Pakistan Economy - News & Updates - Archive

[Neo]

SHEIKHUPURA (July 31 2006): Frequent power shutdowns have caused as much as Rs 2.5 billion loss to Sheikhupura industry in three months, which in turn, will deprive the national exchequer of a substantive amount in terms of taxes.

As many as 900 industries, including paper mills, chemical, food, fertilisers, light and heavy engineering and heavy mechanical etc, are located in Sheikhupura district, of which, over 400 are situated on main Sheikhupura Road.

These industries are facing severe hardships due to unscheduled load shedding by Wapda, which has reduced the industrial output of the area by 25 percent, Shahzad Ali Nagina, Chairman, Sheikhupura Association of Industry, told Lahore-based journalists who visited the industrial area.

Wapda is resorting to 3-4 hours daily load shedding in the area and this practice has been going on for last three months, causing Rs 25 billion loss only to Sheikupura Road industry, he claimed. Despite contributing billions of rupees to the national exchequer in terms of taxes, Sheikhupara industrial area is facing multiple hardships and problems and suffering a lot due to the apathetic attitude of government functionaries, he complained.

Frequent power shutdowns, lack of facilities such as fire fighters, schools, hospitals were the main problems of this area, he pointed out. "We have internal arrangements to extinguish fire in factories, but there is no such facility from the government side," he pointed out.

Manzoor Malik, Convenor of the Association, who arranged the visit, said one of the reasons for piling up of their problems was that their association had no representation at any appropriate forum. Whenever the industrial and business community of the area raised their voice at government level, they were turned a deaf ear, mainly because of their non-representation at any platform.

"The existence of Sheikhupura Chamber of Commerce and Industry was just symbolic as no businessman or trader of the district was its member, nor the persons who run this so-called chamber ever offered its membership to any one," Manzoor Malik revealed.

It is ironic that this industrial estate, which is located in hearts of Gujranwala, Narowal, Faisalabad and Nankana, had lost its importance despite being abundant in industrial and other resources, he said. The significance of this area could be well-gauged by the fact that all Wapda grid stations and transmission lines and Sui gas lines passed through this area, but even then it was facing frequent power shutdowns, which was affecting their business adversely.

Unfortunately, law and order situation in this area was also very dismal and the area had become notorious for theft, dacoities and highway robberies. Except the main road, there was no allied communication links in the area. There was also no drainage system and dirty water was spreading diseases in the area, he said.

He also pointed out that there was no interchange on Motorway, although it passed through this area. The industrial community of the country was paying billions of rupees to the national exchequer, but in return, they were forced to stand in long queues to pay toll taxes and token tax on motorway and highways, which was the worst kind of example to disgracing and mentally torturing them.

About Sheikhupura dryport project, Manzoor Malik said it was delayed despite the fact that Pakistan Railways had enough land for its establishment. Narrating other problems, he said there was no playground and any other facility for promotion of recreational and healthy activities in the area. He also stressed the need of establishing vocational and technical training institutes in the area to ensure provisions of skilled labour to the industries.

 

[Neo]

QUETTA (July 31 2006): The government is spending Rs 19.750 million on development of tourism sector in Balochistan, official sources told APP on Sunday. Rs 12.012 million have already been spent on construction of Hut at Hanna lake a suburb of the provincial capital.

Besides, the government is also spending millions of rupees for preservation of cultural heritages in the province to attract tourists.

In this regard, Rs 61.498 million have been allocated for construction of two cultural complexes in Gwadar and Ormara, out of which Rs 23 million had already been spent.

"With the completion of Gwadar Port the province will be a transit route to Central Asia, Middle East and South-East Asia and the natural beauty of province will attract tourists."

The government has declared the year 2006 as 'Tourism Year' aimed at promoting the image of Pakistan favourable for tourists.

The government is promoting tourism sector, which will pave way to enhance better relations and understanding with the people of other countries. It will not only make possible people to people contact, which promotes foreign relations, but also generates revenue for the development of the country.

The province has colossal potential in tourism and there are great investment opportunities in this sector, sources explained.

Referring to the archeological site of Mahargarh sources said Balochistan is the forerunner of Civilization.

The 11000 years old Mahargarh signifies the importance of the province for the sector. Besides, the province has distinctive tourist attractions such as coastal highway linkages, beaches, religious sites, Juniper forest in Ziarat valley, Khojak Tunnel and several other recreationary and monumental places.

The province has international significance for tourism that possesses natural beauty, cultural heritage and ancient civilisation.

 

[Owais]

Pakistan bourses’ foreign investments

KARACHI: Pakistan stock markets’ foreign investments during July 1-28 amounted to $9.821 million.

Among those withdrawing the investments from the bourses during the period under review, Switzerland with $9.86 topped the list, while the USA with $2.498 remained at 2nd position.

