Pakistan Economy - News & Updates - Archive

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Developing hydropower generation ​

ENGINEER HUSSAIN AHMAD SIDDIQUI

ARTICLE (September 06 2008): The share of hydroelectric power generation in the overall energy mix is persistently decreasing--from 57% in the 1980s to 42% in the 1990s to current 32%of the total installed capacity. In recent times, thermal power, primarily based on fossil fuels, has remained principal source for current electricity generation and expansion.

As a large number of thermal power plants are coming up and the addition of hydropower generation will be comparatively much lower, the present contribution of hydropower to total electricity generation will further decrease substantially by the year 2010. This is an alarming situation in the wake of high economic cost of thermal power generation.

Hydropower is globally recognised as renewable, cheap and reliable resource of energy. It generates electricity with zero emission and produces no waste. There is no requirement of fuel, operating cost is much lower and hydel power plants have longer economic lives than thermal power. Today, Pakistan has an installed capacity of 6,493 MW hydropower. There exists enormous potential to exploit this almost unlimited indigenous resource of energy. According to estimates, it is economically possible to generate some 34,000 MW additional hydropower and 150 sites for projects of cumulative capacity of 20,000 MW have already been investigated and identified.

At present, Pakistan has total installed power generation capacity of 20,456 MW. However, dependable or de-rated capacity is in the range of 16,000 to 17,000 MW during the year, due to a variety of factors. The demand is increasing at an average annual rate of about 8%. Resultantly, there is gross power shortage at national level, demand being projected at around 22,000 MW by the year 2010.

To meet the surging demand, an additional 4,000 MW generating capacity, all based on gas and oil, will be created by December 2010, in private as well as in public sector. In contrast, only 516 MW hydropower is expected to add to the existing system, besides another 325 MW nuclear power plant to be commissioned by then.

To resolve the power crisis in the long term and to sustain economic growth the optimal development of hydropower is needed. There are, however, a host of risks, constraints and specific issues linked to undertaking hydropower projects. These include geological risks, hydrological constraints, problems in water use, need for infrastructure, environmental issues and social problems. Thus the complexity and long lead-time inhibits private sector to invest in hydropower projects, in spite of various fiscal and non-fiscal incentives available under the government policies.

The fallout of these factors is reflected in the fact that not a single Independent Power Producer (IPPs) has started construction of hydel power project. Out of 41 Letters of Interest (LOIs) issued to the private sector under Hydel Power Policy 1995, only 13 Letters of Support (LOSs) for a total of 353 MW capacity could be obtained by the private sector. Among these, only one hydropower project, known as the New Bong Escape of 84 MW capacity downstream Mangla Dam, may materialise eventually, which has yet to achieve financial close though, even after more than a decade of its initiation.

Again, the government has approved another 15 hydropower projects of cumulative capacity of over 3,000 MW under Power Policy 2002. Feasibility studies of two projects have been carried out so far, whereas other project sponsors have asked for extensions in time period as they experienced problem of law and order and other issues to access the site, which all are located far from population centers, besides other reasons.

As a result of recent restructuring, Pakistan Water and Power Development Authority (WAPDA) now focuses on implementing multipurpose water projects, which is a positive advancement seen in the context of harnessing hydropower in a big way. These include medium and mega hydropower generation projects, either reservoir-based or run-of-the-river type.

In addition to expediting various on-going hydel power projects and rehabilitating/modernising the operational power stations, WAPDA has recently embarked upon a series of new hydel power projects. Hydropower projects of cumulative capacity of 419 MW are scheduled to go on stream during the period 2008-2010. These are Allai Khwar 121 MW, Khan Khwar 72 MW, Duber Khwar 130 MW, all located in Kohistan area, and Jinnah 96 MW to be located on Jinnah Barrage. In addition, Malakand III hydropower project, of 81 MW capacity, has been commissioned by the Government of the NWFP, which is expected to achieve commercial operation within a few weeks.

It is a long list of the new projects being implemented or to be launched by WAPDA. Contractors have already mobilised at site to commence construction of the strategic 969-MW Neelum-Jhelum hydropower project, whereas tenders for various works of Diamer Basha Dam project, which is designed for an installed power generation capacity of 4,500 MW, have been invited, while project design is in advanced stage.

Also, WAPDA has recently launched Golen Gol 106-MW hydropower project to be constructed in Chitral. Construction of Kurram Tangi Dam project (hydropower generation of 83 MW) is planned to re-commence soon. Construction of the Akhori Dam project is on cards, which will have a power generation capacity of 600 MW. Likewise, design and engineering work on Keyal Khwar project of 122 MW capacity has commenced.

Feasibility studies related to another 8 hydropower projects are in progress being conducted by the consultants appointed by WAPDA. These projects are expected to have an installed capacity of about 12,000 MW and would require $16.7 billion to construct. It may take two years to finalise comprehensive studies enabling WAPDA to launch the projects.

Kohala hydropower project on the Jhelum River in the AJ&K will have a capacity of 1,100 MW, whereas Bunji hydropower project (Gilgit) will generate 5,400 MW on its completion. Dasu of 3,700 MW capacity is a run-of-the-river scheme, 69-km downstream Diamer Basha Dam.

Lower Palas Valley of 621 MW and Lower Spat Gah hydropower project of 610 MW are proposed to be located at Patan, Kohistan. The remaining projects are Phander (Gilgit) 80 MW, Basho (Skardu) 28 MW and Lawi (Chitral) 70 MW. In addition, pre-feasibility or initial studies are being conducted for Thakot hydropower of 2,800 MW and Patan of 2,800 MW, both proposed on Indus River, and Harpo of 33 MW near Skardu.

In view of reluctance on the part of private sector to developing hydropower projects, the government may be well advised to allow WAPDA to implement all the hydropower projects, in the pipeline as well as proposed, which has the requisite experience, expertise and resources.

Developing hydropower projects in public sector will also curtail the import bill, improve ever-increasing trade deficit and reduce outflow of foreign exchange in terms of profit and dividend by the IPPs. During seven months of the current fiscal year (2007-08) the IPPs operating thermal power plants have repatriated an amount of US $102 million as profit and dividend, which is a record. Above all, the electricity could be made available to the consumers at an affordable tariff if hydropower generation share in total power generation increases in coming years.

