[B][SIZE="4"][COLOR="Blue"][CENTER]The election year budget that brings little respite [/CENTER][/COLOR][/SIZE][/B]



[I]In the national interest[/I]

[I][LEFT]By Kamal Siddiqi( The writer is editor reporting, The News)[/LEFT][/I][RIGHT][I]Monday,June 18,2007[/I][/RIGHT]

The budgets have been unveiled. Both national and provincial. The government promises us relief and respite. In reality, we have neither. Subsidies are back in fashion, much to the disdain of the international finance institutions. Defence spending is up while there is a very marginal increase in spending on health, education and sports. If the state of a nation can be judged from its budget, then Pakistan does not come across as a country that cares much about its people. And yet, budgets are like promises of power by our rulers — seldom honoured usually broken.

At the same time, the CJ saga continues. And with it continues the government offensive on the media. In this age of good government, one finds it strange that those who are seen to be standing by the Chief Justice are being punished while those who are happy to file affidavits that go against him are rewarded. The divide is blatant and brutal. And yet there are those who continue to support the CJ. This worries the government.

This newspaper reported earlier this week that in an amazing “twist of fate” the government’s witnesses against the CJ are getting better deals one by one while those who did not toe the government line have to face the music. The details show that some have been rewarded with plum postings. Those who have opposed have faced arrest, torture and much worse.

In the case of the new Sindh IGP, Major (Retd) Ziaul Hassan, this is an example of shooting two birds with one stone. Major Hassan had earlier given an affidavit that showed the CJ in a negative light. Tongues are now wagging that this is his reward. But there is more. His appointment comes after earlier attempts by Islamabad to put their man in Sindh which were thwarted by the coalition partner, the MQM.

Sindh Advisor for Home Affairs had gone on record for saying that a senior police official from Sindh should be made the provincial police chief. However, after the incidents of May 12, it seems that this demand has been withdrawn. Now we have yet another man from Islamabad who will try to make the most of the situation in what is essentially unfamiliar terrain. Is it fair to Sindh to be given as a reward posting?

What is fair and what is not is subject to debate in Islamabad. Mercifully the minister of state for communications, Shahid Jamil, finally resigned from his position following the registration of a criminal case against him in connection with the alleged killing of a Pakistan-origin Canadian national at his residence. But one wonders why he was not arrested. Instead, when the media got wind of the story initially, the much hyped Motorway Police stood guard to protect the minister from the prying public. This is ironic.

The same irony also applied to the Minister of Tourism, Nilofer Bakhtiar, who resigned from her position because she was relived of a party position that she held. That change came after the paraglide pictures of the minister were made public with a group of men who she was obviously not related to. Why do we have two standards for everything? Also, if the minister should resign it should have been for the disaster she has made of the Visit Pakistan Year 2007. The only beneficiary of this ill-advised venture seems to be the minister herself who went around the world in a bid to “promote” Pakistan during its tourism year. Will we ask her to pay back the public money she spent on these sprees?

Is it not ironic that key members of Prime Minister Shaukat Aziz’s super-sized cabinet resign for all the wrong reasons? Possibly that is why many of the other ministers hold on despite all that is said and written about them.

We are told that yet another minister of state is in the firing line. This time for involvement in human trafficking. The FIA has sent a questionnaire to this minister to explain how his official stationery was used to procure European visas for people. One recalls that the prime minister had said that when he inducted his super-sized cabinet that their performance would be evaluated on a periodic basis. Given the antecedents of cabinet members so far, where is the report card the public should ask? Better still, say some, don’t ask. Ignorance, they say, is bliss.

The prime minister himself has been busy predicting the obvious. In an interview with an American news service, the prime minister said that he expects President Musharraf to secure another five years in office. One hopes the president has the same predictions for his prime minister.

Talking to this foreign news agency, the prime minister also unveiled the grand plan. The president would be re-elected by the sitting parliament between September 15 and October 15 after which around November an interim prime minister would take office so that elections are held within 90 days. So for all practical purposes, elections are expected in January 2008 or so.

Who will be the interim prime minister, one asks. More importantly, will it be someone seen as being close to the prime minister or the president? Or better still, a retired judge?

However, there are ifs and buts to this. For example, the US is insistent that the elections should be held “according to international standards.” US Assistant Secretary of State for South Asian Affairs, Richard Boucher, even went and met officials of the Election Commission of Pakistan this week “to ensure that arrangements are being made to hold free and transparent elections.”

While one is no fan of the military setup in place, a senior US official dictating to the election commission on how elections should be held in Pakistan is taking things too far. If this is not unnecessary interference in the affairs of Pakistan, then what is?

The mixed signals from the government, however, are confusing. The foreign office spokesperson stated “We don’t need an outsider to come and tell us what to do. This is for our people, our government and our media to discuss, debate and decide.” She said this when a reporter asked her about the state of media freedom in Pakistan and comments by some EU officials over recent “setbacks” in media freedom in Pakistan.

Should these comments also not hold true for elections in Pakistan as well? It is one thing to have independent observers from international organisations and another to have a foreign government insisting on supervising the process minutely. With such involvement, one worries about the outcome of the exercise itself.

Email: [email]kamal.siddiqi@thenews.com.pk[/email]

[U][url]http://www.thenews.com.pk/daily_detail.asp?id=60981[/url][/U]

[B][SIZE="4"][CENTER][COLOR="Blue"]Economy’s current state[/COLOR][/CENTER][/SIZE][/B]



[LEFT][I]By Shahid Javed Burki[/I][/LEFT][RIGHT][I]Tuesday,June 19, 2007[/I][/RIGHT]

SINCE I write about the Pakistani economy, I am often asked about its health, performance and prospects. These questions are posed more earnestly in May and June as the calendar advances towards two events. The first is the release of the annual Pakistan Economic Survey; the second is the unveiling of the national budget. The Survey takes a detailed look at the financial year that is about to close; the budget views the year that is about to begin.

The Survey for the year 2006-07 was released to the public by the ministry of finance on June 8. Two days later, on June 10, the budget for the year 2007-08 was presented to the National Assembly. In the article today, I will reflect on the current state of the economy.

The most discussed number in the Survey is the rate of economic growth which is estimated at seven per cent. This is an estimate since the government has data for only the first 10 months of the year, from July 2006 to April 2007. This means that the economy continues to expand at a rate three and a half times the increase in population.

At this rate there should be a sizeable reduction in the incidence of poverty. The expansion that began in 2002-03, when the gross domestic product increased by 4.7 per cent, was maintained in the current year. The GDP increased by 7.5 per cent in 2003-04; by another 8.6 per cent in 2004-05; and by a further 6.6 per cent in 2005-06.

Factoring in the increase for this year, the economy has expanded by almost 40 per cent over the last five years — on average an increase in GDP of seven per cent a year. This makes it one of the most impressive periods of economic expansion in the country’s 60-year history, a fact that Islamabad should celebrate by using the right set of numbers.

I am really puzzled why the country’s senior economic leaders continue to use “nominal” rupees and dollars to underscore the good performance of the economy. A nominal rupee or a nominal dollar is the value of the currency in terms of what it can purchase at a given time. The nominal rupee in June 2007 is what it can buy in June 2007. Its value is eroded by inflation. Consequently, what it can buy today is less than what it was able to purchase a year ago or five years ago.

The rate at which a currency depreciates is what economists call the price deflator. It is the amount by which the value of the currency must be adjusted to discount for inflation. When the Economic Survey says that the GDP increased by seven per cent, the estimate is made in real rupees. It takes out the effect of inflation. It is the real expansion in the economy, not the consequence of inflation.

The claim made repeatedly that the size of the economy has been doubled in five years is correct only when the rate of growth is measured in nominal rather than in real rupees or dollars. That is never done. Growth rates should always be provided in real rather than in nominal terms. The difference between the two is important.

Although this “doubling of GDP stance” was dropped from the various presentations made in connection with the budget, the thinking behind some of these claims, unfortunately, has not changed. “The per capita income in dollar terms has grown at an average rate of 13 per cent a year during the last five years, rising from $586 in 2002-03 to $925 in 2006-07,” write the authors of the recently released Economic Survey. “Per capita income grew at a much lower rate of 1.4 per cent per annum in the 1990s.”

It is particularly worrying that this comparison in the performance of the economy in the 1990s and the early 2000s is being made in these terms. The 13 per cent increase in the recent period was in nominal terms, the 1.4 per cent growth in the earlier period was in real terms.

There was a suggestion that since per capita income is approaching $1,000 a year the country should be on the verge of becoming a middle income economy. But the line that separates the poor from middle-income countries continues to be moved up by institutions such as the World Bank that do this kind of accounting to take account of inflation.

When Pakistan crosses the line, the definition of a middle-income country will certainly have changed. Besides, as indicated in the Economic Survey, the country has continued to keep the exchange rate more or less fixed at Rs60 to a dollar. This has been done despite the fact that the rate of inflation in Pakistan is at least seven percentage points more than in the United States.

As I have suggested earlier, the rupee is now seriously overvalued and when the adjustment is finally made, it will result in reducing the size of the economy as well as income per head of the population when these two are expressed in nominal dollars. That would not mean that devaluation would bring back the country from a middle-income status to being once again poor simply because the exchange rate has been adjusted to a more meaningful level.

This is the kind of problem the use of nominal currencies poses. An economy that has grown at seven per cent average over a five-year period will not only be much larger in size, it will also be structurally different. This will be the case in particular if the rates of growth in different parts of the economy are different from the economy as a whole.

The Economic Survey has data on the sources of growth with the contributions estimated for the main sectors of the economy. Of the three main parts — services, agriculture, and manufacturing — the highest rate of growth was registered by manufacturing. This is to be expected of a rapidly growing developing economy.

The sector’s output increased by eight per cent in 2006-07. However, this was lower than the rate of increase in 2005-06, when the value added in the sector grew by 10 per cent. The rate of output increase in what is described as the large-scale manufacturing sector also declined quite significantly. It was 10.7 per cent in 2005-06 but declined to 8.8.per cent in 2006-07.

The service sector output increased by eight per cent while that of agriculture grew by five per cent. Agriculture’s higher than normal rate of increase was largely the consequence of the recovery from the previous year. In 2006-07, the output of major crops increased by 7.6 per cent, coming after a decline of 4.1 per cent in the previous year.

In other words, the high growth rate of the economy in 2006-07 may be due in part to good weather which normally contributes to wide fluctuations in agricultural output. Also, the fact that the value added by major crops was considerably greater than that by minor crops and the sector of livestock means that the sectors which will ensure high rates of sustainable growth are performing below their potential.

These growth rates suggest that the economy’s three major parts grew close to the average rate of economic increase. The contribution they are making to the economy has not changed by much; the proportions in the national GDP of agriculture, manufacturing and services have remained largely unchanged. This may be the sign of long-term weakness since looking at the country’s endowments growth will come from some of the economy’s components that are currently under-performing. Small-scale engineering and high value added agriculture are some of the activities that would provide long-term momentum to the economy.

What is particularly worrying about the state of the economy is the performance of exports. In the first 10 months of the current year, the value of exports increased by only 3.4 per cent, a sharp decline from the 16 per cent average a year increase in the previous four years. The value of imports has also declined from a sharp acceleration in the period between 2002 and 2006 and the financial year about to be completed.

The Survey identifies in some detail the reason for poor performance of exports among them the most important being the inability of the textile sector to remain competitive in a market that has many aggressive participants. This line of thinking represents a major change in

the government’s view of the performance of the textile sector.

The Economic Surveys from earlier years had celebrated the large investments that were made by the entrepreneurs in the textile sector. It was repeatedly pointed out that by investing massively in the modernisation of the industry, textile entrepreneurs had prepared the country well for the time when the quota regimes that had directed international trade in the sector, would be replaced by open competition.

The approach taken this time is correct since it puts emphasis on the sector itself rather than on the crutch that the entrepreneurs continue to demand from the government. It is the ready availability of the support the government was always prepared to provide that has retarded the sector’s development.

According to the Survey, “it is generally argued that Pakistan’s exports are uncompetitive in terms of adherence to contracted quality and delivery schedule. Pakistan’s competitors are investing heavily and creating better economies of scale.

These are structural issues and must be addressed by the industry itself with the government playing its role as a facilitator and providing some temporary assistance to address some short-term issues…” This is the right approach to adopt.

The real problem posed by the poor performance of exports is the burden it is imposing on the economy. The trade balance continues to deteriorate with Islamabad prepared to finance it by a combination of foreign borrowing and sale of government-owned assets.

This can’t be a permanent solution to the problem of large trade deficits; the only way out is to increase exports of merchandise as well as services. In both, public policy needs to take account of the country’s comparative advantage.

It is not right to focus so much attention on increasing the export of textile, a sector in which, as the Economic Survey correctly points out, Pakistan faces stiff competition. Not only must Pakistan compete with China in textile exports, it must also face competition from countries such as Bangladesh that enjoy privileged access to such large markets as the United States and the European Union.

In sum, the continuing expansion of the economy is something Islamabad’s policymakers can take credit for. That said, the economy needs careful tending particularly to ensure that the rapid growth spreads its rewards widely. I will discuss this aspect of economic performance next week.

[U][url]http://www.dawn.com/2007/06/19/op.htm#1[/url][/U]

Opportunities In The Development Of The Oil & Gas
 

OPPORTUNITIES IN THE DEVELOPMENT OF THE OIL & GAS
SECTOR IN SOUTH ASIAN REGION

Usman Aminuddin

World Energy Outlook

Before we address the issue of opportunities in the development of the oil & gas sector in the South Asian region, it is important to look at the world energy outlook over the next thirty years. If one looks into the future over the next thirty years, it depicts a future in which energy use continues to grow inexorably, fossil fuels continue to dominate the energy mix and developing countries fast approach consumption levels of OECD countries, becoming possibly as the largest consumers of commercial energy. Whilst the earth resources have adequate reserves to meet rising demands for at least the next three decades, but beyond that time frame there are serious concerns about the availability and security of energy supplies, the huge investments in energy infrastructure and the threat of environmental damage caused by energy production.

Energy trade is expected to expand rapidly in the coming years and, in particular, the major oil and gas consuming regions will see their imports grow substantially. This trade will increase mutual dependence among nations. But it will also intensify concerns about the world's vulnerability to energy supply disruption, as production is increasingly concentrated in a small number of producer countries. As such, supply and price security has moved to the top of the energy policy agenda. The governments of oil and gas importing countries will need to take a more proactive role in dealing with the energy security risks inherent in fossil fuel trade. They will need to pay more attention in maintaining the security of international sea-lanes and pipelines, and they will have to look anew at ways of diversifying their sources of fuels, as well as the geographic resources of those fuels.

Necessary expansion of production and supply capacity will call for massive investment at every link in the energy supply chain. Greater investments will be needed in developing countries, and it is unlikely to materialise without a huge increase in capital inflow from industrialised countries.

World energy use will increase steadily through to 2030. Global primary energy demand is projected to increase by 1.7% per year from 2004-2030, reaching an annual level of 15.3 billion tons of oil equivalent. This increase will be equal to twice the amount of current demand.

Fossil fuels will remain the primary sources of energy, meeting more than 90% of the increase in demand. Global oil demand will rise by about 1.7% per year, from 75mb/d in 2000 to 120mb/d in 2030. Almost three quarters of the increase in demand will come from the transport sector. Oil will remain the fuel of choice in road, sea and air transportation. As a result, there will be a shift in all regions towards light and middle distillate products, such as gasoline and diesel, away from heavier oil products, used mainly in industry. The shift will be more in developing countries, which have a lower proportion of transportation fuels in their products mix.

The demand for natural gas will rise more strongly than for any other fossil fuel. Primary gas consumption will double between now and 2030, and the share of gas in world energy demand will increase from 23% to 28%.

The consumption of coal will also grow, and China and India together will account for two-thirds of the increase in world coal demand over the projection period. In all regions, coal use will become increasingly concentrated in power generation, where it will remain the dominant fuel. Power sector coal demand will grow with the expected increase in gas prices. The deployment of advanced technologies will also increase coal's attractiveness as a generating fuel in the long run.

The world's energy resources are adequate to meet the projected growth in energy demand at least for the next three decades. Increased production in the Middle East and the former Soviet Union, which has massive hydrocarbon resources, will meet much of the growth in the world oil and gas demand. OPEC producers, particularly those in the Middle East, will meet most of the projected 60% increase in global oil demand in the next three decades. Output from mature regions such as North America and the North Sea will gradually decline. More oil will become available from Russia and the Caspian region, and this will have major and far-reaching implications for the diversity of supply sources for oil importing countries.

The production of natural gas, resources of which are more widely dispersed than oil, will increase in every region. International energy trade, almost entirely in fossil fuels will expand dramatically. Energy trade will be more than double between now and 2030. All the importing regions, including the three OECD regions will import more oil mostly from the Middle East. The increase will be more striking in Asia. The biggest growth market for natural gas is going to become much more dependent on imports. In absolute terms, Europe will see the largest increase in gas imports. Similarly large gas reserves in Middle East and former Soviet Union states will find potential markets. Cross border pipelines in many regions will multiply, and trade in natural gas, and liquefied natural gas will surge.

[CENTER][B][SIZE="4"][COLOR="Blue"]Ten things this budget ignored[/COLOR][/SIZE][/B][/CENTER]



[I][LEFT]By Sherry Rehman[/LEFT][/I][RIGHT][I]Satureday,June 23,2007[/I][/RIGHT]


EVERY year in Islamabad, even the most lacklustre parliament comes alive during the budget session. This time, no one, particularly the treasury benches, seemed to care. Budget 2007-08, like the last five presented by the regime, once again bases its unmet targets on a small elite of Pakistani society.

Even after five years of public fury at high inflation and joblessness, there is clearly no understanding of the social unrest that this kind of model has unleashed in Pakistan. Why? Because this is a supply-side model where growth is based solely on benefits trickling down, and for this model to deliver effectively in a developing country one needs 10-11 per cent growth at a bare minimum.

Yet in Pakistan no European-style social nets or American-type domestic protection for farmers cushion the shocks intrinsic to this local variant.

Growth is always a good objective but it needs to be structurally balanced in emerging markets like Pakistan. Yet, the bottom line today is that macroeconomic fundamentals remain weak because Pakistan’s growth is driven largely by household consumption at 7.8 per cent of GDP. High growth in consumer sectors disguises dangerous red lines in poverty and low manufacturing growth.

The 74 per cent who now live below two dollars a day, as per World Bank statistics, have been largely ignored except in piecemeal pockets of “relief” which represent sops for a tiny fraction, but ignore a sea of the vulnerable and the socially excluded.

To prevent Pakistan from sliding into more chaos, to lower the stresses of an unemployed, under-educated population, where regional and income inequalities spark further political unrest, the regime should have focused on the following 10 items.

One, public money should have been better utilised and targeted at higher social spending. As it stands, the Public Sector Development Programme at Rs520 billion is illusory. Not only does the real PSDP stand at Rs427 billion, when foreign loans are deducted, but 86 per cent will go to on-going projects. This leaves only 14 per cent for urgent social investments.

At the same time, the governance of PSDP is so poor that 100 projects stand cancelled by the Asian Development Bank. Education and health continue to be neglected by the regime and get an embarrassingly low allocation of Rs24 billion and five billion rupees respectively. Spending should have gone up to 4.5 per cent and four per cent GDP respectively. Although this is old news, Bangladesh performs better on education than we do.

Second, the defence budget of Rs275 billion should have undergone parliamentary audit. If just military pensions worth Rs37.7 billion are added on, leaving out other assorted military items hidden in the civilian budget, the final figure is way above Rs312 billion.

Given that defence spending makes up more than half the amount allocated for development expenditure and got a boost of 10 per cent this year, it should have been discussed in the defence committee of parliament, as in India and other democracies. Under the circumstances, where the treasury benches are beholden to a general for their seats in parliament, there is no prospect of public accountability or transparency, let alone asking what happened to the Rs60 billion from the US Pentagon.

Thirdly, the windfalls from September 11, namely $ 35 billion, should have been used more prudently, preferably to fuel infrastructure and retire public debt. Instead, the fiscal space gained from remittance and aid inflows has gone into profligate spending.

Right now the country’s foreign reserves of $13 billion don’t amount to receipts for 18 weeks of imports, which given the current balance of payments, takes us back to the same situation as 2001 where lower forex reserves covered the same few weeks of imports. Current account expenditures account for 66 per cent of the entire budget of Rs1.8 trillion, so growth is more illusory than it seems. There is no explanation for why we still borrow $38 billion from external sources when the regime claims we have broken the begging bowl, affectionately known as the “expanding kashkol” in the National Assembly. Balance of payment deficits have grown from $1.4 billion in 2000 to $6.1 billion.

Four, deficit financing should have been used less and less as an instrument of policy. It fuels inflation and crowds out private investment, while jacking up interest rates and pushing up production costs. Right now, almost half the budget deficit is funded through bank borrowing, which the State Bank has warned against. Nobody from the treasury is willing to answer why the current account deficit is expected to be around five per cent of GDP at $7.1 billion.

Five, the dangerously high trade deficit — a constant peril to the stability of the economy — should have been lowered. Despite a record trade gap of $12 billion, up from $1.7 billion in 2000, increased foreign direct investment and workers’ remittances are expected to bridge the gap. The latter may persist after 9/11, but given the collapse of law and order today, such supply-driven factors cannot plug black holes in the economy.

Instead, a proactive diversification and higher value addition of Pakistan’s export base should have been pushed to maximise receipts. It goes against the elitist grain of this government, but the import of luxury items should have been reduced by taxing high-end consumer durables. This item jacks up the import bill by $2.04 billion out of a large tab of $27 billion. This way consumption would not have outstripped domestic production by such large margins.

Six, immediate relief should have been given to the growing number of Pakistanis living below the poverty line. Yet, out of the Rs113.9 billion allotted to subsidies, only Rs2.45 billion go to stabilise the prices of essential items. Food inflation still teeters between 10 and 14 per cent and represents a real threat to the inelastic incomes of the growing poor. The subsidies on food provide relief only at two rupees per head, while an obscene Rs98 billion funds the inefficiencies of Wapda, KESC and others.

Fiscal policy should also have been used to stem tragic levels of unprecedented financial destitution due to which more than one suicide takes place per day. At present, 60 per cent of the regime’s total tax revenue for 2007-8 is based on taxes on items like petroleum, sugar, edible oils and packaged milk and meat, as well as other essential items which burden the poor.

No new taxes on capital gains related to real estate transactions or the stock market have been imposed. The Economic Survey admits that the top 20 per cent gets 400 per cent more than the bottom 20 per cent.

Seven, private investment and job creation merit serious allocations to infrastructure and peace. But political instability has driven away private capital. On May 12 alone, the CBR admitted to losing over three billion rupees plus worth of sales tax in Karachi.

Other factors that cripple investment include the paralysing power deficit. Today, Pakistan needs an additional 8,000-10,000MWs by 2010 to meet energy demands. The present government has not added a single MW beyond the PPP government-commissioned Ghazi Barotha (1,450MW) hydroelectric power project, which went online in 2004. More investments in coal, thermal, solar and wind energy would have added surpluses for the economy to resume its growth.

The MOU signed by the PPP government for the Thar coal project should have been revived long ago. This alone can yield 5,000MW of power and 200,000 jobs. Large scale investments in industry including foreign direct investment cannot move without cheap and reliable electricity. Job creation, the knowledge economy, higher manufacturing and exports, lower inflation and a stronger rupee, all need energy.

Eight, as the largest employer, agriculture merited policy attention. Banks and financial institutions should have been mandated to reserve a percentage of credit for farmers for buying inputs. Focus on farm to market roads, higher investments in water management and food processing units per district would boost employment and higher value addition to this sector. Despite critical desertification and dwindling glacier melt, no allocations were made for water conservation. The destitution in the rural sector should have been addressed by initiating a rural employment programme, as successfully adopted in India.

Nine, regional inequalities should have been brought down by devolving sales tax to the provinces. Today, the government’s failure to announce an NFC award before the budget has created dangerous strains in the federation.

Under the interim NFC award, the provincial share in net proceeds of the divisible pool is 42.5 per cent, while the centre retains a major chunk of resources worth 57.5 per cent. Instead of delaying the award since 2002, a fair distribution of national resources based on more than population criteria was needed.

At the same time, the natural gas and royalty formula of the 1973 Constitution should have been applied immediately in order to stabilise the pressures emanating from the NWFP and Balochistan.

Lastly, to show some commitment to the financial austerity so badly needed to curb deficits, non-development expenditures should have been slashed. But the regime’s priorities reflect no concern for public opinion or institutional accountability.President House expenditures have gone up by Rs25 million to over Rs316 million. The National Accountability Bureau, which was established to hound political rivals of the regime, has nothing to show for its lavish spending. Its expenditures, too, have gone up in this budget to an astronomical Rs2.4 million a day at Rs897 million.

In contrast, the ministry of law, justice and human rights is set to spend only Rs179 million. But then we all know how the Supreme Court Chief Justice’s extra car burdened the economy, don’t we?

The writer is a member of the National Assembly and central information secretary of the Pakistan People’s Party.


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[B][SIZE="4"][COLOR="Blue"][CENTER]Inequality & development[/CENTER][/COLOR][/SIZE][/B]



[I]By Shahid Javed Burki[/I][RIGHT][I]Tuesday,June 26, 2007[/I][/RIGHT]


IF budgets are meant to deliver marginal changes in the established fiscal order, they don’t deserve the hoopla that accompanies their announcement. With the private sector now playing the role which is unprecedented in Pakistan’s history, much that happens to the economy is not the result of what Islamabad does but what thousands of entrepreneurs think and do.

When the history of the economy under President Musharraf gets to be written it is the role that he and his associates have assigned to private entrepreneurship that will be singled out as the most important economic initiative of the period.

However, if the people in power choose to use the budget to bring about a major change in the structure of the economy then the changes in the fiscal policy they announce should deserve the attention that the budget normally receives.

From my way of looking at the Pakistani economy, there are two areas that deserve the policymakers’ attention. The first is making the current high rate of GDP growth sustainable. The second is to address the problem of growing inequality in the distribution of both income and wealth.

I will deal with the second issue in this article, having covered the first in several articles contributed earlier to this space. Both the government and independent observers of economic trends in the country have focused a great deal on the incidence of poverty and the rate at which it is declining.

At issue is not the exact estimate of the number of poor who live in absolute poverty (with incomes of less than one dollar a day) or in poverty (with incomes of less than two dollars a day) but the rates at which their proportion in the total population is falling.

The government contends that the incidence of poverty is declining at a significant rate. If this is indeed the case and if the high GDP growth rate of recent years (seven per cent increase per year over the last five years) is resulting in a fairly significant reduction in the proportion of poor in the population then public policy is set on the right course.

Contrary to Pakistan’s own experience in the 1960s and that of a number of other high-growth developing countries, the trickle-down effect may finally be working to help the poor.

However, the government’s critics maintain that the rate of decline in the level of poverty is exaggerated by Islamabad; that, for the rewards of recent high rates of GDP growth to travel down to the poor, public policy needs to be fashioned in a different way.

If the critics are correct then the trickle-down approach would need a helping hand. One way of coming to a conclusion about this argument is to analyse what is happening to economic equality as a result of the rapid growth in GDP in recent years. This is an area of analysis that has even less reliable data and information available than is the case with the incidence of poverty and its decline over time.

Concern with growth’s impact with equality is not confined to Pakistan. This is being debated in the academia as well as in a number of developed countries. Academics have come to it by following a circuitous route. It was in the 1990s that mainstream economists turned to growth as a concept that needed analysis and understanding.Then Robert Lucas of the University of Chicago and Paul Romer of Stanford University published path-breaking papers that laid the basis for what economists call the endogenous model of economic growth.“Endogenous”, as dictionaries inform us, means a process involved in “producing or growing from within.” Until then, economists had tended to describe growth as dependent on the quantities of factors of production – labour and capital – that were used in the process of production.

But there was a limit to the amount of labour that could be applied for economic production, even in a country such as Pakistan that had a rapidly growing population. Adding machines (i.e. capital) to the workplace resulted in what the economists called “diminishing returns”.

This theory had produced a puzzle for economists. With the countries such as those in Europe that had reached the stage of zero population increase, this theory implied a slowdown in the rate of economic growth to the point where developing countries with growing populations would begin to catch up. That was not happening. Economic theory predicted the closing of the gap between the rich and poor nations. Instead, the gap continued to widen.

This is when Lucas and Romer entered the picture by including in the production function inputs such as the quality of human capital and technological developments. This model implied that economies could continue to grow even if the size of the work did not increase. They could do this by investing in improving the quality of the workforce through education and training. Technological improvements would also contribute to growth.

With Lucas and Romer helping us, we begin to understand what is keeping Pakistan well below the growth trajectories being followed by a number of Asian countries, the government’s protestations notwithstanding.

Conventional economic theory informs us that capital accumulation drives economic growth up to a point. Our own experience tells us that capital accumulation, unless it is financed from resources obtained from within the economy, will remain dependent on external capital flows. These may come from sources other than the largesse of friendly rich nations.

In an article contributed to this newspaper a few weeks ago, Ishrat Husain provided some compelling statistics to show why a sudden cut off in American aid will not have the devastating effect it did in 1966 and 1990. Pakistan could survive a spell of bad relations with the United States because it has found new sources of external finance not dependent on Washington’s goodwill.

That said, the remittances sent by the Pakistani resident community in the Middle East, Britain and North America and the large amounts of investment capital that is pouring into the country from the Middle East are not good substitutes for domestic savings. No country has ever been able to secure for itself a good economic future by depending almost exclusively on foreign savings. It would be wrong for Pakistan to rely on this resource.

But there are other weaknesses. Pakistan has a large and young population which is poorly educated and poorly trained. It cannot contribute to sustainable economic growth. Moreover, the economy’s technological base is poor. Neither the state nor the private sector has invested much in technology; the country continues to rely on the technologies imported from abroad.

Even the development of nuclear weapons was made possible by technologies obtained from abroad, mostly be stealth. India, on the other hand, used indigenous technologies to build nuclear weapons.

I should mention two other advances in economic thinking before returning to the subject of the budget and what could it have done to set the economy on the high growth trajectory. The first reference is to the work done by the economist Douglas North on the importance of institutions for economic growth. Following North, institutional economists define institutions not as structures and organisations but as the laws, rules and regulations that govern human relations.

If these are weak, economies cannot grow rapidly. Institutional weakness is defined as the absence of established observable rules that don’t distinguish between the circumstances of the people.

The same set of rules applies to the poor as to the rich, to those who have little influence over the government and to those that are part of the government, to those who have influence over other human beings to those who have to exist within the orbit of other people’s influence.

Economists also borrowed some insights from sociologists and anthropologists to focus on what they began to call social capital. This is defined by the way, or ways, in which people interact with one another.