On the other hand, Singapore with $18.1 million investment in Pakistani bourses during this period remained at the top, while Britain with $2.833 million investment followed.

 

[Owais]

President eyes foreign investment, privatisation key to sustainable growth
CHAKWAL (updated on: July 31, 2006, 18:19 PST): President Gen Pervez Musharraf on Monday described foreign investment and privatisation as the key to the country's sustainable economic growth and said that the government would continue its policies of de-regulation and liberalisation in a transparent manner.

"It is extremely important that we privatise and draw foreign investment into Pakistan", he said at the inauguration of Bestway Cement Factory near Kalar Kahar built at a cost of $140 million.

The president also laid the foundation stone of second production facility of the Bestway cement that involves investment of $160 million and has capacity to produce 6000 tones of cement per day.

President Musharraf rejected criticism by certain elements of the government's privatisation process and said that it will continue in a transparent manner.

"There is no fraud in the privatisation process", he said and added the privatisation is the way forward for Pakistan's economy and it should and it would continue.

The president said that he was fully supportive of the privatisation process and would continue to facilitate foreign investors.

He said that the government policies were attracting foreign investors from all over the world.

The president said that foreign investment would help in the country's economic progress and in creating job opportunities and alleviating poverty.

The president however lamented that certain vested political interests were trying to create obstacles in the way of foreign investment and trying to discredit the country's privatisation policy.

"We are not like them who plundered the country. We are committed to the country's progress and are working with all sincerity".

 

[Neo]

ISLAMABAD (August 01 2006): The Central Board of Revenue (CBR) has collected Rs 7.68 billion customs duty in the first month of fiscal year 2006-07 against Rs 8.38 billion in the same period of 2004-05, showing a sharp decline of 8.3 percent. According to the provisional figures issued on Monday.

All other major taxes, including sales tax, income tax and federal excise duty (FED), have shown increase in July. The CBR said this decline in customs duty was due to 27.6 percent higher payments of refund/rebate in July 2006 than previous year. Overall revenue collection in July amounted to Rs 40.9 billion against the target of Rs 39.5 billion, reflecting a growth of Rs 10.432 billion.

The Board has collected Rs 40.9 billion in July against Rs 34.601 billion collected in July 2005, showing an increase of Rs 15.322 billion. Tax managers are confident that the revenue collection for July would increase further after compilation of final figures for the month in the coming days.

The break-up of July 2006 collection shows direct taxes collection as Rs 9.4 billion against Rs 7.62 billion in the corresponding period last fiscal, showing a growth of 22.8 percent.

The collection of indirect taxes is Rs 31.576 billion against Rs 26.98 billion, depicting an increase of 17 percent. Sales tax collection stands at Rs 21 billion against Rs 15.74 billion, indicating a growth of 33.4 percent. Sales tax collection at import stage is Rs 13.705 billion against Rs 11.082 billion, showing an increase of 23.7 percent.

GST collection on domestic consumption is Rs 7.291 billion against Rs 4.688 billion, reflecting a growth of 56.5 percent. The collection of federal excise duty is Rs 2.894 billion in July 2006 against Rs 2.858 billion, showing an increase of 1.2 percent.

Total payment of refund and rebates is Rs 7.545 billion including income tax refund of Rs 1.498 billion; sales tax Rs 4.345 billion and refund of customs duty Rs 1.702 billion.

 

[Neo]

Pakistan receives record $4.6b remittances

31 July 2006

DUBAI — Pakistan collected record foreign exchange remittances from the Middle East region as it received $2.06 billion workers remittances during fiscal year 2005-06.

Saudi Arabia with $750.44 million tops the remittances list from the region followed by United Arab Emirates ($716.30), Kuwait ($246.75), Oman ($130.45 million), Qatar ($118.69 million) and Bahrain ($100.57 million).

The UAE remained a second major contributor in remittances as Pakistani expatriates sent $716.30 million, a slight increase from $712.61 million in preceding fiscal year. Workers residing in the emirate of Dubai sent $540.24 million remittances, Abu Dhabi $147.89 million and Sharjah contributed $26.87 million remittances. The other emirates’ share also slightly improved to $1.3 million during last financial year.

Pakistan has over half a million of its nationals living in the UAE. Majority of them are in Abu Dhabi and Al Ain, while remaining are in Dubai, Sharjah, Ajman etc. The latest available figures show an upward trend in line with post September 11 scenario.

Remittance inflows have stabilised since a sharp rise two years ago. More overseas Pakistanis started using banks to wire home their foreign currency following a crackdown on informal money exchanges after the September 11, 2001 attacks in the United States.

