Pakistan Economy - News & Updates - Archive

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Foreign trade: challenges ahead​

IN its third review of Pakistan’s trade performance released last week, a WTO report says the country’s economic growth has been impressive since 2002, mainly because of its relatively open trade and investment regimes.

However, the country is now facing various challenges, including controlling inflation, fiscal consolidation (together with raising tax revenues), containing the external current account deficit, obtaining foreign financing consistent with the external debt sustainability, and increasing official external reserves.

The economy has been opened up in several areas in the last few years in particular customs procedures have been greatly improved, overall tariff protection considerably reduced, tariff bindings increased, and intellectual property rights strengthened. But more has to be done for sustaining the growth.

In some other areas, however, trade liberalisation has slowed, for example, support for production and exports has increased. At the same time, structural weaknesses, including infrastructural bottlenecks, excessive regulatory controls and labour market rigidities as well as problems concerning governance, have inflated the costs of doing business. The so-called regulatory mechanism fully controlled by the government has worsened the situation as prices of utilities and others witnessed surge without any genuine reasons.

Continued trade liberalisation and other productivity-boosting structural reforms to address these weaknesses together with steps to reduce political uncertainty would help improve the country’s international competitiveness, especially for sensitive sectors such as textiles and clothing, and thus the prospects for sustained economic growth.

These include a distorting tax (and tariff) system, narrow production and export base, the state's prominent role in the economy, infrastructure bottlenecks, weak governance, business hindrances, including burdensome regulation and red tape, labour market rigidities, and political and security uncertainties.

By raising the costs of ‘doing business’ these hampers private sector growth and efficiency, thereby impeding, inter alia, improvements in productivity and export competitiveness. The overall international competitiveness appears to be declining, including in traditional products (e.g. textiles). Export performance has been mixed and exports as a share of GDP have fallen during the review period and contributed less than previously to growth.

Exports remain highly concentrated and two- thirds were textiles and clothing in 2005-06. Since 2001, the main change in merchandise trade structure has been a rise in the share of mining exports (from 2.3 per cent to 5.5 per cent in 2006) and agriculture (12.5 per cent to 13.7 per cent) at the expense of manufacturing (85 per cent to 80.8 per cent), especially textiles.

There has been little export market diversification. The US and EC remain by far Pakistan's principal markets, accounting for over half of exports in 2006. Partly reflecting the narrow export base, concentrated in low-value-added products and few markets, the shares of exports to Asian, American, and European markets have remained largely unchanged.

However, even the low growth in textile has been aided by several assistance packages, including research and development grants tied to exports, and freight subsidies, but minimal market diversification away from the traditional EC and the United States’ markets have occurred. But textile production is likely to expand; the clothing segment may contract as it faces greater overseas competition; its real income could decline overall unless productivity improves substantially to capture the potential benefits arising from abolishing quotas.

Pakistan has been unable to benefit from the quota abolition due to its high costs, low labour productivity, and inefficient production processes. Raising productivity by 60 per cent to match the Chinese levels could result in annual welfare gains to Pakistan of over $1 billion.

The report says major reforms have taken place in the engineering products sector, where tariff-based schemes have replaced local-content-based deletion programmes on many products, including motor vehicles. However, while tariffs on motor vehicles have been reduced substantially, they remain high (up to 90 per cent) and provide substantial industry protection for assembly activities, where tariffs on imported CKD kits were reduced.

Some other engineering activities, such as certain equipment (e.g. electrical and electronic goods), are also benefited from recently increased tariffs and/or from tariff-based indigenisation programmes. State involvement in manufacturing remains substantial especially in heavy engineering and steel.

Average manufacturing tariffs have fallen from 20.9 per cent in 200-2 to 15 per cent in 2007-08, and peak ad valorem rates have fallen from 250 per cent to a maximum of 90 per cent. The scope of tariff bindings now 98 per cent has risen considerably since 2001-02, thereby promoting market access transparency and predictability. However, as the bound average tariff is some four times the applied level, substantial leeway exists to raise applied tariffs to protect against imports.

Excluding some areas in the taxation structure which showed improvement, it is difficult to understand which concessions/exemptions still operate and to assess their incidence; the extent to which new exemptions/concessions extend, replace or duplicate previous ones is often unclear. While SROs on exemptions/concessions are published in the official Gazette and simultaneously posted on the CBR website, no integrated schedule or publication of current concessions/exemptions exists.

Their wide use makes the tariff regime complex and less transparent. By altering the structure of tariff incentives unpredictably, with uncertain effects on resource allocation, these concessions/exemptions may potentially counteract economic efficiency, for example, by raising tariff escalation and increasing/widening effective rates of protection. The WTO also came hard on Pakistan duty drawback system, which is termed administratively complex and non-transparent, and as it does not directly relate duty paid on imported inputs to refunds, it is likely to have an uneven impact across export items.