If the new government would like to continue to pursue the policy of inducting private sector in hydropower sub-sector, this may be achieved through adopting a well-planned strategy. WAPDA may be asked to construct, operate and divest small and medium hydel power stations, in a phased manner. Sarhad Hydel Development Organisation (SHYDO) has recently followed the modality to privatise its small and mini hydel power stations in the NWFP after putting them into operation and the experience has been successful.

(The writer is former Chairman of State Engineering Corporation and is currently on the Board of Directors, National Engineering Services Pakistan Pvt Ltd, NESPAK.)

 

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Economics must take front seat with new President ​

EDITORIAL (September 05 2008): There is a general consensus that the economic malaise that besets the country is assuming alarming proportions. There is also a consensus that the government so far has been unable to devote the attention that the economy needs.

Political factors have proved to be major irritants for the present government: the forming of the coalition of the major parties that won the elections - a coalition that represented divergent political ideologies resulting in its eventual demise, the subsequent ouster of Musharraf as president, the issue of the judiciary that continues to dog the political arena, and now the presidential election that appears to be very divisive even though the office of the president is supposed to reflect unity within the federating units.

Once the presidential election is over, however, it is hoped that the government would turn its full attention towards the economy. In the words of many an analyst, 'it's the economy, stupid' reflects an obvious fact, namely, that weak economic fundamentals negatively impact on the popularity of any government.

In several cities/localities in Pakistan people have already come out on the streets, less than six months after the newly elected government was installed, in protest against unscheduled load shedding as well as the rise in the inflationary pressures, estimated by the government at 31 percent for last week.

This must bring it home to the government that it does not have unlimited time to deal with the situation if it wants to sustain support from its constituency. It is fervently hoped that once the next president of the country has been elected the full focus of the government would be on the economy. That this is critical at the present moment in time cannot be challenged by none.

Economists are referring to what they term as weak macroeconomic fundamentals that include a whole range of disturbing indicators: from the free fall of the rupee; to a dramatic decline in the foreign exchange reserves; to a budget deficit target of 4.7 percent that increasingly appears unachievable given the budget document of 2008-09 wherein the expenditure trends have been allowed to continue while the ambitious revenue targets lack clarity, reflecting the interests of powerful pressure groups.

In addition, the reliance on domestic and foreign borrowing appears to be on the rise. Supporters of the government maintain, with a degree of credibility, that endogenous factors like the previous government's heavy subsidisation for political gains as well as exogenous factors like the rise in the international price of oil and food are responsible for the current state of affairs.

Be that as it may, there is evidence to suggest that the government needs to focus on providing greater clarity to its revenue generation capacity for the current fiscal year as well as attempts to reduce the expenditure priorities as envisaged in the budget, for example lower outlay for defence in an effort to sustain the amount allocated for the Public Sector Development Programme.

Sentiment in the Pakistani markets today, with the stock market bearish, militates against the inflow of any domestic and foreign investment. It is imperative for the government to turn the sentiment around - from the negative to the positive quadrant. Once local investors begin to see the possibilities in the economy foreign investors would automatically enter our markets.

But for this to happen there is a need for the government to undertake reforms with respect to its fiscal and monetary policies as well as with respect to providing infrastructure like energy that is the basic input for raising manufacturing output.

 

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World investors worried about Pak economic meltdown ​

Saturday September 06, 2008

ISLAMABAD: International investors, who have purchased various Pakistani papers and bonds amounting to billions of dollars, are gravely concerned over the fast-depleting foreign reserves and unbridled inflation with no respite in sight.
A senior government official told The News these global investors were also worried about the increasing political uncertainty that could even continue after the presidential election. The main world investors, who purchased Pakistani papers and bonds during the Shaukat Aziz government, keeping in view the then economic situation, are now worried about their investments and have urged authorities in Pakistan to take stringent measures to stabilise the economy.

The Pakistani rupee has depreciated by 22 per cent since the new government has taken charge. The rupee is the world`s fourth-worst performer, behind the Zimbabwean dollar, Turkmenistan manta and Icelandic krona.

One last option open to the government to stop the continuous flight of the capital from the country could be freezing the foreign currency accounts, as was done by the Nawaz Sharif government after the 1998 nuclear blasts. But this option will have far-reaching political consequences for the PPP government. According to an official source in the finance ministry, Templeton Asset Management Ltd and Aberdeen Asset Management Plc. doubt that Pakistan`s new leaders have the resolve to slash outlays or raise borrowing cost to check inflation in 30 years at a time when the economy is slowing. The risk of failure has prompted investors, stung by a global slump in stocks and debt markets, to shun developing economies from India to Chile that face similar dilemmas.

The official quoted Mark Mobious, executive chairman of Templeton in Singapore, who has about $200 million invested in Pakistan, saying inflation could only be stopped by cutting the government spending. Templeton further said: "Stop spending. Stop wasting through corruption. We have been avoiding Pakistan for a while for investment because of the political uncertainty and we will probably continue to do so."

The official quoted another world business tycoon Goh How Phuang, a Singapore-based portfolio manager at Schroeder Investment Management Ltd, which manages about $250 billion in funds globally, as saying: "Musharraf`s exit is unlikely to improve the political outlook in the near term, which in turn could exacerbate the deteriorating fiscal position and we have been negative on Pakistan post-elections."

The official quoted Kevin Daly, a money manager in London at Aberdeen, Scotland`s largest independent money manager, with $5 billion in emerging market, as saying: "Pakistan rupee may weaken to 80 any time."

 

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Agri credit target set at Rs250bn ​

Sunday, September 07, 2008

KARACHI: Dr Shamshad Akhtar, Governor State Bank of Pakistan (SBP) on Saturday said that the central bank had set an indicative credit disbursement target of Rs250 billion for the agriculture sector for the current fiscal year (FY09), which can be further enhanced after having a detailed analysis of the rising input costs of the sector.

Chairing a meeting of the Agricultural Credit Advisory Committee (ACAC) held at the State Bank of Pakistan, Dr Akhtar commended the performance of banks that played a significant role in surpassing the target set for the last fiscal year.

