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President asks government to maintain growth trajectory

ISLAMABAD (December 01 2007): President Pervez Musharraf on Friday unveiled agenda in his first address to caretaker Cabinet at Awan-e-Sadar, asking the policy makers to do whatever they can to stop downward trend in the economy. He said he was also all-out for supporting the caretaker government to hold free, fair and transparent general elections on January 8, 2008.

He said: "As a President my first priority would be to make sure that Pakistan's economy maintains its growth trajectory and its effects trickle down to the people for improvement in their living standard." He asked the caretaker Cabinet to remain neutral to establish its credibility for January 8 elections and make all possible arrangements to make them free, fair and transparent.

He said that holding of general elections was a big challenge for the caretaker government and it must come up to the expectations of all parties. He recalled the events of last few months, and Shaukat Aziz's government's economic achievements.

He said that Pakistan's economy absorbed big shocks like October 8, 2005 earthquake and many others during the last few years and it was time to take judicious decisions to make sure that the economy did not suffer any setback.

He said the caretaker government was required to do even more hard work and make Pakistan stronger in all senses. Musharraf said that as President he would be available for the government for all-out support to achieve the objectives for which they have been brought in.

He added that Pakistan was making good progress on economic front for the last five to six years for maintaining economic growth rate over 7 percent for the last four consecutive years. He noted that Pakistan's key fundamentals were indicative of promising economic growth but some unfortunate developments badly affected the economic growth to reverse the process.

He said the caretaker government was a good combination of experienced economists, technocrats and politicians and it should deliver on all fronts to make sure that Pakistan maintains the journey of success in coming years.

He directed for taking all-out measures to overcome the shortage of electricity and other inputs to facilitate the industrial sector for improving its efficiency and produce more for getting more share in the global market for increasing exports to a reasonable level.

Business Recorder [Pakistan's First Financial Daily]
 
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Government wants private sector to become an engine of growth: Prime Minister

ISLAMABAD (December 01 2007): Caretaker Prime Minister Mohammadmian Soomro on Friday said Pakistan has always welcomed foreign investment to allow friendly countries to take advantage of Pakistani markets and investment friendly policies.

This trend, the Prime Minister said, is being encouraged so that joint-investment companies can participate in industrial projects, financial services as well as infrastructure projects. He was talking to Aizaz Sarfraz, Managing Director, Pak-Iran Joint Investment Company, who called on him here at the Prime Minister Secretariat on Friday.

The Prime Minister said Iran is a very important investor and trading partner of Pakistan and the relations between the two countries are developing very well. He said besides Iran, Pakistan has joint venture investment companies with Kuwait, Saudi Arabia, Libya, Brunei and China. There are several other ventures under consideration with other countries, the Prime Minister said. This model of cooperation between institutions of friendly countries has been a catalyst to promote investment and trade between Pakistan and these countries, he added.

"Our strategy for improving the investment climate is multi-pronged - marked by financial sector, trade and taxation reforms, dismantling of archaic procedures, better enforcement of civil contracts and documentation of property rights, infrastructure development and, above all, ensuring consistency and continuity of government policies", he added.

Business Recorder [Pakistan's First Financial Daily]
 
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Pakistan's poverty rate declined by five percent: World Bank

KARACHI (December 01 2007): The World Bank is of the view that to end poverty in a generation, South Asian economies must sustain an economic growth rate of 8-10 percent a year. The World Bank Annual Report-2007 made available to the press the other day said Pakistan's poverty rate declined 5 percent in the first half of this decade.

With growth has come an impressive reduction in poverty. "During the 1990s, poverty rates fell 7 percent in India, 9 percent in Bangladesh, and 11 percent in Nepal. Pakistan's poverty rate declined 5 percent in the first half of this decade. But to end poverty in a generation, South Asian economies must sustain an economic growth rate of 8-10 percent a year."

The report says that rapid economic growth and progress in human development have raised the possibility that the region with the greatest number of poor people could end mass poverty within a generation. Following domestic reforms and external assistance, gross domestic product (GDP) in South Asia has grown at an average of nearly 6 percent a year for the past decade.

According to report, growth in the two largest countries, India and Pakistan, reached 7 percent in the past two years. In 2006, GDP in South Asia is estimated to have expanded at very rapid pace of 8.2 percent.

The report has, however, pointed out that South Asia still has some of the worst human deprivation in the world. Levels of child malnutrition in India are nearly twice those of Africa. In Pakistan, one child in ten dies before the age of five, and only one in three completes primary school. About one person in five in South Asia lacks access to water services, and some two-thirds lack access to sanitation.

The report says that perhaps the most fundamental change is the need for improved governance. Several South Asian countries suffer from endemic corruption, with Bangladesh scoring near the bottom of Transparency International's Corruption Perception Index for the past six years.

Weak governance and corruption - reflected for example, in high levels of teacher absenteeism or rampant procurement problems at power plants - are key bottlenecks to human development and growth.

"Confrontational and often personality-based politics plague Bangladesh, Sri Lanka, and some other Indian states, sometimes to the point of political violence. In parts of Afghanistan, Nepal, and Pakistan, conflicts between state and non-state actors plays out regularly." The report says that the challenges facing South Asia can seem daunting, the region's ability to grow and to reduce poverty suggests that they can overcome their problems. The WB sees itself well equipped to support that effort.

The report sees regional integration is one way to achieve some of the goals set for the betterment of the people. South Asia is sitting on a rich potential source of growth.

