Pakistan Economy - News & Updates - Archive

[Neo]

Sunday, August 06, 2006

ISLAMABAD: Iran has sought transit facilities from Pakistan in order to increase its trade with China as the two countries are eying an increase in trade to $15 billion within the next few years, a senior government official told Daily Times on Saturday.

Iran has sought transit facilities from Pakistan and we are negotiating the issue with Iranian authorities, the official said.

Tehran-Beijing trade grew by 50 percent in 2005. Iran-China trade in 2005 was valued at $10 billion in 2005 compared with trade worth $200 million in the previous year. Iranian and Chinese experts say bilateral trade could reach $13 to $15 billion by the end of 2010, according to the official. Iranian exporters are seeking better access to the Chinese market and, therefore, the Iranian side has been seeking transit through Pakistan. If this was allowed by Islamabad, Tehran-Beijing trade will substantially increase.

Iranian goods especially manufactured in north-eastern parts of the country will have easy access by road via Pakistan’s border with the Peoples Republic of China.

This proposal was also discussed at the recent meeting of the Pak-Iran Joint Economic Commission (JEC). Iran has also taken up the issue with Pakistani authorities at a meeting of the Pak-Iran Joint Committee on Road Transportation held in Zahedan, Iran, the official added.

At the same meeting, transport companies from the two countries agreed to cooperate on passenger transport. There were also discussions regarding the easing of visa restrictions for drivers and passengers.

The official said Iran was keen for Islamabad to act quickly on the issue as currently bilateral trade between China and Iran was in China’s favour. Iran wants easy access to Chinese market where Tehran believes it can compete with other manufacturers on quality. Iran, at different meetings with Chinese authorities, complained about what they called, the poor quality of some Chinese goods.

The official said Pakistan has been under pressure from Afghanistan, India and Central Asian Republics to open the country’s roads for trade. Afghan President Hamid Karzai has raised the issue with Pakistani authorities on several occasions for India and Afghanistan to be allowed to trade via Pakistan. However, Pakistan has not agreed to the terms being demanded by neighbouring countries. Iran is yet another country wanting Pakistani land routes to be used for trade with China. An official said Pakistan was still considering Iran’s request.

The official, however, was optimistic due to the recent statements made by President General Pervez Musharraf about the use of Gwadar Port as an energy corridor for China and other regional countries. However the official emphasized that the comments had to be assessed according to their context. China is eager to increase cooperation with Iran in the energy sector as China’s growing economy needed more and more energy to maintain the pace of economic growth, the official added.

 

[Neo]

Sunday, August 06, 2006

KARACHI: The country’s trade deficit may cross $15 billion in the current fiscal year as the central bank has predicted that the country’s imports would total $34 billion while exports would total $19 billion for the 2006-07 fiscal year.

Research Head at Invest Capital and Securities Khalid Iqbal Siddiqui said: “In the wake of the huge trade deficit that the country is facing right now, we feel that there is a need to correct the imbalance prevailing in the economy.”

Two weeks ago, the State Bank took steps to boost the country’s exports by reducing the export finance rate to 7.5 percent from 9 percent.

“The recent measures taken by the State Bank will encourage exporters, but it will take time for the measures to produce results as the additional capacity is going to be built and then output will be received and exported,” Mr Siddiqui said.

According to trade figures, the import of textile machinery (which produces Pakistan’s major manufactured exports) is only 3 percent of the total $28.5 billion import bill. The analyst said there would be pressure on the balance of payments as imports continue to rise. These steps will ultimately have to focus on the promotion of exports and the curbing of imports.

Petroleum group: Imports under the petroleum category grew by 67 percent from $3.99 billion to $6.66 billion during 2005-06. The increase in the petroleum import bill represented $2.66 billion, or 33 percent of our incremental import bill.

The reason for this increase was not only high oil prices, but also the higher quantity of oil imported, especially during the latter half of the fiscal year. The analyst said more oil was needed to fulfill the energy needs of the country because of lower rainfalls last year. Lack of hydropower resulted in the higher use of thermal power plants, which contributed to the increase in the oil import bill.

Agriculture and Other Chemicals: The fertiliser deficit continued to widen as imports under this group grew by 14 percent from $3.6 billion to $4.1 billion. Manufactured fertiliser is one of the key contributors to the increase in agri imports.

Fertiliser: Fertiliser imports grew by 54 percent from $417 million to $643 million. These imports were due to a shortage of fertiliser in the country, which is due to aggressive lending to the agri sector. Imports of insecticides fell by 18 percent from $140 million to $115 million during the last fiscal year.

Metals group: The growth in the metals group shows that the economy’s fundamentals are improving as the consumption of steel is the barometer for industrialization in any economy, but the case in Pakistan is slightly different.

Imports in the metals group soared as Pakistan Steel Mills developed a technical fault, and therefore steel had to be imported for normal consumption, as well as for the earthquake-affected areas.

Also the increase in the prices of steel contributed towards the higher import bill for the metals group. Imports under this group grew by 48 percent from $1.2bn to $1.8bn. The incremental amount of $0.58bn, or 7 percent of the increase in our import bill, could have been averted had Pakistan Steel Mills been functioning properly.