Dr Akhtar informed the meeting that in 2007-08 banks had surpassed the agriculture credit target of Rs200 billion and disbursed Rs212 billion to the farming community, which is Rs43 billion or 25 per cent higher than last year’s disbursement of Rs169 billion.

She said that keeping in view the growing requirements of the sector, the State Bank has proposed an indicative target of Rs250 billion for 2008-09, which is Rs50 billion or 25 per cent higher than last year’s target and Rs38 billion or 15 per cent higher than the actual disbursements of FY08.

Dr Akhtar appreciated the fact that sector-wise agriculture credit disbursements during the last fiscal year showed diversification of the credit to non-farm sector as its share in the total credit disbursement increased to 25 per cent in FY08 from 17 per cent in FY07. She pointed out that recoveries of agriculture loans have shown significant improvement during FY08 and banks recovered 92 per cent of their recoverable amounts as against 83 per cent recovered during FY07.

While responding to questions posed by representatives of three less developed provinces on lower disbursement of agriculture loans to their respective provinces, the SBP Governor said that the banks are making efforts which have resulted in an increase in the disbursements during the last couple of years. Delegates pointed out that there are issues of credit absorption in these provinces because of low productivity, water salinity, lack of good farming practices by the farmers and other issues that need to be addressed by various provincial agriculture and extension services departments to create enabling environment for banks to increase their outreach.

Dr Akhtar urged the representatives of the three provincial governments to take the necessary steps to address these issues and improve the coordination between respective departments on fast-track basis to increase the flow of agriculture credit to the less developed areas of the country.

SBP governor also informed the meeting about the recently launched Crop Loan Insurance Scheme developed by SBP Task Force that would be implemented from coming Rabi crop. To facilitate the small farmers, the government has agreed to share the premium cost of subsistence farmers, she asked banks to adequately publicize the scheme for the benefit of the farmers. It is hoped that banks will also adjust their agriculture loan pricing following the introduction of Crop Loan Insurance Scheme, as it will mitigate their risk of losses due to natural calamity, she added.

Dr Akhtar briefed the committee about State Bank’s initiative of introducing guidelines on Islamic financing for agriculture. She urged all stakeholders to effectively publicize the scheme for creating awareness amongst the farming community.

The representatives of the farming community, while appreciating the efforts of State Bank and commercial banks in increasing the flow of credit to the farming community, highlighted the issues pertaining to low quality seeds, acute shortage of fertilisers, water scarcity and lack of marketing channels. They suggested to the committee to take up these issues with concerned Federal and provincial government departments so that the farming community can utilise the banks’ credit efficiently.

The Executive Director, State Bank of Pakistan, Jameel Ahmed informed the meeting that as per approved plan the banks will open six hundred branches during 2008, 20 per cent of which will be in the rural areas. Dr Shamshad Akhtar said that SBP will encourage the banks to open as many number of branches as they like in rural un-served areas in addition to approved plan.

The banks briefed the committee on their respective initiatives which inter alia include increase in number of agriculture lending branches, increase in agriculture credit officers, introduction of innovative lending products for farm and non-farm activities and number of awareness programmes conducted throughout the country.

While concluding the meeting, Dr Akhtar informed the committee about the introduction of a scheme under the DFID funded Financial Inclusion Programme, whereby the banks can provide wholesale credit to microfinance banks for onward disbursement to micro borrowers of rural areas against the credit enhancement guarantee scheme.

 

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Experts call for imported coal-based power projects ​

Sunday, September 07, 2008

LAHORE: Power sector experts have urged the government to immediately stop approving oil fired thermal power projects and approve imported coal based power generation projects that would produce electricity at half the rate.

They pointed out that electricity from the furnace oil based power plants would cost Rs20 a unit and would be a constant source of pressure on foreign exchange reserves. They said coal-fired electricity generation should be encouraged as it would consume 50 per cent less foreign exchange than furnace oil if the coal has to be imported at all.

They said Pakistan is sitting on the second largest reserves of coal in the world, and the mining potential of coal in Sindh has not been exploited due to the skewed approach of the government. They further said that the government should deal with the coal mining issue separately from power generation. The first priority they added should be to exploit the coal reserves available in Sindh. The electricity generation, they added would ensue once the coal mining starts.

The experts said the country should approach countries with experience in coal mining and electricity production from coal. They noted that Bosnia, Poland, Russia, China and the United States are major players in producing electricity from coal. In fact, they added that Poland produces 90 per cent of its electricity from coal. The experts said that the government should divide the Thar coal reserves in to 15 blocks and issue concessions to interested parties from these countries. They said the coal mined should be allowed to be used or exported on global rates so that the miners are not restricted to wait for local consumption.

The news found out that the main reason that is impeding the progress on the Thar Coal reservoir is the insistence of the federal government that the Sindh government has to get its approval for granting any mining concession in the region. There are vested interests sitting in the federal government that want their share of the cake while granting concessions.

Experts feel that the federal government should not meddle in the way the Sindh government wants to exploit its coal reserves. They said time is fast running out for Pakistan. Thar they added is a coal mine that could save Pakistan from the high cost of oil.

They fear that if the countries continued to award contracts for oil run thermal stations, it would ruin the economy. They said the oil bill would soar and the government would not be in a position to increase the electricity rates in accordance with the increase in cost of new thermal projects. They warned that the country would then regularly face the situation as was witnessed this year, when the thermal stations were operated below capacity to prevent high oil prices. They said load shedding would then become a routine. It does not appear, they added, that Pakistan will overcome its foreign exchange problems in the foreseeable future and boot the bill for added furnace oil imports. They said coal fired power generation plants could be established in the same time period that is taken by furnace oil run projects. They said if the thermal stations could be run on furnace oil then they could also be run on imported coal that would reduce the electricity cost by 50 per cent.

 

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Business leaders express confidence in new President ​

Sunday, September 07, 2008

KARACHI: Industrialists and businessmen congratulated Asif Ali Zardari on being elected the new President of Pakistan and expressed confidence in his abilities.

