Pakistan Economy - News & Updates - Archive

[Neo]

KARACHI, Sept 30: Sindh and Balochistan are relatively less densely populated provinces of Pakistan than Punjab and the NWFP. These provinces have a higher density of government servants and are comparatively badly managed with more illiterates. They are by and large financially insolvent and show high crime rate.

A recent World Bank study has worked out a ratio of 1.85 government servants for every 100 persons in Balochistan and 1.29 for every 100 persons in Sindh. In contrast, there is a ratio of 1.21 government servants for 100 persons in NWFP and only 1.06 in Punjab, the most populated province of the country.

Sindh boasts of showing the highest-ever growth of 60.5 per cent in government employees during 1988 to the year 2000, when elected and caretaker governments replaced each other in quick successions.

In 1988 the headcount of government servants in Sindh was 285,042. This number swelled to 457,494 in the year 2,000. Compare it with only 22.9 per cent growth in Punjab where the number of government employees increased from 722,916 in 1988 to 888,796 in the year 2,000.

The NWFP too showed a high rise of 48 per cent in number of government employees — from 177,196 in 1988 to 262,074 in the year 2,000. In Balochistan, the number of government employees increased from 98,942 in 1998 to 128,132 — a rise of 29.5 per cent.

“In Sindh and Balochistan, the strategy adopted by Islamabad was to accommodate as many locals in the government jobs as possible in 1988 and after when the quasi-elected governments replaced military handpicked team of politicians,” a retired bureaucrat in Karachi explained.

He said that late Zulfikar Ali Bhutto adopted the same policy in 1972 and afterwards. “Just recall, how strong was the “Jiye Sindh” current in late sixties and how it was mellowed down in early seventies,” he said.

His other explanation for expansion in bureaucracy in Sindh and Balochistan, the two southern provinces, which are lagging far behind in economic development, education and infra structure, is that during more than 15 years of One Unit — 1954 to 1970 — people from Punjab literally took over most of the government jobs in police, schools (teachers) and even low positions in districts and tehsils.

“You will not find as many people from outside Punjab province in Lahore Secretariat as you find them in provincial secretariats of Karachi and Quetta and even in police stations, schools and health centres in the villages of Sindh and Balochistan,” he said.

Immediately after taking over the responsibility, Mumtaz Bhutto in Sindh and Sardar Ataullah Mengal in 1972, wanted to repatriate policemen and other government employees back to their home province--Punjab.

Consequently, Mumtaz Bhutto had to be taken out of Sindh and inducted in the federal government and Ataullah Mengal’s government was dismissed to retain the status quo in the two provinces.

Officials say that the government jobs were thrown open much before 1988 in Sindh when Mohammad Khan Junejo was appointed prime minister and Ghous Ali Shah as the chief minister. But late Jam Sadiq Ali, after being appointed in 1990 on dismissal of the Benazir government, used government jobs as a bait to win over PPP supporters in the province.

It was during Jam Sadiq Ali’s tenure that the highest number of persons — both from rural and

urban areas — were given government jobs in Sindh. In the finance department, the number of newly recruited officers of grade 16 and 17 increased so much in 1990 and 1991 that there were no chairs and desks available to accommodate them.

Education remains the most sought-after department for employment by the job seekers from the lower middle class groups in rural and semi-urban areas of Sindh. It provides the opportunity to get recruited, get monthly salary and enjoy benefits without attending the schools.

At one time there were as many as more than 6,000 schools without teachers. The World Bank report says the number of employees in Education department increased from 49,600 to 101,000—-almost 104 per cent.

The quasi-elected and handpicked caretakers did focus on social sectors after 1988 and invested heavily in bricks and mortars and increased the number of primary schools by 160 per cent during 1988 and 2,000. In this period the national average of rise in primary schools was 25 per cent.

Those, who watch the affairs of Sindh, say that literacy in terms of schools enrolment, students in secondary and higher secondary, professional, technical and vocational institutes, particularly in the rural and semi-urban areas of province is just dismal and pathetic.

“It may appear as a puzzle that Sindh succeeded in building so many new schools, and hospitals, hiring the maximum number of civil servants and spending billions of rupees, and yet has very little to show in terms of improved development outcomes,” is the candid observation of the World Bank’s report that asks a question--why?

The report then answers, “When the governance is weak, the increased investment goes into bottomless pit, benefiting no one, except the corrupt officials and the private contractors.”

The report suggests that the Sindh government should improve its governance with increase in the investment and “adopt a strategy that the neighbouring province Punjab is trying to implement in the education sector.”

Not that the World Bank has taken an initiative to point out the problems resulting from a bulging bureaucratic machinery and directionless investment, but there have been politicians and officers in Sindh, who had earlier documented deterioration in administrative and financial management of their province since 1980-90.

“The annual growth rate for establishment cost between 1976 to 1991 was 6.3 per cent,” an official document reveals to point out that this cost increased to 16 per cent a year between 1991 to 1997.

The document blames the directionless initiatives taken by the federal government during the decade of eighties and nineties such as the five point programme, mohalla and mosque schools, Nai Roshni schools, employment generation programmes by government to provide jobs to doctors, engineers and raising of Kutcha police.

“These initiatives resulted into an over-sized establishment rising from 214,000 employees in 1984-85 to 445,830 in 1999-2000.“The bulk of these posts—- nearly 74 per cent—-are in low-skilled levels in basic pay scale grades 1 to 7 and 19 per cent in basic pay scale grades 8 to 16,” the document reveals to illustrate that this expansion has also changed the revenue expenditure pattern in the province bringing general administration from rank IV to rank II downgrading the economic services from rank II to rank IV.

In this backdrop of a bulging bureaucracy and the rising establishment cost, the present political stalemate of the coalition government in Sindh, emanates from differences on new recruitments in thousands in the Sindh government.

 

[Owais]

Private sector playing credible role in development: PM


ISLAMABAD (updated on: October 01, 2006, 17:58 PST): Prime Minister Shaukat Aziz has said that government is working on a two-pronged strategy to keep the prices of essential commodities under control.

Talking to a delegation of Islamabad Chamber of Commerce and Industry in Islamabad , he said on one hand it is working to ensure the supply of these items in sufficient quantity while on the other hand administrative steps have been taken to check hoarding and undue profiteering.

Referring to the economic development the prime minister said high growth achieved by the country has restored the confidence of the investors and created a predictable environment.

