Pakistan Economy - News & Updates - Archive

[Neo]

Understanding between Pakistan and IMF for 2009-10 budget​

0.2% CVT agreed on withdrawal of Rs 25,000 from FCAs​

ISLAMABAD: An understanding between the government of Pakistan and International Monetary Fund (IMF) has reached for imposition of 0.2 percent capital value tax (CVT) on withdrawal of equivalent amount of Rs 25,000 from foreign currency accounts (FCAs) in the budget 2009-10, a senior official at the Ministry of Finance told Daily Times on Thursday.

This has been agreed during Pakistan’s economic managers recent policy level talks with IMF authorities held at Dubai where not only macro-economic targets for the current fiscal year were revised but both sides have also agreed on macro-economic targets for the next fiscal year, the official sources said.

Withholding tax at 0.3 percent is applicable on the cash withdrawal from rupee accounts if the amount exceeds Rs 25,000 in the country. There is also a proposal under consideration at higher level to increase the rate of withholding tax on cash withdrawal from banks from 3 percent to 6 percent for those account holders who are not registered with sales tax and income tax departments and are not filing income tax returns.

Proposed tax on withdrawal from foreign currency accounts is meant to provide a level playing field and to encourage the document of banking transactions through cheques instead of cash payments.

Although the FBR authorities, present during Pakistan-IMF talks at Dubai, have shown ignorance about any such understanding but officials at the Ministry of Finance have confirmed that this proposal has been included in the proposed measures to be taken in the budget 2009-10.

Pakistan’s economic managers have discussed many other proposals as proposed revenue measures to be proposed in the budget for rapid increase in tax-to-GDP ratio from 10 percent in 2008-09 to 12.5 percent in the next three years as against the existing pace of increase in tax-to-GDP ratio, which is 0.2 percent per annum to be increased to 0.6 percent per annum so that revenue collection targets to be agreed with IMF authorities are met.

In this scenario, the government may propose the National Assembly tax collection target at Rs 1.5 trillion for the next fiscal year 2009-10 as against the revised target of Rs 1.3 trillion for the ongoing fiscal year 2008-09 keeping in view inflation, normal growth, FBR efforts and through proposed revenue measures to be taken in the next budget, explained the official.

“The law should be further enhanced to apply to the withdrawals of foreign currency as well as rupee,” stated the joint report of the IMF and the World Bank and added an increase in the rate to 0.6 percent would entice more taxpayers to file income tax returns to claim credit for the amount of tax paid and bring forward payment of tax, said the official.

Withholding tax on cash withdrawal was levied to discourage cash transactions and promote documentation of economy in the country. The tax authorities have been successful in their efforts of taxing money deposited in undeclared additional bank accounts from declared accounts to the tax departments.

 

[Neo]

Less Local Production: HSFO imports increase by 87% in Feb​

KARACHI: The oil industry imports of High Sulphur Fuel Oil (HSFO), to meet the demands of power sector, has increased significantly by 87 percent in February as compare to the same month last year.

According to the Oil Companies Advisory Committee (OCAC), the HSFO imports have reached 459,277 metric tonnes in February 2009 as compared 245,510 metric tonnes in February 2008. Industry people said that oil-marketing firms have imported HSFO in high quantity as the local oil refining companies have produced less HSFO to meet the growing domestic demand of power generating companies. As a matter of fact, the industry’s crude oil imports have also fallen by 19 percent to stand at 587,062 metric tonnes in February versus 708,240 metric tonnes a year-ago. Industry experts were of the view that the cash-starved oil refining companies have reduced their crude oil imports that led to curtail its output of various petroleum products in the previous month. Rising consumption of petrol or mogas during the last few months have led Oil Marketing Companies (OMCs) to import this fuel in February, which is 10 percent higher than January. Petrol demand has increased as the disparity in it’s alternate fuel Compress Natural Gas (CNG) prices has narrowed down since January 2009. Besides, natural gas load shedding also drove to jack up petrol consumption in the northern part of the country.

