Pakistan Economy - News & Updates - Archive

[Owais]

MoA signed with India and China to promote handmade carpet exports


LAHORE (August 28 2006): The representatives from Pakistan, India and China have signed Memorandum of Article (MoA), for the development and promotion of handmade carpet exports under the auspices of World Handmade Carpet Organisation (WHCO) that was formed in China in 2005.

Vice Chairman, Pakistan Carpet Manufacturers and Exporters Association (PCMEA), Major Akhtar Nazir (Retd) revealed this while addressing a press conference at the association office here on Sunday.

Nazir said that all the three member countries have already agreed to form the organisation with a view to develop a product that suits to the importing countries. Now Iran had also shown its interest to join the organisation which would further strengthen this forum, he added.

Elaborating further on the development, he said that the founder chairman of WHCO would be from Pakistan, while general secretary would be taken from China. The organisation's head office has been planned to set up in India. As many as five members from each country would represent WHCO.

Chinese Home Textile Association, Chinese Tibiten Carpet Association, Chinese Chamber of Commerce for Import and Export of Foodstuff, would be among the five members from China. Whereas leading carpet exporters Major Akhtar Nazir (Retd), Latif Malik, Mian Javed ur Rehman, Aslam Tahir and Iqbal Ibrahim would represent Pakistan in the organisation.

Commenting on formation of WHCO, John representative from China, and O.P. Garg from India highly applauded the efforts made by the member countries for the formation of organisation and said that it would help develop and design handmade carpet which in turn would give a boost to the carpet exports of each country, he maintained.

Talking about the Regional Handmade Carpet Exhibition-2006 being held from Monday (August 28), at Expo Centre, Fortress Stadium, Lahore, PCMEA chairman said that it would continue till August 31 while award ceremony would be held on August 30. A large number of foreign buyers, besides local delegates were to attend the exhibition, he said. Adding, he pointed that the exhibition was likely to generate at least 15-20 percent more foreign exchange.

Akhtar Nazir disclosing further said, so far over 200 foreign buyers from USA and European countries had already confirmed their participation in the exhibition.

He told that 50 foreign buyers had already arrived from various countries for the show. 'On their arrival, they expressed their satisfaction over the arrangements of the exhibition. Besides importers, foreign media, particularly Rug News from USA is also arriving to cover this important exhibition. The association has planned setting up of 100 stalls in the exhibition out of which India has been allocated eight stalls, China two and 90 stalls would be set up by the local exhibitors', he maintained.

The vice chairman added that Minister of State for Commerce, Hamid Hiraj would inaugurate the exhibition while Chairman Export Promotion Bureau Tariq Ikram had been pleased to grace the occasion. Punjab Governor Lieutenant General Khalid Maqbool (Retd) would be chief guest on the award distributing ceremony on August 30, he added.

Nazir averring on arrangement of mega event said in order to facilitate the foreign buyers, arrangements had also been finalised for establishing of Carpet Street at Nawazish Ali Road that would help interested importers to view all kind of products at one spot in the provincial metropolis.

He said a Carpet City had been planned at somewhere 50-kilometers from Lahore along the Lahore-Islamabad Motorway. According to the plan, the Carpet City would be set up on an area of 300 acres and all kind of facility like weaving, washing, dying would be provided under the same roof. These steps would help enhance country's carpet exports to earn substantial amount of foreign exchange, he added.

He appreciated export promotion bureau of Pakistan for its all out help for setting up the Carpet City and said that it would take the matter with the ministry of commerce for final approval.

PCMEA vice chairman, however, said that if six percent export rebate was provided to the carpet industry following textile industry example, it would make the products more competitive internationally.

 

[Owais]

Indus Motor plans to double its production by 2010


KARACHI (August 28 2006): The Toyota Indus Motor Company (IMC) plans to double its production capacity from 50,000 units to 100,000 per annum by the year 2010, a plan in line with industry's target to raise its output from the current 215,000 units to 0.5 million by 2012.

In an exclusive interview with Business Recorder, Indus Motor Company CEO Pervaiz Ghias said the local auto industry employing over 400,000 persons had recorded an average growth of 35 percent per annum during the last few years.

The production had gone up from 45,000 to 200,000 units during the same period, he said, adding the government was projecting the sale of 500,000 units by 2012 as a part of its Automobile Vision while industry was looking for 350,000 units by 2010.

Pervaiz said the auto sector in Pakistan had the potential of becoming a major driver of economic growth, adding the Indus Motor Company alone had contributed Rs 12 billion to the exchequer in FY06.

He said the transformation of local auto industry into globally competitive and export-oriented force needed investment, acquisition of latest technologies, expansion in existing capacities, and rationalisation of tariff regime for its integration into the global supply chain. "All of this necessitates government's support to the local auto manufacturers in the form of a consistent long-term policy," Ghias observed.

Commenting on the import of used-cars, he said the policy was making its impact felt in the local industry, which at the first instance, may seem positive as the delivery of clog of cars seemed to be addressed to. "However the matter if analysed on a long-term and macro-level identifies some serious consequences for both the industry and the country," he added.

Last year, he said the imported reconditioned cars accounted for a market share of 19 percent, which was only four percent previous year. This ratio was equal to the 25 percent of the total production capacity of the local plants.

"If 46,000 cars - figures available till June 30 - are imported each year, there would be no expansion plans on the side of local manufacturers," Pervez Ghias remarked.

Although, the government had restricted import of used-cars over five-year-old, but still much more needed to be done by way of non-tariff restrictions so that the misuse of transfer residence and gift scheme was stopped by unscrupulous second-hand car importers who evaded taxes and document transaction. "Domestic demand has to be met by the domestic industry, as is the policy in all other countries," he said.

"The industry has been instrumental in transferring technology to vendors and dealers. The development of this industry would result in substantial foreign exchange savings, which would be drained, as if a short-term solution to address supply and demand gap, the imports of cars continues," he cautioned.

The Indus Motor Company is the second largest local manufacturers of cars in the country accounting for the 18 percent of the total market share in the last fiscal year.

At present, it produces the leading brands; Cuore in the 800cc class and Toyota Corolla in the 1300cc class. One car is assembled every four and a half minutes at the state-of-the-art IMC plant at Port Qasim.

"The quality is according to international Toyota standard. We do not say that a car is made in Japan or Pakistan, we say it is made in Toyota just like the other 62 plants elsewhere in the world. There are regular quality audits that ensure the standards are maintained," Ghias maintained.

