Pakistan Economy - News & Updates

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The beginning of the end?: Record $7.8bn remittances: what next?​

KARACHI: State Bank of Pakistan proudly announced on Friday that Pakistan received the highest-ever amount of over $7.811 billion as workers' remittances in 2008-09, beating the previous record of $6.451 billion of 2007-08.

Remittances have been rising for past several years, but this year's increase has rung alarm bells in the country. People have expressed fears that Pakistanis working abroad might return home in large numbers owing to the recessionary conditions in developed countries, particularly the US. Also, people who had been working in UAE's construction industry are coming back owing to the slump experienced by the real estate sector there.

In this scenario, flow of money from abroad is likely to go down this year, which will be a difficult situation for the government in Pakistan to manage. Successive governments have relied heavily on remittances to meet trade and current account deficits during the last seven years.

The money sent by overseas Pakistanis used to be invested either in real estate or in some business, which would boost country's gross domestic product. Now the economy of the country will also lose this investment. The return of overseas Pakistanis will be a huge setback to the country's economy also because the large number of people coming back home will look for jobs and put immense pressure on a job market where already there are hundreds of candidates for every new job opening. The jobless rate will rise sharply and could lead to social unrest.

In FY09, workers' remittances showed an increase of 21.08 percent, or $1.36 billion, when compared with FY08. The monthly average remittances during the year stood at $650.95 million as compared with $537.60 million in 2007-08.

The inflow of remittances from USA, UAE, Saudi Arabia, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries amounted to $1.735 billion, $1.688 billion, $1.559 billion, $1.202 billion, $605.69 million and $247.66 million, respectively, compared with $1.762 billion, $1.090 billion, $1.251 billion, $983.39 million, $458.87 million and $176.64 million.

Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during FY09 amounted to $771.03 million as against $726.29 million in FY08.

In June 2009, Pakistani workers remitted an amount of $735.17 million, up $187.76 million or 34.30 percent when compared with $547.41 million sent home in June 2008. The amount remitted in June 2009 is the second-highest received in one month, following $739.43 million sent home in March 2009.

The inflow of remittances into Pakistan from most of the countries of the world increased last month as compared to June 2008. According to the break up, remittances from UAE, USA, Saudi Arabia, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries stood $164.70 million, $154.39 million, $152.33 million, $108.11 million, $68.48 million and $22.95 million, respectively, compared with $88.29 million, $143.57 million, $123.67 million, $90.98 million, $38.08 million and $13.98 million in the same month of last year. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during June 2009 stood at $64.19 million compared with $48.80 million during June 2008. The amount of $7.811 billion includes $0.48 million received through encashment and profit earned on Foreign Exchange Bearer Certificates (FEBCs) and Foreign Currency Bearer Certificates (FCBCs).

 

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‘Exhibitions to be held in Canada annually’​

KARACHI: Single country exhibition in Canada will be an annual feature, announced Chief Executive Trade Development Authority of Pakistan (TDAP) Syed Mohibullah Shah.

Shah announced it in a meeting with Deputy Minister, International Trade and Investment, Ontario, Canada, Dr Bruce A Archibald, a statement of TDAP said on Friday.

They discussed means to strengthen and extend bilateral trade between Pakistan and Canada. The meeting took place in Toronto, Canada, during Chief Executive, TDAP’s visit in connection to the four-day exhibition for Pakistani products, organised by the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) with the cooperation of TDAP and Pakistani Consulate General in Toronto. TDAP chief emphasised that the trade relations between the two countries should be extended through frequent exchange of trade delegations and investment in the potential export sector of Pakistan. He invited sectoral trade delegation from Canada to Pakistan, and the Canadian businessmen and traders, to attend the Expo 2009.

While discussing the various export potential sectors of Pakistan, Shah informed that the Canadian businessmen should expand trade in agro-products through investment and technological cooperation. Pakistan telecommunication sector was also highlighted for Canadian investment and expertise. The TDAP chief also pointed out that the paper industry of Pakistan could benefit largely from the art of technological cooperation and investment of Canadian paper industry.

 

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US House approves $1.5 billion aid for Pakistan ​

WASHINGTON (July 11 2009): The US House of Representatives on Thursday approved a $48.8 billion spending bill to bolster US foreign policy and aid efforts, including to allies like Pakistan and Afghanistan. The legislation includes $2.7 billion in foreign aid for Afghanistan and $1.5 billion for Pakistan as they fight Taliban militants.

It also provides $2.2 billion for Israel, another close US ally, for the fiscal year 2010 that starts October 1. The legislation is $3 billion less than the $52 billion requested by President Barack Obama, with cuts in funds for items such as overseas diplomatic operations and money for agricultural assistance and improved food security.

The House bill, approved 318-106, also took a shot at Obama for trying to avoid close congressional oversight of his administration's actions at the International Monetary Fund, which aims to help countries weather the financial crisis. But with the Senate also working on its version, the legislation is likely to change before becoming law.

The Senate Appropriations Committee approved its own $48.7 billion variant of the bill and included a provision to codify into law Obama's order lifting restrictions on US government funding for groups that provide abortion services or counselling abroad.

The panel voted 17-11 to include such language despite protests by Republicans like Sam Brownback who warned it would spark a huge fight on the floor, particularly since Obama's order already set US government policy.

The Senate bill also includes $1.57 billion in aid for Pakistan and $2.7 billion for Afghanistan, though the latter drew concern from Republican Senator Judd Gregg. "We need to watch that money very closely" to ensure it is not wasted. The Senate committee also struck $15 million for the US television service it beams into Cuba, known as TV Marti, after Democratic Senator Byron Dorgan said the signal was jammed by the Communist government so no one there could see it. Differences between the House and Senate bills will have to be resolved before it can become law.

HOUSE TARGETS OBAMA OVER IMF The House, furious at Obama's attempt to avoid congressional influence over administration actions at the IMF, approved an amendment aimed at exerting more control. Obama drew ire from some lawmakers after he said a previous law Congress passed that provided instructions for the administration's interactions with the IMF would "interfere with my constitutional authority to conduct foreign relations."

