Pakistan Economy - News & Updates - Archive

[Owais]

Musharraf to attend roundtable with US traders today


NEW YORK (September 18 2006): President General Pervez Musharraf will attend a roundtable with the US investors, businessmen, bankers and chief executives of important companies at a local hotel on Monday. Among six federal ministers, three state ministers, one provincial chief and two professionals.

Only one minister seems to be the relevant person to assist the President at this meeting where Pakistan would be projected as the most strategic location for investment.

Those who are included in the presidential entourage among others are foreign minister Khurshid Mehmud Kasuri, information minister Mohammed Ali Durrani, railways minister Shaikh Rasheed, minister for special education Zubaida Jalal, state minister for foreign affairs Makhdoom Khusro Bakhtiar, minister of state for privatisation Umer Ahmed Ghumman, minister for women development Sumaira Malik, minister for religious affairs and minorities affairs Ijazul Haq, NWFP governor Ali Jan Orakzai, state minister for education Anisa Zaib Tahirkhali, human resource development chairman Dr Naseem Ashraf and bureaucratic reforms chairman Dr, Ishrat Hussain.

The President will brief participants on the economic progress in Pakistan and availability of resources to facilitate investment, trade, joint ventures and industrialisation.

But from the team of ministers, state ministers, professionals and officials there seems to be only one minister, Umer Ahmed Ghumman, who is directly related with the objective/purpose of the roundtable.

 

[Owais]

Two UAE groups to develop Manora to Cape Monze seafront: MOUs signed


KARACHI (September 18 2006): Two major groups of United Arab Emirates (UAE) have shown interest in investing and developing seafront, from Manora to Cape Monze, for foreign and local holiday seekers. The seafront would be converted into modern residential apartments, five-star hotels, and water and recreational facilities.

The groups include Dubai World (DW) Group, which is a Dubai government owned corporation incorporated under the law of the UAE, and EMAAR Properties, also incorporated under the law of UAE.

One Memorandum of Understanding (MoU) to this effect was signed by Ports and Shipping Minister Babar Khan Ghauri on behalf of the Ministry, Irfanullah Khan Marwat for Sindh government, and Sultan Ahmed Bin Sulayem, Executive Chairman of Dubai World.

The other MoU was also signed by Babar Khan Ghauri, with Muhammad Ali Al Abbar, Director General of the Department of Economic Development, Dubai, and Chairman EMAAR Properties.

Both groups showed investment plans for the development of coastal area near Karachi in a meeting with Prime Minister Shaukat Aziz and, after discussion with him, the two MoUs were signed.

After signing of the MoUs, the Prime Minister directed all concerned ministries and provincial government, including Ministry of Ports and Shipping, Ministry of Defence and Government of Sindh to co-operate in the projects.

According to documents made available for Business Recorder, as the area indicated by Dubai World from Manora to Cape Monze is very extensive, its development may be carried out in phases.

In first phase, Manora area, in conjunction with Sands Spit area and the land behind Karachi Port Trust (KPT) western backwater up to its (KPT) land limits with Hawkes Bay would be offered to the UAE groups. However, the environmental concerns would be resolved before undertaking the projects.

In the second phase, while developing the Hawkes Bay beachfront, it would be ensured that beachfronts are developed in such a way that portions are available to general public for routine recreational purposes.

The government also directed that all concerned agencies should co-operate and make the required parcels of land available for this development venture, which promises to bring huge Foreign Direct Investment (FDI) into Pakistan.

In this connection, the premature cancellation of land leases, if required, would be thoroughly examined and recommendations to be finalised before the proposed joint meeting of the President and the Prime Minister.

Presently, Pakistan Navy, KPT and Cantonment Board are using the entire area and the Secretary of Defence has been directed regarding such development and there should be a mechanism to be applied for shifting the Pakistan Navy and Cantonment Board facilities located at Manora to its (Pakistan Navy) land at Cape Monze area.

The KPT and DW will finance the construction of alternative accommodation and office blocks on Navy land at Cape Monze area required to implement the shifting process.

The Manora Island would be vacated by all agencies and handed over to KPT for the development programmes.

A committee would be constituted to liaise and negotiate with Dubai Worlds, clearly indicating what area can be given and, the associated issues of each segment of their development programme.

Sources in the Ministry of Ports and Shipping said that there are so many issues relating to such a huge plan and could not be settled in a short period of time.

The KPT facilitated some officials of both UAE groups in an aerial survey of Manora to Cape Monze beaches in the first week of May this year.

 

[Owais]

IFC to give $50 million loan to HBL


KARACHI (September 18 2006): The International Finance Corporation (IFC) will provide an eight-year term loan of $50 million to Habib Bank Ltd at 175 basis points above LIBOR, it is learnt. The IFC loan will be classified as Tier-II capital by HBL. It can be used for the planned acquisition by HBL of small bank in Urumqi, China.