On the issue of premium, IMC CEO said that there were two solutions to this problem, one, was increased production that was being done by the local players and the other was government control over transactions by way of documentation and checking source of funding.

"It is the unauthorised dealers and fake buyers ie resellers that were creating artificial demand and the customer was forced to resort to buying on premium. The issue creates bad name for the manufacturers and we condemn this activity," he added.

 

[Owais]

Over Rs 223.405 million anomalies detected in PPO accounts


ISLAMABAD (August 28 2006): The Auditor General of Pakistan has detected misappropriations of more than Rs 223.405 million in the accounts of Pakistan Post Office department. The Pakistan Post Office has failed to recover nearly Rs 36 million from the Pakistan Telecommunication Company Limited (PTCL) as service charges on account of delivery of telephone bills.

According to the audit report tabled in the National Assembly a few days ago, PPO authorities incurred an irregular expenditure of Rs 62.873 million during 2002-03 on printing of stationery and forms from the Pakistan Post Foundation Press without obtaining competitive rates from the Printing Corporation of Pakistan.

The report says there was a variation of Rs 42.188 million between the closing balance of 220 saving bank accounts and the balances appearing in the annual profit statement issued by the Director Accounts, Lahore for the financial year 2002-03.

The differences were not reported by the heads of units of seven formations of the department to the PPO director (accounts), for ratification. The situation, report reveals, reflects that working of the GOPs is not checked appropriately which may lead to over-payment, fraud or embezzlement of the public money.

Moreover, nearly 47 cases of misappropriations, frauds, losses, thefts and dacoity amounting to Rs 29.213 million occurred during 2002-03, but these cases were not reported to audit authorities, who observed that these cases were not appropriately processed or finalised as required under rules.

The PPO suffered a loss of Rs 16.684 million, as 27 formations of the department incurred the hefty amount on engagement of daily wages and contingent paid staff without getting funds allocated under the relevant head during the same period.

The unauthorised expenditure was charged to the regular establishment head instead of the proper head of account.

The audit report also says that Rs 13.546 million was drawn in six formations of the PPO department from the allocation made under the head 'Capital Outlay' during 2002-03, and placed under transitory head 'Other Deposits' in order to avoid the lapse of funds.

The authorities awarded contracts for conveyance of mail to private contractors in a non-transparent manner, causing a loss of Rs 5 million to national kitty.

 

[Owais]

Powerlooms sector demands R&D support, WHT withdrawal

FAISALABAD (August 28 2006): Chairman, All Pakistan Cotton Powerlooms Association (APCPA), Abdul Haq, has said that big investors and industrialists have fully benefited by upgradation in 'Textile Vision 2005', while small units, especially the powerlooms industry, had been totally ignored.

Addressing a business forum, he said that in a way the miserable condition of small and poor farmers was discussed but practically the big landlords benefited. Similarly, in the industrial sector the small industrialists and investors dreamed of bright future, but their all ideas and thoughts remained unrealised.

The APCPA chief said that under 'Textile Vision 2005', the work was done throughout the country relating to the upgradation, under which spinning and processing were not functioning in accordance with their production capacity. In the weaving sector, only the mill sector had been upgraded, but the small scale weaving sector, which was called the non-organised sector had got nothing from the 'Textile Vision 2005'.

He said that the programme of up-gradation announced for the powerlooms industry by Federal Ministry of Industries and Smeda had totally flopped. According to him, the policies prepared in 'closed rooms' never proved effective and there was no say of small industrialists.

Haq said that when the handlooms of textiles were free of quota, then no one bothered to listen to the miseries of the sinking cottage industry. "Now, when India has become the leading exporter of handloom products, we have decided to change our thinking."

He urged the government to convene a roundtable of the ignored segments of the textile sector in the Textile Vision 2005, so that factors relating to failure could be sorted out.

He said that the policy which had been announced by the Prime Minister for promotion of SMEs, small scale industrialisation by Smeda has yet to start it work on it, but what was being done at present was not less than a tragedy. For example, take the electricity tariff B-I and B-II. These are yielding negative impact on the small-scale industrial sector, especially powerlooms industry, which is providing livelihood to more than one million persons, directly or indirectly. Under present tariff system, big industrialists are getting electricity on cheaper rates and enjoying more privileges, while powerlooms industry gets costly electricity tariff, which is the main hurdle in the progress of the 'biggest cottage industry', he said.

Abdul Haq said that if the powerlooms industry had got the facility of research and development and up-gradation facilities, and the electricity tariff had been reduced, then these ancillaries textile units would also have flourished.

He said that before Textile Vision 2005 powerlooms industry had 79 percent share in the export of grey cloth. Now this ratio has been reduced to 59 percent in non-organised sector.

 

[Owais]

Negative signals about Pakistan's ranking

(August 28 2006): The indication that Pakistan's credit rating may be downgraded is sad news. According to some reliable sources, the Singapore-based Standard & Poor's Ratings Services has hinted at changing the long-term positive outlook of Pakistan's credit rating owing to domestic political and economic risks and emerging regional situation.

The State Bank of Pakistan's Governor, Shamshad Akhtar is reported to have informed the Federal Government about the negative signals coming from S&P that clearly indicate a likely downward revision of Pakistan's credit rating that was upgraded from "stable" to "positive outlook" in December last year. S&P analysts have been exchanging data with the central bank for quite some time now but there is no deadline for the review as such.

The SBP Governor is also reported to have written to the government about the impact of downgrading of the country's credit rating on the overall economy that has already been showing signs of imbalances in various sectors. When contacted, the Advisor to the Finance Ministry, Ashfaque Khan said that it was a complicated process and a team of Standard & Poor's would be visiting Pakistan before finalising any revision.

The downgrading of Pakistan's ranking, in our view, if actualised, would be unfortunate for the country, though indications of such an action should not be a surprise. The credit rating of a country, it may be explained, is a reflection of the strength of its economic fundamentals, particularly the behaviour of its foreign sector.

The Standard & Poor's has for the last few years been consistently improving its outlook for Pakistan in view of considerable improvement in its macro-economic indicators and normalisation of relations with India. In December last year, it had revised its credit rating on Pakistan to "positive" from "stable", citing improvement in external debt indicators. Following this, the rating agency affirmed its current 'B+' foreign currency and 'BB' local currency long-term and 'B' short-term sovereign ratings assigned to Pakistan. Since then, there have been lots of negative developments, prompting the rating agency to reconsider its outlook with regard to the prospects of Pakistan's economy.

