Pakistan Economy - News & Updates - Archive

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No investment in tribal areas till clean-up of miscreants: Boucher tells Iftikhar Malik​

LAHORE (December 20 2008): Setting up of Reconstruction Opportunity Zones (ROZs) is not possible before a total cleanup of miscreants in tribal areas, the Assistant Secretary of State on South and Central Asian Affairs, Richard Boucher told to the former President, Federation of Pakistan Chambers of Commerce & Industry (FPCCI), Iftikhar Malik.

Malik expressed his deep concerns about the US policy on Pakistan western borders while disclosing his dialogue with the US official in a recently held meeting at the Lahore Chamber of Commerce and Industry (LCCI).

The former FPCCI President told the LCCI Executive Committee members in presence of the Federal Advisor on Textile, Dr Mirza Ikhtiar Baig that in his recent past meeting with Boucher, the issue of ROZs was discussed in detail. Malik said Boucher asked him whether he understands the meaning of 'reconstruction' and then added that it means a proper cleanup before investment.

Further, Malik said that Boucher also pointed out that the US wouldn't think of investing in tribal areas to invite bomb blasts against its investment. 'We need proper cleanup before investing in tribal areas,' Boucher the former FPCCI President quoted Boucher.

Malik drew the attention of the Federal Textile Advisor towards the US approach while expressing his deep concerns. But the Federal Textile Advisor made no comments. It may be noted that the President, Asif Ali Zardari in his December 17 meeting with parliamentarians from Fata had stated that use of force was the only option against 'power-hungry militants' trying to impose their political agenda on the masses by waging violence.

Islamabad press quoted Zardari saying that 'There is no alternative but to fight the militancy in the country, as they want to seize political power through the use of force.' During the meeting, which is a part of the President's series of dialogue with politicians on the situation in the tribal areas, Zardari said his government would not allow anyone to hold the nation hostage.'

The President told the legislators that the government had decided to lift a hiring ban to fill all vacant positions in Fata development projects. It is worth mentioning that the Frontier Corps (FC) Inspector General, Major General Tariq Khan told Zardari in a meeting on December 18 that large areas of Bajaur and Mohmand agencies have been cleared of miscreants and the government's control would be established there by the end of December.

American Senator, Christopher Bond had also discussed a number of recommendations including ROZs in the northern areas during his December 15 meeting with the NWFP Governor, Owais Ghani for social development in the troubled areas of Pakistan.

The US President, George W Bush, floated ROZs idea during his March 2006 visit to Pakistan, when he proposed setting up of ROZs at border areas between Pakistan and Afghanistan to minimise terrorist activities in tribal areas. ROZs legislation is presently with the US Congress to create industrial zones in order to produce and export textiles and other items to the US duty-free, helping to integrate the Afghan and Pakistani economies.

 

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July-October marble export up by 79.7 percent​

KARACHI (December 20 2008): The commencement of mega construction projects in Middle East countries has drastically escalated Pakistan's marble export by 79.7 percent during first four months of current fiscal year 2008-09.

According to statistics made available to Business Recorder on Friday, the marble sector has exported marbles worth $13.264 million mostly to Middle East during July to October of current fiscal year 2009 as compared to $7.387 million marbles export made in corresponding period of last fiscal year.

Sanaullah Khan, former chairman, All Pakistan Marble Mining Processing Industry and Exporters Association (APMMPIEA) told Business Recorder that the marble sector has surpassed corresponding period export of last fiscal year by $5.96 million, which is a positive stroke for economic growth of the country. This will also pave the way to achieve annual marble export target of $35 million, fixed for current fiscal year, he added.

To a question, he said the sector had increased marble export without any governmental favour. "The government has completely ignored the sector in its policies, however, the sector has privately taken some positive measures for its survival," he said.

Lack of technical expertise in mining processing, outdated equipment and poor law and order situation are affecting the marble export to European countries and America, which has considerably declined during the last few years, Khan observed.

He further said that the marble export to European countries has become more costly as compared to Middle East countries because of high under invoicing. However, the freight charges of marble export to Middle East countries is more reasonable than any other marble exporting countries, he said adding that ME countries are importing marbles in bulk without maintaining quality, which helps all marble processors to export their products.

He feared that if mining process stopped for a long time due to heavy rainfall in Balochistan, it would be very difficult for the sector to meet current fiscal year's marble export target. He urged the government to take positive measures to facilitate marble sector. He demanded of the government to provide gas for the sector. Khan expected that marble export to Middle East countries would further increase because of the ongoing construction projects there.

 

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Beijing-based bank declines to finance power projects​

ISLAMABAD (December 20 2008): Beijing-based BNP Paribas office, an internationally reputed French bank, has refused to finance those power sector projects which are not part of the list that was presented by Pakistan government to the Chinese government, official sources told Business Recorder.

The two much-talked about projects--Nandipur and Chichokimallian--have already been awarded to the Chinese company, Dongfeng, but the company cannot move forward without the formal backing of the Chinese government. "At present, approval of those projects is being considered, which are included in the list of projects handed over by Islamabad to Beijing," sources added.