Urumqi is presently underdeveloped and offers opportunities for infrastructure financing.

Meanwhile, some foreign banks, with affiliates in Pakistan, have reported that they have received invitation from Finance Ministry to pitch for structuring floatation of Global Depository Receipts (GDR) of Habib Bank by September 25-27, it is learnt.

 

[Owais]

Trade with Thailand can be enhanced to $500 million: Pakistan's envoy


BANGKOK (September 18 2006): Pakistan and Thailand mutual trade potentials are enormous in various sectors, specially gems and jewellery, and participation of Pakistani business delegation in "Bangkok gems and jewellery fair 2006" would help further enhance trade between the two countries.

Ambassador of Pakistan to Thailand, Lieutenant General Khateer Hasan Khan (Retd) stated this while addressing the luncheon jointly hosted by Embassy of Pakistan and Small and Medium Development Authority (Smeda) in the honour of Pakistani delegation and journalists here.

Syed Zafar Ali Shah, Pakistan's Commercial Councillor and Alternate Permanent Representative of Unescap Bangkok, Chairman Smeda Shahab Khawaja, also spoke on the occasion.

Suhail Aaamir, Project Director Ahan (One village one product), the representatives of Bangkok Gems and Jewellery Traders Association, Pakistani businessmen, journalists and Thailand government officials also participated.

Ambassador Khateer Hasan Khan said that bilateral trade between Pakistan and Thailand was $70-80 million, which is not sufficient to the trade potentials existed between the two countries.

"We can enhance the bilateral trade to 500 million dollars by exploiting the trade potentials of the two countries", he remarked.

He said that Pakistan apart from the export of raw jewellery could also export seafood, agriculture products, surgical goods, textile and leather goods to Thailand.

Pakistan, he said, needs technical support from Thailand to promote our gems and jewellery sector.

He said that both the countries were involved in expansion of their mutual businesses and Pak-Thai Chamber of Commerce and Industry was established in the year 2005 under the Chairmanship of Chaudhry Shabahat Hussain.

He also appreciated the support and co-operation of Thai government to Pakistan embassy every time and need.

General Khateer expressed the hope that the Gems and Jewellery fair 2006, in which Pakistan is also participating, would help boost gems and jewellery trade for the benefit of the two countries.

He said that Pak-Thailand has traditionally enjoyed good relationship and stressed the need for enhancing it further.

He specially mentioned that crown prince of Thailand personally visited Pakistan for the distribution of relief goods when Pakistan was hit by a devastating earthquake in October last year.

Shahab Khawaja speaking on the occasion said that Pakistan had also participated in the Bangkok fair 2005, in which twenty businesses participated.

He added that Pakistan had rich gems and jewellery resources and called for Pak-Thailand mutual co-operation to exploit the resources for the benefit of the two people.

He further said that Pakistan wanted to learn from the Thai experience and technical support for the promotion and development of gems and jewellery sector in Pakistan.

 

[Owais]

Pace of work on Thar coal project to be accelerated: Prime Minister


MITHI (September 18 2006): The pace of work on the Thar coal project would be accelerated so that the area be made prosperous, and the local people provided with more jobs, said Prime Minister Shaukat Aziz here on Sunday.

Addressing a gathering at Circuit House here during his short visit to Thar, he said during his recent visit to Tajikistan he had talked with the Chinese premier about accelerating pace of work on the Thar coal project. He said the Chinese company would now spur the pace of work and resultantly the whole area would witness progress and prosperity.

Shaukat Aziz announced provision of natural gas to Mithi, saying the people of Thar had given him votes and he could not forget them.

He said the federal government with the help of provincial government would open cattle farms in Thar area, adding that a cattle colony would be set up in Thar over 200 acres of land, and he would himself inaugurate the cattle colony.

The prime minister said the government would also consider setting up of a university in Thar, and asked the local people to work hard for progress of their area under the self-help basis.

Shaukat Aziz said the Badin district was also badly affected by rains and he would visit Badin within a week and announce a package for it.

 

[Neo]

THE expected tour of Prime Minister Shaukat Aziz to China during last week of September, followed by the visit of President Hu Jintao to Pakistan in November this year, will pave the way for opening new avenues of bilateral co-operation on wide-ranging issues.

China has extended financial, technical and industrial assistance for various sectors of economy. It helped to establish a sound capital goods industry, which is equipped with versatile production facilities and design and engineering capabilities.

A few of these monumental projects are Heavy Mechanical Complex, Heavy Foundry and Forge, Heavy Electrical Complex, Heavy Industries Taxila, Pak Aeronautical Complex and a number of thermal and nuclear power plants.

