Pakistan's Economy - News and Updates

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US to ask IMF to consider Pakistan’s positive tax reforms

June 18, 2010


ISLAMABAD: The International Monetary Fund (IMF) may not halt Pakistan’s $11.3 billion loan programme due to the postponement of Value Added Tax, as a key aide to President Barack Obama said the US would encourage the IMF to consider Islamabad’s efforts to reform the tax system.
In an interview with The Express Tribune, David Lipton, Special Assistant to the President and Senior Director for International Economics at the National Security Council, said Pakistan is committed to carrying out tax reforms and member states would encourage the IMF to take into account the steps taken by the country.

“If the reformed General Sales Tax (GST) brings significant revenues and the result is the same as that of the Value Added Tax (VAT), the IMF should support the reformed GST,” said Lipton.

The support from the US, which has majority votes in the Executive Board of the IMF, may allay concerns that the IMF will stop releasing loan tranches after Pakistan failed to levy VAT from July 1.

The government scrapped plans to impose VAT and reformed the GST system in the face of stiff opposition by the business community, Sindh’s demand to collect the tax itself on services and the Federal Board of Revenue’s reluctance to accept the levy.

Lipton said the finance ministry has assured him that it would implement the reformed GST as soon as the issues with the provinces are resolved.

“The government explained the goals of the reformed GST and whether it is the GST or VAT what is important is that the tax system should improve,” he added.

Dialogue on energy
Lipton said two-day Pak-US energy dialogue would be held in October and insisted that it is wrong to say that the US is only pushing for phasing out power subsidies. “We discussed electricity generation, conservation and pricing issues.”

He admitted that despite US involvement energy sector problems have not been resolved. “We recognise that more work needs to be done,” as financial losses caused by the energy crisis are not sustainable.

Kerry-Lugar Act

Lipton said the US government wanted to ensure that funds under the Kerry-Lugar aid programme are used in a way which is effective and consistent with priorities of the two governments.

“We are still going through the process of how to spend the money in a best way as we want a meaningful use of the money.”

To a question whether spending in bits and pieces will reduce the impact of billions in aid over five years, he said the US government is keen to see visible changes after the utilisation of $7.5 billion worth of Kerry-Lugar funds.

“One does not want the money spread in a way which diminishes the impact and some significant multi-million-dollar projects have been initiated in the energy sector.”

CSF disbursements

Lipton said the US government made very strong efforts to resolve the issue of disbursement of the Coalition Support Fund (CSF). He said during the second half of this fiscal Washington transferred a significant amount, which helped control the budget deficit.

To a question why the US government did not transfer $500 million this year out of the $1 billion pledged at the donors’ conference in Tokyo, he said, “we are doing what we can to support development projects. The US government is mobilising a significant amount of money for agriculture, health and education projects.”

War on terror

Lipton said the US government is very appreciative of the government of Pakistan’s efforts in fighting the war against extremists. “It is fighting for the rest of the world.”

He said the money under the Kerry-Lugar Bill will help cope with the losses on account of the war on terror. He said sustainable growth would be the key to recover the losses, a message that Pakistan has to recover most of the $43 billion losses on its own.

He said Pakistan is in a comfortable position in relation to its international debt obligations as the debt-to-GDP ratio is still in the safe range.

Published in the Express Tribune, June 18th, 2010.
US to ask IMF to consider Pakistan?s positive tax reforms – The Express Tribune

 

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Tax reforms, reduction in borrowing needed: minister

By Ahmad Hassan
Saturday, 19 Jun, 2010

ISLAMABAD: Finance Minister Dr Abdul Hafeez Sheikh dismissed on Friday as ‘mere politicisation’ reports about withdrawal of subsidies on food items or any step introduced in the new budget that could hurt the interests of people or hike the prices of essential commodities.

Winding up a two-week debate on the budget in the Senate, he proposed drastic cuts in public-sector borrowing, reforms to bring the affluent into the tax net through direct taxation and controlling inflation to give relief to the poor as pre- requisites of a good economic policy.

“Subsidies have not been withdrawn but rationalised to ensure that their benefits reach the really deserving people,” he said.

The minister said self-reliance could not be achieved unless all the stakeholders wholeheartedly and dedicatedly participated in the effort.

He admitted that the country’s economic situation was grave. “If we shall not rise above our petty political interests, the future of our nation shall be at risk.”

He contended that had the government not approached the International Monetary Fund, the country might have defaulted, which was not a good omen for a sovereign nation.

He assured the house that the government would give due consideration to the 74 recommendations on the budget, prepared by the Senate Standing Committee on Finance for sending to the National Assembly.

He said it was the first budget after the 18th Amendment and the 7th National Finance Commission Award, which had increased the role of the provinces manifold.

“The federation is left with limited fiscal space in the budget and will need to achieve greater fiscal autonomy, which will be a challenge keeping in view the difficult security situation with massive borrowing and poor tax collection,” he said.

TAXATION: The finance minister said a decision not to increase any duty was aimed at providing relief to people.

“When there is inflation, we have two choices — to reduce prices or compensate through other means — and we have increased the salaries of government employees and allocations for the Benazir Income Support Programme and Baitul Mal.”

Mr Sheikh called for a national debate on subsidies to focus on relief to the poor and make them targeted.

He said the budget of the civil government was Rs165 billion, which was less than the expenses of the Pakistan Electric Power Company alone.

The minister said the capital gains tax was a direct tax on the affluent, which would be levied from July 1.

GST: Mr Sheikh said the government wanted to reform the general sales tax through documentation and removal of distortions because of which it had risen to 25 per cent in some cases. He said the government wanted the GST to remain at 15 per cent.