Last month, Wapda had sent a delegation to Beijing, led by Abdul Qadeer, Member, Finance, to discuss financing for Guddu thermal power project and on progress of Nandipur and Chichokimallian projects, which have already been awarded to the Chinese firm. Deliberations were held between Didier Lietaer, Global Head of Organisation (Export Finance), Ms Li Hong, Vice President, Export Finance, Zhan Lei, Proposal Manager of Harbin Power Engineering of China and the Pakistani delegation, including Pakistan embassy officials.

Sources said that Dr Naeem, an official in Pakistan embassy in China, however, stunned the concerned officials of Water and Power Development Authority (Wapda) in a telephonic conversation that Guddu, Nandipur and Chichokimallian projects were not included in the list given to the Chinese government. They said that the Pakistan delegation briefed the Bank's team regarding Guddu thermal power project. BNP Paribas indicated the possibility of US Exim Bank providing the remaining financing for the Guddu project.

In another meeting with HSBC, China, Ms Iris Ren, Manager Project and Export Finance, Pepco inquired regarding progress of approval of Nandipur and Chichokimallian projects, and prospects of partnership in the consortium of Guddu project.

Regarding Nandipur, HSBC said that the project had been approved by Sinosure, but this approval was not enough as there were certain other approvals that were left, including the approvals of Chinese Ministries of Commerce and Finance. This process may take three to six months further. Sinosure, China's first wholly state-owned policy insurer, can insure both China's overseas investments and overseas investments in China, guaranteeing either shares or loans.

With regard to Chichkimalian project, HSBC told the Pakistan delegation that the application was pending at Sinosure Chengdu office and would be processed by Sinosure Beijing office after receiving approval from Chengdu office. After final approval of Sinosure, the project would take up to six months for clearance from other ministries.

According to sources, the bank had intimated to the delegation that the process was slow nowadays. Moreover, Finance Ministry may ask the possible impact of global financial crisis on the project. "Since Pakistan and China are already enjoying good relations, it will be better and will expedite if matters are taken up at government level," sources quoted HSBC officials as advising the Pakistan delegation.

In deliberations, Pakistan team tasked Harbin power to pursue the Chinese government regarding Guddu power project, whereas Dongfeng was asked to follow up with the government for early process of Nandipur and Chichokimallian projects. Moreover, Pepco will seek help of Pakistan embassy in Beijing, sources added.

 

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Pakistan seeks US$9b aid from IMF​

ISLAMABAD: Pakistan has asked the International Monetary Fund (IMF) for a US$9 billion (US$1 = R3.59) bailout along with help from other lenders to avert a balance of payments crisis, a finance ministry official said on Friday.

Credit ratings agency Standard & Poor's cited Pakistan's tardiness in securing foreign assistance for a decision yesterday to lower its rating on the nation's sovereign debt deeper into junk bond territory.

"We are asking US$9 billion from the IMF, they are talking about US$7.4 billion. IMF can give us up to US$7.6 billion," a finance ministry official told Reuters on condition of anonymity.

An official said yesterday that a letter of intent would probably be sent to the IMF before Monday, when potential donors are due to gather in Abu Dhabi for a "Friends of Pakistan" conference.

Pakistan's foreign currency reserves are barely enough to cover nine weeks of imports. - Reuters

 

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2008 a disappointing year for agriculture ​

Sunday, December 21, 2008

KARACHI: Agriculture, the largest provider of livelihood to the poor, faced unbearable losses due to wrong planning and high input costs in the outgoing calendar year.

The year 2008 disappointed the growers despite announcement of an agriculture package by the government in the budget for the current fiscal year. Growers say they did not get benefits of the relief package.

Pakistan’s economy in general failed to achieve its growth target, but agriculture, the major contributor, particularly failed. In financial year 2008 the agriculture sector grew by only 1.5 per cent against a target of 4.8 per cent. Its total contribution to the GDP remained at 20.9 per cent. Out of this, 10.9 per cent came from livestock.

Every two persons out of five work in the agriculture sector, whereas it provides livelihood to every two out of the three. It contributes significantly to the country’s exports.

It also provides raw material to major industries such as textile, sugar, dairy, leather and other agro-based industries as well as market for industrial products.

The growth of major crops was negative three points against 8.3 percent increase last year. Water shortage at the peak season, increase in the fertilizer rates and use of substandard pesticides affected the crops badly. Minor crops showed an increase, but that does not count towards the major growth rate. “The contribution of commodity production sector to overall GDP growth in FY08 was lowest in the last six years,” said the annual report of the State Bank of Pakistan.

Though sugarcane production was above the target, it did not pay much to the growers, as majority of them are still waiting for the payments from the sugar mills.

A bumper crop of paddy was produced this year, but the government failed to ensure the support price. Rice exporters oppose the government agencies entrance in rice trade.

The report said delays in harvesting of cotton and sugarcane (mainly due to pricing issues), and lack of clear incentive signals (as government could not announce its pricing policy before sowing time) also resulted in area deficit for wheat crop.

