Pakistan Economy - News & Updates - Archive

[Neo]

Discount rate hike to hurt industry: FPCCI ​

Thursday, July 31, 2008

KARACHI: Federation of Pakistan Chambers of Commerce and Industry President Tanveer Ahmed Sheikh has expressed serious concern over the State Bank’s monetary policy, saying the increase of 100 basis points in discount rate will adversely affect the industry.

In a press statement, he said the raise in interest rate would further push up the cost of production, which would definitely be transferred to consumers, adding to inflationary pressures.

He strongly reacted to the SBP governor’s claim that stakeholders had been consulted, saying the FPCCI was not consulted at all. He pointed out that “this is the fourth increase in discount rate since July 31 last year.

“The discount rate was 9.5 per cent at the end of July 2007 and the rate of inflation was 7.8 per cent. It was raised by 50 basis points (10 per cent) on July 31, 2007, whereas another 50 basis points were added on February 1, 2008 to make it 10.5 per cent while inflation also increased by 1 per cent and reached 8.8 per cent,” he said.

On May 23, he added, the SBP raised the discount rate by 150 basis points (12 per cent) and the rate of inflation was 17.2 per cent and “now again the SBP is trying to repeat its past practice, which is statistically unfavourable for reducing inflation.”

Sheikh said it was also notable that the SBP had been applying a tight monetary policy to control inflation since last year but inflation had been rising continuously which showed that the central bank was preparing monetary policy without studying the nature of inflation.

In Pakistan, he pointed out, the inflation was not demand-push, which could be controlled through a tight monetary policy. Instead, the major causes of rising inflation in the country were hike in prices of oil, wheat and other food items. “All these are inelastic products and the monetary policy cannot control their prices.”

“We have to take such measures which can improve the supply of these goods and have to improve our inventory management.”

Commenting on the SBP governor’s statement that banks’ balance sheets were under stress, he said that was due to consumer financing where default ratio was high and recovery rate low. “We have been emphasising that the SBP should aim to provide industrial loans instead of consumer financing since industrial development can provide more employment.”

He expressed dissatisfaction over steps taken by the SBP to reduce the Karachi Inter-bank Offered Rate, saying “KIBOR depends on the ability of fund lending and liquidity position of banks and determines the inter-bank market by banks’ demand and supply of money.”

The steps taken by the SBP in the monetary policy, he added, would negatively affect banks’ ability to lend and would further increase KIBOR.

Discount rate hike to hurt industry: FPCCI

 

[Neo]

Landhi bio-gas test plant to revolutionise energy production ​

Thursday, July 31, 2008

KARACHI: Deep inside a part of Landhi, where even a jeep struggles to cross, lies state-of-the-art technology which will use buffalo dung to change the economics and environment of the locality.

A bio gas test plant in Landhi Cattle Colony, which is one of the world’s biggest cattle farms with over 40,000 buffaloes, will start converting organic waste into fertiliser and natural gas within the next few days.

“Nobody has ever thought of such a big project,” said Robert D Orr, a director at Hirad, the English company which has set up the pilot project. “We are talking about collecting 8,000 tonnes of manure daily and using it to make something productive.”

After the project has been tested for a year, it is estimated it will produce 430,000 cubic metres of gas and 1,500 tonnes of fertiliser a day. Presently, the waste from nearly 2,000 farms scattered over the colony is channelled through open drains into the Arabian Sea, leading to massive environmental and heath-related hazards.

The project had remained on paper for the past 11 years, despite the estimated revenue from the sale of fertiliser and gas being enough for its feasibility. The idea of earning income from the sale of carbon credits attracted attention when Pakistan signed the Kyoto Protocol in 2005.

The Clean Development Mechanism (CDM) is a programme initiated by the United Nations Framework Convention on Climate Change (UNFCCC) to explore cost-effective options to mitigate the impact of climate change. It is slowly helping industries here to improve their economies, and even pushing some to adopt unconventional ways to better their businesses.

At least one company, Pakarab Fertiliser Limited, has already started generating saleable carbon-offset credits by undertaking a multi-million dollar project to reduce emissions of nitrous oxide, a highly potent greenhouse gas. Eight more projects are awaiting the approval of the UNFCCC.

