Pakistan Economy - News & Updates - Archive

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Strategy for inclusive and sustained growth​

ARTICLE (September 26 2008): Pakistan has maintained an absolute real GDP average growth rate of 6.6 percent annually over the past six years with per capita income growing at 13.2 percent per annum from 586 USD in FY03 to 1085 USD in FY08 during this period. This growth has been mainly consumption driven with a contribution of 6.0 percentage points compared to investments (capital accumulation) contributing 1.5 percentage points and exports contributing -0.9 percentage points.

The total investments have consistently increased between FY04 and FY07 from 15.3 percent of GDP to 21.3 percent whereas the domestic savings declined from 20.8 percent in 2002-03 to 17.8 percent during the same period. However, Pakistan has managed to successfully tap into foreign savings for closing the saving - investment gap.

Pakistan's six-year economic performance, which has transformed it into an emerging economy, has been at the back of the Government's policy of attaining macroeconomic stability by encouraging private sector led growth. This policy direction was supported by the structural adjustment implemented under the IMF's three-year PRGF programme between 2001-2004.

The programme helped Pakistan re-profile its unsustainable debt burden hovering at over 100.3 percent of GDP in FY99 and reduce it to a level of 56.2 percent in FY07 with debt servicing amounting to only 1.1 percent of GDP in FY07; exercise fiscal prudence to result in public savings (fiscal deficit maintained at -4.3 percent of GDP and 1.7 percent primary saving achieved); loosen the monetary policy to boost demand for loanable funds and contribute to bringing the economy to full employment (the real interest rates dropped into the negative zone with lending rates reaching a low of 4.63 percent in July 2004 from almost 15 percent in 2001); liberalise the economy by removing non-tariff barriers (100 percent foreign ownership permitted in all sectors except agriculture) and rationalising the tariff structure (custom duty structured into slabs with net duty rates reduced to about 16 percent, the lowest in the region); deregulate commodity price controls and free - float the exchange rate (PKR/USD parity remained stable at 60 PKR/USD); put in place a comprehensive privatisation programme for improving the competitiveness of the economy (166 state owned enterprises in telecom, energy, financial and industrial sectors privatised between 1991-2007); and channel public funds towards providing public goods including infrastructure and regulatory/legal mechanisms necessary for a business friendly investment climate along with targeted social protection interventions through direct subsidies to benefit the poor and vulnerable (total pro-poor expenditures on community services, human development, rural development, safety nets and governance increased from 3.9 percent to 5.6 percent of GDP between FY02 and FY07).

Inflation was kept in check using monetary policy tools at under 8 percent until the end of 2007. As a result, Pakistan received Foreign Private Investments worth 6.96 billion USD in FY07 up from 1.524 billion USD in FY05.

IMPEDIMENTS Pakistan's six-year economic growth has also been characterised by certain market and government failures which have resulted in negative externalities, including high inequality and vulnerability to external shocks. This growth has been focused on attaining macroeconomic stability with capital deepening focused in financial, telecom, oil refining/marketing and retail/wholesale sectors.

These services oriented sectors, which have absorbed most of the FDI inflows so far, have not contributed sufficiently to improving the Total Factor Productivity of the productive sectors, including agriculture and manufacturing.

The growth in the industrial sector, 9.0 percent over five years, has occurred due to further capital deepening of the conventional large scale industries such as textile, sugar and cement owned by a few conglomerates.

This market failure of non-optimal allocation of resources has led the private sector to concentrate capital accumulation in mature industries with diminished marginal productivity of capital (MPk) or in unproductive services sectors. As a result, factor accumulation from new labour has been marginal with most new jobs being created in the non-paid family workers category.

Furthermore, the untapped domestic savings have alternatively fuelled consumption demand and contributed to ballooning the housing prices and equity prices due to speculative trading until recently.

With low productive competitiveness and high consumer demand resulting in a widening saving-investment gap, the pressure on Pakistan's external account has consistently been building with the Current Account Deficit rising from 1.3% of GDP in 2003-04 to 8.6% of GDP in 2007-08.

Institutional vehicles ideally should have been developed by the market to mobilise domestic savings of small investors, which could be used in capital deepening in labour intensive sectors such as Agri - processing, SME etc with high marginal productivity of capital (MPk).

The Government failures which have on the other hand hampered the pace of the economic reform process include the presence of a predatory state whereby large industrialists and agriculturists have been members of the ruling government's cabinet; state capture by influential market players especially large stock brokers, land mafias, industrialists, large corporate entities and large agricultural land holders; rent-seeking by duty bearers; limited institutional capacity for effectively targeting pro-poor expenditures; and inability of the government to maintain law and order.

These failures have contributed to oligopolistic behaviour in the factor and product markets, whereby mafias are active in land grabbing, stock market manipulation, causing artificial price hikes in commodity markets, enjoying loan waivers and lobbying for 'special tax/non-tax business incentives' from the Government.

The above inefficiencies and failures have side-tracked Pakistan economic growth from what should have been a capital widening of labour intensive sectors enabled through a broad-based mobilisation of domestic resources, complemented by social investments for building human capital and supported by a fast tracked transfer of technologies.

Pakistan is caught up in a poverty trap whereby influential market players and government failures have precluded providing the masses necessary means to participate in mainstream productive economic activity.

Given this background, it is no surprise that Pakistan's economy once again finds itself in dire straits in the face of multiple exogenous shocks from rising global food and oil prices, the global financial crisis, rising terrorism and the internal political instability.