A significant 25.3 percent rise in agri-credit during FY08 helped farmers to partly compensate the impact of high fertilizer prices. But, growers complained about the corruption in disbursement of agri-credit through the Zarai Tarqiati Bank that charges the lowest mark up.

The ‘percentage’ charged by its staff makes the mark up equivalent to that of the scheduled banks. The State Bank suggested that Pakistan should focus on modernising agriculture sector with greater emphasis on crop diversification and its value chains. “The need is to improve price transmission mechanism to ensure that the benefits reach the farmers,” said the apex bank.

The government has announced Rs32 billion subsidies for the farming sector against Rs25 billions last fiscal year. This year’s budget increased subsidy on DAP by 113 percent or by Rs530 to Rs1,000 per bag. Again, growers complain they were not provided that subsidy. DAP rates in the international market are equivalent to Rs2,600 and after deduction of Rs1,000 subsidy it should come down to Rs1,600 per bag, but the DAP bag was available for not less then Rs3,000. This would result in decline in the yield despite of governments increase of support price of wheat to Rs950 per 40-kg.

This year’s budget also announced exemption of 15 percent GST on urea and other fertilizer. That benefit is not passed to the growers instead, said Abdul Majeed Nizamani, President Sindh Abadgar Board.

The State Bank said if the agricultural package announced in the federal budget was fully implemented it would, “help increase production, export, boost economy and reduce poverty in rural economy.” The fisheries sector recorded improvement though export to the European Union (EU) member countries remained suspended.

Total fish catch in FY reached 640,000 tonnes against 578,000 tonnes last year. Value of the catch was recorded at Rs18.43 million against Rs16.60 million. Value of the inland fish paid around five times higher than the marine catch that shows low prices in the other market than the EU.

Increased use of fertiliser in Pakistan has increased the yields. The country increased its fertiliser use from 20 kg per hectare in early 1970s to 162.5 kg/ha in FY08. Still it remains low compared to 250kg /ha in Northern Europe and 170 kg in India.

Pakistan is the seventh largest wheat-producer but remains at the 13th number in yields. India is at number eight and China at seven. Pakistan’s wheat yield per hectare is 2.37 metric tonnes; India grew 2.62, where the UK has the highest output of wheat with 7.78 metric tonnes per hectare.

Similarly, Pakistan is the fourth largest cotton producer in the world but holds eighth position in its yield, 12th largest rice producer but remains at no.18 in yield with 2.96 metric tonnes per hectare. India is one number forward to us. Egypt with the top yield of rice remains at the top with 9.52 metric tonnes per hectare.

Pakistan can learn lessons from other countries to increase its yield, as water shortages would not allow more land cultivation.

Increase of the value-addition in agricultural crops, on the basis of cotton, have potential to double country’s exports in next five years, said Syed Mohibullah Shah, Chief Executive Trade Development Authority of Pakistan.

 

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‘2,851MW power to be added by next year’ ​

Sunday, December 21, 2008

ISLAMABAD: Minister for Water and Power Raja Pervez Ashraf on Saturday said a total of 2,851 MW electricity will be added to the system by next year with the help of private sector.

Chairing the 79th meeting of the Board of Private Power and Infrastructure Board (PPIB) here, the minister said by subsequent additions into the system each year will accumulate to around 9,500 MW electricity in the next five years.

He said the government is committed to achieve its targets for inducting more power capacity into the national grid to get rid of the menace of load shedding by next year. He congratulated that the 165 MW Attock Gen Power Project has already been synchronized which will shortly be inaugurated by the President. The power plant is due to start supplying power to the system very soon.

The Managing Director PPIB briefed the Board that the rental power projects being processed by PPIB are showing good progress and their contracts have been concluded, while PPIB will solicit additional rental power projects on fast track basis through press, in the coming week, he added.

He said while the projects are being processed on a fast track basis, at the same time an exercise is being carried out to establish realistic power demand supply scenario for all future projects. For future projects, an optimum fuel mix is being considered, and imported coal projects may also be further encouraged in the future, due to the declining cost of coal in the international markets, in addition to the efforts of developing country’s domestic coal and hydel resources.

Ashraf lauded the efforts of the PPIB team for attracting the investor community for establishing power plants in the country, and processing project proposals. It was decided that in order to improve the performance of PPIB, it should be given a statutory status and after due inputs of concerned ministries, a summary will be moved for an act of parliament to provide such a status to PPIB.

 

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L/C for only 150MW rental plant opened ​

Power outages may increase​

Sunday, December 21, 2008

LAHORE: Electricity loadshedding is likely to increase in 2009 as out of the proposed addition of 1,400-megawatt rental plants to the national network, letter of credit for only 150MW plant has been opened.

The News has learnt that the government’s plan to eliminate loadshedding by the end of 2009 has suffered a big setback as the Pakistan Electric Power Company (PEPCO) has been unable to open L/Cs for a majority of rental power plants which were to be imported and installed by June next year. The import of even the 150MW rental plant for which the L/C has been opened is in jeopardy as sellers have sought guarantee of a foreign bank before supplying the plant.

