Pakistan Economy - Daily News & Analysis

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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.

Business Recorder [Pakistan's First Financial Daily]

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Rains damage millions of tons of wheat in Sindh

Sunday, 27 Jun, 2010

Bags of procured wheat damaged by rain in Dadu District.

KARACHI: A huge quantity of recently procured wheat has been damaged during recent rains in many parts of the province, while quality of the grain packed in polymer bags is eroding, causing financial loss to the government.

Heavy rains in the wake of recent cyclone, which hit coastal areas of Badin and Thatta districts, damaged millions of tons of wheat lying in the open.

The estimates of losses projected by the food department are Rs390 million, officials, however, admitted that actual losses may be more.

It is learnt that about six million tons of wheat packed in bags were still lying in the open due to the inadequate storage facilities.

This year the provincial food department achieved 1.5 million tons wheat procurement target.

An official in the food department said that around half of the recently procured wheat was still lying in the open at different procurement centres because the government’s storage capacity stands at 0.6-0.7 million tons. Aftab Memon, director of provincial food department, puts figure of damaged wheat bags at 180,000.

More monsoon rains are expected in July and August this year in the province, which may further damage the wheat recently procured if arrangements were not made for its safe storage.

Sindh Food Department was given 1.5 million tons wheat procurement target this year, but it faced serious shortage of gunny bags, said Naveed K Baloch, provincial food secretary.

Around 1.5 million gunny bags were required by the provincial department to achieve the wheat buying target, but only 1.1-1.2 million gunny bags could be made available.

In different areas of Sanghar, Dadu, Nawabshah, Larkana, Khairpur and districts hundreds of polymer bags of wheat lying in the open are tearing up due to sizzling heat eroding the quality.

DAWN.COM | Business | Rains damage wheat in Sindh

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Coal power generation by 2015-16: Sindh CM

Monday, June 28, 2010

KARACHI: Sindh Chief Minister Syed Qaim Ali Shah informed Sindh Assembly on Monday that expected date of Thar coal based power production by Engro is 2015-16.

He pointed out that feasibility of an approximately 600-1000 MW Thar Coal-based Power Plant will be carried out by Engro Power Gen Ltd which is estimated to take 18 months and further 6-12 months of financial close.

He was replying to a question of Heer Ismail Soho during question hour.

He said no committee has been formed consisting of Secretary Mines and Engro head for development of Thar. However, in line with Joint Venture Agreement (JVA) with Engro Group a J.V. company "Sindh Engro Coal Mining Company Limited (SECMCL)" has been incorporated under the Companies Ordinance.

Qaim Ali who also holds the portfolio of Coal and Energy Development, pointed out that this J.V Company is being run by its Board of Directors comprising ten directors, six from Engro and four from Sindh Government. The Board of Directors is as per the J.V ratio of 60:40 (40% GOS).

He said Government of Sindh has entered into Joint Venture Agreement with Engro Group for development of coal mining in Thar Coalfield Block-II with share of 40% GOS and 60% Engro Group.

He said Sindh Engro Coal Mining Company Limited has been incorporated with initial capital of Rs. 199.200 million (40% share of Government of Sindh and Rs. 298 million (60% share by Engro Group), for detailed feasibility study in first phase.

To another question of same member, Chief Minister said the company would oversee the first "project" for an open cast mining facility with and annual capacity of 3.5 - 6.5 MT for which a detail feasibility study (DFS) will be carried out.

He said the company will ensure that adequate skill development programs are put in place along with other training facilities for locals of the area. He said 2% of profit before tax to be spent on Corporate Social Responsibility (CSR) related activities in Thar.

Coal power generation by 2015-16: Sindh CM

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Pakistan’s new investment incentives

By Muhammad Aftab

Given the challenging circumstances in which the economy had to operate during FY-2010, it is not surprising that the private investment response has remained subdued

Several new incentives will be enjoyed by foreign, non-resident and domestic investors during fiscal 2011, which starts July 1, as the economy is beginning to look up.