Economic growth is faster and economic modernisation is more rapid in societies that are well-endowed with social capital. With the rise in ethnic tensions and sectarianism, the quality of social capital is declining in Pakistan. Only political development can reverse this process.

The third major advance in policy thinking is the focus on inequality. For decades, economists have found it difficult to factor inequality in the subject of growth. For some years, thinkers such as Simon Kuznets who looked at the empirical evidence on growth and distribution, decided that in the early stages of development, inequality is an inevitable consequence of growth. But that has changed.

In recent times, economists such as Paul Romer who had pioneered the thinking about new growth models, have begun to focus their attention on income inequality as an obstacle to sustained economic advance.

Writes one commentator: “During the 1990s, Paul Romer, a Stanford economist, emerged as one of the leading theorists on economic growth. Recently though, Romer has changed his focus, and he told me that the country, too, is entering a new phase. For most of the 20th century, he explained, economists focused on stability — that is understanding and controlling inflation and depressions. Then, towards the end of the century, growth became the central obsession. Now, Romer said, we are embarking on the next great challenge in American economics: mitigating inequality.”

What is true for America is even truer for Pakistan where economic and social inequalities are considerably more pronounced. It is often political scientists who help economists understand why certain distortions created by the strategies they advocate can create social turbulence. Concentrating on growth without caring for its distributional impact is one area where policymakers can go wrong. This is the case in Pakistan.

It should be clear from the above discussion that the conditions just don’t exist in Pakistan which can support a high rate of economic growth, alleviate poverty and improve the distribution of income. We don’t save enough from our national income to accumulate capital. We have not trained our large and growing workforce to help modernise the economy and take advantage of the window of opportunity that exists as a result of falling rates of fertility in the developed world.

We have not invested in the development of technologies that would help improve worker productivity. We have not only under-invested in institutional development, we have destroyed even those institutions that were left behind by the British.

What we need, therefore, is a comprehensive strategy of growth that would help deal with these shortcomings. The budget could have started the process but was confined to introducing only marginal fiscal changes. What could have been done? I will pick up this question next week.


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[B][CENTER][SIZE="4"][COLOR="Blue"]'Consumption boom; taking its toll on the poor [/COLOR][/SIZE][/CENTER][/B]

[I][LEFT]MUZHAR JAVED [/LEFT][RIGHT]Wednesday,June 27,2007[/RIGHT][/I]

ARTICLE (June 27 2007): The echoes of soaring and sustained growth have been sounding very strongly from the top echelons of the current regime since the day it came to power by ousting the then elected government. Seven-point agenda of President Pervez Musharraf, unfolded on October 17, 1999 set the tone for the revival of national economy.

According to the official claims, like the other military regimes, this too has been a superb success story economically. Recently the Economic Advisor's Wing of Ministry of Finance has made the economic survey 2006-07 public and is boasting of strong and sustained GDP growth rate, robust resurgence of agriculture sector, building up all-time high foreign exchange reserves, record Foreign Direct Investment (FDI), unprecedented flow of workers remittances, substantial revenue collection by CBR and shrinking the public debt.

This document lauds the incumbent regime on achieving 7 percent GDP growth rate in the current fiscal and 7.5 percent average growth rate during the last four years (2004-07). GDP growth that was 3.9 percent in 1999-00, 1.8 percent in 2000-2001 (one of the lowest in country's economic history), how it climbed and became sustainable and secular rate of growth? This is an open secret and debatable one.

This twist in economy was triggered with tremendous flow of foreign assistance taken after 9/11. Key and common cause of all the military regimes' high growth rates (from 'Ayub's 'decade of development or disaster' to current one) has been extensive foreign funding and empirical evidences suggest that growth financed by foreign assistance always proves lacklustre because saving-investment gap is filled in through non-traditional source of foreign aid.

Secondly, now a days, high growth rates are a common phenomenon in developing world. According to IMF report, 'World Economic Outlook' April 2007, the average growth rate in developing world has been 7.9 percent in current fiscal and 7.5 percent during the last four years, in India 9.2 percent in current year and above 8 percent during the last four years, in China 10.7 percent and 10.3 percent correspondingly and even Sri Lanka has witnessed the growth pace of 7.5 percent in current fiscal.

The current growth hike is quantitative in nature, devoid of 'trickle down' effect and lacks equity. The gulf between the rich and the poor has widened and according to Human Development Report, 2006 still Pakistan has Gini Index of 30.6 (zero is perfect equality and 100 is perfect inequality) that questions the liberal policies of the regime which lack balancing mechanism. Moreover the growth is consumption-led and economic managers are selling 'consumerism' as economic success.

The government hails the robust recovery in agriculture sector by putting the failure to achieve cotton and rice production original targets at back burner. In spite of bumper crops, government could not arrest the food inflation that is still rising.

Historically high foreign exchange reserves accumulated through non-traditional sources can hardly meet six months import requirements and never provide trouble-free short-term debt to foreign reserves ratio.

All-time high Foreign Direct Investment (FDI) of the regime is narrow based (confined to telecom, oil and gas and banking sector), embarrassing in comparison with traditional and regional competitor India, devoid of very purpose of employment generation and brought in through sale of state-run organisations. The sources of much-trumpeted FDI are not durable and dependable.

Record workers remittances are a more blessing in disguise of 9/11 episode and war on terror. This incident created panic for overseas Pakistanis across the world and forced them to repatriate their earnings. The government did no trick for bringing in the money of overseas Pakistanis, neither offered attractive rate of return nor investment bonanza. Moreover the workers remittances are also not hard-earned money of government and reliable source to bank on.

A very interesting fact is that only trade deficit, which is going to touch 14 billion, will wipe out total inflow of FDI, foreign remittances and assistance that is estimated around $13.50 in current fiscal. In spite of revising the original target, still current account deficit is going to make history.

Troika of economic managers' team (meaning thereby the Prime Minister who is also the Finance Minister, State Minister and Advisor on Finance portfolio) failed to tackle the twin deficits of trade and current account. Unabated twin problems of poverty and unemployment have questioned the quality of economic successes achieved. Only the severity of current power crisis is enough to gauge the depth of economic expansion of almost decade-long regime.

According to WAPDA update, the countrywide electricity shortage has increased to about 2,900MW owing mainly to continued closure of about 25 generating units across the country. This is the worst energy crisis in Pakistan's history. 'Consumption boom' has set the Consumer Price Index (CPI) and Sensitive Price Index (SPI) on upbeat tendency that are taking their toll on the poor.

Tax collection that is well on target becomes worthless when one looks at deteriorating tax-GDP ratio of 9.5 percent. This performance is further eclipsed when one casts a cursory glance at the current number of registered taxpayers which is 2.2 million according to CBR Master Index update.

The commitment and sincerity of tax administration is suspected when it leaves Real Estate and Capital Gains out of 'Tax net' only to patronise the 'Robber Barons' and 'Real Estate Army'. The government claims of breaking the begging bowl prove false when external debt has exceeded $38 billion, internal debt amounts to Rs 2500 billion, every new-born baby will owe Rs 2900 and government has allocated Rs 641 billion only for debt servicing from current budget.

An international research organisation, BCA, in its special report on Pakistan's emerging markets strategy, has characterised the country's economy as structurally weak because of a low investment ratio and lack of competitiveness. In Global Competitiveness Index ranking among total 125 countries, Pakistan stands at 91 with 3.66 points, India at 43 with 4.44 points, Sri Lanka at 79 with 3.87 points.

The report says that Pakistan's growth is driven primarily by household consumption. The macro fundamentals of Pakistan are thus inferior to those of many emerging economies.

Transparency International in its 'Corruption Perception Index' declares Pakistan 17th most corrupt country of the world (2006 report). In Human Development Index (measures the average achievements in a country in three basic dimensions: a long and healthy life, knowledge and a decent standard of living) Report among 177 countries Pakistan stands at 134th position while India at 126th and Sri Lanka at 93.

If we compare the statistics of fiscal year 1999 and 2006, then again the performance of the regime has eclipsed in major areas like inflation rate was 5.7 percent in 1999 and over eight percent in 2006; unemployment rate 5.8 percent in 1999 and 6.5 percent last year; trade deficit $1.5 billion in 1999 and $12 billion last year; the current account deficit $1.8 billion in 1999 and over $5.2 billion last year.

Above all, the current regime must be honest in self-assessment. Living in a global village, performance should not be evaluated in isolation. Regime should not compete within rather than competing with the rest of the world in general and South Asia region and 'Emerging Economies' (which are in transitional phase) in particular.

Secondly, the facts and figures should not be manipulated and maneuvered, sometimes by expressing them in absolute terms and sometimes converting them in percentage. They should be candid and have a fair play. Don't lose credibility that is more important, public is the best judge and actions speak louder than words.

For the sake of argument, let's assume that the regime has improved the performance of the economy as a whole. But the absence of 'trickle-down effect' has made the public reluctant to believe in. If still the regime turns a blind eye to the harsh ground realities and keeps on harping on the growth mantra, then 'Shinning India' episode is bound to repeat in the coming general elections.

(The writer is professor of economics at university of central Punjab, Lahore.)



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[B][CENTER][SIZE="4"][COLOR="Blue"]Uncontrolled inflation[/COLOR][/SIZE][/CENTER][/B]


[I][LEFT]Ismat Sabir[/LEFT][/I] [I][RIGHT]Monday,July 02,2007[/RIGHT][/I]

The government has failed to control inflation this year. The same is likely to happen to the projected 6.7 percent inflation for the next year with 7.2 percent GDP growth and $ 8.1 billion current account deficit against $ 7.1 billion in 2006-07. A trade deficit of $ 10.6 billion and $ 17.7 billion foreign exchange reserves for the year 2007-08 were also estimated. July-April Fiscal Year 2006-07 food inflation depicted a rise. The State Bank of Pakistan figures indicated that food inflation was 15.7 percent in April 2005, 3.6 percent in April 2006, 9.4 percent in April 2007, that rose to 11.3 percent in May 2007. The average rate of inflation for five years was 7.5 percent.

In April 2007, consumer price inflation (CPI) was recorded at 6.9 percent that rose to 11.3 percent in May 2007. The main contributing factor for the rise in overall CPI inflation was food inflation, which was 5.6 percent in the same month last year. The contribution of the food group in overall inflation was 56.1 percent in April 2007, which was significantly higher than the 24.9 percent contribution of food during the corresponding month last year. According to details, food inflation in May 2007 was 11.3 percent. It increased as high as 12.7 percent in December 2006. In January 2007, food inflation was 8.7 percent, which increased to 10.7 percent in March 2007. It remained between 5.6 to 12.7 percent during May 2006 to May 2007.

To control the rising prices of essential items, the government has recently increased the rate of profit on National Saving Schemes, sucking the excess money from the market that is increasing prices. The national savings as a ratio of GDP have been projected at 18.8 percent to reach the level of Rs 1,883 billion and investment of Rs 2,384 billion during 2007-08, against Rs 2004 billion in 2006-07. As far as financing of the targeted investment is concerned, it has been estimated that national savings would finance about 79 percent and 21 percent would come from the foreign savings sector. If inflation was not high people could save more money and our dependence on foreign savings may be far less than projected in the budget.

During 2007-08, exports are projected to grow by 10 percent, to $ 18.9 billion, against $ 17.2 billion estimated for 2006-07. Imports during 2007-08 have been projected to increase moderately by 9 percent, to $ 29.6 billion, from $ 27.1 billion in 2006-07. Higher imports would be the result of higher volume of import of food items, POL, edible oil and fertilisers. Therefore, the trade deficit might reach $ 10.6 billion in 2007-08, against the deficit of $ 9.9 billion estimated for 2006-07. The main reason for out of control inflation is that the government monitors the price of essential items of daily use carrying high weight for low-income people on a weekly basis, presently consisting of 53 goods.

This system, which suits for short period price stabilization, enables the government to tackle transitory problems. The government intervenes in the market by importing deficit commodities, change in tariff rates, taking action against hoarders, providing subsidy on food items by selling through utility stores and financing through banks. To stabilise prices in the medium to long term perspective, monetary and fiscal policies are used to achieve the target. No measures have been taken in the budget to increase the production of value added products that could reduce inflation. Last year, the warning also came from international financial institutions when the inflation rate rose from 3.1 percent in terms of CPI (consumer price index, also known as wage inflation) to 4.6 percent. It doubled in the year 2004-5 and stayed at that level. The government has been invariably fixing its target in annual plans and budgets at around 6 percent.

Over the last three to four years, all government efforts were turned into disappointment. The recent budget stepped up the market interventions through the utility stores and support price for farmers. Official documents indicated that the existing inflation is due to high growth in incomes, increasing demand of food items and fuel inflation. The officials argued that all over the world prices are increasing and are low as compared to India. But this should not absolve the government from its basic duty of taming inflation. Besides, every year the upward adjustments in utility tariffs, gas, electricity and oil, pushed up the transport charges and cost of production in the agriculture and industrial sectors, which is passed on to the consumers. Similarly, almost every year the government increases the support price of agricultural crops like wheat, sugarcane, etc, that has an across the board effect, directly or indirectly, on the general price level.

Moreover, the expansionary fiscal policy pursued by all measures is not as effective as it should be. Despite some increases, the tax revenues are not adequate to match the budgetary requirements. Therefore, the government relies on borrowing for financing the budget deficit, which causes a rise in inflation. This trend would not be discontinued in the near future. This is one of the sources to increase aggregate demand, resulting in pushing up the general price level. The monetary policy of the central bank is generally aimed at price and exchange stability. Net budgetary borrowing alone accounted for Rs 212 billion out of the total domestic credit expansion of Rs 390 billion this year till May 12, besides foreign borrowings. Growing forex reserves have also increased prices of goods. But these developments in the external sector increase the monetary base through net foreign assets.

It is clear that there is a lack of selective domestic production expansion policy. The main pressure on the general price line comes from food prices. Food inflation this year is estimated to be in double digits. This is due to less production of vegetables and pulses. The problem has not been solved for the last 20 years. It can be solved by developing a suitable production strategy by modernising the agricultural sector; that would increase the yield per acre. After every two to three years, we face a shortage of sugar or wheat.

Inflation is also attributed to the push and pull effect of the foreign trade pattern. Exports price index has increased by 4 percent while imports price by about 10 percent. Thus, imports have contributed towards domestic inflation, which can be cured only with market forces. The existing wide disequilibrium in the external sector is reflective of the potential depreciation of the rupee till the time the country has good access to external borrowing. Eventually, it would be a great challenge to anti-inflation policies.

Monetary targets have not yet been revealed but the fiscal profile shows that budgetary borrowing and net foreign assets would push up the monetary base. No serious attention has been paid to remedy the production deficit of essential commodities. Utility stores as sales outlets, imports and occasional adjustments in import duties would prove temporary solutions for controlling inflation during the coming year. However, this scenario is the result of political developments connected with the forthcoming elections, which would come in the way of realising the inflation target.

The writer is a senior journalist and researcher

[U][url]http://www.thepost.com.pk/OpinionNews.aspx?dtlid=105197&catid=11[/url][/U]

[B][CENTER][SIZE="4"][COLOR="Blue"]Strangulations in the economy of Pakistan [/COLOR][/SIZE][/CENTER][/B]

[I][LEFT]Dr Tanvir Hussain Bhatti[/LEFT][/I] [RIGHT][I]Monday,July 02,2007[/I][/RIGHT]

Since the inception of Pakistan the throng of wrinkly toffs on a good wicket framed policies and enacted rules that suited them and their elite community’s vested interests. The flushed and loaded people, tenaciously intoxicated in power, always turned a blind eye to the national concerns and the public welfare. The national economy has sunk into a state of torpor due to the ad-hoc policies of the fact twisting myopic top cats. Ayub’s industrialization and Basic Democracy were cast aside with his ousting, Z.A.Bhutto’s nationalization and land reforms were throttled with his hanging, Zia’s Islamisation crashed in the air, development strategies hatched by Benzir Bhutto and Nawaz Sharif were thrown out of Pakistan’s borders with their exile. The outcome of the ‘Enlightened Moderation’, ‘Devolution Plan’ and the progress plans pioneered by the current regime would not be very dissimilar from that of their precursors. Throughout the 60 years political history of Pakistan, the subsequent government considered its responsibility to brush aside the policies kicked off by its forerunner. The consequence of this frog in the well navigation of the cooties is that there has been no continuity of development plans, which is still gravely tattering our economy. Pakistan has made average steps forward by fits and starts at a snail’s pace since its birth. Foreign aid and assistance funneled by the donor agencies and developed countries acted as short-term laxatives to relieve economic constipation of Pakistan. Even the transitory swiftness of growth rate achieved by foreign assistance, a chunk of which has been provided by America when in hot water, could not give any advantage to man in the street because there is no ‘Trickle Down Effect’. With economic growth at 7.0pc in the current fiscal year, Pakistan’s economy has grown at an average rate of almost 7.0pc per annum during the last five years. This rapid pace of expansion on sustained basis has enabled Pakistan to position itself as one of the fastest growing economies of the Asian region. But, due to concentration of fruits of ephemeral economic growth within few hands the monetary planners have failed to translate this boon to trim down poverty. By 1999s it was acknowledged that growth alone does not diminish poverty and a more direct approach is indispensable. Time and again fiscal crisis ensuing from monstrous economic system of loot and plunder has deteriorated national economy. Therefore, a few growth periods were alternated by long stagnations. Perceptual budget deficit and trade shortfall resulting from wishy-washy failed monetary policies forced Pakistan several times to crawl before IMF to put the lug on. The country is currently entangled in the heavy debt trap of $38.86 billion that has hampered national economy. Splashing of national treasure on political gang-shag and luxurious activities of the men in the driving seat has further upset the applecart. Corruption is acting as a blight to ruin our monetary system. Even black money garnered through black economy and bribery is transferred to the foreign banks and not invested in the country. The reprobate apple-knockers have been transgressing all the bounds of decency by looting whooping national wealth with both hands. This reckless dishonesty has been depriving of the transfusion of cash to the indigenous industry, which has made it vulnerable to flourish. Rampant sleaze has permeated all spheres of national institutions. Economic benefits never trickled down in the politico-economic history of Pakistan but palm greasing has pervaded from top to bottom. Unprecedented surging social and political turmoil due to current judicial imbroglio, unending tide of volatile law and order situation, unchecked smuggling, uncontrolled hoarding, market manipulation by the big guns and shutter down strikes triggered by the business community have further enfeebled the already tightly squeezed economy. Energy is necessary to fuel the power hungry industry. Pakistan is passing through pitiable phase of severe energy crisis because no major dam has been constructed for more than 30 years to tap the country’s hydroelectric potential. During this summer episode, the situation has so worsen that the gap between supply and demand has touched 3,000 megawatts. Lack of national consensus and deficiency of mutual trust among the constituent units are major stumbling blocks in exploiting water resources to meet the immense challenges of water stress and energy shortage. Throbbing pains of mounting inflation are deeply felt by all and sundry. Inflation according to Economic Survey 2006-7 is as high as 7.9 percent, well in excess of the 6.5 per cent target. What is particularly nerve-racking is the considerable growth in food inflation. While everyone in the commercial food chain, i.e., growers, livestock owners, wholesalers and retailers can tailor their priorities to inflationary pressures; no such alternative or method is available to the pitiable and the stipulated income groups. Political stability is imperative for economic stability. Pakistan has failed in its quest to emerge as a developed country on the economic map of the world due to uninterrupted political precariousness. Frequent change of the government due to narrow-minded politicians, firmly rooted corruption-tainted bureaucracy, and time and again army intervention and abrogation of the constitution, have wrecked the establishment of democracy that can act as springboard to provide viable hope for social strength, political steadiness and economic vibrancy. Joseph stiglitz rightly said, “The real miracle of East Asia may be political more than economic.” Second largest economy of the world Japan, and Germany rose like phoenix from their ashes after they were ransacked in the World War II. Now they have become economic giants due their resolute national spirit and political strength. China with $915 billion has largest foreign exchange reserves in the world. A country of opium eaters has now become an economic clout due to indomitable will and dauntless courage of Mao Zee Dong. The walls of the White House are trembling from the fear of this economic powerhouse. It is forecasted by the distinguished think tanks that China can challenge its political and economic rival Uncle Sam in next 50 years. Therefore, America has adopted the” Policy of Containment” to impede China. The developed countries made progress by leaps and bounds because their public have pride of performance. Majority of the people in Pakistan consider work a burden instead of responsibility, especially in the government sector. They escape from liabilities while extracting maximum benefits by using their authority. Even unemployed educated youth avoid joining a job or initiating a business, which is considered menial in our feudal society. Sarcastically, when these people got golden opportunities to emigrate to developed countries they work there happily on a store, hotel, and some earn Dollars and Euros by giving bathe to pet dogs of the rich people which they cannot even dream of in Pakistan. Copious beans of patriotic sentiments are vital to invigorate the civil sector to ensure their meaningful participation in all walks of life. Human are the true assets of any nation. Therefore, there is pressing need of human resource development to give a bounce to national economy. Public can contribute substantially in state’s prosperity to make rapid steps forward. Ironically, patriotism has been deliberately crushed in Pakistan by the vested interests. Contrary to the developed nations, in our country personal interests are given priority over national interests, caste is given preference over patriotic fraternity, regional language is considered superior than national language, sect is propagated more vigorously than Islam, regional leaders gave an edge to provincialism over federation, ethnicity is considered higher than nationalism. Is it possible for such a fractured population to compete in the comity of nations? Can such a divided community come to a single point through consensus to resolve complex national issues, which is crucial to make progress? Internally we are divided and externally we are weedy. There must be fair distribution of resources and uplifting the socio-economic status of the off-scorings of humanity to ensure their full contribution in national productiveness. A host of remedial measures like fair collection and distribution of Zakat, true empowerment of women to guarantee their significant involvement in various institutions, replacement of interest based economy with Islamic monetary system, provision of technical education and micro credit facilities to the unemployed, redistribution of land among landless farmers through land reforms, mobilization of domestic resources, easy availability of loans to the peasants, formulation of effective programs with poverty cutback at their heart, and socio-economic reforms at national level to diminish insolvency can reduce the widening gulf between the prosperous and the poor by making the national economy more vibrant. A sound and long-term economic policy is the crying necessity of time. It is mandatory to develop indigenous goods self-sufficiency, which is vital to ensure pulsating economic independence. Foreign aid should be utilized for beefing up native industrial base instead of time and again getting into the ribs of the donors. Economic self-reliance can liberate our financial system from the tentacles of donor agencies that always have their own axe to grind. Agriculture sector is the main source of livelihood for 66pc of the country’s population. It accounts for 20.9pc of the GDP and employs 43.4pc of the total work force. It is the backbone of our economy. This segment faces numerous bottlenecks that must be removed. Law and order situation must be improved to ensure considerable foreign investment and to magnetize tourists. Alternative energy resources must be tapped to fuel the power starving industry. The black sheep involved in hoarding, tax evasion and grafting should be dealt with iron hands by establishing impartial and powerful accountability institutions. Media should play a constructive role to indoctrinate patriotism and pride of performance in the public.


[U][url]http://www.thefrontierpost.com/News.aspx?ncat=ar&nid=70[/url][/U]

[B][CENTER][SIZE="4"][COLOR="Blue"]Indian imperialism[/COLOR][/SIZE][/CENTER][/B]


[I]EHTISHAM AAMIR[/I][RIGHT][I]Tuesday,July 03,2007[/I][/RIGHT]

In theory, interstate relations are governed by principle of “Sovereign Equality” and “non interference”. But ours is an imperfect world. It is not entirely governed by theoretical principles. “Might is right” is usually the norm. But modern states and specially those who purport to be democratic display some degree of adherence and respect to principles. But in our neighbours we have a state which has violated most principles and norms of modern statecraft and democracy. It concurrently claims to be “the largest democracy of world”. India is one country which has track record of violating most accepted norms like human rights, non interference in internal matters of other states and has been expanding beyond national borders etc. Subsequent to acquiring overt nuclear capability in 1998, the jingoistic overtures and interference in internal matters of other by India has increased dramatically.
All of India’s neighbours have substantial complaints about its high-handed attitude in bilateral matters. But of late, this interference has reached alarming proportions. In 2006, Indian External Affairs ministry issued a statement about security situation in Balochistan. It was clear manifestation of interference in internal affairs of Pakistan.
Lately MK Narayanan, India’s National Security Advisor, issued a statement which reflects India’s designs and future intent about region. He almost thundered out on Sri Lanka “We are the big Power in this region. Let us make it very clear. We strongly believe that whatever requirements the Sri Lankan government has, they should come to us. And we will give to them what we think is necessary. We do not favour their going to china or Pakistan or any other country”. What else would constitute a blatant violation of “Sovereign Equality” and “Non interference” in domestic affair?
India coerced Srilankan government in accepting Indian Peace Keeping Force (IPKF) during late eighties. Subsequent humiliating withdrawal of this IPKF is history. During deployment of IPKF in Srilanka, it used even gunship helicopters to crush Tamils resistance. And the same country is denying a sovereign country the purchase of rudimentary arms and hardware from the desired source. This tiny island nation has never been a strategic or tactical threat to India. But Indian hegemonic designs know no limits. It wants a total subjugation and nothing short.
India belies the oft quoted comment that” democracies don’t go to wars”. it has had wars with almost all of her note worthy neigbours. With Pakistan it has had wars in 1948, 1965,1971 and many stand offs like 1986/87 and recent one of 2001/2002. It has gone to war with China in 1962 over NEFA valley. Has interfered militarily in Maldives in 1988. List is endless. The common point is that India has an insatiable desire of expansion. It can allow her neighbours to lead independent domestic or foreign policy. She wants to realize her dream of “Akhand Bharat”
Purchase of military hardware from any source is sovereign right of Srilankan. Especially if such equipment of Indian origin has failed to deliver. It is appropriate to mention that this statement in question is less of brow beating to Srilanka then a veiled threat to Pak and China. They have been cautioned to refrain from activities considered” unacceptable” by India in South Asia. It is revival of “Indra doctrine” and sign of Hindu Imperialism. This phenomenon, though present since 1947, has exploded post-nuclearisation and as a corollary to revival of "Hinduvita” by Hindu extremist parties. Pakistan and China must stand up and take serious note of renewed imperialist policy of India. But India is not expected to heed to niceties of diplomacy and peaceful coexistence. She has an unenviable record of disputes with all her neighbours on one account or other. Pakistan and China must condemn the statement in clear terms and must ask India to refrain from such overture against their sovereignty.

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ABC of the economics of tariffs and import quotas-I
 

[B][CENTER][SIZE="4"][COLOR="Blue"]ABC of the economics of tariffs and import quotas-I[/COLOR][/SIZE][/CENTER][/B]

[I][LEFT]SHAGHIL AHMED AND IFFAT ARA[/LEFT][/I]

ARTICLE (July 02 2007): Pakistan faces the important challenge of developing a comprehensive strategy for exports that can maximise long-run growth and per capita income without sacrificing the goal of poverty reduction and a more equitable distribution of wealth.

An understanding of and debate on trade policy issues - such as the sources of the disagreements among countries with regard to the liberalisation of agricultural trade that come up in World Trade Organisation (WTO) negotiations, the effects of tariff reductions and the effects of removal of textile quotas starting January 1, 2005 - would seem to be of central significance in meeting this challenge satisfactorily.

There are certainly experts in this area in Pakistan, including among policymakers. Nevertheless, there does seem to be some lack of a more widespread understanding of the basic economics of trade barriers like tariffs and quotas, among all the relevant parties that are engaged in debate. In particular, the discussion one sees in the press and in the electronic media, and even in some policy forums, could be better informed.

The objective of this article is to provide the basics on the economics of tariffs and quotas for the benefit of all those who wish to acquire a rudimentary, but analytical understanding of these issues. The idea is to encapsulate the gist of the analysis that would be found in a basic international economics textbook.

In doing so, we have tried to follow the famous scientist Albert Einstein's maxim that "everything should be made as simple as possible, but not simpler." Thus, while we will avoid equations, we will make use of diagrams (an age-old teaching tool in economics), which facilitate the exposition of the key arguments. But no prior knowledge of economic theory or economic concepts is required. Any concepts that are used will be introduced and developed as we go along.

At the same time it should also be emphasised that the real world of international trade and trade policy is much more complex than the simple world found in textbooks. Many - and often heroic - assumptions have to be made in the textbooks to understand the key building blocks. In particular, our analysis here will all be done in a static and partial equilibrium framework.

A static framework is one which does not take into account the dynamic feedbacks that can result in the future (eg the imposition of a tariff may be followed by retaliatory tariffs by other countries).

And partial equilibrium analysis, as opposed to general equilibrium, analyses the behaviour of a particular sector or portion of the economy separately, without modelling the feedback effects that changes in one sector may have on prices, outputs and other economic variables in other sectors.

Obviously, these are very simplistic notions, but the point is that the more subtle arguments and the finer points involved in the real world relationship cannot be understood without first understanding the simpler arguments which form the building blocks. It is the purpose here to apprise the reader of the key building blocks necessary for an analysis of the economic effects of tariffs and quotas.

The article deals with only a few issues and, in no way is it intended to be a substitute for a textbook or a course in international economics. Quite to the contrary, it is hoped that the interests of the readers will be sparke enough by the discussion here to spur them into acquiring a deeper an even more technical knowledge of trade policy issues.

This work is produced by the Social Policy and Development Centre (SPDC). It is part of a wider SPDC project on the elimination of textile quotas and Pakistan-EU (European Union) trade that is funded by the EU Commission under its Small Projects Facility (SPF) Programme for Pakistan.

It is difficult to grasp the case for free trade based on economic theory without understanding three key concepts - the law of comparative advantage, the notion of consumer surplus and the notion of producer surplus. The Law of Comparative Advantage, attributed to the 19th Century economist, David Ricardo, goes to the heart of the gains that countries will get from specialising in the production of some goods and trading with each other.

The concept is best illustrated through an example. Suppose there are two countries and they produce only two goods, wheat and cloth. By using one unit of labour, country A can produce either 6 bushels of wheat or 4 yards of cloth. Country B's technology is such that it can produce either 2 bushels of wheat or 2 yards of cloth with one unit of labour (Table 1).

[B]TABLE 1

THE LAW OF COMPARATIVE ADVANTAGE: [/B]
======================================
Production Possibilities
Production per unit of labour
Country A Country B
--------------------------------------
Wheat (Bushels) 6 2
Cloth (Yard) 4 2
======================================
This example has been deliberately rigged so that country A is more efficient at producing both goods - that is, it has what economists call "an absolute advantage" in the production of both goods. However, country B has a "comparative advantage" in the production of cloth because this is the good in which it has least absolute disadvantage - it is only half as efficient as country A at producing cloth compared to one-third as efficient in producing wheat.

Both countries can gain if country B specialises in the production of the good in which it has comparative advantage (cloth) and country A produces the good in which it has comparative advantage (wheat). If country B specialises in the production of cloth, it would be willing to trade 1 yard of cloth for 1 bushel of wheat without being worse off. But this would represent a gain for country A.