He reiterated the resolve of the government not to levy GST on food items, health and education, adding that the issue would be tackled in consonance with the provinces.

The house debated some recommendations from the opposition and the movers withdrew most of them on an assurance by the fin- ance minister for their consideration at the proper platform.

Prof Khurshid Ahmad, Ishaq Dar, Mushahidullah Khan and Afia Zia withdrew a proposal to lower the mark-up rate to 10 per cent.

A motion recommending an increase in minimum wages to Rs9,000 was withdrawn when the minister said it could affect industrial competitiveness and cause unemployment.

A proposal to revive the wealth tax was also not stressed.

Mr Dar said the tax, which fetched more than Rs15 billion, had been withdrawn by the Musharraf government.

Prof Khurshid said more than 80 taxes were paid by the lower strata of the society.

DAWN.COM | Front Page | Tax reforms, reduction in borrowing needed: minister

 

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IMF will not object to VAT delay: official

By Kalbe Ali
Saturday, 19 Jun, 2010

ISLAMABAD: Finance Secretary Salman Siddique said here on Friday the International Monetary Fund would have no objection to the delay in implementation of Value-Added Tax (VAT), expressing confidence that implementation of the IMF programme was on track.

Talking to journalists in the Parliament House, Mr Siddique said the next meeting with IMF was expected at the end of next month or early August and IMF authorities would have no serious concern over the delay in VAT implementation.

“The IMF programme is not linked to VAT; it is more linked to the capacity of our system to generate revenues,” the finance secretary said, adding: “It is important that we generate our revenues.”

He said the ‘reformed’ General Sales Tax (GST) would replace the Value Added Tax and if the country was able to generate enough resources from this there would be no objection from any side.
He said that consensus had been reached with provinces on technical aspects of introducing the reformed GST, but time would be required to settle some legal issues. The finance secretary declined to comment if VAT had been shelved or it would not be implemented from Oct 1, 2010, as was announced earlier.

“VAT implementation has only been deferred, but it is our duty to continuously work on all options,” the finance secretary said.

The media was informed that around $800 million would be disbursed under the Kerry Lugar Bill by the end of ongoing fiscal year and a major part of this amount had already been received.

“We expect more than $800 million under the Kerry Lugar Bill in next fiscal year 2010-11,” he added

About ongoing talks with a US team headed by David Lipton, Special Assistance to US President, Mr Siddique said it was an advanced team to assess disbursements under the Kerry Lugar Bill.

The US team was also assessing utilisation mechanism of the amount received by the Pakistan government from the US under different heads.

“The US has shown willingness to help Pakistan in three key areas: energy, food security and human resource development,” Mr Siddique said.

He said that several US projects, many of them by private sector, were expected in the next fiscal year.

DAWN.COM | Front Page | IMF will not object to VAT delay: official

 

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Economy regains momentum, says IMF
By Amin Ahmed
Friday, 18 Jun, 2010

ISLAMABAD: Emphasising that the introduction of a broad-based value added tax (VAT) is essential, the International Monetary Fund (IMF) says the structural reforms in Pakistan have moved forward, but the agenda remains challenging.
IMF in a ‘programme note’ on Pakistan says that the significant steps have been made in preparation for the introduction of VAT, which was expected to be in place by July 1, but has now been delayed till October 2010.

There has been some progress toward the reform in the electricity sector, but more needs to be done to eliminate the financial losses of power companies and other public enterprises, which impose a burden on public finances and pose a threat to macro-economic stability, IMF said.

According to the note, modest signs of recovery in manufacturing mainly in the textile sector and exports suggest that the Pakistani economy is regaining momentum and economic growth in 2009-10 will exceed 3 per cent and could rise to 4 per cent in 2010-11.
However, adverse security developments continue to hurt domestic and foreign investors’ confidence, while electricity shortages continue to prevent the economy from achieving its potential.
Pakistan’s economic growth prospects are also linked to the pace and extent of the recovery of the global economy, which remain uncertain.

Despite these risks, the programme can continue to build on initial success in stabilising the economy, but to achieve those economic reforms need to command broad-based support.

External donors made generous pledges to Pakistan at their meeting in Tokyo in April 2009; it is crucial that these pledges be disbursed promptly to support priority budget spending and reforms, IMF notes.

IMF emphasised that external support should only be treated as a bridge to a greater domestic revenue effort, which will be indispensable to sustain development spending, achieve poverty reduction, and increase much-needed social outlays over the medium term. Fiscal policy continues to be affected by low economic activity and a difficult security environment.

DAWN.COM | Business | Economy regains momentum, says IMF

 

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Rs47.3 b tax-free budget announced for AJK

By APP
June 19, 2010


MUZAFFARABAD: The Azad Jammu Kashmir (AJK) government on Friday announced a tax-free budget of Rs47.332 billion for the 2010-11 fiscal year. The budget has a deficit of over Rs17.6050 billion while a sum of Rs11.1749 billion has been allocated for annual development programs.

AJK Minister for finance Raja Nisar Ahmad Khan presented the budget in the AJK legislative assembly. The session was chaired by Speaker Shah Ghulam Qadir.

The amount set aside for development projects has been increased by 10 per cent compared to last year’s allocation of Rs9.555 billion while a total sum of Rs22.9 billion is estimated to be earned as revenue receipts. The revenue includes a sum of Rs9.92 billion to be generated from the Kashmir Council, Mangla dam water usage charges of Rs750 million, share from AJK council taxes worth Rs4.5 billion, and share from federal taxes that are estimated to be Rs6.68 billion.