The GDP growth rate declined last year and sustainability of a respectable growth in the coming years has become suspect due to a number of factors, including continued low level of savings in the economy.

The budget deficit is on the rise, strengthening the fears that inflationary pressures may reemerge. The biggest negative point is the highest ever trade and current account deficit at about $12 billion and $5 billion respectively last year. During the first month of the current fiscal year, the trade deficit widened to $1.239 billion as against $726.936 million in the same month of 2005-06, as oil prices hit a new high in the international market.

Higher debt costs would ultimately make a large dent in Pakistan's foreign exchange reserves. The uncertain political future in Pakistan before a run-up to the elections, souring of relations with India, a tenuous border situation on the western side, conflict in the Middle East and possibility of its spill-over to the region are also some of the negative factors that may be the basis for a downward revision in the credit rating.

The consequences of downgrading of the credit rating are obvious and need not be recounted here in detail. It would be hard for Pakistan to sell bonds in the international market at favourable terms and attract the much-needed foreign exchange. Foreign banks would be reluctant to do business with their Pakistani counterparts and foreign investors may be tempted to avoid the country.

The privatisation programme of the government may receive a setback and, overtime, foreign exchange reserves of the country would come under pressure. All of this suggests the need to take remedial measures immediately to reverse the trend of deteriorating economic indicators and improve the domestic political and regional climate so far as possible so that S&P maintains at least the present credit rating of the country. We know this is not easy but the alternative to this approach would be harmful to the economy in the long run.

 

[Owais]

Railways and FCCI joint venture soon to launch cargo trains


FAISALABAD (August 28 2006): Pakistan Railways is ready to have a joint venture with the Faisalabad Chamber of Commerce and Industry to launch a cargo train and upgrade the Faisalabad railway station. Addressing the FCCI members, Federal Minister for Railways Sheikh Rashid Ahmad said 14 more freight trains would start working this year.

He urged businessmen to invest in the railway sector. He said display centres and other commercial activities could be started at the railway station.

In this regard, Pakistan Railways was ready to have joint venture with the business community.

Sheikh Rashid Ahmad said fast trains to link Faisalabad with other major cities, like Karachi, Lahore, Rawalpindi and Multan, would soon be started.

In his welcome address, FCCI President Mian Muhammad Hanif said the cargo train facility for Faisalabad Dry Port Trust would be helpful in promoting the export activities.

City District Nazim Rana Zahid Tauseef was also present on the occasion.

 

[Owais]

Cotton prices may rise on crop shortage, quality factor


KARACHI (August 28 2006): The ginners were in trouble facing lack of buying interest from the consumers as rain had nearly forced mills to get shutters down besides a report from America that exports of made-ups will be hit hard, during the week ended on August 26,2006.

The spot rate was dreaded to be touched as scenario change was not in grip. The spot rate was firm until Wednesday but had to be revised higher by Rs 25 to Rs 2475.

WORLD SCENARIO:

Contracts journeyed erratically through the week making hectic efforts to find a direction but except scenario change in Texas where rains were reported increasing somewhat prospect of an improved yeald. However, opening was weaker as futures dived down on speculators indulgence that ldt prices to bottom. The October was down 0.29 to 52.11 and Dec down 0.44 to 54.08 cents a pound.

On Tuesday futures snapped a losing streak to end up for the first time in five days.

The trade buying and short covering did the magic and caused a change. Fundamentally focus was on weather over the US cotton belt, which has raised questions on the type of demand that may emerge for cotton marketing year 2006.07 gets underway.

Until a week back it had disappointed all the players and it appeared that a drought from July through early August would result in a US cotton crop that would be around 19 million bales. But rains have brighten the prospect of favourable scenario sending crop production to high level.

On Wednesday speculative activity pulled contracts down. Meanwhile Pak officials informed that heavy monsoon rains have caused damage about 10pc of the country's cotton crop in Sindh area which produces quarter of total production. However, traders said they were watching eagerly China's issuance of new import quotas for cotton.

On Thursday the cotton market moved marginally higher on rebounding from the previous day's negative session obviously with little fresh direction to inspire trading, operators said. They said they were not inspired by trade data from USDA as it reported net upland sales of cotton rose 16pc to 91,800 bales from a week ago amid a 23pc drop in export.

They expressed uneasy feeling over almost two weeks the benchmark contract has been stuck in two cent range.

On Friday final session showed strengthened as technical buying. Traders said on a macro scale the market is wrestling with two questions, one is the drop in the US and/or world crops enough to sponsor a supply driven rally irrespective of demand and two: when will demand pick up and will it meet projections. The futures closed October up 0.40 to 53.50 and Dec up 0.47 to 55.6 cents a pound.

LOCAL TRADING:

The cotton consumers were pressing ginners to take out stocks at softer rates to lay hands on as they were held up due to inclement weather, mills staying inoperative and report from America that a big group buyers of made ups will not be able to continue. Inclement weather continued to dampen the full swing operation as all waited for a better scenario change favouring both the sellers and buyers.

On Monday modest business transpired as ginners felt pressure which they were not going to low down to. Rains had continued with that sellers/buyers remaining tense. They would have likesd a scenario change enabling all players to become busy and normal. But neither local nor the international news was incentive ladder to start business. The ginners looking at the temper of rains were getting ready for pushing prices higher but consumers were not ready to oblige. Spot rate remained stuck up at Rs 2450.

The second session was no better as buying interest remained thin. No change in spot rate was possible. Brokers with no business had been favouring ginners should not be so stiffly and must be thankful to outlet opportunity. Nearly 500 bales of cotton changed hands in the range of Rs 2500/2525.

On Wednesday no business transpired as both ginners and textile mills were reading the developments due to rains and attacks of pests in the aftermath. However , chances are 50/50 for both the players, but wil depend on the rains condition after a fortnight or so. This period is considered very crucial for the cotton and textile traders. Spot rate remained unchanged at Rs 2450.

On Thursday speculative buying by textile millers pushed cotton price higher, market sources said. The spot rate was up by R 25 to Rs 2475. The millers took the report about damages in lower Sindh and some parts of Punjab and lifted cotton giving ginners a chance to play up with the long stuck up prices.

Nearly 600 bales were lifted at prices ranging between Rs 2500 and Rs 2625 depending on the quality. The cotton commissioner was not certain about the damages but had hoped production loss by damages by 1.5 million or around.