Saadullah Ayaz, Head of the CDM Cell in Pakistan, said that many industries in the country can benefit from trading in carbon emission reduction (CER) or carbon credits. “The CDM has potential wherever energy is being used. Textile units can use it to bring more efficient boilers and shift their power plants from CO2 intensive and expensive oil to gas.”

Under the protocol of the first CDM commitment period, developed countries are bound to reduce carbon dioxide emissions by five per cent from the 1990 levels by 2012. However, Ayaz said that since most of these countries have failed to meet their targets, it was inevitable that the programme would extend up to 2017 and beyond.

The cost of decreasing emissions is often unfeasible in industrialised countries, leading them to buy carbon credits from developing nations as part of their commitment to reduce emissions that cause climate change.

In some businesses, the CDM is being viewed as a way of being more efficient as well as fulfilling corporate responsibility towards the environment.

Almoiz Bagasse Cogeneration Project, which will use the residue of sugarcane juice to generate 27 megawatts of power, has also applied for carbon credits.

“The processes used in the sugar industry are inefficient,” said Salman Shehryar, a business analyst at Almoiz. “There were a lot of technological and financial barriers in projects. However, we have moved on and are in the middle of installing turbines for the internal supply and export of electricity.”

Trading in carbon credits is also a way of stopping environmental damage in a developing country like Pakistan, which is suffering heavy financial losses arising from excessive pollution, said Naeem Qureshi, President National Forum for Environment and Health.

“Every year, around 30,000 people die in Pakistan due to pollution. More than half a million fall victim to severe dieses,” he said, adding that “in terms of money, the country incurs a loss of Rs80 billion annually as exports are barred, seafood production declines, and worker productivity suffers.”

There is a simple reason why Pakistan has not been able to capture a sizable part of the carbon credit market dominated by South Asian nations. “Our industrialists are not proactive in improving their factories,” said Omar Malik, a director at Carbon Services, a Lahore-based consultancy. “The only mentionable response has come from the cement industry.”

Landhi bio-gas test plant to revolutionise energy production

 

[Neo]

$900m sought from ADB to improve reserves​

ISLAMABAD, July 30: Pakistan is desperately seeking $900 million from the Asian Development Bank by October this year to improve its fast depleting foreign exchange reserves.

Sources told Dawn that the bank, which had earlier disbursed $850 million, out of $1.9 billion lined up for calendar year 2008, has been requested to rescue the government by releasing preferably in one tranche the amount of $900 million by October this year. This funding is meant for improving energy sector and infrastructure development programme in the country.

The sources said that Islamabad told the bank that there had been $5.5 billion drawdown in reserves during the last few months due to higher oil and food imports that created lot of problems.

The sources said that Pakistan had been advised to achieve financial discipline to improve its deteriorating economy and qualifying for increased bank’s assistance in 2009.

The bank has also called for establishing more Independent Power Projects (IPPs) by the private sector to meet 7,000MW of electricity shortage. It asked the government to settle tariff-related issues to attract more IPPs in the country.

The government was told that the ADB had launched a new long-term 2020 strategy “refocusing” its operation in Asia and Pacific on three point development agenda that included growth, environmentally sustainable growth, and regional integration.

The strategy 2020 reshapes, redirects, and repositions ADB for a more innovative and effective development role in rapidly changing region and within the international aid architecture.

It sets ADB’s new strategic course, emphasising that poverty reduction can only be sustained if more people are economically productive, economic growth takes place in a well-managed natural environment, and neighbouring economies work within larger and freer markets to achieve shared interests through cooperation.

Pakistan was told that by 2012, 80 per cent lending will be in five core operational areas identified as ADB’s comparative strengths infrastructure, environment, regional cooperation and integration, finance sector development, and education.

By 2020, about 50 per cent of operations will be in private sector development and private sector operations, and 30 per cent in regional cooperation and integration.