The resulting rapid outflow of foreign portfolio investments and a slowdown in foreign direct investment inflows, had rendered maintaining the fiscal balance (-6.5% of GDP in FY08) given the persistently rising current account deficit (-9.0% of GDP in FY08) a daunting task. Pakistan's foreign reserves have rapidly diminished to below 10 billion USD and the PKR/USD parity has depreciated almost 19 percent.

In order to meet its liabilities the Government has resorted to borrowing from the State Bank of Pakistan which has contributed to spiralling the economy into stagflation. The income inequality which had been worsening steadily is now threatening to add millions more who cannot afford the skyrocketing cost of living, to the existing 38 million poor in Pakistan. The poverty gap is also expected to rise as more and more will be pushed further below the poverty line.

THE WAY FORWARD Pakistan's economy, with almost a decade of progressive economic reforms behind it, has placed itself in a position to launch into a second round of economic reforms to ascertain inclusive and broad based growth in the future. However, the threat it faces from the deteriorating law and order situation can wash away this opportunity unless addressed immediately. Unless the war on terror is also treated as a serious counter cyclical measure, a recession may be gripping the economy in the near future.

Cutting the losses already borne due to the aforementioned exogenous shocks, the Government needs to implement an economic strategy with the following elements to attain sustained and equitable economic growth in the future:

-- Ensure fiscal space by exercising fiscal prudence, eliminating subsidies on oil and budgetary support to SOEs and expanding the direct tax revenue base. Minimise tax/non-tax subsidies to industrial, agricultural and corporate giants.

-- Refrain from inflationary borrowing from the State Bank and resort to non-inflationary sources such as commercial papers, bonds and GDRs to bridge budgetary gaps.

-- Tighten monetary stance to sterilise liquidity and reduce inflationary pressures. Expand and deepen microfinance schemes, SME financing and Agricultural credit to provide access to capital to small entrepreneurs to help broad based capital deepening.

-- Alter duty structures to dampen consumption demand for imported luxury goods.

-- Undertake capital market reforms to introduce innovative institutional finance products and restructure the National Saving Schemes to mobilise domestic resources from small investors.

-- Prioritise public development funds for building physical capital, human capital and TFP of the labour intensive sectors (agriculture/livestock, SMEs.). Develop non-farm infrastructure, provide tariff and non-tariff incentives on inputs, target social sector spending on education and skills development and enable technology transfer for value addition. Also provide easy access to ports and facilitate exports to help producers get the best price for their products.

-- Increase social sector spending (Health, Education, Safety, Water and Sanitation...) to help reduce poverty and contribute to labour productivity. Establish a social safety net to protect the extreme poor and vulnerable in the society. The Government has already made steady inroads into implementing these economic reforms. What is needed is the political commitment to eliminate the highlighted market and government failures.

 

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Downgrading of Pakistan's credit rating outlook​

EDITORIAL (September 26 2008): Pakistan's deteriorating economic indicators are forcing the credit rating agencies to reassess their outlook for the economy. Moody's Investors Services downgraded Pakistan's bond rating to negative from stable on 23rd September, 2008, saying that the country could face difficulties in repaying its debts.

It also lowered the outlook on its B3 foreign currency bank deposit ceiling to negative because of "a substantial erosion in the country's external liquidity position, and which is not likely to be adequately reversed by prospective external assistance or ongoing efforts at macroeconomic stabilisation".

Moody's analyst for Pakistan, Aninda Mitra, said that he was concerned about arrears on sovereign debt and missed repayments as Islamabad's access to foreign exchange worsened. The economy's future was also not promising. After the election of President Zardari, domestic political stability may improve somewhat, but underlying tensions will be difficult to remedy.

Economic stabilisation measures are expected to remain under pressure from deteriorating socio-economic conditions as well as worsening external environment, and key macroeconomic objectives may not be met.

Anticipated foreign assistance from official quarters may not prove timely or sufficient to avert near-term financing problems, while considerable delays in disbursements have already contributed to a greater-than-expected erosion of foreign exchange reserves.

"It remains unclear how Pakistan would rebuild its external liquidity in the medium-term, unless either considerably larger amounts of foreign assistance were disbursed, or foreign investor sentiment improved sharply," the credit rating agency added. It may be recalled that Standard and Poor's (S&P) had also cut its rating to B from B Plus in June and has now a negative outlook on its rating, meaning that another downgrade is on the cards.

The downgrading of Pakistan's credit rating, in our view, was neither unexpected nor unjustified though it would prove harmful to the economy of Pakistan in certain ways like sending a negative signal to the foreign investors. Obviously, the balance of short-term and even medium-term economic and external financial risks confronting the economy has tilted to the downside, prompting the negative outlook.

Foreign exchange reserves of the country are now barely enough to cover two months of imports while trade and current account deficits are running well ahead of the target, indicating a bleak external position. While other indicators are also discouraging, the country faces growing political turmoil, rising religious extremism and high inflation and unemployment that could also hold up reforms such as liberalisation, deregulation and privatisation.

Most probably, Moody's assessment was finalised before the Marriott tragedy in Islamabad, otherwise the growing tide of religious militancy and extremism along with the ineptitude of the government to handle the unfortunate incident could have played an added role in undermining our credit rating.

Anyhow, all the negative factors are at work now, that could fundamentally weaken the much-needed capacity to generate higher savings, tax revenues and foreign exchange, exacerbating an already very fragile state of the economy. All the claims of the previous government about the rehabilitation and resilience of the economy and its angling at a take-off stage now look like a distant dream and a big joke.