Tanvir Ahmed Sheikh, President, FPCCI said it is indeed a historic event in the history of country where major political parties have ultimately recognised that unity is the need of time. “I am sure that all political forces have learnt the lesson from the past and that all will be ready to work for this country,” he said.

He added that business community is confident that Asif Ali Zardari has all the capacity to deal with the current economic and political crisis of Pakistan.

As he exhibit political maturity in last some months, the business community is right to believe in him that he will play a positive part in economy as well. He should prepare a comprehensive emergency road map for the socio-economic development of Pakistan, he said.

Nisar Sheikhani, Chairman SITE Association of Industry said that he welcomed Asif Ali Zardari as the newly elected president of Pakistan. “We hope that the country will proper with this new leadership.”

Korangi Association of Trade and Industry (KATI) has congratulated Asif Ali Zardari on becoming the 12 president of country and hoped that Pakistan will progress industrially under his leadership.

The office bearers of KATI in a press statement on Saturday said that Asif Ali Zardari would emerge as the symbol of federation and that he will deal with all the economical problems being faced by the country.

The association hoped that Pakistan will experience development in all sectors under the leadership of Asif Ali Zardari and Yousuf Raza Ghilani.

Siraj Kassam Teli, former President of KCCI along with Tahir Khaliq, M. Zubair Motiwala, Haroon Farooki, Former Presidents, Anjum Nisar, Senior Member, Shamim Ahmed Shamsi, President of Karachi Chamber of Commerce & Industry, Iftikhar Ahmed Sheikh, Senior Vice President, Muhammad Haroon Agar, Vice President and Managing Committee Members, conveyed heartiest congratulation upon thumping majority win of the election of President of Pakistan and prayed for his success towards achieving the desired goal they said that the Business community is confident that the country under his able guidance will move in right direction.

They also said that it is indeed a matter of rejoice and satisfaction for the people of Islamic Republic of Pakistan particularly members of the business community that the electoral college with thumping majority has elected a dynamic personality as President of Islamic Republic of Pakistan which is indeed due recognition of his meritorious services to the democratic system in the county. As the policy of National Reconciliation is the need of the hour and PPP having representation in all the four provinces of the Federation supported and elected to the high Office of the President of the country would strengthen the federation, bring stability and remove political and economic uncertainties, which are pre-requisite for promotion of trade and industrial activities and socio-economic development of the country and ultimately in the interest of the poor masses.

 

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Ministries asked to help Chinese firms complete projects ​

Sunday, September 07, 2008

ISLAMABAD: Planning Commission Deputy Chairman Salman Faruqi on Saturday directed the ministries concerned to remove impediments faced by Chinese companies to ensure a speedy completion of their projects.

Chairing an inter-ministerial meeting convened to discuss issues of Chinese companies working on various development projects in the country, Faruqi asked the ministries to extend maximum administrative, logistical and financial facilitation to these companies adding that Chinese investment in these projects would help bring about macro-economic stability in the country.

“Successful completion of the projects being carried out by Chinese companies will send a positive message that Pakistan is a preferred destination for foreign investment,” Salman Faruqi added.

On the occasion, the ministries and divisions concerned presented the reports on the progress made so far on various projects and explained the future course of action.

Administrative and financial matters related to the Chinese projects were also deliberated in the meeting.

Chairman Federal Board of Revenue and Secretaries of the Ministries of Industries, Information Technology, Board of Investment, Railways, Water and Power, Economic Affairs Division, Managing Director Private Power and Infrastructure Board, Director General Sindh Coal Authority, and Acting DG Civil Aviation Authority attended the meeting.

 

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Bush ready to work with Asif on terror war, economy​

WASHINGTON, Sept 6: Welcoming Asif Zardari’s election as president of Pakistan, the White House said on Saturday that President George Bush looked forward to working with him.

The statement, delivered by the national security spokesman Gordon Johndroe, came hours

after Mr Zardari’s election and dismissed media speculations that the White House was not happy with the PPP co-chairman’s sudden rise to power.

“The United States congratulates Asif Ali Zardari on his election as president,” said Mr Johndroe.

“President Bush looks forward to working with him, Prime Minister Yousuf Raza Gilani and the government of Pakistan on issues important to both countries, including counterterrorism and making sure Pakistan has a stable and secure economy,” he said.

Although brief, the message contained America’s two main concerns about Pakistan: its role in the war on terror and the fear that a weak economy could destabilise this important ally, jeopardising US strategy for combating extremists.

The US media, while reporting Mr Zardari’s victory, noted that the presidential election in Pakistan was considered crucial to US foreign policy and to the war on terror.

The media noted that Mr Zardari’s victory had pleased the Bush administration because it would once again allow the US to deal with a strong figure in Pakistan, as it did with former president Pervez Musharraf.

“The elevation of Mr Zardari to the presidency, where he will have great powers, including the ability to dissolve parliament and name the head of the Pakistani Army, comes with the tacit approval of the United States,” The New York Times said.

“Mr Zardari has promised a tougher fight against the Taliban and Al Qaeda extremists ensconced in the nation’s tribal areas,” the report added.

The Washington Post published an agency report from Islamabad which warned that despite Mr Zardari’s easy win on Saturday, “there are fears his rule will mark a new phase of instability in a nuclear-armed Muslim state rife with anti-Western sentiment”.

 

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‘Pakistan to export 4m tonnes rice this year’ ​

KARACHI: Due to the good harvesting of rice Pakistan will export its 21 percent surplus output in the current fiscal year, Chairman Rice Exporters Associations of Pakistan (REAP), Muhammad Azhar told Daily Times Saturday.

Azhar said that because of good harvesting this year about 4 million tonnes of rice would be exported. He added that rice worth $250 million has already been exported during July-August this year, which is 300 percent more as compared to 2006-07. Rice, a high valued cash crop, accounts for about 8 percent of Pakistani exports and 1.2 percent of gross domestic product.

He said that 4 million tonnes of rice valued at $3 billion would be exported during the current fiscal year, which is 50 percent more when compared to the last year $2 billion. Replying a question he said that the local market wholesale price of rice has dropped down by 30 percent, but the retailers were not passing on the benefit to the people.