He said the private sector is playing a credible role in the development process.

Aziz said the reform agenda undertaken by the government was multifaceted and broad based and was on the philosophy of deregulation, liberalisation and privatisation coupled with transparency and good governance.

 

[Owais]

SBP wants to set up Islamic banking as parallel system



KARACHI (October 01 2006): The State Bank of Pakistan (SBP) aims to establish Islamic banking as a parallel banking system which would be comparable and compatible to conventional banking and could become the banking of first choice in Pakistan, depending on market demand.



This was stated by SBP Governor Dr Shamshad Akhtar at a meeting of the heads of Islamic banks and Islamic banking divisions of conventional banks here on Saturday. Azhar Kureshi, SBP Advisor on Development Finance, and Pervez Said, Director, Islamic Banking Department, were also present in the meeting.

Dr Shamshad said that Islamic banking was a high priority area for the SBP, and she was professionally and personally committed to its growth in the country. "It needs to be robust enough to offer a viable alternative to conventional banking, should the market decide that we should have an exclusively Islamic banking system in the country.

Whatever the market forces decide, the SBP is committed to providing an enabling environment for developing this banking system to enable it to play the role the market may want it to play."

She said: "Towards this end we have made very good progress since the launch of this initiative three years ago. To support this industry and to strengthen the regulatory framework we have taken a number of initiatives that have resulted in this impressive growth in this industry.

"The regulations for licensing of Islamic Banks are in place. We have licensed six full-fledged Islamic commercial banks and 12 conventional banks with stand-alone Islamic branches. We have others in the pipeline. The licensing policies and regulations have worked well and the launch of this initiative has been issueless."

A Shariah Board has been constituted at SBP, which consists of Shariah scholars as well as industry experts and has been functioning smoothly. The Shariah Board has approved the Shariah Compliance Inspection Manual which has been developed by consulting firms of international standing and has undergone extensive refining internally at SBP.

"We are now in the process of training our Inspection staff to carry out this audit and will be implementing it shortly. This will pave the way for ensuring high standards of Shariah compliance by the industry," she added.

At the National Institute of Banking and Finance an Islamic banking certification course has been introduced to cater to the development needs of potential and existing workforce of Islamic banking. The course is aimed at building the capacity of banks to deliver Islamic banking products and services.

"We have formed different task forces to address specific issues like development of a liquidity management product, harmony in Shariah rulings and development of the Islamic products needed by the industry like Long Term Financing for Export Oriented Projects (LTFEOP)".

The task force on Liquidity Management Product has been successful in coming up with a Shariah-compliant structure that successfully mimics the functionality of T-Bills. BMCs or Bait-ul-Mal Certificates will provide the Islamic Banking industry with the much-needed Shariah-compliant liquidity management product that is also SLR-eligible.

"I must congratulate the task force that had members from Standard Chartered Bank, Dubai Islamic Bank, Citibank, Meezan Bank and SBP. I believe the structure finalised is a hybrid and currently the best in class globally. We are currently co-ordinating with MOF to have BMCs issued asap (as soon as possible). We are also working on Islamic Scheme for Long Term Financing for Export Oriented Projects (LTFEOP) through a task force in which Meezan Bank is playing a key role. Similarly, another task force on Research and Development in Islamic Banking and Finance has been established."

The SBP also holds, on regular basis, co-ordination meetings with the Shariah Advisors of Islamic banking institutions through which various issues of immediate nature faced by the industry are resolved and it also focuses on achieving harmonisation of practices related to Islamic banking Shariah operations in different institutions.

In order to give the much-needed global exposure to the domestic Islamic banking industry the SBP is taking a number of steps. "We are in the process of finalising an MoU with the Malaysian based International Centre for Education in Islamic Finance (INCEIF). The MoU will provide the framework for co-operation between SBP and INCEIF to promote and undertake research, development, training and education in Islamic finance. SBP has been encouraging holding of international Islamic banking conferences as these allow for a good way of knowledge transfer."

It also gives exposure to the local industry to the best international practices in different area of Islamic finance. "Last year, we had one such conference, which was very well received. This year, we have already had one, and another one is in the pipeline. I am told that now there is a tremendous interest by international event managers to hold Islamic banking conferences in Pakistan", she said and added, "as such we will be seeing a healthy number and mix of such conferences in the future".

For providing level playing field to Islamic banks, the SBP in co-ordination with ICAP, SECP and CBR is leading the resolution of issues related to Accounting Standards and Taxation.

All in all, a lot has been done and a lot needs to be done. However, this needs to be done in a private-public sector partnership as regulating an industry is no longer a one-way street and market trends as determined by the private sector play an important role in formation of regulatory standards.

"In the recent past, I carried out a restructuring within SBP. Islamic Banking Department has now been placed in the 'Development Finance Cluster'. This has been done to bring focus to the developing side of Islamic banking as this system is still in its early stages and a lot of developmental work is required to provide it the strong regulatory base that it needs if it is to be a system comparable to conventional banking system."

However Islamic Banking Department will continue to be involved in the Islamic Banking Policy and Regulations side and will continue to play its role in ensuring a smooth functioning of this industry. As such it will continue to be the interface between SBP and the Islamic Banks.

"I have outlined for you the major steps we have taken but there is lot more that has been happening and will continue to happen so that we can deliver on our commitment of providing a comparable and compatible Islamic banking system."

The Governor asked for feedback from the participants as to how they see the progress so far and what are the areas of concern or areas where SBP support would be needed. The chief executives of Islamic banks and heads of Islamic banking departments/divisions of conventional banks appreciated the regulatory framework adopted by the State Bank for promotion and development of this industry. Most of the participants said that the biggest problem being faced by the Islamic banking industry today is non-availability of Islamic instrument for liquidity management.

The other issues highlighted by them related to taxation, trained human resource, long-term export finance scheme and standardisation of Islamic banking guidelines etc.

The Governor, while appreciating the comments of the meeting participants, said that such meetings would be held on quarterly basis. She said that all-out efforts were being made to meet the challenges faced by the Islamic banking industry. She said that SBP was in the process of re-aligning its next five-year strategy, and asked the participants to volunteer for preparing the 'Vision' for the industry. In this regard, a committee of Islamic bankers was formed.

Regarding the issue of Liquidity Management in Islamic banks, the Governor said that MoF is pursuing it. Similarly, the other task force on Research and Development would also work faster for solutions of capacity building issues in Islamic Banking and Finance.