Oil refining firms used to produce petrol more than the domestic needs and exported it to various countries, however, the oil industry has not been exporting petrol since April 2008 as the domestic demand stretched in this period. Also, the local refineries’ petrol production was also seen decreasing. Imports of jet fuel (JP-1) was also recorded on the rise and posted 120 percent growth with 22,681 metric tonnes in February as compared to 10,286 metric tonnes in February last year. The demand of JP-1 has been growing in the national airlines on their increasing domestic and international traffic particularly for the last two months. On the other hand, aircraft exports to Afghanistan have also been growing handsomely. High Speed Diesel (HSD) imports also increased by 10.6 percent with 385,364 metric tonnes last month as compared to 348,273 metric tonnes during the same period last year.

 

[Neo]

Expiry of EU anti-dumping duty paves way for Pakistan’s export​

KARACHI: The European Union (EU)’s anti-dumping duty on bedlinen import from Pakistan expired on Thursday paving the way for its export to member countries on normal duty structures enjoyed by its competitors.

The EU’s economic journal notified the expiry of this duty after it received no request for reviewing it from the member states in the stipulated time period. The European Commission is responsible for investigating complaints and assessing whether they are justified.

According to the EC policy if a written request for review is not received in the stipulated time period, the anti-dumping measures will automatically expire on the next review date. The Pakistani bedlinen products were subjected to 5.8 percent anti-dumping duty along with the normal custom duty, which made the products costly compared to its competitors like India and China, which grabbed the major share of Pakistan’s export.

Pakistan lost $250 to $300 million annually in bedlinen export due to this duty and its benefit went to China and India and by some extent to Indonesia during this period.

EU slapped an anti-dumping duty of 13.1 percent in early 2004, but following the protest of Pakistani exporters, the European Commission immediately announced a partial review. European Community rules to deal with dumping date back to the organisation’s earliest days. They are targeted at dumped imports, which cause significant injury to Community producers. If left unchallenged, dumping gives the third country exporter an unfair competitive advantage, which could be exploited with considerable negative consequences for the Community industry.

In the 1st closure of the review, the duty was brought down to 9.9 percent, which was further cut down to 7.6 percent in second review. While in May 2006, the EC further brought it down to 5.8 percent. Textile exporters hailing the latest development for the bedwear industry of the country said that it would help this sector to make up the losses, which it incurred after undergoing this punitive duty five years back.

Zubair Motiwal, a well-known figure in textile circle said that although, the removal of this duty brought some hope for the home textile export, however, the severe recession in Europe would obstruct our products to gain deeper ground in the EU market.

“WE suffered immensely at the hands of this anti-dumping duty and biggest one is the loss of a lucrative market,” Motiwala noted and added that regaining of this market completely would take a long time.

He also ruled out the greater market access in the EU under its GSP Plus scheme as country didn’t meet the required criteria. This status is granted to Least Developed Countries (LDCs) and Pakistan is not included in this category.

Pakistan made untiring efforts in the past years to remove the anti-dumping duty and for greater market access contending that country paid a heavy price by joining the Western allies in their war on terror and deserved trade concessions from its trading partners in West.

 

[Neo]

Pakistan seeks UAE’s help for FTA with GCC​

ISLAMABAD: Pakistan has sought market access from Canada and help from UAE for early completion of Free Trade Agreement (FTA) with Gulf Cooperation Council (GCC).

The Ambassador of UAE, Ali Saif Sultan Al-Awani, and the High Commissioner of Canada Randolph Mank called on the Federal Minister for Commerce Makhdoom Amin Faheem in his office on Thursday. Secretary Commerce Salman Ghani was also present in the meeting.

Ambassador of UAE told the minister that they were like a family and they consider Pakistan as their second home. He expressed the desire to increase the number of flights from Pakistan to Dubai. The federal minister expressed that UAE has become the third largest trading partner of Pakistan and asked the ambassador to use their good offices for support to conclude FTA with GCC. The total trade volume with UAE is $5,483 million and exports from Pakistan amount to $2070 million. Main exports from Pakistan to UAE are apparels of fissile material, chemical materials, and construction material including cements, whereas chemical materials and products are the main imports from UAE.

Mank told the federal minister that they had long traditions of commercial and trade relations and the Canadian government is interested to help Pakistan’s economy.

 

[rubyjackass]

Hey Neo,
Can you give me some link about tax structure in Pakistan?
Unless you can explain it here.