Chairman REAP said that reduced under invoicing has also increased the Pakistani rice export. He added due to the global food shortage the demand of Pakistani rice in the international market has increased, fuelling export of Pakistani rice. moonis ahmed

 

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Pakistan to seek Chinese investment ​

ISLAMABAD: Pakistan would request China to undertake important projects in the field of energy, infrastructure, coal reserves development and export oriented industries, official sources told Daily Times on Saturday. Asif Ali Zardari would place this request before the Chinese leadership during his expected first official visit to China, after being elected as President of Pakistan with an overwhelming majority across the country, the official sources added.

In an inter-ministerial meeting chaired by M Salman Faruqui, Deputy Chairman Planning Commission, issues of Chinese companies working on various development projects in Pakistan were discussed with the relevant ministries at the Planning Commission. Planning Commission, in this regard has directed the federal ministries and divisions to forward proposals relating to the new projects which could be initiated by the Chinese investors and on priority basis for the benefit of both sides. Some of the important projects from federal Public Sector Development Programme would also be offered to Chinese investors and take advantage of the benefits that are available to the foreign investors in Pakistan. sajid

 

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Work on three mega industrial uplift projects underway ​

SIALKOT (September 08 2008): The construction work of Rs 1 billion for three mega industrial development projects was briskly underway at Sialkot for the development, modernisation and up-gradation of Sialkot's export-oriented sports goods industry, besides, enabling this industry to meet the global trade challenges under this WTO Regime.

The under completion projects of 'Sialkot Business and Commerce Centre' and 'Sports Industries Development Centre' at Sialkot would open the new vistas of socio-economic and industrial development in Sialkot region. Besides, providing opportunities for the local industrialists and exporters to struggle hard for strengthening the national economy and enhancing the national exports with full devotion and dedication.

Dr Sarfraz Bashir Former Senior Vice President of Sialkot Chamber of Commerce and Industry (SCCI) stated this while talking to the newsmen here Sunday. He said that the federal government has allocated a special development fund of $2 million for the development of Sialkot's export-oriented sports goods and leather goods industries on top priority basis.

He said that these three launched projects would be helpful in enhancing the pace of the trade activities, besides, helping a lot to modernise the export-oriented industries of Sialkot.

SMEDA would spend a chunk of Rs 34.67 million on the construction of an international standard Sialkot Business and Commerce Centre (SBCC), which would be an eight storey building with total covered area of 101,823 square feet, comprising the advanced facilities including Expo Halls, Display Centers, Convention Centre, Management Offices, restaurant & Residential Rooms and Business Facilitation Center, he added.

The federal government had released special funds of Rs 171.67 million through SMEDA to Sialkot Chamber of Commerce and Industry (SCCI), while the SCCI would contribute Rs 170 million for this project.

This project would be helpful in providing a shared display facility for whole of the Sialkot industry, besides, helping to promote and export of Products from Sialkot based Industries. He said that project would also enhance the Capacity Building of Exporters especially SMEs.

Dr Sarfraz Bashir Former Senior Vice President of Sialkot Chamber of Commerce and Industry (SCCI) said that this international standard project would also have an easy access to Sialkot Airport, Sialkot-Lahore Motorway and Sialkot-Swedish Engineering University.

SMEDA would also spend Rs 272.61 on the establishment of an international standard "Sports Industries Development Centre Sialkot", this mega project would enable Sialkot's sports goods sector to adopt new technology of mechanised soccer ball, which is threatening the current hand stitched soccer ball industry of Sialkot.

On this occasion, the SMEDA officials said that Sialkot is the main export oriented city in Pakistan. Sialkot is known internationally as a producer of quality products in sports goods, surgical instruments, leather garments, gloves & accessories, sportswear and musical instruments.

The local craftsmen produce immaculate products while export oriented entrepreneurs ensure that products reach international destinations. Around 400,000 people are engaged directly or indirectly with export activities. Annual export earnings of the city are around US $1 billion.

Former Sialkot Chamber of Commerce and Industry (SCCI) SVP Dr Sarfraz Bashir said that Sialkot city is under a process of development, the concept of displaying products is taking grounds and with increasing exposure to international markets, industry people are realising the utter need of new marketing and selling hubs. He said that there is increasing need of giving our products more exposure and making them reachable for the customer. Another important thing is that business visitors avoid hassle of visiting multiple locations so if they are provided with single place where they can find a full representation of the industry, a good response is expected out of them.

 

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'Local cottage industries assume a model status for developing world' ​

SIALKOT (September 08 2008): President of Sialkot Chamber of Commerce and Industry (SCCI) Dr Khurram Anwar Khawaja has said that Sialkot is an important economic centre and the only export oriented city in Pakistan and the development of local cottage industries has assumed a model status for the developing world.

Talking to the newsmen, here on Sunday, he said that thousands of small and medium enterprises situated in and around the city are engaged in honouring their global commitments for export of value-added quality goods like gloves, musical instruments, martial arts uniforms, cutlery and military uniform badges.

He said that the entrepreneurs who always focus all their energies and attention in quest of the best in combination with the incomparable expertise and skill of the local workers are exporting the highest quality products to the entire global market.

The century-old history of sporting goods and surgical industry has seen the industries developed to the highest international standards mainly due to business wisdom and natural sense of the entrepreneurs towards export. Other industrial sectors of Sialkot are also following the same trend.

The products standards being of exceptional quality are meant for markets of developed economics not affordable even for domestic markets, which is under developed. It is unique for Sialkot that everything produced here is exported.

SCCI's president said that Sialkot's field hockey sticks and cricket bats are used in all international games including the Olympics and World Cups.

It is the distinction of Sialkot that the hand-stitched soccer balls made here are played in World Soccer Cups, European Championships and other cups as well.

The best cricket and hockey players of the world prefer to use cricket bats and hockey sticks made of Sialkot which has made Sialkot a household name all over the world. Most of the developed countries are importing surgical instruments from Sialkot for the export purpose under their own brand name.

In leather products and textiles sportswear Sialkot compete with other garments. Sialkot is winning the best export trophy award in this sector since 14 years.

Dr Khurram Anwar Khawaja said that the industrialists and exporters accepted the challenges of compliance to quality standard with extraordinary determination, which is proved by the fact that majority of ISO certified companies in Pakistan belongs to Sialkot.