Investment incentives are available to all, including foreign, investors. Boosted by greater openness and privatisation, the FDI rose substantially from 0.7 per cent of GDP in 2001-02 to 3.5 per cent in 2006-07. Inflows originated largely from the United States, EC, and China, and were channeled mainly into telecommunications, information technology, and financial business services.

For achieving greater benefits from liberalisation of trade, Pakistan will have to pay more attention to enhancing the educational and skill levels needed to export value-added and high technology goods and services.

Foreign trade: challenges ahead -DAWN - Business; January 28, 2008

 

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Delivering critical mega infrastructure: World Bank urges Pakistan to re-engineer construction industry ​

FAISALABAD (January 28 2008): If Pakistan wants to deliver on the planned critical mega infrastructure, there is an urgent need to re-engineer the construction industry and the processes typically followed in delivering to mega projects.

Construction efficiency is presently constrained due to the segregated processes through which they are generally planned, designed, constructed, operated and maintained, said Infrastructure Implementation Capacity Assessment Report of the World Bank.

According to he WB report, these processes reflect the fragmented structure of the industry, which contributes to a contractual and confrontational culture promoting inefficiencies.

The generally sequential process adopted in the industry is due to separate teams being engaged in designing, supplying inputs, constructing and for operations and maintenance of infrastructure. This typical process is followed with the aim to minimise risks to constructors by precisely defining through specifications and contracts what each of the players in the process is supposed to do.

However, this strategy is now recognised to be inefficient and does not protect well the client's interests. It acts as an effective barrier in using the skills and knowledge of suppliers and constructors effectively in the design and planning of projects. These segregated processes are illustrated in the following figure with discontinuous relationships between all players and a built-in lack of ownership of the end product.

According to the WB report, the conventional processes require procurement of a new team at each stage of the process and for every project a client implements, in the belief that selection of new designers, constructors and suppliers competitively on a least cost basis for each project provides value to the client. Contrary to this belief, repeated selection of new "teams" inhibits learning and the development of the construction industry.

The team found that while current stakeholders in Pakistan's construction industry feel that the total number of contractors available is a constraint, a similar study in UK in 1998, found the reverse that rather the very large number of contractors, working in a segregated environment, is a constraint to the development of the industry.

Processes need to be explored which focus on delivery of the end product, especially large mega infrastructure projects at cost, in time, with quality and functionality.

The findings of report show that the challenges facing Pakistan are not any different from those faced by other developing countries. These challenges have been documented to include a lack of adequate education and training (insufficient HR); a lack of government commitment; absence of long-term vision and planning for the industry; ineffective planning and budgetary procedures; fluctuations in work load; defective contract documents; corrupt contracting procedures; a lack of protection against adverse physical conditions; delays in payments to contractors; problems of bonding and insurance; absence of adequate credit (a lack of financial resources); restrictions on imports; foreign exchange constraints; unfair competition from state-owned contractors and consultants and problems relating to availability of equipment and spare parts; delays, cost overruns, and miscommunication of information.

The WB report pointed out that sustainable development of the construction sector requires a long-term commitment from the government. The impetus for change has to come from the demand-side as many of the key factors requiring significant improvement are related to the role of the government itself. Overtime, the government together with other industry players will have to shift from being just an external player and move towards self-improvement and taking responsibility.

Infrastructure development holds the key to Pakistan's future growth. The infrastructure development sector is greatly benefiting from the government's ambitious infrastructure drive, but much is still required to be done to ensure that adequate capacity is available to ensure the achievement of targets set.

Recognising the enormity of the challenge, the Pakistan government should improve infrastructure industry-related policies through enhancing public-private partnerships, bringing about regulatory reform; improving in governance and removing corruption and focusing on developing the required pool of skilled HR.

Changing mindsets and improving capacity of government are tasks that require immediate attention, the way the Pakistan government conducts business and the culture of government agencies has to be modified.

The thrust of the Infrastructure Implementation Capacity Assessment study of the World Bank was to assess the implementation capacity for delivering the planned large infrastructure projects. However, considering the unique nature of the industry and the supply chains involved, the large infrastructure projects cannot be viewed in complete isolation from smaller projects.

The existing gaps in the quality and quantity of inputs available to the industry have to be addressed and solved to ensure delivery of both through appropriate measures.

The solutions to remedy the shortfalls can be classified as being either short-term or long-term. Short to medium-term measures are needed to assist the Pakistan government in delivery of mega projects and also contribute towards enhancing local capacity, while long-term sustained measures and committed policy and industry reforms are required to optimise and build up the capacity of the local industry over time.

Short, medium and long-term measures would accordingly help the Pakistan government in delivering both "normal" and mega infrastructure planned under the MTDF by optimising, enhancing and supplementing local capacity. However, given that the crunch faced is imminent, delivery of planned projects in the MTDF will remain a challenge.