This is because if country A specialises in the production of wheat, it is willing to trade 1 bushel of wheat for 2/3 yard of cloth, but it is getting the more favourable terms of trade of 1 yard of cloth for 1 bushel of wheat. It should be clear that for any terms of trade in between 2/3 to 1 yard of cloth for 1 bushel of wheat, both economies would be better off by country A specialising in the production of wheat and country B specialising in the production of cloth and then trading with each other to get the good they do not produce.

This example illustrates the basic argument for the gains from trade and how these gains depend not on absolute advantage in production of goods but on comparative advantage, which is a concept of relative efficiency. This does not mean that a country has to live with or cannot change its comparative advantage. Countries should certainly aim to move up the value chain and produce goods with higher value added so that their per capita incomes can increase faster.

What the law of comparative advantage implies is that countries can only do so by increasing their competitiveness and being able to produce the high-value added items relatively more efficiently than others. In East Asia, for example, we can see how some countries are adjusting to the increased emergence of China by developing new areas of comparative advantage.

[B]CONSUMER SURPLUS: [/B]

Another key concept in understanding the basics of trade policy issues is the idea of consumer surplus (CS). To grasp this concept, we must start with a demand curve. The demand curve for a product shows the quantities of the good that will be demanded at different prices. It is downward sloping, as shown in Figure 1.

When the price is high (say, Rs 900 per unit of the good), only those who value the good really highly will demand it and thus relatively less units will be demanded (say, 20 units as shown in the figure). As the price falls, some more consumers who place relatively lesser value on the good also are now able to afford it and find it worthwhile to buy it. Thus, the quantity demanded will increase.

For a given consumer, CS represents the difference between the amount the consumer is willing to pay to acquire the good and the amount she actually pays. The willingness to pay is represented by the vertical distance to the demand curve from the horizontal axis - the willingness to pay is what any point on the demand curve represents.

Thus, the willingness to pay for the 20th unit of the good is Rs 900; for the 40th unit, it is Rs 800; and for the 100th unit, it is Rs 500. If the good sells for Rs 500, say, the total willingness to pay for all of the consumers taken together is the area under the demand curve, which is equal to the sum of the shaded areas A and B, as shown in the figure.

What is the amount that the consumers actually pay for the good? At a price of Rs 500, 100 units of the goods will be bought so that the amount paid will be Rs 500 x 100 = Rs 50,000, which is represented by the area of the shaded rectangle B in the figure.

[B]THE CS, THEN, IS GIVEN BY: [/B]
-- CS = Willingness to pay - amount actually paid

= (A+B) - B = A

Thus the CS represents the sum of the gains to all the consumers as a result of purchasing the good at a market price that is lower than the value they place on the good.

[B]PRODUCER SURPLUS: [/B]
There is a similar concept of a Producer Surplus (PS), which is also crucial to gain a basic understanding of the effects of trade policy. To illustrate it, let's first consider the industry supply curve for a particular good. The industry supply curve is upward sloping, as shown in Figure 2. The cost of producing an extra unit of the good by the industry (the marginal cost) rises with the quantity produced.

Thus, producers in the industry need a higher price to produce more to cover their costs and that is why the supply curve slopes up. For a given producer, PS represents that difference between the amount received for producing the good and the minimum amount the producer would be willing to accept to produce it. Suppose the industry price is Rs 500 and 100 units of the goods are supplied, as shown by the supply curve in the figure.

What is the minimum amount that the producers would be willing to accept to produce 100 units of the good? This would be the area under the supply curve represented by the shaded area A. This is because any point on the supply curve represents the amount the producers would be willing to accept to produce a particular unit. For example, as shown, to produce the 33rd unit, producers would need Rs 300; to produce the 66th unit, they would need Rs 400; and to produce the 100th unit, they would need Rs 500.

The amount that the producers actually receive for producing 100 units is the price multiplied by the quantity supplied, or Rs 500x100 = Rs 50,000, which is represented in the figure by the areas of the rectangle which forms the sum of the shaded areas A and B.

[B]THE PS IS, THEN, GIVEN BY: [/B]

-- PS = Amount received for producing - amount willing to accept to produce

= (A+B) - A=B

Thus, the PS represents the sum of the gains to all the producers as a result of selling the good at a price higher than the amount they would be willing to accept to produce it. In other words, PS could be thought of as producer's profit.

[B]WORLD EQUILIBRIUM

THE POWER OF MARKETS: [/B]
Consider the world equilibrium for a single good in the absence of any trade restrictions, illustrated in Figure 3. The price would adjust to equate world demand to world supply and, as shown in the figure.

This happens at the price P = Pw. Now that we are talking about world prices, it should be noted that for our purposes it does not matter here so much whether they are expressed in Rs or US dollars or Euros, or some other currency since throughout our analysis we will be abstract from exchange rate issues and might as well treat the exchange rate as fixed.

The remarkable thing about the equilibrium market-clearing price in the absence of any distortions is that it maximises the sum of consumer surplus and producer surplus, shown by the shaded areas CS and PS in the figure. At a price higher than Pw, say P1 > Pw, there is excess supply.

If price was lower than this, more consumers would be willing to buy the good and there would be producers that are willing to produce it at that price. Thus, the price would fall in this case until the price Pw is reached again. On the other hand, at a price lower than Pw, say P2 < Pw, there is excess demand.

If price was higher than this, more producers would be willing to produce the good, and there would be consumers that are willing to buy it at that price. Thus, the price would rise in this case until the price Pw is reached again.

The above equilibrium is for the world, and it does not imply that demand will equal supply in each country. In the case of those goods in which a country has a comparative advantage in production over other countries, domestic supply will likely exceed domestic demand and the excess supply will be exported.

But the world market would still clear, with excess supply in countries with comparative advantage being matched by equal excess demand in other countries.

Similarly, in the case of goods in which a country does not have a comparative advantage it is likely that domestic demand will exceed domestic supply and the excess will be imported. Again, the world market will clear, with the excess demand in countries having a comparative disadvantage in production being matched by excess supply in other countries.

In sum, the key result here is that the world equilibrium market- determined price maximises the sum of consumer and producer surpluses. Moreover, countries specialise in the production of goods in which they have comparative advantage in, and they are likely to become a net exporter of these goods and a net importer of those goods in which they do not have a comparative advantage.

[B]THE ECONOMICS OF TARIFFS: [/B]
A tariff is a tax on the imports of goods. It is one important element of trade policy for any country. There are two main types of tariffs - a specific tariff, which is a fixed tax for each unit of the good imported (eg $2 per barrel of imported oil), or an Ad valorem tariff, which is levied as a fraction of the imported value of a particular good (eg 20 percent of the value of all imported automobiles). Tariffs are imposed both for the purposes of adding to government revenue as well as to try and protect certain domestic sectors of the economy.

Generally, the revenue and protective effects of tariffs occur simultaneously. However, in some special cases only one of these effects occurs at a time. For example, a tariff that is imposed on an import when no domestic producer exists would be a pure revenue tariff; also, a tariff that is imposed is so high that it becomes prohibitive and no goods are imported would be a pure protective tariff. In such a case no government revenue is collected.

[B]SITUATION WITHOUT TARIFFS:[/B]

In order to consider the effects of tariffs from the viewpoint of the importing country, let's first set up what the situation might look like without any tariffs. Suppose the world price (Pw) of a good is determined from the equality of world demand and world supply, as shown in Figure 3 (Note that we have expressed the price here in dollars, but given a fixed exchange rate, we could speak interchangeably about the rupee price which would just be a multiple of this).

Since we want to focus on a country importing the good, let's suppose that at this world equilibrium price, the country in question has excess demand for the good and is, therefore, a net importer of the good. Recall that other countries would have to have excess supply and be a net exporter for world equilibrium to hold.

The initial situation without any tariffs is shown in Figure 4. At the world price of $100, the domestic demand for the good in this particular country is 500 units. 100 units of this good are supplied by domestic producers, who are efficient at producing this good.

However, after 100 units have been produced domestically, it is more efficient to import additional units of the good at a cost of $100, since supply curve shows that domestic producers would demand a higher price to produce more than 100 units. Thus, 400 units of the good are imported from abroad.

[B]EFFECTS OF IMPOSING A TARIFF: [/B]
Now consider the imposition of a $15 tariff on each unit of imports by the home country (This is 15 percent of the original price of $100). If the domestic price remained at $100, no one will be willing to export the good at the world price of $100. The price difference between the home market and the world market will have to rise to $15 for someone willing to ship the good to the home country from abroad, given the import tax of $15.

In other words, at the old world price of $100, there is now excess supply in the world market (since the demand for imports from the domestic country has fallen). The world price would have to drop and the domestic price inclusive of tariffs would have to rise until the price differential between the two markets was exactly equal to $15.

Suppose this happens at a new world price of Pw* = $95 and a domestic price inclusive of tariffs of PT = $110. At this new higher domestic price, domestic supply rises to 200 units from the previous 100 units, and domestic demand falls to 400 units from the previous 500 units. Therefore, 200 units are now imported, which is less than the previous imports of 400 units.

What are the welfare effects of the imposition of the $15 specific tariff? Let's start with what happens to a consumer surplus. Recall from Figure 1 that the consumer surplus is the area of the triangle that is formed by the vertical axis, the demand curve and the horizontal line at the price at which the good sells. With the domestic price rising from $100 to $110, it is easy to verify that the consumer surplus falls by the amount of the sum of the shaded areas A, B, C and D in Figure 4.

Now consider what happens to producer surplus. Again, recall from Figure 2, that this was the area of the triangle formed by the vertical axis, the supply curve and the horizontal line at the sale price of the good. With the price rising to $110 from $100, the producer surplus increases by the amount of the shaded area A, shown in Figure 4.

In addition to these effects, the government now has tariff revenue of the amount shown by the area of the rectangle which forms the sum of the shaded areas C and E. This is equal, of course, to the tax per unit ($15) multiplied by the quantity of imports (200 units), or $3,000.

[B]THUS, THE NET WELFARE LOSS FROM THE IMPOSITION OF THE TARIFF IS GIVEN BY: [/B]
-- Net welfare loss = loss of consumer surplus - gain in producer surplus

-- rise in government revenue

= (A+B+C+D) - A - (C+E) = B+D-E

Domestic producers gain because the tariff increases the domestic price, allowing some domestic producers to compete with the more efficient foreign producers. Consumers lose because the price rises, causing them both to consume less and pay more per unit for the amount that they still consume. The government gains because it has revenue now that it did not have before.

Part of the loss of the consumers becomes the producers gain and washes out on net - this is the area A. Part of the loss of the consumers becomes the government's gain and also washes out on net - this is the area C. However, there are net efficiency losses amounting to the sum of the triangle areas B and D because of the distortions to the incentives to consume and produce caused by the imposition of the tariff.

It should be emphasised that the areas B and D represent net welfare losses that go to nobody. These net losses are caused by the distortion or wedge created by the tariff. Part of this net loss (the area D) is because consumption of the good falls from 500 to 400 units; and part of it (the area B) is because more costly domestic production to the tune of 100 units is being substituted for less costly foreign production.

Offsetting this is a net gain to the domestic economy, arising from the fact that the tariff causes the world price of the good to fall to $95 from $100, which is represented by the area E. If the domestic country is relatively small, as in the case of Pakistan, its decrease in import demand resulting from the higher tariff would be expected to have only a negligible downward effect on the world price and the area E would be very small. Most of the burden of the tariff would then be borne by domestic consumers, and the imposition of the tariff would represent a net welfare loss to the nation.

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[B][CENTER][SIZE="4"][COLOR="Blue"]ABC of the economics of tariffs and import quotas-II [/COLOR][/SIZE][/CENTER][/B]


[I][LEFT]SHAGHIL AHMED AND IFFAT ARA [/LEFT][/I]

ARTICLE (July 03 2007): To summarise, the main results from the imposition of a tariff on the importing country are the following:

1. Quantity of imports falls and domestic prices inclusive of tariffs rise.

2. Domestic producers gain.

3. Domestic consumers lose.

4. Government gains.

5. Domestic economy also gains as a result of lower world price (a terms of trade gain).

6. If the country is relatively small, effect 5 above is very small, and there are net welfare losses because consumers lose more than producers and the government gain.

Our analysis is, of course, conducted with many simplifying assumptions. In particular, it done in a partial equilibrium framework and under the assumption that markets are perfectly competitive. However, economic analysis shows that in most cases the results of partial equilibrium analysis still carry through to a general equilibrium framework.

[B]THE ECONOMICS OF IMPORT QUOTAS [/B]
An import quota is a direct restriction on the quantity that may be imported of a good. An example of this is the case of textile quotas. Many industrial countries, including the United States (US) and the major European countries, imposed quotas on the imports of textile and clothing products from developing countries in 1974 under the Multi-Fibre Agreement (MFA).

In 1995, the MFA was replaced by the Agreement on Textiles and Clothing (ATC), which scheduled a gradual phase-out of the quantitative restrictions in several stages over a ten-year period, with quotas finally completely eliminated starting January 1, 2005.

This has led to serious concerns about how Pakistan's export performance will fare in the now quota-free environment. To understand the implications for Pakistan, it is first necessary to know what economic theory has to say about the implications of quotas - and their removal - for both the importing and the exporting countries.

[B]SITUATION WITHOUT QUOTAS [/B]
For the importing country, the initial situation is very much like the one discussed in the previous section before the introduction of tariffs. We reproduced it in Figure 5, but for the sake of change with slightly different illustrative numbers.

The initial world price is $100, which is the price at which the domestic country can import the good. At this price, domestic production is 400 units of the goods and domestic demand is 1,000 units, so that 600 units are imported from abroad.

[B]EFFECTS OF QUOTAS [/B]
Now suppose we are talking about the textiles and clothing market and the US (say) imposes a quota of 200 units on the imports of these items. The exact implications depend on how the quota is enforced. One example is the imposition of quota by the US on imports of foreign cheese.

In this case, import licenses are given to certain trading firms, each of which is allocated the right to import a maximum quantity of cheese each year. In other important cases, such as quotas on imports of sugar or imports of apparel under the MFA or ATC, the right to sell in the importing country is given directly to the government of exporting countries. Since we want to focus on the textiles example, which is more pertinent to Pakistan, we will assume that the license is issued directly to foreign exporters.

The domestic price has to rise to reduce desired imports of textiles and clothing by the US to the quota amount of 200 units. In the example shown in Figure 5, the domestic price has to rise to $110 to reduce imports to 200 units. When the price has risen to $110, domestic producers increase their production from 400 units to 700 units and domestic demand falls to 900 units.

Note, that an import quota always increases the domestic price, so we should not be under the misconception that import quotas somehow restrict imports without causing a rise in the domestic price.

What are the welfare effects of this quota imposition in the importing country - the US in our example? Again, we can add up the gains and losses of the different groups.

When the price rises to $110, there will be loss of consumer surplus in the US amounting to the sum of the shaded areas A, B, C and D. At the same time, there will be an increase in producer surplus from the price rise, amounting to the shaded area A. There is no effect on government revenues. The quota rents being generated as a result of the rise in price to $110, which amount to the shaded area C, accrue to the foreign exporters who hold the export licenses.

The net welfare loss is, then, given by:

NET WELFARE LOSS = LOSS OF CONSUMER SURPLUS - GAIN IN PRODUCER SURPLUS = (A+B+C+D) - A = B+C+D > 0

For the importing country (US), there is thus unambiguously a net welfare loss. Part of the consumers' loss is due to more costly domestic textiles being substituted for cheaper foreign textiles and part of it is due to less quantity being consumed.

Domestic producers gain because they sell more and at a higher price. Note, that only a part of the losses of the consumers are offset by the gains of the producers (the area A). The rest of the area (B+C+D) represent net efficiency losses to the importing country from distortions of domestic incentives to consume and produce and from accrual of quota rents to the foreign exporters.

How do these quota restrictions by the importing country (the US in our example) impact on the exporting country (Pakistan, say)? First, those exporters that are able to still export - namely, the holders of the 200 unit quota licenses to sell in the US market - gain by the amount of the quota rents, as already discussed. Second, those exporters who were exporting before (recall 600 units were exported before the quota restriction came into place), but are no longer able to export, will lose out.

[B]EFFECT ON IMPORT PRICES OF QUOTA REMOVAL WITH MORE THAN ONE FOREIGN SUPPLIER[/B]
Now we consider the effect on import prices of imposing a quota on the most efficient supplier and its implications, as the quota is then gradually relaxed and then finally eliminated, as in the case of textile quotas under the ATC. The example is stylised, but meant to illustrate the consequences for the less efficient producers.

Suppose the situation is as depicted in Figure 6. There are two potential foreign country suppliers, supplying goods that are perfect substitutes in the import basket of the domestic country.

[B]COUNTRY A[/B] is a more efficient supplier than country B and can supply imports to the importing country at a price of $100, which is lower than the price of $120 at which country B can supply imports. All domestic producers are assumed to be less efficient than either foreign supplier, which follows because the domestic supply curve is assumed to hit the vertical axis at a price higher than $120.8

Equilibrium without an import quota is represented by point E. All 500 units of the good consumed are imported at $100 a unit from country A. Country B and domestic producers being less efficient provide none of the goods consumed. Now suppose an import quota of 200 units is imposed on country A only. This will raise the import price to the price at which the next efficient supplier can supply the goods, which is country B at a price of $120.

Intuitively, this is because the quota on the most efficient producer implies that the importing country will inevitably have to turn to other less efficient producers. At the new price of $120, 300 units will be demanded, which will still all be imported - 200 units imported from country A (up to its quota limit) and 100 units imported from country B. The producers in country A who still hold the licenses to export the 200 units will get quota rents of the amount shown by area R.

Suppose now the import quota of 200 units on country A is gradually relaxed. The price effects will be as shown by the arrows in the figure. Until the quota reaches 300 units, nothing will happen to the price and the amount of imports will shift in source from country B to country A. Once the quota of 300 units is reached, the import price will start to fall and we will gradually move along the part of the demand curve represented by the segment BE and country A's quota rents will gradually decline.

Once we reach point E we are back to the equilibrium without quotas, since the quota becomes non-binding. Country A would have recaptured the whole market at that point.

Thus, we can see that the presence of quotas may have allowed some countries like country B that were not as efficient as country A to remain in the market. However, in the absence of quotas, the third party competition may lead these countries to lose their market share unless a competitive edge is developed and maintained against the most efficient producers.

This result underscores the importance of third-party competition and the difficulties that some countries might face in the post-quota environment for textile trade. If a country like China, say, is more efficient like country A in the example above, it might be difficult for other countries (perhaps Pakistan, hypothetically) that are like country B to compete without becoming as efficient.

[B]SUMMARY OF THE MAIN RESULTS [/B]
The main results with respect to the effects of the imposition of an import quota may be summarised as follows:

1. Domestic price rises and obviously the quantity of import falls because of the quota.

2. Domestic producers gain.

3. Domestic consumers lose.

4. The losses of domestic consumers are more than the gains of the domestic producers, thus leading to a net welfare loss in the importing country.

5. Those foreign exporters who are still able to export and hold quota licenses gain, but other exporters who potentially could be exporting without the quotas lose.

6. Quota restrictions may allow some inefficient exporters to survive, which will be difficult to do (without matching the efficiency of the most efficient producers) when the quotas are removed.

These results suggest that when existing quotas were eliminated, as in the case of the textile quotas starting January 1, 2005, the import price in the importing countries, such as the US and the EU countries should have fallen and there should have been a net welfare gain in these countries, with the losses of domestic producers being more than made up for by the gains of domestic consumers.

Moreover, among the producers and exporters there will be gainers and losers. The less efficient exporters will lose market share to the more efficient exporters, unless they can improve their efficiency and international competitiveness.

The purpose of this article was to provide a flavour of the textbook economic arguments for the benefits of free trade and for why trade restrictions such as tariffs and import quotas are likely to lead to net welfare losses. It was shown that under standard textbook assumptions, the imposition of both tariffs and import quotas lead to net efficiency losses.

There are some gainers - domestic producers in the importing country gain, the government also gets more revenue in the case of a tariff, those exporters in the exporting country who manage to get the quota licenses also gain - but these gains are more than offset by the large losses that consumers suffer.

Consumers face these losses because the distortions resulting from these restrictions mean that they have to consume less and at a higher price because of the substitution of some production from the most efficient producers to less efficient ones.

Often the argument for free trade does not get a fair hearing because the interest groups who stand to lose from free trade are very vocal, visible and influential.

By contrast the large aggregate gains which occur from free trade are often very diffuse and made up of rather small gains per consumer but summed over millions and millions of consumers. This makes the formation of special interest groups and political influence more difficult.

It should be emphasised, though, as was noted when we began, that the world of textbooks is a very simplified one. In the real world, which is more complex, many other issues arise. For example, tariffs are distortionary but so is any other tax that is not lump-sum and yet some amount of government revenue has to be raised.

The existence of some tariffs may be optimal as part of a general package of taxes and public finance considerations. Moreover, for free trade to work best, it must operate from both sides involved in any international trade. This raises concerns having to do with perceptions of the lack of a level playing field being provided by the other side, which is the source of complications and stalling of WTO negotiations, for example.

There can be problems related to efficiency versus equity as well. What should be done when the inefficient domestic producers going out of business leads to large employment losses, particularly of low-skilled relatively poorer workers?

The free trade argument often rests on the principle that there are net efficiency gains, so that the gainers could in principle compensate the losers and still be better off on balance. But redistributions required to prevent the poor from becoming poorer hardly ever occur.

There are other political economy considerations as well. For example, there is an argument for deviating from free trade that rests on domestic market failures. If some domestic market fails to function as it should, deviating from free trade might help reduce the consequences of this malfunctioning.

This rests on the theory of second best, which states that if one market does not work properly it may no longer be optimal for the government to abstain from intervention in other markets.

Some also argue for the protection of key infant industries until they can get beyond their baby steps and for protection of key strategic industries (which might involve national security considerations) from foreign competition.

In this article, we do not take particular positions on these complex issues. The goal rather was more modest; the main point was that, in order to understand these more complex issues and appreciate the debate on them, one must first understand the textbook case for free trade and why trade restrictions could cause national welfare to fall in principle.

It is hoped that after reading the article carefully, the reader can better follow and appreciate the basics of the economics of tariffs and import quotas, which is a crucial starting point for an understanding of the issues involved in the debate about free trade.

(Concluded)

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[B][CENTER][SIZE="4"][COLOR="Blue"]Solving economic issues[/COLOR][/SIZE][/CENTER][/B]



[LEFT][I]By Sultan Ahmed[/I][/LEFT][I][RIGHT]Thursday,july 05,2007[/RIGHT][/I]


THE federal budget has been passed and so have been all the four provincial budgets. In fact, the attention of the members of the National Assembly was diverted a great deal from economic issues during the debate as there was more focus on political issues. The budget debate was, as such, cut short by two days with mutual consent.

The last day of the debate on the budget, which was presented on June 9 with taxation proposals for Rs1.025 trillion, was devoted to the political issues particularly relating to the elections to be held by the end of the year.

There was greater interest in seeking a compromise between the government and the opposition on the electoral arrangements, including the setting up of a non-controversial caretaker government. Such an arrangement is proving to be difficult and yet the quest goes on amidst predictions that the elections may not be held at all and that President Musharraf may not shed his uniform before the elections. A proper budget debate is normally a reflection of the state of the economy focusing on the major problems and seeking solutions to at least some of them. The just-held budget debate in the NA was not an in-depth analysis of the economic problems the nation confronts but more of an opposition protest against official, political policies and practices and its inequity to the poor and the underprivileged. Amidst the political protests, the local problems of the constituencies of the members also figured.

Understandably, since this is the election year, the opposition is more interested in the political issues such as making new alliances and breaking old alliances. The tone of the budget debate was set by minister of state for finance Omer Ayub Khan who used one sentence to praise the present government and two sentences to damn the previous governments which should include his grandfather Mohammed Ayub Khan’s famous decade of development and which eventually led to the separation of East Pakistan.

Had the National Assembly been interested in a real debate on the economy, it would have adopted a thematic approach to major economic issues instead of following clause by clause discussion of the finance bill. It would have allotted two to three days to discuss inflation threadbare, two days to discuss unemployment and two to three days to debate poverty alleviation with various official claims of lowering the rate of poverty and the non-official denial. Such focused debates would have thrown up some positive solutions which could be applied to solve the major problems with the sanctions of the people.

But the Assembly devoted more time not only to the forthcoming general elections but also to the Karachi killings, the prolonged judicial crisis, the disappearing voters and the dominance of the intelligence agencies. If the political parties are seriously interested in the elections, they should be setting up committees of economic experts who would formulate proper economic programmes befitting a poor developing country trying to grow economically fast but, except the PPP, the political parties do not have economic expert groups.

In fact, it would be better if the opposition parties setup a joint committee on the economy and come up with their own proposals for solving the major economic problems. The economic problems of the country are not simple, nor easily soluble. They are complex and tough to tackle to meet the needs or demands of 160 million people, a 100 million of them under 25 with high expectations.

The political parties need to reach a compromise on major issues relating to the economy as neither the simplistic formulas of Islamic parties nor the demands of socialist parties can truly solve our problems at the moment. If the parties do not work out a compromise, they will be going on a collision course and hence defeating their common cause and failing the people. Providing employment to three to five million people in a year for a few years is not easy. And yet that has to be pursued and achieved. Similarly, promoting high economic growth and holding down inflation or the prices of essential supplies is a difficult exercise. There is too much money coming from various sources, half of which is illegally earned that is spent on mass consumption and pushes up the prices in spite of the fact that food imports now cost 2.6 billion dollars.

Two striking features of the budget are renaming of the Central Board of Revenue as the Federal Board of Revenue (FBR) and investing it with vast powers for taxation and providing relief, and the decision to sell a number of essential items through the utility stores.

Once the National Assembly invested the FBR with such exceptional powers, the Assembly was bypassed when it came to making announcements of new taxes or relief measures. That was all done by the government not in parliament but outside of it. Even the increase in profits of five official saving schemes, from 8 paisa to 50 paisa for 100 rupees, was done outside the Assembly. Maybe the increase in the interest rate was so small, that the government thought that the members of the Assembly would jeer at it and hence announced the increase to the press.

Anyway, for a budget which has no new taxes, the one per cent import surcharge which has now been converted to excise duty will yield a hefty Rs20 billion. The FBR has also raised import duty on 204 items and reduced and raised the duty on a number of small items. It has become a truly autonomous taxation mechanism.

The great promise of the budget to reduce the prices of a number of essential items and seek price stability through their sale at the utility stores has not come to pass. Instead prices of essential goods particularly those of edible items have gone up. The disruption caused by the rains has pushed the price of tomato to 100 rupees at places. Even wheat prices have risen by 30 to 40 rupees for 40 kg despite its abundant supply following a crop of 23.5 million tones and the continuing ban on exports.

A thousand utility stores, mostly where the government officers live, is too small a number through which the essential supplies can pass. We have been promised 500 more utility stores, one in each union council area within 4 months, but that is too ambitious a target for an official agency.

While the FBR has been invested with vast powers, the World Bank has asked it to undertake a study of the taxation reforms that it has carried out so far and their results particularly in respect of the large tax payers unit. And with the current account deficit rising to 7.3 billion dollars in the first 11 months of the year, the World Bank, IMF and the Asian Development Bank have cautioned Pakistan that it may not be able to sustain such large deficits and maintain high growth.

Meanwhile, oil prices in the world are rising and have gone above 70 dollars a barrel in both New York and London. And there is distinct possibility of a rise in prices of power and gas in Pakistan, while the POL prices may be reviewed. There is also a possibility of a rise of half a percent in interest rates of banks with the approval of the State Bank of Pakistan to help its tight monetary policy.

Meanwhile, the free trade agreement with China has come into operation and the Russian consul-general in Pakistan has spoken of the advisability of a free trade area agreement between Pakistan and Russia. There is such an agreement between Russia and India and so Indian goods are cheaper in Russia. If an FTA agreement is signed between Pakistan and Russia, Pakistani goods will become cheaper and more popular in Russia.

Textile exports of Pakistan have been inching up and during the last 11 months rose by six per cent to nine billion dollars. The Social Policy and Development Centre has brought out three handy booklets to help exporters to the European Union with whom we have problems. They are the Elimination of Textile Quotas and Pak-EU trade, ABC of the Economics of Tariffs and Import Quotas and the Elimination of the Textile Quotas and Pak-EU trade – a policy brief. They are timely publications and very handy to its users.

[U]
[url]http://www.dawn.com/2007/07/05/op.htm[/url][/U]

[B][SIZE="4"][COLOR="Blue"][CENTER]Citizen participation and community empowerment: system recognised as crucial for poverty alleviation-I [/CENTER][/COLOR][/SIZE][/B]

[I][LEFT]RIZWAN RAHEEM AHMED AND SHAFI AZAM [/LEFT][/I]

ARTICLE (July 05 2007): Pakistan has a poor track record of democracy as for more than half of its years of existence after independence, it has been ruled by the military. While the military governments always found faults with the politicians, it was always them who created the local government systems.

Pakistan has experimented with two systems of local government before the present devolution plan. These were in 1959 under General Ayub Khan and then under General Zia-ul-Haq in 1979, both during military regimes. The present devolution plan is also a brainchild of military government.

History of local governments in Pakistan is characterised by two factors; Firstly, the local governments have never been autonomously functional in the presence of democratic governments. Secondly, every time a new system of local government was created, it was totally from a scratch with no linkages to the previous system.

Under the previous system of local government, there were four levels of municipal government in the urban areas: town committees, municipal committees, municipal corporations and metropolitan corporations. Members of the council elected the senior officers of these councils and the controlling authority was the elected house.

There was a three-tier system of local government in operation in Pakistan in the rural areas, where Union Councils, Tehsil or Taluka Councils and District Councils were supposed to exist. However, provincial governments in practice usually abolished the middle-tier, the Tehsil/Taluka level. As a result mainly Union Councils and District Councils existed, which were elected on the basis of adult franchise.

The elected members then elected the Chairmen of these councils themselves. Municipal status was primarily a function of population. Two types of functions were allocated to local governments-compulsory and optional. Compulsory functions for urban local councils included sanitation and garbage disposal, water supply, drainage, education (primary), fire fighting, public streets, street lighting, and social welfare. Whereas major functions of rural councils included provision, maintenance and improvement of public roads, water supply, drainage, primary schools, medical and veterinary services.

In practice, however, the councils were just performing some of the functions. It has been argued that the allocation of functions to the councils was very liberal. However, the availability of resources and institutional capacity for undertaking development work has been the operative constraints.

Since local governments were not a central part of the Constitution and were delegated powers by the provincial governments, local governments actually owed their existence and powers to the provincial governments. Provincial governments could dismiss local governments by themselves or on the advice of the federal government.