$900m sought from ADB to improve reserves -DAWN - Business; July 31, 2008

 

[Neo]

Investment invited for Thar coal projects​

WASHINGTON, July 30: Sindh Chief Minister Syed Qaim Ali Shah has invited the international companies to make investment in coal-fired power plants and other projects in the province assuring them of full support of his government.

“I will extend warm welcome to all those interested in having a look at Sindh’s coal resources, especially the desert of Thar and its coal reserves for establishing power generation plants or for other purposes.

“As chief executive of the province, I extend my full support and assistance to prospective investors in coal resources of Sindh. We will also provide full access to all data and information available with provincial concerned departments,” he said in his opening address at a roundtable conference at the office of the World Bank here on Tuesday.

The WB and International Finance Corporation had sponsored the conference, presided over by Syed Qaim Ali Shah.

The Thar coal lignite reserves were estimated to be around 175 billion tons spread over an area of 9,000 square kilometres. The total coal resources in Sindh are estimated to be over 185 billion tons, considered sixth largest in the world. Over 90 per cent of country’s coal reserves are in Sindh, he told the participants.

He further stated that the government had facilitated infrastructure development at Thar coalfield where road network, electricity, optical fibre line, water supply, etc., are available while airstrip is being built and laying of a railway track has been approved.

“The mines department of Sindh has intensively explored an area of 455 sq km and further explorations are being undertaken to increase availability of blocks with complete data for potential investors,” he said.

Syed Qaim Ali Shah informed the participants about the response from both local and foreign investors to an offer for public-private joint venture in Thar coal-mining.

“They are enthusiastic and there are several investment proposals under consideration of the government. Some of the companies are participating in this conference.

“We have now formed Thar Coal and Power Board to ensure that the investors do not run for paper work from one department or ministry to other, and provide one-window facility to them.

“The large area of Thar coalfield cannot possibly be developed by a few companies. The existing energy gap and future demand makes it imperative upon the Sindh government to open up its coal resources for country’s needs.

“Coal has to be exploited at a very large scale for meeting the energy demands of the country. This includes demand for electricity as well as for fuel through coal-to-liquid technology and by gasification to conserve the fast depleting reserves of natural gas of Pakistan,” he said.

The Sindh Chief Minister said that development of Thar resources would provide certain degree of long-term energy security to Pakistan.

Over 36 companies from all over the world attended the conference also addressed by Foreign Minister Shah Mahmood Qureshi, who holds the charge of ministry of petroleum and natural resources.—PPI

Investment invited for Thar coal projects -DAWN - Business; July 31, 2008

 

[Neo]

In the interest of economy​

THE State Bank’s decision to hike its key policy rate by one per cent to 13 per cent — the highest since July 2001 — was expected. It is in line with the global trend to fight off the adverse impact of elevated prices of oil, metal and food commodities through tight monetary policy. The bank has been tightening monetary policy over the last one year to mitigate the risk to the economy from rising inflationary pressures. Worsening macroeconomic imbalances during the last fiscal year’s second quarter increased risks to the economy. The bank raised the discount rate by 3.5 per cent in four consecutive hikes — including 1.5 per cent in May — in less than 11 months since July 2007. The business sector argues that the interest rate hike would make credit costlier. But it should understand that the impact of higher credit price on businesses would be minimal in comparison to extremely adverse effects of price instability and ballooning external current account and fiscal deficits. The headline inflation went up to 12 per cent and inflation in food prices doubled to 13 per cent last financial year. The external current account deficit has grown to 8.4 per cent of the GDP and the bank estimates fiscal deficit to be around 8.3 per cent rather than seven per cent as stated by the government.

Businessmen have a point when they say that tight monetary policy is slowing down investment and growth. But this is not to be attributed to the bank’s approach. It is a result of global price uncertainties and the failure of the previous government to pass on the increase in global oil and food prices to domestic consumers. Also the previous as well as incumbent governments relied heavily on central bank borrowings to cover fiscal deficit and, thus, diluted the bank’s tight monetary stance and contributed significantly to inflationary pressures in the economy. Government borrowings topped Rs689bn or 80 per cent of fiscal deficit last year. Political uncertainty, the growing oil and food import bill and crunch in the global financial markets have significantly reduced foreign inflows, resulting in a rapid depletion of the foreign exchange stock and devaluation of the rupee. The fiscal deficit target of 4.7 per cent for the current year is also under stress as government borrowings have risen to above Rs32bn in the first month of the current fiscal. Political pressures deter the government from withdrawing subsidies. The bank has asked the government to stick to its pledge to net zero borrowings from it and look for other funding resources as well as to retire Rs84bn from its debt during the current year.

