it is expected that these two countries would improve their local production and partly overcome this problem,” said Fakhri.

High prices of coal and depreciating Pak rupee are factors negatively impacting on the local cement industry, though cement exports from Pakistan continue to rise. Local cement prices have surged to Rs380, up by Rs100 in just last two months.

As per the McCloskey Coal Price Index (Richard’s Bay), coal prices have breached US$200 (C&F) per tonne mark and are currently trading around US $210 per tonne. Primary reason for this rise is the huge demand for coal in India and China for their energy needs, JS Research reports.

Cement companies in the country are presently importing coal at around US$160-180 (C&F) per tonne. Since majority of the local cement companies are using coal for heating purpose, this price hike will significantly edge up input costs.

Rupee has depreciated around 13 per cent since the start of 2008 from Rs62 to Rs70 against dollar, further depreciation is expected in the future, coal costs in rupee terms are likely to increase substantially. In fiscal year 2008, cement dispatches increased to a record high level of 30 million tonnes depicting a growth of 25 per cent on year-on-year bases. However, this growth was mainly driven by 142 per cent rise in exports and an increase of 6 per cent in local dispatches.

Cement companies to find alternatives to coal

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Karachi stocks shed a massive 518.51 pts on selling pressure

KARACHI: The Karachi stock market witnessed heavy selling pressure on the first day of the trading week Monday as small investors squared their positions by offloading their holdings, analysts said.

The Karachi Stock Exchange (KSE) 100-share index shed a massive 518.51 points as the market closed at 11,177.31 points as compared to 11,695.82 points of the previous session. The KSE-30 index shed 632.96 points to close at 12,772.39 points.

Analysts said the market opened negatively 302 points and during later part of the trading session, the decline continued unabatedly.

However, the only positive feature of the market was better trading activity as the ready market volume was recorded at 69.929 million shares.

The market turnover increased 230.43 percent to 69.92 million shares as compared to 21.16 million shares traded in the previous session. The overall market capitalisation declined 4.26 percent to Rs 3.479 trillion as compared to previous session’s Rs 3.634 trillion. Out of 256 companies, 25 closed in positive zone, 222 in negative while 9 remained unchanged. Farhan Mahmood, analyst at JS Global Securities said circuit breakers were reverted to the previous levels, but the index continued to decline and this time with an extended capacity.

Although attractive levels did offer resistance to the float mainly in oil and gas exploration and marketing stocks, negative sentiments never allowed the so called value buyers, except for some, (who were chanting slogans against the 1 percent lower lock) to come in.

Hasnain Asghar Ali, analyst at Aziz Fida Husein and Co said recent changes made in the circuit breaker mechanism was finally made public (during the recent meeting called by the KSE management on Friday), ensuring the smooth payments was the idea and undoubtedly it was achieved as no risk management issues were heard, tight monetary policy and liquidity crunch on the other hand were blamed for not allowing the innovative changes in the mechanism to bear fruit, but other issues such as a constant flow of negative developments on almost all the sensitive fronts contributed to it and leading the way was certainly decline in the rupee value.

Ahsan Mehanti, senior analyst at Shahzad Chamdia Sec citing reasons of negative index of the market attributed it owing to the selling pressure on account of poor law and order situation, foreign selling, current account deficit, political uncertainty, high discount rate, and falling equity markets globally affected investors’ sentiments negatively.

The futures’ market turnover went down to seven million shares as compared to 7.34 million shares traded in the previous session. 25 of the companies closed in the negative while five remained unchanged.

Daily Times - Leading News Resource of Pakistan

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Trade policy envisions $21.7 billion exports

* Govt wants to reduce imports by 50%

ISLAMABAD: Government is expected to set an export target of $21.7 billion for the current fiscal year 2008-09 along with an emphasis on 50 percent reduction in imports.

Sources in commerce ministry told Daily Times that the Federal minister for Commerce, Chaurdhry Ahmed Mukhtar would announce Trade Policy 2008-09 on July 18.

Government had set the target of export at $19.2 billion for the last fiscal year, however due to host of reasons this target has not been achieved. The new target of $21.7 billion is regarded over ambitious due to persistent load shedding in the country and gas shortages for the industrial sector.

The power and gas shortage, increase in the prices of electricity, POL products, gas prices and overall double digit inflation in the country would not enable the industry to produce exportable surplus and compete in the world market.

Sources said government would take several measures to reduce the import by 50 percent in the current fiscal year through trade policy measures that also include reduction of $1 billion in cotton imports.

And the policy would also carry measures for cotton export by additional $2 billion in the current fiscal year, sources added.

Increase in trade with regional countries especially the neighbouring countries like India, Afghanistan, Iran and China would be the prime focus of the Trade Policy as this would help hike exports on competitive transportation charges.

The major export item is textile, which is the 60 percent of total export and government would give special incentive for the textile sector. It is also under consideration for this time to diversify the export items and go towards surgical and sports items.

Different trade and industry bodies of the country have demanded 25 percent reduction in utility charges for export industries, duty free import of raw materials, allowing imports of machinery and raw materials from India through road and rail routes to incorporate in new trade policy 2008-09.

Federation of Pakistan Chamber of Commerce and Industry (FPCCI) has suggested that import of all raw materials should be allowed on duty free basis while higher duties should be imposed on luxury items.

FPCCI demanded that ban should be imposed on the export of wet blue and split leather and 50 percent air freight subsidy be allowed on finished leather and leather garments and exports.

The government should not allow the export of wheat, rice and cotton and government should also take steps to fill the demand and supply gap in energy.