There seems to be no possibility of adding to the capacity of independent power producers before the first quarter of 2010. PEPCO is constructing two thermal power plants of 500MW each and electricity from these would be available in the first quarter of 2010 if the projects at Nandipur and Chichuki Malian are commissioned on schedule. All other IPPs would be operational after these two projects.

PEPCO might also be able to generate 160MW of electricity from the Mangla raising project which has almost been completed. However, much would depend on availability of water in summer. Mangla could not be filled to capacity this year due to water shortage while its storage capacity has been enhanced by 2.9 million acre feet.

This means that electricity distribution would have to be managed through the currently installed capacities for at least another 15 months.

It has been learnt that PEPCO’s financial problems are the main reason for its failure to open L/Cs for rental power plants. Its miseries have been compounded by the failure of the KESC to pay its outstanding amount which has accumulated to over Rs75 billion. This figure is more than double what the KESC owed PEPCO a year ago.

Presently, PEPCO has installed thermal power generation capacity of 4,464MW, though actual production varies from 2,300 to 3,800MW. Gross electricity generation capacity of independent power producers is 6,296MW, but actual power produced is 5,674MW.

Thermal power available to PEPCO would remain stagnant at 9,274-9,474MW if plants perform with maximum efficiency. Thermal generation capacity of units managed by Water and Power Development Authority (WAPDA) deteriorated in the past as they were being privatised and their maintenance was ignored. Since privatisation did not take place, WAPDA would now try to reclaim lost capacity through further investment, which is not available at present.

Maximum hydropower generation capacity is around 6,400MW while Chashma power station provides 350MW nuclear electricity. Hydropower production is inconsistent and is subject to release of water from dams according to the indents issued by irrigation authorities. Presently, PEPCO is producing less than 1,500MW of hydro-electricity, which dips to near zero when canals are closed every year in winter for one month.

During summer this year, PEPCO resorted to 8-12 hours of loadshedding due to shortage of electricity. Keeping in view normal growth in power consumption and stagnant production, duration of outages is likely to increase next summer. It is pertinent to note that power outages would have increased last year had the industrial sector been fully operative.

 

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Govt borrows Rs205bn in four months ​

Sunday, December 21, 2008

ISLAMABAD: The government’s net domestic borrowing during July-October stood at Rs205 billion, increasing total outstanding debt to Rs3.471 trillion.

During the last fiscal year ended June 2008, total domestic debt stood at Rs3.26 trillion and on June 2007, it was at Rs2.6 trillion. In absolute terms, the debt is increasing substantially due to large trade deficit, savings-investment gap, slow revenue growth and rapid increase in public expenditure.

In the current political and economic situation, these factors make it difficult to contain debt.

Provisional data released by the State Bank of Pakistan (SBP) showed that the increase in domestic debt during the four months was mostly due to a rise in floating debt. Unfunded debt also jacked up total debt but permanent debt declined slightly.

During these four months, floating debt went up by Rs179.2 billion, un-funded debt increased by Rs33.8 billion while permanent debt declined by Rs8.1 billion.

Floating domestic debt, mainly comprising short-term debt instruments and market treasury bills, maintained a rising trend and stood at Rs1.637 trillion at the end of June 2008. During the following four months, it went up to Rs1.816 trillion.

Permanent domestic debt comprising medium and long-term market loans, federal government loans, special government loans, federal instruments and prize bonds, stood at Rs600.3 billion, which was at Rs608.4 billion at the end of fiscal year 2007-08.

Unfunded domestic debt, comprising National Savings Schemes (NSS), at the end of last fiscal year stood at Rs1.02 trillion, which was at Rs1.054 billion in October 2008.

Data reveals that net mobilisation under all instruments of NSS was on the rise during the period under review, against the corresponding period of last fiscal year. The reason for this was the attractive interest rate extended by the government on these instruments.

Investment in saving instruments such as Bahbood Saving Certificates, Defence Savings Certificates, Pensioners Benefit Accounts, Special Savings Accounts, Special Savings Certificates, Regular Income Certificates increased, while deposits in savings accounts, Mahana Amadani Accounts and GP Fund accounts declined.

 

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FDI in telecom sector falls by $0.4bn in FY08, revenues rise by 21pc ​

Sunday, December 21, 2008

KARACHI: In many aspects, FY08 proved to be an important year for the local telecom industry.

Implementation of various important regulatory measures took place this year along with many other developments.

In this regard, Pakistan Telecommunication Authority has recently released its annual report for FY08 that encompasses the state of telecommunications industry during the year.

On regulatory front, during the year, PTA promulgated/enforced many notable measures and determinations. As a regulator, measures to complete migration of mobile subscriber numbers to eight digits, issuance of fixed line licences for AJ&K and NA region and implementation of Mobile Number Portability system are worth mentioning.

Furthermore, revision in APC (Access Promotion Contribution)/settlement charges and reduction in MTR (Mobile Termination Rates) were the noteworthy determinations. As far as MTR is concerned, it is important to mention here that this new announcement of interconnection rate determination is based on Long-Run Incremental Costs (LRIC) model. Pakistan is the first country in the region to achieve this regulatory milestone.