House Financial Services Committee Chairman Barney Frank said he had worked hard to get funding approved for the IMF. "The notion that the administration can take the money and pick and choose what it wants to do with the conditions (placed on it) is unacceptable," Frank declared.

Last month, Congress approved $108 billion in credit lines for the IMF as it helps countries with the economic crisis. The current House legislation includes guidance about how the US representative to the IMF and World Bank should vote on issues like health care. It also requires the US representative to the IMF to oppose allowing countries that have supported acts of terrorism to withdraw hard currency like US dollars, Japanese yen or euros from the IMF.

"I think we can all agree that now more than ever we need to keep a watchful eye on how we spend money," said Republican Representative Kay Granger, who authored the IMF provisions. The administration has opposed the IMF restrictions. The House also approved an amendment removing the president's ability to waive a provision blocking aid for Saudi Arabia. "We want to tie the president's hands," said the provision's Democratic sponsor, Anthony Weiner of New York.

 

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Charade in industrial sector ​

ARTICLE (July 11 2009): The economic survey tells it all. The growth rate in industry has fallen and gone negative. Is it the power shortages or the cost of doing business that has gone sky high? Maybe these are not the reasons after all. Economics does not take into consideration any thing that has to do with human behaviour. So what reason can one attribute to this charade that is going on in the industrial sector?

A friend enquired as to what was the function of the Industrial sector. Rather than giving him a straight answer I stated that the reason seems to be in the realm of human appreciation of the continuous efforts that are required from the entrepreneur and the ability to save when the going is good and to be able to take the losses when the going is difficult as when recession hits the economy.

The issues in industry are such that they require massive re-engineering. Re-engineering not only the hardware [machinery] but also software indicated by not only management but also movements in the international markets. The industrial sector is the lead sector for bringing in harmony so far as capitalism is concerned.

That the players are selfish goes without saying. In majority of the cases the industrial sector is forever seeking government intervention on their behalf. One deputy governor of the state bank stated that had the amount provided to these entrepreneurs been placed in a safe deposit the amount earned would have been colossal.

What was the basis for the entrepreneur's selection? Power and authority seems to be the basis for becoming a risk taker. There is no such thing as a risk taker in Pakistan. Industrial bankruptcies are due to management and in house fighting and are seldom attributed to bad faith that might be conjured by either party. Market is not involved at all.

There is considerable amount of bad faith between the ministry and the private sector for the way in which we are organised. The powerful entrepreneur gets rich while the industrial unit falls in to disarray, yet the number of bankruptcies is negligible. An indication of this is that the numbers of units that are not operating are still with the owners. Government policies formulated on the basis of lobbying groups is really based on a kind of blackmail if you do not do this the fall out will be terrible for the economy. The heavens will fall.

This is particularly true of the textile industry. But any industry that becomes a monopoly or cartel is dependent on this kind of thinking get whatever you can from the country and that's it. There is no accountability of the amount that is thus provided.

Industry is related to trade and developing countries are like most of such countries dependent on the few for the amount of foreign exchange that can be obtained for macroeconomics to work. The link to markets is important for the developing countries but over the years the proponents of the free market have also been guilty of protectionism. Ricardo's comparative advantage takes a nosedive. The rationality to this is that the developed countries losing rare jobs to developing countries hoards that are not paid enough and whose human rights records are despicable. In comes, welfare and a bit of politics to subvert all the policies and theories of the economists.

The problem has been with the entrepreneurs in Pakistan as they were not a product of market forces but were the product of contentious collaborative and connective friendship between the powerful and the government. In fact as the 'licenses' to operate a new industrial establishment was provided the seeds of collaboration between the licensee and license giver was established. Licenses are paper authorities for setting up a new industry.

In there urgency to develop quickly all that the developing country was told was that the route to development is through industry and many a developing country have fallen prey to this kind of thinking. The unholy alliance comes to the fore and the WB and the ADB provide the justifications. They do so on behalf of the developed world because of the sale of demand side [machinery] also seems to be the responsibility of these international agencies. In the process they have misallocated resources in the name of the development when in actual fact they have messed up the economic stability of the countries.

Given the kind of actions required what kinds of entrepreneurs are required in an economy? What kinds of people are needed as entrepreneurs? It was the French economist Frank Knight that mentioned entrepreneurs as possible risk takers. That was supposed to be their quality requirement. The market was supposed to fix the poor performers but that has not happened. What is going to happen if the world is not going to operate on the basis of a free market? Nothing much the world's markets will ensure that all limp together towards a subsistence economy. There are no winners in this kind of a game.

For sure there are some who are able to get away with it but policies determined on the basis of some invidious policy framework will never deliver. We have seen this in the case of the recent recession and the perpetual lies and cleverness has been the result of the meltdown that has taken place in the West. The world's largest and most developed economies were tottering and were on the brink of collapse. Why not allow the market to take charge? At that time it takes a lot of heavy effort to follow principles advocated by the economist entirely from the West. One has come to think very dimly of these policies.

Men of caliber seldom come easy and yet they are necessary in a system. They are the ones that give rise to a fighting spirit that is so necessary in the system. They cannot be made of sugar and candy and must have their baptism by fire. The market place is a tough one for the one's that do not apply themselves and therefore, is a very tough place to play.

The market can and does take away supercilious work and looks for depth and excellence. This game is not for the easy going. Yet the policies that have been advocated are in the realm of more ego orientation rather than work oriented. The textile ministries, the textile city created as wishful thinking have nothing common with the markets of the world.

Governments in succumbing to ego-oriented cries from the industry have not been able to develop the culture that goes with the Silicon Valley or the science cities of the world. The prevalent culture in these cities were for the entrepreneur to try their skills and their mental attributes for the continuous friction in world markets and to come up ahead of the pack. Such mental attributes are not developed in a protected markets but where the abilities of one are matched with those of the competitors.

In these times of turbulence Pakistan does not want midgets but men that match Mt. Everest and claim to be akin to the Himalayan range. Can Pakistan produce these much wanted men? It can. The effort has to be made for them to stand on their feet. For creativity to come to Pakistan the effort has to be towards the ability to go for the objectives in a more determined manner and do it without any props. It is possible. No exceptions are what are required for a way of life in the country. Do it and we are well on the way. Men who match our mountains? Yes!