That is where the catch lies. On the one hand the government needs to turn the sliding economy around, spurring growth and investment and containing inflation, and on the other it must provide relief to people. Long-term economic stability demands tough decisions.

DAWN - Editorial; July 31, 2008

 

[Neo]

‘Pakistan ahead of India in attracting investment’​

KARACHI: CFA Association of Pakistan (CFAAP) held a seminar on ‘What’s Emerging in Emerging Markets–the beauty contest’, according to a press release Wednesday. CFA Emerging Markets specialist, Lawrence Speidell said Pakistan was ahead of India in the contest to attract foreign investment. Speidell is currently the founding partner and chief investment officer of Ondine Asset Management, sponsor of the Frontier Market Select Fund. He highlighted various factors, which work in favour of Pakistan, including better demographics with higher share of younger population, rising urbanisation, lesser income equality, availability of clean water, faster business set up time and freedom of speech.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

Rs 165 billion borrowing by previous government: Naveed asks SBP to clarify its position​

ISLAMABAD (July 31 2008): Finance Minister Naveed Qamar has said that the State Bank Governor Dr Shamshad Akhtar should also clarify about Rs 165 billion borrowing of the previous government, which was adjusted by the present government on June 30.

Responding to a question about SBP Governor's statement of huge borrowing by the present government, the Minister disputed SBP Governor's claim, saying that the previous government did not show Rs 165 billion of oil marketing companies in its book.

Transfer of this amount in the book of the present government on June 30 gave an impression that the amount was borrowed recently. In fact, he said, Rs 165 billion had been borrowed by the previous government and the SBP Governor must have clarified it.

The Minister claimed that the government was taking stringent measures to control its expenditure. "We are suffering due to the previous government's mismanagement, which heavily relied on borrowing to meet its expenditure."

He said the present government had taken over at a point when the fiscal deficit was already galloping and that government neither showed the money it owed to the oil marketing companies in its book nor passed it on to the consumers.

"I wish she should have said the same at the time when the previous government was borrowing from the SBP," he said, expressing hope that his government would be able to retire Rs 84 billion.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Bush backed $15 billion Pakistan aid bill: Gilani​

ISLAMABAD (July 31 2008): Prime Minister Yousuf Raza Gillani has said that President Bush has strongly supported $15 billion of non-military development assistance to Pakistan, as the U S Foreign Relations Committee unanimously approved the Biden-Lugar bill, committing foreign assistance of this huge amount during next ten years.

In an historical event during Gilani's visit to USA, the US Foreign Relations Committee approved the Biden-Lugar bill to provide assistance of $15 billion to Pakistan over the next one decade.

Addressing the think-tank event jointly organised by the council on Foreign Relations and the Middle East Institute in Washington on last day, the Prime Minister said that Inter-Services Intelligence (ISI), Intelligence Bureau (IB), and all other agencies are fully under the control of the civilian government and the US should also provide civilian nuclear technology to Pakistan for meeting the demands of energy in the country.

The PM said that all of Pakistan was heartened by the United States Senate Foreign Relations Committee unanimous passage of the Biden-Lugar bipartisan $15 billion plan for ten years non-military commitment by the US to the people of Pakistan. This legislation also has the support of President Bush, who is eager for democracy to succeed in Pakistan.

The $2 billion FATA plan, to which the US has contributed $750 million over a five-year period, would help accelerate social sector development in the tribal areas, contributing to the efforts to rescue the tribal people from the clutches of ignorance, extremism and foreign terrorist.

He said that this extraordinary recognition of the need to broaden and strengthen the bilateral relationship beyond merely military relations to a genuine economic and social partnership to building a prosperous, just and democratic Pakistan, has riveted the attention of the people of Pakistan.