Business Recorder [Pakistan's First Financial Daily]
 
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$100 million loan for KPT berths: Pakistan and World Bank negotiating interest rate

KARACHI (December 02 2007): Pakistan Government and World Bank (WB) are negotiating the interest rate on a $100 million loan sought by Karachi Port Trust (KPT) for the reconstruction of berths at Karachi port. The KPT has sought a $100 million loan from WB under 'Emergency Finance Facility' (EFF) to reconstruct berths No 10 to 17, sources in KPT told Business Recorder on Saturday.

"After conceptual approval of the project by CDWP (Central Development Working Party) the government and the World Bank are negotiating interest rate on the loan", sources in KPT said.

While any breakthrough in the loaning talks were likely to surface in 6 to 7 months, interest rate was likely to take 2 to 3 months to be determined, they said. "The process would roughly take six to seven months, after which we would go for PC-1 of the project, which may include an estimated cost of Rs 6 billion", they said.

According to them, KPT is quite hopeful about the grant of loan from WB. "We entertain great optimism as KPT is the only government institution which is not running in loss...We have great credibility; the Bank has already been engaged with us on the Karachi Dock Labour Board issue and it knows us well", they added.

Business Recorder [Pakistan's First Financial Daily]
 
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Rain to increase wheat production in arid areas

ISLAMABAD (December 03 2007): The recent rain spell is expected to produce more wheat, worth Rs 8 billion, in the arid areas of upper Punjab and NWFP, which could help the country achieve wheat production close to the annual target of 24 million tons, sources told Business Recorder on Sunday.

However, independent analysts were of the view that achieving wheat production close to ambitious target would remain a distant dream because of the wrong wheat policy being pursued by the present government.

The estimates prepared by the Ministry of Food, Agriculture and Livestock (Minfal) after the recent rain, which ended the over two-month dry spell, would help the country to achieve at least close to target wheat production, sources said.

This year's wheat production target is 24 million tons. The dry spell had dimmed the prospects of achieving, or even closing in, the production targeted, according to sources. At present, the country is in near-to-crisis situation as the government machinery has been unable to stop wheat smuggling because prices in international market are higher than in the country.

The rain would have positive impact on around 4 million acres in arid areas of upper Punjab and NWFP. As the dry is now over, estimates of Minfal now show that 160 kg/acre more wheat could be expected from these areas.

According to sources, the rain has brightened the prospect of achieving the overall agriculture growth target of 4.8 percent for the current fiscal year, though the cotton production remains short of the target.

The government expects that farmers would sow more wheat as there is shortage of the commodity not only within the country but also in the world.

Despite the expectation from the farmers the government has not yet fixed the support price for wheat, and the agriculture managers are still of the view that the farmers would go for extensive wheat sowing both in irrigated and rain-fed areas.

Business Recorder [Pakistan's First Financial Daily]
 
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Smeda to modernise sports goods manufacturing

SIALKOT (December 03 2007): Small and Medium Enterprise Development Authority (Smeda) has finalised arrangements for setting up a product development centre at a cost Rs 443 million here to enable local industry aggressively enter the international market of composite based sports items.

Official sources told APP that the step was being taken to enable the sports goods industry adopt new manufacturing technologies including composite material and enter into the largest segment of sports goods exports.

The PDC would extend services like product testing (physical and chemical), provide skilled workforce to the sector, enhance productivity by providing technical support services to new and existing industrial units, help to develop imported machinery locally through reverse engineering and facilitate in increasing exports of composite based sports goods.

Sialkot globally known as producer of quality products in sports goods, surgical instruments, leather garment, gloves and accessories, sportswear and musical instruments.

The 'composites' have replaced traditional materials and have become affordable as well. For instance in the production of tennis rackets wood was the only material for the frames but these are now being made with synthetic high performance materials.

The trend of tubular steel and aluminium rackets started in 70s as these were lighter than wood and remained unaffected by temperature change.

At present 95 percent of all tennis rackets are being produced with composite materials. The other sports goods equipment like field, roller and ice hockey sticks, ice skates, golf clubs, fishing rods, tackles base bats, billiard cues etc are also in composite materials.

Business Recorder [Pakistan's First Financial Daily]
 
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Building on economic gains

THE business community, though jittery over the risk-ridden phase of political transition, is hoping that the key actors in politics would conduct themselves responsibly to build on, what they call ‘current economic gains’.

New investors are watching and waiting but those already committed are still upbeat about the prospects of their investments. Despite many odds and political complexities, they find Pakistan to be an attractive destination for their bet with a promise of profit margins high enough to mitigate the risks involved.

Locals pray for stability and continuity of the current set of policies that they felt encouraged private sector like never before. For once, instead of recalling problems posing threat to their businesses, the corporate hierarchy, sensing the blowing winds of change, focused on reasons that earned General Musharraf their backing and why the next government must follow economic policies of the last regime.

Most businessmen contacted, trying to sound positive, were careful in their choice of words when commenting on the current political developments. The community trying to pose neutral, however, has drifted from its earlier preference for a military dominated dispensation. Now they seem to be making an attempt to rediscover the bright side of a democratic Pakistan for business, particularly in context of international trade.

Zubyr Soomro, Citibank’s country officer who heads Overseas Investors Chamber of Commerce and Industry (OICCI) told Dawn that foreign investors who are members of this powerful grouping are going ahead with their investment plans. “I do not know of any foreign member company that has put their earlier investment plans on hold. Yes, there is concern over law and order and stability of the future government but measures of the government over the last few weeks have rekindled the hope of a peaceful transition”.