Single largest country: Although, the inflow of workers’ remittances from United States down 3.98 per cent to $1.242 billion in previous fiscal year but it remained on top of the list as a single largest country as far as inflow of remittances is concerned. However, Pakistan received 17.96 per cent more remittances from the United Kingdom as the expatriates sent $438.65 million during fiscal year 2005-06 as against $371.86 million in the previous financial year.

European Union countries ($119.62 million), Canada ($81.71 million) and other countries ($573.31 million) are the other major contributors in remittances.

Record remittances: As per latest available statistics from the central bank, Pakistan received record $4.6 billion in foreign exchange remittances during fiscal year 2005-06, up 10.35 per cent from the same period a year earlier. Remittances is the second major source of foreign exchange earnings in Pakistan after exports.

Pakistan received $4.168 billion remittances during financial year 2004-05, up from $3.871 billion in the previous year. The government had set a $4 billion target for 2005-06 amid considering an upward trend in last two years.

“The monthly average for remittances between July 2005 and June 2006 was $383.34 million, compared with $347.40 million in the year-earlier period,” a senior State Bank of Pakistan official told Khaleej Times yesterday.

“During the last quarter (April-June 2006), the country received $1.267 billion remittances as against $1.118 billion in the same quarter of fiscal year 2004-05,” he added.

“Remittances totalled $506.57 million in May 2006, which is the record amount of remittances in a single month,” the official said.

The central bank data reflect only legal remittances made through banks. Foreign exchange remittances and export proceeds make up the bulk of Pakistan’s foreign exchange reserves, which also includes foreign currency deposits held at commercial banks in the country.

Foreign exchange reserves: The latest central bank data show foreign exchange reserves declined to $12.913 billion in the week ended on July 22, from the record mark of $13.136 billion at the end of June 30 this year. The net reserves with State Bank of Pakistan totalled at $10.546 billion while commercial banks in the country hold $2.367 billion by July 22,2006.

The SBP official expressed his hope that upward trend in remittances will continue in future due to a narrow gap between inter-bank and open market exchange rates.

“The narrow gap in exchange rates will serve as an incentive for overseas Pakistanis to use official channels for remitting foreign exchange back home,” he observed.

Before September 11, 2001 the spread between the inter-bank and open market exchange rates had been more than Rs2 per dollar but it gradually slid to 10-20 paisa over a period of time.

Bankers say home remittances still have potential to grow if the spread between the inter-bank and open market exchange rates remains at the present level. However, they stress the need to introduce better services and incentives to lure more overseas Pakistanis to send remittances through official channels.

http://www.khaleejtimes.com/Display...n=business&col=

 

[Neo]

ISLAMABAD, July 31: Fifty international investors have expressed their willingness to secure Global Depository Receipt (GDR) of Oil and Gas Development Company Limited (OGDCL), which will be disinvested by October this year, says Privatisation and Investment Minister Zahid Hamid.

"We have just successfully held road-shows in London and New York where 50 potential international investors have shown their interest in the GDR of OGDCL," he claimed.

He told Dawn that he himself led the delegation to London and New York to offer OGDCL's GDR to reputed international investors. "And there response was extremely good and we are very encouraged by that," the minister said.

Mr Hamid pointed out that the first leg of road-shows had been completed and within this week another delegation would be visiting Hong Kong and Singapore to offer GDR to the investors.

Later financial adviser to OGDCL -— Citibank group and Goldman Sachs — would work out various details to finalise the transaction by October 2006, he added.

The Privatisation Commission in July 2002 had offered 51 per cent shares of the company for privatisation with management control.

Later expressions of interest (EoIs) were invited from reputed and financially sound investors, acting solely or as part of consortium and having relevant upstream experience.

The government intended to finalise the privatisation process at a relatively fast pace, but there appeared some delay due to various reasons.

According to some reports, a number of overseas oil and gas exploration companies had expressed their keen interest in buying stakes in OGDCL, provided it was divided into various entities instead of offering the company as a whole.

They have reportedly said that specified fields of OGDCL, which were producing oil or gas or both and had sufficient reserves to last for years, were of interest to the foreign companies.

If the fields were offered separately, then the foreign companies would not have to indulge in the overall management of OGDCL, in which they foresee problems because of strong workers union of the company.

The company has the largest acreage position in Pakistan, with considerable exploration upside and significant scope for appraisal and development.

OGDCL, the largest oil/gas company of Pakistan, has also acquired state-of-the-art workstation facilities for interpretation and evaluation, which reportedly enabled delineation of 25 exploratory prospects in various OGDCL-operated concessions.

Under the strategic plan of OGDCL rationalisation, one of the options was not to relinquish the exploration leases portfolio and certain other assets to the private investor under the proposed privatisation plan.

The financial advisers had their own views on this. Also, the question of sale of OGDCL in one go or in parts had first arisen on submission of the initial report of the financial advisors appointed by the Privatisation Commission for OGDCL privatisation.

