Pakistan Economy - Daily News & Analysis

[Neo]

Thar coal reserves to generate 1000 MW: Dr Samar

ISLAMABAD: Member of the Science and Technology Planning Commission Dr Samar Mubarakmand on Monday said that at least 1000 MW can be generated out of Thar Coal reserves.

Talking to a private news channel, he said that at least, $115 billion are required to materialise this project.

He added that Thar contains 175 billion ton reserves of coal, out of which 1000 MW electric power may be generated for the next 30 years.

To a question, he said that Thar coal project will become operational in December 2013 and bring prosperity in the country.

"Pakistan has enough coal reserves that can provide electricity to the country for more than 500 years," he said.

He said that development work was in progress and the first 50 megawatts (MW) gasified project had almost been completed.

He said that the project was to cost Rs 8.898 billion with a foreign exchange component of Rs 5.847 billion that was approved by the Executive Committee of the National Economic Council last year.

To another question, Dr Mubarakmand said that the success of the Thar coal project would lead to investment from leading international companies.

He said that several foreign companies wanted to participate in the project and had shown interest.

He said that these companies are just waiting for the results of the maiden 50 MW pilot project adding that if the pilot project was successful, a barrage of investment would automatically follow.

He said that coal in Thar mines could not be extricated but used to manufacture electric power, diesel and fertilisers in the reserves.

Thar coal reserves to generate 1000 MW: Dr Samar

[Neo]

US corp provides $20 mn loan for building project

In addition to the cogeneration plant, the office space will feature an exhaust heat recovery system, air dehumidification using heating pipes, condensation collection for water usage, efficient lighting fixtures, and clean eco-friendly refrigerants used for air conditioning. - File photo

WASHINGTON: A U.S. finance institution, Overseas Private Investment Corporation, announced on Monday to extend a $20 million loan towards completion of a 28-story office building in Karachi.

Finance Minister Abdul Hafeez Shaikh, who presided over the signing ceremony of the arrangement, hailed the transaction, saying it represents the tremendous opportunities existing between the two countries for stronger economic cooperation.

“I hope this is the beginning of a long-term association,” Dr Shaikh said. The presence of the modern building will help the country attract multinational investors by meeting an urgent need for top-quality office space.

The property will feature several green building characteristics, including a natural-gas fired cogeneration power plant which will increase its energy efficiency and mitigate negative environmental impacts.

Project sponsor TPL Properties expects to complete construction of the Centrepoint office building in central Karachi in 2012, and will then begin leasing space to large local and multinational organizations.

“This is a sign of close cooperation between Pakistan and the United States — the private sectors of the two countries have huge potential to further expand bilateral relationship,” Ali Jameel, Chief Executive Officer of TPL Holdings, said.

In the process, the project will provide new management and professional employment opportunities with benefits, including those specific to female employees. The building will be fully automated, with world-class IT and security systems.

This office building will help Karachi meet a growing need for high- quality office space, creating professional jobs in the process and becoming only the second property in the city to offer services such as world-class IT and security systems, OPIC President and CEO Elizabeth Littlefield said.

“We expect that its many green building features will encourage similarly environmentally-conscious construction in Pakistan.”

In addition to the cogeneration plant, the office space will feature an exhaust heat recovery system, air dehumidification using heating pipes, condensation collection for water usage, efficient lighting fixtures, and clean eco-friendly refrigerants used for air conditioning.

US corp provides $20 mn loan for building project | Business | DAWN.COM

[Neo]

Tremendous potential exists in Pakistan, Argentina: envoy

ISLAMABAD: Argentine Ambassador HE Rodolfo J Martin Saravia said on Tuesday that tremendous potential existed in both Pakistan and Argentina, which needed to be exploited by the two countries.

Saravia said this during a reception he hosted in Islamabad to commemorate the 60th anniversary of diplomatic relations between Argentina and Pakistan. He delivered a speech in which he remarked that it was his mission to bolster political, trade, cultural and sports linkages between Islamabad and Buenos Aires.

Pakistan Foreign Minister Hina Rabbani Khar is scheduled to visit Buenos Aires in the last week of November to sign several agreements between both the countries and also to explore further avenues for cooperation to strengthen bilateral relations.

An example of the cooperation between both countries is a joint venture between an Argentine pharmaceutical company, Laboratories Bagó, and a Pakistani company, Ferozsons Laboratories Ltd. The two companies have set up a pharmaceutical concern in Lahore producing medicine to treat hepatitis. The prices of the products are much lower than those of the imported products with the same formula. The Argentine ambassador said that a mega project was also being organised by the Argentine company, Galileo, in which CNG stations in ten cities in Pakistan would be set up. In the private sector, Argentine entrepreneurs are working to establish CNG stations with the latest equipment to fuel buses. A joint venture between Argentoil Inflex and Wah Industries will locally manufacture CNG cylinders.