In order to safeguard the solvency of the country, the government has taken certain measures to promote exports and contain imports, which need not be recounted here. It has also approached the Saudi Arabian government for an Oil Facility and certain IFIs to provide assistance.

An IMF mission was also called to help devise a framework for stabilisation programme. A couple of days back, the Finance Minister unveiled a "home grown package", without giving details about the precise strategies and outcomes at different points of time.

The latest initiative is the establishment of "Friends of Pakistan" forum including China, UAE and Saudi Arabia, besides the members of G-7 to devise a strategy to help Pakistan overcome its economic crisis and consider a bailout package. However, the exact impact of all these initiatives is still uncertain and would largely depend on the will of the government to confront the economic problems earnestly, squarely and more realistically.

In our view, there are at least two pre-requisites to save the situation from going bad to worse. Firstly, the country needs to have a zero tolerance for growing militancy and lawlessness. No investor is going to hitch his fortune in a country with an uncertain future and where life and property are not safe.

And secondly, the macroeconomic framework unfolded by the Finance Minister to reduce the country's imbalances and reassure investors would not find credibility if steps are not taken to guarantee that the package devised by the government would be implemented in letter and spirit and is certain to meet the specified objectives in time.

We believe that the government has to take on board and develop an understanding with some agency like the "Friends of Pakistan" forum or one of the IFIs to sell its programme to the donors.

It is true that the measures proposed to be implemented to improve the situation are going to be harsh and unpopular but there are no easy alternatives. The credit rating of a country is a reflection of its economic fundamentals and would automatically follow an upward path if we take the right steps.

 

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Telenor and Abacus Consulting to Provide Call Centre Services in Pakistan ​

Friday, 19 September 2008

Telenor Pakistan has partnered with Abacus Consulting to provide high quality call centre services to its customers in several languages such as English, Urdu, Punjabi and Pasthu.

In this regard, a contract signing ceremony was held here. Chief Marketing Officer Telenor Pakistan, Lars Christian Iuel and President Abacus Consulting Asad Ali Khan, signed the contract of the call center outsourcing in Lahore. Later, Lars Christian Iuel inaugurated the call centre.

Speaking on the occasion, Iuel described the agreement as not only an indication of the growing maturity of the market, but also Telenor Pakistan’s commitment towards its customers. He was of the view that by establishing an alliance with Abacus Consulting, Telenor intends to provide its customers even better services.

Asad Ali Khan commenting on the occasion said that Telenor Pakistan and Abacus Consulting share a common commitment towards quality and excellence.

 

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Experts stress long-term policy to revive economy ​

Say donors’ assistance will not work if radical changes in policies are not made

Saturday, September 27, 2008


LAHORE: Economic experts have urged the government to devise a long-term policy for achieving sustained economic growth instead of looking for a short-term economy bailout package from developed countries.

They say the leaders of ruling party while consuming all their energies for a temporary relief to stay afloat are delaying an economic package which is necessary for revival of the manufacturing sector.

The experts say the entrepreneurs have not let the government down by paying 20 per cent higher taxes than last year despite a decline in production. However, the government has failed to take any facilitating steps that could improve the sagging growth.

The News has learnt that many leading economists the government has engaged to evolve an economic stabilisation programme have expressed strong reservations about the credentials of some newly-appointed government functionaries. They have politely excused themselves from the economists’ panel formed by the government. It has also been found that some of those who are on board have strong differences with the way the economy should be handled.

Many economists are appalled by the way the government is handling the economy as federal Finance Minister Naveed Qamar has stayed back while President Zardari seeks an economic package from the US and the Friends of Pakistan.

Even with a large foreign exchange support from the donors, they say, the economy would continue to slide unless radical changes in economic policies are made. The rulers have not set their priorities for taking the economy out of the present mess.

Senior economist Naveed A Khan, commenting on the issue, says the government seems to have no clear plan about the economy except the hope that foreign friends of Pakistan would rescue the country as a reward for the ‘fight against terrorism’. He says the friends may provide a temporary one-time relief but the survival of the country is linked to sustained economic growth through a dedicated plan which is nowhere in sight.

Dubai-based chartered accountant Faisal Qamar says the government has not learnt any lesson from past experience. He says the country has been brought on the verge of economic collapse by a renowned former banker prime minister. Now the government is contemplating to appoint another banker as economic adviser with the rank of federal minister. “Pakistan is not a corporate entity or a financial institution.”

They say the country needs a dedicated economic expert and not a banker to steer it out of troubles. Transparency and good governance needed for fair and equitable growth is absent.

Pakistani-Canadian Certified Public Accountant Asif Ali Shahid says Pakistan should have taken steps to improve its economic credentials first before asking for foreign assistance. The foreigners, he says, would think twice before committing aid to a country where inflation is high, currency is weak, interest rates are high and exports cover less than 50 per cent of imports.

No serious effort has been made by the government to improve macroeconomic indicators, he says, adding any assistance will go down the drain if these indicators are not improved.

 

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‘Friends’ unveil initiative to avert collapse: Over $15bn needed: media​

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NEW YORK, Sept 26: A permanent forum was launched in New York on Friday to help raise billions of dollars to avert a possible economic collapse in Pakistan.

The forum, which will be called the Friends of Pakistan, will hold its first meeting in Abu Dhabi next month.

The decision to form such a body was made at a meeting of some of the world’s richest nations that also have close ties to Pakistan and want to help.