The incentives will spur the overall economic and financial situation, as the domestic investment has begun to look up, after a rather poor FY-2009, and not-so good FY-2010 that ends Wednesday. Everyone feels that the business should do more. And some indicators are that they already are doing so. Despite the global financial crisis, the sub-prime horror, and their spill-over effect that slashed all sorts of demand for consumer products, and exports, Pakistan stood its ground quite a bit. The exports stagnation in Pakistan’s case was the effect of these and domestic causes.

The good news, so for is that the Pakistani stocks offered a 37 percent return in FY-2010 that ends June 30. It translates into 31 percent in dollar terms.

This performance should encourage launch of new businesses, industries and companies. FY-2010 saw eight new initial public offerings (IPOs), with a total Rs 4.3 billion (b) worth. However, it was still better compared to just four IPOs, with Rs 1.4 billion (b) worth, launched in the low FY-2009.

What were the comparative yields and returns in other sectors? Stocks outperformed other investments and businesses, including forex, commodities, debt markets, real estate. But business, industries and investment, both domestic and foreign-funded, including FDI inflows, and domestic and foreign portfolio investment are now getting positive projections during months ahead.

The National Budget for FY-2011 is also keyed to attract foreign, non-resident and domestic investors in order to shore up industrial and business activity in the country.

Finance Minister Dr Abdul Hafeez Shaikh, has built the new incentives into five groups, to benefit the business and industry. These include tax-free payments to non-residents on profits on debt, which will be allowed effective July 1. The rate of final withholding tax on non-specified payments to non-residents has been reduced from the existing 30 percent to 20 percent. A 10 percent tax credit will be allowed for balancing, modernisation and replacement to all companies. A 5.0 percent tax credit will be allowed to any company in the tax year of its enlistment on bourses. A 10 percent withholding tax, as final charge on profit on debt (in debt instruments), and also for the investment in government securities will be allowed to ensure a hassle-free compliance by non-residents.

These securities will include the Treasury Bills, and Pakistan Investment Bonds, issued by the State Bank of Pakistan (SBP), the central bank.

What was the state of investment in the last two years? The government reports, at current prices, the Gross Fixed Capital Formation (GFCF) declined 0.6 percent in FY-2010, after recording a 5.5 percent increase in FY-2009.

A decline in the fixed income by the private sector has accounted for the overall change, with an estimated contraction of 3.5 percent in FY-2010. “Bulk of the decline occurred in electricity and gas, large scale manufacturing, transport and communication, and finance and insurance,” reports the Ministry of Finance (MoF).

Given the challenging circumstances in which the economy had to operate during FY-2010, it is not surprising that the private investment response has remained subdued, the MoF says. A substantial decline in Foreign Direct Investment (FDI) inflows for the year also contributed to the decline in fixed investment in 2010. FDI accounts for a high share of gross fixed investment in Pakistan, and contributes 20 percent to total investment.

The MoF agrees that the decline in FDI inflows was “in line with the steep drop in global inflows of FDI”, which fell 32 percent in 2009 according to the estimates of the International Institute of Finance (IIF). For the period July-April FY-2010, FDI totalled $ 1.8 billion (b), as compared to $ 3.2 billion (b) in the like period of FY-2009 — a decline of 45 percent.

The MoF analysis indicates a large part of decline in FDI was recorded in telecommunications, which was down by $ 607 million. In financial services, it was down by $ 548 million.

The decline in the two sectors, which related to a few “lumpy” transactions last year, amounted to 81 percent of the overall reduction in FDI in FY-2010.

But investment levels in some sectors remained healthy, including those in oil and gas exploration with an FDI of $ 605 million, communications $ 222 million, transport $ 104 million, construction $ 86 million, and paper and pulp $ 81 million. Despite a steep decline, inflow of FDI into financial services was $ 133 million in FY-2010.

The MoF also acknowledges “a worrying development was the large net disinvestment in the IT sector” amounting to $ 95 million in FY-2010. “Overall, out of the major industry categories, 12 of them recorded higher FDI for the period, while 24 industries witnessed a net reduction in FDI inflow,” it says.

But the new incentives are intended to boost investment. “Pakistan’s economy has displayed a significant resilience in the presence of a challenging environment throughout FY-2010. The government’s efforts to tackle the economic slowdown have been noteworthy. An economic recovery is underway as shown by an improvement in macroeconomic indicators. However, this needs to be further strengthened,” says Finance Minister Hafeez Shaikh.