 

[Neo]

KARACHI: The US-based WYSE Technology Incorporation - a pioneer in thin computing - is considering making Pakistan a hub of its commercial activities in the South Asian region, industry sources said on Saturday.

“President and CEO of WYSE Technology Dr John Kish is due to visit Pakistan later this month,” said a source in local IT industry close to the development.

“The convergence of more powerful networks, dramatic growth in wireless devices and rapid adoption of new technologies in markets like India and China make this the right time for WYSE to expand its lead in the thin-client market and deliver entirely new computing benefits to customers around the world. I’m thrilled to take on that challenge,” he quoted Dr John Kish as saying.

NC Incorporation Pakistan had already been appointed as authorised distributor and service centre of WYSE Technology in the region and had included MCB Bank, Allied Bank, EFU, Bank Alfalah, Ibrahim Fibre, Gul Ahmed and others in their clientele, he added.

Founded in 1981, WYSE Technology is a technology developing company headquartered in San Jose, California, USA, with offices worldwide. The company introduced economical, ergonomic and attractively designed terminal products of high quality and reliability.

“Recently, global technology analyst International Data Corporation announced in their fourth quarter 2005 report that WYSE remains the leader in all regions, with 44.2 per cent market share in the US, 37 per cent in Asia Pacific and 27.2 per cent in Western Europe,” added the source.

 

[Neo]

Pakistan to produce 0.5m cars and 1m motorcycles by 2010


ISLAMABAD (APP): Pakistan will be producing 0.5 million cars and 1 million motorcycles by the year 2010 said Chief Executive Officer (CEO) of Engineering Development Board (EDB) Imtiaz Rasgtar here on Saturday. He said that by the year 2010 CNC Machine Tool population requirements would increase to 152,460 as compared to current 9,413. The growth in domestic appliances manufacturing is also encouraging, he added.

He stated this while speaking at a meeting of potential investors in the Machine Tools Assembly and officials of Engineering Development Board held here today. The meeting decided to form a task force for drawing a road map for development in the budget and trade policy.

He said that it provides the base of strong and growing economics. CNC Machine Tool Assembly was also essential for industrial growth and enha-ncement of competitiveness, he said adding, its role in economical production of standardize product was vital. He said only production of 0.5 million cars will require machining of 65,000 tons of ferrous castings, 15,000 tons of forging, 40,000 tons of aluminum casting, production of 60,000 tons of plastic and 32,000 tons of rubber parts.

While listing incentives by government of Pakistan, he said, the EDB realizing the need, recommended the initiative for promotion of CNC Tool Assembly in Pakistan and CBR in acknowledgement of these recommendations annou-nced 0% duty on raw material, sub-components, components and sub- assemblies in the current budget. The CNC machine tool assemblers have choice of foreign or own logo, joint ventures, technical collaboration and assembly by themselves. He recommended the last choice on account of various advantages. Giving the world's scenario, CEO said that China was the top importer for 2005 with a figure of $ 6.7 billion. USA followed it with a figure of &3.87 billion.

Germany, Korea, Taiwan, Italy and France were the other main CNC Machine Tool importers. On the export side, Japan was leading with a figure of $ 6.46 billion. Germany was on 2nd position with a figure of $ 6.21 billion. Italy,Taiwan, Switzerland, Korea and USA were the other main exporters.

 

[Neo]

ISLAMABAD, Aug 5: Prime Minister Shaukat Aziz said on Saturday that the government was committed to bringing qualitative improvement in the life of people through income-generating activities and the network of micro finance had been expanded to ensure that benefits of growth trickled down to the grass-roots level.

Talking to National Rural Support Programme Chairman Shoaib Sultan, the prime minister said that the NRSP was an important facet of the government’s policy to get the people out of the poverty net and improve their standard of living by providing them better facilities.

DRINKING WATER: Presiding over a meeting held to review the goals and targets of the environment ministry, the prime minister reiterated the government’s commitment to provide clean drinking water to every union council by 2007.

He asked the ministry to expedite implementation of the programme to ensure its timely completion.

He said water borne diseases were one of the major public health hazards and the government would spend about Rs7.5 billion on the Clean Drinking Water Programme.

The ministry was asked to focus on reduction of emissions of vehicles to bring them at par with the Euro Standards, operationalisation of the Clean Development Mechanism as per the Kyoto Protocol, preparation of an action plan for implementation of the National Environment Policy, reduction of industrial pollution and increasing forest cover through the National Afforestation Plan.

To keep the environment clean, all public transport will be converted to compressed natural gas and the environment ministry will prepare a plan in this respect.

The ministry was asked to expedite implementation of bio safety guidelines so that the country could benefit from the changes brought about by biotechnology, particularly in the health and agriculture sectors.

The Environment Protection Agency was directed to play a more effective role in the implementation of National Environment Policy and to increase coordination with other federal and provincial departments.

The meeting was informed that under phase-I of the Clean Drinking Water Programme, 554 water filtration plants had been installed in various parts of the country and 6,005 would be installed under phase II, for which a large number of sites had been selected.