The finance minister also announced a 50% ad hoc increase in pensions and in the salaries of government employees and police officials. Ahmad announced to regularize 1,100 contractual employees during the fiscal year starting July 1 while no new posts have been announced in the budget.

In the non-development expenditures head, an amount of Rs7.594 billion has been allocated for the education sector, Rs5.30 billion for electricity department, Rs3.31 billion for miscellaneous expenditures, Rs2.5 billion for state trading, Rs1.82 billion for health, Rs1.17 billion for general administration, Rs1.6 billion for the payment of pension and Rs1.58 billion for the police department.

In the development budget, priority has been given to the transport and communication sector with an allocation of Rs4.18 billion for the construction and maintenance of roads and bridges. A sum of Rs1,500 million has been fixed for development projects in the power sector. Local government department will be given Rs1,000 million during the next fiscal year while Rs916 million has been allocated for the foreign funded projects. The education sector will get Rs800 million for its development schemes.

The minister also presented a revised budget estimate of Rs32.78 billion for the outgoing fiscal year, out of which Rs25.65 billion has been spent as non-development expenditures and Rs7.13 billion as development expenditures. The revised budget shows a deficit of Rs5.5 billion.

During his speech, the finance minister said that the AJK government’s share in the NFC awards has been reduced which has put the government in a financial crunch. “If we are provided net profit over the hydro-electric projects, a complete share of the federal taxes and Kashmir’s property, we might not need any grant in aid to bridge the gap between income and expenditures,” he claimed.

Published in The Express Tribune, June 19th, 2010.


Rs47.3 b tax-free budget announced for AJK – The Express Tribune

 

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KARACHI (June 20 2010): Pakistan needs the support of the United States for mega infrastructure projects that could stimulate the growth process in the country instead of assistance on numerous small projects that it might not be able to monitor transparently. This was emphasised by Chairman Nishat Group Mian Mohammad Mansha during discussion with a high profile US delegation led by David Lipton Senior Economic Advisor to President Obama.

According to a press release issued here on Saturday, the meeting was in relation with President Obama's doctrine to identify measures that could deepen the ties between business leaders, foundations and social entrepreneurs in the United States and Muslim communities around the world.

During their meeting, they discussed various matters including economy, job creation, investment, reforms in financial sector, market access to USA, ongoing power crises in Pakistan including circular debt, implementation of VAT and various other business opportunities in Pakistan.

He suggested that the best way to help Pakistan is to provide access to the US market for Pakistani textile products. He also suggested that the US should take up a major hydal power project as it will help boost investment and create employment opportunities.

He invited the delegation to join hands in his plans to serve education sector by establishing a state of the art university in Pakistan and a University Fund. At the meeting, the delegation also discussed ways of improving access to capital, funding for technology innovation and exchange programme, as the United States trying to improve its image in the eyes of the world's 1.5 billion Muslims.

The delegation apprised Mian Mansha of President Obama's plan to award contracts through its multi-million-dollar Global Technology and Innovation Fund, designed to spur investments in the Muslim world. David Lipton assured the Chairman Nishat Group that his suggestion would be given due consideration.-PR

 

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Pakistani goods' exports outside FTA: China willing to allow unilaterally​

MUSHTAQ GHUMMAN
ISLAMABAD (June 23 2010): China has expressed willingness to facilitate export of substantial Pakistani goods, unilaterally, in addition to the goods being traded under the existing Free Trade Agreement (FTA), whose impact on Pakistan's exports would be around $1-1.5 billion per annum.

This was stated by Commerce Secretary Zafar Mahmood while conducting the proceedings of the Advisory's Council meeting convened to seek suggestions from the business community on Trade Policy 2010-11.

Zafar, who sought an apology from the business community for not implementing the much-talked about three-year 'Strategic Trade Policy Framework (STPF) 2009-12' due to financial constraints, said that Chinese Vice Premier Zhang Dejiang, during his recent visit, had given assurance to consideration of four matters sympathetically.

"I have good news for you that China has assured considering lowering tariff on some of those goods from Pakistan which are not covered under the FTA," he told the participants in clapping. Other three matters will be: (i) provision of place for displaying of goods in trade exhibitions, free of cost or at very cheaper rates; (ii) dispatching of buyers' missions for procurement for public sector; and (iv) training of human resource.

With regard to establishment of the much delayed 'Reconstruction Opportunity Zones (ROZs), the Secretary said that Pakistan has conveyed to the United States that this plan cannot succeed until additional tariff lines are included in the draft legislation, which, according to him, are expected to be approved shortly.

"We have also requested the US to relax rules of origin besides access of goods to the EU countries, Japan and Canada to be facilitated under the GSP," said Mahmood, who recently visited the US with Foreign Minister Shah Mahmood Qureshi.

He said that Pakistan has requested the EU to include Pakistan in GSP plus, in addition to waiver from WTO conditions, otherwise increasing exports of Pakistan's value-added sector would remain a challenge. Dedicated dialogue is also part of strategy to seek market access for Pakistani goods, he added.

"We will do what is humanly possible to get GPS plus from the EU and we need to be reminded that the EU countries are in financial trouble," he said. According to him, Prime Minister Yousaf Raza Gilani had written a letter to his counterparts of the EU member countries seeking their help to increase Pakistan's exports. However, their response indicates that they are in a position to help Pakistan at this juncture due to financial constraints.

Pakistan is also hosting a conference on EU to which the envoys of all the EU members will be invited. Pakistani side will also be represented by Foreign Minister Shah Mahmood Qureshi and Secretary, Defence.