Of late, there has been increasingly Chinese investment in private sector too, particularly in auto industry.

A unique feature of the Chinese co-operation has been the transfer of technology and willingness to upgrade production machinery to suit local market conditions. As part of technology transfer programme, a large number of Pakistani engineers and technicians have been trained by the Chinese experts, in China as well as in Pakistan. The whole-hearted technology transfer, in contrast with the reservations of the western sources, has immensely helped Pakistan in achieving self-reliance in some sectors.

Pakistan can learn from China’s rich experience in further promoting its economic and industrial development. This is also considered desirable in the present situation when Pakistan’s trade deficit is worsening persistently.

Besides oil, major portion of foreign exchange is spent on the import of capital machinery, vehicles and other equipment, which has a share of almost 30 per cent in total import bill. The machinery group, second largest component of the import bill, consumed $5.918 billion in 2004-05 and $7.949 billion in 2005-06, the highest ever in a year.

Understandably, there is an urgent need for adopting measures for import substitution. The authorities can facilitate and encourage indigenous manufacturing of selected items of machinery in collaboration with the Chinese. There may be a number of areas for product diversification that can be jointly identified for the proposed cooperation, taking into consideration the classification of import of machinery and equipment by Pakistan during last few years and the competitive edge of the Chinese products.

According to the available statistics, Pakistan has been importing textile machinery, power generating machinery, electrical machinery, construction and mining machinery, agricultural machinery and other equipment, accessories and semi-finished goods.

Though textile industry maintains its ranking of the single largest manufacturing sector, unfortunately indigenous manufacturing of its machinery could not develop along with the growth of textile industry.

Resultantly, demand for textile machinery still is almost entirely met through global imports. The dedicated machinery installed at the Spinning Machinery Company at Lahore and Textile Machinery Company at Karachi are at present lying idle as the two industrial units stand privatised, which can be put to operation again, in private sector. Even, otherwise, local engineering industry has the requisite capacity and capability to produce various items of textile machinery, if foreign technology partners extend support in terms of design, engineering and quality assurance.

The products may include ring spinning frames, for which Chinese machines are already popular in the local market, and other equipment like shuttle-less looms, blow room equipment, draw frames, carding machines, dyeing and finishing machines etc for which the Chinese have acquired latest technology from the western sources.

In the first phase, CKD kits/components for these items may be imported and assembly can be done locally. Sometime back the Chinese were also interested to produce and market silk printing machinery in Pakistan. Indigenous manufacturing of textile machinery items could, preferably, be undertaken on a joint venture basis, which, besides other advantages, would allow continuous technological up-gradation in the area, so essentially needed by us.

Major funds have recently been allocated for the improvement of communications and other infrastructure, whereas various projects of highways, canals, dams and water reservoirs are planned. These activities require a wide range of earthmoving and construction machinery such as bulldozer, scraper, excavator, motor grader, mechanical shovel, mobile crane, dump truck and alike that are being imported at present.

Farm mechanisation can get boost if modern agricultural machinery, including farming vehicles and small tractors, is produced and made available locally. Development of mining, quarrying and material handling equipment is another feasible proposition as prospects for mechanised mining for upcoming projects are very promising, which would replace present deployment of manual labour allowed to work under poor working and living conditions.

Currently, the government’s major thrust is on developing energy sector for which a number of incentives have been extended lately. A variety of equipment for thermal and hydro power stations can be produced to meet the growing demand. Refurbishing and manufacturing of the large turbines and generators for power generation can be undertaken under a phased programme. Likewise, a broad range of equipment for grid stations needs to be produced domestically.

Pumps and compressors required for the energy sector can be manufactured in Pakistan. Oil drilling rig is in high demand for oil and gas exploration activities, which at present is being availed by domestic as well as international oil exploration companies operating in Pakistan primarily on rental basis.

Drilling rig, on-shore or offshore type, which normally is required to operate up to a depth of 10,000—12,000 meters, is very costly world over and, consequently, its rental charges are as exorbitant as $18,000 per day. Rigs for soil investigations and water well drilling are also needed. Production of oil drilling equipment however will require balancing/up-gradation of existing machinery and other facilities.

The proposed arrangement, if implemented in real earnest, will result in improving the growth of engineering goods that remains practically stagnant.

 

[Neo]

FOREIGN direct investment (FDI) inflows have increased in the last two financial years, peaking at $3.5 billion during 2005-06. The figure was 131 per cent higher than $1.52 billion for 2004-05.

The government sees the volume of capital inflows as a major achievement. Yes, as far as the numbers go, the official claim is very much justified. But there are certain points to ponder over the FDI trends and the emerging scenario.

The economic turnaround achieved about 2-3 years back, started attracting foreign investment which had practically shied away in the last decade.