 

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Thar coal project​

EDITORIAL (July 10 2009): The Sindh government and Engro Chemicals Limited have agreed to form a joint venture for the development of Thar coal mining and power generation. The proposal to develop Thar coal for power generation, with reserves estimated at 850 trillion cubic feet (TCF) of gas, about 30 times higher than Pakistan's proven gas reserves of 28 TCF, has been touted for the past forty years.

Unlike Kalabagh dam where there is no provincial consensus, Thar coal project has been held hostage to lack of investment, attributed to stringent environment protection safeguards that barred bilaterals and multilaterals from investing in coal mining projects, to lack of an agreement on tariff between NEPRA and the Sindh Government.

The federal government abolished the Sindh Coal Authority to end the row over the tariff issue and has formed Thar Coal Authority, with the objective of attracting investment for the project estimated at 4 billion dollars in a phased manner - an estimate released by the former Deputy Chairman Planning Commission Akram Sheikh. Chief Minister Sindh is the Chairman of the authority while the Vice Chairman is Federal Minister for Water and Power and Deputy Chairman Planning Commission is its Deputy Chairman.

A genuine attempt on the part of the federal government to resolve all issues pertaining to Thar coal mining and power generation project is evident. Given the massive loadshedding that the country is currently experiencing, and the expected delay for the operation of the Iran-Pakistan gas pipeline, there is an urgent need to explore domestic energy sources. In the absence of other viable options coal seems to be the obvious way to go.

 

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Rice export tops $2bn ​

Sunday, July 12, 2009

KARACHI: Pakistan’s rice export crossed the value of $2 billion in FY08-9 for the second consecutive year.

According to details revealed by QRC Rice Inspection Cell, Pakistan total export from July 1 to June 30, 2009 recorded 2.930 million tons with non-basmati rice export of 2.005 million tons and basmati 0.924 million tons.

Total value of export recorded at $2.044 billion with basmati as well as non-basmati each had a share of over one billion dollars.

Rice Exporters Association of Pakistan (REAP) Chairman Abdul Rahim Janoo described the export a success for Pakistani exporters amid international recession and competition among the other countries that produced the bumper crop.

He said when time was difficult for the exporters when the government intervention had increased the prices locally but exporters focused on competition and achieved the mileage.

Last year too, Pakistan had crossed the export of $2 billion.

Currently, Pakistan has a stock of over 3.5 million tons for export out of last year’s bumper crop of 6.2 million tons.

Janoo said if the government support remained with the exporters, they would cross these figures in the current fiscal year, as Pakistan had more rice available this year.

Rice Exporters Association of Pakistan chairman said quality of Pakistani rice has improved as more than 200 modern mills were processing the grain.

 

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IMF links release of $840m with power subsidy ​

* 2nd round of talks with WB, ADB on circular debt, power sector to start tomorrow
* Islamabad wants power tariff increase in 3 phases​

ISLAMABAD: The International Monetary Fund (IMF) on Saturday linked the release of a third instalment of $840 million to Pakistan with Islamabad’s economic performance and a proposed increase in its power tariff.

A Finance Ministry statement issued at the conclusion of the Pak-IMF talks in Istanbul said the Pakistani delegation led by Adviser to Prime Minister on Finance Shaukat Tareen had successfully completed the first round of talks concerning the establishment of a standby facility in Istanbul. The second leg of talks with the World Bank (WB) and the Asian Development Bank (ADB), concerning improvement in the power sector and the country’s circular debt, would start in Islamabad from July 13, it added. According to the statement, the IMF programme review at these official-level talks would be completed after requisite inputs from the WB and the ADB. The WB and the ADB are financing power sector reforms in Pakistan, and therefore their input on the withdrawal of power subsidy and increase in power tariff would be the main point of discussion, sources said.

They said the IMF had expressed willingness to allow a one-time waiver to Pakistan, extending the time limit for withdrawal of the power subsidy until load shedding had been eliminated from the country. However, the IMF authorities said any additional expenditure should be dealt with through rationalisation of pre-approved expenses in the 2009-10 budget to ensure the deficit was maintained at a pre-approved value.

Three-phased: The WB has calculated that Pakistan needs to raise the power tariff by 23 percent, however Islamabad’s economic managers claim a 17.5 percent increase would be sufficient. Pakistani authorities are also proposing a three-phased increase in the power tariff, rather than a one-time boost.

According to rough estimates, the budget deficit would increase by Rs 66 billion if the power tariff were maintained at the present level. Some analysts have claimed the government would increase the power tariff from October, as the power consumption will decrease with the end of summer.

Official sources said the IMF authorities were not concerned about the removal of the carbon surcharge, adding they had been satisfied with the government’s initiatives following the interim order of the Supreme Court. However, they added, the IMF was not satisfied with revenue collection in 2008-09, adding they wanted Islamabad to increase the revenue collection target in the 2009-10 budget.

 

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‘Rs 90bn paid to IPPs, load shedding to reduce soon’​

LAHORE: The government has paid more than Rs 90 billion of the outstanding amount owed to independent power producers (IPPs) and load shedding will reduce soon, Water and Power Minister Raja Pervaiz Ashraf said on Saturday. Addressing a joint press conference with Punjab Chief Minister Shahbaz Sharif, Ashraf said the previous government had owed more than Rs 190 billion to the IPPs, which had forced the power producers to cease electricity generation, resulting in severe load shedding.

 

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Rupee may fall further as banks start financing oil imports from Aug​

Tuesday, July 14, 2009
By Saad Hasan

KARACHI: Rupee did not lose a significant ground against the dollar on Monday but anticipation of an increase in demand for the US currency from August when commercial banks start financing oil imports is keeping up pressure on the exchange rate, analysts said.

Pakistani rupee shed 11 paisa to close at Rs82.41 to a dollar in the inter-bank market, which is gearing up to start making payments to oil refineries and petroleum marketing companies for crude oil and diesel imports, a task currently assigned to the central bank, they said. Expectation of a cut in the State Bank of Pakistan’s discount rate, at which it lends to commercial banks, is also fueling a rush for the dollar. “Savings rates are already low and it is reasonable to invest in the dollar,” an analyst said.