There were some reports in newspapers earlier last week suggesting that auto-makers are revising their production targets downwards in wake of falling demand. Some press reports also indicated a fall in the level of activity in luxury items, consumer durables and real estate sector. It, however, is true that so far industrial activity in any part of the country has not been affected in noticeable proportions because of the political turmoil.

Textile tycoons from Punjab were more articulate in explaining their position. “We are indifferent towards political parties in the field but hoping that the next elected government would recognise economy as key driver and treat it accordingly”, said Shafqat Illahi, Chairman All Pakistan Textile Mills Association (APTMA) from Lahore.

Some international investment advisors have termed fears of abrupt reversal of economic reforms rooted in ignorance.

An analyst of investors’ advisory group Eurasia reported to have said that fears about the future of economic reforms do not hold ground because General Musharraf’s reforms have been institutionalised. “No new government is likely to reverse the proforeign investment environment in that country”, she said while talking to an Indian newspaper.

Majyd Aziz, a senior business leader and expresident of Karachi Chamber of Commerce and Industry wanted the West to reciprocate the pro-democracy steps taken by the president by removing impediments to closer economic ties that include greater market access to Pakistani exports in their markets on favourable terms.

Mirza Ikhtiar Baig, another business leader from Karachi, who intends to fight in the up coming election on a Peoples Party ticket, also found fears of his community towards a political government misplaced.

“A long stability can only be achieved under a democratic government. Look around and see where private sector is prospering most. The growth of the private sector in India proves the point”, he said. He felt that political leadership needs to allay the fears of the business community by pledging to give a clean and an efficient government committed to progress with emphasis on continuity of reforms.

Another local leader from Korangi industrial area, Haseeb Khan expressed his frustration over the western powers’ pressurising General Musharraf unnecessarily. “We told all diplomats who invited us over that the imposition of emergency does not affect us in any way and yet they are pushing him to retract steps he took in good faith to deal with chaos in the country”, he said.

On the preferred composition of the next elected government and the time process of transition could take, there was divergence of opinion amongst movers and shakers of the community. Zubyr felt that the dust would take another three months to settle down. He said that the caretakers who do not have a burden of constituency could help the next elected government by taking necessary difficult decisions such as readjustment and rationalisation of oil prices right now.

He said he would like to see people of integrity and capability in the next government so that the quality of governance is further improved. He said his members are waiting for the political parties to make their economic vision public so that they could form an opinion on the basis of their economic programmes.

Recently Dr Salman Shah, caretaker finance minister, in an interview, hinted that some harsh economic decisions are on cards and could be announced next week.

Majyd Aziz does not see normalcy restored before June next year. He foresees a coalition government assuming power after elections. He urged all political parties to participate in elections to pull the country out of the current crisis.

“Political parties would be disenfranchising people if they decide to boycott the general elections. The next batch of rising stars in business community, in my view, would be those who invested in agribased industry. Nawaz rewarded Chunia crowd, Shaukat Aziz favoured bankers and brokers, time ahead seems to be of businessmen with interest in rural economy”, he said.

A senior bureaucrat who heads a powerful regulatory body saw nervousness of businessmen towards a change in the government to be rooted in the culture of patronage. “It would be absurd to try to find some philosophical meaning to the discomfiture of businesses towards political transition.

The reason is simple: a change could throw their business feasibility to winds as it is often based on an individual’s connections with higher-ups. Let there be strong institutions and let the business be operated professionally to minimise the cost of change to businesses. This would take the wind out of their resistance to change”, he stressed.

On November 29, General Pervez Musharraf swore in as civilian president, in presence of about 1,800 VVIPs in Islamabad, presumably to try out the democratic option to deal with the challenges the country is faced with. As a reconciliatory gesture towards political parties or under pressure of friends overseas he also announced lifting of emergency on December 16.

Building on economic gains -DAWN - Business; December 03, 2007
 
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Has US-Pakistan investment treaty been shelved?

WHAT secretary of Pakistan’s Board of Investment stated mid-November about the future of the US-Pakistan bilateral investment treaty is no different from what other senior officials concerned had been saying during the last two years or what even President Musharraf plainly said on the eve of President Bush’s visit to Pakistan in 2006.

Mushtaq Malik was at pains to say that after a long-drawn exercise of negotiations spread over more than three years, the US now appeared unwilling to sign the bilateral treaty. Why the US has assumed this posture was also answered by him. It’s so because Pakistan was unwilling to accept the terms –– the harsh terms –– that the US puts premium on.

An intriguing aspect of how the Americans conduct their dialogue with the developing countries –– which are too eager to conclude a free trade agreement with it under an illusion that it will sky-rocket their exports –– is the negotiating fatigue which they deliberately employ. Keeping pace with the complex mode of negotiations puts a great strain on under-resourced officials and ministries of a government like Pakistan who often have little access to necessary information.

Pakistan, Mr Malik said, has been informed that the United States is not keen to sign the BIT with it because its ‘socio-political fundamentals’ were not right for such a treaty or a free trade agreement (FTA), meaning the US does nott stand to gain from it the way it desires.

But “if we grant these concessions to the United States, we will have to offer the same to 48 other countries with whom Pakistan had signed (or is in the process of signing) this treaty (or FTA),” said Mr Malik. The fact remains that in case of certain countries, the US deems it necessary to conclude a BIT before going for an FTA.

The beauty of America’s snub is that the treaty is neither being signed nor being abandoned, although there is little doubt that its fate has been sealed. Instead, the reports are that the US is more keen on concluding a similar BIT (and later an FTA) with India at the earliest. But the latter is reluctant because of the harsh terms.