The writer is an Islamabad-based journalist and former Director General of APP

Daily Times - Leading News Resource of Pakistan

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IMF chief Strauss-Kahn satisfied with Pakistan

Tuesday, 29 Jun, 2010

WASHINGTON: The head of the International Monetary Fund on Monday praised Pakistan's commitment to an 11.3 billion-dollar rescue package, despite a delay in setting up a nationwide tax.

IMF managing director Dominique Strauss-Kahn said that while Pakistan could not be considered a “normal country” in light of its wave of violence, the government has made a “good step forward” on economic reforms.

“There is a lot of concern but no real problem. I think they are going ahead rightly,” Strauss-Kahn said in a group interview. The Washington-based international lender approved the latest 1.13 billion dollars of the package in May and allowed two waivers on conditions, including giving the government the right to overrun the budget deficit.

As part of the IMF bailout, Pakistan agreed to impose a nationwide value-added tax to bolster government coffers and drum up badly needed funding to fight poverty.

But Pakistani leaders are squabbling over how to set up the tax. Some Pakistanis have voiced fear that the delay could lead to a cut-off in IMF support.

Strauss-Kahn acknowledged the IMF had “questions” about the tax and energy prices, but added: “I must say that a lot already has been delivered by the government.”

Another concern, Strauss-Kahn said, was to ensure that donor nations, informally grouped as the “Friends of Pakistan”, follow through with pledges.

“The question is... does the so-called Friend of Pakistan set of countries... really deliver and provide the resources, because all the resources needed are not supposed to come from the IMF,” he said.

Donors met in April 2009 in Tokyo and pledged 5.28 billion dollars to help stabilize Pakistan, which is the Islamic world's only declared nuclear weapons state and lies on the frontline of the US-led war on extremists in Afghanistan.

The US Congress last year approved a five-year, 7.5 billion-dollar plan to build roads, schools and democratic institutions in Pakistan. -AFP

DAWN.COM | Business | IMF chief Strauss-Kahn satisfied with Pakistan

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Pakistan may get FDI worth $1.7bn from 120 CDM projects: minister

Tuesday, June 29, 2010

KARACHI: Pakistan is likely to get foreign direct investment worth 1.715 billion dollars from the 120 clean development mechanism (CDM) projects that are in the pipeline, said Federal Minister for Environment Hameedullah Jan Afridi on Monday.

He was speaking at a seminar to introduce the business opportunity of Carbon Finance through CDM of Kyoto Protocol under the United Nations Framework Convention on Climate Change (UNFCCC).

These projects will help in green house gasses (GHG) reduction of 28 million tons CO2 equivalent a year, he said.Pakistan has so far approved 25 CDM projects that will bring in FDI of around 742 million dollars and help in GHG reduction of 4 million tons CO2 equivalent a year, Afridi said.

“The CDM Executive Board has registered six projects (out of the 25) which will generate 195 million dollars worth of foreign direct investment (FDI),” Afridi said.Foreign companies invest in GHG emission control in developing nations and swap these ‘carbon credits’ in home countries where this practice is too expensive and proves uneconomical, Afridi explained.

Carbon Finance through CDM was an attractive business opportunity and an increasing number of governments and private companies are now entering the market, he said.Potential for CDM projects exists in energy efficiency, alternate and renewable energy production, cleaner technologies in industrial processes, and improvements in agriculture and forestry practices, Afridi said.

The Ministry of Environment and Korean Trade and Investment Agency (KORTA) had jointly organised the seminar at a local hotel.The CDM under the Kyoto Protocol of 1997 has been particularly introduced for the developing countries for initiating sustainable development projects in return for Carbon Credits that can be sold to developed countries.

“The business is expected to grow to billions of dollars,” Afridi said.

Pakistan offers technical and financial opportunities to attract international investors in the carbon finance, he said.

He appreciated the Korean companies’ interest in CDM project activities.Korean Consul General Lee In-ki highlighted the aim and objective of the seminar. He gave background of KORTA and briefly described the profile of Korean companies interested to invest in CDM projects in Pakistan.