For smoother operations in the products and exports, the exporters are ensuring compliance with environment and social standards and adopting security measures as required by the valued foreign customers' countries in quality and style.

Similar is the case with other items produced in Sialkot. The export oriented industrial sector of Sialkot is earning foreign exchange of one billion dollars annually, which is an exceptional achievement considering the small size and population of the city.

It is worth mentioning that because of the SMEs culture developed at Sialkot, per capita income of the people is much higher than any other part of Pakistan.

He said that the bank loan and tax default rate in Sialkot is practically zero percent which is clear proof of the prudence and responsible attitude of the businessmen in their business dealings, may it be with the foreign customers, the bank or revenue department.

SCCI's president said that the best export trophy awards in sporting goods, surgical and musical instruments have always gone to Sialkot based companies and due to extraordinary export performance in leather the exporters largely have succeeded in meeting the compliance standard of foreign buyers under WTO but need the support of developed countries to enter and operate in the WTO regime well prepared and in a more organised manner.

The business success of Sialkot is a self reliance phenomenon, which has been made possible due to selfless efforts, dedication and commitment of the exporters in Sialkot who travel all around the world to fetch business and supply products to the entire satisfaction of the foreign buyers, he said.

Besides, exceptional achievement in business, the corporate sector in Sialkot is fully vigilant to its role towards social sector and has played significant role in that regard on 'Do it Yourself' basis, which is now culture of Sialkot.

He said that it is due to this approach of self-reliance that the exporters of Sialkot have initiated and completed many city development and human welfare projects.

Every foreign buyer visiting Sialkot appreciates that the exporters through dedication and resolute efforts have enhanced the image of Pakistan in the international markets and have won laurels for the country and for them in business and social sector.

The Sialkot City development and human welfare projects initiated by the business community of Sialkot speak the volume of dedication of SCCI, in which this chamber has played a central role.

Sialkot Chamber of Commerce and Industry (SCCI) was established in 1982. At present, more than 5,000 members representing various industries are enlisted with the chamber.

Sialkot district having population of around 3.3 million has a dry port established by the private sector since 1984. This chamber initiated this project.

In a unique move, Sialkot City package programme was initiated by the Sialkot Chamber in collaboration with other trade bodies. Under the programme, the exporters of Sialkot voluntarily contributed 0.25 percent against their exports to change the face of the city. Main arteries of the city have been constructed and work on remaining road is in progress.

Pakistan's second export processing zone (EPZ) is set up in Sialkot. The zone offers exceptional incentives for the investors and thus is an excellent opportunity for both local and foreign investors.

The role of local business community for developing of the city and welfare of the people needs no introduction. The said projects along with Programme from Soccer Ball and Surgical Industry, Universal Primary Education Programme, Sialkot Tannery Zone etc, speak volumes of the socially responsible attitude of the business community, he further added.

 

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India proposes for opening LoC trade from October 1 ​

NEW DELHI (September 07 2008): Reiterating its commitment to make the Line of Control (LoC) irrelevant, India has suggested Pakistan to open Srinagar-Muzafarabad route for trade from October 1 and expressed willingness to open new routes to give boost to the cross-border trade.

"Our proposal for opening the LoC trade from October 1 has been forwarded to Pakistan and we are awaiting their response. Other necessary steps will be followed up as soon as we receive their (Pakistan's) response", External Affairs Minister Pranab Mukherjee said in an interview with the All India Radio.

Asked whether the recent political upheaval (in Jammu and Kashmir) forced the government to immediately take up the issue of opening of the Srinagar-Muzafarabad route for trade purpose, Mukherjee said: "It had nothing to do with the contemporary events". Talks on this proposal have been going on for quite some time.

Without elaborating fresh proposal to open new routes, the minister said: "We are also thinking of the new routes" as a confidence building measure. The minister, who played an important role in ending the crisis with the Amarnath Sangrash Samiti on law row, claimed that composite dialogue between India and Pakistan had resumed.

The two countries have so far had four rounds of talks. The fifth round has begun with the foreign secretary's visit. "I do hope the fifth round of composite dialogue will also be concluded successfully." Referring to the political unrest in Pakistan, he said India wants peace, stability and development in "all our neighbouring countries, including Pakistan."

Mukherjee favoured resumption of talks with the Kashmiri separatist and Hurriyat leaders, but added it is for the governor and the home ministry to decide whom to invite.

Who will come and who will not come that I cannot decide. This is an area where home ministry is dealing with and it is essentially between the political parties of Jammu and Kashmir, besides governor." If they require the support from the central government, it will extend full assistance.

On holding of elections in Jammu and Kashmir, the minister said: "I would not make any value judgment because it is essentially the domain of the Election Commission. It has to make the assessment by talking to the people concerned whether there is a situation conducive to hold the election or not.

The Indian government has also proposed to Pakistan "triple entry permit" for members of the divided families of Jammu and Kashmir and joint projects in tourism, environment and forestry sectors in the two parts to give boost to the peace process and to ease people's problems caused by the divide.

 

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Need for a cohesive energy policy ​

ARTICLE (September 07 2008): There seems to be lack of co-ordination and/or cohesion in the various departments/ministries of the Government managing energy sectors in the country. In this regard a reference is made to the media report quoting Senator Dilawar Abbas, Head of the Senate Standing Committee on Petroleum and Natural Resources, urging the Government to "Remove Hurdles in IPI's ways" to accelerate work on this project.

Abbas has rightly pointed out that the gas fields are fast depleting and there is an urgency to accelerate work on the IPI Gas Pipeline to meet the growing demand for gas in the country. The demand for gas is expected to grow at a much higher rate than estimated before due to scheduled commissioning of gas fired power generation projects in the next 3 years as planned/approved by Private Power Infrastructure Board (PPIB).

The energy needs of the country are not overseen from any one focal point, but assessed by various sectors independently and making plans to meet the energy requirements of their sectors accordingly. To name a few these are the Planning Commission, Ministry of Petroleum and Natural Resources (MP&NR), Petroleum Institute of Pakistan (PIP), Oil Companies Advisory Committee (OCAC), Water and Power Development Authority (WAPDA), Pakistan Electric Power Company (PEPCO), Karachi Electric Supply Corporation (KESC), Private Power Infrastructure Board (PPIB).