 

[Neo]

Higher level of domestic demand pushing imports

LAHORE: Pakistan is currently facing an “enormously high” trade deficit, according to the latest reported figures released a few days ago, commented Dr Shaghil Ahmed, the head of the Social Policy and Development Centre, at a seminar held in Lahore on Monday.

Dr Shaghil said that the merchandise trade deficit was estimated to be US$12 billion in 2005-06, which was about nine per cent of GDP. He added that the cause of the ballooning trade deficit over the past two years “is not the liberalisation of trade that we have been witnessing in Pakistan over the past 15 years but a much higher level of domestic demand than the productive capacity of the economy.”

He said that the demand was satisfied by importing more. “This imbalance needs to be corrected to bring the trade deficit under control,” said the economist. The SPDC was discussing different aspects of trade liberalisation in Pakistan in the light of its seventh Annual Review of Social Development in Pakistan 2005-06, titled “Trade Liberalisation, Growth and Poverty,” released on May 20, 2006.

Dr Ishrat Husain, Chairman National Commission for Government Reforms and former Governor of the State Bank of Pakistan (SBP) presided the seminar and Inaamul Haq, Adviser on WTO to the Government of Punjab, Dr Shujaat Ali, Chief Economist, Planning and Development Board, Government of Punjab and Dr Abid Burki, Professor of Economics at the Lahore University of Management Sciences (LUMS) were among the discussants of the seminar.

Speaking on the occasion, Dr Ishrat Husain said, “While more and more strong empirical evidence is pouring in, such as the present study by SPDC demonstrating that trade liberalisation in a non-discriminatory multilateral framework is good for growth and poverty reduction, the current trends in international trade developments are moving in the wrong direction.”

Dr Husain added that the Doha Development Round negotiations were stuck and “are not moving forward.” He commented that the loss in momentum, the declining support for trade liberalisation in Europe and the US, and the expiry of fast track authority by the US Congress in 2007 did not augur well for world trade and for developing countries such as Pakistan.

Dr Ishrat Husain added that the preferential and bilateral†trade agreements were proliferating, making it difficult for exporters from the poor nations to participate in world trade on a level-playing field.

The former SBP Governor also said that the wage stagnation in the US in the wake of economic recovery since 2001 is strengthening the hands of politicians in favour of protectionism. “These recent developments are most unfortunate and need to be reversed sooner rather than later,” he noted.

While highlighting his views on whether trade liberalisation was good for Pakistan, Inaamul Haque said that a positive outcome would be possible only if there was macroeconomic stability in the economy. “Macroeconomic stability is and must remain the strategic foundation for Pakistan’s enhanced growth and competitive prospects,” he pointed out.

The WTO expert said that it was imperative to provide adjustment assistance “to facilitate the acceptance of liberal trade. Without it, the benefit of trade liberalisation may be renounced and politically reversed,” he warned.†

Haque said that trade liberalisation and unrestrained free trade was functionally an effective way to harness the value of open trade to principle and fairness. He said that the answer was the progressive reduction of barriers and not a one shot removal of barriers.

Haque commented that on the question whether trade liberalisation was good for Pakistan, the answer was “neither an unequivocal “Yes” nor unqualified “No”, as trade liberalisation can be definitely beneficial for Pakistan provided other complementary measures and structural reforms are adopted.”

He said that this would also mean that pro-poor dimensions were recognised and accommodated. The SPDC report documents that substantial trade liberalisation has taken place in Pakistan since the late 1980s at a pace that has been accelerating over time. Import taxes have been reduced, the Statutory Regulatory Orders (SROs) have now been mostly withdrawn and Non-Tariff Barriers (NTBs) have been largely dismantled. In particular, the average tariff rate has declined sharply from 77 per cent in 1985 to about 17 per cent.†

This process of liberalisation puts Pakistan in the middle of a group of developing economies in Asia in terms of self-imposed restrictions on trade through both tariff and NTBs. In this group, Pakistan restricts its imports about as much as China and less than India, Malaysia, the Philippines and Bangladesh, but more than Thailand, Turkey, Indonesia and Sri Lanka.

However, in terms of barriers imposed by other countries on a country’s exports, Pakistan is the country allowed the least market access among the same group of developing countries in Asia.