“I don’t want them to give us the fish. I want to learn how to fish and do it myself,” said President Asif Ali Zardari while explaining what Pakistan expected from the new forum.

“We are engaged with Pakistan through international financial institutions,” said US Secretary of State Condoleezza Rice. “We will support the steps Pakistan must take” for economic reforms.

British Foreign Secretary David Miliband described the meeting as “a very strong signal of political and economic support to the democratically elected government in Pakistan”.

UAE Foreign Minister Shaikh Abdullah bin Zayed said his country fully backed the initiative to “show our commitment to Pakistan”.

The three officials were among half a dozen world leaders who attended Friday’s meeting formally inaugurated by President Zardari.

The United States, Britain, Italy, Germany, France, Japan, China, Australia, Turkey, Canada, Saudi Arabia and the UAE attended the inaugural meeting.

European Union and the United Nations sent their representatives. Other countries are also likely to join.

Recent reports in the western media indicate that Pakistan needs as much as $10 billion to avoid an economic meltdown.

The United States and Britain jointly launched the initiative to form a group to help Pakistan after realising the seriousness of the economic crisis confronting the country.

Diplomatic sources told Dawn that at a meeting with President Zardari on Wednesday US President George W. Bush had told him that “Pakistan needs help today, rather than tomorrow”.

Pakistan’s foreign currency reserves are falling fast and if forward liabilities are included, the real reserves may go down to $3 billion. This cannot meet the import bill of one whole month.

Out of total reserves of $8.467 billion, the reserves held by the commercial banks stood at $3.461 billion on September 23. From September 22, the reserves fell by around $180 million, as there were no receipts while the government made heavy payments for oil and other imports.

This week, Moody’s Investors Service lowered Pakistan’s credit outlook to negative due to the risk of “missed repayments” on the nation’s debt.

Pakistan’s gradual economic decline, which started last year, alarmed the United States and Britain as they feared that financial chaos could allow terrorists to deepen their roots in the country.

To avoid such an eventuality, they decided to launch a new group of donors.

After Friday’s meeting, President Zardari told journalists outside a UN conference room that the participants had decided to make the Friends of Pakistan group a permanent body.

“All of them want to help. They want to make democracy work,” said Mr Zardari.

He said countries in Pakistan’s region realise that they had to support its efforts to fight terrorism, which was a regional issue as well and therefore needed “a regional ownership”.

“There is a very strong support for Pakistan’s democratic government” and the world wanted to help it deal with the economic challenges the country faces, he said.

“They want to help bring stability to the young democracy” and to help it “take difficult decisions” for economic recovery, Mr Zardari added.

Ms Rice, who accompanied Mr Zardari and Mr Miliband to the media briefing, said that those joining the Friends of Pakistan group had stayed “very closely engaged” with international financial institutions that provided economic assistance to Pakistan.

“We look at the US and the world support to (our economy) as a blessing,” said Mr Zardari while responding to Ms Rice’s expression of support.

The British foreign secretary said that every single country that joined the Friends of Pakistan group “stands shoulder to shoulder with Pakistan”.

 

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ZTBL targets Rs72 billion disbursement​

ISLAMABAD, Sept 26: Zarai Taraqiati Bank President Mohammad Zaka Ashraf has said that the bank will disburse Rs72 billion among the farmers during the current financial year.

Speaking at the inaugural ceremony of the Deposit Management System (DMS) and Field Operation Computerised System (FOCS) at Zonal Office here on Friday, Mr Ashraf said the bank had disbursed Rs68 billion to the farming community in last financial year against the target of Rs60 billion.

He said the pace of disbursement was very satisfactory and that the bank would easily achieve the target within time.

He said the bank had successfully launched the Online Loan Processing System which was designed to ensure timely provision of all financial services to its rural clientele especially small farmers.

He said the DMS had been launched to cater to the requirement of retail banking as it was integrated with NADRA system to access and to verify the Computerised National Identity Card (CNIC) data of its clientele.

He said the FOCS and DMS would work together bringing not only transparency but good governance in the ZTBL besides facilitating borrowers for in-time and effective delivery of financial and banking services.

Mr Ashraf said since the bank was launching its Zarkhaiz One window Operation from October 6, 2008 for provision of production loans, so the new system would support the bank’s credit delivery mechanism effectively.

The bank’s 114 branches had been brought under online Loan Processing System and by the end of December all the remaining branches will be connected accordingly under the FOCS.

He said 750 bank’s officials will be imparted training by the end of this year to handle the new system effectively.

 

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40MMCFD gas for 1,000MW thermal plants sought​

* Water and Power, Petroleum Ministries will meet next month to discuss matter​

ISLAMABAD: The Water and Power Ministry has approached the Petroleum Ministry to arrange gas for 1,000MW thermal power plants on fast-track basis for a two-year period, sources in the Petroleum Ministry told Daily Times on Friday.

The sources said that the Economic Coordination Committee (ECC) of the Cabinet in its meeting held on Sept 10 had approved the 40 million cubic feet per day (MMCFD) gas availability for the 1,000MW thermal power plants for a two-year period. They said the Water and Power and Petroleum Ministries would hold meeting in the second week of the next month to indicate the availability of the gas for 1,000MW thermal power plants to overcome the power shortage crisis in the country.

They said the ECC in its meeting had also cleared 1,500MW power projects that included 1,000MW thermal power plants and 500MW rental power plants that would be set up in Karachi, where citizens were witnessing prolonged periods of load shedding. The ECC has estimated that foreign and domestic investment would be available for these power projects amounting to $2 billion.