The WB report observed that the Pakistan government needs to act now to curtail market distortions and stimulate growth by carefully implementing interventions for structural change. The international case studies and the literature highlight the effectiveness of demand-side interventions and the need for a sustained long-term holistic approach for the development of the industry. The interventions can be broadly categorised as:

(A) POLICY INTERVENTIONS:

-- To adopt long-term planning at all levels.

-- To provide strong government support for the industry by establishing robust, high-level liaison between the government and the industry, investing in strengthening and promoting trade associations.

-- To use procurement to drive behaviour and improve transparency.

-- Policies-backed with legislative and regulatory measures have to be proactively pursued to promote the use of least evaluated cost methods of procurement instead of least cost. The method of lowest bid selection is universally recognised to be the greatest barrier to improvement.

-- Introduce policies to develop the small to medium-sized industry stakeholders as these players deliver a major portion of the actual physical works in partnership with large contractors.

-- Set targets, select relevant performance indicators for the construction industry and monitor and evaluate change on a continuous basis.

-- Improve charge rates for professional services and the construction rates in the industry.

Business Recorder [Pakistan's First Financial Daily]

 

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$132 million Hydro Desulphurization Plant: Parco signs agreement with consortium ​

KARACHI (January 28 2008): Pak-Arab Refinery Limited (Parco) signed an agreement on Friday with a consortium of China National Chemical Engineering Group Corporation (CNCEC) and Hyundai Engineering Company (HEC) of South Korea for the engineering, procurement and construction of $132 million Diesel Hydro Desulphurization Plant at its 100,000 barrels per day Mid-Country Refinery at Mahmood Kot, Muzaffargarh, says a Press Release.

The new plant will help Parco produce low-sulphur High Speed Diesel (HSD) to meet EURO II Specifications. This will be in line with Government of Pakistan directive and will reduce sulphur contents in HSD from the present 7,000 parts per million to 500 parts per million. It will have a capacity of 26,000 barrels per day. The process design and license for the plant has been obtained from M/s UOP of USA, the release said.

It said that Parco has always remained an environmentally conscious corporate entity. The company pioneered 87 Octane (2001) and 90 Octane (2003) lead-free gasoline and with the introduction of the new plant Parco will again take the lead in producing environment-friendly products. The project is expected to be completed in the third quarter of 2010.

Business Recorder [Pakistan's First Financial Daily]

 

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Canadian firm to set up CNG kits manufacturing facility ​

ISLAMABAD (January 27 2008): "Pakistan is the single largest market for compressed natural gas (CNG) and our company has decided to set up a manufacturing facility in this important country to produce CNG filling stations." Peter R Wressell, President and Chief Operating Officer of FTI International Group Inc, of Canada, said in an interview to Energy Update magazine.

He said that his company has so far sold 1,000 'dispensers' which are installed in various locations in Islamabad, Lahore, Peshawar and Karachi. "Pakistan is a very important market to us. We enjoy a very strong and long relationship with Pakistan."

Wressell said that FTI International has established a company in Pakistan with the name 'FTI International Facility' and physical presence of Pakistani soil. This facility will be completed in the next six to eight months".

Pakistan is a single biggest market in the world for CNG, approaching 1.6 million vehicles. He said that authorities were receiving new applications every day from prospective investors for setting up new CNG filling stations all over Pakistan.

"We had taken a decision last year to register our company for arranging compressors for filling stations. Presently, we are providing a complete filling station from Canada, and we will start manufacturing of complete stations in Pakistan. We want to be a major player in Pakistan and we have to do local manufacturing."

About the quality of FTI products, Wressell said that his company does not compromise on safety at any level and produce a very high standard product. "We use all correct zoning. We install a very high level of protection inside our systems to avoid accident because CNG is a very high pressure item."

Talking of his experience of visiting the exhibition, he said this show offers a good opportunity of interacting with quality producers around the globe. "Very high quality level of exhibitions come here. Major global players in CNG business visit this show. At the same time, leading buyers around the world come here along with the people who buy individual components of CNG filling stations and kits."

Regarding use of alternative energy to produce electricity in the wake of high oil prices and gas, Wressell said that the developing countries were working on several options, including wind and solar energy. Most of the developing countries have decided to minimise their dependence on petroleum and they have chosen natural gas. Pakistan has also taken this decision many years ago.

Business Recorder [Pakistan's First Financial Daily]

 

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OGDC to miss drilling target by 10 wells ​

Tuesday, January 29, 2008

KARACHI: Oil and Gas Development Company Ltd (OGDCL) will not be able to meet this year’s drilling target of 41 wells partly due to the poor law and order situation prevailing in the country, a brokerage house said on Monday.

This slowdown is primarily due to heavy carryover of drilling tasks to fiscal 2007-08 from the previous year which saw work starting on 16 new wells within 20 days to the close, said a Jehangir Siddiqui report.

“Another reason of this slowdown is the ceased operations of Chinese rig operators due to deteriorating law and order situation in the country,” the report said. The company might miss its target by 10 wells. Rising militant insurgency in NWFP and Balochistan and attacks against foreign nationals have hampered oil and gas exploration activities in recent past.