While replying to questions raised by business community, Secretary Commerce said that whichever proposal can possibly be implemented, he would include it in the forthcoming Trade Policy. He admitted that neither 'ambitious' STPF has been implemented in letter and spirit nor refunds have been paid to the exporters. The main reason for this, he lamented, was the financial difficulties of the Centre.

Answering complaints against the Trade Officers abroad, he said that the Commerce Minister will hold conferences on different regions in which Trade Officers will also be invited to respond to exporters' queries. If the performance of any Trade Officer is considered 'poor' he can be recalled, he assured.

Earlier, Chairman, Pakistan Sugar Mills Association (PSMA), Iskandar Khan, urged the government to allow duty-free import of raw sugar, effective ban on sugar smuggling to Afghanistan and linkage of sugarcane price to recovery. He was also of the view that Pakistan should implement Iran Pakistan Gas Pipeline Project as it is in the country's interest.

Chairman, Pakistan Fans Association, Malik Safdar said that the government should patronise the fan industry whose exports have reached Rs 3 billion from Rs 1.7 billion last year. One of the businessmen proposed that the government should include Indian chemicals in the positive list as Pakistani industry is importing Indian chemicals from third country at prices which are still lower than the European chemicals.

One exporter suggested that the government should set up warehouses at Pak-Afghan border to facilitate exporters. Raza Ansari, representing auto manufacturers, argued that the government should take stringent measures in the revised APTTA to curb smuggling of cars.

He was right in pointing out that when Afghanistan is a left-hand drive country why right-hand drive vehicles are being imported by it? He proposed that the incentives already available to this sector should continue. One of the stakeholders of leather garments suggested that the government should impose a ban on export of leather skins, or slap 20 percent duty.

Malik Janhangir, Chairman, REAP, apprised the meeting that rice exports have reached $2.3 billion due to efforts of the Association along with the co-operation TDAP. He assured the government that REAP will capture about 25-30 percent of the African market. He requested resolution of duties and tax issues besides some concessions in the Trade Policy. He suggested that the process of withholding tax on rice may be simplified.

He also requested the government to enhance REAP's share in delegations being sent to Africa. Responding to this demand, CEO, TDAP, Mohibullah Shah said that as the Finance Ministry releases funds, the numbers in a delegation will be increased.

Sohail Nasir of Karachi Cotton Association proposed that the government should allow hedging as per the Cabinet decision taken a couple of years ago. He was also of the view that free trade of cotton should continue but at the same time the government should take measures to improve quality of cotton as recovery in India is better than Pakistan.

Textile sector suggested that the government should eliminate cross subsidies for gas and continue zero rating on textile, leather, carpet and sport sectors even after the introduction of reformed form of GST. Value-added sector was of the view that the government should only allow export of surplus raw material.

President of Lahore Chamber of Commerce said that transit trade was damaging local industry. He asked for better co-ordination between Chambers and Commercial Sections of the Ministry posted abroad. President of the Karachi Chamber asked for abolishing or lowering regulatory duties on particular items to discourage smuggling. President of the Peshawar Chamber demanded that illegal export of wood to neighbouring countries should be discouraged to provide impetus to the Match and Wood industry of the province.

President of South Punjab Woman Chamber suggested that women entrepreneurship must be encouraged. Secondly unconventional export markets like Africa and Middle East should be explored. In his opening speech, Commerce Minister Amin Fahim said that Pakistan, being part of the global trading system, was no exception to the impact of supply shocks, soaring oil, food and other commodity prices and turmoil in the international market. He assured the business community that strategy of his Ministry would be to encourage foreign direct investment (FDI), reduce cost of doing business, and generate economic activities.

Copyright Business Recorder, 2010

 

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Hafeez gives tough message in polite words

By Raja Asghar
Wednesday, 23 Jun, 2010

Prime Minister Yousuf Raza Gilani shaking hands with the leader of opposition Chaudhry Nisar Ali Khan during the Assembly Session at Parliament House, June 22, 2010. – Photo by APP.

ISLAMABAD: In polite words of Finance Minister Abdul Hafeez Sheikh, the government gave a tough message in the National Assembly on Tuesday: not to let “vested interests” block a reform of general sales tax (GST) and “take a stand” about loss-making state enterprises.

Winding up a 12-day general debate on the new budget, the minister rejected fears of the parliamentary opposition and traders that a reformed GST, earlier proposed to be renamed as value-added tax, would increase prices, explaining that the move would actually reduce the tax rate to a uniform 15 per cent from the present 16 to 25 per cent but would document the economy without exemptions.

The budget for fiscal 2010-11, announced on June 5 and to be effective from July 1, has increased GST rates by one per cent to 17-26 per cent, but the government plans to reform it by October with a uniform rate of 15 per cent. “Then why the prices should increase?” the minister asked, pointing out that food items, health and education, would be free from the levy, which will be applicable to businesses with a minimum Rs7.5 million turnover annually.

Accusing unspecified “powerful people” of getting exemptions after the GST was introduced 20 years ago, he said those profiting from the status quo were opposing the reform and, “while speaking of the small people, want to benefit the big people”.

He asked parliamentarians to “let us make up our mind” and not to play politics over the issue. The minister evoked cheers from both sides of the house when he proposed formation of a parliamentary committee to have a consensus in deciding the future of loss-making enterprises in the public sector, which he said were neither themselves efficient nor were allowing others to enter their field. “We have to take tough decisions.”

Mr Sheikh said Prime Minister Yousuf Raza Gilani, who was present in the house at the time, had approved only a Rs3 billion bailout package for the loss-making Pakistan Steel Mills, instead of a recommended Rs25 million and any additional help would depend strictly on performance.