For looking into the issue of Basle II implementation in Islamic banks, she said that one or two Islamic banks should work on internal rating methods, which would then be further looked after by some technical experts in the field. Commenting on the role of the National Institute of Banking and Finance, she said that it was offering an Islamic banking certification course to cater to development needs of potential and existing workforce of Islamic banking.

She said that the State Bank wanted an institute of banking and finance in Karachi which should cater to the growing needs of banking sector, including Islamic banking & finance.

Dr Akhtar informed the participants that the State Bank was also working on Islamic version of the Scheme for Long Term Financing for Export Oriented Projects (LTFEOP), which would soon be issued.

She said she was very concerned about deteriorating quality of services in banking sector and advised Islamic bankers that they should attract and retain their customers on the basis of high quality services. She stressed the participants that instead of opening branches in already over-served areas; they should focus on setting up branches in under-served areas.

Being Head of Islamic Banking at the State Bank, Pervez Said also responded to most of the queries of the participants. Particularly, he highlighted the initiatives taken and efforts made by the Islamic Banking Department of the State Bank.

Concluding the discussion, the Governor assured the participants that she would continue to support the promotion of Islamic banking as a parallel system operating at a level playing field with commercial banking.

 

[Owais]

Rs 4.2 billion shortfall in July-September provisional revenue


ISLAMABAD (October 01 2006): The provisional collection by Central Board of Revenue (CBR) in the first quarter of 2006-07 (July-September) has amounted to Rs 172 billion against the quarter's target of Rs 176.2 billion, depicting a shortfall of Rs 4.2 billion.

According to a CBR announcement on Saturday, the Board has collected Rs 172 billion in the first three months of current fiscal year against Rs 152 billion in same period of last fiscal year, showing 13 percent growth.

Since September 30 was the last day of filing income tax returns, it is expected that the final turnout would be much higher, and the revenue target for the quarter (July-September) would be easily achieved. Due to late closing of returns filing time, CBR will release the detailed account on Monday, October 2, the Board announcement said.

The Board had collected Rs 99 billion during July-August 2006-07 against the target of Rs 91.5 billion, reflecting an increase of Rs 7.5 billion. On the basis of the year's target of Rs 835 billion, the CBR has chalked out quarter-wise targets of 2006-07. The target of the first quarter was fixed at Rs 176.2 billion; second quarter (October-December) Rs 203.7 billion; third quarter (January-March) Rs 204.6 billion and the target for the fourth quarter has been fixed at Rs 250.5 billion, sources said.

 

[Owais]

Banks and mutual funds to be hit by government U-turn on NSS: KIBOR to rise


KARACHI (October 02 2006): Banks, mutual fund and asset management companies are expected to be adversely impacted by the government's decision to permit the corporate sector to invest in National Savings Schemes.

Since NSS instruments (are on tap) providing ease in entry and exit to depositors and have zero risk being sovereign paper, liquidity is expected to flow from banks into Savings Schemes. The liquidity crunch, say experts, will not only force the banks to raise deposit rates but also enhance lending rates of borrowers.

The U-turn taken by the government would help it shift reliance from bank to non-bank borrowing for budgetary needs as it will drain the surplus fund in the system into NSS, however, in the process all structured financial products of Asset Management Companies will dry up and the secondary market for bond trading will become dormant.

There are Rs2.8 trillion with the banks and around Rs1 trillion in NSS. For the last three years government's efforts to balance the inflows into NSS through household savings with the outflows of corporate deposits from NSS - due to curbs under NSS rules - have failed.

However, the net outflow from NSS in a falling interest rate scenario was manageable. Since last year the net outflow is on the rise and in the next two years the maturity of corporate deposits will be huge and in no way can it be balanced with the sale of PIBs to corporate sector; as banks have miserably failed to market these bonds to clients and are holding a huge chunk themselves; besides government drying up their flows under an erroneous policy.

With interest rates collapsing to as low as 2 to 4 percent range from 10 to 12 percent, the Federal government, for a short-term gain refrained from issuing PIBs with regularity and instead increased its reliance on short-term treasury bills. This did provide relief to the budget on debt-servicing cost but all warnings to issue PIBs to fund the outflow from NSS - three to five years down the line were ignored.

Despite repeated warnings in annual report of the central bank that government's debt profile was shifting from long- to short-term and this can cause concern when the interest rates start rising, no heed was given and PIB auctions in meagre amounts were held once or twice a year instead of quarterly intervals with regularity.

Multilateral institutions had advised in the mid-90s to have a level playing field in terms of rates and correcting the tax differential between NSS instruments and Certificate of Investments (CoIs) of banks and non-bank institutions for development of the bond market in the country. The rationale to stop the corporate in NSS was based on the notion that savvy investors are better placed then house-holds to evaluate the investment products on the capital market where government paper can compete with private issues.

Some experts say with rising pace of T-bills stocks; bank spreads not being reduced despite repeated moral persuasion and post-1998 plan to develop a market for medium- and long-term instruments failing has forced the government to take the U-turn. This decision should put to rest any expectancy from the capital market for fixed income instruments to finance infrastructure projects.

"Government has not taken a long-term view it will be interesting to see if overseas banks, contemplating an entry into Pakistan after the Standard Chartered buyout of Union Bank, will now remain interested in entering this country," said a bank treasurer.

Provident funds and pension funds will come back to NSS, bank spreads may be reduced by 50 to 70 basis points but not 200 basis points sought by the authorities. Yes T-bill rates will come down as the government needs are increasingly met through NSS, but KIBOR, which reflects the availability of liquidity, will go up, said an expert. In essence debt servicing of private sector will go up and their credit growth will slow down. When the SBP tightened its monetary policy and raised discount rate and managed the liquidity in the system with daily OMOs, KIBOR came slightly down but the T-bills rate went up considerably.

It appears that the dialogue between the fiscal and monetary managers for a consensus is missing and therefore a well thought out policy is non-existent, said a leading economist.

Analysts expect growth in banks' balance sheets to slow down and the growing appetite of asset management companies and mutual funds to diminish.

 

[Owais]

1,384,309 income tax returns filed: over 20 percent increase from last year


ISLAMABAD (October 02 2006): The Central Board of Revenue (CBR) this year received total 1,384,309 income tax returns (1,384,309) up to September 30, 2006, against 1,152,799 (1,152,799) returns last year, reflecting an increase of 20 percent.