Analysts also point out that rupee depreciation means that rising foreign exchange reserves of the SBP are not helping to boost perception of the economic stability. Last year, the rupee fell steeply when the country’s foreign exchange reserves dropped to less than half of the current level of over $12 billion.

That proved devastating for many companies depending on revenues in dollars and imports. The national airline, oil refineries and petroleum marketing companies were battered as rupee cost of imports surged out of control. Industry people say the transfer of oil payments to commercial banks will not change anything.

“We are still not allowed forward cover,” a CEO of a refinery said, referring to the bar on hedging against future currency fluctuation. “So I don’t see any difference.” A few days back, the rupee was trading at under Rs81.50.

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Govt to minimise effects of energy crisis on industry​

Tuesday, July 14, 2009

LAHORE: Adviser to Prime Minister on Petroleum Dr Asim has said that the government is using all options at its disposal to minimize the effects of energy crisis on the industry, especially the export industry.

He was speaking at a briefing on ‘APTMA and winter load management’ at the Sui Northern Gas Pipelines Ltd (SNGPL) head office here on Monday. SNGPL MD Rashid Lone, All Pakistan Textile Mills Association (APTMA) Chairman Tariq Mehmood and other senior representatives of both the organisations were present.

The SNGPL managing director said that there is a ban on new CNG connections from July 1. The adviser said that SNGPL must help the textile industry during the worst energy crisis. “To criticise the government for the sake of criticism is of no use as there is a need of presenting solutions to the issues and workable options for moving ahead,” he said.

Dr Asim said “During winter when gas demand rises we cannot cut gas supply to the domestic consumers or CNG stations and at the same time connections of industry as we can not render our workers jobless.

We have to work within a limited parameters and that is the reason every one will have to share the burden in this regard,” he added. Dr Asim assured of sparing time for having regular interaction with All Pakistan Textile Mills Association either on weekly basis at Islamabad or monthly basis at Lahore as per choice of All Pakistan Textile Mills Association.

He said that such an interaction would help find out solutions of the issues and understand each other viewpoints. There is a huge shortfall in demand and supply of energy sources in the country, he said adding the solution lies in importing LPG etc and maximum exploration of indigenous resources in the country.

Chairman All Pakistan Textile Mills Association said that the textile industry has to face a loss of one billion dollar every year due to energy crisis and the country can get such a big amount of foreign exchange by meeting energy demand of the textile industry. “Losing one export order means losing many customers forever,” he said.

 

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Country’s exports target missed by $4.319 billion​

ISLAMABAD: The government has again missed exports target by a wide margin of $4.319 billion as the country’s exports managed to reach only $17.781 billion against the target of $22.1 billion set for the last fiscal year 2008-09.

At the time of the announcement of the Trade Policy 2008 it was targeted that country’s exports would grow by 15 percent in 2008-09, however, due to number of difficulties and issues the exports have actually registered a negative growth of 6.67 percentage during July-June period.

Similarly, the downward revised export target of $19.2 billion has also been missed and country’s exports fell short by $1.419 billion with total exports at $17.781 billion in last fiscal year 2008-09 ended on June 30.

July-June: According to the trade figures released by Federal Bureau of Statistics (FBS) country’s exports were $17.781 billion as compared with the $19.052 billion exports recorded in the last fiscal year 2007-08 showing a decline of 6.67 percentage.

Due to the import restrictive regime introduced by the economic managers, the imports of the country witnessed a decline of 12.87 percent with total imports at $34.822 billion in 2008-09 as compared with imports at $39.965 billion in the previous fiscal year 2007-08. Trade deficit during 2008-09 amounted to $17.040 billion as compared with trade deficit of $20.913 billion in 2007-08, showing a decline of 18.52 percent.

June over June: Pakistan’s exports during June 2009 amounted to $1.537 billion as against the exports of $1.908 billion in June 2008 projecting a decrease of 19.43 percentage. Imports of the country were recorded at $3.339 billion in June 2009 as compared with $4.023 billion imports in June 2008 showing a decrease of 17.01 percentage. Trade deficit during June 2009 stood at $1.801 billion as compared with trade deficit of $2.115 billion in June 2008 projecting a decline of 14.83 percent.

June over May: Exports of the country during the month of June showed a negligible increase of 2.52 percentage with total imports at $1.537 billion as compared with exports of $1.499 billion in May 2009. Import in the month of June 2009 showed a sudden increase of 30.37 percent with total imports at $3.339 billion as against the imports of $2.561 billion in May 2009. Trade deficit during June 2009 as compared with May 2009 increased by 69.72 percent with total deficit at $1.801 billion in June 2009 as against deficit of $1.061 billion in May 2009.

Concentration of exports: According to the economic survey 2008-09, the export growth is hindered because of lack of diversification in export goods. The trend of Pakistan’s export remained more or less same having concentrated on five items namely cotton manufactures, leather, rice, synthetic textile and sports goods. These five categories accounts for 73.5 percent of total exports during July-March 2008-09. Within these few items cotton manufactures remain major contributor in total exports. The exports structure suggests that the intensity of concentration is changing slowly. The share of exports of other item was 17.4 percent in 2002-03, which has now increased to 26.5 percent of total exports during July-March 2008-09. Likewise, more recently, the share of rice and cotton manufactures contributed 11.3 percent and 53.3 percent in total exports, respectively during July-March 2008-09.

 

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$840m IMF loan tranche further delayed​

* IMF executive board talks to review Pakistan’s performance scheduled for August​

ISLAMABAD: The release of the next instalment of $840 million – part of a $7.6 billion International Monetary Fund (IMF) standby arrangement (SBA) – to Pakistan has been further delayed, with a meeting of the IMF executive board, which would review the release, scheduled for August 7.

Earlier, the IMF was supposed to release the $840 million to Pakistan during June, but as a result of the delay in the announcement of the federal budget, the date for an IMF review was also extended, which in turn deferred the payment.