It said out of the 12 contractual rigs hired by OGDCL, 10 are operated by Chinese who have suspended their activities especially in the NWFP. However, OGDCL believes it will be able to meet the target notwithstanding the security situation.

“We are on track and very hopeful of achieving the target,” Irfan Babar, a company spokesman, said in his brief remarks. “The company has its own nine rigs, which are being used effectively.”

OGDCL, which besides three local bourses is also listed on London Stock Exchange, posted a daily production level of 41,503 barrels of crude oil and 947 million cubic feet of gas in fiscal 2006-07.

While security concerns have moved government to announce assurances for the exploration and production companies, analysts see no impact on macro outlook for oil and gas production.

“In the first half of this year (July-Dec 2007-08) 30 wells have been drilled as compared to 28 in the same period of previous year,” said Umer Ayaz, JS research analyst, adding that Pakistan Petroleum Ltd (PPL) and Pakistan Oil Fields (POL) were set to achieve their drilling targets. But PPL along with OGDCL has also suffered its share of set-backs arising out of the security concerns. It was in October last year when Shell Development and Offshore Pakistan BV finally started drilling a deep-sea exploration well in Indus Delta after a delay of sixteen months.

Shell started the drilling of the deep-sea well quietly because of the security concerns as the entire drilling operation is spearheaded by expatriate crew including many Americans, official told The News.

Saad Bin Ahmed, Head of Research at Capital One Equities, is even more skeptical about the outcome of poor law and order situation. He said the security concerns were not allowing increase in production from development wells. “If things don’t improve soon Pakistan will have to go for imports, either through pipeline or LNG (liquefied natural gas).”

The country’s reliance on domestic gas reserves to run its economy has amplified in last couple of years, so much so that shortfall between supply and demand touched an unprecedented proportion this winter.

Reports suggested the country is facing a gas deficit of more than 700mmcfd as production remains flat at around 4000mmcfd.

OGDC to miss drilling target by 10 wells

 

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Govt plans to boost pharmaceutical exports to $500m ​

Tuesday, January 29, 2008

ISLAMABAD: The federal government is making plans to increase exports of the pharmaceutical industry up to US$500 million per annum over the medium term, it is learnt.

Planning Commission Deputy Chairman Dr Akram Sheikh chaired a meeting of the stakeholders concerned of the pharmaceutical industry a couple of days ago in order to fine-tune strategies for boosting exports of the sector in years to come.

According to sources, pharmaceutical exports stood at $50 million per annum, which could be jacked up to $500 million with concerted efforts. Official sources, who participated in the meeting, told The News that pharmaceutical manufacturers apprised the policy-makers of the lingering energy crisis which has badly affected the production and the export target of $1 billion could not be achieved by 2010.

The industry, the sources said, was facing difficulties in the production of life-saving medicines due to gas and electricity load-shedding. Highlighting future prospects of the industry, the sources said that pharmaceutical exports were increasing rapidly at the rate of 20 per cent annually and the industry was expected to attain 40 to 45 per cent growth in manufacturing and exports by 2010. The Middle Eastern, ASEAN and North African countries were lucrative markets for Pakistan’s pharmaceuticals, since Pakistani medicines were recognised for their high quality.

Govt plans to boost pharmaceutical exports to $500m

 

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Garment, knitwear exports rise ​

Tuesday, January 29, 2008

LAHORE: Twelve foreign garment experts, besides training two local experts, are imparting training in 12 different export-oriented garment and knitwear industries of the country in an effort to boost their quality and productivity.

The impact of this training programme is already visible in the shape of six to 10 per cent increase in exports after six months of training at a time when exports of the sector are generally on the decline. This also gives credence to general impression in official circles that quality and efficiency are the main impediments in the way of increasing apparel exports to their potential.

The News has learnt that after evaluating reports of two international consultants, Werner and Gizri, the federal government decided to remove deficiencies in skills and efficiency faced by the value-added apparel sector. In the short-term, foreign experts were hired to provide on-job training and introduce new technologies in leading industries and at the same time train local trainers who could impart training on a broader scale in government’s technical institutes.

These experts, engaged for a period of one year by the Technology Upgradation and Skill Development Company (TUSDEC), started imparting training in March 2007 at the start of the judicial crisis and stayed throughout the period of political uncertainty. This has sent a positive message to foreign buyers that business and foreigners’ safety has not been compromised due to the law and order situation during the past 10 months.

The experts were engaged after discussions with the local exporters about the various problems they faced in improving their efficiency and quality. According to TUSDEC sources, the main concern of the exporters was about sewing process that included cutting and stitching of garments and knitwear. Other problem areas were dying, finishing, knitting, laundry, packing, industrial engineering and mechanical maintenance of their units.

The most surprising aspect was that the top and big apparel exporters of the country faced these problems. The smaller units too naturally faced multiple of these problems with more severity.