Last but not the least, the authority has also mentioned submission of its policy reviews on telecom deregulation and mobile cellular policies, which are scheduled to complete their five-year term of implementation in 2008 and 2009, respectively.

Key highlights of the telecom industry in Pakistan.

Telecom Economy Sector: The teledensity of the country reached to a level of 58.8 percent in FY08 as against 45 percent during the preceding year. However, the rate of increase remained slower than last years due to a host of factors like deceleration in cellular growth, increase in taxes and higher inflation.

The sector’s contribution to the Exchequer remained at Rs112 billion, almost Rs10 billion higher than FY07. On segregated bases, the major contribution was from GST at Rs44 billion, 4pps higher contribution to the overall telecom tax pie than FY07.

The telecom imports for the fiscal stood at $1.33 billion, slightly lower than FY07, while these imports were almost 4 percent of the overall imports of the country as against 4.4 percent during FY07.

Investment in the sector also remained lower than last year at $3.1 billion as against $4 billion during FY07 with major contribution from cellular segment at $2.3 billion.

On segregated bases, Telecom FDI stood at $1.4 billion (28 percent of total FDI) as against $1.8 billion (36 percent of total FDI) in FY07.

In FY08, the sector’s contribution to the country’s total FDI stood second highest which remained highest in the preceding three years (FY04-07).

Of the total telecom FDI, the privatisation proceeds were $133.2 million, almost 50 percent lower than FY07.

The sector generated revenues worth Rs278 billion in FY08 with 21 percent growth over FY07. Cellular segment remained the major contributor with 65 percent share to the overall revenue as against 56pc in FY07.

Cellular Segment: Cellular density stood at 54.7pct in FY08, 15.7 notches above the mark of FY07 while the growth in subscribers remained at 40pc at 88m subscribers.

In the regional context, Pakistan’s cellular density stands at fourth position, higher than India, Sri Lanka, Bangladesh, Nepal and lower than Hong Kong, Singapore, Malaysia.

Infrastructure expansion gauged by the cellular cell sites expanded by a whopping 57 percent to 21,518 sites.

Total Revenues of the segment grew by 37 percent to Rs182 billion as against Rs133bn in FY07. Average Revenue Per User (ARPU) of the segment stood at $3.1, slightly lower than FY07.

Total Cellular Traffic stood at 43bn minutes, 31 percent higher than last year.

Long Distance International (Carrier Services): In FY08, total Point of Presence (PoP) of the segment increased by 40 percent to 178 as against 127 in FY07.

The revenues of the new LDI operators excluding PTCL increased by 42 percent to Rs22 billion versus Rs15 billion in FY07.

The LDI investment stood at $390 million, 35 percent lower than FY07 and with almost 77 percent contribution from Link Direct at $300 million.

The outgoing LDI traffic was 1.66bn minutes - 31pc higher than FY07. The incoming LDI traffic increased by 163pc to 5.5bn minutes against 2bn minutes handled in FY07, most of it routed from the UK (37pc) and the USA (28pc).

The significant growth in the incoming and outgoing traffic was the result of various regulatory measures by the authority like grey traffic curbing measures (Technical Facility to Monitor IP Bandwidth and International Traffic Monitoring System) and stiff competition that lowered the tariffs notably.

Local Loop, Value-added and Broadband Services: The decline in fixed line penetration continued with FL density further squeezing by 34bps to 2.7 percent versus 3.04 percent in FY07. Furthermore, Rural and Urban densities turned out to be at 1.2 percent and 1.5 percent, respectively.

The WLL subscriber growth also seems to be losing the subscriber addition growth with the total standing at 2.2 million in FY08 compared to 1.7 million in FY07. PTCL remained the market leader with 53 percent share and 33 percent y-o-y growth. The penetration of the segment also increased to 1.4 percent as against 1.1 percent in FY08.

The WLL infrastructure expansion gauged by Cell sites increased by 49 percent to 2,897 sites versus 1,946 sites in FY07.

Card Payphones also increased by 16 percent to 449,000 while Telecard remained the leader with 40 percent market share followed by PTCL with 30 percent share. WLL based PCOs dominated the segment with 59 percent share in the total PCOs.

At the end of July 2008, broadband subscribers of the country reached to the level of 170,000 that is 150 per cent higher than the subscribers in the same month last year.

The DSL - digital subscriber line - remained the leading technology in the country with almost 65 percent subscriber being served through this medium which followed by HFC (Hybrid Fiber-Coaxial) at 25 percent.

 

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‘Pakistan is good for investment, tourism’​

LAHORE: Pakistan is a very attractive country for investment and tourism where the profit becomes double in a very short time period.

Head of Hyatt’s Global Technical Services Department (Vice President, Technical Services) Malcom G Turner said this on Saturday while addressing a press conference organised by the Pace Circles, which was also attended by CEO Pace Pakistan Moeed Rehman, Director Aamna Taseer, Group Director Finance Sardar Ali Watto and General Manager Raza Ahmed Khan.