Trade, as measured by the sum of imports and exports, has accelerated as a result of the process of greater openness of the economy, especially over the past five years. However, trade performance relative to many other developing Asian economies has not been that impressive. While the trade-to-GDP ratio has increased 0.4 percentage points per annum in Pakistan since 1990, it has increased by 0.8 percentage points per annum in India, 1 percentage point per annum in Korea, 1.2 percentage points per annum in Bangladesh and 3.5 percentage points per annum in Thailand, for example. The world average growth of trade as a share of GDP, at 1 per cent per annum, has also been higher than that of Pakistan.†

The SPDC’s Annual Review rigorously analyzes the empirical impact of trade liberalisation on growth, poverty and inequality in Pakistan.† The simulations using SPDC’s model trace a hypothetical path that the economy would have followed since 1990, had import tax incidence been at its 1980s average level of about 45 per cent instead of falling gradually to nine per cent as was actually observed. The results indicate that poverty and income inequality would have been higher without the trade liberalisation, although only slightly so, on balance. Thus, the results are not consistent with the seemingly popular notion that greater trade openness has increased poverty in Pakistan.†

Both positive and negative effects are involved in the channels of transmission. Trade liberalisation has had a poverty-reducing effect through enhanced growth, productivity and investment and through price stability. But it also has entailed some costs, in particular costs related to fiscal adjustment, which have been poverty-increasing.

The axe of lower tax revenues resulting from lower import taxes and control of the fiscal deficit fell on developing expenditures. Not only are such expenditures directly pro-poor, but the employment opportunities that could have been created as a consequence of these expenditures were also foregone, adversely affecting the income of the poor.

With respect to income inequality, the evidence suggests that although trade liberalisation by itself leads to a slight reduction in inequality, a rise in Foreign Direct Investment (FDI) appears to increase it.†

The Annual Review argues that external shocks arising from the events of September 11, 2001 have contributed to a relaxation of balance of payments constraints for Pakistan and played a role in the recent strong performance of the economy. Policy changes and other structural changes in the economy have also played a major role. But ignoring the importance of external shocks runs the risk of becoming complacent about the economy’s long-term prospects for growth.

The findings of the SPDC report suggest that attracting FDI; further reducing trade barriers; improving the institutions related to governance, political stability, law and order, corruption and regulation; and improving market access for Pakistani exports including through greater development of nearer export markets would significantly improve Pakistan’s export performance in the long run.

Specifically, if Pakistan were to reduce its trade barriers to those of the Philippines, it could potentially increase its exports-to-GDP ratio from 13 to about 18 per cent. If it could match the quality of its institutions to those of Malaysia, its exports-to-GDP ratio could potentially rise to 16.3 per cent.

If it faced the less restrictive market access environment faced by China (and had the correspondingly higher FDI that is correlated with that), the rise in exports-to-GDP could potentially be even bigger. But FDI tends to increase income inequality which would have to be countered by other policies.

 

[Owais]

Musharraf urges expatriates to remit part of earnings to home

ISLAMABAD (August 01 2006): President Pervez Musharraf has urged the overseas Pakistanis to step forward and remit a part of their earnings to motherland and help develop Pakistan's economy.

Speaking at the inauguration of Bestway Cement in Chakwal on Monday, the President hailed the Bestway Group's decision to direct their foreign investments to Pakistan. Noting the services and honour of prominent Pakistani, Sir Anwar Pervez, he said that Sir Pervez had set a worth following example for his compatriots living abroad.

Earlier, in his briefing, the Chief Executive Officer of the Bestway Group of UK, Zamir Chaudhry, said that Pakistan is fast emerging as an ideal place for investment in all industrial sectors. Bestway's investment in Pakistan has exceeded one billion dollar and the group is still exploring many other ventures to steadily expand the investments in other sectors, he said.

The Bestway Group has already contributed to establishing the University of Engineering and Technology, Chakwal Campus and also provided financial assistance to the District Government to reconstruct the Choa Saidan by-pass road into a dual carriageway for faster communications. The group has already established many educational and health facilities for the people of the surrounding areas to help improve their living standards.

It is not worth mentioning that Prime Minister Shaukat Aziz had performed the groundbreaking ceremony in April 2005 and the plant has been constructed according to the plans in record time. The commissioning of the project will make the Bestway Cement the second largest cement producer in Pakistan.

President Musharraf is also expected to perform the groundbreaking ceremony of the fourth cement plant to be built by the Group with an initial investment of 180 million dollar.

With an additional investment of 235 million dollar, the group is also entering the power sector and will soon establish three power plants with a total generation capacity of 264 megawatts at three locations.

Governor Punjab, Lieutenant General Khalid Maqbool (Retd); Punjab Chief Minister Chaudhary Pervez Ilahi; Federal Minister for Industries Jehangir Tareen and District Nazim Chakwal Sardar Ghulam Abbas also attended the ceremony.-PR

 

[Owais]

OGDC’s GDRs road shows in Singapore, Hong Kong

KARACHI: Further two more road shows for the Oil and Gas Development Corporation (OGDC)’s Global Depository Receipts (GDRs) will be held during the current month in Singapore and Hong Kong, following Washington and London.

Participating in the Geo News program ‘Tezi Mnadi’, Finance Advisor to prime minister, Dr. Salman Shah told that the US and European investors in the recently held road shows expressed their keen interests in making investments in the Pakistan equity markets as well as in the Pakistani companies’ GDRs and ADRs i.e. American Depository Receipts.