The ambassador said that the trade volume between both the countries went up to $220 million in 2008 from $75 million in 2004, decreasing in the last couple of years due to to the international recession. He added that it was picking up again as both countries were looking for new areas to increase trade volume. On the cultural side, the ambassador said that a grand solo exhibition of Argentine artist Ricardo Cinalli would be held in Islamabad on December 15 and then in Lahore as part of a programme to introduce Argentine artists to Pakistani art lovers. pr

Daily Times - Leading News Resource of Pakistan

[Neo]

SBP required to inject Rs650bn in financial system

Tuesday, 25 October 2011

KARACHI: The State Bank of Pakistan will have to inject an additional Rs 600 to Rs 650 billion before Eid-ul-Azha in order to avoid the abilities of financial system from choking up.

SBP has consistently injected Rs 250 billion every quarter to keep the wheels of the economy churning, allowing the government an incremental increases in its borrowing from the banking system every fortnight.

While the government has endeavoured to keep its budgetary borrowing from SBP, within the June 30, 2011 figure of Rs 1.5 trillion - it has, in essence, borrowed money from banks injected by SBP, through its open market operations. The likely end-result is to put pressure on the price line in the country.

However, there is one difference. When government borrows from SBP, the money supply rises. When government borrows from banks or non-banks, money supply does not rise. But in the present case, SBP's continuous injection of liquidity at the rate of Rs 30 billion a day has the same effect. Borrowing from SBP is regarded as a zero-sum game as profits of SBP flow back into the budget. Borrowing from banks, by the government, results in transfer of money as interest payments from taxpayers into profit for bank shareholders.

POLICY RATE CUT: SBP's policy rate cut of 150bps has failed to jumpstart the economy. The situation warrants a regulatory intervention to ensure flows to productive sectors of the economy. At present, there is no liquidity in the system despite SBP's persistence injection as all of it is mopped up by the government or provided to the enterprises under its control.

Banks have been converted into asset management companies, with investment portfolio of 40 to 45 percent. The Advance-to-Deposit Ratios (ADR) has fallen from a high of 70-75 to 60-65 percent. SBP did impose a ceiling on ADR of banks, however, there is no floor on ADR. This in effect fails to put pressure on banks to extend lending to the private sector, which is known as the engine of growth. "Now there is very little difference between banks and non-bank financial institutions. All of them are placing funding in governmental bonds through money market operations," said a leading treasurer, requesting anonymity.

There is total lack of coordination between the debt management wing of the Ministry of Finance and the money market managers in SBP. In the last treasury bill auction, government raised Rs 113 billion in three, six and 12 months paper @ 11.87 percent; 11.91 percent and 11.93 percent, respectively. A day later SBP injected Rs 210 billion through its open market operations at 11.56 percent.

Although, SBP's liquidity injection is for one week tenor, a continuous administration of injections weeks after weeks (Rs 337 billion a week before) indicates a one-side trend. There is no end to government appetite for borrowing. Nor is the government interest rate sensitive.

Unless there is a heavy dose of external inflows or government and SBP jointly take steps to lower the currency-in-circulation amounting to Rs 1.65 trillion, the liquidity in the financial system will remain tight. Seasonal advances will soon follow the four-week hike in cash needed during the Eid holidays.

SBP will have to inject more liquidity sooner than later. This injection is of a permanent nature and ultimately will find its place on SBP's balance sheet. There is no difference in note printing or liquidity injection by SBP via the banking system. In both cases the consequences are the same - rising inflation. The present strategy, therefore, would lead to high inflation. It is bound to adversely impact the exchange rate. Rupee depreciation may exacerbate inflation further.

According to SBP's own survey, corporates, in Pakistan, change their price more than once a year. The most important factor sighted in the survey indicates rupee depreciation.

There appears to be no conceptual change in economic managers' strategy who appear to be more inclined towards fiscal arithmetic. A rate cut in National Saving Centre instruments - soon after SBP's policy rate cut-based on alignment of rates with three, five and ten-year bonds - was a profound error.

Corporates are no more allowed to invest in NSS instruments. National Savings Centres (NSCs) are now more or less retail outlets. Government needs to encourage household and private savings towards NSS - so that an increasing reliance on banks is effectively checked.

SBP needs to restructure its discount window and the government needs to bridge its expenditure-resource gap through non-bank sources, i.e., either multilateral or bilateral aid or loans or borrowing from local non-bank sources. At the same time, fiscal authorities need to help the banks by reducing the tax on cash withdrawals in order to lower the high level currency-in-circulation and push it towards deposit taking. The present disconnect between liquidity management and lending rates needs to be addressed so that money is made available to the private sector to boost growth.

SBP required to inject Rs650bn in financial system

[Neo]

Pakistan dithers on Iran gas pipeline plan

26 October, 2011

ISLAMABAD: Federal Minister for Petroleum Dr Asim Hussain has said a breakthrough in the project for laying a pipeline to import natural gas from Iran depends on an "understanding" with the international community.

During an interview with the VOA on Tuesday he said Pakistan was working on the project but progress depended on world conditions. "Progress on the Iran-Pakistan (IP) gas pipeline project depends on international understanding," he said.

Twenty million cubic meters gas will be imported per day from Iran under the IP gas pipeline project that will cost $7.5 billion. The 2775 km long pipeline is expected to be completed by 2016.