“Hyatt Regency has constructed its first hotel in Hong Kong in 1961 and after that a number of hotels were established across the world,” he said adding that currently the management is planning to establish 96 branches across the world out of which 20 will be constructed in China.

He further said that in Pakistan, the contraction of hotel is going in Lahore’s biggest shopping mall named Pace Circle and it will take around two and a half year in completion after which the people of Lahore will get new advantage to refresh and enjoy them.

“The hotel will provide apartments, shopping centre, banquet hall, gym, health and fitness centre, social centre, guest rooms and all need of life,” he added.

On this occasion, Rehman said that one of the projects is Pace Circle which includes Hyatt Hotel, a shopping mall and apartment complex, while a number of leading architects, interior designers other consultants including Creative Kitchen Planners, KROLL Security Group, ACVIRON Acoustics Consultants, Bo-Steiber Lighting Design and Green Architects are working with the local construction company.

“Pace Circle will be a landmark complex comprising of Hyatt 5-star luxury Hotel with 300 rooms and state-of-art Hyatt-serviced and Pace managed apartments. A number of giant companies have invested for it including Hyatt’s Global Technical Services, Hyatt International Hotels,” he added.

He said that currently there are six Pace Shopping Malls in three big cities of the country including Lahore, Gujranwala and Gujrat. “After the terrorist attack on Marriott Hotel, Islamabad the investors were not interested in investing in the country but when the management of Pace Circle Pakistan has contacted with Hyatt Global, they assured for their full cooperation and possible help in investing in the country. The total cost of the hotel is $150 million, he added.

 

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ADB finalising Country Partnership Strategy for Pakistan​

ISLAMABAD: Asian Development Bank (ADB) is finalising a new five year Country Partnership Strategy (CPS) 2008–12 for Pakistan, official sources at Economic Affairs Division told Daily Times on Saturday.

Country Partnership Strategy 2008–12 would focus on financial assistance for reforms, development of major infrastructure sectors, second generation reforms to strengthen governance and services to promote structural change, development of the urban and rural economy for balanced development, and effective implementation for development effectiveness and results, the official added.

Bank’s annual lending to Pakistan during 2008-09 is expected to be around $1.8 billion and it is also hoped that ADB’s new Pakistan CPS would offer substantial financial resources to Pakistan to execute its development agenda as well as reforms.

Existing CSP for Pakistan was prepared by ADB in May 2002 that identified good governance, sustainable pro-poor growth, and inclusive social development as the focal areas. A CSP Update (CSPU) for 2006-2008 was prepared and endorsed by the ADB Board in 2005 for a total lending of $3.72 billion. Under the CSPU (2006-2008), the emphasis was on lending for economic infrastructure, which was in consistent with the high priority attached to it by the Government’s Medium Term Development Framework (MTDF).

ADB and Pakistan in June 2008 had agreed that a mechanism would be evolved for careful evaluation and formulation of projects in water, energy and communication and after their approval and the criteria fixed for their implementation would be strictly followed.

Both sides discussed the scope of financial requirements and the assistance being provided by ADB for the various ongoing projects as well as the projects to be implemented in future.

Pakistan is situated at the confluence of Central Asia, Western Asia and South Asia and wants to build up logistics and networks of road and rail to Afghanistan and communications links to the Central Asian region. Pakistan had on many occasions emphasised the need for developing a sound and strong infrastructure and ADB could extend its support for better communication and connectivity as well as for exploitation of its energy and water resources so that the country could initiate projects and programme for the uplift of the country and welfare of the poor.

Ministry of Communications is focusing on the requirements for the expansion of communication networks including Trans Indus connectivity, National Trade Corridor, Asian Highway Routes, North-South corridor connecting Central Asian States, dualization of Torkham-Jalalabad road, rehabilitation of Karakoram Highway, extension of Gawadar linkages and expansion of existing network.

 

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IMF conditions 2nd installment of loan for Pakistan​

LAHORE: The International Monetary Fund (IMF) has conditioned the remaining portion of a loan to bail out Pakistan on a Rs 100 billion reduction in the development budget and the complete withdrawal of the subsidy on electricity by December 31, a private TV channel reported.

According to the channel, Pakistan has to give the IMF a performance report for the first six months of the current fiscal year by January 15.

The channel said that the condition – which came at a meeting between an IMF delegation and government officials – has been linked to the second instalment of the loan.

The channel said that a Rs 115 billion subsidy had been given on electricity over the last five months, but an increase in prices was now likely by December 15.

Separately, Finance Adviser Shaukat Tareen said that tax rate would not be increased further, but steps would be taken to increase the number of taxpayers. His comments came at a seminar of the Federal Board of Revenue in Lahore.

He said a change in tax policies was now necessary. He said that the increase in the rate of interest was a result of soaring inflation.

 

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Investors to be invited for rental power projects ​

ISLAMABAD (December 21 2008): The Private Power and Infrastructure Board will invite investors to set up additional rental power projects of 500MW on fast track basis next week. It was informed during the 79th meeting of the Board of PPIB held on Saturday. Water and Power Minister Raja Parvez Ashraf chaired the meeting.