Finance Secretary Salman Siddique told reporters that the IMF executive board was to meet on August 7 in Washington to review Pakistan’s economic performance and budget initiatives, for a decision on the release of the next tranche.

The finance secretary also said that the IMF, during talks in Istanbul, had agreed to allow Pakistan to provide a power tariff subsidy of Rs 55 billion during 2009-10. He said the government would be required to “rationalise” its expenditures to adjust the additional spending of Rs 55 billion.

He said the World Bank (WB) and the Asian Development Bank (ADB) were the major financers of the power sector reforms, and “we have some commitments with them … technical level talks are underway with authorities of both institutions”. The second leg of the talks between the Finance Ministry and the two institutions began on Monday, and is expected to conclude today (Tuesday).

Hina Rabbani Khar – minister of state for finance and revenue – told reporters that the government might consider the termination of gas supply to CNG stations, and divert the available gas to power generation, as “furnace oil prices are on the higher side”.

According to the official sources, WB and ADB are demanding that the government recover the full cost from consumers to bridge PEPCO’s income-expenditure gap.

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Pakistan and Canada trade exposition attracts huge crowd​

KARACHI (July 14 2009): President Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Sultan Ahmed Chawla and other members of Pakistan trade delegation, led by Chief Executive of Trade Development Authority of Pakistan (TDAP) Mohibullah Shah called on Chief Executive Officer of the Brampton Board of Trade of Canada, Gary Collins.

Gary Collins expressed his confidence that the Canada Pakistan Trade Expo will prove to be a turning point in promotion of bilateral trade relations and restoring the confidence of Canadian buyers. He suggested that Canadian market can be exploited by organising such events with continuity, said FPCCI statement issued here on Monday.

President FPCCI Sultan Ahmed Chawla invited Canadian investors to Pakistan for investment in various fields including energy sector, IT sector, cold storage, textile, garments and transfer of technology.

They informed the Chief Executive Officer about the lucrative incentives being offered by Pakistan to the foreign investors. Canada Pakistan Trade Expo indicates the interest of Pakistani exporters and manufacturers in the Canadian market. Mohibullah Shah, CEO Trade Development Authority of Pakistan announced that Canada Pakistan Trade Expo would be organised every year in Toronto providing opportunities to business communities of both the countries to come more closer.

However, he said, the Canadian businessmen have to reciprocate by arranging visit of trade delegations to Pakistan. He also extended invitation to Canadian investors to visit Pakistan Expo 2009 and offered all possible co-operation and assistance for their visit. Canada Pakistan Trade Expo witnessed heavy crowds.

A large number of Pakistani and Canadian buyers visited Expo and placed orders while retail sale was also at boom. The retail sale of Pakistani rice, bed sheets, spices, onyx leather garments was outstanding while the buyers expressed their interest in surgical items, cutlery, fruits, textile.

The expo presenting a house of Pakistani products has proved that the Pakistani products are in great demand in Canada and with consistent efforts our products will make in roads in the North American market which is hitherto unexplored.

The Expo has given a great deal of confidence to the Pakistani exporters and manufacturers that their products have great potential in this market and they have welcome the announcement of Mohibullah Shah Chief Executive of TDAP to make Canada Pakistan Trade Expo a annual event. The tourism material of Pakistan display in the Expo also attracted the Canadian people. CDs on Pakistan tourism were distributed to Canadian people free of charge.

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'Pakistan should ask India to provide transit trade route'​

ISLAMABAD (July 14 2009): Pakistan should ask India to provide her the facility for transit trade with Bangladesh, Nepal and Bhutan, as Pakistan has agreed to provide India similar relaxation regarding trade with Afghanistan, said Mushahid Hassain Sayed.

Talking to Business Recorder here on Monday, after conclusion of a seminar on the issue of "Pakistan-American Relations" under the auspices of Centre for Research of Security Studies (CRSS) he said that it was need of the hour to pursue India to provide Pakistan route of trade with these countries.

He said that Prime Minister Yousaf Raza Gilani must urge Indian premier Manmohan Singh during his meeting on the sidelines of Sharm-el-Sheikh summit of Non-Aligned Movement (NAM) to resolve all the outstanding issues with Pakistan through dialogue.

On a question he said that Pakistan should raise water issue with the Indian premier during the meeting as it was most important for Pakistan's agriculture. Mushahid added that the prime minister of Pakistan during the talks with the Indian premier in Sharm-el-Sheikh summit must ask India to stop human right's violations in occupied Kashmir.

He also said that conspiracies were being hatched through different channels to deprive Pakistan of its nuclear arsenal. Earlier, speaking at the seminar the speakers said that there are three elements of mistrust between the US and Pakistan and stressed United Sates must try to remove this mistrust.

They said that among the three issues, first is US track record of using, ditching and discarding an old ally (Pakistan) after achieving its goals on any important international matter.

Secondly, there always remained an 'India factor' despite the fact that India was ally of Soviet Union but US had always tilted towards India on Pakistan's expense including arms ban in 1965 war, failure to counter India-Soviet nexus in 1971, Pressler sanctions in 1990s and India-US nuclear deal in 2005, which violated both US laws and NPT. Thirdly, post 9/11 remarks of President Bush pertaining to Weapons of Mass Destruction (WMD) and campaign against ISI.

On a question why Pakistan is relying on US assistance and US dominating Pakistan's foreign policy, Mushahid said that Pakistan had achieved what was needed from US and at present US was dominating Indian foreign policy as compared to Pakistan.

Replying to a question he said that whenever USA starts romance with Pakistan there was dictatorship in Pakistan, adding that the dictators served the USA's interests in the best way as US wants only one window operation instead of democratic complications.

"For years, we had an unbalanced policy in South Asia and people are looking at it superficially and say that we have a great relationship with Pakistan, but it was a false relationship because at the first instance it was built against the India-Soviet Union nexus and latter it was against the Soviet occupation of Afghanistan," Mushahid giving the presentation at the seminar reading an excerpts from an interview of Ex US under secretary of states Richard Armitage with Indian daily the Hindu said that US was safeguarding its interests in the region long ago and Armitage gave this interview to the paper 90 days before the 9/11 incidents.