Now, the all-important question is, where does this enormous capital go and what impact it has on the economic landscape? Did it really generate new economic activities and employment opportunities?

If we look at the FDI inflows in 2004-05 and 2005-06, a major chunk went to communications sector. In 2004-05, communications (including telecom) attracted FDI worth $517 million (34 per cent) followed by financial business $269.4 million (17.7 per cent), oil, gas and petrochemical $217 million (14.3 per cent), power $73.3 million (4.8 per cent), trade $52.1 million (3.4 percent), chemicals $51 million (3.3 per cent) and others $343.1 million (22.5 per cent).

Almost the same pattern continued in first ten months of 2005-06. Telecom was the largest recipient with $1.0 billion, followed by energy Sector ($304 million), financial services ($265.5 million), trade ($81.9 million), construction ($54.4 million) and others. As far as big amounts against the telecom sector are concerned, these have largely come from Telenor, Warid and Etiselat.

The figures speak for themselves. The two cellular operators paid $291 million each for licences, adding to it considerable investment in infrastructure and related developments. The investment enhanced economic activities and created much needed new employment opportunities. The official claim of rise in employment against annul averages of yester years were perhaps well aided by these investments.

On the other hand, nearly half of the FDI came from privatisation proceeds, including the mega deal of PTCL with UAE’s Etiselat. The privatisation of vital public utility and assets, bringing in $2.59 billion in total, makes Emirates the single largest country of origin of FDI to Pakistan, surpassing USA by a big margin that held the position for long. Can it, nonetheless, be labelled as productive capital inflow?

True that some of the Arab investors, their coffers overflowing with fresh petro-dollars, are willing to buy profitable enterprises. But does it indicate that Pakistan has become an investment destination and money coming in will change the economic scene?

First, it is not correct to include privatisation proceeds as FDI, because privatisation does not represent any asset creation or real increase in economic activity. Even including the privatization proceeds, the aggregate inflows remain far below the international trends and even by regional standards - with modest chances of any new production activities and employment generation that is required the most.

How are we faring on FDI front can be gauged from a recent survey of 82 countries conducted by the Economist. Pakistan is placed at number 74.

With FDI figures going up, it is time to ponder for policy planners. FDI’s role in development of developing nations needs no elaboration. But it is important to consider hich sectors need the FDI the most, and how to prepare these sectors for the same. While capital from abroad should be welcomed, rather solicited, efforts should be made to channellise the inflow of funds to priority sectors after accurate identification.

Economics observers believe that certain sectors have the potential of not only becoming new attraction for foreign investors, but can prove to be a cure for un-employment and poverty. For instance, construction is one of these sectors and it has already started attracting notable foreign investment.

Just one mega project in Islamabad, a joint venture of a Saudi and a Pakistani firm, is expected to net in some $350 million. The joint-venture is building a multi-purpose complex containing a 19 storey residential tower, 22 storey offices tower, a five floor mega shopping mall and above all, Pakistan’s tallest 37 storey hotel.

The project is underway on a 6.59 acre plot at accost of over Rs5 billion. Initial total cost of the project was $300 million, but was revised upward to make the complex an earthquake-proof structure.

Thai and other Gulf-based investors have also shown interest in construction sector. As some 35-40 industries are involved in construction, the sector enhances across the board economic activities. FDI in this sector becomes even important considering the shortage of housing units, particularly urban areas.

Then there are sectors like livestock and dairy forming, processing of vegetable and fruits, tourism, engineering and other employment-intensive fields awaiting investments.

Although big FDI investments can provide a sense of satisfaction to the policy makers, the actual requirements of the economy and its masses remains far from fulfilled. A comprehensive, well thought-out strategy, formulated in consultation with stakeholders in every sector is needed to benefit optimally from the surging foreign investment.

http://www.dawn.com/2006/09/18/ebr13.htm

 

[Neo]

18 September 2006



NEW DELHI — The RSS has sought immediate expulsion of Ericsson from India in the wake of the Swedish telecom major’s reported deal with Pakistan to supply sophisticated equipment for military use.
“Its sale to Pakistan of equipment that can be used while attacking India shows the company’s insensitive disregard of India. For this, Ericsson company should be asked to pack its bags and leave India,” RSS mouthpiece Panchjanya said in an editorial in its latest issue.
It cited media reports which said Swedish aircraft major SAAB and Ericsson combine have signed a $1.15-billion deal with Pakistan to supply it with airborne early-warning systems.
“Pakistan has been trying for the past 25 years to buy these highly sophisticated devices, but has been unsuccessful,” the RSS mouthpiece claimed. It called this deal a security concern for India.
It said that the Swedish telecom company should either cancel the deal or end its business in India.
“Ericsson’s agreement with Pakistan, which does not lie in India’s interest, does not make the company eligible to stay (any more) in India,” it said.
The RSS weekly also described as ‘saddening’ the Indian government’s ‘silence’ on the deal. No Ericsson official was available for comment.

http://www.khaleejtimes.com/Display...ent_September651.xml&section=subcontinent&col=

 

[Neo]

THE federal government claims that the economic opportunities created by the high economic growth has brought down the ratio of population living below the poverty line from 34 to 25 per cent. However, what has not been acknowledged is that some 56.2 per cent population remains vulnerable and is on the verge of falling in the poverty trap.