Salman Shah told that the holding of OGDC road shows in the Gulf countries after the holy month of Ramzan was also being mulled over.

He told that the listing process of OGDC’s GDRs in London Stock Exchange would be completed by December 2006.

 

[Neo]

ISLAMABAD, Aug 1 (APP): Pakistan and United States on Tuesday inked two agreements to promote knowledge-based economic development and ensure long term economic growth.

The first agreement is part of the US government’s five year economic growth assistance package to Pakistan worth more than $ 73 million while the second one is to allow the Competitiveness Support Fund (CSF) to partner with the Higher Education Commission (HEC) in support of initiatives that promote knowledge-based economic development. This bilateral agreement commits $ 13.7 million for 2006 on the part of USAID.

Addressing the signing ceremony held here at HEC Headquarters, US Ambassador to Pakistan, Ryan C Crocker said the funding will enable USAID to provide over 130,000 loans for micro and small businesses in the four provinces as well as FATA, and enable assistance to more than 50,000 farmers in drought- affected areas of Balochistan with new seeds, livestock and irrigation systems.

He said the collaboration between HEC and CSF will bring research in higher education and apply it to industrial and commercial development.

In his address, Chairman HEC and Adviser to the Prime Minister for Science and Technology, Dr. Atta-ur-Rahman expressed his pleasure at the realization, though a few decades belated, importance of innovation and entrepreneurship.

He shared his excitement at the opportunity of unleashing of the creative talents of the country’s 80 million youth through the wide ranging programmes offered by HEC for higher education.

Dr. Atta mentioned the foreign scholarships through which 400-500 students were being sent abroad for studies while the indigenous scholarships programme was providing the opportunity to students to pursue their doctoral level trainings within Pakistan.

He said to further enhance the strength of faculty in universities, the Foreign Faculty Programme was operating successfully in attracting faculty members working abroad to return to Pakistan and enrich the academic environment.

The Chairman HEC said further plans were afoot to develop major initiatives with US in the field of science and technology, apart from the largest Fulbright Programme which was in operation in Pakistan.

He expressed his determination to expand the programme with CSF as the establishment of six engineering and three technological universities would complement the industry-academic linkage through it technological incubators and parks.

One of CSF’s main objectives is to develop and support linkages between academia and industry for knowledge-based enterprise development.

The CSF will provide matching grants to the academic community for projects that commercialize their research. It will also help them partner with the business community to start and develop new enterprises and encourage the private sector and local governments to contribute financing to relevant research.

Explaining the steps of technical assistance in the working of CSF, Minister of State for Finance and Chairman CSF, Omar Ayub Khan said the CSF would provide matching grants, venture capitals and business incubators and screen the project for eligibility.

He said the collaboration would unlock productivity and technical advancement in universities and result in increased productivity of economy.

The Minister said as more technology was commercialized, there would be more impetus to protect intellectual property rights from infringement.

Speaking on the occasion, Executive Director HEC, Dr. Sohail Naqvi outlined the manner by which HEC was engaged in investing in building human capital.

He termed research and development the key to development of any country according to its needs and challenges.

He stressed on university-industry partnerships and promoting entrepreneurship to make an impact on the economy.

Leveraging ICT was another area of importance where human resource needed to be enhanced and it remained one of HEC’s major strengths, he said and added HEC had computerized universities all over Pakistan, the digital library programme provided 20,000 journals and 4000 e-books online.

He also launched the new HEC website and national research repository, a consolidated collection archiving of intellectual output of PhD theses written in Pakistan universities.

At present, it has over 150 PhD theses available online in high quality digitized format while 250 are in the process of being uploaded. An additional 400 are in the process of digitization.

Chief Executive Officer (CEO) of Competitiveness Support Fund, Dr. Arthur Bayhan presented a report on Regional Conference on Competitiveness and Economic Growth.

 

[Neo]

1 August 2006

ISLAMABAD — Pakistan government has decided to set up a $2 billion mega oil refinery at Khalifa Point in district hub of Balochistan.

The refinery, to be commissioned by 2010, would have a maximum refining capacity of 13 million tonnes of petroleum products, which would be higher than the country’s total existing capacity of 12.8 million tonnes.

According to the official sources, the ministry of petroleum and natural resources has been directed to award the project contract to pre-qualified at short listed companies through international competitive bidding on build, on and operate (BOO) basis.

Pakistan currently consumes 16 million tonnes of petroleum products, of which 82 per cent requirement is met through imports. Total refining capacity in Pakistan currently stands at 12.8 million tonnes.

The government has also approved in principle a proposal for rationalisation of import tariff for the trucking industry to overcome shortage of trucks but this would be announced with the next year’s budget.