Pakistan is supposed to officially reply to the US but since the attorney-general (who is to look at legal aspects of the whole matter again) is too busy at the moment, so it may not do so in near future.

Negotiations with Washington on the investment treaty, which from the very outset has been a non-starter, have been quite problematic. Speculation about its making satisfactory headway has been on-again and off-again during this period. Only five months ago, acting US Ambassador Peter Bodde had told a Pakistani TV network that some headway in mutual investment agreement has been made but a fortnight later an English daily reported that the treaty talks were “in doldrums.” When President George Bush visited Pakistan in March 2006, there were all indications that a signing ceremony was part of his itinerary but it was later cancelled and its reason, as described by General Musharraf himself, was presence of some provisions in the draft text which were “highly objectionable” and needed to be re-negotiated.

After the visit, the then US Trade Representative (USTR) Susan Schwab met Pakistan’s Commerce Minister Humayun Akhtar Khan first in August and then in Cairns (Australia) in September to discuss the treaty’s progress. Apparently, there was no breakthrough on the contentious issues. But little is known if the controversial provisions, which mostly related to security of investment and intellectual property rights, were re-opened to a fresh round of discussion or not.

Then, in April, Assistant US Trade Representative (AUSTR) Douglas A. Hartwick met Humayun Akhtar in Islamabad and later in October co-chaired the second meeting of the US-Pakistan Trade and Investment Framework Agreement (TIFA) Council in Islamabad. This council is the forum for sorting out each other’s complaints or demands. Since October 2006, neither any talks have taken place over the BIT, nor had any delegations visited each other’s country. There prevails an eerie status quo over the matter.

This year, the BIT was not in focus but bilateral discussion on key trade and investment issues did take place between the senior officials of the two sides. In September, the so-called ‘strategic dialogues’ were held at the foreign office between the US Deputy Secretary of State John Negroponte and Pakistani officials. Later, sub-groups were formed to sort out solution of issues like money laundering, intellectual property rights, investment guarantees, Reconstruction Opportunity Zones in FATA and data exclusivity on pharmaceutical products.

In 2005, the US had given its ‘final text’ of the proposed BIT and insisted that Islamabad endorse it without any hesitation or amendment. The text included a “confidentiality agreement.” Pakistan objected to it and stressed that it should be made open so that the investors have no apprehensions about it. Then, there was a clause about “pre-establishment phase of investment” according to which if a US investor suffers a loss when he is still in the process of establishing his business in Pakistan, he would have to be compensated through a court of law.

Many BITs contain a clause under which if a dispute cannot be settled amicably and procedures for settlement have not yet been agreed to within a specified period, they can be referred, for example, to the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) or the UN Commission on International Trade Law (UNCITRAL). Nafta lets unhappy investors choose between the two. Both recourses, however, represent the privatisation of commercial justice.

Pakistan is reluctant to accept the ICSID as a forum for dispute resolution or arbitration, which the US favours, but would agree to the UNICITRAL for this purpose. Earlier, the attorney-general of Pakistan and other legal experts had cautioned Islamabad against rushing into signing bilateral investment treaties (BITs) with foreign countries (the US in particular) for these can create ‘painful’ legal implications.

Americans want intellectual property rights to be part of the treaty as they are too unhappy over the inadequacy of IPR protection in Pakistan. The US Trade Representative’s annual report has been placing Pakistan each year, since 1989, on Priority Watch List or “Special 301” for piracy and counterfeit problems. The establishment of Pakistan Intellectual Property Organisation (PIPRO), though admired, has not satisfied the US authorities and the US copyright industry remains disappointed.

However, American authorities are now less outspoken because of Pakistan’s lead role in the ‘war on terror’ and have asked the USTR to discontinue further investigations into the ‘rampant’ copyright violations until this phase of relationship is over.

Resumption of negotiations over the bilateral investment treaty shall not take place until Pakistan agrees to have stiff enforcement of IPRs and the resolution of investment disputes the way the US desires, as major clauses of the treaty. Another harsh term to be included is readiness to pay damages to US companies for their “future” investment in case there was an infringement of IPRs and unilateral cancellation of licences.

According to law ministry officials, US insists that either Islamabad pay immediate compensation to the affected US firms or the World Bank’s ICSID should pay the compensation and treat the amount as a loan to Pakistan. The US also wants protection of its current investments in various sectors of the Pakistani economy but Pakistan feels that protection and guarantees, if any, can be provided to the investment which comes in after the BIT has been signed.

Experience tells us that the bilateral investment treaties of American initiative often seek following concessions and guarantees from the developing country partner: (1) Every sector of the economy is to be opened to foreign investment. These include health, education, electricity, water and even prisons. (2) ‘National treatment’ is to be accorded to American companies. National treatment, a WTO term, means equal treatment. (3) US investors will enjoy same privileges as offered to local or any other foreign companies. (4) Expectation of earnings by US businesses must be guaranteed. (5) Compensations to US firms when they do not earn what they expect. (6) US businesses to be protected against any kind of expropriation.

Since WTO’s multilateralism has so far failed to deliver as much as many corporations would want, the US and other western governments, on their behalf, are increasingly turning to bilateralism. These negotiations are being used strategically to advance not only US corporate interests, but also the US administration’s broader foreign policy and geopolitical goals.

Has US-Pakistan investment treaty been shelved? -DAWN - Business; December 03, 2007
 
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Options for Punjab’s progress

By Shahid Javed Burki

PUNJAB’S future can be portrayed in terms of several different scenarios for the economy’s growth in the period 2007 to 2020. I will work here with four of them. Which of these will get actually enacted will depend upon public policy choices made by the people who will walk the corridors of power in Islamabad and Lahore in the next few years.