The poverty becomes more apparent when you enter any goth, village, deh or killi—situated not more than even two kilometres from any urban centre. Worn-out households, unhygienic living conditions, small children working, unemployed youth and a number of social ills speak volumes of the way people live.

The fact that some 60,000 skilled and non-skilled labourers have opted to work in the war-torn Afghanistan to earn more than what they were earning in Pakistan can be regarded as a strong evidence of the alarming proportion of the poverty found in Pakistan.

No doubt, the government has taken initiatives to find ways and means for dealing with the situation. However, the achievement of the end objective to improve people’s living standards would largely depend on the success of the future socio-economic strategy.

Official sources say that the government has undertaken is formulating ‘social protection strategy’ by targeting segments of society most vulnerable to fall below the poverty line.

The need to have an effective policy and undertaking full-scale measures to counter the poverty threat emanates from a lending agency’s findings that one in four Pakistanis is poor and one in every two vulnerable to fall prey to poverty.

The analysis is based on the findings of the World Bank’s study which states that “56.2 per cent of Pakistan’s population faces more than 50 per cent probability of finding itself in poverty in the next few years”.

The study distinguishes between the vulnerable – those with a high probability to find themselves in poverty and the non-vulnerable. Within this vulnerable group, some are already in poverty (32.5 per cent), while others are currently not so poor (23.8 per cent).

According to the study, 21.9 per cent of the population is poor. It also predicted to be poor in the near future as they are chronically poor and vulnerable.

The large proportion of the population vulnerable to fall prey to poverty are the children under 15 years of age. About seven million children in the 10-14 years age group are not enrolled in schools as a result of which they run high risk of falling in poverty.

According to the World Bank’s assessment, an estimated 2.5 million children - one in every six children – is working which reflects that the incidence of child labour is higher among the chronically vulnerable, as one in four children in this category is a worker.

In addition to children, rural household with low levels of assets/land have also been described as the most vulnerable to become poor. The assessment contains that lack of assets together with unemployment and under-employment as key sources of vulnerability in rural areas.

Highlighting the significance of having an effective policy with concrete measures to tackle the issue, the draft strategy says that “there is currently no overarching social protection strategy in Pakistan, this leads to lack of direction and poor co-ordination on the part of individual agencies and programmes working in this area.”

The government spends about 0.5 per cent of gross domestic product, on the social protection schemes, an amount which is inadequate by any means in view of the growing needs.

“Economic restructuring and recessions have led to the high levels of poverty and vulnerability, it is therefore important to ensure that economic growth is shared by poor households,” says the study.

The strategy, being devised to target the most vulnerable groups, aims at strengthening social assistance to provide protection against poverty to large households with children and elderly persons and these households constrained by limited income.

In addition to pleading for a comprehensive health insurance system, the strategy asks for strengthening the labour market regulations and natural and environmental risk management through nationwide planning.

Sources say that the strategy has evolved under the medium-term development framework asking for sustained increase in poverty reduction planned expenditure from 4.25 per cent of GDP in 2004-05 to 5.07 in 2006-07 and 6.49 per cent in 2009-10 financial year.

This means that the government would need an additional amount of Rs46 billion in 2005-06, Rs55 billion in 2006-07, Rs66 billion in 2007-08, Rs78 billion in 2008-09 and Rs92 billion in 2009-10 financial year.

“Currently, social protection expenditure is a fraction of poverty reduction expenditure and would need to grow more than proportionately to accommodate the increased expenditure in the proposed programmes,” says the draft strategy, which has also put forth four proposals vis-à-vis cash transfer programme to target 10 per cent of the poorest.

This would need a greater amount of funds than what the government is presently spending on schemes that can be regarded as meant to provide social protection but which are not so effective.

The government’s expenditure on such schemes comes to about Rs25 billon per annum out of which an amount of Rs5.86 billion is spent under the Zakat distribution, another Rs4.5 billion through Bait-ul-Maal and some Rs700 million through Tawana Pakistan.

Other than that, an amount of Rs8 billion is extended as wheat subsidy by the federal and provincial governments which do not benefit the poor.