In this regard, the Economic Coordination Committee of the Cabinet (ECC) has recently considered a policy of incentives for new entrants in the auto industry but constituted a committee to review this policy in detail.

The committee led by the Prime Minister and comprising deputy chairman planning commission, commerce minister, secretary of the industries ministry, minister of state for investment and chairman central board of revenue, would take a decision shortly. The ECC allowed extension in the lease period of mining, production and development of three major fields of Pakistan Petroleum Limited for their full life to get better price during the sale of 51 per cent of its shares.

The ECC also approved about 67 per cent increase in the power tariff for import of 30-mw of electricity from Iran for border areas of Taftan and Mashakhail. The Wapda had been importing this electricity at three cents per unit under a three years contract which has now been increased to five cents per unit. The ECC rejected a proposal of the petroleum ministry for providing industry status to the CNG sector on the ground that petroleum sector was already under a deregulated regime. The ECC, however, approved a policy for the import of LNG which would be announced separately.

 

[Owais]

SBP unveils criteria for strategic equity investment


KARACHI (August 02 2006): As the banks are required to cap their investment in shares at 20 percent of their equity, the strategic investment is excluded from the subject limit to enable banks to take exposure in these investments within overall permissible limits per company.

In order to give a more objective criteria for marking an investment as strategic, as well as replacing the condition for banks to obtain prior approval from the State Bank of Pakistan (SBP), the strategic investment will continue to be excluded from the 20 percent aggregate exposure limit in stocks. While the investment marked as such at the time of investment, shall be retained by the banks/DFIs for at least five years.

Strategic investment is defined to be as an investment which a bank/*** makes with the intention to hold it for a longer duration and should be marked as such at the time of investment and can only be disposed-off with the prior approval of SBP.

According to a SBP notification, if there is a series of purchases of any company's stocks, the minimum retention period of five years shall be counted from the date of last purchase while the banks/DFIs' investment in a company can be segregated to be categorised as strategic and non-strategic.

The banks' decision to make strategic investment carries great significance, keeping in view the implications of such investment in terms of liquidity management and long term outlook of the investee companies; thus, such decisions have to be undertaken with proper diligence, taking into account all relevant factors.

Accordingly, it is understood that a committee, clearly designated/empowered by the bank, should take the decision for strategic investment. All Record of transactions/decisions, taken by the committee, regarding strategic investment should be properly maintained and kept in a separate file, for provision of the same to the SBP Inspection Team during their visit to the bank.

The banks/DFIs may review their existing strategic investment portfolio in the light of the above criteria, and investments, not falling in strategic portfolio, may be shifted to the Trading Portfolio. However, if any such shifting results in an excess over the 20 percent limit, prescribed under Regulation R-6, the excess should be regularised and brought back within the 20 percent limit within 3 months.

The position of investment in strategic portfolio will be reported by the banks/DFls to the Banking Policy Department, within the 15 days from the date of issue of this Circular Letter, and within two working days from the date of investment in strategic portfolio.

 

[Owais]

Ministry faces tough opposition over setting up of LPG terminal


ISLAMABAD (August 02 2006): The Petroleum and Natural Resources Ministry is facing tough opposition by the Defence Ministry and the Oil and Gas Regulatory Authority (Ogra) for establishing new liquefied petroleum gas (LPG) terminals at the Karachi Port under the administrative control of the ports and shipping ministry, official sources told Business Recorder on Tuesday.

Both the opponents ie the defence ministry and Ogra are of the view that storage, handling and transportation of LPG would pose dangers to the facilities situated at the port, but the petroleum ministry says that by adopting international best practices relating to safety standards, dangers and hazards involved could be averted, the sources added.

Giving the background, they said that Defence Committee of the Cabinet (DCC) in its meeting held on April 3, 1984 decided that ministries concerned should look into the additional tankage facility being created at Keamari and impose immediate restrictions on further construction of tankage in the area.

Any future construction had been linked to clearance by the relevant cell of Pakistan Navy. However, in view of the increasing demand for the petroleum products in the country, Parco, PRL and NRL were allowed construction of additional petroleum storage at Keamari in relaxation of ban.

The petroleum ministry, in its summary to the Cabinet, a copy of which was made available to Business Recorder, said the existing demand for LPG in the country is estimated to be 3,000 metric tonnes per day against the modest domestic supply of around 1600 metric tonnes.

The ministry argued that due to the shortage of LPG in the country, its price was always been under pressure on one hand and the government has also approved, in principle, use of LPG in motor vehicles on the other.

After the approval of the regulatory framework being prepared by Ogra, the LPG use in the auto sector would be regulated and would compete with the gasoline and compressed natural gas (CNG) as an alternative fuel usage which is expected to be increased where natural gas is not available.

Keeping in view the limited level of indigenous LPG production and incremental growth, the only option available to enhance the fuel's availability in the country is through imports, the ministry added.