The sources said the ECC had approved the power tariff of 13-13.5 cents for these thermal and rental power plants. Thermal power projects would be commissioned in the next twelve months, whereas rental projects of 500MW would be operational in the next six months, the sources added. They said rental power projects would be commissioned in the Karachi city that would be an immediate arrangement to end the load shedding in the city.

The sources said the ECC had also directed the Petroleum Ministry to co-operate with the Water and Power Ministry to arrange the 40MMCFD gas for the 1,000MW thermal power plants that were cleared also by ECC. They said that now these two ministries would hold a meeting in the second week of the next month to arrange the gas for the thermal power plants.

The present government had inherited the problem of power shortage and it had directed the Public Power Infrastructure Board (PPIB) to attract the investors for setting up 1,000MW thermal and 500MW rental power plants that could help end load shedding in the country.

They said that in this regard, bids of receiving proposals for setting up these power plants were opened on July 15, 2008 in presence of the bidders and the media, a total of nine bids of 3,060MW were received for Package-A (thermal power plants), whereas for Package-B rental projects.

Three bids of 678MW against 500MW were received. A bid evaluation committee, comprising the representatives of Ministry of Finance, NEPRA, WAPDA/PEPCO and PPIB processed these bids, and out of the twelve bids, nine bids were declared as qualified.

Under package A, the investors had sought the power tariff of 13 cents to over 15 cents/Kwh. Under the package B for the rental power plants, the investors had sought maximum power tariff of 17 cents.

Sources said that the country has been facing the power shortage of 3,500-4,000MW that caused a series of load shedding in the country. They said that the country required 6,000MW power to inject in the national grid system to overcome the power shortage in the one year and government is committed that there would be no load shedding by the end of the next year.

They said that these thermal and rental power plants are a part of the government’s strategy to end the load shedding by the end of the next year. They said that the operational Independent Power Plants (IPPs) were the main contributors to the load shedding in the country as they had dropped power generation citing the reason that they had no money to provide fuel for running the power projects.

 

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Major powers vow sustained economic support for Pakistan​

NEW YORK (September 27 2008): Friends of Pakistan Group, comprising major world powers meeting on Friday assured Pakistan of its full support to bring the country out of its present economic crisis. The next meeting of the Group (which will be made a permanent body changed with the aim of finding solutions for the economic crisis faced by the country) will be held in Abu Dhabi next month.

President Asif Ali Zardari termed the international community's support to Pakistan as blessing. The group, which met here on Friday, assured Pakistan that it would extend its full support to bring it out from prevalent economic crisis which, according President Zardari, is a blessing for Pakistan. Pakistan needs 10 billion dollars urgently to come out of financial crisis and the same case has been placed before the international community.

US Secretary of State Condoleezza Rice said that the US would ask the financial institutions, ie World Bank, International Monetary Fund (IMF) and Asian Development Bank (ADB), to support Pakistan. The group comprised upto 15 member countries, including the US, European Union (EU), Japan and the United Arab Emirates (UAE) discussed Pakistan's economic and security situation for an hour in the United Nations where they agreed to help Pakistan in this critical juncture.

"We have very constructive meeting with the Friends of Pakistan, who revisited Pakistan's situation," said President Asif Zardari at the conclusion of the meting. Replying to a question, he said that Pakistan was doing its best, transformed into democracy, fulfilling its commitments and the proof was that partners were standing before the media.

Answering another question, he said: "We are a strong nation of 180 million which needs to work very hard to get our nation back on track." "I don't want them to give us the fish. I want to learn how to fish and do it myself," said President Zardari while explaining what Pakistan expects from the new forum.

The US Secretary of State, while replying to a question, said that it was a very good meeting and the international community had assured strong support. "We are engaged with Pakistan through international financial institutions," said Condoleezza Rice.

"We will support the steps Pakistan must take for economic reforms," she added. She was of the view that US was very much engaged with Pakistan and we are working with Pakistan through financial institutions closely to ensure a rapid, secure financial support. British Foreign Secretary David Miliband described the meeting as "a very strong signal of political and economic support to the democratically elected government in Pakistan."

UAE Foreign Minister Sheikh Abdullah bin Zayed said his country fully backed the initiative to "show our commitment to Pakistan." The two officials were among half a dozen world leaders, who attended Friday's meeting formally inaugurated by President Asif Ali Zardari. The group called Friends of Pakistan includes the United States, Britain, Saudi Arabia and the UAE. Other nations are also expected to join.

APP ADDS: President Zardari said the overwhelming expression of support for Pakistan reflects the "world cares about Pakistan and the people of Pakistan can rest assured that democracy does work and it is the success and victory of democratic Pakistan that we are standing before you."

"There is very strong support of the international community for Pakistan's democratically elected government, we know Pakistan has many challenges in the security and economy fields)," stated Secretary Rice, standing alongside Zardari. The President said whenever the leaders of Pakistan and the US meet they discuss the weaknesses in relationship and try to convert these into our strengths.

"All weaknesses have to be looked at and if there are any weaknesses or any foresight, definitely we will talk about it." British Foreign Secretary Miliband expressed solidarity with the Pakistani people over the horrible Marriott Hotel bombing last weekend saying "equally important every single one of our countries stands shoulder to shoulder with the democratically elected government and the people of Pakistan in their struggle against terrorism, which is a threat to them as well as a threat to us."