On Friday the buying turned respectable as millers tried to resume week long absence from the market and buy. The raise in price a day earlier had no effect over 1000 bales of cotton were bought at prices ranging between Rs 2475 and Rs 2625 depending on quality.

IMPORT SUBSTITUTION, HOW LONG:

For six decades people at the helm of affairs in Pakistan ignored thoroughly on major field of petro-chemical based industry. Had industries would have been set up as soon as cotton based economy was considered parallel to none other sector country would have enjoyed exemplary prosperity.

With extra-ordinary vision to successfully muster resources to keep this country at par with China and India. China envisioned the idea as back as 60 years to build and manufacture everything to be the short and long cost effective. One after another leaders here emerged to leave a mark on the course of history.

But our learned PhDs and class engineers and recognised scientist first knocked at the door in country for an opportunity to serve this country. But disappointed as they were., were eloped by countries who saw worth in them and paid the amount country had considered too much. It was, knowledgeable circles say for merely 18000 or so per month.

Thus the country with ever rising import was thrown to the brink of bankruptcy. Loans carrying high interest rates were acquired to buy or manufacture fashion powder or gun powder. The circles stood firm that Pakistan will any day will have to think that, cotton economy on top, and textile products earning 70 pc of the total of the forex, petro-chemical sector will have to be embraced and sooner the better.

Or, Pakistan will never emerge as an industrialised country and top exporters and earners from the textile products. The authorities must realise the grave mistake committed in the past for dearth of raw material or expertise, ignored the industries based on petro-chemicals.

The Chittagong steel mills was also opposed on raw material grounds but is running and meeting the country's needs. And sirs, will you ponder for a moment what precious things country established that led it to the brink of bankruptcy? The details are very ugly. Pertinent question is that Pak or foreign friends patronised raw material suppliers of Europe and Amercia and elsewhere should have set up, at whatever cost, to day textile raw materials besides cotton would have been receiving most of its chemicals and dyes needs from tjis country in stead of 70pc from abroad. Once newspapers reported chemical and dyes town was being set up.

It was good to hear. Country lover want now town set up. The donors have today been talking of religiosity, they will not mind Pakistan spends the interest payment on debts to be devoted to making industries that would make Pakistan pay all debt at a stretch instead of in bits. The hint is not that Pakistan is awarded LDC status but time to make Pakistan industrialised in true sense. Similarly need for production of textile machinery for all purposes should be manufactured and govt freed from demand of packages.

LAMENT, CERTAINLY NOT:

In China textile think tank, after going through a report showing deplorable condition leading Best Manufacturing Group to filing chapter bankruptcy, should have started how to meet the likely loss of $42 million. This sort of befalls afflict some business. The losers must not however waste time and energy on lamenting.

BMG of New Jersey is one of the best groups but misfortune led the management, to, as it so happens in America, resort to register bankruptsy. The loss as Pakistan exporters have calculated will come to around $42 million. Fortunately the BMG was importers of items that Pakistani exporters have made inroads in but the market they hope would remain intact. Ofcourse, they are worried the new approach to new buyers may record some hurdles on account of importers own preferences for importing the items imported by BMG without much hassle.

This is where Pak exporter, or may be exporter in other countries, get illusioned and take for granted that they won't find replacements. They have already expressed in the report that Pak exporters will have to make renewed efforts to find some sound and reliable US importers with whom they could build a smooth trading relationship.

Apprehending such losses expose weakness on the part of exporters, who has very vague picture of world market. In this case exporters seen to be unaware of the importers Pakistanis were having contacts around. The exporters should have, if they have surplus products to sell beyond, if such a setback hit them.

 

[Owais]

Cont......

It has been past experience that some aggressive exporters would contact our diplomats abroad for remaining untouched from ardent importers in the country they are working in for this purpose. Often diplomats also either write or seize the meeting or conference they are invited to attend to tell their exporters such and such country has scope for imports of products. among many countries particularly are said to have scope for our products one being Poland and other South Africa.

However, this is consoling that some exporters have reached America and meeting their importers who may not oblige right now and even exporting and exploring new American market and importers. If this is so, the loss being contemplated will be recovered with renewed efforts.

DIRT-FREE COTTON CULTURE:

A few chips more are the obstruction in getting seedcotton cleaned and supplied to textile exporters. Officials are always aware of the cure but they have been victims of indifference thus their approach misses the right tract. The clean cotton or contamination free lint has not been as difficult as it has been made to look.

A recent report from Islamabad quoted a senior official in Minfal, who, however preferred to remain anonymous as it had feelings the sector consuming most cotton has the key to make the programme of clean cotton a real success. Some ginners in Sindh also think likewise, no, in fact they suffered financial loss, as consumers refused to pay additional money spent on the lint for making it clean.

Only the cotton and textile exporters can encourage ginners to supply required quality lint and spinners and textile exporters who always are in look out lint of international standard can make sure the success to achieve a culture of dirt-free lint. The ginners are on record they claimed they had made moves to supply clean lint because they were hurt for this reasons. Pak annually lost one billion dollar.

They called the instrument lint cleaner or roller-gin and they regret to say their rusted parts could be seen in some corners of the ginneries. But the cotton buyers who won't buy below world standard quality cotton, won't pay a penny more than the rest of cotton. It is since then the efforts are now being stepped upto make Pakistan a contamination free cotton culture. But it is still to get the move going. This particular point has to be kept in mind that ginners who had travelled to countries to observe and learn how in Turkey, India and Italy cotton is turned into clean lint.

Exports are of the opinion that the belief that all contamination in cotton is at picking stage. But they contest this belief and claim that cotton or seedcotton gets contaminated while on the way carried by middlemen or the "Arhatis." These two are also major players and they must be made conscious to avoid seedcotton getting mixed up with foreign elements, which have nothing to do with contamination.Tthat has made Pak cotton so much unpopular sort of thing that without nay word or bargain, according to sellers, foreign importers of cotton and textile products pay five to 10 cents lower than cotton of other countries.

US WAS NOT BACKING OUT:

The words of the Chief US trade negotiator are to be taken on face value that it was premature to review trade legislation to give countries time to reach a new world trade deal. The talks were declared as collapsed on July 24, 2006. The knowledgeable circles touching upon the issue recalled US past gimmickry unworthy of super power game. All the other WTO members looked aghast, at one another.