This was a subjective and dominating, relationship; local governments did not operate independently from the provincial government and could hardly exercise any influence. From senior appointments to requests for more resources or the permission to increase taxes and rates, local governments were dependent upon their provinces. It would not be unfair to say that provinces controlled local governments. Besides, the budgets of local councils had to be approved by the provincial government, who were entitled to make amendments and suggestions.

Pakistan has a federal administrative structure guided by the Constitution of Pakistan of 1973 with amendments. Parliament consists of the National Assembly and the Senate. National Assembly members are directly elected on adult franchise basis and have a term of 5 years in office.

The National Assembly determines the major policy issues and passes annual budget and legislation. It elects the Prime Minister from among its members. The Prime Minister forms the cabinet from among members of the National Assembly and the senate. Provinces have their own elected legislative assemblies and Chief Ministers. Majority of the members of the Senate are elected by the Provincial Assemblies on the basis of proportional representation.

The allocation of functions of the federal government and the provincial governments is specified by the Constitution with the former having the authority to make laws with respect to any matter in the Federal Legislative List and the later in the Concurrent Legislative List. However in case of a dispute between the two, the writ of federal government shall prevail, hence providing for the root of centralisation in Pakistan.

Until the introduction of current legal changes 8, the Constitution of Pakistan did not fully recognise local governments as separate tier of government with their own powers and functions. They were essentially viewed as extensions of the provincial governments, having been created by the provincial legislation, through which some functions were delegated to them.

The purpose of giving an overview of the old system was to prepare a ground for comparison with what the new plan promises to offer by way of addressing the issues identified. Pakistan began implementing a major devolution plan in 2000, which has produced a new breed of local leadership under the military-led government of General Pervez Musharraf, who also holds the civilian office of the President of Pakistan. Some studies have viewed the current devolution exercise in Pakistan as a success; others have seen it as the military's attempt to prolong its rule in Pakistan.

The National Reconstruction Bureau (NRB) developed the Local Government Plan in 2000, and the provincial governments promulgated the Local Government Ordinance in 2001. The aims were to extend democracy to the local level, to create a proactive citizenry that directly solves problems through community organisation and projects, to strengthen local legislative bodies, to improve respect for citizen's rights and improve service delivery, and to reduce high levels of corruption.

These aims have measurable endpoints. Their achievement will depend on the level of Governments and civil society effort, the measurement of any progress and, based on reliable local evidence, midstream adjustments to reinforce changes through positive feedback. The objective of the study is to evaluate the performance and effectiveness of CCBs (Citizen Community Boards) in income generating field in Sukkur, Larkana and Nawabshah district, furthermore, to evaluate the participation of local people in CCBs projects in Sukkur, Larkana and Nawabshah districts.

THE CITIZEN COMMUNITY BOARDS (CCB): The development at the level of all tiers of local government is governed by the Citizen Community Boards (CCB). The CCB are designated agents of change and catalysts for activity. This institution has been created to organise and enable proactive elements of the society to participate in community work and undertake development-related activities in both rural and urban areas following a bottom-up and participation based approaches.

In the previous system, administrative control as well as development planning was carried out through a centralised system. It was essentially a top-down approach in which the people, for whose alleged benefit the development was being done, were conspicuous by their absence in the entire decision-making process. By creating an enabling environment, the people are themselves involved in arranging and managing various kinds of social and developmental projects.

In a local area, a group of non-elected citizens may set up a voluntary organisation with the name of CCB. The creation of CCBs is formalised through registration.

Unlike NGOs, which are registered under various laws; the CCBs are registered with the Community Development Office of the respective District under the Local Government Ordinance. The CCB has a general body, comprising all its members, which elects a Chairman, Executive Committee and a Secretary of the Board for carrying out its functions. A CCB may raise funds through voluntary contributions, gifts, donations, grants and endowments for its declared objectives, ie establishing a needed welfare or development project for the community. It may also receive project-based cost-sharing support from any local government in accordance with the provisions of the Local Government Ordinance.

The law lays down that at least 25 percent of the District development funds will be reserved for projects that will be identified, planned and sponsored by the CCBs. The Boards will submit the details of their development projects along with the proof that they have collected at least 20 percent of the estimated cost specifically for that project.

The Union Council and the Union Administration will then take up the project either with the Zila Council or the Tehsil Municipal Administration for approval and grant of the matching funds at the Union and/or Tehsil and/or District levels.

Depending on the socio-economic characteristics of the Union, the District Government or the Tehsil Municipal Administration may grant funds up to 80 per cent of the total estimated cost. Since development funds are available at all three levels, the Boards may seek funding from any level. Following the selection and approval of the project proposal by the Council, an agreement will be signed between the authorised official of the Local Government and the CCB.

A major problem has been the non-establishment/registration of CCBs. It is taking a lot of time for people to grasp the idea of the concept. This is also affecting the utilisation of allocated funds for development projects to be implemented through the CCBs.

OPERATIONAL ISSUES: In situations where CCBs have been established and registered, capacity of these entities and those of its members has found to be very weak. They have not been able to formulate projects to benefit from funding allocated by the local governments. Some CCBs are finding it difficult to arrange for 25% contribution to initiate projects.

Non-cooperation of the bureaucracy and elected councillors are also cited as some of the operational constraints. In many cases the required personnel of department for community development have not been posted. The new system tends to isolate the existing local organisations as it puts additional demand on them to fulfil various procedural requirements. It is also contended that in the plans proposed by CCBs are crowded by those put forward by the district development Committees.

CITIZEN PARTICIPATION THROUGH CCBS: The active promotion of CCBs amongst the most vulnerable citizens could help ensure that they do not miss the opportunity for citizen participation and community empowerment, elements now internationally recognised as crucial for poverty alleviation.

The 2004-05 social audit provides evidence that citizen participation is increasing; both generally, for example in increased membership of voluntary groups, and specifically in increased awareness and willingness to participate in CCBs. All the indicators point in the same direction, and there is synergy so that people who are interested in joining a CCB are also those more positive about their community and the way people work together in the community. Again, it will be necessary to keep monitoring the situation for equity of participation.

At present, the vulnerable (poor), women and the uneducated are less likely to participate than others. It will require additional efforts to draw in the more disadvantaged members of society. The willingness to participate is there: people from vulnerable households were as willing to join a CCB as people from less vulnerable households. But they face practical difficulties and special arrangements might be needed to ensure they can participate fully.

CCB promotion could actively target these groups to ensure equitable presence of the most vulnerable in the CCB movement. Women's participation remains a challenge and there is clear evidence of women's continuing exclusion from many aspects even of household functioning. For example, female respondents' under-reported household contacts with councillors, with the police, and with courts. Women councillors described some of the difficulties they faced in their role.

And women were less aware of, and expressed less willingness to join CCBs, undoubtedly because of the practical problems involved. On the other hand, women in the community focus group discussions showed their clear awareness of what was going on in their communities and had ideas about what needed to be done to improve matters. For the first time in the 2004-05 social audit we added some specific questions about social capital, which will serve as a baseline for following this important indicator over time. If devolution works as intended, social capital ought to increase.

To achieve the objectives under district governments, institutional arrangement was done. Formation of Citizen Community Boards (CCB's) is one of the institutions which are unique in nature in the history of local government. People at the grass-root level have been managed to form Citizen Community Boards (CCB's) to develop an environment of self help in collaboration with the government. As a result thousands of CCB's have been established so far throughout Pakistan. Through CCB's local development is being carried on.

In fact, CCB's can recommend projects to be financed by the development budget on an 80:20 principle11, where the community bears 20% of the proposed budget. Some communities have taken advantage of the opportunity by proposing projects to improve water supply and sanitation. Other communities have spent funds on projects that were not urgent in nature.

For instance, one community in Lodhran District used the funds to build a wall around a graveyard. Detractors of the devolution plan point out its financial shortcomings. For instance, the plan has transferred responsibility of municipal service delivery such as water supply, sanitation, primary education, and basic health to the local governments. However, the devolution plan falls short of building institutional, financial, and technical capacity of local governments.

How far these CCB's are successful in coping with the development challenges is not very clear till this date. Therefore, the undertaken study will evaluate the effectiveness and role of CCB's in social development projects (income generation sector) in Sindh province (Sukkur, Larkana and Nawabshah districts).

(To be concluded)

[U][url]http://www.brecorder.com/index.php?id=587224&currPageNo=1&query=&search=&term=&supDate=[/url][/U]

Education Budget
 

:wub: Education budget



THE government announcement, in the budget 2007-08, to raise the education outlay to four per cent of the GDP to improve the declining standard of education is a welcome move but not sufficient to rehabilitate the facade of the system that has been badly vandalised over the years due to sheer mismanagement of the resources allocated to the educational sector, rampant corruption and maladministration.

Available data suggests that despite high spending, enrolment has decreased in the public sector educational institutions.

At the moment we are spending less than two per cent of the GDP, which is considered peanut in the light of educational budget of our neighbours. India spends 3.5 per cent, Sri Lanka spends about five per cent and Bangladesh about four per cent, and their standard of education is far better than that of ours.

Personally I think this is a misplaced notion on the part of the government that with the injection of more liquidity the standard of education will improve. Increasing educational budget is a good thing but this does not serve as panacea as we have seen in the past that the injection of more liquidity has led to more corruption in the absence of a viable system of checks and balances, which can only be attained if there is efficient but democratic system of governance.

For example, Shah Abdul Latif University has suffered much in terms of its physical and human development. Most of the critics attribute such predicament to the increasing financial indiscipline and deviation from the codal formalities.

For instance, the special audit 2002, released recently, accuses the university of flaws and instances of misappropriation, nonobservance of codal requirements, etc. While cataloguing the details, the report maintained that there had been total of 50 cases of misappropriation, fraud and doubtful cases amounting to Rs703.359 million, 71 cases of violations of rules and nine cases of non-production of record.

The audit reports carried out during the years 2003-2004, 2004-2005 also accuse the university administration of misappropriation and failings in reconciling the accounts with the bank.

As a matter of fact, the only way to check such irregularities could be through computerisation of data and reconciliation with bank accounts to which university has so far turned a blind eye.

In the country where universities are allegedly auctioned like police stations and the highest bidder is appointed as vice chancellor, the proliferation of corruption is not an unusual thing to happen. But if the government wants to raise the standard of education in the country, it has to change its policies and treat the universities as centres of learning and research instead of using them as job factories to recruit the workers of political parties and appoint them as teachers and researchers.

To turn universities into centres of knowledge, however, it is imperative to initiate sweeping administrative reforms under which the appointment of the vice-chancellor must be made on merit rather than political consideration as political interference has ruined educational institutions, resulting in the declining standard of education and diminishing enrolment.

This can be judged from the fact that recently the Higher Education Commission has spent about Rs70 million on the strengthening of the Department of Computer Science, Shah Abdul Latif University, but shockingly no student has turned up for admission this year. The apparent reason is the poor standard of teaching and the practice of favouritism and nepotism while recruiting teachers.
By:
[I]MANZOOR ALI ISRAN[/I]

Federal budget 2007-2008
 

Federal budget 2007-2008: a review



Budget making is definitely a very serious exercise and the budget document a solemn piece of legislation that reflects a nation's resolve how best to overcome economic hardships and how to effectively harness the available resources to achieve autarky in all fields of national economy.

Unfortunately, the budget presented by the government for the fiscal 2007-2008 is highly disappointing. It is obviously an election budget and not one based on genuine economic logic. The government has taken credit for what it claims to have achieved by way of seven per cent rise in the GDP and $14 billion as foreign exchange reserve. The question, however, arises as to what extent are these due to the government's economic policies and to what degree due to exogenous factors like foreign remittances of Pakistani expatriates and economic and political assistance received as a result of the government's dubious surrender to US pressure after 9/11.

A recent study on development indicators released by the World Bank on April 15, shows that from 1999 to 2005 the average GDP per capita growth in Pakistan on the basis of purchasing power parity has been 4.62 per cent. During the same period the average per capita increase in other developing countries was: Philippines 5.17 per cent, Indonesia 5.77 per cent, Turkey 5.79 per cent and India 7.32 per cent. It is important to note that the average growth of GDP per capita for all low-income countries during this period was 6.38 almost 30 per cent more than what was achieved in Pakistan. In this context too much clap drap about macro indicator is to be taken with a pinch of salt.

The government's claim about reduction in poverty to the extent of 10 points, i.e. from 34 per cent of the population to 24 per cent, is similarly hardly tenable. In fact this would mean almost 33 per cent of the people living under the poverty line to cross the poverty line upwards. This means that every year 2-3 per cent of the population has moved above poverty line. In aggregate terms this would mean that out of 52 million people living under the poverty line some 13 million have improved their status and got out of the grip of poverty. A statistical miracle indeed!

What about the ground realities? Do these confirm the government's claim? Even the survey (PSLM 2004-05) on the basis of which this claim is made contains evidence, which falsifies this official position. Accordingly to Vol. II of the survey, giving provincial and district data, it is stated in Table 5.1 (Page 406) that actually 24 .15 people interviewed had claimed that they were worst off or much worst off in 2005 as compared to 2001. The remaining 51.5 said that their position has not changed. How can the official claim of 33 per cent of people moving upward from poverty line be reconciled with this confession by the same group of people? Asian Development Bank's latest report on Poverty Reduction Programme of Pakistan (Working Paper No. 4, 2007) also records people's perception that the development programme conceived so far, including the SAP, have not brought about any real qualitative change in the country, particularly, in rural areas.

One feels seriously concerned about the mis-presentation of facts and data by the government. Surprisingly, there are serious discrepancies and contradictions in the budget speech and documents. The minister of state, as well as the prime minister and his advisors have claimed that the size of the current budget is Rs1,875 billion. Yet in the federal budget document the total outlay of the budget is given as Rs1, 599 billion: (Budget in Brief, Chapter 2, p.7). This goes to show how irresponsible the government has been even in a highly serious exercise like budget-making.

Even a cursory glance of the budget reveals at least six major failures, which may be summed up as follows:

1. The country is faced with unprecedented balance of payments and balance of trade deficits. When the government took over in 1999-2000, the trade deficit was $1.74 billion. Now it has risen to over $11 billion. In fact, it is feared that this deficit could be well over $13 billion. The balance of payment deficit in 1999-00 was $1.14 billion, which turned positive in 2002-2003 and became $3.16 billion in the year the current National Assembly was elected. Presently the B/P deficit has reached the Himalayan figure of $6.2 billion. The budget fails to come up with any policy initiative to drastically reduce these two major deficits.

2. Economic growth can be sustained only if the Commodity Sector of the economy grows and becomes the main engine of growth. The growth we are witnessing at the moment is based more on the services sector and exogenous factors like foreign remittances and the US aid for Pakistan's mercenary role in its 'war on terror'. There has been no significant and sustained quantitative or qualitative improvement in the agricultural sector of economy. Basically, the agricultural sector has remained a neglected sector where the cost of production is escalating resulting in food inflation. The industrial sector is also lagging behind, particularly the textile industry, which accounts for almost sixty per cent of our exports. It is because of this crisis in our textile sector that exports have seriously lagged behind. In fact, raw cotton is now being exported ($3 billion this year), while value-added textile exports are on the decline. Other industries including leather, surgical instruments and even the sports industry are in serious trouble. Their cost of production remains high, making our exports uncompetitive. The government has neglected these problems. Unless these problems are thoroughly reviewed, this may lead to even de-industrialisation of Pakistan. Already 116 textile mills have been closed, half a million spindles gone out of motion and several million people rendered jobless. So strong in rhetoric, the budget is silent on the problems of the country's most crucial commodity production sector.

3. Inflation is beyond anybody's control. The common man is caught in its menacing grip. He is unable to have two square meals a day. Food inflation, according to official figures, is over 10 per cent and according to unofficial assessments between 15 to 20 per cent. This is ironical in the context of claims about bumper agriculture crop. The proposed relief measures stated in the budget are non-starter. Subsidies have always increased corruption and failed to deliver. There can't be a substitute for a correct economic strategy to fight inflation. Out of a subsidy of Rs210 billion that the government claims to offer in vital sectors of public interest, over Rs90 billion are meant for WAPDA and KESC. One wonders, how this hefty subsidy could be relevant in reducing inflation and bringing any relief to the poor consumers? The country needs a policy to reduce the cost of production by reducing import duties and sales tax on items of daily use. Utility Stores do not cater for more than two per cent of the population and do not serve the poor only. They are hardly the answer. Inflation can be fought only with a combined use of monetary and fiscal policies, taking care of the demands and supply sides simultaneously. This is, however, not being done. That is why the Frankenstein of inflation has been haunting the country throughout the tenure of the present government. Inflation in the year 1999-2000 was 3.58 per cent. In 2002-2003 it was 3.1 per cent and in 2004-2005 it rose to 9.3 per cent. It has been eight per cent during the current and last fiscal year. The budget has miserably failed to seriously address the very crucial issue of inflation in all its dimensions.

4. The other major problem faced by the country relates to poverty and unemployment. Both are organically linked. So is the question of human resource development and manpower and educational planning. The budget is full of rhetoric but there is no plan to effectively face these challenges. There are no sufficient allocations for poverty reduction and massive promotion of health-care. A vital sector like education is starved of resources. The government has increased expenditure and remains addicted to ostentatious living. The development expenditure has been revised downwards to the tune of Rs36 billion. The budget fails on the count of real development, poverty eradication, human resource development and social welfare.

5. Another major problem relates to the elitist nature of the economy. Musharraf-Shaukat policies have made the rich richer and the poor poorer. The extent of inequalities in the country has increased to scandalous proportions during the last eight years. The government's economic survey admits that the top 20 per cent are getting at least 400 per cent more than what is being received by the lowest 20 per cent. According to another study, out of every 100 rupees added to the national income, only Rs3 go to the lowest 10 per cent and over Rs40 to the upper 10 per cent. The stock exchange and real estate boom has only been instrumental in producing millionaires and billionaires because of speculation, not through real value-addition in the economy. The country's elitist class of big landlords and capitalists has become the robber-barons. They are subject to no tax. It is the common man that is crushed under the weight of indirect taxes, while the class of exploiters is spared of any effective tax regime. Inequalities are multiplying and producing divisiveness and polarisation in society. The budget fails to even take note of this gruesome situation.

6. Finally, the government's claim about the fiscal discipline is fictional. The budgetary deficit is above Rs300 billion. The quantum of both the external and domestic debts has increased. Total national debt has swollen to more than Rs1500 billion during the last seven years. The debt management strategy has totally collapsed. Another aspect of the government's failure relates to squandering away of the fiscal space of around forty billion dollars provided during the last seven years in the form of remittances from Pakistani expatriates ($26 billion) and foreign assistance ($10-12 billions). These huge resources have not been harnessed in investment avenues and the bulk of them has gone in conspicuous consumption, real estate and stock exchange speculation. The country is living beyond its means. The rulers have set the worst example. Unproductive expenditure has recorded exponential increase. So has expenditure on the armed forces, whose budget has increased three-fold from around Rs90 billion to virtually over Rs300 billion in the 2007-08 budget. This has made the country's economy lop-sided and the government will have to account for this strategic failure.

Finally, huge allocations made for district and tehsil governments and local unions, are for all practical purposes a lucid political bribe to be used for election purposes. This is a total abuse of public money.

Viewed in this backdrop, the federal budget 2007-08 deserves to be thrown out by the parliamentarians in the same way as happened with the budget presented by Mr Yasin Watto in 1986-87. This year's budget deserves a similar fate. Would the National Assembly do its duty or buckle under pressure from the government in uniform?

By Prof Khurshid Ahmad

[B][CENTER][SIZE="5"][COLOR="Blue"]A recipe for instability [/COLOR][/SIZE][/CENTER][/B]


[U]Mir Jamilur Rahman[/U][RIGHT][I]Satureday,August 11,2007[/I][/RIGHT]

August 8 was a nightmarish day. That afternoon the whole country was abuzz with the talk that the government was contemplating proclamation of Emergency. By nightfall, the TV channels were running the strip that proclamation of Emergency was imminent. Some highly placed functionaries of the ruling party let it be known to a select group of media persons that proclamation of Emergency was a matter of time. Some even went to the extent of explaining the reasons for declaring a state of emergency: American threat of attack was cited as the top reason. This brings up the question: how declaration of emergency could stop American belligerency? Is Emergency our secret weapon against foreign aggression and internal threats?

The news of the Emergency stunned and horrified the people. The official spokesmen's denials were feeble and smacked of double-speak. First a spokesman would flatly deny the news and then in the same breath he would add that the government has the authority to proclaim emergency because it is in the constitution.

Next day, Aug 9, the Karachi Stock Exchange fell by 610 points, a record fall. Later, when firm denials started coming in, the market recouped about 320 points. The irresponsible handling of the Emergency news, or was it a rumour floated by the government itself, deprived the people of billions of rupees for no fault of theirs.

Various interpretations are being put forth for the great mishap but none stick. Perhaps, it was written in the stars that whatever important action President Musharraf took, it would boomerang and harm him politically and the country economically. It cannot be explained away by taking cover under 'mishandling'. There could be a plausible reason for the tactical mistakes which Presidency has been committing on a regular basis starting with three-nine, the day the Chief Justice was sacked.

Apparently, Musharraf's faceless advisors are tired and have become impotent sitting at the same posts for ever and ever. They have outlived their usefulness. Resultantly, they have been failing again and again in gauging the public mood correctly in the post 3/9 period. Or perhaps President Musharraf's grip over national politics has softened. He is definitely overworked. In fact, he is a workaholic. I remember him once saying that to him sleeping was a waste of time. With his workload, looking and monitoring every aspect of his government, he gets scant opportunity to relax or have a vacation to get away from it all for a few days.

The saying goes that Pakistan is the most difficult country to govern. This conclusion is rubbish. On the contrary, Pakistan is one of the most pliable countries to rule. The ruler can get away with grand larceny; can put people in jail and forget about them; can tax them without giving them representation; and can make hash of the constitution. However, despite their pliability, the people would hit back violently if they are deceived by the rulers. In fact, it is the rulers of Pakistan who are most difficult to discipline. They make laws and are the first to break them. Most of them consider themselves indispensable. They think and think very wrongly that Pakistan would collapse if they are not at the helm of affairs. They wish to live for ever.

It is undeniable that Pakistan has made more economic progress in the last eight years, 1999-2007, than it achieved in 52 years, 1947-1999. The cynics can attribute the eight years' exceptional progress to extraneous factors but the fact remains it happened during Musharraf's time. Musharraf, with the help of Shaukat Aziz, first as Finance Minister and later as Prime Minister, has done wonders by raising the GDP to over seven per cent consecutively for six years. The per capita income now touches 1,000 dollars and the living standards have risen appreciably. The social sectors have been given all the money they could spend. The foreign direct investment from negligible figures has risen to respectable figures.

It is unbelievable that President Musharraf, who has brought Pakistan to new economic heights by unleashing the hidden potency of Pakistanis, would put his economic bullet train in a reverse gear. It is unbelievable that the architect of the economic growth would himself contribute to the destabilisation of the politics and the economy of the country. The country's stability cannot be assured by the 'unity of command'; it is guaranteed by the 'predictability of command". Gen Yahya Khan had the unity of command and yet he lost the war and East Pakistan. The fact is that people do not like confusion and they hate unpredictability.

President Musharraf might have been personally offended on the restoration of Chief Justice Iftikhar Muhammad Chaudhry, but it has done wonders to the image of Pakistan internationally. Our foreign friends could not believe that Supreme Court could have the courage to go against the wishes of the President. Even the Indian commentators had to concede that their judiciary went underground to avoid the wrath of Indira Gandhi who had proclaimed emergency which only gave political and economic turmoil to India. In Pakistan, the restoration of Chief Justice gave stability to the country. Everybody felt relieved at the decision of the Supreme Court. People annoyed at bad governance saw a ray of hope vis-a-vis judicial activism.

President Musharraf was the first ruler, absolute or otherwise, who was not afraid of the independent press. Because of press freedom the newspaper industry has gown phenomenally in his tenure. He introduced private TV channels in Pakistan, a feat that no political ruler had dared to do. It is not a small achievement to have 50 channels in a short period of five years. It has opened up new job opportunities and it appears it may become the largest job provider.

President Musharraf would meet the media persons in small groups at regular intervals. He preferred direct rapport with them. He interacted with them in a relaxed manner. He valued the feedback he received from them. He now meets them rarely. His advisors do not want direct interaction between the President and the media because such meetings provide mountains of information to the President, which his advisors consider an encroachment on their authority.

It is painful to watch President Musharraf undoing his achievements in economic, social and political fields. He is doing it for the sake of his uniform that he wants to retain at any cost. His uniform has become a red rag to politicians and the people. Legally he may be right that he can fight his re-election in uniform. He can force his way into the presidency in uniform but it would completely alienate him from the people. What President Musharraf needs is political solution to the uniform problem, and not a legal one.



The writer is a freelance columnist. Email: [email]mirjrahman@yahoo.com[/email]

[U][url]http://www.thenews.com.pk/daily_detail.asp?id=67856[/url][/U]

Pakistan’s per capita availability of water fell by 80 per cent between 1951 and 2006, from 5,300 to 1,105 cubic metres per person per year. Now a report by the Asian Development Bank confirms that the situation is dire and worsening by the year. Anything under 1,700 cubic metres per person falls below the ‘water stress threshold’ and Pakistan is well short of this benchmark — we are hovering, in fact, just above the scarcity ceiling of 1,000 cubic metres. Water quality and waterborne diseases are also pressing concerns, as are salinity, waterlogging and contamination of underground reservoirs. In terms of efficient use, Pakistan is rated at ‘zero’ by the ADB. The bank stresses that this value must quickly rise to 40.

[B][U][CENTER][SIZE="5"][COLOR="Blue"][FONT="Comic Sans MS"]Election 2008
[COLOR="DarkGreen"] likely expectations from the elected govt[/COLOR]
[/FONT][/COLOR][/SIZE][/CENTER][/U][/B]


The general elections, scheduled to be held in the country on February 18, are now only 2-3 weeks away. It may, therefore, be interesting to analyse what would be the likely expectations of the people of this country from the newly elected government.

Since the previous government has left and the caretaker government has taken over about 2-3 months ago, a number of unfavourable developments have taken place. The PPP leader and the former prime minister Benazir Bhutto was assassinated when she came out of the Liaqat Bagh after finishing her election speech. Her assassination was followed by serious turmoil, loot and arson throughout the length and breadth of the country. Particularly in Sindh, private and public property including private cars, petrol pumps, railway engines and railway tracks, banks and jewellers shops etc were damaged, burned and looted. While a commission of enquiry has been constituted to look into the matter, the loss resulting from the aforesaid loot and arson is estimated to be over Rs.100 billion.

There is both political and economic instability in the country right now. Although the government has repeatedly stressed that the elections will be conducted on time. Besides, the wheat flour situation, which has already been causing concern for the last so many months, had worsened in recent weeks. The item has disappeared from some parts of the country and its price has increased two-folds. However, the situation has now slightly improved, after the federal food committee (FFC) (constituted by the government recently) took steps to check hoarding, profiteering and smuggling of wheat/ wheat flour across the border.

In addition to the above, power shortage resulting from water scarcity and damage caused to the infrastructure for power generation (during recent riots) caused great inconvenience to the people in all parts of the country during this winter season. The industrial and commercial sector has also suffered badly due to the power shortage and load-shedding during the last few weeks. A number of industrial units have reportedly been closed and their employees have become unemployed.

But, the prohibitive price of wheat flour has, in particular, hard-hit a large number of poor families who are now finding it extremely difficult to make both ends meet within their limited income. The caretaker government is presently considering issue of ration cards to such families to enable them to purchase items of daily use such as wheat flour, pulses, vegetable ghee and sugar etc. from the utility stores, at subsidized prices.

In the above-mentioned circumstances, and poor and low-income groups have suffered badly. People falling in these categories would naturally expect that the elected government should come to their rescue and help them in getting out of the situation, instead of celebrating their victory in the elections. To be able to do this, the party winning in the elections would have to manage with a small cabinet. It would have to shun ostentatious profile and adopt austerity measures. This is, also, the need of the hour at a time when the budget deficit is poised to shoot up to 6.8 percent of the GDP from the present level of 4.2 percent, due to the heavy burden of subsidy on oil, electricity, wheat flour and fertilizers etc.

People are now tired of frequent increases in the prices of items of daily use such as wheat flour, rice, pulses, sugar and vegetable ghee etc as a result of speculative hoarding, profiteering and smuggling etc. They would expect from the new government that it should be able to ensure availability of all items of daily use at reasonable prices, not only at the utility stores but also in the open market. This is a normal practice the world over.

At the same time, it is the duty of the government to protect the poorest of the poor in the country. The double-digit food inflation during the last 2 years had badly eroded the limited income of the poor.

In addition, people would expect from the new government that it should save them from the long and painful load-shedding during the coming summer season. It would of course not be possible for the government to increase the available electricity supply of electricity in the short run. However, an improvement could still be brought about even in the short run through conservation and better management. In the long run, construction of mega dams, power generation from coal and development of wind and solar energy could be of immense help in overcoming the current power shortage.

In all future energy plans, government should give preference to power generation from coal, water, wind and sun. All these sources are cheaper and locally available in abundance.

Even the industrial and commercial sectors would like the new government to address and resolve the problem relating to the growing power shortage, as quickly as possible. During the last few months, both the sectors have suffered losses due to frequent power outages. To solve some of the energy problems, business community was recently required to close their shops early in the evening to conserve energy for industrial and other important uses.

The new government would, no doubt, be facing a difficult task in putting the economy back on the right track. It will have to control the soaring fiscal deficit, bring down inflation – particularly food inflation from its higher level and contain the ballooning trade/current account deficit.





[url]http://jang.com.pk/thenews/feb2008-weekly/busrev-11-02-2008/p8.htm[/url]

[COLOR="Red"][SIZE="5"][FONT="Comic Sans MS"]Pakistan's foreign exchange reserves fall by $487 million [/FONT][/SIZE][/COLOR]

[CENTER][SIZE="4"][COLOR="Blue"][FONT="Comic Sans MS"]RECORDER REPORT [/FONT][/COLOR][/SIZE][/CENTER]


[FONT="Comic Sans MS"][SIZE="4"]KARACHI (May 16 2008): The country's liquid foreign exchange reserves have declined by 487 million dollars during the last week. The State Bank of Pakistan statistics show that total liquid forex reserves held by the country stood at 12.2071 billion dollars on May 10, 2008, as compared to 12.2558 billion dollars at the week ended on May 3, 2008.

Major decline was witnessed in the reserves held by the SBP, down by 788 million dollars to 9.8474 billion dollars during the last week as compared to 9.9262 billion dollars a week earlier. While the reserves held by banks increased by 301 million dollars to 2.3597 billion dollars from 2.3296 billion dollars[/SIZE][/FONT].