Daily Times - Leading News Resource of Pakistan

[Neo]

Government agrees to appease disgruntled elements: 10-15 percent share in Balochistan development schemes' allocations

ISLAMABAD (July 15 2008): The government has agreed with a major demand of projects' executing authorities in Balochistan to include in the overall allocations of development schemes the money they spend on giving to the elements, which can create law and order and cause security problems in projects' execution, informed sources told Business Recorder on Monday.

Recently the federal government has agreed with contractors of projects being launched in the country's largest province to spend around 10 to 15 percent of the projects' allocations on the people who can use their influence for maintaining law and order and ensuring security to the projects' execution. The extra money, unlike the past, will be included in the total cost of the projects, the sources said.

Balochistan, FATA and some areas in the NWFP are those where the government has already conceded to the demand of the executing agencies to include security cost in the overall projects allocations being made through budgeted Public Sector Development Programme (PSDP).

Previously, the contractors and executing authorities were required to spend the amount for the same purpose, but that amount was to be spent from the contractors' own pocket. "That was not included in the overall cost of the projects," sources added.

"The step has been taken in bid a to implement development projects in Balochistan as the number of delayed or time overrun schemes has been increasing," the sources said. According to the sources, almost all the government agencies have reported that the development projects could not be timely executed as the security has become a major hurdle and they requested the federal government to do more for taking its development agenda in Balochistan forward.

Despite the fact, the government of Balochistan established a separate police and FC force for the purpose of providing security to the personnel of projects, the security arrangements were not up to the mark, the sources added. "This measure, which was taken last fiscal, caused 6 to 8 percent raise in the overall cost of the development schemes," the sources said.

The federal government has now included the extra money being given to law and order creating elements in the overall cost of the development schemes that will further escalate the projects allocation and could be another burden on the development budget.

Some analysts believe that this step will not work as the government writ in almost all areas is weakening day by day. The federal government must show its political commitment to take up all these issues with all political forces of the province. In a recent meeting of the Oil and Gas Development Company Limited (OGDCL) informed the Senate Committee on Petroleum and Natural Resources that it was facing serious troubles in carrying out oil and gas exploration activities in Marri, Bugti, Jhal Magsi areas.

Due to a lack of security, the OGDCL could not start drilling. In some areas, the company abandoned work on some projects after the security lapsed, the sources said.

Business Recorder [Pakistan's First Financial Daily]

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Rs 52 billion to be generated through privatisation: Prime Minister

LAHORE (July 15 2008): Prime Minister Syed Yousuf Raza Gilani has said that privatisation of 16 units, which will be made in consultation with the workers unions of the respective organisations, will generate a revenue amounting to Rs 52 billion while 10 percent shares would be reserved for the workers.

Addressing the Lahore Chamber Award Ceremony organised by the Lahore Chamber of Commerce and Industry on Monday evening, he said it is not the government's job to run industries but it is only for protecting them from crises and facilitating them. Punjab Governor, Salmaan Taseer and Punjab Senior Minister Raja Riaz Ahmad were also present on the occasion.

He said that many external and internal severe shocks including the deceleration of economic growth, rising inflation, particularly the food inflation, current account and trade deficits have badly hit the country's economy. However, the government is giving priority to expedite the industrialisation process to create job opportunities, he maintained.

The government is also working for the promotion of non-traditional sectors including gems and jewellery, granite, marble sectors to ensure fast track economy. Similarly efforts are being made to enhance country's exports, he added.

To address the energy crises, the government is exploiting all opportunities and zero-rated import has already been declared to induce investment in this sector. It is also awarding contracts to independent power producers so that energy issue could be resolved. Besides, one-window facility is also being provided at the Board of Investment, Gilani said.

The Prime Minister said the present government has also taken many steps for providing conducive environment, evolving business friendly policies, and concentrating on skill development so that 6-8 percent economic growth could be achieved.

He said the world class infrastructure facilities would be provided at different industrial parks like Korangi Industrial Estate on 250 acres of land, Bin Qasim Industrial Estate on 970 acres, and Auto Cluster Park Sheikhupura on 170 acres.

Responding to LCCI president demand for withdrawal of 10 percent Withholding Tax on electricity bills, he said that the Withholding Tax on electricity bills and cheques would not affect the businesses because these are to be adjusted in their tax returns at the end of year. However, it would help bringing non- documented economy into tax network.

About the textile sector, he said the Economic Co-ordination Committee in its upcoming meeting will review gas price for the textile sector and urged the Faisalabad Chamber of Commerce and Industry to call off its strike. All the issues confronted by the textile and other industrial sectors would be redressed in the industrial policy.

Appreciating the LCCI role in promoting trade and industry in the country, he said it is an effective platform to provide bridge between the government and the business community.

Speaking on the occasion, the LCCI President Muhammad Ali Mian said the government needs to take solid measures including relaxation of taxes on export oriented industry, setting up of skill development institutions, the provision of infrastructure, availability of resources for exploring new markets and help the growth of SMEs to enhance country's exports.

He stressed the need for facilitating and strengthening industrial sector and urged the government to chalk out business friendly environment to attract foreign investment. The government should also start short-term and long-term projects of electricity generation especially hydroelectric and wind energy projects.

He urged the government to stop the Oil and Gas Regulatory Authority (OGRA) from increasing the gas prices during the ongoing electricity shortage crisis. He asked the government to announce a relief package to save the textile industry that contributes 65 percent in exports and major source of employment. Pakistan cannot enhance exports unless it concentrates on non-traditional items, along with traditional export items.

The Trade Development Authority of Pakistan needs to take concrete measures for exploring new markets to introduce Pakistani products, he added. Later, Prime Minister Syed Yousuf Raza Gilani distributed Prime Minister Trophy, Businessmen Gold Medal, and awards among the winners.

Business Recorder [Pakistan's First Financial Daily]