Lama surrendering with all of them. All the ultra-hopeful members looked at their closed fists, which they had all put together could inject a new life in dying WTO. But the US had not budged an inch from its rigid stand. Naturally, tearful Lamy, in whispered tone said talks were being suspended. And now report of US trade representative Susan Schwab that despite "there has been strong resistance to any relaxation it was not backing away from its demand in the talks for deep farm tariff cuts." The US president himself, many will recall had expressed an early meeting just to lest his own and his country's business.

But the WTO chief Lamy and his Union had clearly stated to participate in any meeting to face the similar situation and end. However, the US trade representatives language seemingly gave a hope that US has to live up to its bigness. Susan's tone is clear that some solution is coming and before the trade promotion authority expires in mid-2007. Undoubte1dly Susan had in her view as all Americans November elections had.

The sources pursuing into the turn and twist in her language said that let us hope for the best and should take rather seriously that "it was premature to renew trade legislation." The sources however were not optimistic that all are intended to go well from US side.

This may be a half hearted call to get EU and Lamy attitude to soften as EU has not been going to attend CAIRNS group meeting in Australia around September 20/22. So, so what the meeting in Australia is some weeks in future. Time can show us as many game or twice as much the world has already witnessed.

TAIL PIECE: On a cursory look on BR Port Activity column certain news hurts feelings of some vulnerable people, such as one on August 2, 2006, was that 3993 tonnes of sugar at Karachi Port were unloaded. My God, hold on Sir, there was yet another news about sugar 2536 tonnes unloaded at Port Qasim. The total comes to 6449 tonnes.

The foreign exchange drained, could only be correctly calculated by the mill owners. The consumers can only feel the pinch of their hard earned tax money drained out to import an item served entire subcontinent before partitions world thinks and rightly so, it being agri based country, but they refuse to believe. Sugar, wheat and even some cotton needs are met from imports.

 

[Owais]

Adamjee declares Rs 1.064 billion after-tax profit

KARACHI (August 27 2006): Adamjee Insurance Company Limited has declared after-tax profit of Rs 1.064 billion for the first half of the current year ended on June 30, 2006, as compared to Rs 456 million in the corresponding period of previous year.

Announcing the financial results here on Saturday, Nasreen Rashid, Chief Operating Officer of the company, said that earning per share (EPS) of the company had increased to Rs 11.71 as compared to Rs 5.52 of previous year.

The break-up value per share has also increased to Rs 37.05 in the period reviewed against Rs 22.31. Total assets of the company have increased to Rs 10.238 billion from Rs 7.395 billion. Investment income rose to Rs 917 million as compared to Rs 323 million.

The paid up capital of the company rose to Rs 909 million against Rs 826 million, while the company has announced to increase its paid up capital to Rs 1 billion. Adamjee Insurance is the first insurance company which has announced increase in its paid up capital to Rs 1 billion.

The gross premium of the company was Rs 3.9 billion in the first half of 2006 against Rs 2.9 billion, showing 35 percent increase, while the net premium was Rs 2.6 billion against Rs 1.9 billion with an increase of 26 percent. The underwriting profit was Rs 331 million against Rs 293 million, showing 13 percent increase.-PR

 

[Owais]

Worldcall signs Rs 720 million agreement for WLL system


LAHORE (August 22 2006): The Worldcall Group of Pakistan on Monday signed Rs 720 million agreement with Huawei Electronics of China to collaborate in setting up a Wireless Local Loop (WLL) system in South of Pakistan.

According to a spokesman of the company, the contract award marks a major milestone in Worldcall positioning as a premier WLL operator in Pakistan. The contract includes line capacity infrastructure deployment for Worldcall WLL operations. Worldcall contract with Huawei for South of Pakistan will focus Karachi and Hyderabad as principal target areas. Service launch under this turnkey contract is planned for first quarter 2007. Besides the basic telephony services, WLL brings more value to the network by offering high speed Internet access, multi media, bandwidth on demand and fast file transfer.

'Pakistan is witnessing an unprecedented growth in demand and the wired network alone is not enough to keep up with it. This is especially true in areas where existing cables would require costly or time-consuming upgrades to provide high-speed, high-quality Internet access', the spokesman pointed out.

According to him, WLL is ideally suited for expansion in an existing wire line network in the provisioning of local telephone service. However the deployment of WLL will depend upon the prevalent market and regional terrain.

Huawei Technologies is one of the world's foremost solution providers for WLL CDMA networks. Selection of Huawei for the turnkey contract was based on excellence of Huawei's technology offering, along with its ability to deliver turnkey solutions on a major scale. In CDMA solution offering, Huawei is already a world leader with matchless profile in 450 MHz solutions deployed for WLL service, the spokesman added.

 

[Neo]

ISLAMABAD, Aug 27: The government has decided to set up a $500 million Thar Coal Mining Company (TCMC) run by the private sector to develop the country’s largest deposit after having failed to involve any major company for investment in coal mining and power generation.

The plan, approved by the president and the prime minister, envisaged unbundling of the Thar Coal project into mining and power generation to bring down the size of investment in each block from $1.5 billion to $500 million, a planning commission official told Dawn. There are more than six major blocks identified so far in Thar.

The decision was taken after realising that mining and power generation needed to be developed independently. It was also felt that energy crisis had already hit the country and it might begin to affect the economy from next year and even the power produced from natural gas was now costing 5.9 cents per unit.

“We lost six years in trying to attract large companies to finance up to $1.5 billion in mining and production of electricity from Thar coal reserve but failed to get a breakthrough because such a big investment was not forthcoming,” said a senior government official.

It has also been decided to gear up Wapda to set up first coal-based thermal power plant at Thar if foreign or local investors continue to show indifference because dependence on imported fuels has to be checked.

He said the ‘mining majors’ were not coming in for the Thar coal mining. Many companies showed keen interest in power generation at Thar coal but showed hesitation when the government asked them to also develop the mines themselves. He said an integrated project of mining and power generation required investment between $1 billion and 1.5 billion which was found to be difficult. “Thar (coal) is not worth $1.5 billion investment for a foreign investor.”

 

[Neo]

THE government has committed to provide electricity to the entire population by 2007. Out of a total of around 130,000 villages, 99,600 were electrified at the end of March 2006. There are still 30,400 villages that have to be provided with electricity.

The hydro potential in Pakistan has been estimated at 46,000 MW; the present installed capacity is 6,459 MW. According to the ‘Policy for Power Generation Projects Year 2002’, Pakistan plans to commission 12 large scale hydro power plants, besides other relatively small scale projects.