The choices made will cover not only the field of economics but also the areas of politics and foreign affairs. According to the projections made for the four scenarios developed here the provincial GDP would increase at various multiples of the projected increase in population.

The least ambitious picture sees the province’s GDP increasing at a rate equal to twice the rate of population growth. Punjab’s population increase is expected to decline to about two per cent per annum over the next decade. Therefore, according to this scenario, GDP increases at a rate of only four per cent. (See the table for details.)

There will be an increase in per capita income of two per cent a year which, given the fairly unequal distribution of income, will not have a significant affect on the incidence of poverty .The provincial gross domestic product will grow by 66 per cent in the 13-year period between 2007--2020.

The number of poor will increase to 30 million and poverty will continue to be a major feature of life in the province. Most of the poor will live in the province’s large cities where they will suffer from the absence of several vital public services. While the level of literacy may increase beyond that reached in 2007, the poor will not have the skills required to find productive employment. With such a large concentration of the poor in large urban centres, the province would come under severe social and political stresses and strains.

The only contribution public policy needs to make to achieve this level of growth rate and sustain it over time is to ensure there are no serious disruptions to overall security in the province, that there is a reasonable amount of continuity in public policy, that the quality of education improves somewhat, that some provision is made for improving health care, and that some effort is made to remove the bottlenecks that have appeared in the availability of fiscal infrastructure. This is a business as usual scenario with no significant change in the structure of the economy.

The second scenario sees an increase in the provincial GDP equal to three times the rate of growth of population. In other words, provincial output will increase at a rate of six per cent a year, with GDP more than doubling in this period. This is very close to the scenario envisaged in the Punjab Economic Report, 2005. This report, prepared in association with the World Bank was based on the assumption that the economy would go through a significant structural change, particularly in the non-farm sectors. It assumed that the economy would be able to create one million jobs a year, a number large enough to absorb the new entrants in the workforce.

To maintain this level of increase in GDP – “maintain,” since this is the rate at which the provincial output increased in the period 1999-2007 – considerable amount of effort will have to be made in creating a pro-growth environment. The 2005 report made a large number of recommendations aimed at realising this growth rate. These focus in particular on improving the productivity of small and medium enterprises and improving the efficiency of the sector of agriculture.

There will be a much larger role for the private sector in the economy with the state confining its activity to mostly regulating private enterprise and making investments in improving physical and human capital. Public policy will also seek to address the problems created by some pick up in the rate of urbanisation. This scenario seems further increase in the proportion of the urban population living in the province’s major cities, in particular in Lahore and the industrial centres of central Punjab.

According to the third scenario, the provincial GDP will increase by eight per cent a year and income per head of the population will grow by six per cent per annum. The size of the provincial GDP will grow by more than two and a half times, increasing from the current $89 billion to $242 billion.

GDP per capita – a better measure of development – will more than double, from less than $1,000 in 2007 to more than $2,000 in 2020.

There will be dramatic effect on the level of poverty, with the proportion of the poor declining to just above eight per cent of the total population to only 10 million.

There will also be a significant change in the distribution of population. By 2020, one half of the 120 million people will live in urban areas. Lahore – counting its suburbs and satellite cities as parts of the city – will have a population of 15 million. It will be one of the world’s mega-cities.

Lahore’s own output could reach $50 billion with the city’s per capita income climbing to $3,300, more than 50 per cent higher than the projected provincial average.

The fourth and final scenario is the most ambitious one. It sees the economy growing at a rate of 10 per cent a year, five times the rate of increase in population.

This scenario will have the province reach the status of a middle income region with the provincial GDP at $360 billion and the income per capita at $3000.

Public policy will play a greater role in achieving this rate of growth. It will focus, in particular, on four aspects.

The main public policy initiative needed to achieve this rate of growth would be to open the economy to the world outside, in particular to India.

This will have a significant impact on the structure of the economy. The ratio of trade to GDP will increaser significantly and reach 50 per cent. In other words, Punjab alone will earn $180 billion in export earnings, most of it from trade with India.

Under this scenario, Punjab will also become the centre of transit trade, with goods and commodities passing through it to and from India, China, Central Asia and the Middle East.

To take full advantage of the opening to India and with the development of transit trade, the province will undertake a major improvement in its physical infrastructure: an intricate network of highways that will serve the traders in all countries with which Pakistan shares common borders.

The government would aid and encourage the development of the components of the service sector needed for handling trade and human traffic.

Some of the major cities and tourist sides will need to be improved to make them attractive for the Indians and people from the neighbouring countries.

The size of the urban areas will not increase beyond those envisaged under the third scenario.

That notwithstanding, the quality of life in the large cities – and to some extent also in the medium- sized and small cities – will improve with better provision of basic services to the population.

One interesting feature of the four scenarios is that the share of agriculture in GDP increases significantly in the last case. This will be the result of the larger proportion of trade in GDP and greater trade with India and the Middle East of high-value added agricultural products.

The share of modern services in the economy will also increase with a sizeable contribution made by the businesses associated with both international trade and transit trade.

In sum, appropriate set of government policies could turn Punjab into a middle-income province within less than a decade and a half.

Its economic transformation would pull along the rest of Pakistan towards a much higher rate of GDP growth than was the case even in the high growth years of the later part of the period of General Pervez Musharraf.