TEXT OF THE STATEMENT BY CHAIRMEN OF THE FRIENDS OF PAKISTAN: Following is the text of a statement by the Chairmen of the Friends of Pakistan following the Friends of Pakistan Group meeting in New York on Friday, September 26, 2008:

"The Foreign Ministers of Australia, Canada, China, France, Germany, Italy, Japan, and Turkey, and representatives of the European Union and the United Nations met under the co-chairmanship of President Zardari of the Islamic Republic of Pakistan and the Foreign Ministers of United Arab Emirates, the United Kingdom and the United States, to launch the Friends of Pakistan Group in New York on Friday, 26 September.

Those present congratulated President Zardari on his election as President and noted the significant opportunities for Pakistan under democratically-elected, civilian leadership. They made clear their determination to support the Government of Pakistan in its efforts to consolidate democracy to enable the people of Pakistan to benefit from this historic opportunity.

They expressed their outrage at acts of terrorism in Pakistan, in particular the recent attack on the Marriott Hotel in Islamabad, and made clear that the Group of Friends stood shoulder-to-shoulder with Pakistan in its fight against such terrorism.

The Group of Friends noted the formidable challenges Pakistan faces and the importance of well-co-ordinated international co-operation as the Government works to address them. They welcomed the Pakistani leadership's focus on national development as a strategic priority and desire to promote peace and stability in both the country and the region.

With this in mind, the Friends agreed that the Group should work in strategic partnership with the Government of Pakistan and other relevant partners in the following areas:

I. STABILITY: The meeting recognised the significant problem of violent extremism in Pakistan and looks to Pakistan to lead the fight against this extremism, with the support of the international community. The Group committed to work with the Government of Pakistan to develop an over-arching Pakistani-led strategy and to provide technical assistance for this.

II. DEVELOPMENT: The meeting agreed to develop a comprehensive approach to the economic and social development of Pakistan, with a particular focus on education, health, and human development. The Group acknowledged the need for Pakistan to undertake serious economic reform and agreed to look at improved trade access for Pakistan to their markets. The Group also agreed to encourage private sector involvement in Pakistan's development.

III. BORDER AREAS: The meeting noted the importance of the border areas to the overall territorial integrity of Pakistan, as well as the impact the situation there was having beyond Pakistan. The Group agreed to form a partnership with Pakistan to develop a comprehensive and co-ordinated approach to the security, development, and political needs of the border.

IV. ENERGY: The Group agreed to look at ways of addressing Pakistan's energy shortfall.

V. INSTITUTION-BUILDING: The Group agreed on the importance of supporting Pakistan's democratic institutions, including in support of economic reform, rule of law, good governance and countering extremism.

At the request of the Government of Pakistan, the Group agreed that a special representative should be appointed from a member nation or organisation to take forward the above agenda. The Group agreed to meet again at official level in Abu Dhabi within a month to determine a detailed programme of work to take forward the above agenda."

 

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SPI surges up to 28.72 percent​

ISLAMABAD (September 27 2008): The weekly inflation measured by Sensitive Price Indicator (SPI) surged up to 28.72 percent on week ending September, 25, owing increase in the prices of 15 essential commodities, according to Federal Bureau of Statistics (FBS). A surge in inflation was recorded in the week ended on September 25 as compare to the previous week, as inflation measured through SPI was 27.93 per cent.

The SPI inflation is calculated on the prices' trend of 53 essential commodities for all income groups taken from 17 centers in urban areas. Further analysis of the data showed that dearness for families bracketed in Rs 3000 income group was increased from 29.31 per cent last week to 30.23 per cent.

The price hike particularly of essential commodities of kitchen items has been making lives of salaried class and low-income group harder with the government having nothing except rhetoric to lessen their miseries.

The dearness for families earning monthly income between Rs 3001 to Rs 5000 has increased during the week from 27.99 per cent to 29.09 per cent and for Rs 5001 to Rs 12000 to 28.90 per cent. For families earning over Rs 12, 000, the dearness increased slightly during the week from 28.29 per cent last week to 28.72 per cent on September 25.

The prices of 15 commodities have increased during the period under review, 14 showed a decline whereas 24 remained stable during corresponding week as well as the same week of previous year.

Further analysis of the data showed that prices of per kg Chicken (Farm) has increased to Rs 105.42 during the week under review over Rs 101.52 for previous week, Gur per kg to Rs 38.33 from Rs 37.39, potatoes per kg to Rs 25.48 from Rs 24.99, garlic per kg to Rs 45.45 from Rs 44.63, sugar per kg from Rs 34.14 to Rs 33.60, wheat average quality per kg to Rs 22.33 from Rs 22.07, bread plain mid size each to Rs 22.79 from Rs 22.62, cigarettes K-2 per packet (small) to Rs 8.88 from Rs 8.82, washing soap nylon per cake to Rs 12.57 from Rs 12.51, wheat flour average quality per kg to Rs 23.93 from Rs 23.83, tea (prepared) per cup to Rs 8.03 from Rs 8.00, bath soap lifebuoy per cake to Rs 21.37 from Rs 21.30, beef per kg to Rs 137.08 from Rs 136.73, curd per kg to Rs 42.40 from Rs 42.32 and mutton per kg to Rs 251.92 from Rs 251.66 Prices of 14 commodities included tomatoes, bananas, red chillies, vegetable ghee rice basmati and others declined marginally during the week.

 

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World Bank likely to release $500 million: Salman Bashir​

ISLAMABAD (September 27 2008): Foreign Secretary, Salman Bashir said on Friday that Pakistan needs $10 -15 billion. As against that World Bank (WB) is expected to release $500 million immediately. Addressing a press conference here, he said that one of the major highlights of the visit 'Friends of Pakistan' initiative was to express support and solidarity with Pakistan from several important countries.