The current statement of the minister apparently makes the project of importing natural gas from Iran doubtful. On the contrary, Iranian officials recently gave optimistic statements about completing the project at the earliest. The Iranian foreign minister had told Prime Minister Yusuf Raza Gilani in September that the Iranian part of the Iran-Pakistan gas pipeline would be completed by the middle of next year while PM Gilani had also emphasised the early completion of the gas pipeline project and the import of 1,000 MW electricity from Iran.

During his visit to Pakistan in September, Iranian Foreign Minister Ali Akbar Saleh said Iran was ready to lay the pipeline in Pakistani territory and that Iran could even start exporting electricity immediately if it could be connected with the grid system of Pakistan.

Dr Hussain has also said Iran has offered to supply 10,000 MW electricity to Pakistan to overcome the current power shortage. He said a plan to lay the transmission line in this connection is under consideration. At present Pakistan is importing 35 MW electricity from Iran for Gwadar and plans are also under way to increase it to 100 MW.

Since the decade of the '90s Pakistan has been trying to implement the proposed plan of laying the pipeline to import natural gas from Iran. But the international community, particularly the US, does not support the plan and hence Pakistan has always taken a cautious approach towards the issue.

In August this year, Pakistan sought a six-month waiver from Iran in executing its part of the $3 billion IP gas pipeline project. Both sides had agreed on the GSPA commencement date of December 31, 2014 to make the project operational, and there was a clause of take and pay in the agreement under which any of the two countries that caused a delay in completing the project would be liable to $200 million penalty per month after December 31, 2014. Both countries are to complete the project under a segmented approach.

According to a top official at the ministry of petroleum and natural resources, Pakistan has formally asked Tehran to extend a waiver for at least six months since Pakistan fears that the project might get delayed because of unforeseen hurdles.

During her tour of Pakistan last week, US Secretary of State Hillary Clinton, without mincing any words, expressed American reservations about the Pakistan-Iran gas pipeline project. She said, "Iran is a very difficult, rather dangerous neighbour of all countries whose borders meet with it. Apparently no prediction can be made about the internal political and economic situation in Iran."

Pakistan dithers on Iran gas pipeline plan - PakTribune

[Neo]

Act now for energy

February 22, 2012

Prime Minister Yousuf Raza Gilani believes that 500 million cubic feet import of Liquefied Natural Gas (LNG) would help the country's powerhouses generate 2500 megawatts of electricity to bridge the present 7500 MW supply-demand gap.

One can only hope that the government's plan would see the light of day.

For years, the matter of balancing country's supply against the demand for electricity has remained a largely unresolved matter.

Plans to import natural gas as one of the solutions to growing electricity shortages have been on the table for over two decades, but thus far have not materialised.

We are afraid that the present approach toward future LNG imports will not work either and the Ministry of Petroleum appears to be clutching at straws in the wind.

Our apprehensions rest on dividing the LNG import plan into two distinct areas, ie (a) bidding for import of LNG; and (b) establishing a terminal at Port Qasim.

Previously the plan was a more integrated approach, ie bidding to import LNG as well as establishing a terminal at Port Qasim known as the Mashaal project.

Unfortunately, however, the process got derailed as the Supreme Court stepped in and the Economic Co-ordination Committee (ECO) too was beset with controversy with the Ministry of Finance questioning the process adopted by the Ministry of Petroleum and Natural Resources at the behest of Fauji Foundation.

Even though the court had not advised against continuing the process; the Ministry of Petroleum in its wisdom decided to scrap the bidding round and subsequently divided the bidding into two distinct rounds - one for importing LNG and the other for establishing the LNG terminal.

One needs to understand that the importer has to tie both ends simultaneously, ie sign up with the consumer of LNG for off-take ie power generation as well as have guaranteed source of supply.

Once it ties both ends, then only will it invest nearly half a billion dollars in a terminal.

The other option is, the government either invests directly or provides a guarantee or else enter into a public-private partnership for establishing the terminal.

We are afraid that asking for mega-investment in an infrastructure project of this magnitude, under the present investment climate may not materialise.

End-to-end solution from a single consortium with deep pockets is the answer.

But time is of the essence.

Dilly-dallying on the pretext that import of natural gas can come from the US at one-fourth the price is unrealistic.

The US at present does not have the export infrastructure for natural gas.

Had it been so, Japan and China would have opted for import via the Pacific to balance their trade instead of importing from Qatar and the Middle East.

Pakistan will surely miss the boat, if does not sign up with Qatar quickly.

The Government of Qatar is likely to advise Pakistan to sign up with one of its existing long-term buyers for import of LNG.

No investor or supplier will wait for us while we play hooky in taking a decision.

We are not the only destination for investment and no one is beholden to help us in this present crisis.

Act now for energy | Business Recorder

[VCheng]

Excerpt from: Rupee ends flat at 90.76/78 to USD - geo.tv

The rupee has been supported by remittances, which rose 21.45 percent to $9.73 billion in the first nine months of the 2011/12 fiscal year, compared with $8.02 billion in the same period last year.

In March, remittances totaled $1.14 billion.