Options for Punjab’s progress -DAWN - Business; December 03, 2007
 
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Access to housing finance essential for growth

SBP deputy governor says housing sector generates employment;legal issues restraining development of housing finance

Tuesday, December 04, 2007

KARACHI: Deputy Governor State Bank of Pakistan (SBP) Yaseen Anwar has said that access to housing and reliable urban services are essential for poverty reduction and economic growth in Pakistan.

Despite deficit of six million housing units, absence of legal cover, non-implementation of Recovery Ordinance 2001, frauds in property sale, unregistered transfers and tenancy issues were impeding growth of housing finance, he said.

Addressing the inaugural session of a 12-day ‘Housing Finance Training Program’ jointly organised by the SBP and International Finance Corporation (IFC), a private sector arm of the World Bank on Monday, Anwar said performance of the country in housing sector was insufficient, Anwar said.

“The housing is an important component of the economy that contributes in job creation, expansion of financial services and creation of household wealth,” he said. Outstanding mortgage loans in Pakistan were approximately 1 percent of GDP compared to 3 percent in India, 15 percent in Chile and 65 percent in the USA, he pointed out.

The start of housing finance by commercial banks along with state owned House Building Finance Corporation (HBFC) calls for capacity building for improving skills to design the product and ensure that risk attached to such lending was quantified and minimized.

He said that objective of this SBP-IFC training program is to address the area of expertise in financial institutions, assuming that capacity building in mortgage lending will increase housing finance activity in Pakistan. “As the population and urbanization increase we need to develop the housing finance market.”

He said Pakistan, with 162 million people, was ranked number sixth on the world’s population index, 70 percent reside in rural areas and 15 million people migrate from rural to urban areas each year and it was forecasted to increase year to year. The obvious reason was that the bulk of the GDP was generated in urban locations.

According to 1998 official statistics, there were 19.3 million households in Pakistan, with an average household size of 6.6 persons and occupancy at 3.3 persons per room and out of total housing units 39 per cent comprises over mud houses. “Currently incremental demand for housing is estimated at 570,000 units annually whereas only 300, 000 units are being built and majority of these are in urban areas.”

He also shared that till June 2007, total disbursement by all banks/DFIs in housing sector was Rs116 billion, of which share of government owned HBFC was Rs40 billion and Rs76 billion was of other banks.

He said that in FY04, FY05, FY 06 and FY 07, disbursement data for housing finance reflected substantial growth of 24.8 percent, 56.0 percent, 38.2 percent and 27.7 percent respectively. However, market share of HBFC has declined due to the emergence of the banking sector in housing finance. In 2002-03, the share of HBFC was 89.5 percent, which was reduced to 34.2 percent by FY07.

“The rising trend of commercial banks in respect of their market share in housing finance is likely to continue in the future,” Anwar foresaw and maintained that banks were primarily focusing in major cities and selected areas for providing financing and their average loan size is Rs2.5 million while HBFC serves low income borrowers with an average loan size of Rs75,000.

Deputy Governor pointed out that lack of enabling legal framework, non implementation of Recovery Ordinance 2001, fraudulent sale of property after an attachment order to an innocent purchaser without full disclosure, unregistered transfer of immovable property and problems generated by tenancy and urban rent control laws besides of many more are the major constraints in the growth housing sector in the country.

He told participants that SBP had taken certain initiatives to remove constraints in the growth of housing sector including establishment of a special department for Infrastructure & Housing Finance, Housing Advisory Group (HAG), dissemination of HAG’s recommendations to the city and provincial governments besides of capacity building of commercial banks/DFIs on mortgage lending and infrastructure finance with the assistance of World Bank/IFC as around 200 SBP and banks/DFIs officers will be trained in first stage and it will be an ongoing process.

He hoped that all SBP initiatives and training program would bring together mortgage lending experts and commercial bankers to deliberate all issues confronting mortgage lending in Pakistan.

Access to housing finance essential for growth
 
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Pakistan, Turkey talk trade hurdles

Tuesday, December 04, 2007

ISLAMABAD: Pakistan and Turkey discussed major impediments to enhancing trade on Monday which included lack of land and shipping transportation system, minimal consultation of business communities of both the countries and sharing of information.

The discussion came during a meeting between a 42-member visiting trade delegation of Turkey, led by M Rifat Hisarciklioglu, Chairman of the Union of Chambers and Commodity Exchange and Federation of Pakistan Chambers of Commerce and Industry President Tanvir A Sheikh. Business and trade community of the country was also present.

Currently, bilateral trade between the two countries is about half a billion dollars which is very nominal. However, both the governments have agreed on its enhancement through cooperation in tourism, construction, transport, energy, information technology and other sectors.

For augmenting bilateral trade, Pakistan has also sought Turkish government’s certification for high-quality Pakistani leather and surgical goods.

Pakistan is manufacturing quality leather products, ISO-certified surgical equipment and sports goods, which could have a larger share in the Turkish market and the US and EU through Turkey, as there exists scope for third country exports in these areas.

M Rifat Hisarciklioglu said Pakistan was becoming a new trade and energy corridor and its economic performance had been impressive and was one of the fastest economies of the Asian region.

Talking about Turkish economy, he said “our economy is the 17th largest in the world with GDP worth $400 billion. Turkish exports during the last five years increased by 100 per cent and currently stand at $100 billion, of which about 92 per cent are industrial goods.”

Last year, Ankara attracted $20 billion in foreign direct investment and “today about 165 Turkish construction companies are working in other countries. It is world’s 10th best preferred tourism destination and about 20 million tourists visit our country,” he said.