The Biden-Lugar Plan, the Reconstruction Opportunity Zones program, and the FATA social development plan, taken together, are a clear and bold signal to the people of Pakistan that not only is Pakistan back in business, but the US is standing with it in a long-term mature partnership.

He said that there are abundant business and investment opportunities in Pakistan. "We have established special economic with special incentives for foreign companies to invest. In the last PPP government, Pakistan was cited by the World Bank (WB) as one of the top ten emerging markets in the world. Foreign investment in Pakistan quadrupled, but we want to recreate the economic incentives for foreign investment and trade that will re-establish our nation as a leader in the emerging global economy."

He said that one of the great tragedies of the modern era is that after achieving the liberation of Afghanistan, the world failed to reconstruct a post-war Afghanistan built on democratic principles of coalition, consensuses and compromise. "We failed to rebuild civil society and promote democratic institutions. The US thought short-term, but not long term, as far as reconstruction of a post-war Afghanistan is concerned."

Meanwhile, Pakistan's envoy to the United States, Husain Haqqani, said: "The government and the people of Pakistan are grateful to the members of the Senate Foreign Relations Committee for their unanimous, bipartisan and broad vote in support of Pakistani democracy".

He said: "Today's action by the Committee heralds a new day in the bilateral relationship between the United States and Pakistan, a relationship that will be founded on mutual interest and mutual values, an economic partnership that transcends political and military relations and directly impacts the life of the people of Pakistan.

"We are especially grateful to the leadership and vision of Senators Biden, Lugar, Kerry and Hagel. The $15 billion commitment to the long-term development of a prosperous and stable Pakistan is a dramatic expression of the confidence and support of the United States Congress in the future of democracy in Pakistan."

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Get rid of TDAP, redundant ministries, EAC tells government​

ISLAMABAD (July 31 2008): The Economic Advisory Committee (EAC) has recommended to the government to get rid of Trade Development Authority of Pakistan (TDAP) and all other redundant agencies/ministries and authorities to cut down non-development expenditure, besides rationalising development spending to achieve fiscal consolidation.

The EAC wanted the government to achieve 20 percent reduction in non-development expenditure in the current fiscal year to reduce its dependence on domestic borrowing. It suggested cut in number of ministries/divisions from exiting 45 to 18 to run the government affairs more prudently.

Sources said EAC, formed by the prime minister, submitted its detailed report on Pakistan's economy, its weaknesses and suggested a number of steps for quick fiscal consolidation. Most of the measures suggested by it have already been implemented by the government. Some of them were reduction in subsidy by passing on actual oil prices to the consumers, imposition of tax on property and 10 percent regulatory duty on all non-essential items.

Among other measures, restructuring of public sector corporations was of extraordinary importance. It said that the government should follow a clear strategy to eliminate their losses.

The EAC also wanted the government to reduce fleet of large cars/aircraft for VVIPs use. It also recommended reduction in travel expenditure of the government both foreign as well as local by promoting the use of video conferencing. Other than cutting down travel expenditure, the EAC also wanted drastic reduction in VVIPs protocol.

The EAC seemed concerned over the procedure followed in the past for development expenditure. It, in particular, wanted a qualitative change in the process of selection of development projects. It recommended a major change in the procedure for selection of projects for making development the people centric. It wanted that the government should align Public Sector Development Programme (PSDP) with overall development priorities to make them beneficial for the people.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Extra funds for projects: provinces seek PC help for evolving mechanism​

ISLAMABAD (July 31 2008): The provincial governments have approached the Planning Commission (PC) for help in formulating a mechanism to allocate more funds than actual cost to development projects due to escalation in prices of the inputs, sources told Business Recorder.

The PC has already set up a committee on the issue, but its progress is very slow due to lack of sharing of information from the Commission by different authorities executing schemes under provincial governments' development plan. The executing authorities of the ongoing schemes are trying to know how the escalated the prices of inputs, like cement, steel, labour, etc, should be accommodated as implementation of projects in actual cost is becoming more and more difficult.