 

[Owais]

Proposal for PSM sell-off postponement turned down

ISLAMABAD (August 07 2006): The Ministry of Industries and Production has turned down a proposal of Pakistan Steel Mills (PSM) Chairman in which deferment of the privatisation process was pleaded. Sources in Privatisation Commission (PC) told Business Recorder that the PSM Chairman, in a letter to the Ministry on July 14.

He had asked for postponing privatisation of PSM and had sought a financial package for its expansion, but the Ministry in its letter of July 29 rejected the proposal, saying that it was not feasible.

Sources said that the Supreme Court, in its short order held that "the approval for privatisation of PSM by the Council of Common Interest (CCI) on May 29, 1997 continues to hold the field. But in view of the developments that have taken place during the intervening period and the stand taken by the counsel for the federal government that the referred order was never recalled and the stand taken by the counsel for the PSM that the matter of its privatisation had been dropped subsequently, by way of propriety, it would be in order if the matter is referred to the CCI for consideration."

According to sources, the Privatisation Commission was asked to indicate the factual position with regard to any decision to drop PSM from the privatisation list, while the Ministry has clarified that there was no such decision in its record.

The Ministry also provided statement indicating, in chronological order, the history of privatisation and decisions relating to restructuring of the mills.'

Sources said that the Privatisation Commission is of the view that PSM should remain on the privatisation list for the following reasons, beside other reasons:

-- The PSM plant is outdated and inefficient. It has never achieved its designed production capacity of 1.1 million tons per annum, which in any case is sub-optimal.

-- Huge investment (estimated $1 billion) is required to increase its capacity to 3 million tons per annum to make it more economical. This huge investment could be better made by the private sector, which will also introduce new technology, improve competitiveness and transform the PSM into a commercially viable unit in the long run.

As regard the need for critical repairs, the Prime Minister had directed the newly constituted PSM Board of Directors on February, 10, 2005, that critical maintenance could be undertaken side by side with the privatisation process to ensure that the plant runs smoothly.

Despite tariff protection, the PSM has incurred heavy losses ever since it commenced production in 1984. After restructuring, its financial performance improved significantly during the past four years due to high international steel prices and margins as the steel industry globally hit a historic peak.

The government's decision to directly pay interest/mark-up on its Rs 7.8 billion subordinated loan and allow its mark-up-free loan of Rs 825 million also contributed to its improved performance.

The PSM is neither a "strategic" industry nor it produces specialised steel used for any strategic purposes. It is not a dominant player in the steel market and has less than 25 percent market share. The steel demand is approximately 4.5 million tons per annum. Two million tons approximately is produced by a large number of small private sector units and the remaining demand of more than 1.5 million tons is met through imports.

As the CCI has approves PSM privatisation in its meeting a few days earlier, the Privatisation Commission would pursue necessary pre-qualification and valuation process and documentation in accordance with the rules and regulations as well as relevant observations of the apex court, the Ministry said, according to sources.

 

[Owais]

Huge trade deficit poses threat to economy: SBP

ISLAMABAD (August 07 2006): Fuelled by a huge trade deficit, Pakistan's current account deficit during 2005-06 reached a worrisome 4.7 percent ($5.683 billion) of the gross domestic product (GDP), posing a threat to the economy simultaneously on both internal and external fronts.

The State Bank of Pakistan (SBP) on Sunday reported that the current account deficit was the largest, both as a share of economy and in dollar terms. During the period under review (July-May 2006), the current account deficit, excluding official transfers, grew by more than 218 percent to $5.683 billion, against $1.784 billion of previous fiscal year.

It is worth mentioning that owing to higher than expected trade deficit, the Finance Ministry revised the target for current account deficit and set it at $5.137 billion (4.2 percent of GDP) against budgeted target of $2.7 billion (2.19 percent of GDP) for FY06. But, at the end of the year, it breached the ministry's target by a sizeable margin.

According to independent economic experts, this external disequilibrium in the shape of current account deficit may have a significant impact on the value of the rupee--a matter attracting keen attention around the country. Besides, it would translate into a large increase in Pakistan's net foreign debt position. A large and growing public debt could also eventually put pressure on interest rates and crowd out private investment.

The government's economic managers, on the other hand, are of the view that Pakistan is enjoying an economic boom, and the current account was manageable by borrowing from abroad, remittances, drawing down reserves and inflow of investment.

The country has witnessed this current account imbalance as trade deficit (in goods and services) jumped to $12.84 billion during FY06 from just $7.81 billion in FY05. The trade deficit figures are arrived at using free-on-board value of imports and exports.

The central bank's data shows that goods imports stood at $24.984 billion whereas exports totalled $16.50 billion, thus leaving a trade imbalance of $8.44 billion. The services account also witnessed a large imbalance of $4.40 billion during Fy06 as inflows under this account stood at $3.748 billion and outflows totalled $8.15 billion. The factors responsible for this huge deficit were higher outflows on account of transportation, travels, insurance, construction services, royalties and licence fees.

Pakistan had to spend $2.856 billion on transportation account, whereas its earning under this head was only $1.06 billion. Thus, the net deficit in the services account due to chartering of vessels for imports, exports shipment was $1.79 billion.