FPCCI President Tanvir A Sheikh said there were many areas such as tourism, education and culture where Pakistan and Turkey had common perceptions and interests. “However, over the years, the two brotherly countries have not been successful to exploit the tremendous potential that exists for mutual cooperation in trade, business and industrial joint ventures.”

Talking about trade, he said “for the last six years, bilateral trade volume has improved by 267.8 per cent from $147.6 million in 2001 to $543 million in 2007.

“The business community of Pakistan is keenly waiting for the signing of the proposed Free Trade Agreement (FTA) which can even enhance our bilateral trade beyond $1 billion provided serious efforts are made by the private sectors of both countries.”

The privatisation programme of Pakistan had attracted investors from the UAE, Malaysia, China and Europe, he informed and said the liberal investment policy included 100 per cent foreign equity in all economic sectors, with attractive incentives like remittances of capital, profits, royalty, technical and franchise fees without obtaining permission from the government. Foreign investment was fully protected under Foreign Private Investment (Promotion & Protection) Act 1976 and Protection of Economic Reforms Act 1992, he added.

Pakistan, Turkey talk trade hurdles
 
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Private sector credit to pick up in H2: SBP governor

Tuesday, December 04, 2007

KARACHI: Dr Shamshad Akhtar, Governor of the State Bank of Pakistan (SBP), has said disbursement of credit to the private sector gained momentum significantly in October-November 2007 and is likely to pick up further in the second half of the current fiscal year 2007-08.

She was chairing the second meeting of the Private Sector Credit Advisory Council held here at the SBP headquarters on Monday. The meeting dwelt at length on recent trends and issues relating to availability of credit to the private sector and discussed ways and means to enhance credit disbursement to key sectors of the economy.

Dr Akhtar said the growth in private sector credit was broadly in line with last two years’ comparable period growth, and expanded by Rs103.1 billion in the period from July 1, 2007 to November 24, 2007. Private sector credit growth in FY07-08 mainly reflected convergence to its long-term trend, relative to the surge observed in FY05-06 due to several years of pent-up demand and need for investments in BMR by the industry.

The SBP governor stressed that in FY07 the credit growth supported effectively the growth in real economic activity. It is expected that private sector credit disbursement this year will continue to support economic growth as the SBP has continued to efficiently manage liquidity.

“The private sector credit is expected to pick up in the second half of FY08 as investors launch the pending projects and various IPP (Independent Power Producers) projects are also in pipeline involving investment of around Rs100-120 billion,” she said.

There was a general agreement that the private sector credit has been impacted, among other things, by (i) banks adopting cautious lending stance given the experience with loan defaults in some sectors; and (ii)†mergers and acquisitions have required banks to focus on restructuring, while adjusting their portfolios and rationalising their branch network. However, banks after their restructuring and upgradation of their credit policies and risk management systems are expected to be positioned better for credit delivery in the coming years.

During the meeting, relevant directors of the State Bank made detailed presentations on Agricultural Finance, SMEs Finance, Consumer Finance, Infrastructure & Housing Finance, Microfinance and Islamic Banking Finance to point out issues/constraints in the growth of credit in respective areas and initiatives taken by the SBP to resolves these issues.

While concluding a comprehensive discussion on above-mentioned subjects, the SBP governor announced the setting up of a task force for the development of mortgage financing and a task force to devise a mechanism for rating of SMEs.

Private sector credit to pick up in H2: SBP governor
 
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Accor, EOBI sign accord for hotel in Pakistan

Tuesday, December 04, 2007

KARACHI: Accor here on Monday signed an agreement for the first Novotel hotel in Pakistan, The Novotel Lahore Airport.

Scheduled for opening in mid-2011 with 250 rooms, the 4-star hotel forms an integral component of a mixed-used development which also comprises a shopping centre and residential towers. “The Novotel Lahore Airport will be owned by PRIMACO on behalf of the Employees Old-Age Benefits Institution (EOBI) and managed by Accor”, said Christophe Landais, Managing Director, Accor Middle East, while speaking at a press conference at the agreement-signing ceremony.

“The signing of the Novotel Lahore Airport is an exciting step for us as we further our presence in Pakistan”, he said and described the opening of this new modern hotel as a significant development. The Novotel hotel and commercial complex, valued at over rupees five billion will be constructed on a 13,000-square yard plot at Lahore International Airport.

Accor, EOBI sign accord for hotel in Pakistan
 
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Tuesday, December 04, 2007

Industrial land in Karachi, the most expensive in region

* Industrial real estate dearer in Karachi than China, Malaysia, Thailand, UAE, Sri Lanka and India

ISLAMABAD: Industrial land in four successful industrial estates in Karachi is more expensive than the real estate available in industrial estates of China, Malaysia, Thailand, UAE, Sri Lanka and India.

Availability of industrial land in existing industrial estates of Karachi is minimal and over the last few months prices have dampened and stabilised, reveal the findings of a survey details of which were presented before the Economic Coordination Committee (ECC) of the Cabinet.

Industrial land in Federal "B" Area Karachi costs Rs 85 million per acre for a 99-year lease, Korangi (Main) Rs 56 million per acre for a 99-year lease. Landhi charges Rs 36 million per acre for 99-year lease. An acre in North Karachi industrial costs Rs 65 million for 99-years' lease. Land in S.I.T.E (Main) is priced at Rs 56 million per acre for a 99-year period.

It is hoped that availability of industrial land at Rs 24.50 million in low-density areas and at Rs 85 million per acre high-density areas of Korangi Creek Industrial Park, Karachi would help overcome the shortage of land for industrial purposes for rapid provincial industrialisation.