[CENTER][B][SIZE="5"]Copyright Business Recorder, 2008[/SIZE][/B][/CENTER]

5 July, 2008
 

[CENTER][U][SIZE="4"]Oil prices drop below $145 a barrel[/SIZE][/U][/CENTER]

LONDON: Oil dropped below $145 a barrel on Friday, but was still within sight of record highs reached in the previous session when traders bought into the market ahead of a holiday weekend in the United States.

US crude oil was down $1.40 at $143.89 a barrel, below an all-time high of $145.85 hit on Thursday. The contract has risen more than 50 percent this year.

London Brent was down $1.19 at $144.89. Prices fell more than a dollar after Iran said it would make a response later on Friday to proposals from six world powers to try to resolve a long-running dispute over its nuclear development programme.

Investors have rushed into crude oil ahead of the US independence day holiday on July 4, because they are wary of any escalation in tensions between Iran and Israel that have contributed to oil’s rise to a record of $145.85 this week.

Oil has risen about 50 percent this year, driven partly by the tensions over Iran’s nuclear programme, plus expectations that global oil supplies will not be able to cope in the long term with strong demand growth from newly industrialising China and India.

The price spike has caused fuel protests worldwide and has begun to dampen demand in consuming nations, including the United States, the world’s biggest energy consumer. The next milestone is $150 a barrel, which some analysts had predicted the market could reach by July 4.

The weak US dollar has also played a part in boosting oil, which is priced in the US currency. The dollar drew some support on Friday after European Central Bank President Jean-Claude Trichet appeared to play down chances of further interest rate rises.

[CENTER][U][SIZE="4"]Dollar weakens versus Pakistani rupee[/SIZE][/U][/CENTER]

KARACHI: Dollar weakened against the national currency, as its demand plummeted in the inter-bank on Friday. The greenback shed by 19 paisas in the inter-bank during closing hours trading at Rs 69.59 for buying and Rs 69.64 for selling compared to 69.78 in the previous session.

An analyst in his comments said dollar failed to maintain its strength and its demand has fallen in the inter-bank. Pound streling also weakened against the national currency as it closed at Rs 137.96 at buying and Rs 138.14 at selling compared to 138.52 in the previous session making the national currency weaker by Rs 0.56 paisas. Euro also weakened against rupee as it closed at Rs. 109.24 at buying and Rs 109.44 at selling compared to Rs. 110.78 in the previous session thus the national currency shed Rs 1.54.

Open market: The American dollar gained strength against the national currency in open market on Friday, as it closed at Rs. 69.60 at buying and Rs. 69.90 at selling compared to Rs. 69.50 in the previous session gaining 10 paisas. Pound Sterling weakened against the national currency in the open market as it closed at Rs 136.50 at buying and Rs 136.90 at selling shedding 30 paisas. Like pound sterling, euro also weakened against the national currency. It closed at Rs 108.20 at buying and Rs 108.60 at selling compared to Rs 109.10 in the previous session losing paisas 0.90.


[CENTER][U][SIZE="4"]‘Weak dollar is global concern’[/SIZE][/U][/CENTER]

BRUSSELS: The dollar’s fall is a source of global concern and the European Union wants a better balance between the US unit and other major currencies, European Commission President Jose Manuel Barroso said on Friday.

Speaking to a group of journalists before departing for the annual Group of Eight industrial nations’ summit in Japan next week, Barroso endorsed the European Central Bank’s decision to raise its key interest rate despite warnings from some EU governments, notably France.

“I believe it is important we show at European level that we are committed to fighting inflation,” he said. “Inflation is a real threat,” he said, adding it would have been very difficult to understand any other decision by the ECB, which raised its key rate by 25 basis points to 4.25 percent on Thursday.

In an indirect rebuke to French President Nicolas Sarkozy, who had warned publicly that a rate hike would harm a slowing euro zone economy, Barroso said: “When it comes to inflation, I have more confidence in the positions of the central banks than of politicians.”

The head of the European Union executive said he did not expect the G8 leaders to take a stand on currencies but added: “This is a matter of global concern, the falling dollar.

“We would like to see a more balanced relationship between the dollar and other major currencies, including the euro.”

Climate change and soaring fuel and food prices are likely to be the main themes of the G8 summit at a luxury hotel in Hokkaido, northern Japan.

Barroso also said he hoped U.S. President George W. Bush would show more ambition than in the past about curbing emissions of greenhouse gases blamed for global warming.

[CENTER][U][SIZE="4"]
Gold prices edge lower as dollar holds gains[/SIZE][/U][/CENTER]

LONDON: Gold inched lower in Europe on Friday as the dollar held onto the last session’s gains against the euro and as oil prices eased. Concerns over rising inflation are firmly underpinning the metal, however. Trading is set to be light on Friday with New York closed for the Independence Day holiday, potentially leading to increased volatility in the market. Gold eased to $931.00/932.00 an ounce from $932.70/934.70 late in New York on Thursday. Nonetheless traders expect to see the metal well supported above $930 an ounce, as inflation fears driven by high energy prices boost the precious metal’s appeal as a hedge. Gold dipped one percent in New York on Thursday as the dollar rallied against the euro, benefitting from a less hawkish than expected outlook on interest rates from the European Central Bank and firmer-than-forecast US payroll data. Among other precious metals, spot platinum fell to $2,003.00/2,023.00 an ounce from $2,017.50/2,037.50 late in New York. Spot palladium slipped to $452.50/460.50 an ounce from $460.50/468.50 an ounce, while silver eased to $18.04/18.10 an ounce from $18.21/18.31.

[B]Copper slips, lead falls to 17-mth low:[/B] Copper prices slipped on Friday as worries about supply disruptions in Peru receded and as the market fretted about a slowing of demand in China, the world’s largest consumer. Lead traded down at $1,565 per tonne in official rings on the London Metal Exchange from $1,610 at the close on Thursday. Earlier the battery-making material lost 4.9 percent to $1,531 — the lowest since February 8 2007. Copper for three-month delivery traded lower at $8,500 in open outcry trade, compared with $8,655 at the close on Thursday. Lead extended the previous day’s losses, when it dropped 6 percent, as investors worried about oversupply in the market. Lead stocks in LME warehouses rose by 175 tonnes to 100,675, more than double the level in January and the highest in almost two years. Zinc was untraded in the rings, but was bid at $1,761 a tonne compared with $1,783 on Thursday’s close. Earlier, it traded at $1,750, its lowest level since December 2005. Nickel slipped to $20,650 a tonne against $20,850, hovering above a two-year low of $20,625 reached on Thursday. Aluminium traded at $3,154.5 a tonne from $3,184. On Thursday it reached $3,229 — the highest level since March 7. Tin was bid lower $22,450 a tonne from $22,850.


[CENTER][U][SIZE="4"]Record-breaking oil prices on G8 agenda[/SIZE][/U][/CENTER]

How to get high oil prices down will top the agenda as leaders from the Group of Eight rich countries meet for a summit in Toyako, on Japan’s northern island of Hokkaido, from July 7-9. Here are some facts about the issue:

[B]Prices[/B]

* Global oil prices doubled in the past year and have risen by 50 percent since the start of 2008, triggering fears over inflation and slower economic growth.

* The record run set a new high over $145 a barrel on July 3, well beyond the previous inflation-adjusted peak of $101.70 in April 1980, a year after the Iranian revolution.

[B]Reasons[/B]

* Rising demand and growing investor interest spurred by worries about the global economy and the weaker dollar have been identified as factors.

* Daily demand of roughly 86 million barrels is almost the same as supply. Growing demand from emerging economies such as China and India is stretching supplies.

* Sanctions, then war, have disrupted Iraq’s output for years. Sanctions have also limited exploration in Iran and violence has interrupted flows in Nigeria. Meanwhile high prices have fuelled a trend for resource nationalism.

* Even with plentiful crude there may not be enough refined diesel and gasoline, due to a lack of refining capacity.

[B]Impacts[/B]

* European truckers and fishermen have led street protests from London to Barcelona. Several Asian nations have scrapped controls and hiked prices, angering consumers.

* Commercial airlines in the United States and Australia have cut routes and staff. US automakers have reported slowing sales.

* Above $4 a gallon gasoline has become a major campaign theme for Democrat presidential hopeful Barack Obama and his Republican rival John McCain for the US Nov election.

* Lost consumer spending power is hurting retailers, as people cut back on non-essentials. Company profits are being eaten up by the huge rise in energy costs.

[B]Responses[/B]

* World leaders and policy-makers are under pressure, but effectively powerless to control the price of oil.

* In June G8 energy ministers pledged domestic cuts through energy efficiency and the development of green alternatives.

* Led by Italy, the G8 wants new curbs on speculators to subdue prices, a move the US Congress also discussed and the International Monetary Fund may report on later in the year.

* Saudi Arabia, the world’s biggest exporter, raised output to near 9.5 million bpd in June, up from around 9.1 million bpd in May, and has promised 9.7 million bpd in July.

* The Organization of Petroleum Exporting Countries (OPEC) has not officially increased output since a meeting last September and has no plans to meet formally until Sept 9.

* China, India and other developing Asian nations have raised domestic fuel prices to curb rising subsidy costs, potentially helping slow future demand growth by passing on some of the surge in global prices.

[B]Forecasts[/B]

* Global demand for crude is forecast to rise from the first quarter’s 85.98 million barrels per day (bpd) to 87.69 million bpd in Q4, the IEA said in a June report.

* The IEA’s mid-long range forecast is for tight world supplies to 2013, with capacity at 95.33 million bpd by 2012.

* Reuters’ latest oil poll found analysts expect more price rises for the foreseeable future. Previous polls said US crude would stop rising in 2008 and fall in 2009/2010.


[CENTER][U][SIZE="4"]G-8 leaders face worst economic outlook in decade[/SIZE][/U][/CENTER]

SAPPORO: Between surging oil prices, food inflation and a credit crunch that's depressed global growth, leaders from the Group of Eight economic powers face the gravest combination of economic woes in at least a decade when they gather on 7 July.

The outlook has darkened dramatically since last year's summit in Germany, when the leaders declared the global economy was in "good condition" and oil cost $70 a barrel, which seemed high at the time.

Since then, the US subprime mortgage crisis has erupted, roiling markets and battering financial firms. Oil has doubled to above $140 and food prices have jumped, hurting the poor in particular and raising the threat of political instability.

"Things have changed for the worse across the board," said Robert Hormats, vice chairman at Goldman Sachs (International) Corp. in New York.

Hormats argues that the economic problems now are more serious and widespread than during the Asian financial crisis of 1997-98, where the pain was largely limited to emerging markets.

"Now you have a financial disorder where the epicenter is the US," he said. And fuel and food inflation "are serious matters that affect large numbers of people."

Host Japan had put global warming at the top of the summit's agenda, but the dilemma of how to respond to accelerating inflation and slowing global economic growth could grab the spotlight.

Prime Minister Yasuo Fukuda has said he hopes the July 7-9 meeting at a hot springs resort in Hokkaido, Japan's northern island, will "show some direction" in tackling oil and food prices but stressed it was only "one step" in a longer process.

On oil, analysts are skeptical that the G-8 leaders, representing the US, Japan, Britain, France, Germany, Russia, Italy and Canada, will come up with much beyond urging major petroleum producers to boost output, reiterating the message of their finance ministers, who met last month in Osaka.

Foreshadowing possible disagreement among the leaders, the finance ministers were divided on where to assign blame for the run-up in oil prices. Germany, France and Italy held speculators largely accountable, while the US and Britain said the focus needed to be on boosting production capacity that has barely kept up with growing global demand.

Soaring crude prices have already forced India, Malaysia, and Indonesia to cut subsidies and raise state-set prices on gasoline and other fuels. Last month, China hiked fuel prices as much as 18%.

At the same time, prices of corn, wheat, rice and soybeans and other farm goods have surged due to changing diets, urbanization, expanding populations, extreme weather, growth in biofuel production and speculation.

Spiraling fuel and food costs could drive millions into poverty, the Asian Development Bank has warned. In India, inflation has jumped to a 13-year high of 11.63%.

On the food front, the G-8 leaders may announce an aid package or pledging agricultural investment in poorer countries, experts say.

The credit crisis and global market turmoil are sure to be discussed, but with central bankers absent the leaders will most likely avoid saying anything specific about interest rates and currencies. The European Central Bank raised its benchmark interest rate a quarter point Thursday, suggesting it saw inflation as a greater threat than slower growth. Overall, the summit's main goal will be demonstrating confidence that they can "work through the oil crisis without causing the global economy to melt down," said Tom Cooley, dean of New York University's Stern School of Business.

"The key thing is not what they do at these meetings but what they do at home," he said. Oil and energy have remained recurring themes at the annual summits, said Hormats, who participated in several of the first meetings, which started in 1975. That initial gathering came after the 1973-74 oil embargo, when fuel prices surged after Middle East oil producers cut off the US and other countries supporting Israel.

"We now have another oil crisis," Hormats said. The summits were originally meant to focus on economic issues, but the agenda has expanded to include terrorism, Africa's development and the environment.

The group's membership also has grown from six to eight, adding Russia in 1997. But many argue that it should be expanded to include China, the world's fourth-largest economy, and other emerging powerhouses like India and Brazil, especially to tackle global issues like energy and climate change.




[url]http://dailytimes.com.pk/default.asp?date=7/5/2008[/url]

[B][CENTER][SIZE="4"]Agri credit target set at Rs250bn [/SIZE][/CENTER][/B]


[B]Sunday, September 07, 2008[/B]

KARACHI: Dr Shamshad Akhtar, Governor State Bank of Pakistan (SBP) on Saturday said that the central bank had set an indicative credit disbursement target of Rs250 billion for the agriculture sector for the current fiscal year (FY09), which can be further enhanced after having a detailed analysis of the rising input costs of the sector.

Chairing a meeting of the Agricultural Credit Advisory Committee (ACAC) held at the State Bank of Pakistan, Dr Akhtar commended the performance of banks that played a significant role in surpassing the target set for the last fiscal year.

Dr Akhtar informed the meeting that in 2007-08 banks had surpassed the agriculture credit target of Rs200 billion and disbursed Rs212 billion to the farming community, which is Rs43 billion or 25 per cent higher than last year’s disbursement of Rs169 billion.

She said that keeping in view the growing requirements of the sector, the State Bank has proposed an indicative target of Rs250 billion for 2008-09, which is Rs50 billion or 25 per cent higher than last year’s target and Rs38 billion or 15 per cent higher than the actual disbursements of FY08.

Dr Akhtar appreciated the fact that sector-wise agriculture credit disbursements during the last fiscal year showed diversification of the credit to non-farm sector as its share in the total credit disbursement increased to 25 per cent in FY08 from 17 per cent in FY07. She pointed out that recoveries of agriculture loans have shown significant improvement during FY08 and banks recovered 92 per cent of their recoverable amounts as against 83 per cent recovered during FY07.

While responding to questions posed by representatives of three less developed provinces on lower disbursement of agriculture loans to their respective provinces, the SBP Governor said that the banks are making efforts which have resulted in an increase in the disbursements during the last couple of years. Delegates pointed out that there are issues of credit absorption in these provinces because of low productivity, water salinity, lack of good farming practices by the farmers and other issues that need to be addressed by various provincial agriculture and extension services departments to create enabling environment for banks to increase their outreach.

Dr Akhtar urged the representatives of the three provincial governments to take the necessary steps to address these issues and improve the coordination between respective departments on fast-track basis to increase the flow of agriculture credit to the less developed areas of the country.

SBP governor also informed the meeting about the recently launched Crop Loan Insurance Scheme developed by SBP Task Force that would be implemented from coming Rabi crop. To facilitate the small farmers, the government has agreed to share the premium cost of subsistence farmers, she asked banks to adequately publicize the scheme for the benefit of the farmers. It is hoped that banks will also adjust their agriculture loan pricing following the introduction of Crop Loan Insurance Scheme, as it will mitigate their risk of losses due to natural calamity, she added.

Dr Akhtar briefed the committee about State Bank’s initiative of introducing guidelines on Islamic financing for agriculture. She urged all stakeholders to effectively publicize the scheme for creating awareness amongst the farming community.

The representatives of the farming community, while appreciating the efforts of State Bank and commercial banks in increasing the flow of credit to the farming community, highlighted the issues pertaining to low quality seeds, acute shortage of fertilisers, water scarcity and lack of marketing channels. They suggested to the committee to take up these issues with concerned Federal and provincial government departments so that the farming community can utilise the banks’ credit efficiently.

The Executive Director, State Bank of Pakistan, Jameel Ahmed informed the meeting that as per approved plan the banks will open six hundred branches during 2008, 20 per cent of which will be in the rural areas. Dr Shamshad Akhtar said that SBP will encourage the banks to open as many number of branches as they like in rural un-served areas in addition to approved plan.

The banks briefed the committee on their respective initiatives which inter alia include increase in number of agriculture lending branches, increase in agriculture credit officers, introduction of innovative lending products for farm and non-farm activities and number of awareness programmes conducted throughout the country.

While concluding the meeting, Dr Akhtar informed the committee about the introduction of a scheme under the DFID funded Financial Inclusion Programme, whereby the banks can provide wholesale credit to microfinance banks for onward disbursement to micro borrowers of rural areas against the credit enhancement guarantee scheme.

[B]
[CENTER][SIZE="4"]ZTBL disburses Rs67bn against Rs60bn target [/SIZE][/CENTER]


Sunday, September 07, 2008[/B]

LAHORE: Zarai Taraqiati Bank Limited on the directive of the Prime Minister disbursed a record amount of Rs67 billion in production loans to farmers across the country, against a target of Rs60 billion.

Executive Vice President (Credit Division) ZTBL, Muhammad Imtiaz Malik, told APP on Saturday that these loans were granted to farmers on first-come-first-served basis, under the one window operation during the last fiscal year ended June 30, through a network of 342 branches spread across the country.

He said foolproof arrangements were made for transparent disbursal of the loans to farmers at their doorsteps, while various teams from the bank paid surprise visits to branches to monitor the staff’s performance in this regard.

Responding to a question about refusal of issuance of loans to farmers at some branches on the pretext of non-availability of funds, Malik said that funds were made available to all branches on the basis of the number of local population.

When it was brought to his notice that Zafar Iqbal, a Branch Manager ZTBL, Tandlianwala, Faisalabad had refused a loan to Pir Zafar Hussain Shah of Pindi Sheikh Musa on different pretext, Malik said that he had directed the Zone Chief Faisalabad, Mubarak Ali Chaudhary to ensure disbursement of the loan to the complainant by tomorrow, otherwise strict action will be taken against the manager.

He said where ever any genuine complaint is received, prompt action is ensured for quick, on-the-spot address of the grievances.


Source : The News

[B][CENTER][SIZE="4"]
Economy under severe stress[/SIZE][/CENTER][/B]

[B]By Khaleeq Kiani
Monday, September 08, 2008
[/B]

Pakistan’s economy is fast approaching an insolvency-like situation. Liquidity is drying up. The cost to protect $2.7 billion sovereign bonds in the international capital market from preventing default, is increasing.

The external debt and liabilities have increased in rupee value by more than Rs705 billon in less than six months just because of over 25 per cent or Rs15 per dollar decline in currency value. The country’s overall external debt stock has increased by almost $7 billion to $47 billion since June 2007.

At the same time, the stock market has fallen to a 28-month low by registering over 42 per cent decline since April 2008. In the process, the stock market capitalisation has almost halved to $39 billion from a peak in April because investors generally avoid markets where there is political instability.

The government plans to introduce two weekly holidays (Saturday-Sunday) soon after presidential elections and close down petrol pumps for the third day (perhaps on Friday) to reduce consumption of petroleum products. The federal cabinet has already approved the plan and announcement would be made sometime this week. These measures are estimated to save about $3 billion per annum in oil consumption.

In another step, the government has already imposed higher regulatory duties on import of non-essential items while letters of credit (LCs) for imports are opened on 100 per cent cash margin to discourage misuse of foreign exchange. These two measures are anticipated to save about $1 billion per year. But the most worrying thing for the finance managers is the interest repayments on the back of dried up pipeline of financial inflows.

The country’s total debt stock now hovers around Rs7 trillion, up by about Rs1.4 trillion from Rs5.6 trillion in March 2008.This includes about Rs3.4 trillion domestic loan and Rs3.6 trillion in foreign loan and liabilities. For many years in decades, Pakistan’s external debt in rupee value has surpassed the domestic debt.

The cost to protect sovereign bonds from default that stood at 788.8 basis points on August 22 has increased to 975 basis points, overtaking Argentina’s number one position of being the riskiest investment paper. Foreign-exchange reserves have declined from their peak at $16.5 billion in October to just $8.89 billion, less than three months of imports, while trade and current account deficits are widening..

This is happening at a time, when foreign investors in the capital market are loosing confidence and flight of capital by Pakistanis mostly to the Middle East is gaining momentum. Despite remittances and exports on a mild growth path, the inflows are not catching up with the rising foreign currency requirements on the back of limited financial flows from multilaterals and bilateral sources. On top of that, the environment does not seem favourable enough to float major sovereign bonds or sell government entities because of political instability and overall security situation.

Meanwhile, the last year’s consolidated federal accounts showed that the budget deficit had increased to a record Rs777.2 billion or 7.4 per cent of GDP during 2007-08 that was met through the highest ever bank borrowing of Rs625 billion and over Rs75 billion cut in development expenditure. The most depressing feature was a massive reduction in revenue receipts that declined to 14.3 per cent of GDP compared with 14.9 per cent in 2006-07 despite higher revenues in absolute terms. In contrast, the total expenditure in 2007-08 increased substantially to 21.7 per cent compared with 19.2 per cent a year before.

The government is taking up with International Monetary Fund (IMF) at the top level to secure a letter of comfort that should help Pakistan persuade the World Bank and the Asian Development Bank to provide at least $1 billion in quick disbursement loans to overcome some of the immediate liquidity problems.

The senior level separate visits by the two bank officials last week have asked Pakistan to introduce tough decisions for macroeconomic stabilisation by allowing full pass-through in utility costs, removal of subsidies in petroleum products, reduced domestic borrowing and flexible exchange rate, so direly needed to reign in whopping fiscal deficit.

In this background, the IMF was expected to send its mission to Islamabad next week to take stock of economic situation on ground before issuing the required letter of comfort. Interestingly, both the ministry of finance and IMF’s office in Islamabad were unaware of the scheduled visit. Knowledgeable quarters suggest the government was trying to convince the Fund through some powerful capitals to help secure financing from the WB and ADB without going through procedural requirements given its severe financial problems as a goodwill gesture to support democratic forces.

Simultaneously, the PPP-government sent a delegation last week to Saudi Arabia with a wish-list of about $17 billion multi-year bail-out package for oil imports and balance of payment support. Led by foreign affairs minister Shah Mahmood Qureshi and comprising secretaries of finance and petroleum, the delegation met the Saudi leadership and sought oil supplies on deferred payments and other facilitations for budgetary support to boost foreign exchange reserves.

The delegation wanted to have a soft term credit facility of about $2.5 billion from Saudi Arabia for essential commodities like fertiliser, another $7.3 billion oil imports on deferred payments or reduced rates and rescheduling or write off of about $5.8 billion amount it was required to pay to the brotherly state on account of oil it had imported on deferred payments during 1999-2004.

Likewise, Islamabad also wanted to have an arrangement with Kuwait on special terms for diesel imports of over $4 billion over a period of two years. Pakistan imports about one million tons of diesel from Kuwait for Pakistan State Oil under a long-term agreement. Relevant government agencies believed the United States’ reduced crude imports from Arab countries offered good chances for Saudi support to divert its surplus production.

The members of the delegation were hopeful of a positive response expected to come soon after the presidential elections on September 6. Although the arrangements for imports of crude from Saudi Arabia are yet to be worked out, any relief from the brotherly nation are seen as the best solution to economic problems. This could provide reasonable breathing space to the government till such time it comes out of the political crisis surrounding presidential elections and concentrate on economic revival.

Sooner the country returns to political stability, overcomes judicial crisis and puts in place an economic revival plan, better it will be for the restoration of investor confidence needed to attract direct investment and revive capital market. That requires seriousness of the political leadership in economic revival, poverty reduction and macroeconomic stability.

[B][CENTER][SIZE="3"]
Development goals: bridging the gaps[/SIZE][/CENTER][/B]

[B]By Afshan Subohi
Monday, September 08, 2008
[/B]

Total earnings of Rs7500, a little under $100 a month, from two jobs was not enough to make a living.

Mohammad Jaffar a young migrant working 14 hours a day in Karachi as a loader during the day with a contractor and a waiter at a small restaurant in the evening, was forced by demands of survival to vacate Rs3000( about $40 a month) rented house and shift to a hutment with his family.

Jaffar arrived in Karachi with his wife four years back. Despite being hardworking today he is deep into debt struggling to sustain his family of four children. One of the four, Azam is ill and dying for health care which is expensive and beyond means of his family.

But Jaffar still prefers to stay on in Karachi over going back to his home village in southern Punjab because he is still better off in the city. However, if this is better what the worse would be like?

For this family and their likes life is nothing but a painful journey into disappointments. Indeed, there is little to suggest that those in power really care.

The fate of poor in resource rich country is as dismal as it can get. Excluded from the gains of high growth during 2004-07, they are now being advised by the wise men of the government to endure more than their fair share of pain as the economy is under a difficult patch. For both internal and external reasons, Pakistan is currently grappling with high inflation and slower growth.

Today of 1000, some 79 infants die at birth, 99 more die before their fifth birthday. According to latest figures compiled by international economic monitoring agencies, Pakistan has the highest proportion of under nourished population in Asia Pacific region. The government might feel uncomfortable with such observations but would find it hard to challenge them because it is still busy collecting and processing data on social indicators for 2006.

Sadly this is where the country has reached riding the Asian tide-- what the ex-prime minister Shaukat Aziz used to call ‘stellar growth’ ----when the sale of motorcycles multiplied from 90 thousand to 900 thousand.

Some press reports suggest that the elected President will lead Pakistan’s delegation to the UN General Assembly in New York later this month. A few high profile meetings are reported on the sidelines of the meeting. But nothing has so far been published about one of the main themes of the UN Sept 25 meeting that is to review the progress on Millennium Development Goals. One wonders, with so little to show in absence of the current background material, how productive the participation of the political leadership would be in a meeting of 188 nations that made a solemn pledge to the eight goals in 2000.

At the half way point to the target year of 2015, the world prepares to meet to take stock of the progress made towards these goals. The leaders in words of UN are ‘to review progress, identify gaps and commit to concrete efforts, resources and mechanisms to bridge the gaps’.

Pakistan’s participation is expected to be as embarrassing as its progress towards 38 targets that it set out for itself to achieve eight goals. These MDGs are: eradicate extreme poverty and hunger, achieve universal primary education, promote gender equality and empower women, reduce child mortality, improve maternal health, combat HIV/AIDS, malaria, and other diseases, ensure environment sustainability, develop a global partnership for development.

Pakistan committed to half the poverty rate to bring it down to 13 per cent by 2015.

The elected leadership is too preoccupied by other issues to spare a thought for MDGs or targets. The government functionaries have failed to deliver. No one expects any wonders from them but unfortunately, they have also not been able to bring out 2006 MDGs progress report in September 2008.

“The report of the year 2006 should be ready over the next few months” Dr Arshad Amjad, Chief Economist Planning Commission told Dawn from Islamabad.

Salman Farooqui, Deputy Chairman, Planning Commission, when contacted was unable to comment off hand on the issue. He, however, directed Dr Mohammad Aslam Khan, specialist on fiscal and monetary affairs, Planning Commission to respond to Dawn’s queries. The gentleman told Dawn that Pakistan is on track on many goals but was not able to justify the delay of the publication of the progress report that last appeared in March 2007 reviewing the performance for 2005.

Insiders told Dawn that the delay was because of the government’s interference in functioning of the cell responsible for processing and analysing data. “We are not allowed to work with numbers independently. All relevant numbers are audited by the government so that no number that the government perceives to be harmful to its political image is made public”.

“The government is very sensitive with poverty figures as they carry political weight. The last government forced us to suppress provincial poverty numbers as they reflected increasing intra provincial disparities”, a senior economist privy to the monitoring process said.

Most worrying is the low level of public awareness on the eight goals or the 38 specific targets. There is absolutely no pressure on the government from local stakeholders to reshape its spending pattern or re-arrange its order of priorities to achieve targets leading to sustainable development.

Most leaders and people, who should be spearheading the process in achieving those goals, when contacted, were little or not informed at all on the subject. Many admitted that they were hearing the word MDGs for the first time. This unaware mass includes people from all strata of society including drivers, clerks, plumbers, teachers, salesmen, doctors, lawyers, traders, housewives, etc.

Except in the Punjab, the situation in rest of the three provinces is bleak. In NWFP, some spade work started in 2005 but the tide of extremism and related law and order challenges did not allow the provincial government to move beyond planning stage. The Sindh government was found to be too fragmented to focus on anything worthwhile. Balochistan is too volatile politically to plan or execute a programme for MDGs.

Even the private sector that is supposed to be the key driver of the economy has totally been kept out of the picture in formulation of targets or their implementation. Tanvir Sheikh, President FPCCI admitted his ignorance about the goals this week over telephone from Multan.

It appears that so far it has all been a closed door ministry level activity. Yes, the reference is made to the goals in official documents such as Medium Term Development Framework (MTDF), the State Bank annual reports and the Economic Survey. The two progress reports were prepared primarily for the consumption of World Bank, IMF, UNDP, etc.

[B][U][CENTER][SIZE="4"]Good practices for doing business: Pakistan ahead of India and Bangladesh [/SIZE][/CENTER][/U][/B]

[B]ASMA RAZAQ [/B]

[B]ISLAMABAD (September 11 2008)[/B]

Pakistan ranks 77 in good practices applied for doing business as compared to Bangladesh and India that rank 110 and 122 respectively, a World Bank report revealed. According to the report, there are 10 indicators for measuring the good practices applied for doing business.

These include starting the business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contractors and closing a business.

The World Bank issued a report on 'Doing Business 2009'on Wednesday that focuses on easing the regulatory burden of doing business through reforms in most of the countries of the world.

The report shows that the introduction of reforms in business regulations makes it easier for a country to obtain credit by strengthening the legal rights of creditors and enhancing the availability of credit information. The main purpose of the report is to encourage the countries to bring about changes to improve their competitiveness globally.

The report shows that there are eleven procedures required to start a business in Pakistan in contrast with India where the number is 13, whereas it requires just seven procedures in Bangladesh to start a business. Similarly, it takes 24 days in Pakistan for starting any business while in Bangladesh 73 and in India it is 30.

According to report it requires twelve per cent of per capita income to start any business in Pakistan, while in India the trend goes up to 70 per cent and in Bangladesh it's 25 per cent. Pakistan stands 43rd on the table regarding the rigidity of employment while India is 30th and Bangladesh 35th, the report stated.