Pakistan may get FDI worth $1.7bn from 120 CDM projects: minister

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Pakistan enters export market of CNG kits

KARACHI: Pakistan has entered the export market of CNG kits as famous CNG kits manufacturer from Italy – Landirenzo has started regular shipments of four-wheeler’ CNG kits to Brazil, China, Far Eastern and European countries, said Chief Executive Officer of Landirenzo Pakistan, Alberto Barbiery.

He said about 30 percent of the total production of CNG kits by Landirenzo is being exported abroad; as the company is planning to increase its production and is likely to enhance export volume from Pakistan.

Alberto said Landirenzo has over 90 percent market share of CNG kits in Pakistan including customers like Indus Motors for Toyota and Daihatsu cars and Pak Suzuki Motor Company for all range of cars and vans besides catering to the individual customers through its four dealers across the country who have further network of wholesalers.

He informed that Landirenzo started its operations in Pakistan in 2007 by assembling CNG kits and now it has reached the deletion level of 20 percent as the company is manufacturing 20 percent local components.

He said that the company’s total volume has reached $20 million (Rs 1660 million approx) per annum. He, however, said that Landirenzo is yet to exploit the market of heavy vehicles such as buses, trucks and vans, which has a big potential and if the owners of heavy vehicles convert their vehicles to CNG, the country would save precious foreign exchange being spent on import of diesel. He said that the Pakistan’s mounting menace of environmental pollution would also be resolved considerably.

To a query he said that his company believes in quality and safety and is ready to transfer its technology to Pakistan by gradually adding local components until it reaches 100 percent. He said that the company has set up a testing laboratory besides assembling and manufacturing plant in SITE area and each and every component is checked before assembling.

Alberto informed that about 12,000 to 15,000 kits are being manufactured in its SITE facility and the total annual production has gone beyond 45,000 units.

He warned that the safety and quality of the CNG kits manufactured in Pakistan or imported should be checked by the concerned authority and that could be possible when the authority would issue license to the certified dealers only.

He expressed concerns over the safety and quality of CNG and LPG kits being installed in auto-rickshaws and taxis in Pakistan.

He advised that people considering getting CNG kits installed into their vehicles should to go to registered and certified CNG installers for the sake of their safety. He informed that his company would soon launch an awareness campaign about safety and precautions regarding CNG kits.

Daily Times - Leading News Resource of Pakistan

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Economic indicators improving ECC informed

ISLAMABAD ( June 29, 2010): The Economic Coordination Committee of the Cabinet (ECC) met here on Tuesday under the chairmanship of the Federal Minister for Finance, Dr. Abdul Hafeez Shaikh.

The ECC was briefed about the key economic indicators, said a statement issued here by Ministry of Finance.

It was apprised that various economic indicators had shown signs of improvement.

The Quantum Index of Large-scale Manufacturing (QIM) had registered a positive growth of 4.5 per cent during July-April 2009- 10, against negative growth rate of 8.2 per cent during comparable period last year, it said.

The meeting was informed that trade deficit improved by 9 per cent to $13.9 billion in July-May 2009-10 from $15.3 billion in the same period last year. The workers' remittances amounted to $8,064 million in July-May 2009-10 as against $7,076 million, showing an increase of 14 per cent over the same period last year.

The ECC desired that in view of the forthcoming holy month of Ramadan, the availability of essential items during Ramadan and their prices would be examined by a Ministerial Committee under the convenership of Federal Minister for Industries and submit its recommendations within the next four days.

The ECC also considered and approved the decision of the Ministerial Committee constituted by the prime minister to settle the issue of compensation and resettlement of the affectees of the Diamer-Basha Dam. It was also decided that the scheme would be revised and sent to the ECNEC for final consideration.

Regarding the World Bank loan for reconstruction of berth 15 to 17 A and SRB's 1 & 2 at Karachi Port, the ECC decided that the proposed World Bank loan be on-lent to KPT at a rate of 8.2 per cent. The loan shall be repaid by the KPT in US dollars over a period of 30 years.

The ECC was informed that during July-May 2009-10, the overage CPI-based inflation stood at 11.6 per cent as against 21.6 per cent in the same period last year.

Whole Sale Index inflation stood at 12.2 per cent as against 19.7 per cent last year.