Large hydro power generation projects involve a number of social, political and technical issues. Despite the government’s intensive campaign, it has failed to remove the fears of Sindh and NWFP on the issue of the Kalabagh Dam. Also, the construction of barrages and dams upstream on Indus has degraded the Indus delta.

The promises of cheap hydro energy from large dams, if analysed from a sustainable development prism, are not reliable because of two reasons; first, there is a vocal demand to include the social displacement and environmental degradation costs in the up-front capital costs of such projects.

Financing of such mega projects remains the most important aspect of this problem. Funding from international donors for such a project is difficult to receive, considering their commitment to facilitate investments in private thermal based power plants.

Second, even if the government arranges funding for such projects, the outlays involved in resettlement compensations are huge. For example, the government intends to spend Rs2.025 billion on the resettlement issues of the Kalabagh Dam by constructing 20 model and 27 extended villages.

Also the world over, a large hydro power is not considered as a renewable energy option due to its negative impact on the local environment and on the people displaced by water flooding. There is also strong evidence to show that such large schemes emit greenhouse gases, often equivalent to fossil fuel power plants, due to the decaying of biomass covered by the reservoir.

However, small hydropower plants have emerged as a desirable option, especially for hilly terrains where natural and manageable waterfalls are abundantly available. Being environmentally benign and having a small gestation period, small hydro resources receive worldwide attention both in developed and developing countries to augment energy generation. Small hydro plants offer a wide range of benefits, especially for rural areas in developing countries.

Development of small hydro power plants (SHP) around the world has increased substantially in the last 10 to 15 years because of limited and fast depleting fossil fuel resources such as coal, oil and natural gas.

The world’s installed capacity of small hydro plants is 47,000 MW, against an estimated potential of 180,000 MW. The development of small hydro projects appears strong in many parts of the world, especially in Asia, where it accounts for more than 19,000 MW of energy. Within Asia, China alone contributes more than 15,000 MW to the grid. There are over 420 small projects producing 1423 MW in India

Within the range of small hydro power plants mini-hydro typically refers to schemes below 1 MW, micro-hydro refers to schemes below 100 kW and pico-hydro to schemes below five kW. Although all of these technologies could be regarded as small hydro power plants, they have specific technical characteristics that warrant their own definition.

Generally speaking, micro- and pico-hydro technologies are used in developing countries to provide electricity to isolated communities where the electricity grid is not available, whereas mini-hydro tends to be grid connected. In most of the cases, no dam or reservoir storage is involved.

Generally the Northern areas are thinly populated. Low population and scattered settlements make it economically unfeasible to provide electricity supply to such places through the national grid.

These hilly areas receive a significant quantum of precipitation every year. Hence, water flowing through small rivers and streams is a potential source for small hydropower generation in order to solve the problem of energy shortages in such geographically discouraging areas

In fact, Pakistan Council of Renewable Energy Technologies (PCRET), a department of the Ministry of Science and Technology, has implemented 290 micro-hydro power (MHP) schemes in FATA and the northern areas with a total capacity of 3.5MW, ranging from 3-50kW per plant, with the participation of local community . All of these plants are run-of-river type in the low (four meter) to medium (30 meter) head range.

Similarly, Aga Khan Rural Support Programme (AKRSP) has constructed 171 micro-hydel units providing electricity to around 17,000 households in the remote and isolated region of northern Pakistan, and currently provides 11,000 households with electricity in very remote locations.

Once the plant is installed, the local community takes the responsibility of operating it. These plants provide electricity mainly for domestic purposes. Local people have installed agro processing plants for flour grinding, rice husking, lathe, in the power house. Such units are run during the day time, directly from the turbine shaft. The electricity produced through micro hydropower in the country is in the range of 5-50 kW.

Recently United Nations Development Programme (UNDP), the Alternative Pakistan Energy Development Board (AEBD) and German Technical Assistance Agency (GTZ) launched a Rs4.5 million project to promote adoption of renewable micro-hydro energy for the poor rural communities in Northern Areas.

A major advantage of micro hydro is that it can be built locally at a considerably less cost. For instance, imported turbine sets generating up to 50 kW cost approximately Rs30,000-60,000 per kW, while the local manufacturers located in Taxila, Gujranwala, Lahore, Karachi offer facilities for turbine manufacturing at Rs10,000-15,000 per kW, with marginally reduced turbine efficiencies. The cross flow turbine used by PCRET and AKRSP is manufactured in local workshops.

The unit cost of MHP in Pakistan is currently $1000-1200. The areas are remotely located at considerable distance from the national grid. Hence micro hydropower plants are the most attractive option of power generation. The system is a decentralised one, with no dependency on the national grid.

The substitution of conventional sources of energy like traditional biomass for cooking, diesel generators, kerosene lamps and biomass stoves with renewable energies like SHP help to decrease carbon dioxide emissions and also contribute to poverty alleviation and economic development by supplying the electricity needs for lighting, water pumping and operating small workshops.

These projects benefit the local environment by using a natural resource to generate much needed electricity without depleting the quantity or quality of that resource or harming aquatic fauna and flora.

The access to electricity provides women with an opportunity to improve their social and economic condition. Women in rural areas use time saved and extended working hours due to availability of light to manufacture traditional handicrafts for domestic and commercial purposes. Many children, especially young girls use the extra hours available during the nights to study.

Small hydropower (SHP) is a renewable energy source, a proven technology that can be connected to the main grid, used as a stand-alone option or combined with irrigation systems. The development of micro hydropower plants should continue, with continuous research for increasing the efficiency of these plants. Further, the government should launch new micro and Pico-hydro energy projects through Town council and Union council respectively. The costs of local manufacture can be reduced still further by developing local engineering capabilities and advisory services.

 

[Neo]

Conspiracy theories alleging the collusion of large multinational corporations with the spread of the new empire led by the now sole superpower seldom receive serious academic attention. These theories are often discredited as a figment of imagination of left-wing radicals still reeling under the shock of the demise of socialist regimes.

However, a recently-published book by someone who claims to have had first-hand involvement in shaping the policies of a number of developing countries, including Kuwait, Saudi Arabia, Iran, Indonesia, Colombia, Ecuador and Panama as an undercover agent for the US government and the recipients of large infrastructure contracts provides some useful insights into the modus operandi of collusion between big business and US government agencies in pursuit of extending the new empire’s global reach.

The book, entitled “Confessions of an Economic HiT Man” by John Perkins, sheds new light on the genesis of the present conflicts in the Middle East and shows that military adventures by the new empire are only a last resort to subdue a country.