He asked advocates of imposing an agricultural income tax to use their “convincing power” with provincial governments because agriculture was a provincial subject, but said a committee would examine re-imposing wealth tax as the government had committed in the Senate.

The minister also announced government plans to make the Federal Bureau of Statistics “totally autonomous” in a few months so that its statistics could be trusted by the people.

Mr Sheikh advanced his arguments in his usual polite manner, but he seemed to have little patience for those unnamed cabinet colleagues who, according to leader of opposition Chaudhry Nisar Ali Khan, were using up to six government cars each though their entitlement was only one car.

“What can I say about them?” the minister wondered and said: “Those keeping six (government) cars should be shamed of themselves.”

The minister said the government had accepted 61 out of 71 non-mandatory recommendations made by the Senate about the new budget, including those relating to austerity and targeting subsidies.

After the minister’s speech, the house began a discussion on the charged expenditure of more than Rs5 trillion included in the demands for grants and appropriations which are not to be voted upon before the house adjourned until 11am on Wednesday.

The opposition leader earlier led a token walkout by his PML-N party to protest at what it regarded as unsatisfactory reply of Law and Justice Minister Babar Awan about the time of grants-in-aid for bar associations though the minister assured the house the required rules for such allocations had been followed.

 

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UK plans to invest £665m in Pakistan

By Shamim-ur-Rahman
Friday, 25 Jun, 2010


KARACHI: British Foreign Secretary William Hague on Thursday visited the Karachi Stock Exchange and expressed satisfaction over efforts at maintaining stability in the financial sector in Pakistan.

According to a media release of the KSE Mr Hague participated in a financial services roundtable and was impressed with the overview.

Speaking on the occasion he discussed the UK government’s plan to invest 665 million pounds in Pakistan. He solicited views of the participants on how best to utilise these funds.

Accompanying the foreign secretary were Adam Thompson, British High Commissioner, Robert Gibson, Deputy High Commissioner, and other members of UK Trade and Investment Office.

Zubyr Soomro, chairman KSE and Adnan Afridi, MD KSE, organised a financial services roundtable that included Yaseen Anwar, acting Governor State Bank, Dr Ishrat Husain, Dean IBA, Dr Mushtaq Ali Khan, Chief Economic Adviser SBP, Naved A Khan, president Faysal Bank, Anjum Iqbal, CEO Habib Metropolitan Bank, Moazzam M. Malik, CEO BMA Capital, Shahzad G. Dada, Chief Country Officer Deutsche Bank, Gulrez Yazdani, CEO Institute of Capital Markets, Yaseen Lakhani and Abid Ali Habib, directors KSE.

The roundtable included a presentation on capital markets and the Karachi Stock Exchange by Adnan Afridi. The participants stressed the resilience of the Pakistan economy and the maturity as well as sophistication of the private sector.

There was a consensus that vocational training combined with primary and higher education should be the focus as Pakistan has a young and fast growing population that requires skill development. Moreover, the participants stressed that public-private partnership model should be employed to leverage the UK funds for optimal impact.

The British foreign secretary hoped to see stronger relations between Pakistan and UK in trade and investment.

Talking to media he agreed to a questioner that Pakistan was still a better destination for investment. But he emphasised that Pakistan must focus on addressing the security issues for enhancing investors’ confidence.

The British delegation discussed issues of bilateral interest relating to financial services sector, employment, and education, health, investment and energy shortages.

At the conclusion of the discussions, the UK foreign secretary rang the ‘KSE Bell’ on the trading floor. He also met informally with KSE members.

Mr Hague later called on Governor Sindh Dr Ishratul Ibad Khan. He said that Pakistan was a suitable country for foreign investment and on his return he would encourage British investors to explore new avenues of mutual cooperation.

But he emphasised that it was necessary for Pakistan to ensure improvement in security situation to restore confidence of foreign investors. .

Mr Hague had wide-ranging discussions with the governor and said that the new government was taking stock of Pakistan’s needs and the purpose of his visit was to make these relations deep-rooted.

The British foreign secretary said that during the next four years Britain would provide 665 million pound, besides providing assistance for improving primary education in the country.

Governor Ishratul Ibad said that Pakistan’s law provided complete protection to foreign investors and their capital. He claimed that there has been significant improvement in the law and order situation in the country.

He also referred to Mass Transit Project in Karachi, besides water management, desalination and solid waste management and infrastructure development schemes and hoped that the British investors would invest in these schemes.

The British foreign secretary also made a courtesy call on the Sindh Chief Minister Syed Qaim Ali Shah and exchanged views on ways and means to improve bilateral relations.

DAWN.COM | Business | UK plans to invest £665m in Pakistan

 

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3.5 million footballs exported for World Cup
Friday, 25 Jun, 2010

ISLAMABAD: Pakistan has exported around 3.5 million footballs worth $5.2 million for the ongoing FIFA World Cup, chairman Pakistan Sports Manufacturers and Exporters Association Zia-ur-Rehman said.

Talking to APP on phone he said that Pakistani balls were being used for only training and promotional purposes and not for the playing purpose.

The penetration of machine-made footballs in the international market has caused a serious dent to Pakistan’s hand-made stitched soccer industry as the country’s manufacturers grabbed only 30 per cent of the total orders floated globally for the World Cup.

Only a few years ago around 70 per cent of world soccer balls were prepared in Sialkot and the country on average was exporting 40 million balls worth $210 million produced annually by some 60,000 highly skilled labourers.