Sindh government had raised the issue with the PC, but latter gave no response to repeated requests in this regard. According to sources, almost all ongoing development schemes are facing the same problem. Sources said the number of ongoing projects is around 1500. The contractors are in serious trouble to cope with the prices of inputs within the actual cost.

They have taken up the issue with the executing agencies (federal and provincial ministries) to include the raise in the total cost of the projects. According to normal procedure, the CDWP is the competent authority to revise the cost of the projects with cost of Rs 500 million. Beyond this limit, the task is done by the Executive Committee of the National Economic Council (Ecnec). If this procedure is followed, then the executing agencies will have to wait for the meetings of the two bodies.

Officials said that since the rise in the inputs' prices has become a big constraint, the government had constituted a committee to look into the issue in a different way in order to take development agenda ahead. But the provincial governments are still waiting for proper mechanism to tackle the problem, sources added.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Investment in power sector: Prime Minister assures US entrepreneurs of full security​

WASHINGTON (July 31 2008): Prime Minister Yousaf Raza Gilani has assured full security to the investment being made in power and energy sectors by the US investors, leading power companies, foreign investors and businessmen in the United States. Addressing the American businessmen and chief executives at a breakfast meeting jointly organised by US-Pakistan Business Council and the US Chamber of Commerce.

The prime minister said the government is ready to give security to all sorts of investment being made by the US businessmen in power and energy sectors. The adequate power generation was the top priority of the government to ensure smooth functioning of industrial units, business centers, and trade establishments.

There is an urgent need for strengthening economic and trade ties with United States in various fields, including power, education, and defence sectors. Gilani highlighted the significance of bilateral relations between Pakistan and United States, which needed to be enhanced for the mutual benefit of two countries. He invited the US companies to invest in Pakistan and assured them of full security to be provided to their investment money.

He said Pakistan's economy was facing numerous challenges, including adjustment in fiscal revenue and oil prices, targeting the inflation trend, and improving better demand and supply management. Gilani said Pakistan's geographical location can help it emerge as a growing economy if proper economic measures were taken in time.

He said the government was making investor-friendly policies and providing incentives to the foreign businessmen to attract investment in the power sector from all over the world.

He referred to the Roundtable Energy Conference, organised by the World Bank in Washington aimed at attracting investment to Pakistan's Thar Coal Project for power generation, which, he said, received huge response by US power companies that would help the country overcome the crisis.

For the ongoing food and energy crisis, Gilani said the government was considering focusing on strengthening agricultural infrastructure to ensure self-sufficiency and exploit the country's coal reserves to meet energy requirements.

He said we were compelled to take some unpopular decisions in terms of increasing electricity and fuel tariffs, for the overall betterment of the country's economy.

Myron Brilliant, vice-president, Asia US Chamber of Commerce, in his address of welcome, said the focus of interaction with Prime Minister Gilani with businessmen was on strengthening economic relations between the two countries and seeking opportunities of trade in various fields.

Jay Collins, CEO, Public Sector Group Citi, said though Pakistan was facing difficult economic times, the interaction between the business communities of two countries would help it overcome such problems. David Chavern, executive vice-president and chief operating officer also spoke on improving trade ties between Pakistan and United States.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Forex reserves fall to $10.487bn ​

Friday, August 01, 2008

KARACHI: Pakistan’s foreign exchange reserves fell $241 million to $10.487 billion in the week that ended on July 26 due to outgoings for import payments, the central bank said on Thursday.

According to official data, the State Bank of Pakistan said its reserves fell $330 million to $7.448 billion, while those held by commercial banks rose $89 million to $3.039 billion from $2.95 billion.

Total reserves are now down to the equivalent of less than three months of imports, raising the prospect of a balance of payments crisis unless large multilateral loans arrive soon.

The government says it has obtained Saudi Arabia’s agreement to defer oil import payments for the 2008/09 fiscal year (July-June) and an announcement would be made soon by Saudi Arabia.

Pakistan’s foreign exchange reserves hit an all-time high of $16.486 billion on Oct 31, 2007, but have fallen since then because of rising oil payments and foreign investors pulling money out because of political uncertainty dogging the country after a civilian coalition formed a new government.