Another factor responsible for big services' account deficit was a net outflow of $1.185 billion on account of overseas travelling. Pakistan had to spend $1.40 billion to finance personal and business-related travelling abroad of individuals and groups whereas it earned only $216 million under this account. Hence, the services account deficit in FY06. The same applies to spending on insurance and royalties and licence fees paid to international organisations and their employees operating in Pakistan.

The imbalances in trade and services were so large in FY06 that the current account turned negative despite a strong build-up in current transfers. Net current transfers rose to $10.62 billion during the period, from $8.768 billion in FY05.

Current transfers went up as Pakistan received $4.60 billion in workers' remittances or foreign exchange sent home by overseas Pakistanis, up from $4.17 billion in previous year.

A big increase in foreign currency deposits, held by resident deposit holders also boosted current transfers. However, it declined to $312 million against $521 million primarily because of the stable rupee.

Independent economists have also questioned time and again that how long the trade deficit would continue on that trajectory without disrupting the economy? And, how much longer can Pakistan continue to spend more than it earns, and support the growth? And, are the inflows sustainable in the long run?

 

[Owais]

Solar energy a vital alternative source of power

LAHORE: Following international oil prices shooting sky-high, the resurgence of interest in the solar energy as an alternative source of power has significantly gained currency in the country.

Statistics available here shows that there are still some 40,000 villages in Pakistan deprived of electricity, while 7,000 of them are located at places 20-kilometres away from the nearby grid stations, where making the power facility available would be a difficult task.

In such a backdrop, the use of solar energy as an alternative source of power is being given due priority by the government for meeting the acute power shortage in the country these days.

Officials told that the costly imported appliances for harnessing solar energy were an impediment, which has now been removed by manufacturing local solar energy panel, which costs Rs52000 each working for 25 years, while the battery good enough for 2 years were being manufactured for Rs8000, which thus making a complete unit could give an output of 220 watts of electricity.

Besides domestic use, solar energy getting a boost here could also be used for cottage industries

 

[Owais]

$150 billion investment required in energy sector in next 25 years

FAISALABAD (August 07 2006): The total investment requirements in the energy sector during the next 25 years were estimated at $150 billion ($50 billion in the public sector and $100 billion in the private sector).

This works out to an annual average of $6 billion ($2 billion in the public sector and $4 billion in the private sector) and calls for a doubling of the current investment levels, said official sources.

Energy was the lifeline of economic development. An Energy Security Action Plan (2005-30) had been developed to meet the requirements of Pakistan's Vision 2030 for reliable and quality energy supplies and to ensure that energy deficiency does not become a constraint in development.

The main objective of the energy sector development was to enhance energy supply through an optimal mix of all resources including hydropower, oil, gas, coal, nuclear and renewable energy such as wind and solar. It was planned to optimise utilisation of the country's indigenous resource to reduce dependence on imported fuel. In view of the public sector resource constraints, an important focus was also creating an environment conducive to the participation of the private sector, both international and domestic.

The total primary energy consumption was expected to rise 7 fold from 55 million tonnes of oil equivalent (MTOE) to 360 MTOE by 2030. The requirement for power generation would increase more over eight fold from 19,540 MW in 2005 to 162,590 MW in 2030. It was recognised that Pakistan was running out of useable and affordable energy and more efficient use of energy was absolutely vital. While improving efficiency, a major shift was planned towards coal, nuclear and renewable over the long-term period.

The share of coal in the energy mix was planned to be increased from the current about 6 percent to 19 percent by 2030. However, the energy mix can only be changed gradually over a longer period of time. In the mean time, there was an urgent need for import of gas, both through pipeline as well as Liquefied Natural Gas (LNG).

In the oil sector, it was planned that the number of exploratory and development wells to be drilled would be increased from at least 100 wells per year during 2005-10 to 330 wells per year during 2025-30. Plans were also being made to accelerate the exploration of indigenous coal. The import of coal was also being encouraged in the short term for use along with local coal for industrial purposes and for power generation. Based on energy demand supply gap, there was also an urgent need for import of gas.

Accordingly, various alternatives for import of gas (particularly from Iran and Turkmenistan) were under active consideration at the highest level for finalisation of an option to ensure that the 1st pipeline gas was available by 2010. Establishment of refineries and petrochemical plants in the private sector was also being emphasised.

For rapid economic growth, official sources stated, developing countries like Pakistan need cheap, abundant and an environment-friendly source of energy. Previously, Pakistan's economy has in fact, witnessed a visible and crucial structural shift since 1999-2000.

 

[Neo]

ISLAMABAD (August 06 2006): Water and Power Minister Liaquat Ali Jatoi on Saturday directed Wapda to speed up their work on the ongoing mega projects and ensure their early completion. Presiding over a meeting to review progress of ongoing mega hydel projects here, he underlined the importance of power sector and declared it as a backbone of economy of the country.

The minister directed Indus River System Authority (Irsa) and Private Power Infrastructure Board (PPIB) to resolve all issues within three weeks so that no negative impression, signal is conveyed to private investors of important hydro power plants. He was briefed about the progress on Munda dam.