 

[Neo]

Five top foreign companies making huge investment: National Assembly informed​

ISLAMABAD (March 06 2009): Minister of Investment Waqar Ahmed Khan has informed the National Assembly that five top foreign companies are making huge investment in Pakistan for construction of hotels, shopping malls, international chain stores and real estate projects, costing billions of dollars.

In a written reply on Thursday, the minister said that presently various foreign companies are engaged in the business of shopping complexes (Malls), hotels and residential projects in Pakistan without collaboration of local companies.

M/s Metro Cash and Carry, Germany and M/s MAD Hypermarkets Pakistan, Dubai are establishing retail chain stores in Pakistan independently. Similarly, M/s Pak Gulf Construction Company, M/s Al-Ghurair-Giga Group and M/s Emmar Properties of UAE are foreign companies and have launched their residential, commercial and hotel projects here.

Details of investment made by foreign companies revealed that the estimated cost of M/s METRO Cash & Carry would be Euro 200 million for investment in trade/ services/consumer products. The company has planned to open at least 10 Cash & Carry wholesales centres in all major cities of Pakistan including Multan, Sialkot, Rawalpindi and Gujranwala. Currently, two stores in Lahore and one each in Karachi, Islamabad and Faisalabad are operational. Their second store in Karachi will be opened soon, the minister informed.

He further said that the estimated cost of Carrefour Store, Lahore, a project of M/s MAF Hypermarkets Pakistan (Pvt) Ltd, (Dubai), comes to $31.3 million. The company from Dubai is opening first ever store in Pakistan at Fortress Stadium, Lahore and is planning to open about 10 more stores in Karachi, Lahore, Islamabad, Multan and Faisalabad during next five years.

The estimated cost of Centaurs Blue Area, Islamabad being constructed by M/s Pak Gulf Construction Company (PGCL), is US $450 million. It is a joint venture between M/s Sardar Builders Holding (UAE) and Al-Tamimi Global Company (Saudi Arabia). The project is under construction and expected date of completion is 2011, he added.

The estimated cost/investment of World Trade Centre, Gold Crest, DHA Islamabad, a project of M/s Al Ghurair and the Giga Group, UAE, is US $1 billion. The project is under construction and to be completed by December 2010.

The projects of Highlands DHA-I, Islamabad, Canyon Views DHA-II, Islamabad and Crescent Bay, DHA-VIII, Karachi are being implemented by M/s Emaar Properties (Public Joint Stock Company) UAE. The estimated cost and investment of these projects is $2.4 billion. The projects are underway and to be completed by December 2014, he concluded.

 

[Neo]

Hey Neo,
Can you give me some link about tax structure in Pakistan?
Unless you can explain it here.

Sure...let me do some research and I'll explain in a new thread.

 

[Neo]

$5m investments likely from Middle East, China ​

Saturday, March 07, 2009

LAHORE: Pakistan is expected to receive some $5 million worth of investments from China and the Middle East in the current financial year and a major share of that amount may go to the horticulture sector.

Federal Investment Secretary Tariq Iqbal Puri disclosed this in a meeting held at the Pakistan Horticulture Development & Export Board (PHDEB) head office on Friday. Federal Investment Minister Waqar Ali Khan was also due to attend the meeting but he cancelled the visit at last moment on ‘security concerns’.

Puri urged investors to avail tremendous investment opportunities in Pakistan where highly professional, qualified, competent and hard-working workforce is also available. Giving salient features of the government’s incentive-based, investor-friendly policies, he said Pakistan’s investment policy is the most liberal in the region.

“Most of our economic sectors are open to foreign direct investment where foreign investors can receive 100 per cent equity. Safety of investment is assured and we have signed Bilateral Investment Treaties (BIT) with many countries worldwide.”

He further said that government processes and procedures are being streamlined and a number of incentives and facilitating measures are being taken for promoting business activities. These included the network of industrial estates and export processing zones, economic zones with tax holidays, concession in customs duty on import of plant & machinery and unrestricted outward remittance of capital, profits, royalty, technical & franchise fees etc. Special Economic Zones are proposed to be set up in different parts of the country.

Earlier, PHDEB Chief Executive Officer Shamoon Sadiq said in his presentation that the horticulture sector possesses a great potential for development. However, its growth is inhibited by multitude of constraints. “Per hectare yield is very low compared to the international benchmarks. Products are perishable by nature and therefore require proper handling after harvesting to keep them in good condition till they reach consumers and export destinations.”