Sialkot gained international celebrity status when it produced the “Tango” ball for the 1982 World Cup in Spain, kicking off a lucrative industry. But Adidas, the company that got the responsibility of providing soccer for the 2010 World Cup, has chosen China for producing the thermally bonded balls for the mega event.

“In the past we have been contributing millions of dollars to the national kitty by exporting footballs but our share in the international market has registered a significant decline, mainly due to the use of machine-made balls for the main events,” Zia said.

New players in the international market, particularly China, India, Japan and Thailand have posed a real challenge to Pakistan football industry. “Lack of modern technology is the main factor in tilting the balance against the local industry,” Zia asserted.

“No doubt, the machine-made footballs have affected our businesses, but we are in process of buying latest machinery and soon the best world teams will again be using our soccer,” Zia added. —APP


DAWN.COM | Business | 3.5 million footballs exported for World Cup

 

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$270 million ADB loans for Punjab, Sindh

By Amin Ahmed
Friday, 25 Jun, 2010

ISLAMABAD: The Asian Development Bank (ADB) on Thursday approved two loans worth a total of $270 million for Sindh and Punjab.

One loan is meant to help Punjab to cut infant and maternal mortality rates by improving the delivery of health services and the other to assist Sindh to boost growth and expand economic opportunities in rural areas.

The bank announced after the approval of the loans by its board of directors in Manila that the funds would come from its concessionary arm, the Asian Development Fund (ADF).

The Punjab government will receive $150 million for the second phase of the Millennium Development Goals (MDGs) Programme being carried out by the health department. Under the three-phase programme, reforms are being carried out to improve access, quality and equity of public health services.

“The programme will help the province cut child and maternal mortality levels and more broadly ensure adequate health care for the poor by improving the availability and quality of health services, and by developing a viable pro-poor health-care financing system,” Linda Arthur, Social Sector Specialist in ADB’s Resident Mission in Pakistan, said.

It supports government measures to enhance equipment and staffing levels at primary and secondary health-care facilities and to strengthen the quality of health workers through expanded training, improved facilities and development of a comprehensive human resources plan. It aims to strengthen the management and performance monitoring of health services and to make the procurement and supply of essential drugs more efficient. It continues a conditional grant mechanism for district governments which allocate funds to meet minimum service standards for maternal, neonatal and child health care, and supports improvements in financial management and fiduciary oversight.

Without major improvements in health-care delivery, the province is unlikely to meet the MDGs for reduced child and maternal mortality by 2015.

A $120 million loan is for the ongoing second phase of the three-phase Sindh Growth and Rural Revitalisation Programme that will help the provincial government boost growth and expand economic opportunities in poor rural areas.

The programme supports the provincial government’s drive to reduce poverty and stimulate economic growth by improving management of public spending and enabling higher private-sector participation in the economy.

The second phase of the programme supports government reforms to spur growth, including the development of a legal, institutional and regulatory framework for public-private partnerships, increased private-sector representation and introduction of market-based principles of management to agriculture and industrial state-owned enterprises, by computerising land titles and the corporatisation of public agriculture and produce markets.

It also helps the government improve the management and targeting of public resources.

As a result of the programme, the government now includes a women development secretary in the Provincial Development Working Party.

Guidelines have been drawn up to ensure that all public project proposals assess impact on women and explore employment opportunities for them and public-private partnership projects pursued by the provincial government deliver benefits to both men and women.

http://www.dawn.com/wps/wcm/connect/dawn-content-library/dawn/the-newspaper/national/$270-million-adb-loans-for-punjab,-sindh-560

 

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Petroleum prices can be lowered further, NA told

* Syed Naveed Qamar says govt lowered petroleum prices in April, May due to downward trend in international market

By Sajid Chaudhry


ISLAMABAD: Federal Minister for Petroleum and Natural Resources Syed Naveed Qamar told the National Assembly on Thursday that the government would reduce oil prices for the third consecutive month if the current trend in the international market continued.

Speaking in the Lower House after the approval of grants for Petroleum Ministry for 2010-11, the minister said that the government had reduced petroleum prices during the last two months due to falling oil prices in the international market.

He said that the government would soon launch a project for supplying liquefied petroleum gas (LPG) to far-flung areas of the country through a new pipeline.

“The government will provide LPG to consumers of these areas on subsidised rates and the first project in this regard is being inaugurated in Noshki next month,” he said. Prime Minister Syed Yousaf Raza Gilani will inaugurate the project.

“In the next phase, LPG supply through pipelines will also be started in Kot Ghulam Muhammad,” he said, adding that the government would start similar projects in other areas of the country.

The minister also briefed lawmakers about government efforts to increase indigenous oil and gas production.

He said the government had issued 40 oil and gas exploration licenses in the past six months alone. “This is for the first time in the history of the country that so many exploration licenses have been issued in such a short time,” he said.

He said the issuance of exploration licenses to oil and gas companies would provide them with an opportunity to invest in the key sector of the economy and enable the government to reduce its dependence on imports.

“Successful exploration in this area will benefit the entire country as well as help reduce our import bill,” the minister said.

He said that under the 18th Amendment, exploration and development of mineral sectors had been transferred to provinces.

“They (provinces) can develop these minerals with their own investment as well as with the help of local and foreign investors,” he said.

He said that Sindh had auctioned off its blocks in the Thar Coal Reserves to investors and work on two major projects had already started.

“The government will not only utilise the coal reserves of the country for power generation, but will also use the reserves for preparation of synthetic fuel,” he said.

Referring to the ongoing development activity in Qadir Pur gas field, the minister said that gas pressure had decreased over the months.