Skill Upgradation Project Director Waqas Munir Qureshi, talking to The News, said the company had decided to start enhancement of skills and technical know-how with the top exporters that had comparatively better workforce, machinery and infrastructure.

He said the company engaged two local experts in the same fields with the foreign experts, adding the idea was to improve the capacity of the local experts to the level of foreign experts who would transfer skills and knowledge to them during their one-year stay in large units. In these units, they were already engaged in improving procedures and skills of the staff.

The local experts would then be placed at the disposal of other exporting units to apply what they learnt from the foreign experts. The News has learnt that five apparel exporting units in Faisalabad, five in Lahore and one each in Karachi and Pindi Bhattian are currently benefiting from the services of these experts. Each unit was given the option to select up to four fields where they needed expert advice on skill and technical improvement.

Many exporters complain that they were not consulted in that process. TUSDEC authorities, however, contend that top exporters were included in the process and said in case of refusal by any unit falling under the training programme on merit the next best was selected.

Garment, knitwear exports rise

 

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First public sector power plant after 17 years ​

Tuesday, January 29, 2008

KARACHI: As a deepening power crisis threatens to hamper its economic growth, Pakistan has finally moved to bridge the shortfall by setting up a power plant in the public sector after 17 long years.

All major newspapers on Monday carried the advertisement which announced signing ceremony of the 450 megawatt Nandipur power plant in Lahore, an initiative taken after power projects in the private sector failed to materialise. The decision to setup the power plant in the public sector is a deviation from the previous government policy of encouraging private investment for power generation.

But experts believe this retraction might just be the answer to the woes of the public and industry. “This is the most feasible solution,” said a senior official of Institute of Electrical and Electronic Engineers Pakistan (IEEEP). “Cost of energy from a 500MW power plant will always be cheaper than a 150MW unit.” Projects in the private sector are normally smaller in size while government invests in relatively large projects. Feasibility of a public-sector project vis-a-vis power tariff is further enlarged by elimination of mandatory return, which private investors demand on their investments.

Munawar Baseer Ahmed, Managing Director, PEPCO, told The News by phone from Lahore that financing facility for the project was arranged easily. “The financiers have expressed confidence in the country and expressed willingness to finance more such projects.” The project will cost US$329 million including foreign financing component by French bank BNP Paribas and local component by Bank of Punjab. Success in securing finances from private banks is a major achievement on part of the government and reflects its independence since shift in power policy, which favoured private power projects, was pressured by development institutions like World Bank.

“We could not have waited,” responded Baseer on retraction in power policy. “Out of the 12 projects in the private sector only nine have reached financial close. Their cumulative production capacity is not even 2000MW, which is the present shortfall.” The National Electric Power Regulatory Authority (Nepra) is yet to be approached for a power tariff. Nandipur power plant has been configured to run on fuel oil.

First public sector power plant after 17 years

 

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Japan approves $6m for FATA uplift ​

Tuesday, January 29, 2008

ISLAMABAD: The government of Japan has extended a grant of 700 million Japanese Yen (approximately $ 6 million) to assist in socio-economic development of FATA through the Non-Project Grant AID (NPGA).

The documents for this aid were duly signed and exchanged between Secretary for Economic Affairs Division (EAD), Ministry of Economic Affairs, Statistics M Akram Malik and Ambassador of Japan to Pakistan Seiji Kojima here on Monday.

The secretary said though the allocation of development resources for the area had been increased by the government manifold, FATA still required additional economic resources to address long development lag. He said Japan had been providing assistance to Pakistan in different sectors for the last fifty years and the current aid is yet another step in that direction, which would help facilitate the government’s effort for socio-economic uplift of its people.

The secretary said in the year 2001 Japanese assistance to Pakistan was Rs1.17 billion and it continued growing and at present stood at Rs6.2 billion. The Japanese Ambassador on the occasion expressed his country’s commitment to continue assisting Pakistan in social and economic uplift of its people.

He said the social and economic projects for FATA would be formulated along with sustainable development plan. About the current aid he said various sectors could be included in the scope of this assistance, however education and health are important for better life in the regions.

“The NPGA will be an investment in the social sector for the sake of a sound and peaceful civil society in FATA”, he added. The ambassador said Japan had been implementing the 65 schools rehabilitation project in FATA, the scholarship programme for Pakistani students as well as the NGO’s projects, which he added had helped a lot in improving socio-economic condition of the people in the region.

Japan approves $6m for FATA uplift

 

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Carmakers curtail production​

KARACHI, Jan 28: The car assemblers maintained a slow pace in production during January 2008 after slashing parts procurement from their vendors by at least 50 per cent.

They had also revised parts procurement for November and December last year by 50 per cent after a series of violent incidents culminating on the murder of Benazir Bhutto on December 27.