Other speakers addressing the seminar said that the Pakistani leadership was just doing nothing seriously on the issues relating to Pak-US relations. They said that the Pakistan government was even informed about the US Drone strikes inside the Pakistani territory, but the leadership was just making statements.

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Pakistan and Canada trade exposition attracts huge crowd​

KARACHI (July 14 2009): President Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Sultan Ahmed Chawla and other members of Pakistan trade delegation, led by Chief Executive of Trade Development Authority of Pakistan (TDAP) Mohibullah Shah called on Chief Executive Officer of the Brampton Board of Trade of Canada, Gary Collins.

Gary Collins expressed his confidence that the Canada Pakistan Trade Expo will prove to be a turning point in promotion of bilateral trade relations and restoring the confidence of Canadian buyers. He suggested that Canadian market can be exploited by organising such events with continuity, said FPCCI statement issued here on Monday.

President FPCCI Sultan Ahmed Chawla invited Canadian investors to Pakistan for investment in various fields including energy sector, IT sector, cold storage, textile, garments and transfer of technology.

They informed the Chief Executive Officer about the lucrative incentives being offered by Pakistan to the foreign investors. Canada Pakistan Trade Expo indicates the interest of Pakistani exporters and manufacturers in the Canadian market. Mohibullah Shah, CEO Trade Development Authority of Pakistan announced that Canada Pakistan Trade Expo would be organised every year in Toronto providing opportunities to business communities of both the countries to come more closer.

However, he said, the Canadian businessmen have to reciprocate by arranging visit of trade delegations to Pakistan. He also extended invitation to Canadian investors to visit Pakistan Expo 2009 and offered all possible co-operation and assistance for their visit. Canada Pakistan Trade Expo witnessed heavy crowds.

A large number of Pakistani and Canadian buyers visited Expo and placed orders while retail sale was also at boom. The retail sale of Pakistani rice, bed sheets, spices, onyx leather garments was outstanding while the buyers expressed their interest in surgical items, cutlery, fruits, textile.

The expo presenting a house of Pakistani products has proved that the Pakistani products are in great demand in Canada and with consistent efforts our products will make in roads in the North American market which is hitherto unexplored.

The Expo has given a great deal of confidence to the Pakistani exporters and manufacturers that their products have great potential in this market and they have welcome the announcement of Mohibullah Shah Chief Executive of TDAP to make Canada Pakistan Trade Expo a annual event. The tourism material of Pakistan display in the Expo also attracted the Canadian people. CDs on Pakistan tourism were distributed to Canadian people free of charge.

 

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Punjab gets $45m to improve social services​

Punjab gets $45m to improve social services
Wednesday, July 15, 2009

ISLAMABAD: Punjab, the most populous province of Pakistan, has received fresh funds worth $45 million for a programme to improve the delivery of health, education, water and sanitation services in the region, the Asian Development Bank (ADB) said on Tuesday.

According to a statement issued by ADB, its board of directors has approved release of the third tranche of the Punjab Social Services Programme.

Twenty-five million dollars come from ADB’s concessional Asian Development Fund and $15 million from its ordinary capital resources. Co-financing in the form of a $5 million grant is being done by UK’s Department for International Development (DFID).

First and second tranches of $80 million and $55 million were disbursed in December 2005 and November 2007 respectively.

Punjab, which contributes to more than 50 per cent of the GDP and is home to 56 per cent of the country’s population, has in the past suffered like other parts of the country from lack of social services, resulting in a high level of poverty, low level of literacy and school enrolment, and other development problems.

In a bid to improve service delivery to the poor, Punjab’s government devolved responsibility for education and health to the districts, while water supply and sanitation was passed on to town municipalities. Recently, the province adopted a Medium Term Development Framework (2008-2011) to strengthen allocation of resources and promote fiscal discipline.

ADB’s program, which is closely tied to the development framework, set out a challenging reform agenda for improving social services. Achievement of policy actions was linked to release of loan funds.

To date, the province has made significant progress in complying with key actions including strategic sector planning at the provincial and local government levels, establishment of minimum standards for social services, strengthening accountability and promotion of public-private partnership (PPP).

Despite facing fiscal constraints which have been exacerbated by the global economic crisis, the province has boosted per capita health spending in the public sector from FY2005 to FY2008. Reforms in the education sector have increased the number and quality of schools.

The province has also benefited from expansion of district inspection in education.

“Over two million more children are in school because of these investments, with enrolment rate in middle school among females rising from 43 per cent in 2003 to 53 per cent in 2005.

The share of female enrolment in government primary and middle schools increased from 45 per cent to 50 per cent,” said Linda Arthur, Social Sector Specialist at ADB’s Pakistan Resident Mission.

Plans to increase and improve water supply and sanitation services are also on track, while PPP models have been drawn up, paving the way for private sector investments.

“PPPs are expected to improve the quality of services, particularly for the poor, while helping to reduce the cost burden of full public service delivery,” said Arthur.

The program includes a technical assistance grant of $20 million equivalent from DFID to support reforms and boost the capacity of institutions to deliver improved social services.

The executing agency for the program is the Punjab Planning and Development Department.

ADB, based in Manila, is dedicated to reducing poverty in the Asia and Pacific region through inclusive economic and environmentally sustainable growth, and regional integration.

Established in 1966, it is owned by 67 members, 48 from the region.

In 2008, it approved $10.5 billion in loans, $811.4 million in grant projects, and technical assistance amounting to $274.5 million.

 

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Foreign investment takes deep plunge​

KARACHI: Foreign direct investment in the country took a deep plunge of $1.688 billion or 31.2 percent to $3.721 billion during 2008-09. The country had received foreign direct investment worth $5.409 billion in 2007-08.

During 2008-09, foreign investors withdrew $1.053 billion they had earlier invested in Pakistan’s securities including government bonds, according to SBP’s data. As a result, net foreign investment declined by $2.781 billion or 51 percent to $2.668 billion.

In the early part of the year, the PPP government was claiming that the decline in net foreign investment was because of a fall in portfolio investment and that the foreign direct investment was still rising. But as the year progressed, it became clear that the PPP government was also failing to attract foreign direct investment.