While giving an overview of the current situation, the ministry said there was dearth of LPG storage at ports and only one import terminal is functional at the Port Qasim, owned by Engro Vopak Terminal Limited (EVTL) which is unable to meet the requirement of LPG storage demand.

The Progas is also in the final stages of completing its LPG import terminal at the Port Qasim, the ministry said, adding there should be more LPG terminal and storage at diverse locations.

"This will not only pave the way for healthy competition among the LPG storage terminals for the benefit of consumers, but will also secure supplies in case of closure of any location", the ministry added.

The ministry has suggested to the cabinet that the ports and shipping ministry/KPT may be authorised to allow establishment of LPG terminals at the Karachi port in relaxation of restrictions imposed by the DCC, subject to strict observance of international best practices in safety standards in order to avoid hazards and dangers involved in storage, handling, and transportation of the LPG.

 

[Owais]

Goods export and import procedures notified

ISLAMABAD (August 02 2006): The commerce ministry on Tuesday notified the procedures for export and import of goods announced in the Trade Policy 2006-07. According to the import policy order, imports may be allowed against all modes of payment subject to procedures prescribed by the State Bank of Pakistan (SBP) whereas the importers have to reach commodity exchange arrangements with the suppliers.

For imports under loan, credits and bilateral assistance requiring contracts to be approved by the Economic Affairs Division (EAD) or some other agency of the government, letter of credit (L/C) to be opened with in 60 days of registration of contract with a bank designated by the SBP.

According to the policy order, relocation of complete projects has been allowed in all the industrial sectors, including high-tech and export-oriented sectors.

Licensed call centres would be allowed to import complete call centres, their parts, spares and components in second hand or used condition under re-location scheme exclusively for their own use and not for sale.

Complete laboratory projects for quality control and complete effluent treatment plants would be permissible to be re-located under this scheme. Spare-parts on the regular inventory list of projects being re-located may be new, old, used or second hand. Complete projects and spare-parts would be permissible for import under the relocation scheme even if their substitutes are being manufactured locally.

Relocation of project machinery and equipment would be subject to fitness certificate by any of the pre-shipment inspection companies subject to the condition that the machinery is in good working condition and the remaining life is not less than 10 years.

Construction, mining, oil and gas and petroleum sectors would be allowed to import second hand plants, machinery and equipment and their parts, actually required in Pakistan for their projects.

The units operating in the Export Processing Zones (EPZs) are allowed to import goods as well as tariff areas in accordance with the rules and procedures prescribed under the Customs Export Processing Zones Rules, 1981.

Units operating in the EPZs may sell defective goods, wastes, used packaging material, empty drums and cartons, to the tariff area subject to the condition that the total value of such sales during a year does not exceed three percent of their FOB exports. Besides, such sales would be subject to payment of normal duties and taxes.

The plant and machinery import for EPZs or already installed, would be allowed to be sold or shifted to tariff areas by approval of the EZP authority irrespective of that the machinery is old or new and whether it has remained installed in EPZ for any period its import is otherwise permissible into tariff area under the import policy.

The units established in the EPZ can sell only 20 percent of their total production to tariff areas in Pakistan, while 80 percent would be exported to foreign countries.

Admission of goods into Gwadar Special Economic Zone from abroad and from the tariff areas would be allowed in accordance with the rules and procedures to be notified by the government.

In the export order, the commerce ministry has notified that all items and commodities produced or manufactured in Pakistan, exported via land route or by air against irrevocable letters of credit, confirmed orders on realisation of export proceed through banking channels or advance payment, in convertible foreign currency, would be allowed (i) zero-rating of sales tax on taxable goods, (ii) rebate of central excise duty, and (iii) repayment or drawback of customs duty.

However, the exporters have to provide proof that goods exported from Pakistan have reached Afghanistan would be verified on the basis of copy of import clearance documents by Afghan customs authorities across the border.

The export would be allowed only through export land routes ie Torkham, Chaman, Ghulam Khan, (for export of cement only) and Qaman Uddine Karez (when it becomes operational).

The export from EPZ and manufacturing bonds, except vegetable ghee and cooking oil would be allowed, but these exports would not be entitled to zero-rating of sales tax on taxable goods, rebate of CED and repayment of drawback of customs duty, provided that exports made to International Security Assistance Force (ISAF) may be made on deferred payment basis without opening of L/Cs.

The notification also said that normal duty drawback would remain available for exports to the Central Asian Republics via Iran. However, export of acetic anhydride to Kabul would not be allowed till further orders.

The export of imported goods in their original and unprocessed form would not be allowed except parts obtained from ship breaking, scrapped battery cells, waste dental amalgam, waste exported X-ray films, old machinery provided no refund of import levies or duty-drawback would be made.