A number of vendors on condition of anonymity said that the imposition of emergency and killing of the PPP chairperson made a negative impact on the consumers’ buying sentiments thus affecting the local car sales, especially in some versions of Suzuki Cultus, Alto, Mehran, Ravi and Bolan.

Sources in the car industry said that the parts procurement plans for February and onwards has also been slashed for Cultus and Alto, especially.

They said that the makers of Toyota Corolla and Daihatsu Cuore had also curtailed the parts supply for January production by 45 and 28 per cent, respectively.

However, the plant of Indus Motors, maker of Toyota and Cuore, remained shut from the first 10 days of January, 2008 and the depressed demand did not prompt the manufacturer to make additional cars for the rest of working days.

The manufacturer of Honda Civic and City cars had also curtailed purchase of car parts from vendors by at least 40 per cent in January and as a result, their production had remained limited.

The vendors and the assemblers now pin hopes on peaceful passage of elections and the post-election scenario as some vendors think that the demand for cars may pick up slightly by May and June in case everything remains stable both politically and economically.

Suspension of auto financing by many banks, high interest rates, rising default rates on cars instalment payments and increase in prices are some of the main reasons impeding the growth in the locally assembled cars industry. Few years back, car assemblers used to show 25-30 per cent growth in production.

To offset the negative growth in car production and sales, the Pakistan Automotive Manufacturers Association (PAMA), on the instruction of the Engineering Development Board (EDB) included Suzuki Bolan in the category of cars for the last many months despite the fact that Bolan had remained in the LCV category for decades.

This had helped in alleviating the growth in the production figures but in real sense the original car figures have been portraying a dismal growth.Excluding the Bolan Van figures, production and sales of cars in July-December 2007 stood at 75,261 and 69,950 units as compared with 73,005 and 71,027 units, respectively, in the same period in 2006. If Bolan figure is added, then overall production and sales of cars in the last six months amounted to 84,172 and 78,759 units as compared with 79,813 and 77,545 units in July-December 2006, respectively.

Production of Suzuki Cultus in October was recorded at 3,131 units, which fell to 2,047 in November 2007 and 1,739 units in December. However, Alto had 1,590 units in October rising to 1,947 units in November 2007 and then falling to 1,452 units in December. Liana production in October, November and December were 439, 306 and 10 units, respectively.

Honda Civic production in October was 662 units falling to 423 units in November and 363 units in December. Likewise, City production recorded only 297 units in December as compared with 778 in October and 657 units in November.

Toyota Corolla production improved in November 2007 to 2,702 units from October’s 2,543 but declined to 1,690 units in December.

Hyundai Santro production in October was 134 units but came down to 86 units in November and 81 units in December.

Sales of Daihatsu Cuore in November rose to 960 units from October’s 749 units but plunged to 443 in December.

Suzuki Mehran in December fell to 2,193 units from 3,475 units in November. It was 2,814 units in October.

An analyst at Jehangir Siddiqui linked the decline in December sales to Eid holidays, killing of Benazir Bhutto, suspension of auto financing by many banks and price hike after new tax levy.However, a vendor said that the companies had rescheduled parts procurement plans several times in January 2008 in view of the uncertain situation after December 27 tragedy followed by various incidents of bombing. He added that the January production of the PAMA will reflect at least 40 per cent decline.

Vendors were of the view that the target of five million cars and LCVs set by the Engineering Development Board (EDB) for 2011 would not be achieved owing to current political uncertainty.

Carmakers curtail production -DAWN - Business; January 29, 2008

 

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Body to modernise trucking sector​

ISLAMABAD, Jan 28: The government on Monday decided to form a committee to harmonise age factor of various types of transport as part of modernisation of the trucking sector.

The decision was taken in a meeting held here to review implementation on modernisation of the trucking sector.

An official announcement said that it was also decided that the committee will also deal with other issues concerning provincial governments and various agencies regarding registration, and training etc. It was proposed that only 10-year old trucks should be allowed to ply on motorway while age of trucks for other roads was fixed at 25 years.

The training of drivers was classified as most important issue of the transport sector. The manufacturers assured their willingness to establish driving training institutes in their premises. The need of establishing driving schools at divisional headquarters was also felt.

The meeting directed the Pakistan Standards Quality Authority (PSQA) to finalise national standards and specifications for trucks and trailers by March 31, 2008 so that these could be notified by the ministry of industries. The representative of PSQA briefed the meeting about the progress made so far.

The meeting was informed that the National Industrial Parks Development and Management Company have already acquired land in Lahore and Karachi for establishing Trans-freight stations. The company was also working for the establishment of an industrial estate for trucking sector at Lahore.

The secretary clarified that the role of ministry was limited to coordination as various agencies were concerned with the implementation on trucking policy as approved by the Economic Coordination Committee.

It was decided that the Engineering Development Board (EDB) will hire the services of a consultant, who would determine the burden on national exchequer on account of special financial relief provided to the private sector transport companies.