The sponsor of the dam informed the minister the project entails a 200m high concrete Face Rock Fill dam, which will have water storage of 1.2 billion cubic meters and have capacity of generating 726MW power.

The project will cost about $1.02 billion, which is totally a private investment. The project is expected to start generation by 2014.

Flood emergency arrangements and Nullah Leh flood relief plan and preparedness arrangements also came under discussion in the meeting.

The minister was informed about damages caused by current flood in Nullah Leh. It was apprised that 57 families who were living along the banks had been shifted to relief centres.

He directed Wapda to streamline telemetry system within two weeks for the satisfaction of all stakeholders.

 

[Neo]

Editorial:

By Dr Mahnaz Fatima

WHILE support from the government is required to help boost exports, there is much that needs to be done internally to make the industry internationally competitive. This piece focuses on the quality of the internal environment to build competitive advantage in the international market place.

And competitive advantage is based not just on the quality of the product, cost competitiveness and ability to respond to the dynamic environment but also on all those internal factors that feed into the above bases of competitive advantage.

The criteria for international quality awards, therefore, include quality of human resource, of work climate, of management, and of leadership. Only then can quality be built into the products that will sell internationally and will help penetrate the global markets.

Efforts to build quality should graduate much beyond quality control of the inspection or the statistical process control type or even quality assurance through quality processes to building an organisation-wide quality philosophy through total quality management (TQM).

TQM is a company-wide effort supposed to build quality into outcomes and outputs through intense involvement of the workforce who should remain engaged in continuous improvement of products and processes due to the high level at which they should be operating in the needs hierarchy.

Managerial challenge, therefore, lies in enabling the workforce so that it operates at this high a level of motivation and fulfillment. Unless an organisation-wide effort is made to build and sustain competitive advantage, external players such as the government can do little to sustain growth in exports.

In Pakistan, the general belief is that acquisition of ISO-9000 & 14000 certification also certifies international competitiveness. This may not be true especially if the above is viewed as the only sure-fire source for international competitiveness. While the certification facilitates entry into the international marketplace, building competitiveness is a continuous process, especially when this is how the competitors compete in the world markets.

In one export-oriented industry that was surveyed, 90 per cent responding firms were ISO-9000 certified. However, the modal value that occurred most frequently for both the rates of rejection and rework was above five per cent of output. Only one-third respondents relied on modern technology.

And, while all relied on the basic quality control of the inspection type, only about one-third had even reached the stage of quality control of the statistical process control kind. Also, about one-third had reached the stage of quality assurance. Only about five per cent were striving to reach the TQM stage.

Another export-oriented industrial sector had only about 50 five per cent ISO-9000 certified firms and only about six per cent responding firms that were reaching the TQM stage. About 12 per cent responding firms were in the TQM stage in another export-oriented industrial sector surveyed that had only about 41 per cent firms that were ISO-9000 certified. In both these industrial sectors though, the modal value for the rate of rejection and rework was between 5—2 per cent of output.

With the world trying to approach or even better Motorola’s “Six Sigma” which means only one defect per million units produced and with Japan striving towards zero-defects, the above rates of rejection and rework in Pakistan’s export-oriented industry present an outlook that requires transformational remedial action.

For, these are not only an adverse reflection on the quality of process and output but these add to costs thereby further eroding competitive advantage.

In yet another export-oriented industrial sector surveyed that had almost two-third firms that were ISO-9000 certified, 57 per cent firms had graduated to quality assurance and about 27 per cent firms claimed to have even reached the TQM stage.

However, the modal value for both the rates of rejection and rework was between 5—2 per cent of the total output. So, it is not just the prima facie stage of quality management that matters but its effective translation into competitive advantage is what should matter and count.

The above indicates that the road to international competitiveness of export-oriented industry is a long and arduous one. While all players appreciate the significance of quality, the road to this goal is not too clear yet.

For, they started off with ISO-9000 certification viewing it mostly as an entry-level requirement when actually it is a recipe for improvement of quality of processes and products. The goal of ISO-9000 acquisition will remain unfulfilled for as long as the underlying quality philosophy is not internalised.

Then, they are introduced to the jargons of quality assurance and TQM again without absorbing their true meaning. For, some of those surveyed claim to be using TQM without appreciating the concept of “Kaizen” that means continuous improvement. Some others claim to be using “quality circles” without appreciating the meaning of TQM.

So, even though they try to improve quality through the deployment of jargon, it may not work not until the concepts are appreciated and acted out in the true sense. This essentially requires goal alignment. That is, congruence of personal goals with the goals that should be of the organisation and then getting them to see their long-term personal goal fulfillment through the attainment of organizational goals on a sustainable basis.

Emphasis needs to shift away from short-term financial goals as it obfuscates attempts at long-term organisational development.

And, emphasis needs to shift towards long-term business goals of customer satisfaction from which should flow financial results as a business outcome which relationship the export sector should be able to appreciate. For, long-term financial gain of the shareholders can only be secured through a strengthened competitive position. The above can be communicated through the following steps.

It is very important for export-oriented industries to get to see and understand what the international environment looks like and what Pakistan’s place is in the global arena.