In the existing scenario, a high percentage of horticulture produce is wasted due to ineffective post-harvest practices. As per the estimates, about 25 to 30 per cent of the total production of fruits and vegetables is wasted due to the lack of proper post-harvest handling. This wastage can be reduced by adopting methods that can improve the shelf life of the products after harvesting. High post-harvest losses are mainly on account of insufficient packing/grading and cold storage facilities along with the absence of refrigerated transport/containers. All such constrains can be eliminated through the foreign investment.

 

[Neo]

IDB to finance Pak projects ​

Saturday, March 07, 2009

LAHORE: Islamic Development Bank (IDB) is ready to finance up to 65 per cent cost of Pak projects in textile, agriculture, energy, food, hosiery and garment sectors in order to foster economic development and social progress.

IDB President Dr Ahmed Mohamed Ali assured deputy leader of a 10-member Pakistan private sector delegation, Iftikhar Ali Malik, during their visit to the 5th World Islamic Economic Forum, concluded a couple of days ago at Jakarta. The forum was attended by high-profile delegates from 57 Muslim states.

Malik, who returned home on Friday after attending the three-day World Islamic Economic Forum which concluded on March 4, told media persons that he held a productive meeting with the IDB chief who assured him that the bank is ready to finance projects in Pakistan up to 65 per cent.

He said that Pakistani businessmen dealing in textile, agriculture, energy, food, garments and hosiery sector must avail this opportunity. He said IDB chief explained to him that prime object of bank is to foster economic development and social progress of the member countries and Muslim states in accordance with the principles of Shariah.

He said that all delegates from 57 Muslim countries who attended the WIEF session expressed their keen interest to establish and promote trade links with Pakistani counterpart in different sectors.

He said that IDB is also ready for investment in joint ventures with Pak private sector provided the projects must be genuine. He said Pak exporters and traders in order to capture Muslim market must adopt modern techniques of marketing only through promotion of branding trade mark of their international standard products.

He said Pak traders must bear in mind the importance of better quality of products, excellent finishing and outstanding design etc. Malik said he is advising the Pak traders on the basis of his 45 years of experience and added that international quality of their branded products will help capture the European Union and Muslim countries markets.

 

[Neo]

Pak team to seek UAE investment ​

Saturday, March 07, 2009

KARACHI: A top level business delegation of FPCCI and Board of Investment (BOI) will visit United Arab Emirates (UAE) from March 23 to 26, 2009, to attract investment in agriculture sector.

PM’s Advisor on Textile and Chairman Pakistan UAE Joint Business Council Dr Mirza Ikhtiar Baig said here on Friday that the delegation comprising FPCCI President Sultan Chawla and leading businessmen will hold meetings with UAE ministers, top business groups of Emirates and leaders of business chambers.

He said that the delegation was visiting UAE on the instructions of President Asif Ali Zardari with the aim to attract investment from Gulf states in agriculture sector including agriculture insurance.

Pakistani delegation will hold meeting with UAE ministers for Finance and Foreign Trade on March 24, 2009 in Abu Dhabi and attend meetings at Federation of UAE Chambers of Commerce and Industry, Abu Dhabi Chamber of Commerce and Industry.

Later in the day, the delegation members will hold match making meeting with UAE businessmen and attend a lunch by Pakistan Business Council.

On March 25, Pak delegation will meet leaders of Dubai Chamber of Commerce and Industry, attend a seminar on investment and networking lunch.

On March 26, the delegation will hold meeting with Sharjah Chamber of Commerce and attend a networking lunch. Later, in the evening, Pakistani businessmen will attend a networking dinner of Pakistan Business Council Dubai.

 

[Neo]

IDB ready to finance Pakistan textile sector​

LAHORE: Islamic Development Bank (IDB) is ready to finance up to 65 percent of the total cost of Pakistan’s projects of textile. IDB is also ready to finance agriculture, energy, food, hosiery and garments sectors to foster economic development and social progress in Pakistan. President IDB, Dr Ahmed Mohamed Ali assured Deputy Leader of the 10-member Pakistan private sector delegation, Iftikhar Ali Malik during their visit to 5th World Islamic Economic Forum concluded at Jakarta. Iftikhar Malik told newsmen Pakistani businessmen dealing in textile, agriculture, energy, food, garments and hosiery sector should avail this opportunity.