Body to modernise trucking sector -DAWN - Business; January 29, 2008

 

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Steel project​

KARACHI, Jan 28: Tuwairqi Steel Mills Limited (TSML) has signed an agreement with AMZ Securities Ltd to raise funds to finance additional expenditure for its state-of-the-art iron and steel project being set up at Port Qasim.

According to TSML here on Monday, the AMZ will act as the financial adviser and arranger to raise finance for the project which would have a designed capacity of 1.5 million tons per annum and an initial operational capacity of 1.28 million tons per annum of directly reduced iron (DRI) and billets.

Steel project -DAWN - Business; January 29, 2008

 

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Dealing with the economy​

HOW should Pakistan address some of the economic problems Islamabad’s policymakers had not foreseen? Some of these were caused by the assassination of Benazir Bhutto on Dec 27.

However, not all that has gone wrong with the Pakistani economy in recent weeks can be attributed to the killing in Rawalpindi of the PPP chairperson. Some of these are the consequence of the failure of the previous government to put Pakistan on the path of sustainable development.

There was a strongly held belief in Islamabad that having achieved a high rate of growth in the 2002-07 period when the economy expanded at the impressive rate of seven per cent a year, the country was on track to maintain that kind of expansion for years to come. That that was not the case was argued by some of us. I wrote a number of articles for this newspaper to suggest that the impressive performance in the 2002-07 period was the result of both good public policy and happy circumstances.

We suggested that the latter may not always be there. The only way out would be to design public policy in a way that the country was not totally dependent on a conducive external environment for achieving economic prosperity. That said this is not the occasion to repeat some of that old debate. What is of real importance at this time is to rescue the economy from its current difficulties.

The government has already begun to take some actions to address the setback that was caused by the mayhem that followed the death of Benazir Bhutto. If appropriate actions are not taken, the damage done to the asset base of the economy and the loss to the incomes of workers and small traders will take a heavy toll. The country has also suffered a reputational hit which will raise the cost of external borrowing and reduce the interest of potential investors in the country.

My estimate is that the rate of economic growth could decline by as much as two per cent in the current year for these reasons and the year that follows while the medium-term growth rate could decrease by one to 1.25 percentage points. Some of these losses could be averted by public policy. The repair to the assets destroyed will take time but the losses suffered by the people who are vulnerable in these kinds of circumstances can be dealt with by a combination of cash payments and a public works programme aimed at providing employment. The government is doing the former; the latter needs some thought.

The use of public works programmes to provide relief to the poor and vulnerable has been successfully tried in a number of countries, most notably Chile which once had to deal with the kind political upheaval that Pakistan is experiencing these days. One way of launching these programmes across the country would be to provide funds to local governments to implement simple projects — repair of roads and government buildings, planting of trees in public places, removal of trash and its disposal etc.

Such a programme could provide immediate employment to hundreds of thousands of people and provide them with the incomes they need to deal with the rising cost of living. How to pay for such a programme without stretching the already stressed government financing? The best way of doing this would be to cut down non-development expenditure which has increased enormously over the years.

Another step taken recently by the government to deal with the difficulties faced by the poor is the launch of a ration card programme. This will provide a number of essential commodities at highly subsidised prices. While this may help a small number people in the urban areas, it is not a viable, long-term strategy to deal with sharp fluctuations in agriculture prices and ups and downs in agriculture output. What is needed is the formulation of a food security programme built on improving storage, creating buffer stocks and establishing a fund the government can tap for providing relief to the poor during periods of extreme stress.

Having dealt with the immediate problem the government needs to strategise about bringing economic growth to the country in a sustainable way. This is an area in which the government headed by President Pervez Musharraf has failed. It should have done this by incorporating four elements in a strategy aimed at producing long-term sustainable growth. I will mention these briefly in the hope that the government that takes office following the elections scheduled for mid-February will work on developing such a strategy.

First, there must be good understanding of the shape of the global economy. The world production and trading systems have gone through some profound changes which means that Pakistan no longer has the opportunities available to it that propelled forward a number of developing countries in the last quarter century and placed their economies on high-growth trajectories. It must seek new avenues for growth that have become available in the new global production and trading system.

Second, having identified the opportunities available to Pakistan, the new administration should determine what kind of public policy initiatives are needed to realise them. These initiatives will need to cover a wide front including the strengthening of the institutional base, building the required physical and human infrastructure and the provision of financial support to the enterprises operating in a few selected areas.

I am among those economists who, while believing in giving fairly free rein to market forces, would also argue for state intervention to guide the private sector in the developing areas that hold promise.

Third, the new strategy must focus on the diversification of trade both in terms of content of exports as well as the direction in which they are sent. Pakistan is one of the few large developing countries which have deviated from what is suggested by the gravity model of trade. According to this, large trading partners are those that are close to the country’s border and also have a large economic mass. According to this, India should be Pakistan’s largest trading partner rather than the United States.