In this knowledge economy, they also need to know the paths that the world leaders tread to achieve the competitive as well as financial position they have acquired over time.

These paths will demonstrate that there has to be a handle on both the external and the internal organisational environment. Focus has to be balanced between the external inducements and the internal strengths which must be strengthened and weaknesses that must be overcome.

A comparative study of successful global players in contrast with those not-so-successful should highlight the gaps we need to plug to make our internal micro-level operations strong. It is the minds that need to be opened up to be receptive towards another mode of internal operations and working with the key stakeholders of employees, suppliers, environment, government, and customers. This new mindset alone will make a difference.

It is this process of intellectual transformation that needs to be facilitated in a way that the industrial sectors begin to own it as a business purpose and mission. Industry should feel as they though they are doing it themselves. Only then will they take pride in the process of change which will be followed by strong commitment and delivery.

 

[Neo]

THE recent power outages in big cities including Karachi have brought into focus the need for additional power generation capacity together with revamping of transmission and distribution networks.

To improve energy supply, the government has been working on different options including Iran-Pakistan-India oil pipeline and import of electricity and gas from the Central Asian Region. Hydro power generation by planned large dams is also on the cards.

And the development of alternate energy resources is receiving more attention. The exploitation of the Thar coal mines for power generation is one of the important options.

The $12 billion trade deficit recorded last fiscal is a clear message for controlling big-ticket imports particularly fuel for power generation. Although the local gas is being used for power generation, the gas distribution companies are finding it difficult to make long-term commitments for supply to new power plants.

So, there a strong justification for exploiting Thar coal reserves (Sindh) estimated at 175 billion tons as the government has decided to raise the share of coal in overall energy mix from five to 18 per cent by 2018.

The Sindh government has so far reportedly invested over Rs4 billion on infrastructure development such as roads network, town planning, water, telephone, electricity and power supply systems and other schemes. Work is still continuing.

Wapda is working on 500-kv transmission line to connect the proposed coal-based power plants to the national grid. In addition, it would also construct Rainee-Thar canal to irrigate the region and to meet water requirements of the power projects.

Presently, two power projects are under process at Thar. The Chinese 600 MW power plant based on block-one is stuck due to disagreement on the tariff at which power will be sold in bulk to NTDC.

The American 1,000 MW power plant based on the block-two, initiated on the basis of a study prepared by German consultants, is under further detailed review due to investors’ reservations on the availability of underground water required for cooling purposes and consequently for change of project site to a location with abundant water supply.

The prospective investors may assess the respective project parameters and the government might look into their reservations.

There have been reports of coal-based power plants or coal-washing facilities being considered by local entrepreneurs as well. Coal has been used as fuel for power generation in a number of developed counties but Thar coal is said to have a number of special characteristics. Heating value is said to be relatively low, while the level of moisture, ash, volatile matter and sulfur is slightly on the higher side.

These characteristics have implications for plant design as well as supply of coal, disposal of ash and management of environmental pollution. Such matters have also a bearing on the attractiveness of Thar coal for investors.

For the development of this field in the shortest possible time, the federal and the provincial governments might have to reduce investment uncertainties by appropriate measures aiming at good governance, improved law and order situation, construction of physical infrastructure and provision of level playing field to the local and foreign investors.

Some suggestions are offered here for consideration:

The Power Policy-2002 may not provide sufficient incentives to investors to address issues associated with exploitation of Thar and other fields for power generation.

The announcement of a special policy, namely Thar Coal Development & Power Generation Policy may perhaps expedite the project.

Important parameters such as policy on leasing, handling and transportation of coal to site, provision of water, power generation from coal burning, sale of bulk power to NTDC, handling of emission gases, disposal of ash, etc might be discussed and agreed among the major stakeholders.

Efficient use of such power generation while complying with environment considerations may require the use of advanced technologies which promise low emissions from coal-based electricity generation and may push up the tariff for the electricity genera acceptable balance has to be found.

The provincial policies might not be fully appropriate for protection and optimal exploitation of the natural resources in matters such as mine lease period, levying and collecting of royalty, minimizing damage to the landscape, saving the population from harmful pollutants, etc. These might be updated.

The potential investors are likely to adopt technologies which are reasonably modern and tested and at the same time acceptable, both technically and environmentally, to international lenders who are likely to be financing major cost of power projects based on Thar coal. PPIB, NEPRA and the Sindh government might engage at different levels experts who understand these modern technologies and would support it in the design of new policies.

Policy support for research and development of such new technologies with possible technology transfer to developing countries might also be arranged. Natural resources are precious and local population must benefit the most from their exploitation.

It is imperative to build capacity and properly motivate different cadres of the government officials associated in the work pertaining to enhancing capacity for power generation and the purchase of bulk power from the IPPs. Capacity building will not come easy or cheaply. Dedicated efforts and support over a long period are required. Liberal budget for capacity building may also be assured.

Sindh already has a 150 MW coal-based power plants (three units of 50MW each) based on fluidised bed combustion technology from China. The plant managed by Lakhara Power Generator Company, district Jamshoro is also coal-based. This plant, expected of becoming the harbinger of coal-based power generation activities, has been plagued with periodic technical or other problems. It might be revamped and made more reliable.