Sources privy to the meeting revealed to Business Recorder that the PPIB is working out setting up of additional 500MW rental power projects to bridge power shortfall. The PPIB will solicit additional rental power projects on fast track basis through press in the coming week.

It was decided during the meeting that the PPIB should be given a statutory status and after due inputs of concerned ministries, a summary should be moved for an Act of parliament to provide such status to the PPIB. The PPIB is currently working under an executive order.

The meeting was informed that a total of 2,851MW would be added to the system by next year, which by subsequent additions into the system each year will accumulate to around 9,500MW in the next five years through the private sector. The minister said the government is committed to achieving its targets for inducting more power into the national grid and get rid of the menace of load shedding by the next year.

The minister congratulated that the 165MW Attock Gen Power Project has already been synchronised which will shortly be inaugurated by the President of Pakistan. The power plant is due to start supplying power to the system very soon. The Managing Director of PPIB briefed the Board that the rental power projects being processed by the PPIB are showing good progress and their contracts have been concluded.

He conveyed to the Board that while the projects are being processed on a fast track basis, at the same time an exercise is being carried out to establish realistic power demand supply scenario for all future projects. Raja Parvez Ashraf lauded the efforts of the PPIB team for attracting the investor community for establishing power plants and processing project proposals.

The meeting was attended by Water and Power Secretary Ismail Qureshi, Planning Commission Secretary Suhail Safdar, Petroleum and Natural Resources Additional Secretary G A Sabri and PPIB Managing Director Fayyaz Elahi, besides other senior government officials and private members of the Board.

 

[Neo]

Germany allows 19 percent VAT refund to Pakistani businessmen​

ISLAMABAD (December 21 2008): As a result of concerted efforts by Pakistan Embassy in Berlin, the German government has concurred to include Pakistan in the list of countries whose business entities can claim refund for Value Added Tax (VAT) from July 1 2008. Resultantly, Pakistani businessmen have been allowed to claim refund of 19 percent VAT in Germany.

The decision of the German government will help further boost trade relations between the two countries by the increased participation in trade related activities. According to the notification of the German Ministry of Finance, the administrative formalities in order to benefit from VAT exemption had been completed.

Under The German VAT regime, the rate of the levy is 19 percent as compared to lower rate of general sales tax (GST) at the rate of 16 percent. German VAT law would provide refund facility on payment of VAT during procurement of goods and services during exhibitions in Germany. Pakistani entrepreneurs will now be able to claim refund of VAT paid by them at the time of purchase of goods and services during their visit to Germany for business purposes including participation in exhibitions and trade fairs. Claims can now be lodged for VAT paid after July 1, 2008.

The business community of Pakistan and various trade promotion bodies working under the government of Pakistan including the Trade Development Authority of Pakistan and the Engineering Development Board will be able to make enormous saving. Henceforth, the amount that will be refunded will be significant as a large number of Pakistani businessmen visit Germany every year and Pakistan has large participation in various German trade fairs and exhibitions.

Refund of VAT paid by Pakistan business community and various trade bodies for purchase of goods and service, especially during participation in exhibitions/fairs held in Germany, was a long standing demand of all the chambers and other trade associations in Pakistan. Pakistani business community is now not required to pay VAT for purchase of goods and services during their stay in Germany for business purposes.

 

[Pk_Thunder]

Purchase of 75 locomotives: award of contract to Chinese firm evokes controversy​

RECORDER REPORT
ISLAMABAD (December 22 2008): A glaring lack of transparency or fair play perceptibly bordering on infighting, bickering and squabbles among the senior officials of the Railways and the Railways Ministry has led to cause a highly unfortunate situation.

The deal that the ministry has struck with a Chinese firm for the purchase of 75 locomotives has been termed by its competitors-General Electric USA- "unfair" and in violation of procurement rules while the Chinese firm not only contests these charges, it claims that it has been facing unfair delay in the convening of a contract signing ceremony.

Inquiries conducted by Business Recorder show that the Chinese firm did eventually pass the pre-qualification and technical evaluation stages to qualify for financial bid process amid some highly controversial circumstances, or through an overnight change in the composition of the tender committee at a later stage with a view to giving favour to this company as alleged by its competitors.

These inquiries, however, strongly suggest that the Chinese firm, Dongfang Electric Corporation, turned out to be the successful bidder for the Rs 8 billion locomotives purchase mainly on the basis of the price that the Chinese firm quoted for the deal which was not only substantially less than the one quoted by its competitor-General Electric USA-it was even lower than the PC-I estimated cost.

The other main reason, or perhaps the overriding factor, behind the success of the Chinese firm could be the unique importance and significance of the friendship between China and Pakistan, although the company has been carrying a controversial image because of a badly flawed deal that it struck with PR for the supply of over 50 locomotives a few years ago.