Fourth, the strategy should aim at developing a robust relationship between the public and the private sector. The previous administration did well to give a lot of space in which the private sector could operate. It did not, however, build a strong institutional infrastructure for regulating private enterprise, so that it did not work against the welfare of the citizenry.

It is, therefore, incumbent upon those who are likely to take office within a few weeks to restore the confidence of the people both inside and outside the country for the latter’s economic future. As I have indicated, there is an urgent need to formulate a strategy built upon a few elements which could set Pakistan on a new course. This would ensure a healthy and long-term sustainable rate of economic growth. Only then would the county be able to deal with some of the problems it faces, not only in economics but also in politics.

DAWN - Editorial; January 29, 2008

 

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Brown to seek economic support for Pakistan ​

LONDON (January 29 2008): British Prime Minister Gordon Brown has assured President Pervez Musharraf that he will contact the world leaders in weeks time, seeking more economic and political support to Pakistan which will help stemming the scourge of terrorism and extremism.

During joint stakeout, after one-and-half hour talks, more than the scheduled time, which were mostly exclusive at 10 Downing Street, the two leaders described their talks extremely useful and productive. They expressed the joint resolve to continue the fight against terrorism and also pushing forward their economic cooperation in diverse fields.

At the outset, the British Prime Minister said the two countries enjoyed strong links and close cooperation at bilateral and regional levels, describing Pakistan a key ally in the fight against terrorism.

Prime Minister Gordon Brown said that stable Pakistan was essential for peace and stability in the region, and its ability to meet the growing threats of violence was vital for the global community.

The two sides must forge stronger economic cooperation, which was imperative for Pakistan to meet the challenges it was facing, he added. He was confident that the electoral process in Pakistan would be fair, free and transparent and also credible and would remain on track.

Brown said they discussed the steps, which could be helpful in defeating extremism and terrorism. He said his country would provide any amount of assistance, including forensic, to Pakistan in the investigation of the assassination of former prime Minister Benazir Bhutto. President Musharraf, in his remarks, said the two leaders had an excellent interaction, and said he reinforced whatever the Prime Minister had just said.

He said they discussed further enhancing economic cooperation between the two countries, and appreciated the British Prime Minister's desire in assisting Islamabad in the socio-economic uplift of the country. The President said they also discussed further strengthening the cooperation in the fight against terrorism.

Musharraf said he briefed the British Prime Minister about the holistic and multi-pronged strategy to address the complex issue of extremism and terrorism. He said defeating the menace was a challenge for Pakistan, and expressed the firm resolve that the country would meet it successfully.

The President said he also briefed the British leader about the democratic transition in Pakistan and holding of fair, free and peaceful elections on February 18. He reiterated the resolve that peaceful transition would be completed after the elections, hoping it would lead to stable government in the country.

Replying to a question, the British Prime Minister said his country would continue to assist Pakistan economically, and assured that the two sides would further bolster their ties in the fields of trade, economic, investment and joint ventures.

Gordon Brown said he realised the significance of increased economic assistance and cooperation for Pakistan for combating the scourge of terrorism. He said he would contact the leadership of the developed countries for opening window of cooperation for Pakistan in trade and investment, enabling the country to fight extremism and terrorism by bringing down poverty, illiteracy and improving education facilities.

Responding to a question about the security steps taken on Pakistan's border with Afghanistan, President Musharraf said steps had been taken to ensure effective check on movement of militants across the border, including sealing of border and its selective fencing.

He refuted the impression that Pakistan was not succeeding against terrorism, stating that al Qaida had almost been defeated and the remaining few were on the run. He said Pakistan would continue to fight militant Taliban.

To a question, Prime Minister Gordon Brown expressed his support for the "Jirga process" between Pakistan and Afghanistan. These steps, he added, helped reduce the crossing by 42 percent from Pakistan into Afghanistan, which had created desperation among the militants of Baituallah Mehsud, who was attempting to destabilise the country, and detracting the country's democratic transition.

About the incident of taking school children hostage in NWFP, Prime Minister Brown said it was unfortunate that innocent children were made to suffer. President Musharraf informed him that it was not a hostage-taking incident, but in fact the militants running from law-enforcement agencies, took refuge in the school, taking the children hostage, who were later released.

Business Recorder [Pakistan's First Financial Daily]

 

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Punjab to set up large number of cottage, small industries ​

SIALKOT (January 29 2008): The Punjab government has formulated a strategy for setting up maximum number of cottage and small-scale industries, particularly agro-based industries in the province.

Official sources told Business Recorder here on Monday that the government has set aside huge funds for development of small industries to create more employment opportunities both for skilled and semi-skilled persons.

The agro-based industries would be established preferably in remote and neglected areas by giving incentives and concession to the respective areas entrepreneurs. The Punjab Small Industries Corporation (PSIC) would extend full guidance, assistance and loan facilities to the interested businessmen and newcomers for setting up and upgrading their industrial units in the province.

Business Recorder [Pakistan's First Financial Daily]