" Pakistan's requirement is 10 to 15 billion dollars but we are expecting $500 million immediately," he added. He said that most important element of this meeting was that the big countries have the capacity to help, and UN, the entire EU collectively will supported Pakistan

Replying to a question, he said that joint statement issues after the meeting of President Zardari and Indian Prime Minister, Manmohan Singh was very constructive, adding that engagement with India is important for both Pak and India.

He was of the view that links between the political leaderships is easy, they pick up the telephones and talk to each other, track- 2, the only track that got under shadows was the composite dialogue track, several positive things emerged from those talks.

He said that the modalities also cover the list of items that is traded. Pakistan, he said had four doable, Sir Creek, Siachen issue, trade and visa liberalisation.

He said first two could be resolved as a lot of work has already been done whereas there were problems in the remaining two. "We have agreed to convene the fifth round by December, our approach will always be constructive and positive," he continued.

We are engaging with the coalition and the Nato, it is not only in their interest but also for Pakistan, he said adding that the policy is being followed by other partners. Replying to a question, he said that as for as sentiments of the Kashmiris are concerned there was no ambiguity.

 

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Qureshi pleads Pakistan's case for greater access to EU market​

ISLAMABAD (September 27 2008): Foreign Minister Shah Mehmood Qureshi pleaded Pakistan's case for greater access to EU market and handed over a concrete plan for building long-term relations with EU. He also briefed EU Troika on the multi-pronged strategy being adopted to combat terrorism, says a statement issued here by the Foreign Office here on Friday.

The Troika of European Union, consisting of deputy foreign minister of France, foreign minister of Czech Republic and commissioner of foreign relations of the European Union, met Shah Mehmood Qureshi and discussed Pak-EU relations, efforts to combat terrorism, Pak-Afghan relations and Pak-India peace process.

Qureshi called for strengthening multifaceted relations with EU, the largest trading partner of Pakistan. He proposed strategic dialogues with EU and to upgrade ministerial level dialogue to summit level.

He said a stable Afghanistan was in the interest of Pakistan, as Islamabad wanted peace with its neighbours. The EU troika expressed complete faith in the resolve of the newly elected government to combat terrorism. They said that EU was working on a draft package for economic assistance to Pakistan and Afghanistan.

 

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ADB wants Pakistan to enter into PPPs to attract private capital investment​

FAISALABAD (September 27 2008): Asian Development Bank (ADB) has emphasised the needs that motivate governments including Pakistan to enter into Public-Private Partnerships (PPPs) to attract private capital investment (often to either supplement public resources or release them for other public needs); to increase efficiency and use available resources more effectively and to reform sectors through a reallocation of roles, incentives, and accountability.

According to ADB study report, most of the Asian governments face an ever-increasing need to find sufficient financing to develop and maintain infrastructure required to support growing populations. Governments are challenged by the demands of increasing urbanisation, the rehabilitation requirements of ageing infrastructure, the need to expand networks to new populations, and the goal of reaching previously un-served or under-served areas. Furthermore, infrastructure services are often provided at an operating deficit, which is covered only through subsidies, thus constituting an additional drain on public resources.

Combined with most governments limited financial capacity, these pressures drive a desire to mobilise private sector capital for infrastructure investment. Structured correctly, a PPP may be able to mobilise previously untapped resources from the local, regional, or international private sector, which is seeking investment opportunities.

ADB report mentioned that the goal of the private sector in entering into a PPP is to profit from its capacity and experience in managing businesses (utilities in particular). The private sector seeks compensation for its services through fees for services rendered, resulting in an appropriate return on capital invested.

The efficient use of scarce public resources is a critical challenge for governments and one in which many governments fall far short of goals. The reason is that the public sector typically has few or no incentives for efficiency structured into its organisation and processes and is thus poorly positioned to efficiently build and operate infrastructure. Injecting such incentives into an entrenched public sector is difficult, though not impossible, as Singapore has demonstrated by developing a government-wide dedication to efficiency while maintaining many critical services within the public domain.

Private sector operators, however, enter into an investment or contracting opportunity with the clear goal of maximising profits, which are generated, in large part, by increased efficiency in investment and operations. If the PPP is structured to let the operator pursue this goal, the efficiency of the infrastructure services will likely be enhanced. Improving the efficiency of services and operations also increases the chances that those services are economically sustainable and provided at affordable rates even after satisfying the profit requirements of the private operators.

PPP allows the government to pass operational roles to efficient private sector operators while retaining and improving focus on core public sector responsibilities, such as regulation and supervision. Properly implemented, this approach should result in a lower aggregate cash outlay for the government and better and cheaper service to the consumer. This should hold true even if the government continues to bear part of the investment or operational cost since government's cost obligation is likely to be targeted, limited, and structured within a rational overall financing strategy.

Governments sometimes see PPP as a catalyst to provoke the larger discussion of and commitment to a sector reform agenda, of which PPPs are only one component. A key issue is always the restructuring and clarifying of roles within a sector. Specifically, there is a requirement to re-examine and reallocate the roles of policy maker, regulator, and service provider, particularly to mobilise capital and achieve efficiency, as outlined above. A reform programme that includes PPP provides an opportunity to reconsider the assignment of sector roles to remove any potential conflicts and to consider a private entity as a possible sector participant.