The FBR tax collection stood at Rs. 1,137 billion on net basis during July-May 2009-10 as compared to Rs. 996 billion in the same period last year, thereby posting an increase of 14 per cent.

Economic indicators improving ECC informed : Business Recorder | LATEST NEWS

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Pakistan expects $970 million foreign inflows to meet IMF target

Wednesday, June 30, 2010

KARACHI: Pakistan expects to secure $970 million in the next two days from overseas Pakistanis to help it cut the central bank borrowings and meet a condition of the International Monetary Fund’s (IMF) $10.66 billion loans programme, officials said on Tuesday.

Under the programme, the government has to pay back any incremental budgetary borrowing from the central bank by June 30. As of June 18, those borrowings stood at Rs130 billion ($1.5 billion).

Officials said a loan from the Asian Development Bank (ADB) will bring in $470 million.

The government also hopes to be paid $500 million by Etisalat, the Gulf Arab region’s second-largest telecom firm, as part of a 2006 deal to sell a stake in Pakistan Telecommunication Company Limited (PTCL).

The government sold the stakes for $2.6 billion and about $800 million is outstanding, officials said.

Finance Ministry Spokesman Asif Bajwa said the government expected to receive $970 million “in the next few days”.

“We are trying to get these inflows in this quarter,” he said.

Officials said that the government had recently asked Etisalat to release at least $500 million of the outstanding amount from the stakes sale to help meet the IMF condition.

Pakistan turned to the International Monetary Fund for a $10.66 billion loan in November 2008 to avoid default on its debt.

As part of the deal, the IMF said the government must reduce to zero its incremental budgetary borrowings from the central bank at the end of each quarter.

At the end of the March quarter, these borrowings with the State Bank stood at Rs30 billion, although it had met the condition in previous quarters.

“The government needs to retire this amount or otherwise it will need to seek a waiver from the IMF for being in breach of a key performance criterion,” said Asif Qureshi, director at Invisor Securities, a local brokerage house.

Along with profit transfers from the central bank, as well as some other debt retirements by the government, these inflows will help meet the IMF target, said Qureshi.

Pakistan has drawn down $7.27 billion of the IMF loan programme that runs to the end of 2010.

The IMF is due to meet in August to review Pakistan’s progress in meeting loan conditions before approving the next tranche, likely to be $1.1 billion to $1.2 billion.

Pakistan expects $970 million

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Punjab working on energy generation from waste: Shahbaz

Wednesday, June 30, 2010

LAHORE: Chief Minister Punjab Mian Shahbaz Sharif has said the Punjab government is working on a comprehensive project of solid waste management in cities and generation of energy from waste.

He said the provision of potable water to people was the top priority of the government for which record funds had been allocated. He said that an agreement was being signed with the Istanbul Municipality on solid waste management in Lahore, which would bring about a visible change in the sanitary system in the provincial metropolis. He said that apart from middle and long-term policies in the sector, optimum utilisation of available resources would have to be ensured for improving the existing situation.

He was giving a briefing to Pakistan Muslim League-N Quaid Mian Nawaz Sharif about measures taken by the Punjab government for providing civic amenities to people of the province at the Chief Minister’s Secretariat on Tuesday.

The chief minister said the Punjab government was utilising all possible resources for the rapid development of the province as well as providing basic amenities to the citizens. He said that special attention was being paid to Solid Waste Management and provision of potable water to the people.

He said there was a need to mobilise the existing workforce immediately which was drawing salaries of billions of rupees without showing satisfactory performance. He directed that staff of the Solid Waste Management Department should immediately be withdrawn from residences of officers and be utilised for providing a better environment to people. He said the government was determined to making solid waste management an active and vibrant institution by eradicating corruption, negligence and politics.

He said a Solid Waste Management Company had been constituted which would have an autonomous board of directors and experts. He said polluted water had become a serious issue due to which people were suffering from various diseases.

He said the Punjab government had allocated Rs. 9.5 billion for the sector which would be utilised for providing potable water and drainage facilities in urban and rural areas. He said that 54 percent funds would be utilised in rural areas. He said that a sum of Rs. two billions had been allocated in the next fiscal year for the construction of new water supply schemes besides improvement existing ones in areas of brackish water.

Punjab working on energy generation from waste: Shahbaz