CBR spokesman and Member, Facilitation and Taxpayer Education (FATE), Habib Fakhruddin, said on Sunday that total tax paid along with the returns up to September 30, 2006 was Rs 11.98 billion, against Rs 4.5 billion of last year, showing an extraordinary growth of 170 percent.

He said that taxpayers who could not furnish their returns by September 30 2006 for any reasonable cause and have applied for extension in time within the due date, may approach their respective Commissioners of Income Tax for such relaxation and file their returns within the next 15 days. He added that the CBR has advised the Regional Commissioners of Income Tax (RCITs) and Commissioners of Income Tax to facilitate such applications.

Taxpayers who could not file copies of their computerised national identity cards (CNICs) along with their returns have been advised to do the needful up to October 15, 2006, the CBR spokesman said.

 

[Owais]

AJK government signs pact with two power companies


MUZAFFARABAD (October 02 2006): The Azad Kashmir government has formally signed an agreement with two power companies for providing 15 megawatt electricity so that the growing electricity requirement of the state could be fulfilled. This was stated by Azad Kashmir Chief Secretary (Electricity) Mushtaq Gorsi while talking to newsmen here on Sunday.

He said that the agreement between the Azad Kashmir government and power companies would bring positive results, saying it would also help speed up work on hydel projects.

To a question about the load shedding he said that it is being carried out from the main grid stations of Mangla and Rawat due to lack of power generation in Pakistan, adding, "We have no control over it." He also made it clear that the load shedding would continue till the increase of power generation in the said grid stations.

To another question he said that 132 KV line is being constructed from Mangla to Bagh to reduce the load shedding, adding that 67-kilometre long alternative double line is also being built from Mangla to Chaksawari.

The chief secretary said that they would also replace the outstanding meters with new meters to be installed on poles to save line losses. He said that during the current year more electricity schemes would be completed which would also help reduces load shedding.

 

[Owais]

CBR receives Rs 11.98 billion Income Tax, registers 170 percent increase



ISLAMABAD (updated on: October 01, 2006, 21:41 PST): A spokesman of the Central Board of Revenue (CBR) has intimated that total returns filed upto September 30, 2006 are 13,84,309.

"Last year, on the same date returns filed were 11,52,799 showing an increase of 20%," he added.

Tax paid along with returns upto 30-09-2006 is Rs 11.98 billion as against Rs 4.5 billion in the corresponding period of last year showing increase of 170%.

It may be clarified that the taxpayers, who could not furnished their returns by due date i.e. 30-09-2006 for any reasonable cause and have applied for extension in time within the due date, may approach their respective Commissioner of Income Tax for such relaxation and file their returns within 15 days. Regional Commissioner and Commissioners are being advised to facilitate such applications.

It may be reiterated that those taxpayers who could not file copies of their Computerised National Identity Card (CNIC) along with returns are also advised to do the needful up to October 15, 2006.

 

[Owais]

Rs 520 mmillion gas project under completion


MULTAN (October 02 2006): A mega gas project ensuing an expenditure of Rs 520 million for Mailsi, Tibba Sultanpur and Dokota is under completion, said National Assembly member Muhammad Azhar Khan Yousufzai, on Sunday.

Talking to APP here, he said President Pervez Musharraf and Prime Minister Shaukat Aziz had provided unprecedented funds worth Rs 1.1 billion for the development of the hitherto neglected Mailsi, which is famous for its bumper cotton crop across the province.

He said among the projects under way include the mega scheme of Sui gas, which would cost the exchequer Rs 520 million. He said 95 percent work on 60 km long main pipeline laying task has been completed from Jahanian (Khanewal district) to Mailsi (Vehari district).

He said the supply to Tibba Sultanpur would start within a couple of weeks during Ramazan benefiting a town of 20,000 population and then the same number of population would be benefited at Dokota on way to Mailsi.

Azhar Khan said that some villages lying in the proximity of Mailsi city like Basti Kumbir and Tilokpur would also be supplied with the Sui gas.

The legislator from Mailsi said that supply to the Mailsi city would start probably in November-December benefiting more than 70,000 souls.

He said it was a long-standing demand of the people of Mailsi, which was accepted by General Pervez Musharraf during his visit to Mailsi some six months back.

He said other projects, which had been sanctioned by the government, include electrification projects worth Rs 190 million, roads schemes worth Rs 120 million, sewage scheme for Mailsi city Rs 70 million, tehsil headquarters hospital upgradation Rs 85 million and Rs 25 million allocated for railway under-pass.

Azhar Khan said all these development projects, when completed, would usher the area in an era of prosperity.

He lauded the government decision to increase support price of wheat which will encourage the farmers to grow more wheat.

 

[Neo]

Why Sindh is lagging behind?



By Sabihuddin Ghausi
AS many as 94 per cent of the 60 American multinationals have a negative image of Sindh government, according to a recent annual survey.

Sharing this perception, chief executives of a few British and German multinationals described “bad governance’’ the single most critical challenge to the development of the province.

The World Bank too, carried out a survey of primary stakeholders in December 2004 to discover that “an overwhelming majority of them consider bad governance as the biggest challenge to the Sindh’s development’’.

“Corruption and law and order, which are derivatives of weak governance system, emerge as the second and third most critical challenges’’. It is this candid observation of the World Bank report that has caused discomfort to the political leadership as well as the bureaucrats in Karachi.

A recent report of Transparency International put Punjab government ahead of Sindh on corruption index has brought some consolation to the provincial administration. But the World Bank report, “Pakistan: Securing Sindh’s Future: The Prospects and Challenges Ahead’’ awaits official comments from the provincial authorities even after submission and presentation about nine months ago.

According to World Bank sources in Islamabad, the bank gives the draft report to the government after carrying out surveys and holding sessions with stakeholders. A presentation is made and then the relevant authorities are expected to offer comments. The bank’s board then reviews the draft report in the light of comments of the government and gives it a final shape that accommodates all views and comments.

Spread over 100 pages, the World Bank report is divided into seven chapters. The bank study has detected an all round deterioration. Thee province is falling behind in almost all sectors be it economy, manufacturing, agriculture, services education, gender equality and social sectors.