A comparative study was conducted by independent valuer to get an estimate of current market prices of different industrial estate lands in Pakistan and surrounding regions. For land in Karachi, valuers visited areas at Korangi Industrial Estate, Landhi and Quaidabad Industrial Estates, Sindh Industrial and Trading Estate, Federal B Industrial area and Port Qasim Industrial Zone.

This survey was conducted in a manner that independent valuers contacted several real estate agents and other sources in locality in order to ascertain the current asking price of industrial land. It was visible from the survey that prices of industrial land vary a great extent in different localities depending upon location, size and frontage.

In Punjab no concept of lease was not in vogue and the survey revealed that industrial land in Punjab is available on ownership basis at competitive rates. M3 City Faisalabad costs Rs 5 million per acre on ownership basis. Sunder Industrial Estate, Lahore is priced Rs 4.3 million per acre. Land in Value Added City, Faisalabad costs Rs 5 million per acre. Sialkot Industrial Estate charges Rs 5 million per acre.

Prices of industrial land in NWFP show that real estate in Hayatabad costs Rs 4 million for a 99-year lease, Hattar Industrial Estate and Gadoon Industrial Estate charge Rs 0.66 million for a 99-year period.

The survey also quoted price of industrial land in China. In Beijing Zhongguancun Life Science Park land costs Rs 50.75 million per acre, Shanghai Zhangjiang Hi-tech park Rs 56.86 million per acre and Chengdu High Tech Development Zone at Rs 15.41 million per acre.

Land in Technology Park, Kuala Lumpur, Malaysia is available for Rs 10.38 million per acre and at the Emirates Modern Industrial Area at Rs 29.23 million per acre.

Among the industrial parks in Thailand, the survey quoted prices of the Amata Nakoram Industrial Estate at Rs 10.89 million per acre, Eastern Seaboard Industrial Estate, Rs 10.89 million per acre, Wellgrow Industrial Estate Chachoengsao, Rs 20.19 million per acre and Rojana Industrial Park at Rs13.28 million per acre.

In Sri Lanka, Seethawak Industrial Park charges Rs 5.5 million per acre, My Phuoc Industrial Park Rs 9.87 million per acre.

Daily Times - Leading News Resource of Pakistan
 
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LSM growth at 6.93 percent in first quarter 2008

* Government may again miss growth target

KARACHI: The Large Scale Manufacturing (LSM) grew by only 6.93 percent in the first quarter (July-September) of current financial year compared to corresponding period of last fiscal, diminishing the prospects of achieving the growth target of current fiscal, official data said here Monday.

The growth in LSM in the first quarter was even lower from the over 7 percent growth, it posted in the corresponding period of last financial year. It is pertinent to mention that in the last two consecutive financial years LSM targets were missed. For the current fiscal, the government has set 12.5 percent LSM growth target.

In month of September only, LSM index posted a growth of 7.35 percent compared to September of last year, the latest official statistics released indicated.

The LSM index is based on the latest production data of 100 items provided by Oil Companies Advisory Committee (OCAC), Ministry of Industries and Production and provincial Bureaus of Statistics (BoS).

The breakup of data shows that OCAC index registered growth of 14.02 percent during the first three months of 2007-08 followed by provincial BoS index by 7.10 percent and ministry of industries by 7.10 percent over the corresponding period of last year.

On the other hand, in month of September, 2007 OCAC index grew by 9.38 percent, provincial BoS by 11.56 percent and Ministry of Industry 4.67 percent over the same month of previous year.

Analysts commented that growth figures of LSM in the first quarter 2007-08 again reflected the unrealistic target of this sector set for the current fiscal year. “Just to set high GDP projections, government sets such ambitious targets, which, however, unfortunately culminated in failure,” an analyst remarked.

Analysts, however, predicted that LSM growth might go up in next financial year because a number of major projects of fertilizers, refineries and others are in pipeline, which would be operational by fiscal year 2008-09 and could contribute substantially in the overall growth.

In petroleum production sector, the statistics show that kerosene oil production was up by 1.7 percent, motor spirits 21.03 percent in first quarter of this fiscal, high-speed diesel 19.83 percent, furnace oil 16.39 percent, LPG 9.41 percent etc.

Whereas jet fuel oil production dipped by 6.26 percent in July-September 2007-08, lubricating oil by 0.46 percent etc.

In Ministry of Industries Index, in the quarter under review, the production of cigarettes was up by 5.31 percent, cotton yarn 4.53 percent, jute goods 19.29 percent, soda ash 19.81 percent, caustic soda 12.24 percent, Nit. Fertilizers 4.17 percent, Phos. fertilizers 14.04 percent, cement 22.33 percent, steel products 1.77 percent, coke 23.54 percent, pig iron 8.66 percent, buses 17.79 percent, LCVs 26.61 percent, motorcycles 30.47 percent etc.

On the other hand, production of cotton cloth declined by 1.23 percent, paper and paper board 14.64 percent, glass plates and sheets 3.27 percent, billets 4.97 percent, tractors 4.19 percent, trucks 23.26 percent.

In the index of provincial bureau of statistics, in July-September period, cooking oil production was up by 2.83 percent, starch and its products by 1.41 percent, beverages 59.49 percent, cycle tubes 4.72 percent, motor tyres 15.19 percent, power looms 114.94 percent, diesel engines 35.69 percent etc.

Whereas the production of TV sets declined by 7.61 percent, bicycles 4.21 percent, electric bulb 4.91 percent, vegetable ghee 1.55 percent, electric meters 37.93, air-conditions6.37 percent etc.

Daily Times - Leading News Resource of Pakistan
 
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