 

[Neo]

China willing to give $450m for Basha Dam​

LAHORE: China has expressed its willingness to give Pakistan $450 million in aid for the construction of Basha dam, a private TV channel reported on Friday. The channel quoted unidentified sources as saying that Pakistan had requested China to lend it technical and financial support for construction of various dams.

 

[Neo]

Suparco predicts 23 million tons of wheat production​

ISLAMABAD (March 07 2009): The Pakistan Space and Upper Atmosphere Research Commission (Suparco), national space agency, has predicted that total wheat production in the country would be around 23 million tons, two million tons less than the estimate of Ministry of Food and Agriculture (Minfa), official sources told Business Recorder here on Friday.

"Suparco has conducted an aerial photographic survey, and assessed that total production of wheat would not be more than 23 million tons," sources said. This disclosure came at a time when wheat harvesting season is about to start in Sindh, most probably from March 15.

In January 2009, the committee on agriculture, headed by Minister for Minfa Nazar Muhammad Gondal had observed that the country would be able to meet the wheat production target of 25 million tons despite a 50 percent shortfall in availability of urea fertiliser. Minfa still believes that Suparcos prediction is not credible, sources added.

A top government official has also cited some Minfa officials as saying that initially they would insist on 25 million tons of wheat production, but at a later stage it would be revised to 23 million tons. Sources said that the Economic Co-ordination Committee (ECC) of the Cabinet in its meeting on March 3, 2009 had also discussed the total estimated yield of wheat in the light of Suparcos aerial survey.

Minfa, however, vehemently negated Suparcos contention and assured the ECC meeting that crop position was good but it would approach the national space agency and collate with it, sources added. The ECC was also given a short briefing on the proposed Guaranteed Minimum Price (GPM) of wheat at Rs 950 per 40 kg which the private sector is unwilling to pay. There are reports in Sindh that private sector would not pay more than Rs 750 per 40 kg to the farmers.

This reporter interviewed some government officials and private sector individuals in 2006-07 who were unanimous that the actual wheat production was about 21 million tons but the government projected it at 23.5 million apparently to show GDP growth of 7.02 per cent in 2006-07. This year, the same exercise is expected to be repeated, rehearsal of which has already been started by the Minfa.

The government had approved Wheat Procurement Plan 2009, according to which Pakistan Agricultural Storage and Services Corporation (Passco) and provincial food departments would procure 6.55 million tons wheat at Rs 950 per 40 kg. For ensuring targeted procurement of wheat by the federal government, it will be proposed in the Cabinet that Passco should be allocated more areas so that it should be able to establish maximum number of centres in those areas, sources added.

The government also decided that banks would not lend against hypothecation of stocks, but on pledging of stocks. Sources said that to ensure that farmers get fair return for their produce during wheat harvest time in April/May 2009, Minfa convened a meeting of all stakeholders and proposed a comprehensive plan.

The Cabinet had accorded approval of a well thought out plan according to which procurement target had been increased from 5 million tons to 6.5 million tons. According to the plan, Passco will procure 1.5 million tons wheat; Punjab 3.5 million tons; Sindh 1.2 million tons; NWFP 0.3 million tons; and Balochistan 0.05 million tons.

Sources said that the provinces and Passco would establish maximum number of purchase centres where farmers would be offered Rs 950/40 kg along with transportation charges determined by the respective procurement agency. "There will be no restriction on inter-district or inter-provincial movement of wheat, and no coercive measures will be adopted by provincial food departments / Passco for procurement of wheat," sources added, quoting officials.

 

[Neo]

Government committed to opening more cross-LoC trade routes​

JAMMU (March 07 2009): The Jammu and Kashmir government is committed to work with the Central government to open more trade routes across the Line of Control (LoC), Chief Minister Omar Abdullah has said. He said his government wants to facilitate more meaningful trade between the two parts of the state by providing effective banking links, simplifying the procedures and easing restrictions on the movement of men and material.