Documents available with Business Recorder show that technical proposals were opened on 25-09-2007 and as many as four bidders submitted their proposals. The technical committee consisting of Sher Ayaz Khan Managing Director/Locomotive Works, Behzad Mehmood Chief Mechanical Engineer/Loco and Habib-Ur Rehman Project Director/Loco Rehabilitation, evaluated the proposals two times and recommended the following conclusions for tender committee's consideration:

i) Dallian Rolling Works-China declared unsuitable for 3000HP, suitable or 2000HP with many reservations and 1500HP 5 locos on trial basis.

ii) General Electric-USA fully qualified suitable for all 3 types of locomotives as a package.

Prior to the review of technical evaluation, the remaining two bidders were disqualified. On 29th July 2008, Technical Committee again disqualified Dallian Rolling Works-China for 3000Hp.

Subsequently, however, the ministry issued letter of intent to Dallian Rolling Works-China around 09-06-2008.

The Chinese firm's competitors have alleged that the Tender Committee ignored several tender conditions and opened the financial proposal of Dallian-China which, according to them, is against PPRA guidelines for two envelops tender on package basis.

The competitors have also alleged that Dallian/Chinese diesel engine has not been standardised by PR because the number of monthly failures is on very high side comparing with any other class of locomotives. That is why Pakistan Railways has not yet issued any performance certificate for 69 locomotives (3000HP and 2000HP) procured from China in 2001 because the performance is not up to the mark.

According to them, fuel consumption of Dallian diesel engine is extremely high as compared to General Electric locomotives equipped with Electric Fuel Injection (EFI) that could further reduce the fuel consumption, and that Axle weight of Dallian locomotives for all 3 classes is much higher than required. It will adversely affect the Pakistan Railways track (Technically it's not possible to reduce the axle weight without removal of certain major assemblies and that Pakistan Railways should have declared Dallian proposal as Non Responsive when they failed to extend the offer validity in July 2008.

Later, the Farooq Aziz tender committee was reshuffled overnight and a new committee was formed headed by Asad Saeed as GM M&S, consisting Naim Mailk AGM mechanical, Tariq Yaseen AGM infrastructure.

Although the Railways Secretary Kashif Murtuza has reportedly defended the action on grounds that the reshuffling or transfers were as a matter of routine and in accordance with rules and that the tender committee is the final authority to award the tender and that those sitting on the technical committee are junior to those in the tender committee, the Chinese firm's competitors believe that the tender committee's unanimous decision in favour of Dongfang was in total disregard of Farooq Aziz Committee, PPRA guidelines and tender specifications. The letter of intent (LOI) was issued to Dongfang without prior approval from the PM in the absence of Federal Minister of Railways, according to them.

Not only has the Chinese firm denied these charges quite vehemently, it has also claimed that its contract was never cancelled even for a single time because it fulfilled all the requirements of the international bid.

It says that the contract document for the purchase of 75 Chinese locomotives was prepared in November this year. Each page of this contract had been signed and stamped by representatives of Pakistan Railways and the Chinese company on November 11 while the signing ceremony was to take place on November15, 2008, in the presence of Prime Minister.

The Chinese firm has alleged that the US Embassy officials had exerted pressure on the Railways for the cancellation of the contract with the Chinese in favour of the US bidder.

It further claimed that the Chinese firm had also offered transfer of technology for the PR Locomotive Factory at Risalpur. About 54 locomotives were manufactured at Risalpur in June this year, while an ordinate delay in execution of the project has also halted production work at the factory. The DongFang Electric Corporation had already trained officials of railways working at Risalpur.

The Chinese firm argues that the price of Chinese locomotive is within the price range given in the PC-1 of the project, whereas the price quoted by the US bidder is much higher than the estimated cost.

Comparative figures are given below for each 3000 HP Completely Built Up (CBU) locomotive:

PC-1 estimated cost: US $1.79 million, Chinese locomotive: US $1.41 million, US locomotive: US $2.80 million.

According to it, the price offered by the US firm exceeds PC-1 estimate by 56 percent, while price offered by the Chinese firm is 21 percent lower than PC-1 estimate. As per the Planning Commission rules, the price of the project cannot exceed the PC-1 estimated price by more than 15 percent. In terms of delivery of locomotives, the Chinese bidder has offered delivery time of 11 months while the US firm had given 22 months period for the delivery of locomotives after the finalisation of the contract.

The chief executive of the Chinese company, DongFang Electric Corporation, told Business Recorder that "our contract was not cancelled even a single time because we fulfilled all the requirements of the international bid, and there was a proper procedure for the approval of the bid, he added.

He further claimed that first the Financial Evaluation Committee of the Pakistan Railways approved the prerequisite of the tender, then the Technical Evaluation Committee approved the bid after removal of objections.

It may be mentioned here that during his recent visit to China, Prime Minister Yousuf Raza Gilani had said he wanted to be present at the formal signing ceremony. However, the Federal Minister of Railways, Haji Ghulam Ahmad Bilour, who took charge of his office on November 14, reportedly raised some objections over the contract and delayed the signing ceremony. He did not forward the file to the Prime Minister for the signing ceremony. Safdar Rasheed contributed to this report from Lahore.