“However, new compressors are being installed at the well to bring the pressure back to normal,” he said. The new compressor will start functioning by September 2010.

The minister said a court was hearing the case related to the Kunhar Gas Field and production would start once the case is decided.

Earlier, the National Assembly approved five demands for grants worth Rs 1.14 billion to meet expenditures of the Ministry of Petroleum and Natural Resources during fiscal 2010-11.

Minister for Finance Abdul Hafeez Shaikh moved demands for grants, which were adopted by the House with a majority voice vote.

The House also rejected more than 100 cut motions moved by the opposition members citing the poor performance of the ministry as a reason to slash its budget.


Daily Times - Leading News Resource of Pakistan

 

[Hyde]

Pakistan's exports to South Korea register tremendous growth​

KARACHI (June 26 2010): Pakistan's export to South Korea, 80 percent of which is raw material, has recorded tremendous growth during January to March 2010 as compared to same period last year. The export of raw material like Naphtha, Unrefined Copper, Indentured Ethyl Alcohol and Cotton yarn from Pakistan was increased many folds, as Korean overall import was showing signs of improvement having increased 37.3 percent for the three months after the global economic recession, a recently issued report of Pakistani commercial counsellor in Seoul said.

According to the report though there were no imports into Korea during January to March 2009 but the import of the same item from Pakistan during the same period this year was worth $33.972 million. It said Naphtha as a raw material used for many petrochemicals and plastics, ranked the first place amongst the imported items from Pakistan for the year 2009. The product dependency of Pakistan on naphtha is currently 43.23 percent of its total export volume to Korea.

The report said that Pakistan's export of leather prepared (bovine) has shown remarkable increase rate by 238.80 percent in the period January to March 2010, compared to same period of 2009. Also leather prepared (other) has increased by 22.0 percent in the same period, year-on-year.

The total import of cotton yarn to Korea from world-wide sources increased by 90.4 percent in the period January to March 2010, compared to the same period of 2009, also the same thing from Pakistan increased by 22.25 percent and Pakistan ranked as the 3rd largest exporter of this product to Korea, it added.

Pakistan's export of cotton fabric (under 200g/m2) to Korea, it said, has been continuously increasing by remarkable amounts every month and it increased by 170.40 percent during 2009, while total import from world-wide has decreased by 8.4 percent. Also, total import of cotton fabric (over 200g/m2) to Korea has increased by 71.7 percent for the period January to March 2010, while the same from Pakistan increased by 114.7 percent compared to the same period of 2009. Pakistan ranked at second number in each of these categories, respectively.

Since the first export of indentured ethyl alcohol from Pakistan to Korea in March 2007, the same has been one of our leading export items to Korea. However, so far this year $0.413 million worth has been imported, which is a decrease of 87.2 percent compared to the same period of 2009, ranking Pakistan as the largest exporter of this product to Korea.

"While export of unrefined copper from Pakistan to Korea was worth $12.793 million during January to March in 2009, ranking Pakistan as the 2nd biggest exporter of this product to Korea, it has not been imported in January to March 2010. Since import of unrefined copper to Korea is through international trading companies with LME unit price, just like Naphtha, its high position in exports is not certain", it added.

According to the report total import of frozen fish to Korea was gradually increasing from November 2009, but the import from Pakistan has decreased by 15.5 percent in the period January to March 2010 compared to the same period last year. However, the import of Crustaceans from Pakistan has increased by 45.8 percent compared to the period January to March 2009.

For the period January to March 2010, Pakistan's traditional exports such as cotton fabric over 200 g/m (114.7 percent up), leather prepared (238.8 percent up) have performed exceptionally better than the same period last year. However, exports of raw material like unrefined copper, indentured ethyl alcohol (87.2 percent down) have substantially decreased. Apart from local variables, this could be due to demand drying up last year globally for raw material due to the global economic crisis.

 

[kugga]

Refineries and OMCs to fix monthly prices


ISLAMABAD: While protecting the guaranteed tariff for movement of diesel through pipeline, the petroleum ministry has decided to allow refineries and oil marketing companies to fix monthly prices of petroleum products despite opposition to the move by the Planning Commission, Oil and Gas Regulatory Authority (Ogra) and members of an experts’ committee.

According to a fresh summary, the ministry has also decided to allow refineries to charge 7.5 per cent deemed duty on locally produced diesel and kerosene, similar to the customs duty permissible to marketing companies on imported products.

Sources told Dawn on Sunday that the ministry had withdrawn two summaries earlier submitted to the Economic Coordination Committee (ECC) of the cabinet because of criticism of private members of the experts’ committee.

At a meeting on June 10, the petroleum ministry had accepted the members’ proposal that 7.5 per cent deemed duty on domestic production should be removed and the guaranteed tariff for transportation of products through pipeline abolished.

The sources said that the petroleum ministry issued notices on June 15 to the stakeholders, including members of the experts’ committee, to attend a hurriedly-called meeting the same day, but the private members could not attend it. However, no agreement was reached with the Planning Commission, the committee’s members and Ogra.

The Planning Commission categorically called for a phased deregulation of petroleum products, allowing the private sector to fix the prices of aviation fuels and light diesel oil in the first phase.

The commission and the private members also advised that in view of the Justice Bhagwandas Commission’s recommendations, the deregulation of petrol and high speed diesel should be deferred for the time being to prevent market abuse by refineries and OMCs. They also proposed abolition of inland freight equalisation margin under an Ogra-regulated regime to prevent market abuse.

According to the sources, Ogra expressed its inability to intervene in a deregulated environment unless the relevant law was changed.