What is startling is the fact of highest incidence of absolute landlessness, highest share of tenancy and the lowest share of land ownership in Sindh. The wealthy landlords with holdings in excess of 100 acres, who account for less than one per cent of all farmers in the province, own 150 per cent more land than the combined holdings of 62 per cent of small farmers in the province with land holdings of less than five acres.

Crops and livestock have been devastated by the four years drought exposing more than 50 per cent of its rural population to extreme poverty. Being on the lower riparian, water supply remains less than what is needed and hence all the problems.

The World Bank found Sindh to be endowed with many characteristics of a high growth region. At one time it was the most industrialized province accounting for 40 per cent of the country’s manufacturing output in the country.

Rich in mineral resources, the province possesses one-third of total deposits of the country. At one time it was the most efficient producer of agricultural goods. The per capita income in Karachi was 55 per cent higher than the national average at the time of independence. Karachi was the first city in Asia to have a full fledged airport and its sea port was the main supplier of cotton and grains to Europe in 19th and 20th century.

The city’s seaport is well connected by extensive road and rail network with all parts of the country and is well extended to India in East and up to Central Asia in North. The province has highest literate population, a strong entrepreneurial class, a large pool of educated labour with relatively low wages and home to many institutions of higher learning,

According to the World Bank report “Sindh should be on a fast growth track and Karachi should have been a flourishing metropolis’’.

Instead of building on the initial advantages to become country’s growth engine, the province, “has been gradually losing position of pre-eminence’’ the report notes and goes on to illustrate its observations with facts that show the rise in unemployment in the province.

The report warns of deterioration in unemployment situation as it counts 610,000 unemployed in the year 2003-04 and nearly half a million persons are likely to be get added each year for next ten years.

“Without a sustained growth rate of around 7-8 per cent per year, the number of unemployed in Sindh could go as high as 1.6 million by 2013-14’’ warns the report.

The province’s share in the national gross domestic production (GDP) is found to have fallen in almost all sectors with the largest declines recorded in large scale manufacturing, finance and insurance, transport and communication sectors.

Another significant observation of the World Bank is that the Sindh’s development indicators are not only low in absolute term, but are growing less rapidly relative to rest of the country. For example, its literacy increased by five percentage points from 51 to 56 between 1998-99 and 2004-05, while corresponding increase in the country was eight per cent, from 45 to 53 per cent. With a 41 per cent net primary enrolment rate, it was one percentage behind the national average.

This gap widened to four percentage points by 2004-05. In 1998-99, the percentage of household with access to roads exceeded the national average by two percentage points but it fell by seven percentage points in 2004-05.

Poverty headcount ratio increased from 23.4 to 40.4 per cent between 1995-96 to 01-02 when corresponding national poverty was 30.1 per cent in 95-96 and 36.4 per cent in 01-02.

The report has raised issues as to why Sindh has grown below its potential and is lagging behind the other provinces in growth, poverty reduction and social indicators.

The report addresses the growing inequality and disparity within the province across various dimensions. How can these barriers be removed, enabling the province to accelerate its economic growth, improve distribution and reduce poverty? This is one question that the World Bank tries to answer in the context of sound economic policies of the federal government.

But in this utter dismal socioeconomic scenario, the World Bank report finds light at the end of tunnel. “Fortunately, the favourable conditions at the global and national levels and the province’s own existing and potential strengths provide an opportunistic setting for the government to embark on a broad and ambitious reform programme’’ the report suggests.

The report notes polarisation in Sindh political environment, where political parties are formed on ethnic lines and it pleads for building a consensus in favour of reform among the existing political parties. According to the WB report, it is the only province where politicians are mobilised on ethnic lines with conflicting interests.

As a part of its study, the World Bank in its earlier report given in May last year found that nature of coalition government seems to have been burdened by political stalemates that is holding the provincial government to focus on developing the “type of strategic vision, action programme and implementation drive that made the province a leader in implementing reforms in earlier years.

Moreover, a lack of attention to business related issues and sustained bureaucratic inaction has created a perception of severe policy uncertainty and has heightened the level of mistrust between the business community and the public sector institutions’’ the report pointed out while drawing attention towards economic stagnation and increase in the number of people being pushed down the poverty line.

“It seems that the progressive policymakers, the resilient business community and the activist civil societies have given up any hope of creating a more prosperous Sindh’’, the report said.

Top executives of about half a dozen multinationals and business leaders endorse most of the observation of World Bank. “ The government does not have any vision for future economic development’’ remarked a chief executive of a giant multinational. Except for Governor of province, the business leaders and executives of big corporations find difficulties in communication with the ministers and the bureaucrats.

‘Is there really any Investment Cell in the Chief Minister House?’’ asks an executive of a corporation who said he never knew if there was any cell working in the province. But his questions as to when the cell was notified, what are its terms of reference, who are its members and how many times it has met and whether it has given any approvals to projects and finally does it interact with local and foreign businessmen remain unanswered. So long as Kamal Mustafa was the provincial minister for IT there was some communication between the government and foreign investors.

The Karachi Chamber of Commerce and Industry leadership including President Majyd Aziz have high hopes from the political leadership of the provincial government. “From the Governor to the Chief Minister, all area easily accessible’’ Majyd Aziz said.

But he admits that the government does not have any vision for industrialisation and agricultural growth. He concedes that lawlessness is growing out of proportion that now threatens the normal day-to-day economic activity. “But four times reshuffling in the cabinet portfolios is no issue for us’’ Majyd Aziz said and hopes for best in the coming days.

 

[Neo]

Balochistan and IPI gas pipeline



By Syed Fazl-e-Haider
Islamabad and Tehran have agreed to conclude quickly the talks on the $4.5 billion Iran-Pakistan-India (IPI) gas pipeline project. In the trilateral scheme of gas pipeline project, Iran would be the supplier, India recipient and Pakistan transit facilitator as well as buyer of Iranian gas.

The security situation however needs to be improved in Balochistan across which the strategic pipeline will pass.

According to one estimate, Pakistan is expected to get $200-$500 million annually in transit fees alone. Some MPAs in the Balochistan assembly have recently demanded a higher royalty as the greater part of the IPI gas pipeline passing through their province. The house later unanimously admitted a motion that seeks to debate the issue.

Some assembly members believe that the success of the IPI project is linked to accommodation of Balochistan’s demands. Their concern revolves round two main issues: Balochistan needs to be assured of a royalty that will satisfy the people of the province and the locals must be ensured maximum employment in the project.