However, opening up of more routes across the LoC will become possible only after the two countries sign an enabling agreement, Abdullah told the state legislative assembly in a written reply to a question by Nazir Gurezi of the National Conference (NC).

He said in pursuance of decisions taken in the round table conference convened by Prime Minister Manmohan Singh, a working group on "strengthening relations across the LoC" was constituted. The working group, among other things, recommended opening of additional routes across the LoC, which includes the Gurez-Astoor-Gilgit road, he said. At present, trade activities and bus services across the LoC have been established via Chakan-da-Bagh in Poonch district and Salamabad in Baramulla district, he said.

In reply to another question by Sofi Abdul Gaffar of PDP, the Chief Minister said that 2,603 and 3,410 persons have been granted LoC permits for the Poonch-Rawalkote and Uri-Muzaffarabad routes respectively. There are 1,277 applications pending with the passport offices in Jammu and Srinagar and 4,923 applications with *** authorities for grant of such permits, he said.

On the steps to be taken for grant of LoC permits to aspirants other than members of divided families, Abdullah said a decision on the matter would have to be mutually arrived at by the governments of India and Pakistan. Similar decisions have to be arrived by the governments of both countries on opening of Jammu-Sialkote, Jhangar-Mirpur and other routes to facilitate the movement of the members of divided families, he added.

 

[Neo]

LSM 100 items growth rate declines by 4.72 percent during July-December​

ISLAMABAD (March 07 2009): Minister for Industries and Production Mian Manzoor Ahmad Wattoo has informed the National Assembly that the large scale manufacturing growth rate of 100 major items has shown decline of 4.72 percent during July-December (2008-2009) against 3.76 percent growth in the last fiscal (2007-2008).

In a written reply to the National Assembly here on Friday, Wattoo said that the LSM 100 items growth rate was minus 4.72 percent in the first six months of 2008-2009 whereas growth rate of 100 items was positive consistently during the last three years and growth of 3.76 percent was witnessed in 2007-2008; 8.6 percent growth in 2006-2007 and 8.3 percent growth was witnessed within the LSM during 2005-2006.

He said that the Ministries of Industries; Finance and Federal Board of Revenue (FBR) would thoroughly examine proposals for the development of manufacturing sector. Under the "Measures to Address Declining Trend in Automobile Sector", the government has granted exemption of 35% cash margin on Letter of Credits (LCs) on the non-localised components for the auto manufacturers/assemblers and raw material for the vendor industry as done for other segments for the industrial sector.

Moreover, 35% LC Margin on 218 items was also removed. He said that the government has also taken other measures for growth in the manufacturing sector. In this regard, Ministry of Industries had convened important meetings to devise price packages for revival of manufacturing sector. The meetings were convened with the major stakeholders of industry and Chambers of Commerce and Industry to facilitate local industry and diagnose the problems of the auto-sector.

Minister for Industries also specified the budgetary measures to develop manufacturing sector in Pakistan. It included discouraging import of non-essential and luxury items and minimising the cost of doing business. The pharmaceutical industry given specified active ingredients, chemicals and packing materials at 5% duty.

The manufacturers have been allowed to import samples duty free as per specified conditions in chapter 99 of Pakistan Custom Tariff (PCT). The exemption of sales tax on medical equipment, apparatus, reagents, disposables, spares and donations supplied to operating hospitals of 590 beds or more. He said that the supplies to Export Processing Zones (EPZs) were exempt from central excise duty vide SRO 333(I)/2002.

However, the entry relating to supplies to EPZs could not be given in Third Schedule of the Act at the time of promulgation of Federal Excise Act, 2005. To remove this adequacy, a new entry has been inserted in Table-1 of the Third Schedule of Federal Excise Act to exempt goods imported or purchased locally for use in further manufacturing of goods in export processing zones.

Under the investment /trade facilitative measures, the manufacturers and particularly soap manufacturers based in Azad Jammu and Kashmir have been extended concessionary duty regime in line with SRO 565(I)/2006, as available to Pakistan based manufacturers.

The specified industries/ projects have been de-linked from the local manufacturing condition for import of required machinery, equipments and raw materials etc. The Tariff based system (TBS) for auto sector has further been improved and release of held up indemnity bonds by the customs department has also facilitated the manufacturing sector, he added.