The draft strategy says : “Each of the broad programmes has a number of projects which reflects the ad hoc nature of how programmes were added on over time, the lack of coordination, sometimes even within programmes, and the lack of an overall strategy for social protection”.

About the wheat subsidy, the government’s own findings are that though it is the biggest safety net, it is a non-targeted poorly packaged scheme that has, at best, a very small impact on the poor.

According to officials, the government has been proposed to establish an institutional structure with defined functions and responsibilities for various public sector entities to carry out the strategy side by side strengthening and reforming the current Bait-ul-Maal enabling it to become an effective agency.

For any poverty reduction programme to succeed, the government needs to take measures to create economic opportunity at the grass root level as social protection policies would only keep the poor dependent on doles.

 

[Neo]

SINGAPORE, Sept 17: The World Bank is actively considering a $6.5 billion four-year support programme for Pakistan to assist this promising economy overcome the difficulties that deficient physical and human development infrastructure pose in its effort to accelerate the growth further in a way that benefits widest sections of the society.

“Pakistan is a success story that needs to be told and heard here. There is also a need to show a clear break from the past (before 1999 period) when the country’s policies were inconsistent and irresponsible. The country needs this to reach out to the potential investors and also to make a case for the support it is seeking from donors to match the physical and human infrastructure deficit,” John W Wall, country director, Pakistan, in the World Bank, said this in an interview with Dawn on the sidelines of the meetings.

“At the moment, Pakistan has the soundest and safest banking system in South Asia, but many people do not know that,” he said.

He said that Pakistan’s delegation had a chance in the huge gathering of bankers and private sector representatives to present its case to be a country that offered comparatively favourable business environment for investors in South Asia. “This is exactly what Pakistani official delegation has been doing over the past two days and intends to do over the next couple of days of meetings in Singapore”.

The WB director was referring to an array of meeting that the State Bank of Pakistan governor and Dr Salman Shah, head of Pakistan’s delegation, are having with the World Bank/IMF teams and others.

Mr Wall said that restructuring of the fund and the bank, if approved, would benefit Pakistan and other developing countries as the dominance of lending countries in the institutions would be moderated, creating more space for the voices from emerging and less developed nations.

On the sensitive issue of conditionality, he said that the bank had realized that reforms could not be imposed on countries from outside. “When countries are coerced into certain policy prescriptions, they lack willingness to implement them,” he added.

“We have changed. We realize that we can not buy reforms. We have cleansed ourselves of that attitude. Even when governments sign on the dotted line in most instances, they do not live up to promises made”, he said.

He said that the bank now operated with close consultation with the policy makers so that they took the ownership of the programme.

 

[Neo]

A ROSY economic outlook for 2006 from the ministry of finance ought to be welcome. While it looks up in terms of GDP growth rate, the ministry is honest enough to accept the challenges of job creation, poverty reduction, social indicators improvement, and physical infrastructure.

If the challenges are as humongous as they are, one wonders why the IFIs are so enthusiastic about the “economic progress” that is coupled with a lack of progress on crucial fronts. For, this shortfall might serve as a drag even on growth in the future.

One further wonders about the IFIs excitement as unless there is progress on the other fronts, growth will not be generated endogenously for a long time as per their own endogenous growth theory they exported to us and that serves as the basis of our economic policies. Could the IFIs be defining “economic progress” too narrowly?

IFIs satisfaction emanates from an “improvement” in Pakistan’s business environment. One has reasons to wonder about this too given the law and order situation, the poor infrastructural facilities, the image of breeding terror that is dispelled by the top brass but that gets borne out every now and then when terror strikes, the provincial tensions now, the despondency that prevails together with the attitudes that serve as a drag on productivity and low levels of literacy, education, and health conditions, percentage point improvements notwithstanding.

In the exuberance, the dismal progress, if at all, on these other indicators is lost sight of and all appear to be managing by hope on this front rather than through positive definite action.

So, the improvement in the country rating only on the basis of the “time and cost to meet government requirements in business start-up, operation, trade, taxation, and closure” may look impressive at 74 out of 175 economies with India trailing at 134.

However, it does not capture the full picture that would together make up the business environment leave alone the economic landscape that should be seen on a canvas much broader than the above narrow depiction.

Even for business to perform, the businesses require a proactive strategic outlook which is lacking. Business start-up requires a competitive go-get mindset for successful operations that too is rare. The giant of textiles is having difficulty competing internationally with the protective umbrella receding.

Then businesses require social and political stability to pursue their goals with some degree of confidence. They need roads, electricity, and other utilities for sure. Roads get washed away after one downpour. Electricity situation is chaotic. Gas and gasoline price issues feed into the cost of production.

With food prices spiralling upwards, labour costs go up. The environment is anything but comfortable for businesses. To give a high ranking on the basis of even business environment that is defined even more narrowly than what business environment actually comprises is to forcibly give a ranking that is not valid enough even for the measure that they are attempting to measure. Ends do not always justify the means.