The idea that corporate interests have undue influence over White House administrations is neither new nor unbelievable, but has grown in credence during the Bush administration, especially since the Iraq war.

According to a recent Gallup poll, 70 per cent of those questioned in the US said they believed that big business had too much influence over Bush administration decisions.

The existence of a thriving business in the heart of Washington D.C. on K Street, which has become synonymous with the corporate lobbying industry, testifies to this influence. The book vividly articulates how audaciously this influence is manifested in practice on a global scale.

Briefly, Perkins describes economic hit men (EHM) as “highly paid professionals who cheat countries around the globe out of trillions of dollars”. They funnel money from the World Bank, the US Agency for International Development (USAID), and other foreign “aid” organisations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet’s natural resources.

Their tools include misleading financial and economic reports, rigged elections, besides payoffs, extortion, sex, and murder, which are more typical of James Bond-type cloak and dagger spy stories. “They play a game as old as empire, but one that has taken on new and terrifying dimensions during this time of globalisation.”

The Harvard Advisory Group (HAG) in Pakistan in 1960s was one of the early proto-types from which a nucleus of “EHM” emerged. In particular, Richard Gilbert, the field supervisor of the project, developed a close relationship with President Ayub Khan, who honoured him with one of the highest civilian awards, Sitara-i-Pakistan, on the Independence Day in 1965. He was instrumental in making Pakistan a firm ally of the US in the cold war and in inducing it to follow a foreign-aid dependent development strategy.

The EHM came into being after a realisation that military and CIA-type operation needed to be supplemented by direct involvement of (pseudo) professionals who would seduce third world rulers into embarking on ambitious development plans funded by multilateral lenders which would provide multi-billion contracts to mega-multinationals like Bechtel, Haliburtron, GE, GM and Enron.

These loans were to be largely used for the benefit of elites and for greasing the palms of the bureaucracy, military and the politicians, creating an unbreakable dependency on the empire and its financial institutions. Mr Perkins calls this evil nexus “corporatocracy”.

Interestingly enough, the former CEOs of these large corporations, like McNamara (GM), George Shulcz (Bechtel) and Richard Cheney (Haliburton) have served high executive offices in the US Administration in recent decades.

The archetype of the EHM was Kermit Roosevelt, a grandson of President Theodore (not Franklin) Roosevelt, who was sent to Iran as a CIA agent to topple the regime of Prime Minister Mossadegh in August1953 for trying to nationalise the oil industry and overthrow the Shah.

“I owe my throne to God, my people, my army - and to you,” said a sobbing and grateful Shah of Iran to Kermit Roosevelt after being restored to the Peacock Throne.

Since the Mossadegh affair, American corporations and government agencies employ two types of operatives: “economic hit men,” who bribe emerging economies, and “jackals,” who may be used to overthrow or even murder heads of state in Latin America and the Middle East to serve the greater cause of American empire.

The EHM were recruited by CIA and the NSA and assigned to work for private consulting companies, engineering firms and construction companies, to provide them a cover. Even the role of the “jackals”, formerly performed directly by CIA, is now sub-contracted to private sector, to avoid Congressional scrutiny.

Perkins entered the service of EHM after cutting his teeth in the Peace Corps in Ecuador, working with the indigenous farming population, an ideal internship opportunity for his future career. Simultaneously, he interviewed with the National Security Agency and then became an economic forecaster, with the pretentious title of Chief Economist (although he had only a Bachelor’s degree from Boston University and a minimal training in economics) with a major consulting company called Chas. T. Main, based in Boston.

Perkins joined this international network in the wake of the first oil shock, after the formation of Opec in the 1960s largely to challenge the power of “big oil” companies which set extremely low prices for crude oil. His work in Saudi Arabia is particularly revealing, because of the construction boom the oil shock spawned as a result of the enormous rise in oil prices.

Helping shape the US – relations was the EHM’s main task during that period that became pivotal to avoiding a serious recession in the US and the world economy after the 1973 oil shock, which raised the price of crude oil from $1.30 on January 1, 1970 to $8.32 on January 1, 1974.

 

[Neo]

The US immediately realised that Saudi Arabia had to play a key role if the oil cartel’s back had to be broken and if the use of the oil weapon resorted to by Arab countries in the Yom Kippur war had to be banished for good. Simultaneously, the US raised its military aid to Israel to $3 billion and set forth an arms race which would absorb a large part of the increased oil proceeds of the Arab world.

Almost as soon as the oil embargo ended in March, 1974, the United States started negotiations with Saudi Arabia to provide it technical and military support, both for its internal and external security and to transform the medieval nomadic nation into a modern economy. These negotiations led to the creation of a powerful collaborative institution called Joint Economic Commission JECOR (much wider in scope than, for instance, the Harvard Advisory Group in Pakistan) with overall management and responsibility delegated to the US Department of Treasury.

The unwritten job description of the EHM working in the commission as employees of various consultancy firms was “to maximise payouts to US firms and to make Saudi Arabia increasingly dependent on the United States.”

The Royal House of Saud agreed to play a dual role to help the US economy in exchange for keeping it in power – the threat of Mossadegh’s fate hanging over its head as a sword of Democles, in case of non-compliance.

First, in its role as a “swing producer” it would agree to maintain the price of oil within acceptable limits by pumping more oil, often in excess of Opec’s agreed quota. Secondly, it would send most of its petro-dollars back to the United States and invest them in US government securities.

The US Treasury Department would use the interest from these securities to hire US companies to build Saudi Arabia–new cities, new infrastructure. This strategy not only kept Saudi Arabia under a tight US leash, it also provided a great fillip to economic growth in the US which had started decelerating in the 1970s.

Saudi Arabia’s economic development in the 1970s also spawned the growth of defence-related industry which increased its dependence on the United States to defend itself from possible backlash against modernisation within the country and the fear of such unfriendly neighbours as Iran and Iraq.

This dramatically increased the expenditure not only on expensive military hardware supplied by the US firms but also the construction of airports, missile sites, radar stations and military bases which provided lucrative contracts to the US companies.

This ingenious method of recycling petrodollars and converting the oil shock into a bonanza for the US corporates was, according to Perkins, quipped by insiders as the Saudi Arabian Money-laundering Affair (SAMA) with a pun on the initials of the Saudi central bank.