The proposed Iran-Pakistan gas pipeline project conceived in 1993 was later proposed to be extended to India. The pipeline would carry 1.1- 3.4 billion cubic feet per day (BCFD) gas from Iranian Pars field to Pakistan. A 2670-km pipeline of 32 to 44 inch diameter would be laid from Iran to India, 707 km of which would traverse Pakistani territory, a greater part of which will pass through Balochistan.

Under the plan, Iran would build the pipelines from its Pars gas field to Jiwani in Balochistan (near Pakistan’s border), while Pakistan would lay the pipelines from its side up to Jiwani. This would greatly save the cost of the proposed Iran-Pakistan gas pipeline project by $1 billion.

The gauge of the pipeline would be increased from 36 inches to 40 inches if India shows interest in the Iran gas pipeline project. The inter-state gas distribution company (SSGC) puts the cost of the Iran pipeline project at $2.1 billion. The length of pipeline has been calculated as 2106 km.

India’s oil minister recently called the proposed gas pipeline from Iran across Pakistan ‘a risky venture’ that would be difficult to finance. He viewed that security for any pipeline was a concern because it would run across volatile areas of Pakistan where other pipelines have been attacked in the past.

The proposed plan for laying Turkmenistan-Afghanistan-Pakistan (TAP) gas pipeline could not be materialised due to the prevailing political instability and uncertain security situation in Afghanistan.

Islamabad has however repeatedly been rejecting the India’s concern contending that it can effectively handle the security of the proposed IPI gas pipeline. Petroleum and Natural Resources Minister recently claimed the government had been looking after the 6,000-kilometer-long domestic pipeline network that provided gas countrywide. But the recent incidents of targeting gas installations and blowing up of gas pipelines have become a routine in the province.

The acts of sabotage have several times forced the gas company to shut off the main compressor plant, thus suspending gas supply to parts of Balochistan, Sindh and Punjab. A decline in production has reduced the province’s share in gas royalty to Rs1.5 billion in.

The transportation of hydrocarbons from energy-rich Central Asia and Iran to energy-starved South Asia is a complicated business involving strategic interests of big powers and corporate interests of global energy giants. The proposal of laying gas pipelines from Daulatabad fields in Turkmenistan or South Pars fields in Iran to Gwadar in Balochistan has triggered a cold war between pro-project and anti-project actors in the regional geopolitics.

The US opposes the IPI pipeline project but supports the TAP pipeline project. On the other hand, the Russia supports the IPI pipeline project and opposes TAP pipeline project. While India’s position in the game is that of running with the hare and hunting with the hound.

Balochistan’s concerns about the IPI gas pipeline needs to be addressed. The primary beneficiary of the economic gains from transit fee for trans-regional gas pipelines should be shared by the locals in the form of royalty and job opportunities to Balochis in the IPI project. And the locals should be made directly responsible for the security of the pipeline traversing in their territory. The provincial government needs to be involved in the pipeline issue.

In short, the current Balochistan crisis needs to be amicably resolved through political reconciliation on the autonomy issue.

 

[Neo]

Doors open for larger trade with India



By Sultan Ahmad
THE one-hour positive meeting between President Pervaiz Musharraf and Dr Manmohan Singh at Havana and their decision to resume the composite dialogue between the two countries has opened the path for larger trade. As a first step, India had suggested the inclusion of about 300 items from that country for Pakistan’s positive list of imports for India.

And the Economic Committee of the Cabinet has approved that list of 302 items which include pharmaceuticals including those manufactured under franchise from foreign companies, which should be cheaper than the same kind of items available in Pakistan through imports or local manufacturing which are priced high.

Iron and steel imports from India approved now should be cheaper than imports from the West. So should be machine parts from India which have been coming otherwise through third countries or through smuggling.

The same should hold good for diesel locomotives and surgical goods from India. It is to be hoped that Indian exporters will not put up the prices for exports to India far above the higher exchange rate of the Indian rupee.

The actual trade between the two countries including a two-way smuggling and trading through third countries like Dubai and Singapore is said to be of $3 billion.

The two governments are loosing a great deal in revenue because of smuggling, while the products obtained through third countries cost far more than what direct trade would.

In fact, Pakistani businessmen wanted about 900 items more from India to be added to the positive list. For such an escalation they have to wait.

Both the governments of India and Pakistan want larger trade between the two countries. But while India believes that larger trade and greater cultural relations and more people to people exchanges will lead to a congenial climate for the solution of political problems, Pakistan wants political problems inclusive of the Kashmir dispute solved first or at least positive moves made in that direction simultaneously.

While there have been many meetings between the two countries including submit level talks, there has been no real progress in the area of resolving political disputes. Hence larger trade between the two countries is held up.

The total trade between the two countries is barely $1 billion while the potential is said to be of $5 billion. The two governments are loosing a great deal of revenue, while the products obtained through third countries cost far more than what direct trade would cost.

There are other deterrents to full scale trade between the two countries. India wants to be given the Most Favoured Nation (MFN) treatment by Pakistan in mutual trade. But Pakistan is not ready for that until India makes positive moves for a settlement of the Kashmir dispute.

India gave the MFN status to Pakistan two years ago but Pakistan argues that it is ineffective as there are several tariff and non-tariff barriers. Hence the volume of Pakistan’s exports to India is too small.

At the same time, the South Asia Free Trade Agreement (SAFTA) has come into effect after laborious efforts. But Pakistan wants trade between the two countries on the basis of the positive lists of both countries.

Under the SAFTA, the seven member countries of Saarc enjoy tariff concessions on 4872 items. India hence strongly objected to its exclusion from this list by Pakistan and proposes to take up the issue at the meeting of the ministerial council of SAFTA.

Meanwhile, Pakistan is importing more and more vegetables and meat from India as well as sugar to overcome its shortage of these essential items. As a result, trade between the two countries rose to $746 million in 2004-05 against $476 million in 2003-04.

In the earlier years, Pakistani businessmen were opposed trade with India, but now the textile mill owners find they can buy chemicals and dyes much cheaper from India and so is the case of textile machinery.

In addition, China is now able to sell a great many variety of manufacturers much cheaper than India. Pakistani businessmen have also become more self-confident and venturesome than before and are ready to compete with India on home grounds.

As a result of such developments and the inclusion of 302 items from India to Pakistan’s positive list, the volume of trade between the two countries should increase.