Implementing a specific PPP transaction often forces concrete reform steps to support the new allocation of sector roles such as the passage of laws and establishment of separate regulatory bodies. In essence, re-examination of the regulatory and policy arrangements is critical to the success of a PPP project, ADB report concluded.

 

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Comprehensive plan to develop northern Lahore: Hamza​

LAHORE (September 27 2008): The Punjab government has prepared a comprehensive plan of development of Northern Lahore under which besides construction and expansion of roads, facilities of provision and drainage of water would be increased. The Pakistan Muslim League-Nawaz (PML-N) leader, Hamza Shahbaz Sharif MNA said this while inaugurating eight development projects at Mian Muhammad Aslam Road in UC-12 Datanagar Badami Bagh.

Hamza said the Punjab government would provide clean environment to its citizens which will help improve living standard of the masses while best medical and educational facilities would also be made available to them, he added. Provincial Minister for Excise and Taxation Mian Mujtaba Shuja ur Rehman, MPAs Khawaja Salman Rafiq, Chaudhry Shahbaz, Nazims and Naib Nazims, DCO Lahore Sajjad Bhutta, elite of the are and a large number of PML workers were also present on the occasion.

Hamza said that government is making efforts for bringing backward areas at par with the developed ones so that people of these areas could also benefit from the fruits of development. He said that NA-119 is like his own home and that is why he is starting the development work from this constituency under his own supervision. He said that an amount of Rs 180 million would be spent for construction of 7-km long eight roads, restoration of sewerage system and provision of potable water in Data Nagar. He said that these development projects would be completed within seven months, which would resolve the problems of the area.

He further said that now the public money is being spent on the uplift of living standard of common man rather than on luxuries of rulers. He said that Punjab government has always given priority to the service of poor masses because it is our vision. Provision of daily use items and atta at cheaper rates in Ramzan and Sunday Bazaars and tandoori roti at Rs 2 through subsidy of billions of rupees are proof of the fact that the provincial government is poor-friendly in real sense, he said.

He said that employment package for unemployed persons would be announced after Eid. He said that Chief Minister Shahbaz Sharif has helped the oppressed through open courts. He said that PML-N would improve the living standard of the people, which is the real essence of democracy.

Addressing on this occasion, Provincial Excise and Taxation Minister Mian Mujtaba Shuja ur Rehman said that Mian Shahbaz Sharif considers himself as "Chief Servant" of the people instead of ruler and he is serving the people day and night. He told that more than Rs 500 million are being spent on the development works in Northern Lahore.

 

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Mini-industrial estates in rural areas on the cards​

SIALKOT (September 27 2008): The setting up of mini-industrial estates in remote rural areas is on the cards aiming at promoting non-traditional products being produced in these areas and generate employment opportunities for skilled and semi-skilled persons at their doorsteps in the Punjab.

Official sources on Friday told Business Recorder that the government has accorded special attention on the promotion and development of cottage industries and for this purpose Rs 400 million would be spent on accelerating the pace of exports and enhancing the productivity in Punjab.

The development of industrial sector was top on government agenda and during current fiscal period Rs 1.30 billion were being spent on the development of industrial sector in the province. The government has already introduced business-friendly policies for ensuring maximum establishment of industries in private sector and to expand the radius of setting up industries to rural areas for bringing industrial revolution in the Punjab.

In order to facilitate the SMEs the Punjab government would soon initiate a "Micro Finance" loaning scheme with an amount of Rs 1 billion during current fiscal period for the development of cottage industries and creating self-employment opportunities in the province. The concept of introducing this scheme was to extend loan facilities to the interested persons for setting up small scale and cottage industries in the Punjab.

Punjab government has evolved a strategy to develop "Business Friendly" environment and setting up cottage industries aimed at ensuring Direct Foreign Investment (***) in various fields of industrial sector in the province while exporters and manufacturers were being motivated for bringing innovation and diversification in their products to cope with global market more easily sources added.

 

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Zardari and Manmohan meeting new era of cooperation: SCCI​

ISLAMABAD (September 27 2008): Tariq Sayeed, President Saarc Chamber of Commerce and Industry (Saarc CCI) and Iftikhar Ali Malik, Vice President Saarc CCI have hailed the joint statement of President Asif Ali Zardari and Indian Prime Minister Dr Manmohan Singh for restarting composite dialogue between India and Pakistan and said that the meeting between them in Washington will instigate a new era of socio-economic co-operation which would positively impact on the South Asian region as a whole.

They regarded this initiative as an earnest commitment of the leadership of two major players of South Asia, reflecting their mindset towards resolving core issues, impeding socio-economic growth of the region.

"The decision to restart the stalled Composite Dialogue process will instigate a new era of co-operation between two countries and will positively impact the region as well" said President SCCI and appreciated the statement of Dr Manmohan that a peaceful, prosperous and strong Pakistan was also in India's interest and statement of President Zardari that peace with India was part of Benazir Bhutto's doctrine of peace, prosperity and progress and her vision for a better and improved South Asia.

President and Vice President Saarc CCI welcomed the under consideration agreement between two countries that would allow commerce across the Line of Control in Kashmir and open the land route for trade between New Delhi and Kabul.

He said that the decision for commencing cross-LoC trade on the occupied Srinagar-Muzaffarabad and Poonch-Rawlakot roads from October 21, 2008 and agreeing on opening the Wagah-Attari road link and Khokrapar-Munabao rail route to all permissible items of trade will facilitate trade between two countries. President SCCI said that the long-lasting demand for unfettered trade through this transit route and opening the road link will meet after these decisions are materialise.