To use the business environment score as a proxy for economic progress would be least convincing too. It is important to know the contributors to high GDP growth. Good weather conditions that should hopefully be similar in the future to yield a decent agricultural growth rate, credit financed demand for industrial products, banking sector’s contribution based on high spreads and the continued injustice to depositors, and viewing capacity utilisation as growth when growth is increase in potential output to name a few sources of GDP growth.

As for inflation, the rate of inflation may remain in single digit but consumers experience a higher burden on their household budgets due to a price line rising incessantly and faster. How CPI is measured remains a big question mark as there should be harmony between the officially stated inflation rate and the price pressures experienced by people.

Exports may be touching new highs but so is the trade deficit. Trade deficit shot up to $4.5 billion during 2004-05 (SBP Annual Report, 2004-05). It further increased to $6.5 billion during July–April2005-06 (SBP Third Quarterly Report, 2005-06.

That current account deficit is financed by foreign inflows in 2005-06 is no consolation if Pakistan is liable to pay in the future. Question remains about the extent of imports of finished luxury goods that the upscale segment can now access due to liberalisation—-a factor that must be of great comfort for the foreign suppliers whose interests are promoted by the IFIs through rapid liberalisation.

The external deficit is explained in part by rising oil prices on the international market. But, does Pakistan not import subsidised oil from Saudi Arabia, UAE, and Qatar and is the oil price not fixed for some time? In-depth item-wise independent trend analysis is required.

So, what is passed on as an economic feat too needs a deeper look to see who benefits? The multitude is being asked to wait for the trickle at an unknown point in time in the future. So, never mind what rank we may get on a narrowly defined business environment indicator, the ranks we have on human development and human deprivation speak volumes about the dichotomy in the policy preferences.

Pakistan’s HDI (human development index) rank is 135 behind India’s at 127 and only better than Nepal, Papua New Guinea, Ghana, Bangla Desh, Congo, Uganda and a few other medium and all low HDI countries (UNDP: Human Development Report 2005). HDI is based on longevity, knowledge, and per capita income.

Out of HPI-1 (human poverty index) ranks for 103 developing countries, Pakistan’s is at 68 behind India’s at 58 with Ghana, Sudan, and Congo and many other smaller countries’ better than Pakistan’s (UNDP: Human Development Report 2005).

HPI-1 measures long and healthy life, knowledge, and access to economic provisioning gauged by percentage of population without sustainable access to improved water source and percentage of children underweight for age. HPI-2 also includes percentage of people below income poverty line and social exclusion as measured by the rate of long-term unemployment (12 months or more). HPI-2 is calculated for 18 selected OECD countries. One is curious to know what it would be for developing countries in general and Pakistan in particular.

Unless improvement is shown significantly on the human development and human poverty indices and their results square with the one on what the IFIs call business environment, the result cannot be called development.

For a country to develop, all must benefit as the development of a few is the development of a few and not that of the nation as the nation is a lot bigger than the few who have been benefiting from the imported endogenous growth theory pushed by the IFIs.

 

[Neo]

All good stuff Neo, and most interesting, but may I give a word of caution? Please do not get over-reliant on the undoubted short term benefits of agro-chemicals to boost crop yield, as there could be long term problems. One way round this is to add more agro-chemicals in future years, but this is expensive and is not good for the soil. If agro-chemicals are needed I would suggest that they are only used where absolutely necessary and applied at the lowest volume possible.

Agree on post poits Gyln.
In Pakistan's case, benefits of agro-chemicals are huge and could mulitply the yield by factor 3 to 4 and allow difersification in crops. The enviromental demage is unavoidable sine we need to feed 160 mouths, possibly 350 milion by year 2040 so one way or other we'll have to apply modern technology which often includes use of agro-chemicals.

Imho much better solution will be to switch over to GM species of crops to gain highest yield, better water management and introduction of greenhouses to allow highest cultivation of soil.

 

[Neo]

SINGAPORE (September 19 2006): With 54 percent of the 160 million population under the age of 19 years Pakistan has a huge pool of baby boomers at a time when the West offers a growing market with great potential for all kinds of consumer goods, said the Advisor on Finance Dr Salman Shah.

Addressing the loan signing ceremony between the International Finance Corporation and Habib Bank Limited here on Monday, Shah said that the stage was set for foreign as well as domestic investment and for the banks to mobilise domestic savings. Financial players are needed for asset management, real estate investment trusts, rural finance and pensions.

The growth of demand by consumers can be judged by the sale of 1.5 million new cellular phones every month as the income of the middle class, constituting 60 percent of the population, is increasing. They are the driving force behind the 25 percent growth in the sales of all kinds of household appliances.