The infrastructure for larger trade with India is also being improved in Pakistan. An agreement has been signed for resuming the long abandoned shipping service between Karachi and Mumbai. And the Thar-Munabao railway line has been restored . But the major deterrent against the trade with India is the absence of an Indian visa office in Karachi or the old Deputy High Commissioner’s office. That is not to be opened until Pakistan is able to get suitable place for a visa office in Mumbai, which is taking a long time.

The approval of 302 items to be included in the list by the ECC so promptly shows that Pakistan is ready for larger trade with India and the greater number of items, inclusive of diesel locomotives. That should get the business on both sides more active to increase the volume of trade between them in a significant manner.

Now the Indian businessmen should explore the Pakistan market to ascertain what they can buy from us. It can’t be a one way trade for two long. Pakistani traders should also participate in Indian trade fairs not only in New Delhi but also in other parts of India.

And President Musharraf has also reaffirmed following his long US visit that negotiations to build the Iran-Pakistan-India gas pipeline are on and the details are being awaited from a consultant. Dr Manmohan Singh is very keen on the project and Russia is now reported to be interested in the tri-nation pipeline.

Meanwhile, its has been reported by the Transparency International that India is among the 30 countries identified for bribing to boost its exports.

 

[Neo]

New housing and real estate development policy



By Ihtasham ul Haque
A NEW policy on the “housing and real estate development” for channelling sizeable resources to the investors and amending land acquisition laws has been jointly drafted by the Ministry of Housing and Board of Investment.

The draft envisages an attractive package to lure foreign and local investors in rural housing schemes. There are many private and cooperative housing societies operating or being established in the urban areas. None a single one is being set up in the rural areas.

People suffer from critical shortage in housing both in urban and rural areas especially the poor. And the rising land prices have been identified as one of the major impediments in the way of investment in the housing sector, which both the ministry and BoI believe, needs to be rationalised by a comprehensive long-term workable policy.

It would be the second effort to lure some meaningful local and foreign investment in the housing and real estate sector. A number of incentives were given to the investors in the National Housing Policy to make housing affordable for the poor. Now, there is a growing realisation that a rapid growth in housing finance can significantly develop housing and real estate.

The copies of the draft have been sent to the economic ministries, State Bank of Pakistan (SBP), banking institutions and other concerned agencies in order to come up with a final report to be approved by the cabinet for effective implementation.

The BoI and the ministry of housing and works are of the view that the financial institutions should give mortgage loans for housing purposes at market rates.

All commercial banks should be encouraged to advance loans for housing and housing projects by earmarking a “substantial percentage” of their loan portfolio like they do for other industries and commercial projects. The central bank is being requested to set up a “housing refinance window” for long-term funds from multilateral agencies.

Institutions maintaining insurance, provident and EOBI funds etc can be encouraged to invest a part of their portfolio in the housing and construction sector including long-term housing bonds. A part of the sale proceeds of valuable public land will be set aside to provide plots for low-income people, for the poor and needy at “concessionary rates”.

Similarly, the draft urges financial institutions and housing institutions to float long-term bonds at market rates to raise housing finance. Also, housing finance institutions shall be promoted to encourage savings and provide credit from community-based finance and other sources.

Under the proposed policy, the provincial governments would be required to urgently identify state and other lands in and around urban and local settlements for housing development. It provides for amending land acquisition laws to make provision for unified, transparent and market oriented system and minimisation of litigation.

The provision of trunk infrastructure shall be the responsibility of Wapda, PTCL, SNGPL,SSGCL, KESC etc. The cost of trunk infrastructure will be an additional charge on the public and private housing development schemes with the planned areas.

The construction sector is currently growing at by 7.9 per cent. and has attracted an investment of $89.3 million since July 2004. The draft anticipates that the growth in the sector will be multiplied manifold in the future. Building and construction sector is identified as the driver of economic growth.

According to the official estimates, Pakistan has over 19.3 million housing units. For a population of 148.7 million people, about 24.8 million units are required. Hence a shortfall of 5.5 million homes is estimated at end June 2004. On an annual basis, the country needs 570,000 units against the actual supply of 300,000, showing a shortfall of 270,000 units and the backlog is rising.

The overall housing stock comprised 39 per cent kuchcha houses, 40 per cent semi-pukka and 21 per cent pukka houses. The household size is 6.6 persons and the occupancy per room is 3.3 persons. It is estimated that to make up the backlog and to meet the shortfall in the next 20 years, the overall housing production has to be raised to 500,000 housing units annually.

The housing ministry and the BoI both believe that without extending adequate fiscal and non-fiscal incentives to the local and foreign investors, it would be difficult to ensure required pace of investment in housing projects.

However, it is agreed that the existing National Housing Policy has not been able to cope with the problems effectively..

Once the final report of the housing ministry and the BoI was prepared and submitted to the prime minister for approval and it is enforced effectively, one could talk about the new investment opportunities in the housing sector.

 

[Neo]

Monday, October 02, 2006javascript:; http://www.dailytimes.com.pk/print.asp?page=2006\10\02\story_2-10-2006_pg7_22
Steps to make Pakistan a land of honey


PESHAWAR: Haji Wahid, a 54 year-old-beekeeper, was leading a happy life earning a handsome amount to feed his family but two thirds of his bee colonies were destroyed in the October 8 earthquake last year.

A native of Bajaur Agency, Wahid is running honey business with the assistance of 50 members of his family at Tarnab, a hub of honey trade in the NWFP.

“I travel with the bees across the country to provide them with pollen and nectar,” said Wahid, who started his honey business in 1992. He said that he visited Punjab and Azad Kashmir in search of bee-flora plants and flowers at the end of the spring season. “The large scale cutting of calocacia (palosa), berry, shisham, sunflower, peaches and citrus fruits in the NWFP has affected beekeeping,” he added.

Another beekeeper, Hameed Khan, said hundreds of his bees were killed during the termite attack in Karak. He said his bees could have been saved had he got anti-termite medicines and injections at the early stages. The medicines useful for bee treatment were being imported from China, Australia and Germany, which were not only expensive but were often not available in remote areas of the province, Khan complained.

He said there was an ever-increasing demand for Pakistan’s berry and palosa honey in Saudi Arabia, Kuwait, Yemen, the UAE, Qatar and other Middle Eastern countries besides Europe because of its fine quality. He urged the government to fix honey rates to help thousands of beekeepers in their business.