The report revealed that six procedures are required to register property both in Pakistan and India while in Bangladesh the number goes up to eight. The report indicates that the cost of doing business can be reduced to a great extent by easing regulatory burden through local reforms and getting inspiration from other economies.

According to the report, New Zealand can be considered as benchmark regarding the credit information, while Pakistan and India rank four in contrast to Bangladesh two. Pakistan ranks sixth in the table regarding the strength of investor protection, extent of disclosure and the extent of direct liability, the report reads.

The report shows that in Pakistan 47 payments are required for an entrepreneur to pay tax while the number goes up to 60 in India while the number in Bangladesh is 21. According to the report Pakistan requires $611 per container to export any commodity while the cost goes up to $944 per container in India whereas in Bangladesh the cost is $970. Pakistan requires $680 per container to import, while India requires $960 and Bangladesh $1375.

[B]
Copyright Business Recorder, 2008[/B]

[U]
[CENTER][SIZE="4"][B]
Activity at Karachi and Qasim ports [/B][/SIZE][/CENTER][/U]


[B]KARACHI (September 11 2008):[/B]

The Karachi Port handled 122,558 tonnes of cargo including 80,464 tonnes of import, 42,094 tonnes of export cargo and 3,679 loaded and empty containers (TEUs) during last 24 hours ending at 0700 hours on Wednesday.

The freights comprised of 96,458 tonnes of dry cargo including 58,273 tonnes of general cargo; 2,618 tonnes of fertiliser; 7,768 tonnes of wheat; 17,100 tonnes of coal; 10,699 tonnes of cement and 26,100 tonnes of oil/liquid cargo. Six ships namely Sari, Sinar Bintan, Bengal Orchid, Lalazar, Ocean Coral and Far Singapore sailed out to sea during the reported period.

Nine vessels viz Cape Negro, Sea Veteran, Lake Maja, Lily Noble, Far Singapore, Reovoung Prince, Hansa Liberty, Apl Cairo and Fusion-1 are currently at the berths. Three ships namely Cape Negro, Apl Cairo and Lily Noble expected to sail on Wednesday while another three vessels viz Hansa Liberty, Ocala and Red Sea Spirit are expected to sail on Thursday.

Five ships namely New Selukaze, Global Progress, Apl Chicago, Sea Bridge and Ramish due to arrive on Wednesday while another eight ships namely Maersk Rouen, Chemstar Brave, Soon Fu, Ym Initiative, Ibn Sina, Blida, Jin Cheng and Arcadia are due to arrive on Thursday.

[B][CENTER]
PORT QASIM[/CENTER][/B]

A total cargo volume of 81,072 tonnes including 61,131 tonnes of import 19,941 tonnes of export cargo and 1,702 containers (TEUs) was handled during last 24 hours on Wednesday. The cargoes comprised of 36,175 tonnes diesel oil; 2,539 tonnes LPG; 10,350 tonnes of palm oil; 1,331 tonnes of wheat; 4,745 tonnes of iron ore; 2,085 tonnes of cement; 2,781 tonnes rape seeds and 21,066 tonnes of containerised cargo.

Four vessels viz MV Shinyo Integrity, CV Maersk Damietta, MT St. Kitts and MT Al-Soor-II sailed out to sea during last 24 hours. A total of ten ships namely Acx Dahlia, Saudi Tabuk, Clipper Trinidad, Oak Galaxy, Karolina, Multi Trader, Nova Noor, Energy Falcon, Captain Markos and Nordiana-G carrying containers, crude oil, palm oil, iron ore and cement respectively are currently at the outer anchorage.

Eight vessels viz CV Maersk Damietta, MV Mustafa Bay, MV Melpomeni, MV Med Salvador, MT St. Kitts, MT St. Rilen, MT Al-Soor-II and MV Hellenic Horizon are currently occupying berths to load/offload containers, cement, wheat, rape seeds, chemicals, palm oil, diesel oil and iron Ore respectively during the report period. Two container ships namely Saudi Tabuk and ACX Dahlia are expected to take berths at Containers Terminal on Wednesday.

Five vessels viz MT Prem Pride, MT Vema Ocean, MT Eastern Tera, MV Xu Chang Hai and CV CMA CGM Kingston carrying crude oil, furnace oil, chemicals, rape seeds and containers due to arrive on Wednesday while another vessel viz MV Arcadia with rape seeds is due to arrive on Thursday. Four ships namely Force Ranger, Akmi, Toto and Pos Dignity carrying wheat and iron ore are also due to arrive.

[B]
Copyright Business Recorder, 2008[/B]

[U][B][CENTER][SIZE="4"]Senate committee strongly advocates cut in oil prices [/SIZE][/CENTER][/U]

Sunday, September 14, 2008[/B]

ISLAMABAD: The Senate Standing Committee on Cabinet Secretariat and Special Initiatives (Cabinet Division) has strongly recommended to the government to undertake downward revision of oil prices in view of the recent decrease of oil in the international market.

The meeting chaired by Senator Abdul Ghaffar Qureshi here on Saturday also asked the government to direct the gas companies to cut their line losses and improve efficiency. The meeting instructed the Oil and Gas Regulatory Authority (OGRA) to perform its regulatory duties diligently and to keep an eye on CNG prices and to initiate punitive actions against those stations, which are indulging in over-charging from the public and other malpractice.

The meeting was convened to apprise the parliamentarians of the role and functions of the Oil and Gas Regulatory Authority (OGRA) and to review the recent increase in oil and gas prices in the country.

The chairman of the committee underscored the need to formulate a long-term oil and gas policy in view of the fact that present reserves are going to deplete within 20 years. He observed that “we must have a clear vision and roadmap of what we are going to do in the future to meet our energy requirements.”

The meeting urged the government to step up exploratory activities in Balochistan and elsewhere in the country to bridge the supply and demand gap. The members of the committee observed that generally privatisation and deregulation have led to the increase in prices and the basic purpose behind creation of authorities like NEPRA, OGRA, etc, was to protect the interest of the consumers.

If these authorities, they say, fail to perform their regulatory duties, it would be a major set back and blow to the general public. Therefore, in order to ensure healthy competition and with a view to protect the interests of the consumers, the regulatory authorities must perform diligently and efficiently the duties assigned to them.

The committee asked OGRA to monitor the working of various companies and to intervene immediately whenever it feels that the interests of the consumers are threatened. The meeting also instructed the authority to devise a mechanism for avoiding illegal and inappropriate use of LPG in taxis and auto-rickshaws.

Earlier, the acting chairman, OGRA informed the meeting that the authority was established in 2000 under the Natural Gas Regulatory Authority (NRGA) Ordinance to regulate natural gas pipelines, transmissions, distributions and sales thereof. He said that the basic objective of the creation of this authority was to increase private investment and ownership in the midstream and downstream petroleum industry, protect public interest, while respecting individual rights and to provide effective and efficient regulation.


[U][B][CENTER][SIZE="4"]Remittances rise 23pc to $1.22bn [/SIZE][/CENTER][/U]


Sunday, September 14, 2008[/B]

KARACHI: Remittances sent home by overseas Pakistanis continued to rise as $1,219.51 million was received in the first two months (July-August) of the current fiscal year 2008-09, showing an increase of $234.31 million or 23.78 per cent over the same period of the last fiscal year.

According to the State Bank of Pakistan (SBP), the amount of $1,219.51 million includes $0.06 million received through encashment and profit earned on Foreign Exchange Bearer Certificates (FEBCs) and Foreign Currency Bearer Certificates (FCBCs).

The monthly average remittances for the period of July-August, 2008 comes out to $609.76 million as compared to $492.60 million during the same corresponding period of the last fiscal year, registering an increase of 23.78 per cent.

The inflow of remittances in the July-August, 2008 period from USA, Saudi Arabia, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UAE, UK and EU countries amounted to $319.84 million, $264.64 million, $206.70 million, $201.45 million, $74.82 million and $32.70 million, respectively as compared to $265.33 million, $202.40 million, $142.88 million, $156.88 million, $82.81 million and $28.88 million, respectively in the July-August, 2007 period.

“Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during the first two months of the current fiscal year 2008-09 amounted to $119.30 million as against $105.60 million in the same period last year,” SBP said.

During the previous month (August 2008), Pakistani workers remitted an amount of $592.30 million, up $102.79 million or 21 per cent when compared with an amount of $489.51 million brought into the country in August 2007.

The inflow of remittances into Pakistan from almost all countries of the world increased last month as compared to August, 2007. According to the break up, remittances from USA, Saudi Arabia, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UAE, UK and EU countries amounted to $151.45 million, $131.38 million, $101.39 million, $101.35 million, $32.78 million and $15.63 million, respectively as compared to the corresponding receipts from the respective countries during August 2007, ie $137.34 million, $95.85 million, $72.58 million, $79.53 million, $43.31 million and $14.07 million.

Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during August, 2008 amounted to $58.31 million as compared to $46.70 million during August, 2007.


[U][B]
[CENTER][SIZE="4"]E-banking grew 32pc in 2007-08 [/SIZE][/CENTER][/U]

Sunday, September 14, 2008[/B]


KARACHI: Electronic banking is getting popular in the country as the number and value of e-banking transactions showed a significant growth in fiscal year 2007-08.

According to a report titled ‘Retail Payment Systems of Pakistan (Paper-based and e-banking)’ prepared by the State Bank of Pakistan, a total of 124.6 million e-banking transactions worth Rs13.9 trillion were recorded during the last fiscal year, showing a growth of 25.4 per cent in number and 32.3 per cent in value when compared with 2006-07.

During FY08, the volume and value of transactions through e-banking channels (Point-of-Sale (POS), Internet, call centre/IVR and mobile) reached 20 million and Rs120.1 billion, depicting an increase of 15.6 per cent in volume and 31.9 per cent in value as compared to a rise of 46 per cent and 63.8 per cent respectively in the previous fiscal year.

According to the report, the quantity of active (in-use) debit/credit cards during FY08 reached 6.7 million, a growth of 15.8 per cent compared to an increase of 53.7 per cent in the previous fiscal year.

Separately, the volume of credit cards decreased by 8.9 per cent as compared to a 74 per cent increase in the previous year, reaching 1.5 million. In contrast, debit cards registered a growth of 24.7 per cent as compared to a rise of 45.3 per cent last year and stood at five million.

The SBP report pointed out that total number of Automated Teller Machines (ATMs) during FY08 rose 21 per cent to 3,121 as compared to a 17pc increase in the previous year. The number of Real Time Online Branches (RTOB) during the year reached 5,282, recording a growth of 26.4pc as compared to a 5pc decline last year. The number of Point of Sales (POS) grew 21pc to 55,853 as against increase of 4pc in the previous fiscal year.

According to the report, during FY08 the volume and value of ATM transactions stood at 67.9 million and Rs453 billion, recording an increase of 31.8pc and 43.2pc respectively as compared to a rise of 47.1pc and 49.9pc last fiscal.

Moreover, the volume and value of RTOB transactions in FY08 rose to 36.9 million and Rs13.3 trillion respectively, an increase of 19.9pc in number and 32pc in value as compared to a rise of 46.2pc and 49pc in the previous fiscal.

The report said the volume and value of paper-based transactions during the period under review stood at 334.4 million and Rs137.4 trillion, registering an increase of 3.1pc and 20.9pc respectively as compared to increase of 48.1pc and 29.4pc last year.

According to the report, total retail payments during FY08 reached 459 million in number and Rs151.3 trillion in value, an increase of 8.4pc and 21.8pc as compared to a rise of 17.2pc and 35pc in FY07.

Retail payments are mainly made by consumers and between commercial parties to purchase goods and services. At the retail level, most transactions are done through paper-based instruments.

However, the electronics mode is also getting popular with the passage of time.

Retail payments comprise various paper-based and electronic instruments ranging from conventional cheques to modern smart cards.


Source :The News

[CENTER][SIZE="4"][B]Government spending Rs 30 billion for improving infrastructure [/B][/SIZE][/CENTER]

[B]LAHORE
(September 18 2008)[/B]

Senior Minister, Raja Riaz Ahmad has said that the government is spending an amount of Rs 30 billion, during the current fiscal year, for improving socio-industrial infrastructure in Punjab. The purpose is to provide good living conditions to the ordinary people.

He was talking to various delegations of people and the political workers who called on him at his residence here on Wednesday. Raja Riaz informed that developmental resources are being utilised for improving necessary infrastructure in the province in a most transparent manner. Raja Riaz told that government is spending Rs 17.50 billion on roads development, Rs 15.23 billion for construction of public buildings and another some of Rs 6.76 billion on urban development. These expenditures are 38 percent greater than previous ADP's allocations.

The government is also spending Rs 1 billion on improving environment, he told. The government is also giving importance to improvement of less developed areas and some of Rs 7.50 billion has been earmarked for the composite development of southern Punjab, he informed.


[CENTER][B]Copyright Business Recorder, 2008[/B][/CENTER]


[B][CENTER][SIZE="4"]Business team to prepare points to discuss with President [/SIZE][/CENTER][/B]


[B]KARACHI
(September 18 2008)[/B]

The business community has decided to establish a committee and prepare comprehensive suggestions on economic issues for discussing with President Asif Ali Zardari. The decision was made in a meeting held at the residence of Aquil Karim Dhady on Tuesday night in which prominent persons from FPCCI, KCCI, Kati, Site, KSE and other trade bodies participated.

The business community was of the opinion that the country is facing very serious economic crisis which needs government's immediate attention and taking up bold decision to revive economic and industrial activities. The announcement of names of the members of the committee expected to be made in the next few days. They demanded of the government to immediately reduce mark-up rate by 2 percent to revive industrial activity in the country.

They emphasised the need of unity in the business community of the country to start joint efforts for reviving industrial, trade and economic activities in the country. They were of the opinion that until and unless business community is united and started joint efforts problems would not be resolved. They criticised the State Bank's tight monitory policy.

Tariq Sayeed said that until and unless business community was united in the country their problems would not be resolved. He thanked Aquil Karim Dhady for inviting and uniting various fraction of business community at one platform after 40 years on economic issues.

He said that the country was passing through worst economic crises and in these conditions the business community must give well thought out workable suggestions to the government for its consideration and implementation.

He said that the cost of doing business had increased manifold and at this cost of production Pakistan would never succeed in marketing its products in world market. He said that due to the ever-increasing cost of doing business no investor is prepare to invest and establish new industrial units. Shopkeepers and traders are also facing multiple problems in sale of goods.

S M Munir expressed concern over continuous sliding down exports and said that due to high cost of production no one in world market is ready to purchase goods from Pakistan. He said that policy of increased mark-up has failed to reduce inflation. With the increase of mark-up inflation and prices of goods also increased, he added. He said that the President and Prime Minister must hold meeting with business community to discuss issues and make decision Zubair Motiwala said that the country does not need tight monitory police in the present circumstances.

What it needed is restoring business community's confidence. He said that Afghan transit trade has crippled Pakistan's economy. Involving IMF and World Bank in Pakistan's economic issues is not in the interest of the country, he claimed Mirza Ikhtiar Baig said that over 137 industries have already become defaulter and in these conditions monitory policy must be soft.

Zakaria Usman said that the country is facing serious law and order problems, and added that these problems need to be taken up on priority basis Aptma chairman Iqbal Ibrahim criticised government policies and said that dollar value increase was due to policy failure. The meeting was attended by Siraj Kassim Teli, Iftikhar Ahmed Shaikh, Haroon Agar, Zahid Hussain, Arshad Vohra, Ibrahim Panwala, Arif Habib and others.


[B][CENTER]Copyright Business Recorder, 2008[/CENTER][/B]


[CENTER][B][SIZE="4"]Current account deficit widens to $2.5 billion in July-August [/SIZE][/B][/CENTER]
[B]
Rizwan Bhatti

KARACHI
(September 18 2008)[/B]

The country's current account deficit widened by 64 percent to 2.5 billion dollars during July-August of current fiscal year mainly due to slowdown in exports and rising trade deficit, besides slow foreign inflows.

Official statistics on Wednesday revealed that during July-August of FY09 the country faced a current account deficit of 2.572 billion dollars against 1.571 billion dollars during the corresponding period of last fiscal year, depicting an increase of some 1.001 billion dollars in first two months.

Economists expressed deep concern over the rising trend of current account deficit saying this would put more negative impact on the PKR and the country's economy, which is already facing a difficult situation for last one year. "With the current and continuously upward trend in the current account deficit, the government would also be compelled to get new foreign loans to meet the requirement of the increasing foreign payments," they said.

Increasing trade deficit followed by slow growth in exports and high imports coupled with rising oil and food import bill are the chief reasons for this raise in the C/A deficit, they observed. "Although, the government has taken some steps to curb the booming imports by imposing 100 percent cash margin and regulatory duty on the import of luxury items, however positive results are expected to be witnessed in next few months," they added.

The State Bank of Pakistan statistics indicate that principal factors responsible for the widening of current account deficit include a widening trade deficit, which surged by 67 percent. However, services deficit registered a negative growth of 2 percent in July-August of 2009.

The country's overall imports stood at 6.299 billion dollars and exports at 3.643 billion dollars registering a trade deficit of 2.657 billion dollars during first two months of current fiscal year. It earlier stood at 1.593 billion dollars during same period of FY08.

Services trade deficit stood at 1.068 billion dollars from 1.090 billion dollars, depicting a decline of 22 million dollars in first two months with 1.491 billion dollars import and 423 million dollars exports.

Similarly, income deficit also witnessed a slight increase of 44 million dollars to 683 million dollars from 638 million dollars. During the first two months, the country's overall income from abroad stood at 119 million dollars as compared to payments of 802 million dollars to overseas.

Overall deficit including trade, services and income stood at 4.408 billion dollars against the current account transfers of 1.854 billion dollars. Statistics show current account deficit without official transfers climbed to 2.633 billion dollars during the first two months of fiscal year 2009 as compared to some 1.575 billion dollars during FY08.


[B][CENTER]Copyright Business Recorder, 2008[/CENTER][/B]

[B][CENTER][SIZE="4"]Rs 100 million to be spent on basic facilities in rural Sindh [/SIZE][/CENTER][/B]
[B]
KARACHI
(September 21 2008)[/B]

Sindh Minister for Rural Development Zubair Ahmed Khan on Saturday said Rs 100 million would be spent on providing basic facilities in rural areas of Sindh. "It is the all out effort of the government to provide all basic facilities including clean drinking water, gas, sewerage system and electricity in rural areas so that their living standard is improved."

Talking to various delegations, the minister said that besides cities, supply of electricity to villages was the government responsibility. Zubair Ahmed said that soon after Eid, he would visit districts of Sanghar, Badin and Mirpurkhas to take stock of problems of their rural areas and provided with basic facilities by Rural Development Department. These areas would have model villages where all basic facilities besides school, hospital, Masjid, Community Centre etc would also be made available, he added.

[CENTER][B]Copyright Associated Press of Pakistan, 2008[/B]


[SIZE="4"][B]Business community hails Zardari's address [/B][/SIZE][/CENTER][B]
LAHORE
(September 21 2008)[/B]

Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Saturday greeted the President Asif Ali Zardari for addressing the joint sitting of the parliament and effectively safeguarding the national sovereignty and frontiers from external aggression besides giving top priority to agriculture and power sectors.

Talking to APP on telephone, the federation acting President Tufail M Zubair, Vice President, Saarc Chamber of Commerce and Industry, Iftikhar Ali Malik and Chairman Businessmen Panel and former federation chief, Tariq Sayeed hoped that government would continue to serve the people in same spirit and zeal throughout its term.

Tufail said that politically matured newly elected President Asif Ali Zardari has far-reaching approach towards the solution of all important issues and hoped that business community, the backbone of the national economy, especially, pak-exporters would also get due attention of the government to steer the country out of looming monetary crisis.

Iftikhar Ali Malik said that it was first time that entire business community including FPCCI and all its affiliated chambers and trade bodies have reposed full confidence in the leadership of Asif Ali Zardari. He said it is good omen that all national and international issues confronting the country will be discussed in the parliament.

He said that the Presidential address would help a lot to restore the confidence of foreign and local investors. He said rule of law, supremacy of constitution, promotion of democratic values and safeguarding the frontiers are the panacea of all solutions.

He hoped that Asif Ali Zardari would steer the country out of ever looming deep economic crisis under his dynamic leadership by taking PFCCI and private sector into confidence for evolving violable practicable monetary policies. Tariq Sayeed said that political stability, good governance and better law and order is pre requisite for strengthening of the national economy.

[CENTER][B]Copyright Associated Press of Pakistan, 2008[/B][/CENTER]

[B][CENTER][SIZE="4"]
Inflation, high prices cut down purchasing power of people[/SIZE][/CENTER][/B]
[B]

[B]TAHIR AMIN
ISLAMABAD [/B]
(September 21 2008)[/B]
Already under tremendous pressure of the high inflation, the low income group find it difficult to purchase clothes or other for their children as prices of garments and other accessories have shot up sharply with the nearing of Eid-ul-Fitr.

A survey conducted by Business Recorder revealed that as Eid comes close, prices of clothes, bangles and artificial jewelleries are soaring with each passing day in the capital. Consumers have been left at the mercy of shopkeepers, who have increased manifold, the prices of all Eid-related accessories.

The price of a single stitched suit for men has gone up to Rs 2500 to Rs 3000, as compared to Rs 1000 to Rs 1500 before Ramazan. Similarly the prices of unstitched clothes for men have gone up to Rs 1500 as compared to Rs 700 to 1000 before Ramazan.

Unstitched suit for female, which was available at Rs 1000 to 1500, is being sold at Rs 3500, which is quite shocking for any buyer. Similarly the prices of shoes have also gone up. A pair of shoes which was available at Rs 500 to 700 before Ramazan, is now being sold at Rs 1000 to 1200.

"Price of a dozen bangles ranges from Rs 100 to Rs 300, depending on their quality and style," a shopkeeper Ahmad Ali said. No haggling can be done with tailors, who are lurking these days in every nook and corner of the twin cities like elsewhere in the country to make most of the season.

In the holy month of Ramzan, tailors are busy like bees even in godly hours, making quick bucks with both hands in every small and large scale market and the people have no option but to yield to have their suits sewn for the Eid-ul-Fittar. These tailors have also raised their prices. In normal condition they stitch one suit at Rs 250 now stitching at Rs 300 to 500.

"We are having the real joy of Eid (Asal Eid tuo hamari ha) by making a lot of money", Tufail Khan, a tailor remarked when asked for comments on his business before Eid ul Fittar. In wake of the rocketing price hike, the poor and low-income group of our society are unable to buy cheerfulness and joy for their children in the shape of only normal clothes and shoes.

[CENTER][B]Copyright Associated Press of Pakistan, 2008[/B][/CENTER]

[B][CENTER][SIZE="4"]Pakistan to hold two investment conferences in China [/SIZE][/CENTER][/B]

[B]BEIJING
(September 23 2008)[/B]

In order to lure Chinese investors, Pakistan is scheduled to hold two investment conferences in the month of November this year. These conferences are part of Pakistan government's efforts to attract FDI from China in terms of latest policy initiative of Chinese government to invest abroad as per policy of diversification of investment and business, said Economic Minister at Pakistan Embassy, Sardar Aminullah Khan while talking to APP on Monday.

He said the first Pakistan-China Investment Conference will be organised by the Investment Division of Board of Investment on November 17. The second such conference will be held in Shanghai on November 19, he added. He pointed out that conferences are likely to be attended by businessmen of both the countries interested in making investment in different sectors of power generation, mining, manufacturing and infrastructure.

Aminullah further said Pakistan is one of the attractive places for Chinese investors in view of most cordial relations between the two countries, besides geographic proximity, resource endowment of Pakistan and complementary in large economic fields.


[B][CENTER]Copyright Associated Press of Pakistan, 2008[/CENTER][/B]


[B][CENTER][SIZE="4"]Pakistan and India agree to Kashmir border trade route [/SIZE][/CENTER][/B]

[B]NEW DELHI
(September 23 2008)[/B]

India and Pakistan agreed on arrangements to open a border route for bilateral trade in disputed Kashmir, a joint panel said on Monday. "We have finalised the arrangement, the trade list and the modalities," Aizaz Ahmed Choudhary, a senior foreign ministry official leading a Pakistan delegation, said in New Delhi. "We will go back to our respective governments, it is for them to decide," he said after talks with Indian officials.

THE JOINT PANEL SAID THEY WERE HAPPY TO OPEN THE SRINAGAR-MUZAFFARABAD HIGHWAY TO TRADE, BUT DID NOT SPELL OUT DETAILS:

A joint working group comprising senior government officials from both countries held talks on starting border trade in Kashmir following unrest in held Jammu and Kashmir state over a planned government land transfer to Hindu pilgrims.

Last month, Hindus in occupied Jammu region cut off supplies to the mountainous Kashmir area after the government backed out of its promise to transfer land to build shelters for Hindu pilgrims.

The dispute polarised held Kashmir, split between the Muslim-majority Kashmir valley and the Hindu-dominated region around Jammu city, severely curbing trade between the two areas. As a result, traders in Kashmir wanted to sell their goods in neighbouring Pakistan and asked the government to talk to its neighbour.

On Monday, the joint panel said they were happy to open the Srinagar-Muzaffarabad highway to trade, but did not spell out details. Officials said bilateral trade would help improve relations between the two countries.

[CENTER][B]
Copyright Reuters, 2008[/B][/CENTER]


[B][CENTER][SIZE="4"]QIE tightens security arrangements [/SIZE][/CENTER][/B]
[B]
LAHORE
(September 23 2008)[/B]
The Quaid-e-Azam Industrial Estate (QIE), in view of current law and order situation in the country, has further tightened security arrangements in and around the largest industrial estate of the province so that the businessmen could do their business with a peace of mind.

The decision to this regard was taken at an emergent meeting at Quaid-e-Azam Industrial Estate under the chair of QIE President Mian Nauman Kabir. He said that fool proof security arrangement were being made in the industrial estate and in this regard two security gates ie at Hamdard Chowk and Denim Chowk have been completed while six barriers were also established at all the important points that would help check the movement of suspicious vehicles.

The QIE President told the meeting that the Police and QIE internal security patrolling had been expedited besides equipping them with most modern equipment. He said that the Quaid-e-Azam Industrial Estate has its own central control system that is working very efficiently to avert any untoward incident in the industrial estate that houses more than four hundred industrial units with a manpower of more than 40 thousand workers.

Meanwhile, The President QIE Mian Nauman Kabir appealed to the people belonging to all segments of the society to come forward and play their role for the betterment of law and order situation.

[CENTER][B]Copyright Business Recorder, 2008[/B][/CENTER]

[CENTER][B][SIZE="4"]Rupee firms amid lack of payments[/SIZE][/B][/CENTER]

[B]Saturday, September 27, 2008[/B]

KARACHI: The rupee ended firmer on Friday as import payments tailed off but dealers said the currency was likely to weaken in coming days on poor economic fundamentals and more payments.

Dealers said the rupee closed at 78.05/15 to the dollar compared with Thursday’s close of 78.21.30.

“There were no major payments today (Friday),” said a currency dealer. “But next week we might see the currency weaken as all payments for the month will have to be made by September 30.”

Dealers said there were payments due before the end of the month and before a holiday for the end of the fasting month of Ramazan at the beginning of October.

The rupee traded at a record low of 78.55 to the dollar on Monday. It has lost 21.07 per cent against the dollar since the beginning of the year.

Moody’s Investor Services on Tuesday downgraded the outlook for Pakistani debt to negative, and highlighted the foreign exchange market’s doubts over when funds would arrive to bolster dangerously low currency reserves.

Pakistan is struggling with inflation at more than 25 per cent and a widening current account deficit. The current account deficit widened to $2.572 billion in July and August which is equivalent to about 1.6 per cent of gross domestic product and compares with a full-year target of 6 per cent of GDP.

Data released on Thursday showed total foreign currency reserves had fallen to $8.82 billion in the week ending on September 20, down $90 million from the previous week. Dealers said there was also pressure due to security concerns following Saturday’s suicide truck bomb attack at the Marriott Hotel in Islamabad that killed at least 54 people.

[B]
[CENTER][SIZE="4"][CENTER]Experts stress long-term policy to revive economy[/CENTER][/SIZE][/CENTER][/B]


[B]Saturday, September 27, 2008
By Mansoor Ahmad[/B]

LAHORE: Economic experts have urged the government to devise a long-term policy for achieving sustained economic growth instead of looking for a short-term economy bailout package from developed countries.

They say the leaders of ruling party while consuming all their energies for a temporary relief to stay afloat are delaying an economic package which is necessary for revival of the manufacturing sector.

The experts say the entrepreneurs have not let the government down by paying 20 per cent higher taxes than last year despite a decline in production. However, the government has failed to take any facilitating steps that could improve the sagging growth.

The News has learnt that many leading economists the government has engaged to evolve an economic stabilisation programme have expressed strong reservations about the credentials of some newly-appointed government functionaries. They have politely excused themselves from the economists’ panel formed by the government. It has also been found that some of those who are on board have strong differences with the way the economy should be handled.

Many economists are appalled by the way the government is handling the economy as federal Finance Minister Naveed Qamar has stayed back while President Zardari seeks an economic package from the US and the Friends of Pakistan.

Even with a large foreign exchange support from the donors, they say, the economy would continue to slide unless radical changes in economic policies are made. The rulers have not set their priorities for taking the economy out of the present mess.

Senior economist Naveed A Khan, commenting on the issue, says the government seems to have no clear plan about the economy except the hope that foreign friends of Pakistan would rescue the country as a reward for the ‘fight against terrorism’. He says the friends may provide a temporary one-time relief but the survival of the country is linked to sustained economic growth through a dedicated plan which is nowhere in sight.

Dubai-based chartered accountant Faisal Qamar says the government has not learnt any lesson from past experience. He says the country has been brought on the verge of economic collapse by a renowned former banker prime minister. Now the government is contemplating to appoint another banker as economic adviser with the rank of federal minister. “Pakistan is not a corporate entity or a financial institution.”

They say the country needs a dedicated economic expert and not a banker to steer it out of troubles. Transparency and good governance needed for fair and equitable growth is absent.

Pakistani-Canadian Certified Public Accountant Asif Ali Shahid says Pakistan should have taken steps to improve its economic credentials first before asking for foreign assistance. The foreigners, he says, would think twice before committing aid to a country where inflation is high, currency is weak, interest rates are high and exports cover less than 50 per cent of imports.

No serious effort has been made by the government to improve macroeconomic indicators, he says, adding any assistance will go down the drain if these indicators are not improved.

Source : The News

[B][CENTER][SIZE="4"]Government focusing on achieving export target of $22.1 billion [/SIZE][/CENTER][/B]

[B]ISLAMABAD
(September 29 2008)[/B]

The government is focusing on the diversified sectors to achieve the export target of US $22.1 billion set for the current financial year. Sources told agency that a series of steps have been taken to boost exports of pharmaceutical items, gems and stones, furniture and herbal medicines.