Wapda has been recently allowed to establish new gas-based power generation capacity. The government might consider allowing Wapda to undertake Thar coal-based power generation plants as well. This might expedite the Thar coal project.

A Thar coal research institute needs to be set up preferably in the mine area and it should be developed into a centre of excellence. It may initially require large financial and human resources which might be made available by the government. It should have the wherewithal to set up pilot power plants and operate them over extended periods to establish the most appropriate technologies for burning of coal, control and collection of gases being emitted, disposal and use of ash that remains after coal burning.

To show its commitment for the development of Thar coal, the government might consider becoming an investor (say with 5-10 per cent equity stake) in the plants to be set up in the private sector. Once the power plants are in commercial operation, the shareholding can be off-loaded, possibly at a profit.

 

[Owais]

Exports of goods, services rise by $2.45 billion

KARACHI: The exports of goods and services during the previous financial year witnessed a rise by $2.45billion.

State Bank of Pakistan (SBP) released figures here showed that Pakistan exported goods and services worth $20.25 billion during July 2005 to June 2006 as against goods and services exports in 2004-2005 amounting to $17.80.

On the other hand, imports of goods and services during the previous fiscal year remained at $33.9 billion, which was at $25.61 billion in 2004-2005.

 

[Owais]

2005-06 trade gap surges to $12.112 billion

KARACHI (August 08 2006): The trade deficit during 2005-06 has surged to $12.112 billion with imports totalling at $28.581 billion against exports of $16.469 billion. According to provisional figures released by the Federal Bureau of Statistics on Monday, the deficit amounted to Rs 725.285 billion in terms of rupees.

Exports totalled Rs 985.901 billion, against Rs 854.088 billion during 2004-05, showing an increase of 15.43 percent.

Imports during 2005-06 totalled Rs 1.711 trillion, against Rs 1.223 trillion during 2004-05, showing an increase of 39.91 percent. The balance of trade in June, 2006 was (-) 88.508 billion in terms of rupees, and (-) 1.471 billion in US dollars.

Exports from Pakistan during June 2006 amounted to Rs 91,160 million against Rs 89.434 billion of May 2006, and Rs 91.424 billion of June, 2005, showing an increase of 1.93 percent over May 2006, but a decrease of 0.29 percent over June, 2005.

In terms of dollars, the exports increased by 1.77 percent in June 2006 to $1.515 billion, when compared with May, 2006 $1.489 billion, but decreased by 1.11 percent as compared to June, 2005 ($1.532 billion).

Main commodities of exports during June, 2006 were: cotton cloth (Rs 11,536 million); bedwear (Rs 10,575 million); knitwear (Rs 9,936 million); cotton yarn (Rs 8,580 million); readymade garments (Rs 7,904 million); petroleum products (Rs 5,163 million); towels (Rs 3,867 million); rice basmati (Rs 3,269 million); leather garments (Rs 2,379 million); and made-up articles (Rs 1,790 million).

Imports into Pakistan during June, 2006 amounted to Rs 179.668 billion, against Rs 159.086 billion in May, 2006, and Rs 133.036 billion in June, 2005, showing an increase of 12.94 percent over May, 2006 and 35.05 percent over June, 2005.

In terms of dollars, the imports increased by 12.76 percent in June, 2006 to $2.986 billion as compared to May, 2006 $2.648 billion, and by 33.94 percent as compared to June, 2005 ($2.23 billion).

Main commodities of imports during June, 2006 were: petroleum crude (Rs 23,264 million); petroleum products (Rs 19,032 million); road motor vehicles (Rs 9,416 million); iron & steel (Rs 7,082 million); sugar (Rs 5,202 million); [plastic materials (Rs 5,118 million); textile machinery (Rs 3,973 million); palm oil (Rs 3,795 million); fertiliser manufactured (Rs 3,521 million); and electrical machinery and apparatus (Rs 3,259 million).

 

[Owais]

Planning Commission approves Rs 5 billion for KMTP

ISLAMABAD (August 08 2006): The Planning Commission has approved a Rs 5 billion mass transport plan for Karachi and allocated Rs 500 million as the first instalment to put the new transport system in place on priority basis. The programme has been included in the Public Sector Development Programme (PSDP).

After successful implementation of the mass transport system in Karachi, it will be extended to other major cities of the country.

An official who has been working with Sindh government to finalise modalities for Karachi mass transport system told Business Recorder here that the government would extend the project to Lahore, Rawalpindi-Islamabad and other major cities where traffic is a nuisance. According to the PC-1 submitted by Sindh government, the project will be a private-public partnership.

The project will cover the entire Karachi city, encompassing urban intra-city bus routes which operate under DRTA bus route permits. The regulatory and institutional frameworks, in the terms of the study, will encompass the relevant administrative and regulatory structures under Sindh government city district government Karachi (CDGK). The Planning Commission is sponsoring the project.

The PC-1 buses to be operated and maintained by private investors I operators, individually or in the form of syndicate I group I company under the government defined regulatory framework

It indicated that the government has allocated Rs 5 billion to induct 8,000 environment-friendly (CNG) buses under PSDP 5-year phase-wise program.