Economists say that the decline in foreign investment coming into the country was inevitable because the sectors that had been receiving these foreign investments have now come to a saturation point.

Dr Asad Saeed, an economist, says the wave of foreign investment seen in previous years when Shaukat Aziz was in charge of country’s economy was not sustainable. “It was restricted to a few sectors only,” he said.

Telecom and banking were the two main sectors that received the bulk of the foreign investment that came from 2001 to 2007. There is no more room for any other player to enter the telecom market now because of immense competition while profits in banking sector are also declining because of rising number of non-performing loans and economic slowdown.

One very important reason why investment flows from abroad are falling is the economic slowdown in Western countries. Multinational companies have been hit hard by the recessionary conditions and they are unable to invest in developing countries. In fact, those who had been operating for long are considering abandoning it.

Muhammad Imran, head of research at First Capital Equities, says Pakistan has been affected by the recession in the West indirectly as the flow of funds from developed countries to emerging economies has been choked.

The problems at home also send a negative signal to foreign investors, he says. These include law and order situation, lack of infrastructure, power shortages and political uncertainty; he says and adds that foreign investment has declined because the government focus has deviated from economic development.

Foreign investors who had put their money in Pakistani stocks in the previous years when there was a boom in our markets pulled out large amounts last year owing to continuous decline in all three stock markets of the country. Foreign investors became net buyers at the Karachi stock market only recently—after a gap of fifteen long months.

But Saeed says that decline in foreign portfolio investment is good for country’s economy because it is highly volatile and, therefore, damaging for the economy. “It doesn’t boost production when it comes in, but when it goes out—for whatever reason, domestic or international—it puts pressure on foreign exchange,” he says.

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Darwat Dam Project: Government plans to bring 25,000 acres under cultivation​

ISLAMABAD: Realising the existing potential in agriculture sector, the government plans to bring 25000 acres of agriculture land under irrigation through construction of Darwat (Baran) Dam project.

The dam would be constructed on Nai Baran near Thano Bulla Khan, District Thatta / Dadu at Darwat Gorge Sindh with total cost of Rs 3.656 billion and the entire cost of the project would be provided by the federal government through Public Sector Development Programme (PSDP). Apart from irrigation of agriculture land, the dam would also help in providing water for domestic drinking purpose in the area.

The project area falls in the Kohistan geological region which itself consists of different formations named as Guru, Rani Kot, Takhdro and Baran etc. All the rocks exposed in the area are of sedimentary origin, working paper of the project obtained by Daily Times here on Tuesday revealed.

The agriculture in the area was wholly dependent on rain. Due to fluctuation in the subsoil water levels in dry seasons, tube-well irrigation was severely hampered. The reservoir area of the Baran Dam was located near Thano Bula Khan in district Dadu. The dam is located in district Thatta. Nai Baran is a large river with the catchment area of 3,151 square kilometers. The dam site is accessible from Karachi-Hyderabad super Highway at kilometer 114.

The dam site is proposed at Darwat Gorge, which located near the village of Jhingri about 20 km from Super Highway. The project reservoir area has been seriously neglected in terms of public facilities, education, health, sanitation, communication, infrastructure and other utilities.

An amount of Rs 500 million has been earmarked for construction of eight small / medium dams in Sindh, including Darwat-pas (Baran) dam project in federal PSDP 2009-10.

Ministry of Water and Power is the sponsoring agency of the project and Irrigation & Power department, government of Sindh would be responsible for operation and maintenance of the project. It would be completed in four years duration (from Oct 2009 to Sep 2012). The project is related to the issue of water augmentation, water conservation, ground water management and need for additional reservoirs.

The Sindh province covers an area of 140,913 square kilometers. 14 irrigation canals off-take from three barrages located on the Indus river at Guddu, Sukkur and Kotri, having length of 2083 km covering culturable command area of about 13.24 MA with peack discharge of 150,000 cusecs. The total length of channels off-taking from these canals is 18277 kms.

The technical appraisal of the working paper of the project revealed that the construction of this dam was endorsed in the context of national strategy to harness flood water for irrigation, power, water supply and other purpose through construction of small dams and is one of the prime minister program of small / medium dams in the country. Prime Minister has also desired the quick response on implementation of the project on fast track basis for completion of the project in stipulate time period.

 

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Causes: domestic and external shocks: 51 percent decline in foreign investment in fiscal year 2009​

KARACHI (July 15 2009): Foreign investment during last fiscal year (2008-09) registered a massive decline, of 51 percent, due domestic and external shocks and massive outflow of portfolio investment mainly due to political uncertainty. The State Bank of Pakistan (SBP) on Tuesday issued statistics of foreign investment (FDI) and portfolio investment for the fiscal year 2008-09, which shows that constantly for the second time the country witnessed a massive decline in foreign investment.

FDI declined by 31.2 percent during the year, while portfolio investment posted a dip of 2,730 percent. The State Bank report showed that overall, decline of some $2.7814 billion occurred in foreign investment during the year. With current decline overall foreign investment stood at 2.6685 billion dollars in fiscal year 2009 as compared to 5.4499 billion dollars in fiscal year 2008.

FDI stood at 3.7218 billion dollars in fiscal year 2009 as against 5.4098 billion dollars in fiscal year 2008, depicting a decrease of 1.688 billion dollars. "Domestic shocks like worst law and order situation, negative economic indicators, power shortage and future uncertainty have largely hurt the foreign investment and, ahead of these factors, foreign investors were more reluctant to invest in Pakistan," economists said.

Although, Pakistan was the most favourite country for foreign investors in the wake of high profitability during last five years (2002-2007), yet since 2008 foreign investors have been reluctant to invest in Pakistan due to the discouraging economic indicators, poor law and order situation, operation in northern areas and global economic meltdown, they added.

Economists said that rising power shortage has also played a vital role in the hampering foreign investment. They said: "On domestic side, reduction in private credit supply is clearly reflecting that presently local investors are not doing new investment due to the poor infrastructure". Foreign investors were expecting political stability after general elections in Pakistan in February 2008, but despite the constitution of a political government the country is still not out of political uncertainty.