The central bank on Tuesday tightened the monetary policy by raising the discount rate to 13 per cent from 12 per cent to counter accelerating inflation and widening fiscal and current account deficits.

It also took steps to help stabilise the rupee earlier this month. The main measure was a temporary suspension of forward booking of foreign currency for all imports.

An assurance was also given that the central bank would provide foreign exchange to authorised dealers for all imports of furnace oil used for power plants.

Forex reserves fall to $10.487bn

 

[Neo]

IPDF offers to complete 20 projects ​

Friday, August 01, 2008

ISLAMABAD: The Infrastructure Project Development Facility (IPDF) has suggested to the government to transfer over 20 infrastructure development projects worth Rs165 billion from PSDP allocations, as the IPDF would complete these projects by involving the private sector under the Public Private Partnership’s (PPP) modality.

“We have sent a summary to the prime minister with a proposal to transfer over 20 projects in various sectors to IPDF as it would save a huge amount of Rs165 billion of the PSDP (Public Sector Development Programme) thus giving relief to the government,” disclosed IPDF Head Ghulam Murtaza Satti, while chairing a meeting here.

These projects include construction of IT parks in Islamabad and Karachi, upgradation of PIMS Hospital, Islamabad, construction of Rawalpindi Bypass, development of Leh Nullah Expressway, Faisalabad-Khanewal Expressway, Peshawar-Torkham Highway, JPMC Karachi Medical Tower.

He said the proposal has been moved on the special directives of PPP Co-Chairman Asif Ali Zardari who is taking special interest in accelerating infrastructure development activities in the country.

The government, which is presently facing a critical time mainly due to rising inflation and runaway prices of oil and other commodities, has allocated Rs165 billion for these projects, out of the total Rs540 billion the PSDP funds earmarked for the financial year 2008-09.

However, if these projects are transferred to IPDF, it would provide a major relief to the government by involving private sector’s financing, he remarked.

He urged the government’s economic managers to intensify cooperation and coordination with the IPDF as by executing these projects under the PPP framework they would not only fetch private sector’s investments but also improve the living standards through increased economic activities in the country in addition to benefits to the agriculture sector.

IPDF offers to complete 20 projects

 

[Neo]

Is it dollarisation? : Forex reserves with banks cross $3bn​

KARACHI: Foreign exchange reserves with banks crossed $3 billion mark last week mainly because more and more depositors are opting to keep their money in dollar to avoid losing their money’s worth at the hands of high inflation and falling value of rupee against dollar.

According to a statement issued by the State Bank of Pakistan, the total foreign exchange reserves of the country stood at $10.487 billion at the end of last week, lower by $241 million from the previous week’s level. While central bank’s reserves fell by $330 million to $7.448 billion from $7.778 billion, the reserves with banks rose by $89 million to $3.039 billion from $2.950 billion.

“Certainly, this is dollarization,” said a treasury official of a large local bank when asked if the trend could be called dollarization. “People have been converting their money lying with banks into dollars as the rupee continue losing its value.”

He said people who are choosing to keep their money in dollars would earn more from rupee’s depreciation than the interest they would have earned on rupee deposits.

Another banker said people might have been investing in dollar since the stock market was not performing well and there was hardly any chance of earning money by trading in shares these days.

“The rise in banks’ reserves can only be attributed to people’s inclination to get their money converted into dollars or to investor interest in currency market, because there have been no major inflows,” he said.

A look at the foreign exchange reserves sheet posted by the State Bank on its website reveals that the foreign exchange reserves with banks have been rising since February this year while the reserves with the central bank continued to fall from their October 2007 peak of $16.486 billion.

Banks had $2.107 billion at the end of February 2008; $2.152 billion at end-March; $2.293 billion at end-April; and $2.573 billion at end-May. The reserves rose to $2.659 billion by June 27; $2.798 billion by July 4 and $3.039 by July 26.

The overall increase in banks’ reserves from February 2008 to July 26 comes out to $932 million. During the same period—from February 2008 to July 26—the reserves with central bank declined from $11.923 billion to $7.748, a fall of $4.175 billion.