For 2006-07, Rs 500 million has already been earmarked. However, the provision would be made available to meet the interest part of the buses to be inducted on leasing from financial institutions. Besides, GoP has approved Rs 12 million for detailed study by private consultant in association with foreign input to facilitate the implementation of Bus Reform Program.

Project is included in 5-year plan under PSDP funding provision. It said Rs 400 million were provided in PSDP for 2005-06, which could not be utilised for want of necessary project formalities/studies. However, Rs 500 million has been allocated for 2006-07 for defraying part of interest on loan from financial institutions to be secured by private investor/operators individually or in the form of syndicate/group/company under the government-defined regulatory framework.

The main objective of the project is to establish an integrated, efficient, economically sustainable affordable and market-driven quality urban transport system, which PC-I showed that the plan will support rapid economic development/poverty alleviation.

Sindh government added that a strategy has been framed to provide an urban transport system under a reformed program of regulation aimed at maintaining a balance between the provision of fast, frequency, reliable, comfortable, safe and affordable service to the public.

The need for operators is to make a reasonable return keeping the environment-friendly standards of buses and road/service discipline.

In line with the above objectives and strategy, a project has been conceptualised to encourage private sector's interest in transport sector of the city and the country at large. The government has decided to provide additional comfort to private sector to bring new CNG city buses on leasing from financial institutions. It has agreed to pay interest portion to this effect. Besides, Sindh government and CDGK would ensure investment friendly environment to the private sector to ply safe, comfortable, reliable and affordable public transport on sustainable basis ensuring reasonable profit. The financial institution and the private investor/operator will mutually decide the terms & conditions of the payment and the repayment plan. The CDGK would, however, play its regulatory role to ensure that the interest of the operators remains intact in the scheme by payment of reasonable equity.

Lack of proper transport facility is one of the major obstacles for development in the countries where economy is progressing rapidly but infrastructure facilities are lacking. Pakistan is a glaring example of such conditions.

PC-1 said that in order to meet the pace of rapid economic development, comprehensive transport sector development projects need to be implemented and accordingly an efficient public transport network with all needful infrastructure facilities is required to keep the wheel of Karachi and country's economy as a whole well lubricated, besides, to ensure the health of the habitants, clean air and noise pollution free environment is quite essential.

It said Karachi has been facing enormous challenges with special reference to deteriorating environment due to outdated vehicles plying on the roads without any vehicle fitness check, import of diesel with higher sulphur contents and substandard illegal import of fuel from Iran, rapid growth of new vehicles on roads (400 +vehicles daily added on city roads). The city roads are not vehicle-worthy and lack of public awareness and education, and above all rapid growth of population are attributed to environmental degradation. In view of the existing situation, the government has rightly decided to promote use of CNG fuel in public transport. Besides several mega transport sector infrastructure development projects have been initiated including Lyari expressway, northern bypass, Elevated expressway at Shahrah-e-Faisal and construction of several flyovers/underpasses, bridges and road network improvement programs. Further, the government has geared up its efforts to implement mass transit project on city priority, corridors as recommended by the World Bank study.

The bus reform program in question is in line with the government strategy and plan to ensure friendly environment and better public transport facilities to city commuters by replacing old buses and removing congestion to introduce road discipline.

The induction of CNG buses in Karachi with catalytic converter (to protect NOX-emissions) with Euro-Ill compliant city standard buses would require huge investment in fuelling infrastructure. Fortunately, all oil companies including PSO, Shell, Caltex etc and other private sector working on CNG projects have already assured their interest in establishing CNG filling stations, independently or joining hand with GoP, GOS & CDGK, to facilitate bus reform program. Furthermore, the federal government has already agreed upon to provide duty/tax exemption on import of CNG (CBU/ CKD) buses and CNG kits which would definitely motivate private investors in transport sector and CDGK. Besides, GOS & CDGK are also working on providing a package of incentives for the bus operators to ensure relief in local taxes including registration fee.

The bus routes in Karachi have developed over decades without much strategic planning and currently no planning function exists. The routes are selected by private operators on their own criteria of financial viability by opting location routes without any social considerations, with little planning by the DRTA.

Presently, 207 routes have been identified under the operation of minibuses, coaches and large buses. The study has undertaken preliminary route network surveys, and a database has been established to analyse the operations. However, analysis has proved difficult due to the paucity of information in various departments (also due to the fact that many records are kept manually) and the actual 'on-road' status has been difficult to assess accurately.

However, analysis of the collected data gives a reasonable picture of the status of the present operation with sufficient information available to determine travel patterns and demands. It is evident that the present fleet, being mixture of large buses and minibuses, operates from all points to any destination without co-ordinated planning;

What is clear is that the task of route rationalisation cannot involve rearranging the present routes as the route design is haphazard, with little pattern or system approach evident. The whole network is a collection of single routes heading in all directions.

Attempting to rearrange and create order from the present situation would be time consuming and perhaps yield little benefit, as the whole network needs to be redesigned along a strategic planning approach, based on identified demands (also evident from major route orientation).