Their plans are being developed rather independently as these are independent bodies and are not working in tandem to support any unified energy policy as we understand there is, none. One may recall that some two years back in the Oil and Gas Conference held in Islamabad, Government sponsored the announcement of a pilot project for import of Liquefied Natural Gas (LNG) by Sui Southern Gas Company Limited, then under Engineer Munawar Baseer.

The Project ambitiously was named "Mashaal" and entailed development of port facilities on fast track for import of LNG, de-gasification for Sui Southern Gas Company (SSGC) system mainly for use by the power generation companies as the estimated landed cost of LNG was viewed as unviable for domestic users. We understand highly reliable foreign partners were taken on board after due diligence and scrutiny.

This project has still not moved ahead from the 'Drawing Board' level as the foreign investors, partners in the project, are looking towards the Government for a 'Sovereign Guarantee' to protect their investment in this country against any eventuality of not finding the market for the gas imported through this project.

This guarantee is not forthcoming as such the project is not moving ahead or is moving at a snail's pace. The time and money spent so far on Mashaal Project may be lost and opportunity too as there will be hardly any source of supply of LNG available in the international market if the present partners move away from this project taking with them the committed source of supply wherefrom the product has been planned to be obtained.

Experts are of the view that as of today, there is hardly any source supply left uncommitted from where this product can be obtained. LNG is now a scarce commodity unless some new production facilities are added which takes 3 to 4 years in development. The Gas Pipeline Projects, both Iran-Pakistan-India Pipeline (IPI) and Turkimanistan-Afghansitan-Pakistan Pipeline (TAP) under the Ministry of Petroleum and Natural Resources managed through Inter-State Pipeline Company are still a far cry and their dates of commissioning are uncertain.

There is definitely an urgency to remove all the impediments in the way of IPI as urged by Senator Dilawar Abbas so that actual construction work on this project is undertaken at the earliest ensuring supply of gas to meet the demand. The increase in demand of gas in the domestic, commercial and in the power sectors in the Country is not matched by the limited increase in the local production.

Experts are concerned with the looming crisis and their concerns are increasing with every passing day. The gas shortages in winters even today are unmanageable and the increased demand in the future is likely to add to the woes of the consumers, both in terms of gas supplies as well as electricity shortages due to limited gas supplies.

The electrical energy requirement in the country on a conservative estimate is likely to grow by 12.5% per annum and to meet the demand/supply gap WAPDA, PEPCO and PPIB are working independently and one learns about approval of projects in the print and electronic media every now and then without any information as to when will the net outcome favourably affect the consumers as they presently continue to face the unprecedented electrical outages, making their life utterly miserable.

According to information posted on the website, PPIB has recently updated the list in July 2008 of approved power projects for more than 4500 mega watts based on Gas, Oil/Gas and Oil during the short term ie March 2009-June 2011 as detailed below:

All these projects have different commissioning dates. However, all are scheduled to be commissioned before June 2011, under the 'short term plan'. Apart from the above listed oil and gas based power projects there is a list of other hydel and coal based projects, including two 1200 MW imported coal based projects near Karachi, expected to be commissioned in 2013. This is good news for the Karchiites and something to look forward to.

It is apparent from the above list of the projects that most of the power projects are based either on gas, oil/gas or purely on Fuel Oil. We have discussed shortage of Gas earlier and it is imperative that LNG and natural gas must be imported as planned to meet the growing demand of gas in the country. Experts view the availability of fuel oil as questionable, both in terms of sourcing of supplies as well as port infrastructures limitation to handle import of such large volumes at the ports.

If all the listed purely oil based projects are commissioned as scheduled, estimated fuel oil required to meet the approved capacity works out to an additional 60,000 tons per month during 2009, 350,000 per month during 2010 and yet another 60,000 tons per month during 2011 after their commissioning dates. The additional requirement of fuel oil will have to be imported unless new refineries are commissioned in Pakistan.

On the supply side, fuel oil or furnace oil, as it is commonly known, has been viewed by the refiners as a loss making product as the selling price in the international market of this product has traditionally been lower than the price of crude oil. As such all refineries in the Middle East and elsewhere have commissioned highly capital intensive fuel oil cracking units to further process the available residue fuel oil (RFO) to produce value added products.

This has resulted in much reduced availability of fuel oil in the international market, pushing the prices upwards as well. The need to have a co-ordinating body cannot be more justified as implementation of the PPIB's ambitious short term plan may run into snags for want of fuel oil for generation of electricity from these projects.

At present, Oil Marketing Companies (OMCs) are importing fuel oil in addition to the availability from the local refineries to meet the requirement of power sector and general trade in the country. The total fuel oil import at present exceeds 4 million tons per annum (actual import 2007-08 was 4.8 million tons) and the available port facilities are being utilised to the maximum leaving hardly any room for accommodating additional imports.

The additional fuel oil required by the newly approved private power projects will be in excess of 2.5 to 4.0 million tons per annum. The problem is two-fold, firstly the availability of the product in the international market and secondly the infrastructure limitations at the ports which is likely to constraint the imports in excess of the present 5 million tons per annum.

Another factor that may crop up later could be the cost of the electricity generated from the "Thermal Power Projects," including the existing ones as we have seen that there was not any sizeable reduction in the prices of fuel oil in the international market due to limited availability of this product in spite of the downward movement in crude oil price in the recent past.

Moreover, the fuel cost, as we understand is a pass-through item in the pricing structure of the IPPs Tariff as approved by National Electricity and Power Regulatory Authority (NEPRA) and actual fuel cost will be passed on to the buyers of the electricity under the Power Purchase Agreement (PPA) in this case to WAPDA and KESC. The higher cost of fuel is likely to push up the per unit price and may not be affordable by the consumers.

The Mashaal Project which was supposed to be commissioned on fast track is still far from commissioning and needs to be addressed quickly as it may help in partly resolving the supply side issue of Independent Power Projects (IPPs) fuel requirements both in terms of port infrastructure constraints as well as fuel oil availability in the international market.