They said that the country's overall foreign investment, which was in positive side in the initial months of current fiscal year, was constantly on decline for last few months and lastly it posted over 50 percent decline in fiscal year 2009. Major dip was witnessed in portfolio inflows as foreign investors withdrew millions of dollars investment from equity market due to uncertainty on the political front, they added.

"Foreign investors have adopted wait and see policy and stopped new investment till the economic situation could not clear on domestic and external front," economists said. Similarly, portfolio investment stood in a negative position of 1.053 billion dollars in last fiscal year over an investment of 40.1 million dollars in fiscal year 2008. Including privatisation proceeds, total private investment depicted a decline of 40.8 percent to 3.2126 billion dollars in fiscal year 2009.

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Pakistan asks additional $4 billion in IMF loan​

NEW YORK (July 15 2009): Pakistan has asked some $4 billion in additional financing from the International Monetary Fund as an "insurance" against the economic crisis, a top Finance Ministry official said on Tuesday. "The world has not come out of recession, so I might as well have more insurance," Finance Ministry chief Shaukat Tarin told investors in an event organised by the Asia Society in New York.

Pakistan has already signed a $7.6 billion loan deal with the IMF in November to avert a balance of payment crisis. Now the South Asian country is requesting additional financing worth two times its quota, or $3.1 billion, plus $1 billion worth of capital increase in the fund, Tarin told Reuters on the sidelines of the event.

 

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ADB to help Pakistan organise targeted safety net programme for poor​

FAISALABAD (July 15 2009): The Asian Development Bank will help Pakistan in transition from the system of inefficient and untargeted subsidies towards a targeted safety net programme for the poor, with a focus on women. To retain the reform momentum and predictability of financing, the government has requested ADB that the Accelerating Economic Transformation Programme (AETP-3) be processed in December 2009 for possible approval in the second quarter of 2010.

In an update project report of ADB on the second sub-programme of the Accelerating Economic Transformation Programme (AETP), subject to reform progress and financing requirements, subsequent sub-programmes could each be in the range of $400 million-$500 million, putting the AETP programme cluster's aggregate amount in the range of $1.8 billion-$2 billion. The scope and amount for each sub-programme will be finalised during the review and processing of the respective sub-programme.

According to the ADB report, the new Federal Social Safety Net Programme, the Benazir Income Support Programme (BISP), is expanding its coverage from 3.5 million families in FY2009 to 5 million families in FY2010 and aims to target up to 7 million families by FY2011. Benefits are also paid to female heads of families.

The government has improved inter-ministerial and agency co-ordination and information sharing to communicate reform measures more effectively than in the past. Further, the single tranche structure of the AETP sub-programmes ensures prior actions by the government before financing is provided, and engagement through a programme cluster ensures sustainability of such actions.

The ADB report mentioned that this is a generic concern which is elevated in the case of complex reforms. Technical assistance is helping to address this concern over the shorter term. Moreover, there is strong ownership for reforms since the agenda under the AETP is also largely home-grown.

Commenting over the "Weak fiduciary controls", the ADB report mentioned, with the large amounts of safety net needs and assistance, it is vital to design and execute the BISP in a fully transparent and accountable manner. The World Bank is providing a dedicated project, backed up by financing support; and ADB has worked closely with the government and World Bank, particularly to strengthen financial management systems.

Commenting over the "Global financial crisis", the report pointed out AETP measures are predicated on a global recovery. While the programme cannot influence global events, it can help cushion Pakistan against exogenous shocks.

At the same time, the risks associated with not supporting macroeconomic stability, fiscal sustainability, and Pakistan's social safety net programmes are very high. In the absence of timely reforms, the government's budget would be continually burdened by costly and inefficient subsidies, leaving far less resources for development financing. The financial sector would be vulnerable to systemic risks.

High and persistent macroeconomic imbalances would constrain investments and economic growth while aggravating poverty. ADB experts hope that the AETP-2 to include (i) strong and sustained leadership and commitment to reforms, (ii) development partner coordination, and (iii) open dialogue with the private sector and other key stakeholders.

The AETP will help Pakistan achieve and sustain higher economic growth in the medium term. The expected outcome of AETP-2 is improved prospects for macroeconomic stability and fiscal sustainability through (i) reducing short-term distortions in the agriculture and energy sectors while improving the social safety net for the poor and vulnerable, and (ii) strengthening financial inter-mediation.

Commenting over the "Special Features of AETP-2" ADB report stated that it is an integral part of the Government's macroeconomic stabilisation programme. ADB has participated in IMF missions, at the government's invitation and with IMF's consent, to ensure close co-ordination on the reform agenda.

AETP-2 supports the empowerment of women under the Benazir Income Support Programme (BISP). The amount of $150 million of AETP2 will go to the BISP, whose primary recipients are female heads of the family so that women of poor families can directly access and manage the social safety net benefits.

AETP-2 will also help women to obtain national identification cards, a precondition to receive BISP benefits. The national identification card provides women with a legal identity and will enable them to play a greater role in society. The government will ensure that the local currency generated from the proceeds of the OCR loan to be used first to support the adjustment costs of reforms to be initiated and implemented under AETP-2, and second to finance expenditures for the government's general development purposes.

The government will ensure that the local currency generated from the proceeds of the ADF loan to be used to support poor and vulnerable families that qualify via the new targeting scorecard method under the BISP set forth in output 1 of AETP-2. ADB report pointed out that the Loan Proceeds would be used to pay for items procured in ADB member countries, other than the items specified in the negative list of ineligible items and imports financed by other bilateral and multilateral sources.

The proceeds of the programme loan will be disbursed in accordance with the provisions of ADB's simplified disbursement procedures and related requirements for programme loans. Loan proceeds disbursed against imports will require a certificate from the government stipulating that the value of Pakistan's total imports, minus its imports from non-member countries, ineligible imports, and imports financed under other official development assistance, is equal to or greater than the amount of the loan expected to be disbursed during a particular year. ADB reserves the right to audit the use of loan proceeds to verify the accuracy of the government's certification.