A member of the committee said that the petroleum ministry had disregarded recommendations of not only the Bhagwandas Commission, but also of the Planning Commission and Ogra.

But the petroleum ministry’s summary expected be taken up by the ECC on June 29 claims that Ogra and the Planning Commission “agreed in principle with the proposals of deregulation of the IFEM and pricing of petroleum products, However, they suggested an effective role of Ogra”.It says: “The issue of removal of 7.5 per cent deemed duty on diesel was also discussed and considered not viable at this stage because of recent losses to the refineries and GoP revenue loss on import of HSD.”

The ministry has now proposed to deregulate the road and rail transportation of petroleum products which will reduce retail rates in major cities by 50 paisa to Rs2.5 per litre.

“However, for a transitional period of six months, Ogra will notify per litre freight rate to establish standard norms and mechanism and estimated transportation cost of IFEM for various locations.”

The summary says the pipeline component of IFEM for movement of HSD only will remain in the common freight pool because of “GoP volume and tariff guarantee for oil pipeline from Port Qasim to Muzaffargarh”.

It says Ogra will intervene if any violation takes place from refineries in allocation of petroleum products to OMCs and in case of misuse of freight rates.

But a committee member said Ogra could not intervene in market manipulation of prices or freight rates unless its law was changed.

The ministry has proposed to allow refineries and OMCs to announce on a monthly basis the ex-refinery and ex-depot sale prices of motor spirit, HOBC, LDO and aviation fuels on competitive basis.

The committee member said the past practice of the fixing of price by oil companies and refineries had led to probes by the National Accountability Bureau (NAB) and apex court’s intervention and the role had to be returned to the regulator.

The summary says that ex-refinery prices will not be more than average import prices of previous months. It says the ex-refinery prices of HSD and kerosene produced by local refineries will continue to be managed by Ogra in accordance with the existing formula, including 7.5 per cent customs/deemed duty on HSD. The OMCs’ and dealers’ margin on HSD will remain fixed at the existing Rs1.35 and Rs1.5 per litre.

The summary also calls for fixed margins for dealers and OMCs in absolute terms, assuming crude price at $62.5 per barrel. As such, the OMCs’ per litre margin will be Rs1.5 on petrol, Rs1.72 on HOBC, Rs1.58 on kerosene and Rs1.61 on LDO. The dealer margin on petrol and HOBC will be fixed at Rs1.87.

As opposed to Justice Bhagwandas report, the summary neither makes it mandatory for refineries not to use special reserves funds for meeting their revenue requirements nor fixes any deadline for sale of 0.05 per cent sulphur content diesel.

The summary says the refineries “will be advised not to adjust their losses against the special reserves accumulated since July 2002 and utilise the same on special projects i.e. hydro desulphurisation project to reduce sulphur contents in diesel from one per cent to 0.05 per cent”.

The ministry did not consider the Bhagwandas Commission’s recommendation for fixed GST.

The ministry has also recommended reduction in investment requirement for new marketing companies from Rs6 billion to Rs500 million to enable four influential parties to set up marketing firms, although 12 companies are already operating.

 

[Hutchroy]

Pakistan faces grim economic situation

Stricter IMF conditionalities in coming months, years

Monday, June 28, 2010
By Mehtab Haider

ISLAMABAD: Pakistan will have to either accept Greece model IMF sponsored new programme for obtaining $5-$7 billion wrapped in tough conditionalities in the second quarter of fiscal year 2010-11, or Islamabad will have to undertake harsh measures for cutting down imports by 40 percent by banning all kinds of luxury items as well as taking measures to ensure stable exchange rate in order to avoid default.

A senior official involved in decision making process at the top level confided to ‘The News’ that Pakistan’s economy was running on tight rope and a contingency plan was required to consider two available options, including new programme of the IMF or without IMF programme, for avoiding an unwarranted situation that could appear after the first half of the next fiscal financial year, starting from July 1, 2010.

“The ‘status quo’ will not provide solution to the biggest challenges currently faced by the country at the moment as there is a need to sensitize the top political leadership of the country as they are not fully aware of the challenges confronting the national economy,” he added.

Severely criticising the budget makers for 2010- 11, the official said that he remained unable to understand that who advised the Finance Ministry for including projection of Rs43 billion for launching Euro bond as this one step could close doors for obtaining cheaper funding from the IMF under its facility of Poverty Reduction and Growth Facility (PRGF). Now Pakistan will have to get extended Standby Arrangement (SBA) programme, which is more expensive, compared to the PRGF. Under the IMF rules, all those countries cannot qualify for cheaper facility of the PRGF which are approaching international capital market.

“No one should expect that the IMF will extend the second SBA programme on soft conditionalities similar to the ongoing programme because international environment is quite different from 2008 as many countries are in queue for obtaining bailout packages from the Fund,” said the official and added that the Greece model IMF programme would be extended to Islamabad under which tough conditionalities, including laying off thousands of employees from public sector enterprises, complete elimination of subsidy for energy sector and many other tough steps could be the order of the day.

In a scenario of without the new IMF programme, the country will face a major challenge on repayment of foreign debt that would touch new heights from 2011-12 when Pakistan will be required around $6-$7 billion on annual basis to ensure its foreign loan repayments, said the official, who seems quite worried about the emerging economic situation of the country.

He conceded that the country liberalised its trade regime on fast track basis during the decade of 90s and the situation was rapidly arising where the country would have to seriously consider cutting down all kinds of non-essential imports. According to him, the food items, machinery, fertilizers, edible oil and few other items should be put in those categories which are essential for the country while all other items such as cars, mobiles and several other items should be put in the non-essential list and should be restricted for imports.