In view of the good prospects of pharmaceutical export, the government has decided to support setting up of new pharmaceutical plants by providing an incentive of 90 percent exemption in the first year on investment in plant, machinery and equipment.

Gold, silver, platinum, palladium, diamond and precious stones would be exempted from levy of customs duty and sales tax with a view of increasing their exports. Further, Ministry of Industries would set up a wood seasoning plant and Navtec will set up a couple of vocational training centres on modern lines to promote export potential of furniture.

Similarly, a Flora Common Facility Centre would be set up in collaboration with Punjab government near Lahore while an Irradiation Facility in Karachi to promote floricultural exports.

To promote export of herbal medicines, 50 percent cost of registration of herbal medicines abroad would be picked up by the government. There will be an especial focus on promotion of various activities related to the Prime Minister's programme of "one village one product" with a view of promoting export of handicrafts. The sources said the export policy announced by the present government for the current year 2008-09 is aimed at poverty alleviation, value addition, compliance with international standards, reduction in cost of doing business and diversification of products and market.


[B][CENTER]Copyright News Network International, 2008[/CENTER][/B]


[B][CENTER][SIZE="4"]New industrial units could fight unemployment [/SIZE][/CENTER][/B]


[B]LAHORE
(September 29 2008)[/B]

The Founders' Chairman, Dr Khalid Javed Chowdhry on Sunday has said that setting up new industrial units could only fight the dangerously increasing unemployment. He said the government is not solely responsible for resolving issues, the industrialists and investors too, should carry the task of overpowering the crisis that the country was passing through.

Dr Khalid who recently received Medipak Achievement award said that heavy responsibility lied on pharmaceutical companies as they have a direct link with human lives.

He stressed upon the government to pay attention to the issues faced by the public. Further, he stated that industrial representatives should be taken into confidence while evolving industrial policies.

He criticised few trade chambers that were taking illegal actions to protect their monopolies and asked them to concentrate on the issues and difficulties that the members were facing.


[B][CENTER]Copyright Business Recorder, 2008[/CENTER][/B]


[SIZE="4"][B][CENTER]Pakistani handicrafts have global demand [/CENTER][/B][/SIZE]


[B]LAHORE
(September 29 2008)[/B]

'Pakistani handicrafts are in great demand in foreign countries and we can earn a lot of foreign exchange by exporting them,' the Chairman, Chief Minister's Task Force for Industrial Development and SME's, Yawar Irfan Khan said.

He said this to a delegation of industrialists at his residence on Sunday. Stressing the need of arranging exhibitions of non-traditional items of Pakistani artisan abroad where they could display their items directly, he said, the artisan would be encouraged to promote the handicrafts and they would be given export training. Further, the Chairman emphasised on introducing modern marketing system for enhancing the export of non-traditional items as per global requirement.

[CENTER][B]Copyright Business Recorder, 2008[/B][/CENTER]


[B][CENTER][SIZE="4"]Pakistan keen to promote economic collaboration with China[/SIZE][/CENTER][/B]

[B]ISLAMABAD
(September 28 2008)[/B]
Foreign Minister, Makhdoom Shah Mahmood Qureshi has said that Pakistan is keen to promote economic collaboration with China and is aiming to raise the bilateral trade from $7 billion to $15 billion by 2011. He stated this during his meeting with the Chinese Foreign Minister Yang Jeichi on the sidelines of the 63rd UN General Assembly session, says a Foreign Office statement here on Saturday.

Qureshi said that he was looking forward to visit China with President Asif Ali Zardari in the middle of October. The President valued China's friendship, which was demonstrated by his decision to send his son for the opening ceremony of the Olympic Games, he said.

Chinese Foreign Minister Yang Jeichi said that China was proud to have assisted Pakistan and had done its best to advance co-operation. China would endeavour to continue this co-operation in the future as well. He said that China attached great importance to the PPP government's commitment to promote friendly relations with China.

The Chinese government, he underlined, was concerned about the security of its nationals in Pakistan. China appreciated the complexity of the matter and the efforts made by the Pakistan government for their safe release.

Foreign Minister Qureshi assured the Chinese Foreign Minister that the safety of Chinese nationals was important to Pakistan and it will do everything to ensure their protection. Meanwhile, Makhdoom Shah Mahmood Qureshi also called on Foreign Minister of Ireland, T D Martin on the sidelines of the 63rd session of the UN General Assembly in New York. The Foreign Minister appreciated the award conferred by Ireland on Shaheed Mohtarama Benazir Bhutto. She had visited Ireland in 1994 and wanted to cultivate close relations with it.

The Foreign Minister requested the Irish Foreign Minister to open its embassy in Pakistan, which would give further impetus to the bilateral relations. He also requested the Irish Foreign Minister to encourage investment by Irish companies in Pakistan.

He invited Ireland to participate in the Food Technology and Agricultural Show, Expo 2008 and the Ideas exhibition. He said that Irish companies were already present in Pakistan in several fields including the power sector and oil exploration. He said as part of its Asia strategy, Ireland wished to develop strong economic relations with Pakistan. He felt that Pakistanis were playing a prominent role in Ireland and welcomed their presence in the country.


[B][CENTER]Copyright Business Recorder, 2008[/CENTER][/B]

[B][CENTER][SIZE="4"]Asia to become economic powerhouse by next decade [/SIZE][/CENTER][/B]

[B]ISLAMABAD
(October 01 2008)[/B]

Pakistan Economy Watch has said that only regional cooperation can provide relief to 500 million poor living in South Asia. Political differences, if set aside, will spur new era of growth and Pakistan will reap dividends as Asia will be world's centre of economic activity by next decade.

Pakistan needs to avail this chance and initiate preparation as we have missed many opportunities in past, Dr Murtaza Mughal, President, Pakistan Economy Watch said. "No doubt that Pakistan will be world's leader in textiles and banking," he added. He said 500 million people are living below poverty line in South Asia and their plight will only end if region can grow at a rate of eight per cent, which is only possible in presence of enhanced regional trade.

He said that regional trade is five per cent of the total Saarc trade activity while trade among Association of Southeast Asian Nations is 30 per cent. Intra-European Union commerce has been estimated at around 55 per cent. He said that a common strategy is needed for the purpose and India should rethink about her aims of regional dominance and expansionism. Otherwise, Dr Murtaza Mughal said, everybody including New Delhi will be at the loosing end.

He said that New Delhi is mulling to ban FDI from Pakistan which will sent very negative signals. Pakistan and India have lead role in regional grouping and the two countries can promise a good future to masses if they show flexibility, which will immediately result in augmented bilateral trade to the tune of 10 billion USD.

He said that the region need to focus on FDI, tourism, deficits and technical expertise in which it is behind other regions. "Political differences, corruption, lack of proper infrastructure etc are also stumbling blocks," said Dr Murtaza Mughal. He said agriculture insurance is a very positive step that can change the fate of Pakistan if executed properly.


[B][CENTER]Copyright News Network International, 2008[/CENTER][/B]

[B][CENTER][SIZE="4"]Edible oil prices high despite 27pc fall in palm rates[/SIZE][/CENTER][/B]

[B]
Saturday, October 04, 2008
By Mansoor Ahmad[/B]

LAHORE: Palm oil prices have declined from $1,100 per tonne six months ago to $573, resulting in a fall of over Rs27 per kg after adjusting the dollar rate differential, though without a visible decline in retail rates.

The rates of palm oil, which is the main raw material of the edible oil industry of Pakistan, have registered a decline of around 27 per cent after the easing of crude oil prices in the global market. However, the rates of edible oil in the country are still in the range of Rs120 to Rs145 per kg, which was fixed by the manufacturers when global prices were at their peak.

The News has found that at peak with rates revolving around $1,100 per tonne, the import price of palm oil was Rs68,200 at the dollar rate of Rs62 six months ago.

After adding the fixed import duty of Rs9,800 on palm oil, the cost increased to Rs78,000 per tonne. Adding 15 per cent sales tax worth Rs11,700 and one per cent excise duty and withholding tax, each amounting to Rs2,000, the total landed cost of palm oil was Rs91,700 per tonne.

Manufacturers had increased the edible oil and Vanaspati ghee rates immediately after the increase in palm oil rates in the international market. The rates reached their peak starting from $460 per tonne in June 2006 to $1,100 in the early months of 2008.

Palm oil rates started declining sharply in the past two months without any relief to the consumers. At the current rate of $573 per tonne, the import price of palm oil used by the local industry comes to Rs44,694 at a high dollar rate of Rs78. After paying a fixed duty of Rs9,800 per tonne, the cost increases to Rs54,494. Sales tax has been increased by one per cent to 16 per cent which amounts to Rs8,719, taking the cost to Rs63,203. After adding excise duty and income tax at one per cent each, the total landed cost comes to Rs64,703, which is Rs27,000 per tonne less than the earlier cost.

The manufacturers, however, are not passing on the benefit to the consumers, though the decline in rates has also been gradual. In fact, palm oil deliveries for December and January shipments are even lower.

Economic experts point out that regulatory authorities, should take notice of the undue profiteering by the edible oil industry. They said that proper checks by various institutions could easily force the manufacturers to adhere to fair practices.

They noted that the income tax department for instance should inflate its income to the tune they overcharged. Manufacturers usually declare the same percentage of margin of profits that they have been declaring over the past years. They said they reduce margins in case of higher global oil rates but most of them do not review their profit margins when global edible oil rates go down and their profits soar.

Experts said that most of the manufacturers would try to fool the government and consumers by lamenting that the decline in global palm oil rates has been neutralised by the increase in the value of dollar vis-‡-vis the Pak rupee. They further noted that the calculations based on their own methods provided to the media would prove them wrong. They said the government should establish its writ to ensure the relief that the consumers deserve in the current inflationary environment.

[B][CENTER][SIZE="4"]
From sea to shore: A businessman’s struggle in Pakistan [/SIZE][/CENTER][/B]

[B]
Saturday, October 04, 2008
by Saad Hasan[/B]

KARACHI: After assuming charge of a navy merchant ship at a very young age, Haleem Siddiqui thought it was time for him to move on and sail into the world of commerce instead. Little did this seafarer know then that for doing so, he will have to brave through a tumultuous sea of Pakistani politics in the bargain.

Even now, as Chairman of the Pakistan International Container Terminal (PICT), the only such facility in the private sector which is owned by a Pakistani, he claims that all odds are against him.

However, there is good news in the near future. On October 5, 2008, when a ship carrying two sophisticated sea-to-shore quayside cranes for his terminal anchors at Karachi port, he will have a different reason to prove that Pakistanis can compete with any foreign terminal operator.

“You must come and see them. It will be something so different,” an enthusiastic Siddiqui, 67, said about the cranes, which help load and unload cargo from a ship. PICT already has four quayside cranes, two mobile harbor and 10 rubber tired gantry cranes.

For PICT the importance of new addition to terminal facilities is much more than just competing with other private operators. It is over and above the contractual obligations which Siddiqui had committed when he was finally allowed to set up the terminal after a battle of more than 20 years.

His lifelong struggle has its roots in advice given by his father almost 50 years ago. “I remember it very well. He told me whatever work you do, do it whole heartedly otherwise you will go nowhere. Age was an important factor and I had to firm up my mind then.”

Born to a doctor in 1941 in Lucknow, Siddiqui was fascinated by traveling to different places. After college, he migrated to Pakistan in 1958 when only 17. By the next year he was on the seas, living his dream onboard the ship “Pakistan Promoter”. “Back then there were no marine academies,” he recalled. “We used to go straight to the ship for training.”

For 12 more years, he remained affiliated with merchant navy, completed his masters and worked with different Pakistani and international shipping companies. By the time he decided to move on, in 1971, he was already commander of a ship. “There were not many qualified people in the marine services industry,” he said recalling how new shipping lines were fast coming up against lackluster growth in service providers on port.

A strong foresight backed by experience of service in merchant navy had made Siddiqui conscious of the changing trends in the shipping industry. He decided to venture into the stevedoring business despite having no experience in this particular field.

“Life is a gamble. One has to take risks,” he said about the decision to quit the job and invest whatever he had saved in the business. “I had my wife and a son and no liability as such. I must say my wife was supportive. I told her if something happened, I’ll just pick up my bag and go to sea again.”

Just like that, he bought a partnership into a struggling stevedoring company, Premier Mercantile Services and jumped into the world of cargo handling. “Stevedoring is loading and unloading cargos from a ship. It looks very simple but seriously it is not,” he said in a recent interview with The News. “While loading and unloading cargo, you are playing with the stability of a ship, you are also responsible to safely store cargo according to its nature and considering the voyage it is bound to make.”

Aware of the shift in mode of transportation, which started in 70s, from conventional shipping to containerization, Siddiqui knew it was imperative to equip his company with modern equipment.

“We kept on investing in the business and hardly took anything home. This is something which ship owners started to see as we improved and avoided even invisible damages to containers,” he said, adding big names like Cowasjees and Dinshaws slowly disappeared from the ports and shipping scene as they did not keep pace with changing trends.

In the ensuing years Premier Mercantile Services Limited had established its name as a leading company in the stevedoring business. In December 1981, he wrote to authorities that he wanted to establish a container terminal at Port Qasim, which was being constructed 50km from Karachi center.

“I still remember we wrote to Port Qasim suggesting that we were interested in developing a container terminal,” he said, lamenting “They laughed at me. They said it was not possible for container ships to come there.”

An opportunity to prove him right was to present itself soon. In early 80s dock labor at Karachi Port Trust (KPT) went on strike and Siddiqui pushed forward the idea of handling the ships at Port Qasim.

“Overnight we shifted all the equipment to Port Qasim and handled seven ships there. I was the first one to that,” he said, adding that made Port Qasim Authority (PQA) realise the importance of its location and finally in 1983 invitations were sought for construction of a container terminal there.

His company also participated but the contract was awarded to Dubai’s Al-Ghurair despite the fact that Premier Mercantile was handling bulk of the cargo at Pakistani port. Al-Ghurair which had no experience of handling container cargo did not invest anything till 1996.

Similarly in 1990 when KPT invited firms to develop the infrastructure, his company also participated. “Again we were rated the best technically and financially as we had the backing of IFC (International Financial Corporation).”

This project which would have made Karachi port the first in the world to move from public to private sector was made hostage by labor unions that were backed by the port’s administration, he claimed.

During that period, Siddiqui went to court and finally on September 15, 1993, Supreme Court ruled in his favor. “Admiral Tasneem, Chairman KPT, ringed me up the same day and said lets sign the agreement without any delay.”

However, just when he was near achieving his ambition, a decision to venture into politics turned everything against him. That same year he ran for a seat in parliament and was elected member of national assembly on a Pakistan Muslim League (PML) ticket, which as a party did not do well at the polls.

“Nawaz Sharif dragged me into politics,” he said recalling the time he got acquainted with the politician who was loved by industrialists for his business friendly policies. “The government formed by Pakistan Peoples Party created every hurdle in my way and the project was cancelled in 1995,” he said.

While he took the battle to the court again, foreign companies were preferred for setting up container terminals at KPT and Port Qasim. His fortune did not change even when PML was voted into government in 1997. When the PML government decided to set up a new terminal, Siddiqui’s company was disqualified on the pretext that he was in politics. And again he went to court. It was not until 2002, when then President Pervez Musharraf was in power that KPT had to negotiate with his company following orders of high court.

Finally the PICT was commissioned in 2004. The growth it has shown in last four years has been phenomenal. From around 90,000 twenty foot equivalent container units (TEUs) it handled in its first year, growth has jumped 420 per cent to more than 472,000 TEUs in fiscal year 2008.

Now as Haleem Siddiqui is increasing the number of quayside, rubber tired gantry and mobile harbor cranes in anticipation of increase in cargo handling, there is another challenge facing him.

“Ports are the barometer of an economy,” he said, adding that “We are the first industry to get hit when trade slows down and that has started happening.” These are mixed blessing for the maverick shipping man turned politician. Despite the obvious downturn, he says he is hopeful. From a man who has done so much, these are encouraging words indeed.


Source : The News

[B][CENTER][SIZE="3"]Pakistan and Iran to enhance economic cooperation [/SIZE][/CENTER][/B]
[B]
ISLAMABAD
(October 09 2008)[/B]

Pakistan and Iran agreed to enhance bilateral economic co-operation in various sectors including energy, railways, roads and trade besides realising the need for establishing Joint Shipping Company to boost maritime co-operation and mutual trade.

The issues related to enhancing trade were discussed during a meeting between Iranian Ambassador Mashallah Shakiri and Deputy Chairman Planning Commission, M. Salman Faruqui here. Speaking on the occasion, the Iranian Ambassador said that his country was ready to export electricity to Pakistan, adding that Iran was already working on Sahara hydel power project on the river Chenab and had raised its capacity from initially proposed 65 Mega Watts to 130 Mega Watts through IPP.

The Ambassador said that the present volume of trade between the two countries showed that the bilateral trade potential was untapped, adding that the volume of trade between Iran and other regional countries is significantly higher than that of Iran and Pakistan.

He pointed out that the main problem was lack of physical as well as institutional connectivity between the two countries and proposed to establish Pak-Iran Joint Shipping Company that would enhance connectivity leading to increase in bilateral trade.

He also showed his country's interest in enhancing the co-operation in banking sector by opening up branches of banks in each other's countries on reciprocal basis. Deputy Chairman Planning Commission, Faruqui told the ambassador that Pakistan was interested in importing electricity from Iran as Pakistan was currently facing power shortage.

He suggested bilateral negotiations to work out the modalities related to pricing and transmission and appreciated the proposal to establish a Joint Shipping Company to boost maritime co-operation and mutual trade. He promised to examine the proposal and said that Pakistan National Shipping Company would be asked to look into this matter.

Faruqui also underlined the importance of modern railroad between Quetta and Taftan. For this purpose, he said, funds could be raised together with Iran and by using the forum of Economic Co-operation Organisation or Islamic Bank. Both the sides agreed to increase co-operation in health services and pharmaceutical sector as well.

Faruqui informed the Ambassador that Planning Commission of Pakistan had good mutual relationships with its Indian and Chinese counterparts and it wanted the same level of institutional interaction with its Iranian counterpart.

The Ambassador appreciated this proposal and assured that Iran would welcome this institutional linkage that would further enhance business to business contacts for regional development. Secretary Planning Division, Suhail Safdar, Member Energy, Pervez Butt, and Member Infrastructure, Akram Malik were also present on the occasion.


[B]Copyright Associated Press of Pakistan, 2008[/B]


[B][CENTER][SIZE="4"]Gold rises another Rs900 [/SIZE][/CENTER][/B]

[B]Thursday, October 09, 2008[/B]

KARACHI: Gold spiraled by another Rs900 to reach Rs23,142 per 10 grams on Wednesday against Rs22,242 a day earlier as the rupee fell further against the dollar and international bullion rates rose.

The precious metal is at an almost three-month high and was valued at Rs27,000 per tola.

President All-Pakistan Supreme Council of Jewellers Association, Alhaj Haroon Rashid Chand said that the crisis in the global markets and the instability in the local economy were both taking their toll on the precious yellow metal which continued to hike in value.

Mohammad Kamran, a gold dealer in KDA said that several women had visited his shop demanding to sell their jewelry items. However, as gold continued to remain volatile, many gold dealers refused to purchase gold items as they wanted to wait and see where the precious metal would settle.

In the international bullion market, gold inclined by US$24 an ounce and stood at US$911 an ounce when it continued to gain on Wednesday as investors sought safer assets despite a coordinated rate cut by the world’s biggest central banks to calm battered international financial and equities markets.

[SIZE="4"][B][CENTER]IMF says Pakistan’s economic situation is fragile

[/CENTER][/B][/SIZE]
[B]Thursday, October 09, 2008
By Mehtab Haider[/B]

ISLAMABAD: Estimating Pakistan’s financing gap at $7 billion in the current fiscal year, the International Monetary Fund (IMF) has said the country’s macroeconomic situation is very fragile and further significant losses in reserves would make it vulnerable to a crisis.

IMF Macroeconomic Assessment Letter about financial health of the country’s economy given to the Asian Development Bank on September 28, which paved the way for the release of $500 million, states that IMF’s staff preliminary projection for 2008-09 based on a continuation of the prevailing monetary policy stance, expected external financing and revised oil prices, saw external current account deficit of $14 billion (7.7 per cent of GDP).

With capital inflows of about $7 billion, the IMF staff estimates external financing gap of $7 billion. “Given the difficulties involved in forecasting capital inflow in an unsettled macroeconomic environment, this financing gap is subject to a high degree of uncertainty,” the fund further states.

The fund staff believes that tax revenues should be increased by at least 3-4 per cent of GDP over the medium term (from 10pc of GDP in 2007-08) by broadening the base of the general sales tax to services, taxing commercial agriculture under the income tax, eliminating other tax exemptions and significantly strengthening tax enforcement. On prospects of real GDP growth for 2008-09, the IMF says that GDP growth is expected to slow further to about 4.5 to 5pc in the current fiscal year while average inflation is projected to increase to 16 to 17pc owing in part to the envisaged pass through higher international prices of energy and food.

The country has set inflation target at 12pc for 2008-09. Recently, the country’s authorities specified their policy plans for the current fiscal year and stressed their commitment to addressing macroeconomic imbalances and putting the economy back on a sustained path.

Moreover, following the recent increases in the discount rate and the adoption of policy of greater exchange rate flexibility, the authorities indicated that the SBP stood ready to take further actions in this direction, as needed. The authorities also committed to meeting the government’s domestic financing needs through market based instruments and ensuring that both borrowing from the SBP is zero on a net basis at the end of each quarter, the IMF noted.

The authorities have taken some measures to by adjusting fuel and electricity prices as well as slowing down the development spending, further measures are required to achieve the target of reducing the fiscal deficit to 4.7pc of the GDP.

On the expenditure side, the IMF says, the authorities need to move ahead with planned increase in electricity tariff and with larger than budgeted reduction in other outlays to offset the impact of potentially higher interest rates on the government’s debt servicing.

This will require removing other subsidies, containing other non-interest current expenditures and carefully prioritizing development spending, said the IMF.

The authorities should also ensure the implementation of targeted social protection mechanism to cushion the impact of lower subsidies on vulnerable groups.

Regarding revenue generation, the IMF says a stronger than envisaged effort is needed to broaden the tax base by eliminating some tax exemptions.

On the monetary side, the IMF mentioned the recent increases in interest rates have been insufficient to stem reserve losses and eliminate the central bank financing of the government.

If the SBP follows guidelines outlined by the IMF, rupee will further depreciate against dollar in coming days, said market analysts. The IMF says looking beyond 2008-09, a further fiscal effort, together with continuation of tight monetary policy and exchange rate flexibility, will be required to notch a sustainable current account position and bring down inflation.

In particular, strong tax and policy administration measures will be necessary to further reduce the fiscal deficit.

Source : The News

[B][CENTER][SIZE="4"]Minister urges closer economic ties with Iran [/SIZE][/CENTER][/B]


[B]LAHORE
(October 16 2008)[/B]

Senior Minister Punjab Raja Riaz Ahmad has said that Iran and Pakistan enjoy long standing brotherly relations, adding that these ties can grow stronger in the areas of trade and investment, agriculture, industry and energy resources.

He was talking to Saeed Kharazi, Consul General of Iran in Lahore, at his residence here on Wednesday. Punjab Minister for Sports and Culture Dr Tanveer-ul-Islam and a number of PPP MPAs were also present on the occasion, says a handout.

Raja Riaz observed that Pakistan and Iran have common interests in South Asia. The democratic Pakistan government is working to bring Pakistan out of the quagmire of terrorism and poverty by increasing economic opportunities for the people.

He regretted that no new dam was developed during the last decade, adding that the provincial irrigation department has identified 317 suitable points on barrages/canal falls where small hydel power stations can be set up to produce 600 megawatt electricity.

Commenting on the ongoing visit of President Zardari to China, the minister maintained that it will open up new avenues of bilateral co-operation and joint ventures between the two countries. Pakistan government wants friendly relations with its neighbours, he said, adding that investors should avail the lucrative new investment opportunities in Pakistan and enhance economic co-operation between Pakistan and Iran.

The Iranian Consul General Saeed Kharazi said that Iran can help Pakistan fulfil its energy needs as Iran is producing 35,000 megawatt electricity, and observed that its nuclear energy programme is for peaceful purposes. He said that the Iran, Pakistan and India joint gas pipeline project is of vital importance for Pakistan with its increasing energy needs.

The Consul General told that an exhibition of Iranian goods will soon be held in Lahore and informed that the Governor of Mashhad province of Iran will also visit Lahore to further cement bilateral ties. He said Iran wants to enhance co-operation in the fields of agriculture and industry as Punjab has vast potential of investment in these sectors.


[B][CENTER]Copyright Associated Press of Pakistan, 2008[/CENTER][/B]


[B][CENTER][SIZE="4"]Law and order, energy crisis: FPCCI announces shutter down in Punjab on October 25 [/SIZE][/CENTER][/B]


[B]LAHORE
(October 16 2008)[/B]

The Federation of Pakistan Chambers of Commerce and Industry Zonal Chairman and Vice President Azhar Saeed Butt on Wednesday announced complete shutter down strike in Punjab on October 25 against the worsening law and order situation, energy crisis and terrorism.

Azhar Saeed Butt who is also President of Qaumi Tajir Ittehad, said that the country is facing severe financial crisis due to bomb blasts and terrorist activities taking place all over the country. "Bomb blasts have become order of the day in the country, especially in the NWFP and Fata and Pakistan is facing worst financial crisis. Our economy is on the verge of collapse, he said while addressing 4th meeting of the zonal committee here.

Former FPCCI President Iftikhar Ali Malik, Khawaja Khawar Rashid, Nadeem Bhatti, Tahir Malik, Adil Mahmood, Aziz ur Rehman Chan and Usama Ahsan, besides large number of traders and industrialists from across the country were also present on the occasion.

Butt said that the depreciation of the rupee is badly hitting our economy and the survival of our economy depends only on peace and better economic policies. The government has failed to stabilise the rupee against the US dollar that has resulted in the collapse of our economy, he added. He said the government has also failed to resolve the problems being faced by masses.

He said that Director General Trade Organisation and the Ministry of Commerce had not issued licences to many trade bodies of more than 70 years old. He said although trade organisation ordinance and rules have lost its value due to non-presentation in the parliament but even then the DGTO is putting hurdles in the way of issuing licences to genuine trade bodies.

He said that bureaucracy is dealing with the business community roughly as the staff of the collectorate of customs had beaten President of Clearing Agents Association, Khawaja Shahid, over a petty issue of customs duty at Lahore dry port which has created a sense of insecurity among traders. He demanded of the government to suspend the Collector Customs, Lahore and order impartial inquiry to provide justice to the victim.


[B]Copyright Business Recorder, 2008[/B]

GEO Business
 

Updated at: 0119 PST, Wednesday, October 15, 2008
[IMG]http://www.geo.tv/10-15-2008/eng/10-15-2008_26915_l.gif[/IMG] KARACHI: The Board of Directors of Karachi Stock Exchange (KSE) in its meeting on Tuesday decided to remove the “floor mechanism” from October 27.

A KSE statement issued here on Tuesday said the normal trading parameters of five per cent upper and lower circuit breakers will be imposed from that day onwards.

It said over the past few weeks, the KSE has been in active consultations with the Ministry of Finance, SECP, State Bank of Pakistan and other stake-holders to develop a set of measures for achieving market ability.

In this context three critical areas were identified namely Liquidity, Risk Management and Restoring Investor Confidence.

The statement further pointed out that the Board of Directors of the KSE met on Tuesday to review the progress made on these efforts and noted that some recommendations have been implemented (for example announcement of Buy back of shares, Reduction in CRR) while other recommendations (for example Equity Fund, Put Options, change in CFS margining regime, etc.) are being processed.

The respective authorities like Ministry of Finance/ SECP will announce the final details of all the stabilisation measures.

The statement said the Board has decided to remove the “floor mechanism” from the KSE from October 27, 2008.

Normal trading parameters of 5% upper and lower circuit breakers will be imposed from that day onwards.

The statement further said the Board of Directors has been informed that the Ministry of Finance and SECP will implement the full set of stabilisation measures prior to October 27, 2008.

[B][RIGHT][CENTER][SIZE="4"]Pakistan and India open Kashmir trade today [/SIZE][/CENTER][/RIGHT][/B]

[B]OCCUPIED SRINAGAR
(October 21 2008)[/B]

India and Pakistan are due to start trading on Tuesday between their divided zones of Kashmir, raising hopes that the revolt-hit region could see a major drop in tensions. It will be the first time that trucks will roll between the two zones created in the bloody aftermath of independence of the subcontinent from Britain six decades ago, when the region was split into India and Pakistan.

"The step will go a long way to cooling tempers in Indian held Kashmir," said Tahir Mohiudin, the editor of Urdu-weekly Chattan in held Kashmir, where a insurgency has raged since 1989.

The countries, who have fought two of their three wars over Kashmir, are to resume trade across the heavily militarised Line of Control, a key demand of Kashmiris who this summer led some of the largest-ever anti-India demonstrations in the region. The weeks of protests began over a row to provide land to a Hindu pilgrim trust, sparking Muslim anger.

A government decision to reverse that order because of the anger then prompted a punishing blockade by Hindu hard-liners of the only road linking the held Kashmir valley with the rest of India. "Opening the trade route to Pakistan will have a psychological impact. It will create a confidence in people that even if the Indian route is shut, they have an alternate route (for trade)," Mohiudin said.

Anything calming tensions would be good news for Indian authorities, who announced plans on the weekend to press ahead with polls in Indian Kashmir later this year despite the recent upheavals in the state.

The business community is delighted at the move. "I'm hopeful I'll be doing business soon with people in Azad Kashmir and Pakistan," said Abdul Hameed, who owns an electrical generator company. Business leaders from the divided zones have already met in held Kashmir to discuss the opening of trade. Hameed said the blockade convinced them of the need for an alternative trade route.

The first link to be opened Tuesday will be between occupied Srinagar and Muzaffarabad. The route to Muzaffarabad was the scene of a massive demonstration in early August during the blockade when 100,000 protesters marched toward the Line of Control, intending to cross over.

A prominent Kashmiri leader and four other protesters were shot dead when Indian forces halted the marchers. The second trade route, expected to be opened at a later date, connects Poonch in southern Indian held Kashmir with Rawalkot village in Azad Kashmir. A bus service was launched between the two sides in 2005, the first fruit of a peace process begun the previous year by the two countries.

The opening of the trade between two parts of the disputed region will go a long way toward building confidence among the Kashmiri traders, who suffered losses due to the recent economic blockade. "The blockade created fear. If it happened once, it can happen again," said Amin-bin Khaliq, adding he suffered big financial losses over the summer as he couldn't export dry fruit in time.