Perkins shows that the seeds of the Bin Laden insurgency, two decades after he decided to give up the role of an EHM, were sown by the way the US and other western oil and infrastructure contracts cashed in on the opportunity. Saudi Arabia was hardly the only fertile ground for EHMs to prosper. Latin America and East Asia also figure prominently in Perkin’s confessional account. In fact an earlier version of the book was dedicated to the Ecuador president Jaime Roldós and Panama’s president, Omar Torrijos, who died in mysterious air crashes in the 1980s.

According to Perkins, when we economic hit men failed to bring Roldós and Torrijos around, and the other type of hit men, the CIA-sanctioned jackals who were always right behind us, stepped in.” Perhaps, General Ziaul Haq’s exit from this world 18 years ago could also be explained in similar terms.

No one knows where the EHM will strike next. But after oil, it is water that is being targeted for privatization by the corporations with the help of the World Bank and the IMF.

 

[Neo]

DUE to the accumulation of heavy debts, followed by intermittent external and internal shocks in the 1990s, economic mangers were urged by international lending agencies to undertake reforms on a priority basis in order to remove social and economic imbalances.

Since then, successive governments have been focusing on liberalising the financial sector, dismantling foreign exchange controls and deregulating markets to achieve an open and competitive economy for foreign investment and trade. More importantly, they have privatised public sector enterprises in order to enhance the private sector’s role in the development process.

Despite initial efforts in the last decade to restructure state-owned commercial banks and the State Bank of Pakistan (SBP) and privatise a few financial institutions and certain loss-incurring public sector state entities, the country has remained in the grips of high inflation, low GDP growth rates, rising fiscal and trade deficits and a worsening of the poverty and unemployment situation.

However, 9/11 proved to be a blessing for the external sector of the economy due to a spurt in the inflows of remittances and a rescheduling of external loans. This resulted in a sharp rise in the country’s forex reserves, improvements in its balance of payment position and stability in its exchange rate against leading currencies.

Deregulation ,in the real sense, started from 1999 onwards with the purpose of promoting a more open and competitive economy, by eliminating or reducing subsidies, deregulating prices and trading in some areas particularly oil and gas prices.

The present practice of fortnightly fixing of fuel prices is directly linked to the international oil price level. Pricing distortions with regard to natural gas have also been removed. Similarly in the agriculture sector, particularly in compliance with WTO dictates, subsidies allowed to farmers relating to the pricing of their crops have been brought down to minimum and the concept of market based prices has been strengthened.

But due to a lack of good governance, the opening of food items procurement to the private sector has led to speculative trading in agriculture commodities, particularly wheat and sugar items, and the creation of cartels by the suppliers of these commodities. This has negated the concept of competitive markets.

The recent sale of PTCL and KESC to foreign buyers did not bring any improvement in the operational efficiency of these organisations; instead KESC’s new management proved itself incapable of handling its affairs.

The sale of United Bank and Habib Bank brought a quick turn around in the performance of these two major institutions, helped by the injection of billions of rupees by the government to prepare them for privatisation. But the imprudent approach towards the privatisation of the Pakistan Steel Mills has evoked a lot of criticism from all quarters.

The overall results of the deregulation and privatisation policies have not been very fruitful for the economy. Privatisation has in fact aggravated the unemployment situation and enhanced economic inequalities.

In fact, in a democratic set-up, reforms require consensus- building. There should be a general awareness that the process of reforms result in creating losers and gainers. As such, policy makers must have concern for equity. They must develop mechanisms to compensate losers and must search out ways for distributing the benefits of reforms to all stake holders.

Financial sector reforms have improved the financial health of banks. Restructuring and privatisation of the four big state-owned banks, where huge amounts of non-performing loans (NPLs) had concentrated, have improved their operational efficiency. Settlement of their NPLs issue is being undertaken through the creation of the Industrial Restructuring Corporation (IRC). The IRC acquired NPLs from banks in order to pass the related liability and assets to third parties for ultimate recovery from borrowers.

Furthermore, regulated processes like selling treasury bills and other securities like Pakistan Investment Bonds, in vogue until early nineties, was made market oriented through the introduction of the sale of government papers through open auction.

Prudential regulations enforced since early nineties for all categories of banks / financial institutions and compulsion on the part of all banks to obtain credit and operational efficiency ratings from rating agencies placed on the panel of SBP are effective measures for ensuring risk management, transparency and self-discipline.

Despite a turnaround achieved in the financial sector, the recent spurt in consumer financing and banks quest for maximising loan spread are potential risks to the viability of the financial sector as well as the economy.

The SBP must tighten its control and monitoring on these counts through a credit policy in order to ensure deployment of bank financing for productive ventures and entailing less reliance on the import of consumer items which adversely affect the trade balance.

Recent efforts to make institutional credit accessible to small and medium enterprises, particularly exclusively through micro finance banks and SME bank and regulating financing to this sector, are steps in the right direction for inducting financially disadvantaged segments of the population in the formal economic process.

However, in order to make these specialised institutions really accessible to potential entrepreneurs, the procedure for obtaining loans need to be further simplified and made cost effective for the client.

One of the basic aims of introducing reforms was to bring macro economic stability. In the period, 1999-2003, efforts were stepped up to achieve fiscal discipline. A sizable reduction in debt – GDP and fiscal deficit – GDP ratios was achieved.

The government’s efforts towards evolving fiscal discipline are visible from the CBR’s embarking on a programme for widening its tax net accompanied by a significant reduction in allocations for debt servicing after rescheduling of external debts reduced the fiscal deficit ratio to GDP to the internationally bench marked level( three per cent).

However, thereafter speculative trading in essential food items, cement etc and a continuous rise in oil prices forced the government not only to import these items, but also to offer these commodities / goods to the general public at subsidised prices. Thus not only the balance of trade and the balance of payment position were adversely impacted, but also the fiscal deficit increased substantially in recent years.

Second, for the development of infrastructure through the current Public Sector Development Programme (PSDP) of Rs415 billion and also for the rehabilitation programme of earth quake affected areas, the government resorted to borrowings from the IMF and other funding agencies, raising external debt.

Reform related policy should ensure debt sustainability over the medium term. In conformity with internationally recognised strategy, policy makers must focus on sustainability of debt rather than on reducing the fiscal deficit ratio to GDP through temporary measures.

External borrowings in particular need to be utilised prudently for development projects, with the sole aim of making each project viable enough to service a portion of its debt from its own generated funds, and for accelerating the over-all economic growth rate to achieve a budget surplus.