Raza Shah, president of Pak Beekeepers Association (PBA), said that 6,000 honey farms existed in the NWFP. He said the government should impose a ban on the cutting of berry and palosa trees to save millions of bees from starvation and ultimate extinction. He said beekeepers should be provided interest-free loans.

Haji Rafique Najeeb, a leading honey exporter in Tarnab said, “Demand for Pakistani honey is always on the rise in the Gulf states, especially Saudi Arabia.” He said an increase in average yield of honey per colony had increased from four kg to 21 kg while the total production in the country had increased from 250 tonnes to 2,500 tonnes for the last two decades. He said the increase in honey production had brought down the prices of honey in the local market. “I have been selling berry’s honey for Rs 180,000 a tonne in 2005 against Rs 160,000 in 2006,” Rafique said. He added local beekeepers needed to have technical know-how and training to improve the quality of honey and to increase their annual income.

He alleged that some officials of the Food Department demanded illegal gratification from the exporters and on refusal declared their products injurious to human health.

“The department’s inspectors take 20 samples from the honey market every month to examine its quality,” Dr Bilal, deputy district health officer (DDHO) of Peshawar, said. The samples are divided into three parts, all sealed. One is handed over to the owner, another to the Health Department official while the third is sent to the laboratory for test, he added. “We lodge an FIR against the owner once his product is declared injurious to health,” the official said.

“The population of the local bee apis florae (small bee) is gradually vanishing from the country because of consistent loss of flora plants, flowers and scrub forest,” Anisur Rehman, assistant entomologist of the Agriculture Research Institute (ARI), Tarnab, said. He said if urgent measures were not taken for the conservation and protection of flora plants, there was every possibility of loosing an average five to 10 kilogramme out of 1,000 kg honey.

China became the biggest honey producing country by giving attention to apis cerana bee while the Pakistan stood 20th.

In 1977-78, the official said, that Pakistan Agriculture Research Institute (PARI) had brought apis mellifera (western bee) to increase honey production but unfortunately they were not adjusted with the climate and proved to be non resistant to diseases.

“A gigantic project with the assistance of UNHCR was launched for Afghan refugees in 1981-82 at the ARI where a large number of apis mellifera were brought from Australia and Italy. They were distributed among the refugees and locals that played major role in the increase of honey production,” he added.

“There is a possibility of losing the wild bees in the future if proper attention was not given to its preservation and management of natural forest,” said Dr Mumtaz Malik, chief conservator of the NWFP Wildlife Department. The gradual cutting of olive, kicker and berry trees also contributed to the decline of wild bee population, he added.

Dr Malik said beekeeping could be developed as a non-wood-forest product for the locals living near the forests by raising their income level through preservation of wild bees population. Under the Palas Conservation Project in Kohistan, he said, the capacity building and training of the beekeepers was being focused.

“The government has included a ‘Honey is remedy for health’ in the Annual Development Programme of 2006-2007 to promote the beekeeping industry in FATA,” said Dr Syed Qasim Shah, assistant director of agriculture in FATA. It is a two-year project and would be completed with an estimated cost of Rs 950,000. A project for women called ‘Honey in kitchen’ is also in the pipeline. Nine projects worth Rs 22.175 million are underway in FATA with focus on capacity building, farmers’ education and raising nurseries of bee-flora plants in FATA.

“We will issue a card to beekeepers for their identity before law enforcing agencies to save their time while migrating from one agency to another or settled areas,” Dr Shah said. The department has planned to train 8,000 people, including 1,000 females, besides distributing 2,500 bee-boxes on cheap rates among the farmers of tribal areas by 2010 to bolster their income.

“The University of Engineering and Technology (UET), Peshawar, is working on a honey extracting machine which will be available in the market in June next,” Javed Iqbal Khattak, SMEDA manager said. The cost of an electric machine would be Rs 9,000 which is designed in such a away that could purify tonnes of honey in relatively far less time besides saving precious life of bees off springs that are killed in thousands during purification process of combs, he said.

 

[Owais]

World Bank accuses government of distorting petroleum prices


ISLAMABAD (October 03 2006): The World Bank has accused Pakistan of petroleum products' prices' distortion, and warned that continuity of this flawed strategy would have negative impact on its economy in free market mechanism.

The bank referred a number of items in support of its viewpoint, which were massively distorted by the government to achieve some social and other objectives.

These included undue protection to refineries through concession in taxes, below import-parity-plus-margin sale of diesel and kerosene and tax relaxation to CNG and LPG. The bank highlighted thorny issues for the government in its a recent report. The report was based on a World Bank's mission's visit to Islamabad in September.

The report indicated that refineries were protected through a 5-10 percent import duty. This was forcing the consumers to pay correspondingly higher charges for the products. It added that with the exception of Parco, a little rationale seems to protect other refineries, which are old and have depreciated.

It said that petroleum prices across Pakistan for most of the products have been equalised through a freight equalisation margin applicable to 29 main depots. The fund is administered by the industry on behalf of the government, while cartage rates are fixed by the government. It added that the policy was questionable from economic standpoint and has other consequences. The mission supported OCAC's point of view to reduce the number of depots to 8 as an interim measure and then abolish the freight pool, once for all.

The report indicated that diesel and kerosene have been sold to end-consumers at prices below import parity plus margins. This resulted in price signals not being passed on to the consumers that resulted in building up of arrears to the refineries and OMCs. It maintained that gasoline has traditionally been fuel of choice for private vehicles, and as a result, was heavily taxed. In recent years, CNG, based on domestic gas, has captured a significant market share, given that out of a fleet of about 5 million light vehicles, in excess of 1 million now operate on CNG. CNG, which is not specifically taxed, costs about 40 percent of the price of motor gasoline.

The report said that in 2005, the government had authorised LPG use in private vehicles. LPG, which is not specifically taxed, represents effectively 80 percent of that of gasoline. As a result, gasoline, for which specific taxes account for about 23-29 percent of retail price, is not competitive with LPG and CNG.

The report said this was affecting inter alia the government, and finally it would affect fiscal receipts and the refining industry, which produces excesses of gasoline for export (in the form of naphtha). The report added that international prices of gasoline and diesel were usually close. But in Pakistan diesel price is only 63 percent of gasoline. The difference is excessive as it provides another incentive to switch from gasoline to diesel, largely at the expense of the Exchequer. The bank stressed the need of reducing the gap to bring in line with the international practices.