The domestic currency has fallen by about 16 percent against the dollar during the last one year from around Rs 60 in July 2007 to Rs 70 to Rs 71 now. The demand for dollar has been much higher than its supply because the volume of exports was barely half the volume of imports during 2007-08. Moreover, inflows from abroad also dried up, creating severe shortage of dollar in the local currency market and necessitating central bank intervention on quite a few occasions. It resulted in the depletion of foreign exchange reserves held by the State Bank.

But bankers also say that while some people might be choosing to get dollars for rupees, others would be hesitant to do this because they have had a bitter experience in 1998 when the Nawaz Sharif government froze their accounts. “It is risky. People have gone through a bitter experience. They fear the government could freeze foreign currency accounts.”

Daily Times - Leading News Resource of Pakistan

 

[Neo]

New Steel Policy aims at 10m tonnes production by 2015​

* Imported plant and machinery should have zero duty & sales tax n Establishment of a steel board also suggested​

ISLAMABAD: The government on Thursday initiated the preparation of long term Steel Policy aimed at achieving the production target of 10 million tonnes by 2015 and 15 million tonnes by 2020 to cover the widening demand-supply gap.

Draft of the policy would be completed by August 31 this year.

In this regard the Engineering Development Board (EDB) held a meeting with the officials of Ministry of Industry, Minerals, FBR, representatives of different steel mills and other stakeholders. Three committees are established to develop the blue print with the recommendations of the industry. These committees have been assigned to finalise their reports by August 31 2008. In order to support and sustain this level of production, the policy also intends to address the issues of infrastructure and the development of mines for usage of local iron ore and coal for the production of steel in the country. The other main features of the blueprint are technology up-gradation and modernisation, availability of technical and skilled manpower, testing facilities, product certifications etc.

Chief Executive Officer, EDB, Asad Elahi, in his address underlined the importance of the steel sector in country’s economy. He said it served as the backbone of any economy because of backward and forward linkages as it feeds the manufacturing and infrastructure sectors, construction and engineering industry along with providing the basic raw material to many sectors of the economy.

At present the steel products are imported, exposing this sector to exogenous shocks, short supplies, high freight cost, and logistic problems. The proposed steel policy would help in increasing capacities of this sector, saving precious foreign exchange by utilising local untapped natural resources that would also help in generating more employment opportunities.

The participants were of the view that efforts should be made to document the un-organised sectors of melting and re-rolling industry. They said that time line must be given in the supply of utilities to the foreign direct investors by the utilities companies for making proposals bankable and valid. They stressed for developing the downstream industry, and in this regard Pakistani steel products should be of international quality and prices should be at par with the international market. It was suggested that minimum duty should be levied on products not made by Pakistani steel mills or which could not be produced in the required quantity. Financing for capital investment of large-scale plants should be at minimum cost.

It was also suggested that modern technology should be introduced for ore mining, billet production and scrap handling, big international investors should be encouraged to set up mini steel mills in the country, transfer of technology from neighbouring countries especially from India should be encouraged, they suggested.

The members recommended that imported plant and machinery should have zero duty and zero sales tax. They also recommended 10-year tax holiday for the iron ore based units due to low return on investment in initial years and also for the acquisition of land at concessional rates. The government should also encourage development of iron ore based steel industry by awarding one time matching development grants if the investors undertake to develop infrastructure by themselves.

The participants were informed that in Pakistan iron ore was found in number of places like Kalabagh, Chiniot, Dera Ghazi Khan, Langrial, Chitral, Nokkundi, Dilbund, FATA and host of the other small deposits. However, except for Kalabagh and Nokkundi, detailed feasibility reports and mining scheme were not available. They proposed that a strong team of geologists, geochemists, mining engineers or foreign firms should be assigned the duties to prepare feasibility report as soon as possible.

The stakeholders claimed that the government is not supporting the industry as required. The cost of doing business was too high and recovery was a problem for investors. Citing the example of India, a participant said India has established a separate ministry for steel and the step proved to be very encouraging for the industry. Some participants also suggested for the establishment of a steel board, which will only deal with this important sector of the economy.

Daily Times - Leading News Resource of Pakistan