If the Mashaal Project is to be finally abandoned for reasons best known to the policy makers, in that case alternate sources of supplies have to be tied-up on long-term basis with matching port infrastructure development to support PPIB's ambitious target to generate 4,400 MW plus electricity to alleviate the sufferings of the common man in the next 3 years or so.

The element of high cost of fuel will continue to haunt the planners in PPIB until their prayers are answered through some miracle. We all pray for the same. There is an urgent need to have a cohesive energy policy and all stakeholders to work within the ambit of the well outlined policy contributing through their constructive role for a better and progressive Pakistan.

The Government may consider establishing a Ministry of Energy overseeing implementation of the energy policy by all the stakeholders and co-ordinating for achieving the common goal of providing the much need energy for the economic growth of the country and for the betterment of the people of Pakistan.

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(Figures in Mega Watts)
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TYPE OF FUEL 2009 2010 2011
Gas 227 - 584
Oil/Gas 450 1450 -
Oil 425 1015 400
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Like oil, speculators and water an uneasy mix

ROB TAYLOR On the cracked grey clay of an ancient lake bed on the edge of Australia's outback, Guy Kingwill is at the frontier of a global rush to commercialise water. Despite a long-running drought, Kingwill, who runs the vast Tandou farm, 142km southeast of the mining town of Broken Hill, has just sold his property's critical water on a national market rather than pump it into irrigated cereal crops.

"The return on the water is higher," Kingwill told Reuters. "Where we are it's broadacre cropping. But the market now is driving significantly more per megalitre from horticulture than you can get a profit margin out of wheat and barley," he says. Across the world, speculators are increasingly looking to water as a new profit engine as supplies dwindle, caught between booming populations demanding more access and climate warming threatening its very availability.

Australia, the most parched inhabited continent, has for 25 years had an internationally unique water market to better share supplies among farmers and reverse years of allocating more water than the country's rivers and dams could spare. That market last year traded $1.1 billion in permanent and seasonal water rights, according to Mark Siebentritt, the Operations Manager for national water broker Waterfind, who says business last year grew by 20 percent.

But Kingwill, whose corporatised farm lists on the Australian Stock Exchange, says prices are being pushed up by a metaphorical gold rush, luring bankers and speculators both at home and internationally to a new and waterlogged Elysian field.

With drought gripping some areas for a decade, prices for one megalitre of seasonal water - enough for an Olympic-size pool - are peaking at A$600 ($517), while permanent water entitlements are less volatile, but still pricey at up to A$2,500 a megalitre. "You've got from the biggest financial institutions down to aunty Jane buying 10 megalitres of water ... It's now an asset, just like a block of land, and people are buying on a daily basis," Kingwill says.

ARGUMENT FOREVER While Australia has the most mature water market, it is stunningly complex, drowning in around 10,000 rules and the regulation of four states spreading over the huge food bowl Murray-Darling river basin in the continent's southeast.

The country's consumer watchdog, the Australian Competition and Consumer Commission, or ACCC, has been asked by the centre-left Labour national government to develop new and uniform rules for how water should be charged and traded. State governments agreed in 1993 to establish a free market underpinned by a national register of water entitlements. Development has so far been hobbled by political rivalries and water over-allocation problems in some regions.

"What we want to do is to see water trading freed up so it can trade not only across regions, but also across state borders," says ACCC Chairman Graeme Samuel. But some farmers are wary of intervention by the nation's powerful regulator, fearing it will further push up prices when drought is already evaporating supplies and even major cities are enforcing tough water-saving measures like no car washing.

In July, national Water Minister Penny Wong extended the time for farmers to have a say in the coming reforms, with the ACCC to report back in December and again in June 2009. "By making it so investors can come in, there is concern the small guy on the block is not getting a fair shake. But then again, some argue that the more investors come in, they drive the value up. The arguments go on forever," says Kingwill.

PUBLIC RIGHT Waterfind's Siebentritt says his business has been tracking water trade for 20 years and has developed an electronic platform which automatically matches registered buyers and sellers, advising which areas are legally entitled to trade. Kingwill's Tandou, which has more land under water-saving subsurface drip irrigation than any other farm in Australia, is a client, with a sizeable ability to store water.

But Siebentritt does not see water making the transition anytime soon to a pure investment rather than a public right overseen by government and used 70 percent for agriculture. "There's some speculation, but people investing in water now are doing it as a way of investing in agriculture," he says.

"What drives the price is the value of the produce that can be grown with the application of that water, so really the price of commodities on international markets - whether it be food or rice or cotton - is having an impact on the value of water," Siebentritt says. Wendy Craik, in charge of managing food bowl water through the Murray-Darling Basin Commission, said there has been an "explosion" on the water market in recent years, with around 30 percent of all available water traded.

"We're seeing corporate groups getting together and purchasing water, and then having an arrangement with farmers where they provide the water to produce a crop," Craik says. "There are stories of some of the banks getting in there and buying water for agribusiness," she says.

ACCC involvement, Craik says, will streamline and regulate a water trade system that has evolved over a quarter century from a semi-informal dealing between farmers in separate river valleys, but given new urgency by scarcity, climate shift and drought. "Government will always have a pretty close eye on water, simply because water has become more critical," Craik says. "Currently buying a house has a lot of paperwork, but buying a piece of water has a lot more."

 

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ADB: Pakistan to get 810 million-dollar power sector loan​

MANILA (AFP) - Pakistan will receive an 810 million-dollar loan to help address its growing electricity needs, the Asian Development Bank said Sunday.

The loan is to be released in several instalments over 10 years to support Islamabad's 5.2 billion-dollar power distribution enhancement programme, the Manila-based lender said.

Pakistan's national power grid is short of generating capacity, and suffers from poorly maintained transmission and distribution systems that lead to supply disruptions, ADB said.

System losses from distribution companies range between 10 and 33 percent.

"A secure and predictable electricity supply will lead to social and economic benefits and improve conditions for schools, hospitals and other social services," said ADB energy specialist Rune Stroem.

The funding will focus on the distribution sector, which is burdened with worn out and overloaded infrastructure, power losses, capacity shortfalls and other constraints.