He said that consumer finance is still very small as percentage of banks' balance sheets. Local demand is reaching the scale which makes the local products competitive.

"Pakistan is producing tractors at a cost lower than India, and we are seeking a transformation of our export base from textiles to engineering products. Until now, foreign investment was concentrated in infrastructure-oil and gas and power sectors-but now it is increasingly flowing into manufacturing including textiles."

Earlier, State Bank of Pakistan Governor Dr Shamshad Akhtar welcomed the IFC's growing involvement in Pakistan beyond financing. She said that IFC's technical advice for implementing Basle II would be invaluable.

She said that concerns expressed about overheating of Pakistan's economy were unfounded. And, the high spreads enjoyed by banks at present were largely due to monetary tightening to effectively manage the economic risks.

She said the central bank was seeking credit diversification and banking inroads in the under-served areas. "Cross-fertilisation of knowledge is more important than seeking money," she added.

REUTERS ADDS: Pakistan may issue a 15-year foreign currency bond when it taps the global bond market next to create better liquidity after the sale of 10- and 30-year bonds this year, an official said on Monday.

"We may do a 15-year bond - between 10 and 30 (years) we need to fill them up," adviser to prime minister on finance Salman Shah told reporters. He said the government had not decided on the timeframe for the bond issue, but he added different maturities were necessary to have liquidity in its bonds. In March, the government sold a total of $800 million 10- and 30-year bonds-the country's third foray into the international bond market since 2004.

When asked if the government has been able to contain inflationary pressures, he said the monetary tightening has helped curb rising inflation. "We have tightened up, the supply situation is better. This year our target is 6.5 percent, we should be able to do that," he said.

The adviser said the government was "watching" the situation closely after the central bank recently increased its benchmark interest rate and hiked its cash reserve ratio for banks. Foreign banks are on the hunt for more acquisitions in Pakistan's banking sector following Standard Chartered's purchase of a local bank, State Bank (SBP) governor Dr Shamshad Akhtar said on Monday.

"I am confident that there will be 2 to 3 additional international banks that will be viewing Pakistan with keen interest. Some of them are already talking to the local banks," the governor said. Akhtar said she also expects further consolidation in Pakistan's banking sector because of higher capital adequacy ratios and new regulations that banks must adhere to under Basel II.

In August, Standard Chartered agreed to buy an 80.9 percent stake in Union Bank for $413 million. Under Pakistan law it is also obliged to make a public offer for Union Bank's remaining shares, which would take the total price to $511 million, the biggest purchase by a foreign bank in Pakistan.

She was speaking at an event in Singapore where International Finance Corp announced a $50 million long-term loan to Habib Bank Ltd, the country's second biggest bank in terms of assets.

 

[Neo]

ISLAMABAD (updated on: September 19, 2006, 19:09 PST): Minister of State for Investment, Omer Ahmed Ghumman on Tuesday expressed the hope about the prospects for pouring of $2-5 billion investment from US businessmen into Pakistan in next one-two years.

Talking to PTV in a telephonic interview from New York the minister said that President Pervez Musharraf during his interaction with the US investors had removed all the misperceptions and reservations about the business environment in Pakistan.

He has ensued new confidence among the US businessmen particularly among Pakistani origin Americans the minister said and added the results would come on surface in next 2-3 months.

He said the US business community was very much convinced the way President Musharraf briefed them adding none of the participants expressed any reservation over law and order situation in Pakistan.

President Musharraf has offered his personal co-operation to the US investors for doing business in Pakistan and they were deeply impressed by this offer, he added.

$2-5 billion US investment eyed after Musharraf's speech

 

[Owais]

Pakistan likely to skip sugar imports in 2006/07
BEIJING (updated on: September 20, 2006, 15:54 PST): Excessive imports this year and expectations of a better harvest next year mean Pakistan could skip importing sugar in the upcoming crop year, a leading industry official said on Wednesday.'We have now a huge surplus of imported sugar,' Mian Kausar Hameed, chief operating officer of Dewan Mushtaq Group, a leading sugar producer.

"We don't expect Pakistan will import sugar in the year 2006/2007."

Pakistan still has 800,000 tonnes to 900,000 tonnes of sugar left over from a total of 1.3 million tonnes imported in 2005/2006.

"The stock will carry over to the next year 2006/2007," he told a Beijing sugar conference organised by F.O.Licht and the China Sugar Association.

Inventories and estimated domestic output of 3.3 million tonnes would balance consumption, which he put at 4.0 million tonnes for next year.

"Maybe because it is an election year and the government wants to be very sure of keeping prices lower, they might import maybe 200,000 tonnes or so," he said.

Pakistan produced 2.6 million tonnes of sugar in 2005/2006.