"India is a good market but if we're able to sell our goods in Azad Kashmir it will be a huge bonus," said Khaliq. Kashmiris have welcomed the opening of the trade route. "The time has come when we should move forward towards economic as well as political freedom," said Mirwaiz Umar Farooq, adding the route could turn out to be a "first step towards a political resolution" of the Kashmir issue.

[CENTER]
[B]Copyright Agence France-Presse, 2008[/B][/CENTER]
[B]
[CENTER][SIZE="4"]
Boucher warns no blank cheque for Pakistan [/SIZE][/CENTER]
FIDA HUSSAIN

ISLAMABAD
(October 21 2008)[/B]
US Assistant Secretary of State for South Asia Richard Boucher has said that Pakistan would not get aid in cash from Friends of Pakistan (FoP) and forum's meeting would deliberate on alternate modes of assistance. He stated this while addressing a news conference following the meeting with Prime Minister Yousuf Raza Gilani and foreign minister Shah Mehmood Qureshi here on Monday.

The US diplomat made this assertion at a time when representatives from FoP countries held a preliminary meeting with President Asif Ali Zardari, which was also attended by Prime Minister Gilani. Boucher said there is no lack of trust between the leadership of the two countries as US has extended its full support for the democratic process. Referring to his meetings with President Asif Ali Zardari and Prime Minister Yousuf Raza Gilani, he said these were very useful and fruitful interactions.

According to IMF estimates, Pakistan, which has been playing frontline state in the US-led war on terror for the last seven years, needs $10 billion within two years to avert a default. "There will be systematic support to Pakistan from FOP group for various projects," Boucher said without giving any further explanation.

The US diplomat also made it clear that Washington is not supportive of the idea of holding talks with militants who lay down their arms. This disclosure also came at a time when the joint sitting of the parliament is discussing the war on terror policy.

"There should be no negotiations with any involved in terrorist activities even in his past," he added. Boucher asked all the political forces and the people to unite against terrorists. "This is essential for having political will and determination to wipe out terrorism," he added.

He said his visit to Pakistan is aimed at follow up of the meetings between President Bush and President Asif Ali Zardari held in New York to assess how US can be more helpful to Pakistan to face the present security and economic challenges.

Boucher expressed concern on the attack by the terrorists on the peace loving people, government officials and security institutions killing innocent people. Boucher referred to the previous deal with the Taliban and added that it had proved a "total failure".

Appreciating the courage and determination of the people of Tribal areas, he said they have shown great courage but they are being killed by the terrorists. He especially mentioned the killing of over 150 elders the last couple of months in various suicide attacks in the tribal areas.

"Terrorism is a threat to Pakistan, Afghanistan and to whole world," said Boucher while appreciating the bold steps taken by Pakistan recently against the terrorists in the Tribal Areas.

Replying to a question, he said, the training of Frontier Constabulary in NWFP is on-going co-operation between the two countries. He said America has already announced $110 million for the help of those who have been displaced due to the disturbed situation in the tribal areas.

Regarding energy crisis being faced by Pakistan, Richard Boucher said US has been extending help to Pakistan for alternate sources of energy. He said Pakistan has great potential for various types of energy including coal and assured the US would extend help in exploring these sources of energy.

Meanwhile, Foreign Minister Makhdoom Shah Mahmood in meeting with Boucher reaffirmed Pakistan's commitment to work closely with the international partners in war against terrorism.

Qureshi noted that the third session of Pakistan-US Strategic Dialogue, held in Washington in September 2008, had contributed substantively to the two sides' efforts towards deepening bilateral co-operation in diverse areas and building a broad-based and long-term relationship.

Pakistan-US co-operation in the field of counter-terrorism was also discussed during the meeting. The foreign minister highlighted government's three-pronged strategy - combining political, economic development and security tracks - and reaffirmed Pakistan's firm resolve to combat terrorism and extremism. He underscored that Pakistan desired a peaceful and stable Afghanistan. He noted that the forthcoming visit of the Afghan foreign minister as well as the mini Jirga meeting in Islamabad would help move the process forward


[CENTER][B]Copyright Business Recorder, 2008[/B][/CENTER]

[B][CENTER][SIZE="4"]Saudi Arabia to support Pakistan in all economic sectors[/SIZE][/CENTER][/B]

[B]
RECORDER REPORT

ISLAMABAD
(October 25 2008)[/B]

Ambassador of Saudi Arabia Ali Saeed Mohammad al-Awad Assery has said that the government of Saudi Arabia is ready to support Pakistan in all sectors of the economy.

During a meeting with Dr Fehmida Mirza, Speaker National Assembly on Friday, the Ambassador stressed the need for spreading the true message of Islam through placing appropriate people on the pulpit for curbing extremism from the Muslim World.

The Saudi Ambassador also handed over a letter from Imam-e-Kabah Dr Saleh Bin Abdullah in which Imam-e-Kabah condemned the Islamabad explosion on his behalf and on behalf of the Members of Shura Council of Saudi Arabia. The Imam-e-Kabah Dr Saleh Bin Abdullah Bin Humaid expressed his sympathies for the affected families and prayed for the departed souls.

While talking to the Ambassador at the Parliament House, Dr Fehmida Mirza said that Saudi Arabia has always supported Pakistan in difficult times and is also expected to play a leading role in the Group of Friends. She said that new government was facing many challenges, which could be overcome with the support of friendly countries like Saudi Arabia.

She said that the adoption of unanimous resolution by all political parties on the issues of national security and curbing terrorism was a landmark achievement of the Parliament and has sent a clear message to all that the whole nation was united on issues of national importance. She said that the resolution in fact envisages change in the course of history. The Speaker said that stable and strong Pakistan was necessary for stability of the region. She said that Pakistan was pursuing a multi-pronged policy including dialogue, development and determination to end terrorism and extremism from the country. The Speaker informed the Ambassador that the Speaker's Relief Fund for the internally displaced people of Bajaur and Fata has been established to provide them relief and rehabilitation. The Speaker further informed that the fund was established with the consent of the House and a committee comprising parliamentarians was formed to oversee and handle the relief work.

[B][CENTER]
Copyright Business Recorder, 2008[/CENTER][/B]

[B][CENTER][SIZE="4"]'Great potential to boost economic ties between Pakistan and Canada' [/SIZE][/CENTER][/B][B]

ISLAMABAD
(October 25 2008)[/B]

Pakistan and Canada need to reinforce their bilateral economic relationship, specially trade and commercial exchanges for which there is a great potential, High Commissioner to Canada, Musa Javed Chohan said while addressing the ambassador's roundtable organised by the prestigious institution the Norman Patterson School for International Affairs at the Carleton University in Ottawa.

Chohan said that with a population of approximately 165 million people, Pakistan offers an attractive and huge market for Canadian exports and investments. "Foreign investment is critical to our endeavours to maintain our economic growth rate of 7 percent so necessary to meet the requirements of our burgeoning population," he added.

Highlighting Pakistan's contributions in the war against terrorism, Chohan said Pakistan was fighting the war against terrorism in its national interest and making every possible effort to eliminate this scourge from the globe. He said peace, stability and security in Afghanistan were crucial for Pakistan. Without stability in Afghanistan there cannot be stability in Pakistan.

Pakistan was providing $300 million for Afghanistan's reconstruction, besides offering 1000 scholarships for training of Afghan cadres. He said Pakistan was following a policy of constructive engagement with the Karzai government. Pakistan has deployed 100,000 troops to fight terrorism, which is more than the collective presence of international troops, deployed across Afghanistan.

Chohan said there were institutional frameworks available for co-ordinating military actions in Afghanistan such as the Tripartite Military Commission. As far as Pakistan was concerned, it will continue its efforts to eradicate the menace of terrorism and extremism, which affects the fabric of body politics. Chohan appreciated the sacrifices made by Canada in the war against terrorism. He said Canadian involvement and troops presence in Afghanistan added another perspective to Pakistan-Canada relations.

He said Pakistan was firm in its commitments to Afghanistan and hoped that other nations involved were equal in their resolve. Talking of bilateral relations, he said there was a strong political will at the highest level to further strengthen and broaden Canada-Pakistan relationship. The function was attended by Canadian Academia, intelligentsia and media persons

[B][CENTER]
Copyright Associated Press of Pakistan, 2008[/CENTER][/B]

[CENTER][B][SIZE="4"]Grants for social sector areas: Pakistan and US sign $339 million agreements[/SIZE][/B][/CENTER]


[B]RECORDER REPORT

ISLAMABAD
(October 25 2008)[/B]

Pakistan and USA on Friday signed agreements, worth $339.10 million, on strategic objective grant to be spent in areas of economic growth, education, governance, health, population welfare, earthquake reconstruction programme and Fata development programme during fiscal year 2008-09.

Under the strategic objective grant agreements, for Education Sector Support Programme US Government has committed to provide $128.9 million. This contribution will strengthen and improve basic education and higher education programme. It will further enhance the need and merit-based scholarships programme with the collaboration of Pakistan Higher Education Commission.

The financial assistance under Governance to the tune of $23.2 million will be spent for improvement of justice system, civil participation and media freedom, improvement in electoral process and decentralisation programme. Similarly, the amount allocated for Health & Population Welfare of $76.5 million will ensure improvement of reproductive hea1th, HIV Aids, tuberculosis, maternal and child health and water supply & sanitation in different parts of the country.

The financial assistance under economic growth amounting to $43.5 million will ensure the economic stability in the areas such as trade & investment, infrastructure, agriculture, private sector competitiveness and strengthening of micro enterprises productivity.

Under Earthquake Reconstruction Programme the Government of United States has committed to provide $48.5 million. The said contribution will further enhance the technical assistance & capacity building in the affected areas and will also be utilised for construction and procurement.

In September 2007, US Government had approved huge package assistance for Fata Development amounting to $750.0 million over a period of five years (2007-2012). Last year, US Government provided $73.0 million under this programme, whereas now $20.5 million will be disbursed during the year 2008-09. The funds under this programme would be utilised for capacity building of Fata Secretariat and other government institutions for service delivery, good governance, infrastructure, economic growth, micro enterprises development, health arid education.

Earlier, Anne Aarnes, Director, USAID/Pakistan and Farrukh Qayyum, Secretary, Economic Affairs Division, signed these SOGA Amendments on behalf of their respective governments, whereas James Kunder, Acting Deputy Administrator of USAID, Gerald Feierstein, Deputy Chief of Mission, US Embassy, Islamabad and Shaukat Tarin, Adviser to Prime Minister on Finance, Revenue and Economic Affairs signed the agreements as witnesses.


[B][CENTER]Copyright Business Recorder, 2008[/CENTER][/B]


[B][CENTER][SIZE="4"]Soft loan to industrialists for generating electricity urged[/SIZE][/CENTER][/B]

[B]
RECORDER REPORT

ISLAMABAD
(October 25 2008)[/B]

Government should give special incentives and soft loans to Industrial sector and motivate them to generate their own electricity and help country at this hour of need, said Senator Talha Mehmood, Chairman, Senate Standing Committee on Interior. He said this while talking to a group of journalists here on Friday..

He said that 12 to 18 hour long power breakdown have forced the industrialists to lock their factories and units and put a negative impact on productivity of the country."

He stressed the need of immediate initiation of construction work on big dams on which people have complete consensus, besides working on small projects to provide immediate relief to masses.

He criticised the load-shedding policy of the government and said that this would have negative impacts and result in worst law and order situation. "People would have no other option to come in streets and start loot and arson," he added. Government should work on war footing to address the current power crisis and reduce the power tariff to give relief to the people, Talha Mehmood said, adding that government should adopt both short and long term policies to address the power crisis to bail out country from this darkness.

He said that load-shedding has jammed the wheel of industry and has brought the economy to a stand still and forced people to come out in streets to protest. "Factories and other small industries were closed due to long power breakdowns, which have rendered thousands of people jobless", he added.

"I am shocked over callous attitude of Wapda, as there was no load-shedding during the holy month of Ramazan and every thing was normal, but soon after Ramazan passed country plunged into darkness," Talha said. He also said that the mismanagement of Wapda and other concerned institutions has brought Pakistan in to dark age. Government should take serious note of the situation and save the country from complete disaster, he concluded.


[CENTER][B]Copyright Business Recorder, 2008[/B][/CENTER]

[B][CENTER][SIZE="4"]'Expo-Pakistan 2008' starts today [/SIZE][/CENTER][/B]

[B]ANWAR KHAN

KARACHI
(October 27 2008)[/B]

The country's largest trade show, 'Expo-Pakistan 2008', which is expected to receive around 500 foreign visitors and expatriates amid an airtight security, is being held from October 27 to 30 at Karachi Expo-Centre. The Trade Development Authority of Pakistan (TDAP) is the official organiser of the show, which will be inaugurated by Federal Defence Minister Ahmed Mukhtar.

He will also hold a press conference. Although, there will be no seminars or workshops during the event, the participating companies will sign MoUs. Rafeo Shah, Director Expo-Pakistan, TDAP, told Business Recorder on Saturday that the government has done the spadework for watertight security for the event.

He said that assistance has been sought from police, rangers and Sindh home department to provide maximum security. "The government has taken maximum precautionary measures to ensure sound security to the participants of the show. "Participants are also visiting from Britain and the US," he added.

Asim Siddiqui, Chief Executive Officer of Pegasus Consultancy, event manager, said that intelligence and law enforcing agencies would be responsible for security. He said that about 500 visitors including European, South and North American, Middle and Far East have confirmed their participation.

"The major countries are UK, Spain, France, Japan, Arab countries, China, Brazil, Mexico, US, Bangladesh, Sri Lanka and Morocco are taking part besides the expatriates. Bangladesh will represent the largest delegation in the event," he said.

Over 400 exhibitors will displays their products including textile garments, sports, surgical instruments and food items, he said, adding that three foreign exhibitors - two from Sri Lanka and one from Poland--will also display products. Over 650 stalls are being set up, while many interested parties are on the waiting list.

TDAP has given maximum concessions on stall bookings to participants from far-flung and underdeveloped areas of the country including Azad Kashmir and interior parts of all provinces to increase the volume of country's exports.


[B][CENTER]Copyright Business Recorder, 2008[/CENTER][/B]


[B][CENTER][SIZE="4"]UK businessmen keen to invest in Pakistan: Sindh chief minister informed[/SIZE][/CENTER][/B]

[B]KARACHI
(October 27 2008)[/B]

Pakistan High Commissioner in Britain, Wajid Shamsul Hassan, called on Sindh Chief Minister, Syed Qaim Ali Shah, here at the Chief Minister House on Sunday.

They remained together for sometime and discussed matters of mutual interests. Wajid Shamsul Hassan informed Syed Qaim Ali Shah that with the people's government coming to power in Pakistan, our ties with Britain have strengthened further. He also informed the Sindh chief minister about the interest of the British businessmen regarding investment in Pakistan.

Qaim Ali Shah on the occasion apprised Wajid Shamsul Hassan of the projects that have been initiated in the light of the manifesto given by Shaheed Mohtarma Benazir Bhutto. He also informed that the government has started Shaheed Benazir Bhutto Youth Development Programme whereby over 40,000 youth will be imparted technical training and in the meantime they will be given stipend in the range of Rs 4,000 to Rs 10,000.


[B][CENTER]Copyright Associated Press of Pakistan, 2008[/CENTER][/B]

[B][CENTER][SIZE="4"]'Pakistan has potential to enhance trade with Turkey' [/SIZE][/CENTER][/B]

[B]RECORDER REPORT

ISLAMABAD
(October 30 2008)[/B]

Pakistani business leaders and Industrialists in MUSAID International Trade Fair and International Business Forum in Turkey used this forum to attract the businessmen and investors of more than 60 participating countries to take advantage of attractive investment opportunities in different sectors of Pakistan.

"Our efforts were to make sure that Pakistan could get maximum investment in this critical phase of its history", said Muhammad Ijaz Abbasi, ICCI President after his return from Turkey on Wednesday.

The ICCI President said MÜSIAD is an Independent Industrialists and Businessmen's Association and MÜSIAD International Trade Fairs promise to give the indispensable means of increasing sales, expanding to the promising markets. He said MÜSIAD has the potential to continue to initiate prosperous commercial opportunities for the enterprising business entrepreneurs who are willing to take part in its fairs.

He said many sectors of the economy like machinery, computers, automation, automotive, spare parts and electrical goods, textiles, garments, leather and carpets, construction, furniture and building materials, food, beverages, packaging and service sectors get representation in this trade fair to explore more business opportunities.

Speaking about the opportunities of further enhancing bilateral relations between Pakistan and Turkey, ICCI President said Turkey ranks 3rd in the world glassware production and 6th in the world textiles and garments production while Turkey's production capacity ranges from food industry to hi-tech based products such as F-16 warplanes and electronics.


[CENTER][B]Copyright Business Recorder, 2008[/B]


[B][SIZE="4"]Abu Dhabi meeting: Fehmida hopes Germany to support Pakistan [/SIZE][/B][/CENTER]

[B]RECORDER REPORT

ISLAMABAD
(October 30 2008)[/B]

The Speaker, National Assembly, Dr Fehmida Mirza was optimistic that Germany will support Pakistan in the 'Friends of Pakistan' meeting to be held in Abu Dhabi next month for overcoming fiscal and external deficits as it helped in strengthening democracy. She said this to a four-member delegation of German parliamentarians led by its MP Ute Koezy on Wednesday.

Fehmida said that Pakistan was committed to eradication of extremism and terrorism to give peace and stability a chance. She said that only addressing the root causes could eliminate the scourge of extremism and terrorism. The NA Speaker said, the issues of poverty, unemployment, illiteracy and provision of infrastructure for development need to be tackled to curb extremism.

'Adoption of unanimous resolution by all political parties on the issues of national security and curbing extremism, was a big achievement of the Parliament and will go a long way in curbing the menace of terrorism,' she maintained.

She apprised of the delegation about the functioning of the parliament and NA Standing Committees, where women avail of substantial representation. She said that awareness among women in the country is high and they are possessing important slots in various departments.

Furthermore, women should be empowered economically and politically for protection of their rights, she said adding that Pakistan has the distinction of having first women prime minister and first women speaker in the Islamic World and the response from the Islamic Ummah in this regard was encouraging.

Underlining the role of women in development, the Speaker said that no society could prosper ignoring its women population and stressed the need for meaningful legislation to bring a pragmatic change in the lives of womenfolk. The Speaker also said that she was working on formation of women caucus in parliament and very soon, a steering committee comprising of all women parliamentarians in the NA will be constituted to work for women's welfare.

[B][CENTER]
Copyright Business Recorder, 2008[/CENTER][/B]

[CENTER][B][SIZE="4"] Pakistan's foreign exchange reserves fall below $7 billion mark [/SIZE][/B][/CENTER]

[B]
RECORDER REPORT
KARACHI
(October 31 2008)[/B]

Country's foreign exchange reserves have further plunged by some 401 million dollars during the last week and fell below 7 billion dollars mark aggravating the threat to the economy. State bank of Pakistan on Thursday informed that country's foreign reserves have declined to 6.9218 billion dollars during the week ended October 25, as against the 7.3233 billion dollars a week earlier, depicting a decline of 401.5 million dollars during the week.

A major decline has been witnessed in the State Bank's reserves, showing a decline of 323 million dollars during the previous week and came to below the four billion dollars mark. The SBP reserves stood at 3.7138 billion dollars on October 25, as compared to some 4.0368 billion dollars on October 18, 2008.

The reserves held by bank also show a negative trend during the last week and banks overall foreign reserves declined to 3.208 billion dollars that previously stood at 3.2865 billion dollar a week earlier. Depicting a decrease of 78.5 million dollars during a week.

It may be mentioned here that after the imposition of the state of emergency in the country, foreign reserves have been continuously on decline and now has been reached at lowest level of 6.91 billion dollars. Economists said that declining trend in the foreign reserves need some new and speedy measures to maintain the foreign reserves.


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[B][CENTER][SIZE="4"]Expo Pakistan may yield $100 million export order [/SIZE][/CENTER][/B]


[B]RECORDER REPORT
KARACHI
(October 31 2008)[/B]

Chief Executive Trade Development Authority of Pakistan (TDAP) Syed Mohibullah Shah has said as a result of Expo Pakistan, international buyers would ink export agreements of $100 million. Addressing a press conference on concluding day of Expo Pakistan, he said that the international importers have signed memorandum of understandings and trade agreements of $50 million, while $50 million deals would be matured later.

"In addition to this a Korean company has inked $10 million trade agreement of ethanol," he added. He said that the delegated from Sweden, US, Spain, South Africa, France, Malaysia, Romania, Bangladesh, Argentina, Morocco, South Korea, Hong Kong and others have shown their interest in textile, handicraft, rice, lather, industrial garments, surgical instrument and other sectors.

Regarding the law and order situation, Mohibullah Shah said, the delegates have expressed their satisfaction, adding that even the delegates went for shopping and picnic, which negates the international propaganda regarding the law and order situation of Pakistan.

He asserted that it also proved the travel advisories issued by different countries to their citizen as wrong. He said that TDAP arranged visits of the foreign delegates to other industrial cities including Lahore, Gujranwala, Sailkot and others. He said that the exhibition brought largest number of exhibitors from every nook and corner of the country and it has also brought in large number of buyers from over 50 countries.

"For the first time the entire commercial space for stalls were occupied by 408 exhibitors, who have displayed a wide range of agricultural, industrial, engineering, textile, jewellery, minerals and a wide range of handicrafts including rugs carpets, surgical instruments, sports goods and many other products of Pakistan," he added.

Chief executive TDAP said this year Expo Pakistan also introduced several new exporters especially SMEs, who are real backbone of country's economy being the largest employers. He said that Expo Pakistan provided "direct marketing" opportunities to Pakistani producers and exporters by bringing in large number of foreign buyers and local sellers under one roof for four days.

This method of direct marketing eliminates 2nd and 3rd tire of middlemen, adding by providing this direct marketing opportunity in Expo Pakistan, TDAP had enabled Pakistani producers to get better prices. "Expo Pakistan has also opened up new opportunities for expanding trade and investment and exports from Pakistan, while the numbers of foreign buyers have shown keen interest in investment in export oriented products of Pakistan," he added.

This interest has been confirmed in their meeting with TDAP in areas such as agro food and food processing, halal food, industrial garments, cold storage, packing, canning and processing of new food products, processing of new product developed from fruits and vegetables, surgical instruments etc.

Shah said that some foreign delegates have also shown interest in setting up showrooms and warehouses of Pakistani products in their own countries and they are willing to make their own investment in setting up such facilities.

He informed media that number of foreign buyers also indicated their interest in setting up their own subsidiaries companies in Pakistan so that they could regularly keep purchasing Pakistani products round the year, in addition to attending these exhibitions.

He said that TDAP is mulling to construct a new exhibition hall, so that congestion in future is avoided and many more exhibitors of Pakistani products could be accommodated. He said that keeping interests of buyers in exhibition especially in textile sector in view, TDAP would hold textile and clothing exhibition. "The next Expo Pakistan would be held in month of October 2009," he informed.


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[B][CENTER][SIZE="4"]Wide scope to increase trade with Pakistan: Turkish CG[/SIZE][/CENTER]

RECORDER REPORT
KARACHI
(October 31 2008)[/B]
The bilateral trade volume between Pakistan and Turkey has touched $600 million mark and there is much potential to increase the economic relations. These views were expressed by Fethi Etem, the Consul General of Turkey in Karachi while talking to media at a ceremony on the occasion of 85th anniversary of the proclamation of the Republic of Turkey held at his resident here on Wednesday.

He said that Pakistan and Turkey are two brotherly countries and enjoying very good relations. He said that the event is being held on the occasion, when the Prime Minister of Pakistan Syed Yousuf Raza Gilani was in Turkey on his official visit. He said that this visit would increase the already good relations between the two brotherly countries.

He said that there are many sectors, in which bilateral trade could be increased by both sides. Sindh Governor Dr Ishratul Ebad Khan was the chief guest. Speaker Sindh Assembly Nisar Khuro, Provincial Minister Agha Siraj Durrani, a number of diplomats, political leaders and other dignitaries attended the event.


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[B][CENTER][SIZE="4"]Foreign investment of $15,574 withdrawn equity market [/SIZE][/CENTER]

RECORDER REPORT
KARACHI (November 09 2008)[/B]

An outflow of $15,574 of foreign investment was witnessed the country's equity market during the outgoing week ended November 07, 2008. According to the National Clearing Company of Pakistan Limited (NCCPL) data, the cumulative figure of this mode of financing stood at negative $337.778 million in the current calendar year January 01, 2008 to November 07, 2008.

"The foreign investors opted to offload their holdings during the week on their concerns over the prevailing economic situation and uncertainty on removal of floor mechanism", analysts said. The week started on a positive note as an inflow of $182,643 was witnessed on Monday, however, this trend could not continue as the foreign investors withdrew $29,312 on Tuesday.

The negative trend continued as an outflow of $252,913 was recorded on Wednesday and the offshore investors withdrew $201,288 on Thursday. A positive trend was witnessed on the last day of the week as an inflow of $284,175 was seen on Friday.


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[B][CENTER][SIZE="4"]Ecnec approves 11 projects [/SIZE][/CENTER]

RAJA AQEEL
ISLAMABAD (November 09 2008)[/B]

The Executive Committee of the National Economic Council (Ecnec) has approved eleven projects in infrastructure, education, energy, security and rural uplift sectors in its meeting held recently, sources told Business Recorder on Saturday. It has given go-ahead for setting up of Pak-China Friendship Centre, costing Rs 2519 million as a gesture to cement the deep-rooted Sino-Pak ties.

A Chinese company has started construction of the centre and Rs 287 million were spent on purchase of land and preliminary works. The centre will include hall, exhibition centre, multipurpose hall, hostel and a library. Basically, the project is being undertaken to promote tourism through projection of culture.

It will also provide opportunities for income generation along-with promoting Pakistani culture through institutional arrangements. Development projects for Sindh: The Ecnec also gave go-ahead for Phase-II of Japanese-assisted rural road construction project under which 500 km rural roads in various districts of Sindh will be constructed 2008 to 2013.

The project will cost Rs 5114 million, of which Japan Bank International Co-operation (JBIC) will provide a loan of Rs 4729 million, whereas Sindh government will spend Rs 385 million. This project is continuation of an agreement between Pakistan and JBIC for construction of 3000 km rural roads in Pakistan.

The project will provide better access to market and alleviate poverty to improve socio economic condition of the poor people. It will also help reduce unemployment and under employment in the rural areas.

[B]SINDH CITIES IMPROVEMENT PROGRAMME:[/B] To improve urban infrastructures for creating better economic opportunities in Sindh through reforms and investment, promoting services delivery system, costing $400 million, of which ADB will provide $300 million, whereas Sindh government will share $100 million.

The project will provide clean drinking water supply in areas where availability is inadequate and develop sanitation facilities to improve environmental health through increased investment in water supply and sanitation sub-sector in six secondary cities of Sukkur, New Sukkur, Larkana, Khairpur, Shikarpur and Rohri. It will be completed in 10 years and about 4 million people will benefit.

Similarly, Ecnec has approved revised projects for conversion of 135 km long existing metre gauge railway track into broad gauge track Mirpur Khas to Khokhropar. The link connects the existing Karachi-Hyderabad-Mirpur Khas with Indian railways network. The cost of the project will be Rs 1860.17 million.

[B]PROJECTS FOR FATA/NWFP[/B]: The meeting also approved project for training and support of Levy forces in FATA at a cost of Rs 558.89 million, out of which US grant is Rs 546 million, whereas Rs 12.89 million is the local component. The project envisages provision of essential infrastructure to station the law enforcement agencies (Khassadars, Levies and FC) at strategic location at the junctions of FR Kohat, FR Peshawar and Khyber Agency to have integrated and co-ordinated force.

[B]PRIMARY EDUCATION IN FATA: [/B]The Ecnec approved another project costing Rs 657.00 million for promotion of primary education, with the assistance of World Food Programme in Mohmand Agency and Landi Kotal tehsil of Khyber Agency in FATA.

Under this project, flour, vegetable oil and biscuits will be provided as incentive for parents to send their children for schooling. The donor agencies, especially World Food Programme is assisting Pakistan to achieve Millennium Development Goals (MDGs), universal primary education, implementation of Saarc action plan and reduction of gender gap.

[B]KARAKORAM INTERNATIONAL UNIVERSITY, GILGIT:[/B] The meeting also approved establishment of Karakoram International University, Gilgit worth Rs 449.792 million. Presently, the university has no proper campus and it will be constructed in Gilgit to enhance the access of the people of the Northern Areas to higher education. The project will be funded through Federal PSDP.

[B]NEW MINERAL SERVICE SCHEME:[/B] A scheme sponsored by Pakistan Atomic Energy Commission (PAEC) for exploration of minerals has also been approved by the Ecnec. The estimated cost of the project is Rs 1085.395 million, including foreign exchange component of Rs 486.018 million.

The project aims at establishment of additional Reasonable Assured Reserves (RAR) of uranium and other nuclear minerals to meet nuclear fuel requirements of the country to generate electricity. Under this project, detailed geological mapping, drilling, test-mining operations and collection of samples and their testing etc would be carried out. It would help in establishing techno-economic parameters of various mineral deposits in the country.

The survey will cover twenty (20) major geological rock formations located in Punjab, Balochistan, NWFP, FANA and FATA. It will be completed in five years (2008-13).

[B]Bagh City Development Project, AJK:[/B] For reconstruction and rehabilitation of earthquake damaged infrastructure the Ecnec has given approval of Bagh City Development project, costing Rs 7.00 billion as part of Erra's Urban Development Programme. The project will be implemented in 10 years in two phases.

Similarly, the Ecnec also approved Rawalakot City Development project worth Rs 8 billion, of which Saudi government will give 4.00 billion in the form of soft loan. The umbrella project includes 48 infrastructure development schemes seismic safety.

[B]NHA TO CONSTRUCT ROADS/BRIDGES THROUGH PUBLIC-PRIVATE PARTNERSHIP[/B]: The Ecnec has approved construction of a 2-lane, 600 metres long bridge across the river Sutlej at Emanwala near Multan, worth Rs 1147.77 to be completed in 22 months.

The bridge will connect Multan with N-5 through the existing provincial road through Jalalpur Pirwala and Uch, whereas it will be maintained through toll tax. Similarly, the Ecnec approved construction of high level bridge over Chenab River Head Muhammad Wala, district Multan, at a cost of Rs 2376.8 million, to be completed in 3 years (2008-11).

[B]DUALISATION/REHABILITATION OF THE LARKANA - MOEN-JO-DARO ROAD[/B]: The project has also been approved with a cost of Rs 1931.1 million to be completed in 22 months. The project includes upgradation of existing 2-lane road through 4-lane, including reconstruction of 8 bridges. The road connects Larkana city with Moenjodaro Airport.

NHA will execute the above-mentioned project and the project will be funded through federal/NHA PSDP subject to federalisation, otherwise 50:50 cost sharing will be done by federal and provincial government. IPDF will explore private sector investment for the project.


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